How to Raise Capital for Real Estate Investments

Knowing how to raise capital is an important part of the real estate investment process. Relationships are key to growing your net worth, and when you need to raise money, it is absolutely crucial.

Since I jumped head-first into this business, I have spent a lot of time thinking about these relationships and learning how to effectively raise capital for real estate.

How do you find high-net-worth individuals? How can you do your part to ensure high-profile investors will return your messages? What needs to be done to raise private money with a 506(b) and 506(c) offering? Which routes should you take to raise more than $1 million for your first apartment syndication?

Finding the answers to these questions, among others, can go a long way toward obtaining the money you need to reach your financial goals.

Below, you will find more than 20 articles detailing various ways you can figure out how to raise capital. Take some time to dive into these posts, and I promise you will be well on your way to constructing a plan that makes sense for you.

When you have finished your research, I encourage you to check out other sections of the blog, which can help you understand what it takes to build your own team, gain financial independence, gain insight from celebrity investors, and plenty more.

I also encourage you to check out my podcast, Best Ever Show, the longest-running daily podcast about real estate investing, as well as both volumes of my book and my own mobile app, which is available on Apple and Android devices.

And if you feel ready to start investing, do not hesitate to reach out. Click here to learn how you can schedule a planning session and start investing with me today.

location on a map

How to Find Private Money Regardless of Where You Live

Last week we closed on our 12th property and our company portfolio is now valued at more than $250,000,000 (click here to see the lesson I learned on my last deal). Since this quarter billion dollar mark is sort of a milestone I thought it would be interesting to look at where my potential and current investors live to see if there is anything interesting we could learn from it.

 

Yes. Yes, there is.

 

Before we look at the stats, let’s define a couple things.

 

I define Potential Investors as investors with whom I have a relationship, are accredited and have expressed interest in investing with me but have not invested yet. Current Investors are accredited investors with whom I have a relationship that are currently investing in my apartment deals.

 

Now let’s dig into the stats of my investor database.

 

Top 5 Cities with the most Current and Potential Investors:

  1. New York City: 18%
  2. Dallas-Fort Worth: 10%
  3. Los Angeles: 9%
  4. Houston: 5%
  5. San Francisco: 4%

 

So, out of all my Current and Potential Investors across the United States, 18% live in NYC, 10% live in DFW, etc. This makes sense for a handful of reasons.

 

First, they are large cities (ex. Population of NYC is 8M+).

Second, I lived in NYC and DFW so have family and friends there.

Third, our properties are in Texas so DFW and Houston investors have a level of familiarity with the market they are investing in. They see the same thing we see in terms of population growth, job growth, economic outlook, etc.

 

Now let’s look at the Top 5 cities with the most Current Investors (removed Potential Investors).

 

Top 5 Cities with the most Current Investors:

  1. New York City: 18%
  2. Dallas-Fort Worth: 11%
  3. Los Angeles: 6%
  4. San Francisco: 5%
  5. Tied- Houston, Miami, Austin and Seattle: 4%

 

Ok, still making sense and for the reasons stated above. Large cities, places I lived, have family and friends residing, and, in three cases, are in the same state as our multifamily deals (Austin, Houston and Dallas-Fort Worth).

 

But here’s where the wrinkle occurs.

 

Let’s look at all the equity my investors have invested in my apartment syndications and what % of the total invested dollars is attributed to each city where investors live.

 

Top 5 Cities with % of Investment Dollars in Deals

  1. New York City: 18%
  2. Cincinnati: 13%
  3. Dallas-Fort Worth: 11%
  4. Miami: 7%
  5. San Francisco: 6%

 

…what in the Cincinnati just happened?!?!

 

Cincinnati isn’t a top 5 city of mine in terms of total # of Current Investors and/or Potential Investors.  In fact, to dig deeper Cincinnati only has 2.5% of my Current and Potential Investors living there. And only 3.5% of my Current Investors living there.

 

I am not from Cincinnati and, in fact, have only lived here for approximately 3 years. So, why does it represent 13% of all the equity invested in my apartment deals? The short answer is because I am actively involved in the local community. But that short answer doesn’t do the real lesson learned justice so let me elaborate more.

