Raising Private Capital by Matt Faircloth

There are a lot of books on real estate investment out there. Some are good and some are bad, but one problem many of them share is that they most are very broad. In other words, they all tell you how to become a real estate investor in general. (As my upcoming book will as well, but it will be done better than all the rest so it should definitely buy it!)

The problem is twofold. First, by covering so much information (marketing, networking, acquisition, rehab, management, maintenance, etc.) each topic if unavoidably given only a relatively small amount of space. And second, many of these books start to become quite repetitive as you read more and more of them. Even very good books, like Brandon Turner's The Book on Rental Property Investing (again unavoidably) covers a lot of the same ground that The Millionaire Real Estate Investor by Gary Keller did.

Fortunately, BiggerPockets has lead the trend toward more niched themes for real estate investing books. This allows for deep dives into important topics that would otherwise get a relatively cursory and often redundant overview in your standard real estate investment book. And with that, I can finally turn to the subject of this review: Raising Private Capital by my friend Matt Faircloth.

The book is definitely focused primarily towards raising private capital for real estate investment, but should be helpful for raising private capital for other ventures as well. This is because Matt focuses much of his attention on how to find and persuade potential private lenders to become actual private lenders. And for anyone involved in real estate investment (especially those using the BRRRR strategy, like ourselves), raising private capital is absolutely essential.

Matt covers both those looking to raise private debt, usually to buy houses, and those looking to raise private equity to buy apartments and commercial buildings. Indeed, one of his key recommendations for finding potential lenders is similar to the best piece of advise my dad gave me when looking for private lenders; sit down with a pen and pad and set a goal for the number of names you can write down. As Matt puts it,

...I want you to take out a piece of paper and create your master core group list.
Step No. 1 - Write down the following headers:
- Friends
- Family
- Neighbors/neighborhood (this includes stores and restaurants you always go to)
- Coworkers
- College/graduate school alumni
- Groups and organizations you are a member of, such as:
    - Business networking organizations
    - Volunteer/philanthropic groups
    - Social groups
    - Real estate organizations (pg. 90)

That should get the noggin joggin'.

And then, of course, you write down anyone you can think of in those groups who might be a possible "cash provider" and start reaching out to them.

Matt also goes through the nitty-gritty of the how-to part of financing (trust deeds, title companies, syndications, the SEC, etc., etc.,) so the book makes for a good reference manual as you work your way through the process, especially in the early going. (Although, as he and I both note, you should always talk to an attorney about such things as well.)

And I should that this book is even a good read for seasoned investors who have already had success raising private funds. There were several nuggets I found which I hadn't thought of before, including finding people with equity in their home who can use a HELOC (Home Equity Line of Credit) to lend to you. Then they can pocket the spread between their HELOC interest rate (usually 4 or 5 percent) and the private loan rate (usually 8 to 10 percent). The big advantage a HELOC gives a cash provider over a traditional mortgage is they can lend to you exactly how much you need when you need it and only pay at those times,

If they [cash providers] don't borrow against the line, they have no monthly payments. When they do borrow, the payments are associated only with what they have out on the line of credit... Once they are in a deal, the carrying costs of that debt are low, and once the deal is complete, they can pay back their HELOC and wait for the next deal to come around.  (pg. 76)

This is a highly flexible and relatively low-risk method for potential lenders (or "cash providers") to lend you funds for your next deal.​

Now, perhaps I should have already thought of this, but it's sort of aside the point. The fact there were multiple nuggets in the book that I hadn't thought of attests to its thoroughness on the subject. I suspect most other seasoned investors will find several good tips as well.

And for new investors looking to raise private capital, there's far more than just a few nuggets!



​You can check out Raising Private Capital here as well as Matt's BiggerPockets' blog here and his and his wife Liz's Youtube channel here.