Raising private finance is an important strategy for any HMO investor. In fact, it’s often key to the growth of any property business. As HMO property investment is especially capital intensive, we’re almost always going to run into difficulties with not having enough cash.
One of the solutions to this is raising private finance. Successfully raising this kind of finance can help scale your business more quickly and allow you to get to the next level.
In this blog, we’re going to give you 10 things to do to help you build the foundations of a successful finance raising strategy. And if you want to hear more about what Andy has to say from his personal experiences, you can listen to the full episode over on The HMO Podcast.
1. Let Private Investors Find You
Rather than thinking about how you can find investors, start thinking about how investors can find you. It’s a subtle mindset shift, but this difference means that your entire approach and strategy changes.
Consider how you can put yourself out there so investors can see you. If you successfully do that, you could have a consistent and steady supply of potentially interested parties who want to invest with you.
2. Take Time to Build Relationships
It takes time to build relationships and rapport with investors and make them comfortable with the idea of lending you money. It might happen over three months or it could take years to develop that kind of relationship.
Additionally, if you’ve built a relationship over time, this gives you a strong relationship to work from. If you trust the person that you’re working with and they trust you, that provides a great foundation to work together.
3. Don’t Judge a Book By Its Cover
While you need to figure out whether someone could be a suitable investor or not fairly quickly, don’t be too hasty without exchanging a few conversations with them first. Give everyone a bit of time, and ask the right questions.
Anybody could be a potential investor, whether it’s a friend, family member, business associate, a person you meet at a networking event or even someone who messages you on social media.
4. Think About the 7 Touchpoints
It often takes around seven touchpoints before someone is comfortable with the idea of working with you. It could be an exchange on social media, a quick email, a catch-up phone call, or a meeting. All of these are touchpoints that can help solidify trust and build your relationship.
Some people may not be ready to invest straight away. Or maybe you aren’t ready to take investments right now. You’ll need to keep these potential investors warm and nurture them over time. Even when there’s nothing going on, it’s important to check in with them periodically.
5. Be Yourself
Investors are ultimately going to be investing in YOU. When putting yourself out there, don’t pretend to be anything else. People are drawn in by personalities, so just be yourself. That will help you to start attracting the right kind of investors.
Be honest about your experience and what you’re trying to achieve. Remember that you are the unique selling point. That’s why it’s so great to be on social media. It’s an opportunity to share your story. You don’t need to be an expert. You just need to be demonstrating what you’re doing.
6. Get Educated
It’s really important to understand the different ways to raise and use finance. It’s also crucial to get educated about the associated risks, how these might affect investors’ decisions and ways to create security for them.
Inside The HMO Roadmap, we have a course section dedicated to raising private finance, so sign up to learn more.
7. Get to Know Your Potential Investors
If you show an interest in your potential investors, not only will it give you insight into what they want, it will also help mould your relationship with them and show you’re actually interested in what they want from the opportunity as well.
The way that we communicate with our investors can help grow trust and build the foundations to a successful partnership. And the better you know them, the better you can understand what they’re trying to achieve and how your relationship might work.
8. It’s Better to Have One Investor Than Multiple Investors
If you can find one investor who has a lot of capital that you can repeat invest with, this means you won’t have to keep going back to the drawing board. And the more capital they have, the faster you could grow and scale your business.
With investors who have smaller amounts of capital, there’s nothing wrong with working with them. But remember that for some it might be all of their savings, which makes for a very different relationship and risk-reward scenario.
9. Make Sure to Deliver
When you get an opportunity to work with private finance, make sure you get the numbers exactly right, from the purchase price and the refurb costs to your rental confidence in filling rooms. It’s a privilege to be able to use other people’s money, and it brings a huge responsibility.
Whatever deal you make with an investor, make sure that you deliver and that they get whatever was agreed. If you get it wrong, it could damage your reputation and scupper your plans to raise any more private finance.
10. Carry Your Portfolio Around
Carry some examples of what you’re working on everywhere with you – even if this is just on your phone. You never know when you might get into a conversation with someone interested in what you’re doing. It could be anywhere – sat on a train or waiting in a queue.
It’s even better if you have a physical case study or a collection of material that you can take with you to networking events. It can be really beneficial to give investors something to walk away with. This can help differentiate yourself, and it could be the difference in them following up or forgetting about you all together.
So there you go! These are the 10 things to start thinking about and implementing to help you raise private finance. If you apply these principles consistently and confidently, you’ll likely achieve some great results, which could open so many doors for you and your HMO property business.
To get started, write your private finance raising strategy down on paper. Give yourself objectives to work towards and determine what you’re trying to achieve.
In The HMO Roadmap, there is a whole course section about raising private finance, which will help you establish your fundraising objectives, create investor decks and deal packs and learn how to differentiate yourself through brand, credibility and authority.
For access to the step-by-step course and downloadable resources, join The HMO Roadmap today!
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!