Private Money Partnering

Evaluating The Money Momma/Money Man

Chapter H (continued)

Evaluate As A Business Partner
Evaluate At Year-End

Forms:
Application For Investment
Earnest Money Agreement
The Risk Quiz

Business Sense

Do they have it? How have you evaluated that? You need someone with business sense. What if you go to someone who is a schmuck with money and the project doesn't go well? An absolute schmuck is going to sue you and then you sure don't have somebody that can work with you to get the project completed. You’re better off dealing with the strongest and best possible people, since in the long run you'll then be able to handle the bigger deals and the more complex deals.

Accessibility

I want somebody who is accessible, somebody who is not flying off to wherever at the drop of a hat. If they’re not accessible, I want power of attorney. In other words, I want to know where the source of funds is going to be.

Staying Power

I want somebody with staying power, who can stay in it for the long run when things go wrong, when things don't work out quite like you think.

Friends With Money

I want somebody with friends with lots of money. And it’s true, people with money usually have friends with money.

Honesty

I want somebody who puts their money where their mouth is. A number of people have said to me, “Well, I’d love to do a deal. Just let me know the next time you have something.” And then you approach them with a good possibility, and where are they? You find out they weren't serious, they weren't real. The Earnest Money form is a mechanism for making it real.

You may ask, “Which comes first, the money person or the deal?” It depends. I'm always looking for deals and I know I have people who will act quickly on them, or I have someone looking for something specific and I'll look on their behalf. But I decided that I cannot waste my time with people who are not real. The earnest money form says, “I'll do what I say I'm going to do; give me your earnest money to show me that I should invest my time. And based on the application if I can't provide you with what you wanted, at least two possibilities for you in the next three months, I'll refund your money.”

Of course, we know that if you look hard, you could find three deals in the next three weeks, or a week. In any case, if I bring you what you say was criteria, and you don't’ want it or you’re busy, I keep earnest money. In other words, all the deal makers should value their time. How much earnest money should you collect? That would probably depend on the size of the total investment, but I would think at least $500 or $1,000. Or you could ask the money investor what they would feel comfortable with, which would be information for you in managing the joint venture relationship.

Comfort Level

I want someone comfortable with how real estate investments work, because real estate is not particularly liquid.

Relief Capacity

I want someone who can bail me out if needed, both in terms of money and support.

Evaluating The Money Man / Money Momma - Chapter H (continued)