Hey Bridger here! Today I wanted to talk about an easy way to get started in the fund world and build momentum for yourself.
Now I’ve talked to people that say:
“I want to start my private equity firm right now… but I don’t have any experience.”
You are starting from nothing- and you want to go start buying multi- billion dollar companies and be a private equity fund manager??
I say, hold up one second. I don’t know if that’s that’s going to happen right away. However, there are easy, small funds that you can go after first-
- start by being a small fund manager
- build confidence in yourself
- build out a team
- build out a track record
- build up an investor base and then slowly start working your way up
Every Entrepreneur says,
‘Woah. I have this amazing idea. We’re going to make so much money and it’s going to be freaking awesome.’
And then nothing happens, right?
Ideas are a dime a dozen. Execution of those idea however, are not so common. Pro tip? Make it as easy as possible for yourself at the beginning.
When I started my first fund I was said to myself,
“Hey, I’m just going to go get a couple quick wins at the beginning.” I’ll prove the model myself, give myself momentum to keep moving and keep rolling. And then I can get bigger and bigger over time.
And that’s the approach I took. I’ve started a number of businesses in my life and the ones that started with these massive ideas that required me to raise tens of millions of dollars over time? -They never ever worked out.
You’re probably saying to yourself right now – Well that is great and all Bridger, but I’m different. I can hustle forever. I wake up at 6:00 AM every day and can go all day long. Well, you say that at first, but motivation wears off over time if you aren’t getting anywhere!
BUT, If you can keep getting small wins and small wins and get bigger wins and bigger and bigger and bigger, your confidence builds up. People trust you. They want to work with you at that point.
I want to give you an easy way that I found to go out and launch a fund to get in the space. How? I started small.
I started a company issuing loans- small short-term bridge loans. When I talk about lending, there are a lot of different things you can do, but I’m going to walk you through one or two scenarios to get your mind rolling.
Ask yourself: Where can I interject money that will help the business grow.
So, together with a lending company we started looking at real estate lending/loans. You can make a lot of fairly easy money in real estate, but you have to be smart.
I actually was talking to a friend who has flipped over 300 houses in his lifetime! He had said something that caught my attention though-
“The funny thing about flipping houses is -You know who makes the most money? The lender- The lender who gives me the capital to flip the house. The person who barely did anything ended up making most of the money! If you could be on that side of the table, that would make all the difference.”
That was all I needed to hear. To explain how it works- let’s say there is a house on the market for $200,000 to buy. Some thinks that with a little work they can sell it for $250k but they don’t have the money- so they come to me!
I’ll usually say- Hey, I’ll give you $170,000 today. You’ve got to put a little of your own skin in the game, say $30k- But I get first position on the house. Meaning: if you don’t pay me back the money, or if something happens, you can run to The Bahamas with my money, but I own the house.
I’m not a real estate expert, but I believe if I took that house today, I could probably sell it at discount for $190k. And it’s still make $20k profit.
Okay. We set up the loan at six months. And I give him the $170k- he goes and he puts the $30k down and does the renovations.
Another good option if he doesn’t have the $30k, but needs money to renovate, is too issue a line of credit. So I’ll issue him a $30k line of credit that can be drawn down at $10k at a time.
I’ll then do weekly or monthly checkups before they draw down more money on that line, to ensure that they are doing what they are saying.
So after everything, regardless of the structuring, I’ll give him $170k and in six months and one day, all of it’s due back.
With a $30k revolver plus the $170k loan is a total of $200k loaned out for six months.
He will renovate the house and then(if all goes well) sell that asset for about $250k. He’s going to pay me back 200 grand plus a little interest. So $214k in six months. And tada! I just made 14 grand doing barely anything. Kind of like a hard money loan, right? This type of lending is typically referred to as bridge loans.
It is a simple and easy way to get started. There are so many people doing real estate that need money for a down payment but don’t have it, but they really want to get started.
If you tell these people that you are interested in investing and that you have money… they will come flocking to you.
You are probably thinking,
Now Bridger, I don’t have the money. I don’t have $200k to go set up a syndication.
Go raise the capital- or in other words, be the middle man!
These are the perfect deals. They are safe & stable investments because if the deal goes bad, you just take the asset, sell at a discount, and you will still make money!! These are the easiest type of deal to sell investors on.
You do that twice a year you make anywhere between a 14%-18% return on these hard money loans. It’s amazing!
Remember: Time is one of the key Contributors to your IRR. If you do a deal that gives an 11% return in 6 months- that’s really an annualized return of 22%.
In my fund with loans, they’re typically not backed by real estate. But they are usually for only issued for about 45 days. And I usually make back about 20% on my money in those 45 days.
Can you imagine the IRR on this? This is a great way to get started because it then gives you credibility.
I do super small loans. My loans are like $5k-$15k a piece. And it was so easy for me to get started.
I started small and then I’ve slowly scaled up and now I’m able to do some massive real estate deals. On the larger deals, you don’t have to do it alone. You can start pooling money together!
Someone will come to me saying
” Bridger, I need a million dollars.”
I respond by saying, ‘I’ll give you a million dollars. If you can provide a property, that’s worth $1.3 million. Show me the appraisal and additionally, I want to be the first position on that property.’
So they show me the appraisals for a cabin or a beach house in California and boom.
Always make people give up collateral. I can take first position lien on their house at $1.3 million and it covers my risk of issuing the money.
If they don’t pay back, or it ended up falling through, I could take their house.
Fortunately, they did pay us back! They paid us back $1.2 million after the period and their deal went through. I just made $200k in 5 months!!!
Now you are probably wondering- how do I find deals?
Start telling people you have money. Start saying that you will lend if people have collateral on real estate or maybe a car collateral or machinery, Whatever it is. I’m looking for house flippers out collateral.
You can just repeat this pattern and get bigger and bigger until you start doing $10 million deals right?
Now, this path isn’t for everybody… but it has definitively worked for me.
|
By the way, if you want a free strategy session with one of my coaches, go to www.investmentfundsecrets.com/free-call today!
Or if you want to learn more go sign up for my free webinar at Investment Fund Secrets!
Informative article!!