Understanding the Mindset of the Investor
By Leonard Rosen
In my 38 years of being involved in the real estate marketplace, I have come to the conclusion that not many promoters of real estate syndication understand the mind set of of the investor.
In order to begin the process of raising capital, the promoter needs to understand the risk tolerance and appetite of the investor. Every investor needs to feel comfortable with the asset class, geographical area and dividend yield associated with the investment. Real estate investors have different comfort levels, consequently, the investment must fit into their strategy.
Also, investors come in all shapes and sizes, some investors will deploy capital utilizing their self directed IRA, while others deploy capital outside of their retirement accounts.
Obviously, these are easy questions to be answered with a quick due diligence check list. I ask real estate syndicators all the time, what is your investors most dominate question prior to deploying capital? I receive answers such as dividend yield is the predominate concern. After further discussion, we realize that the dividend yield is used as an excuse for not feeling comfortable with the investment proposal.
Investors participate in business deals with people that they like and trust. If the trust factor is not addressed, the likelihood of an investor participating in your deal will be low. Addressing the emotional needs of someone who is asked to give you money is a complex issue.
I believe you should follow my simple 4 step rule.
Rule number 1. Never ask your investor for capital on a first meeting, simply share some concept and ideas and gauge their interest. This is a time to fact find and begin your relationship. The ultimate goal is to begin a dialogue in the purpose of creating a trust factor.
Rule number 2. Exchange contact information and reach out to your possible investor by email or phone and thank them for the time they spent with you.
Rule number 3. Schedule a time for coffee to explain in detail your investment strategy to determine if the investment strategy fits into the investors comfort level. You can speak about risk factors, dividend yields and security interests.
Rule number 4. Be patient, move the relationship along at the speed the investors feels comfortable with. This is the time to gauge their interest for their participation.
Always remember, Have testimonial letters available, website address and a detailed executive summary of the proposal.
Good luck
Leonard Rosen
CEO, Pitbull Conference
“The Most Interesting Man in Hard Money”
Leonard Rosen’s career has spanned over 30 years in the financial services market as it relates to real estate. In the 80’s, Mr. Rosen was the nightly news anchor for the Financial News Network. After the network was sold to CNBC, Mr. Rosen hosted the nationally syndicated television program “The Leonard Rosen Show”.
Today, Mr. Rosen hosts “Financial News with Leonard Rosen”, which focuses on the real estate markets with an emphasis on the private lending sector. Mr. Rosen’s market commentary has been featured in The Wall Street Journal, Fox News, and MSNBC.
As the CEO of Pitbull Conference, he is regarded as “The Most Interesting Man in Hard Money”.
Mr. Rosen believes you sell the problem you solve not the product. His visionary approach has earned him praise from the real estate and lending community nationwide.
Mr. Rosen provides private consulting to major banks, hedge funds, mortgage companies and private lenders.
“Business is based on two essential components, power and leverage. The most common way people give up power is by thinking they don’t have any.”
