Recently, I have been examining how to ask for other people’s money. In my last post, I discussed building a banker’s book. In this post I want to get into building and organizing that book by delving into a couple of its components.
Asking for other people’s money, be it from a commercial bank or private lender, is a learned skill. The key to learning that skill is understanding the lender’s perspective. That is, the lender is concerned about the risk of losing their money. They want to be assured that you can and will pay them back. Learning how to provide those assurances and demonstrate that you are a good risk is therefore a major part of your job as an investor.
The first two sections of your banker’s book will in part provide those assurances. These are the “Company Overview” and “Resume” sections. It is in these two sections that you get the chance to make your first impression on the lender. And since you only have one chance to make a first impression, the development of these two sections should not be taken lightly.
The Company Overview
Most investors are going to develop some sort of business structure. In the early stages of your business, this structure may simply be a sole proprietorship or a partnership. No matter. This “Company Overview” section of your banker’s book provides you the opportunity to give a quick synopsis of your business, who does what, and what its goals are.
This section should be no longer than a page at most. You do not want to burden your lender complicated and complex business structures. Rather, layout when things got started and where you plan to go. Describe your business strategy. Here is an example from my own Company Overview:
Kevron Properties, LLC has been in the real estate business for fifteen years and is a licensed LLC in Tennessee. Our company focuses on buying and managing residential rental properties in Memphis, TN.
Kevron Properties strives to provide high-quality, well maintained rental units. We purchase mismanaged properties at a discount, do quality renovations, and then increase the rents while selecting the best quality tenants.
The Resume
The next section, your resume, should be a bit more detailed. Your Company Overview section lays that foundation, now you must add detailed finishing with the Resume section.
A resume describes work and educational history. Details and dates are provided. Try to emphasize increasing levels of knowledge and experience. List any real estate or business related organizations that you may belong to and add a few personal touches, such as coaching little league for example, to help personalize you.
If you have never completed a resume before, this task may take a bit of effort. To help you, here are some resources, including a resume template, offered by a local community college that I teach at.
Do Not Lie
I should not have to say this but unfortunately it is necessary. Sure, you can be a bit boastful perhaps but do not cross the line into outright lies. Nothing says high risk like being caught in a lie. Lying can quickly stifle your chances for success and ruin your otherwise good name. Be honest.
The Catch 22
Lying can be tempting however, especially if you have no real estate related education or experience. How do you get that first deal so you can get over the hump and show experience? How do you get around the catch 22?
I’ll admit it may not be easy but it can be done.
You may not have any real estate experience, but you likely have more relevant experience than you may at first realize. Have you renovated and built things? Have you worked at jobs with steadily increasing responsibility? Did you do any college coursework? Have you been educating yourself on real estate investing? Put all of that down and show how you have set and met goals in the past and plan to do that going forward.
Even if you are a newbie with little to no experience, someone will take a chance if you present yourself properly. They did with me and they will with you.
Think carefully about the Company Overview and Resume sections. Use the resources I have provided and Google other sources to provide you with some examples on what to write. You do not have to reinvent the wheel here but you do need to create a good first impression about you, your business and what you plan to do.
