And like raising money first before finding the deal. That seems like it could be challenging, though, too, because people want to know what they’re investing in. So do you just get sort of a soft commitment, like if I find this criteria?
So the way that I help people to do that is I give them this thing called a sample deal package. It’s like, if you’ve never done a deal ever, then you want to download one of these sample deal packages for free. You want to have one. The thing about the sample deal package is it allows you to do a few things and this is how to actually start getting those soft commitments.
The sample deal package allows you to sit down at lunch and give somebody something tangible. So a lot of people find value in things that are tangible, and when it’s not tangible, there’s a lot of confusion in their mind. And so the passive investor who’s confused, they always say this in sales and marketing, “the confused mind says no”, like it’s an automatic no if you don’t know what you’re doing, if you’re nervous about it.
And so when you hand somebody something, not only do they have something tangible which makes them feel like there’s value, but they also have the information where they can see it because a lot of people are visual. And and even if they’re auditory listeners or tangible listeners or whatever, if you can say it while they touch it and they see it at the same time, they’re more likely to have that information stick.
And so when they go maybe home to their spouse, which usually will happen, you might sit down with one one of the members and they’ll usually talk to their spouse. And if they do that and they can’t really comprehend everything, the spouse is generally going to say, “No, that sounds risky. Let’s just keep our money in the stock market.”
And so this is this allows you to kind of go through a sample deal like a pretend deal, an idea of the type of deal that you might close and like the listener could use my sample deal package, which I only have five pages. A real a real deal package is a lot longer. But this is the meat of it.
It’s the five pages. And we don’t use words like IRR because when they get home to their spouse and their spouse is like, “Explain IRR to me”. And they can’t because they’re not engineers or they don’t have a ton of experience. The wife is going to say no if you don’t even know what this means, we’re not going to do it.
So like in the sample deal package, we clean it up. We make it shorter than the real deal package. And we don’t use confusing things. We want it to be something that they can take home to their spouse. And it’ll say something on there like “average annual return”. “Average annual return” is fairly obvious to most of us, but IRR is like, “Well, what you do is you kind of like, do this. And then…” and once you start kind of confusing people, they’re not going to do it.
So the sample deal package helps because while you’re sitting there with this package, you can you can point to it and you can say, “If I have a deal that looks a lot like this, would you want to be a part of it?” And it’s so simplified for them, they’re probably going to say yes.
And if they do, just let them know…. (This is the trick). You say something like, “When I when we do these deals, they generally go pretty fast. And so oftentimes we’re only raising maybe $1 million. So that only leaves us room for 10 or 15 investors. And a lot of times that that all gets closed out in a few days or at max a couple of weeks. So if you want to be involved, let me know now and I will save your spot.”
I always say “I will save your spot” because they have now ownership of that spot and it also helps them feel more committed because they don’t want to give their spot to someone else. That’s their spot. They own it. It’s human psychology. They don’t want to lose it. And now they feel also a little bit kind of connected. They have agreed to something.
And I always tell clients double the amount that you think you really need to have. So if you’re going to if you’re going to close on like a $4 million property that you are going to maybe have to raise about a million, I want you to have 2 million just in soft commitments where you’re going with this sample deal package showing people kind of what it might look like when you close and asking them if they’d be able to move within two weeks if you end up having one and how much they would want to put to it. And then you give them the the paperwork.