** When to seek outside investors to help fund your growing real estate portfolio so it’s only natural that we should also spend a little time talking about the pro’s and con’s of various investor types. Not every investor is created equal; the trick is to learn how to find the ones that bring the most value and the least constraints to the relationship. Here is a quick overview of the most commonly encountered types of outside investors and how each may play an important role depending upon your current needs.
1. High Net Worth, Experienced in Industry, Exceptional Contacts. This is the most desirable outside investor possible. Not only does this person have sufficient capital to invest but their industry and professional affiliations can open doors that would otherwise be ‘off limits’. Not only do you benefit from access to capital but even more importantly, learn from their experience and expertise while meeting the “right” people. However, preparation is essential and a wrong step could have dire consequences for years to come.
2. High Net Worth, Experienced in Industry, Related Contacts. This can be a win-win situation for those that are long on short sale or real estate experience but a bit short on cash; by teaming up with someone that has plenty of cash sitting idle you are able to provide the expertise required to put it to work. Often these persons have valuable contacts outside of real estate; for example, doctors, lawyers and other professionals. It may be necessary to provide extensive explanation and education prior to investing in order to put the person or group at ease.
3. High Net Worth, Experienced in Industry, High Contacts. Plain and simple, this is one of the most frequently encountered types of investors the novice short sale entrepreneur is likely to encounter; someone simply seeking a return on their money rather than watching it waste away in a bank account or the bond market. Although the money is often a welcome addition to your individual growth plans, it often comes with a rather steep price tag…a lot of oversight and explanation. Family member, retirees and small investment groups often fall into this category which can add even greater volatility to the equation.
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