Very few of us have the necessary funds to purchase investment properties outright. Instead we need other people’s money. Learning how to ask for other people’s money is therefore crucial to your business. Learning the right way to ask for other people’s money will put you and your business on the path towards growth and cashflow.
It Is About Risk
Other people’s money, or OPM, can come from one of two sources. Those two are institutions or private lenders. Institutional lenders can be neighborhood or commercial banks and credit unions. Private lenders could include hard money lenders, syndications of investors and individuals. While the sources can be very different, asking to use either one is done in much the same way.
Very few lenders are just going to hand you some money with no questions asked. Lenders are instead are going to be concerned with just one thing. They will want know if you will be able to pay their money back. The will want to assess the risk of lending their money to you. Your job as an investor therefore is to demonstrate that you are a quality, low level risk. Your job is to show that you can and will pay them back.
How do you do that? You do it by putting together what I call a banker’s book. This book will demonstrate that you are a risk worth taking and should go hand in hand with asking to borrow OPM.
Putting It All Out There
A good banker’s book lays everything about you, and the risk you are, on the table. It puts it all out there in black and white. If done properly, it will easily demonstrate that you have your business and financial act together. You are a good risk.
What goes into your banker’s book? Quite a bit. The book contains your personal and business financial information. It charts the history of your financial decision making. It demonstrates who you are and where you want to go. Because of this it is not something you want to publish for the entire world to see. Rather, it is offered selectively and privately to those companies and individuals you are interested in doing business with.
The Contents
What are the actual contents of such a book? I can’t put mine on the web, but I can put up the table of contents. You can download the table of contents to see for yourself and use here. This table of contents will provide you with an outline to get started in putting together your own banker’s book.
At first glance, putting such a book together may not seem like a very large or difficult undertaking. It may appear to be simply getting paper work together. While getting paperwork together is certainly part of it, there is much more. And if you have never done such a task before, you may be in for more than you think.
Get Started Today
You newbies out there (and perhaps even some of you more experienced investors) need to look over the table of contents and start putting the materials described in it together. In future posts, I will go into more detail about the book’s organization and contents. If in the meantime you have a question, please feel free to ask in the comments section.
Putting this banker’s book together has made me a lot of money over the years. If you are serious about becoming a serious real estate investor, you need to do this. It shows lenders that you are professional, focused, organized and many of the other qualities that constitute a good risk.
