In my conversation with Devan McClish, who has completed over 60 deals and is currently building 26 properties at the ripe age of 23-years old, he explains the trick that has enabled him to raise capital for real estate investments and create such a large business at such a young age: using other people’s money!
Devan’s real estate philosophy is to focus solely on finding deals. Then, once he has obtained a deal, he makes it his life’s mission to find the real estate investment funds for the deal. Everything else is secondary.
Just because you don’t have any money doesn’t mean that you can’t invest in real estate, as long as you have certain investor skills. When Devan came out of college, he didn’t have any money at all. However, instead of going into another profession, he decided to just focus on finding deals, finding private investment funding, and then figuring everything else out later.
In regards to how to fund real estate deals, Devan has found success in three main arenas:
Devan met his largest investor and received his highest real estate investment fund to date using Google. When he was 19 years old, he typed “top real estate investors in Nashville Tennessee” into the Google search function. He sent introductory emails to the top 50 hits that were returned. Out of the 50, only one responded.
Devan sat down for coffee with the investor that responded and explained his business plan. Fortunately, the investor offered him free advice and said that, if Devan brought him a deal, he would analyze it with him and see if it was a good deal for a private investment.
Over the next few years, Devan brought this investor numerous deals. Upon analysis, the investor continually concluded that the deals weren’t good. Finally, Devan brought him a deal that the investor approved of, AND he provided the real estate investment fund for it! Devan made the investor a good amount of money on that deal, so they partnered again and again.
Eventually, it got to the point where the investor was comfortable enough to invest $350,000 into a new construction deal. Since Devan had a track record of never losing money and always making money, the investor had no problem investing such a large sum.
Another arena in which Devan has found investors is at the local REIA group. He has found that, while most attendees have never done a deal or have only done a few, they do have the cash for a private investment. That is why they are there. Typically, 60% to 70% of the people at the meetings have over $100,000 in their pocket that they want to put to work. All you need to do is have the courage to walk up to them with a deal and say:
“Hi, my name is ____________. I noticed that you said at the beginning of the meeting that you are a cash buyer. Well, I have a deal. I am not interested in selling it to you but I am interested in partnering on the deal. Here are the numbers. Does this deal sound good to you?”
One of two outcomes will happen:
They aren’t interested in making a private investment. Therefore, you walk up to someone else and repeat the statement above. Most of the time, if it is a good deal, someone is going to listen to you and offer the real estate investment fund you need to make the deal happen.
They say “yes” and you say, “lets go talk about the deal further.” At this point, if you don’t like what they have to say, that is fine. You aren’t obligated to have them invest in the deal. You walk away, find someone else, and repeat the statement above.
Devan met his second biggest investor on BiggerPockets. Every time he sees a new member post an introductory message on the forum, he sends them a DM inviting them to sit down and talk real estate. On one such occasion, he sat down with someone who had a very good paying W2 job. Devan explained that he focuses on new construction and asked, “If I bring you a good enough deal, would you take a look at it?”
A couple of weeks later, Devan found a deal. He presented it to him, showed him the deal financials, and asked if he was interested in investing? In this particular situation, Devan needed to close on the deal in 17 days, so they would have to pay all cash. The investor agreed and provided a private investment of $200,000.
Google searches for the area’s top investors, the local REIA, and BiggerPockets are three real-world examples of ways Devan has been able to raise real estate investment funds for his deals. However, if you are just starting out and are not as familiar with how to fund real estate deals, Devan recommends that you begin with local investors. With nonlocal or out-of-state investors, it gets a little more complicated and, more importantly, it is harder to truly know those people. You need to sit down with these individuals and build a relationship. Keep in mind that you are interviewing them just as much as they are interviewing you.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.