The Brita Effect: Filter Your Joint Venture Candidates Carefully [Landmines 6-10]
The Brita Effect: Filter Your Joint Venture Candidates Carefully [Landmines 6-10]

I took a short hiatus from the Joint Venture blog series last week with the announcement of the brand new Top BC Investment Towns research report, but this week I’m right back at it with part two and the next five joint venture landmines you must avoid.

Understanding your potential partners is critical when you’re pitching deals and looking for qualified investors. If you miss the mark, you might miss out on not only one deal, but also the potential for multiple deals with that person in the future. Don’t get left in the dust by wasting time – make sure you are laser focused on who and where you are devoting your time to when pitching the deal.

Click here to purchase a copy of “Real Estate Joint Ventures”

Click here for Part One of the 20 Landmines series.

Landmine #6—A lack of insight: You don’t understand where your JV partners will come from.

Review the REIN™ Circle of Influence. Joint-venture partners can come from all three levels in your Circle of Influence. But Level 1 candidates carry significantly less risk compared to prospects from Level 2 and 3. Ignore this rule at your peril.

Evasive action

Make a list of your Levels 1, 2 and 3 contacts. Try to identify 15 to 25 people who are at Level 1 and design a plan that targets those Inner Circle candidates first. Once you have developed JV partnerships, look at how you can reach out to Level 2 contacts. Track all of the names and revisit the list regularly. Your Circle of Influence changes over time. Savvy JV investors track those changes and act accordingly.

Landmine #7—Sitting still: You can’t attract more leads

Investors who step on the first six landmines are likely to step on this one, too. Generally speaking, investors who can’t attract more leads are looking in the wrong places!

Evasive action

Your list of leads can never be too long! Aim to cultivate new leads. Take a critical look at your marketing materials. Do your business cards describe you as a “professional real estate investor”? Make that a priority. Get yourself 500 business cards that have your name, phone number and e-mail. Don’t forget your website, if you have one. Hand these out to people you know.

Set goals for lead cultivation. How many people do you want to talk to about real estate investment on a weekly basis? Set your goal, make a plan to accomplish it, and then track your progress. Attend meetings, set up appointments, network and pursue direct communication. Letters and e-mails to get people thinking about your follow-up call or visit are critical. Following the principles of JV wealth attraction, assess what you’re doing to get people to invest in your deals.

JV Investor Insight: The best business card

Business cards can be tricky. But it’s not rocket science, and professional real estate investors never leave home without them. Go through the cards you’ve collected from others. Copy the things you like and head down to a business store to place your order.

No time? Stop making excuses. Make an appointment with yourself and get the job done!

Landmine #8—Wasting time: You think everyone’s a prospect

Potential JV leads are not prospects until they have been appropriately filtered to make sure they (a) have the money and (b) are people you want to be in business with. Be honest about the fact that you can’t deal with every lead that comes your way. You can, however, devise a plan to filter that information automatically.

Evasive action

An unfiltered lead is a suspect, not a prospect. Prepare an information package that’s easy for you to send to prospects. Include an Expression of Interest letter and a special report about why, where and how you invest. If the lead comes from your Inner Circle and you want to showcase your credibility as an investor, include important background information like a copy of Real Estate Investing in Canada 2.0 or 97 Tips for Canadian Real Estate Investors.

JV Investor Insight: Weed out the tire kickers!

Novice investors are sometimes overwhelmed when JV prospects ask for information. While the package you send is likely to evolve (and improve) with experience, knowing what you will send will save you a lot of time in the early days of building your portfolio.

Landmine #9—Prospects Renege: You aren’t Filtering your JV Candidates Carefully Enough

Every real estate investor, novice and veteran, has a horror story about dealing with enthusiastic JV candidates who turn out to be duds. Some of these people never planned to invest—even though they talked as if they did. Others won’t have the money, so their intentions are moot.

Evasive action

While it’s probably impossible to avoid this landmine completely, a quality filter will help you separate the winners from the losers. This is not harsh. You are in business to make money for yourself and other people. When people waste your time, it costs you and your partners.

Never let a prospective JV candidate skip your filtering process. Have them complete an investor questionnaire. If timing is an issue and you can’t conduct a face-to-face meeting, set up a phone appointment so you can go over the questionnaire informally.

Never confuse business with friendship. You can do business with friends, but that is not essential to the JV partnership. Set this relationship table carefully—and early. You want to work with people who want to work with you.

JV Investor Insight: Show me the money!

Work with money partners who can deliver what you need. Self-employed money partners may have more difficulty qualifying for a mortgage, especially if the lender can’t reconcile the difference between the incomes they say they can access versus the income they report to the Canada Revenue Agency. If someone claims $12,000 in annual income, they are going to have trouble qualifying for a loan on an investment property.

The same goes for a bad credit report. The bank won’t allow someone with a poor credit rating to borrow money. This isn’t news. It’s business.

Landmine #10—Confusion reigns: Identify the decision maker

We’ve all seen the good cop/bad cop routine on television dramas. This is where one officer appears to not care about the suspect being questioned, paving the way for the more compassionate officer to elicit a confession. The same roles play out in real estate transactions with money partners. Here, one partner appears to want to make the deal and then another partner walks in and tears up the deal (hoping for a better offer).

Evasive action

Make sure your filtering process nails down the facts about who has the authority to sign the papers that will get you the money to make a deal happen. Does a spouse need his or her partner’s approval? Are there other shareholders you need to bring onboard before a deal transpires?

Asking this question in your formal filtering questionnaire ensures a prospect can’t claim ignorance down the road.

JV Investor Insight: Vet your prospects

If you’re not sure how to vet your prospects, make it your business to learn. Read Real Estate Joint Ventures: The Canadians Guide To Raising Money And Getting Deals Done, partner up with a successful mentor or join a real estate investment group where you can learn from experienced investors.

Click here to purchase a copy of “Real Estate Joint Ventures”

The Brita Effect: Filter Your Joint Venture Candidates Carefully [Landmines 6-10] was last modified: May 30th, 2012 by maddy
 

4 Responses to “The Brita Effect: Filter Your Joint Venture Candidates Carefully [Landmines 6-10]”

Joey Ragona says:

November 16, 2011 at 8:26 pm

Filtering is probably the most important in my mind Don, and so many investors worry about annoying people with questionnaires etc and having them turn away.  The entire REASON to filter is to find out all you can about your partner, their values, concerns, characteristics and so on.  If they are unwilling to cooperate at this infancy stage, imagine what will happen later on?  Trying to “serve” the entire market of prospects is a natural way to disaster and burn out.  Thanks for all this great insight !!!

 
 
 

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