 

Here’s how I did it:

 

  • Host a local meetup. The first month I officially moved to Cincinnati (because my wife is from here and she’s the love of my life so I followed her to the city and now we’re here for the long-term) I started a meet-up. If you have time to ATTEND a meet-up then you have time to HOST a meetup. It doesn’t take that much more effort to HOST than it does to simply ATTEND and the rewards for HOSTING are exponentially greater. I did this to make friends in Cincy. I didn’t do it necessarily to generate investor relationships but that’s exactly what it did.
  • Host Board Game and Drinks nights at your house. This Friday my wife and I are having friends of ours, some of which are investors, come over to our house for a night of board games, drinks and dinner. Hosting events at your house as couples, along with couples, is fun and goes a long way to continue to build your friendship with those locally.
  • Consistent online presence that has an interview component to it. Or, in short, my podcast. I interview someone Every. Single. Day. on real estate investing and have released an episode for the last 1,197 days. There are multiple benefits for doing this and I won’t get into all of them but I will focus on one of the benefits and that is that every time I interview someone they then want to share it out to their audience which helps expand my reach. And, if I interview people in my local market that introduces new, local connections to me which can then turn into business relationships since I get to have dinner, drinks, etc. with them. Here’s a post I wrote on the step-by-step process to create a real estate thought leadership platform.
  • Volunteer then become a board member for that non-profit. I had no intention to meet investors when I started volunteering for Junior Achievement. But I have since realized that by volunteering for a cause I feel strongly about (Junior Achievement helps kids in underserved communities learn financial and entrepreneurial skills) I was able to connect with like-minded people and then become friends with them. I got on the board for JA in Cincinnati and have built friendships with people on the board which then turned into business relationship where they invest in my deals. You could take the same approach but make sure you genuinely believe in the cause and are doing it for the right reasons (i.e. helping further the cause’s mission) vs trying to grow your biz, otherwise it will fall flat and won’t be fulfilling for you.

 

By doing these simple things, you can build an investor network in your city that is perhaps stronger than any other network. When people personally know you they are more likely to trust you, recommend you to others, and invest larger. The beauty in this is that it’s helpful for you regardless of where you live.

 

Cincinnati is approximately the same size as St. Paul, Minnesota, Toledo, Ohio, Stockton, California and…Anchorage, Alaska. So, if you live in a city that is larger then there’s really no excuse to not having all the capital you need for your deals. If you live in a city that’s smaller than Cincinnati (300k population) then you can still apply these principles although it might require you to host your meetup in the next largest city next to where you live, that way you get better return on your time.  Regardless, apply these principals and you will quickly build a local investor network than can help you fund your deals.

 

In the comment section below, tell me how you will implement these proven money-raising tactics in your real estate business.

 

Make sure you subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

                       

If you have any comments or questions, leave a comment below.

 

Greek-inspired building

The 3 Pillars for Building Relationships with High Net-Worth Investors

Any real estate investor can attest to the fact that relationships are one of the keys to growing a business. As an apartment syndicator myself, one of the main ways I have directly benefited from relationships has been my ability to meet potential passive investors.

 

Being a key to our success, we should be actively seeking out tactics and techniques for sharpening our relationship building skills. And if we are raising money for our deals, this should be one of your top priorities – how can we meet potential passive investors?

 

Jason Treu is an expert in this field. He is an executive coach who specializes in teaching his clients how to strengthen their relationship building skills. Through his coaching, his clients have built relationships with industry titans such as Tim Cook, Bill Gates and Richard Branson. In our conversation on my podcast, Jason provide his expert opinion on where to find high net-worth individuals and outlined his three pillars for building relationships with them.

 

How to Find High-Net Worth Individuals?

 

Building relationships, like building a business, is all about strategy. You need to have a plan, which starts with knowing where to go to maximize your chances of meeting the high net-worth individuals or entrepreneurs who can help you along your real estate journey. Jason said, “I’ve found through a lot of research [that] some of the best people to meet are in charities and non-profit groups.

 

Not only are these places where the people in attendance will have money, but they will also likely be altruistic. If it is a nonprofit or a charity, the whole premise is built around giving. “When you’re around people that have the mindset of giving and you build a relationship,” Jason said, “they’re much more open to helping you.”

 

Jason recommends Googling terms like “young professional,” “charity,” and “non-profit,” building a list of organizations and places in your local market and attending the ones that aligns with your interests the most. Go one or two times and determine if you like the people, the cause and spending time there. If you do, get more involved. If the answer is no, find another one and repeat the process.

 

I can back up Jason’s advice with my personal experience. I’ve found that volunteering at local non-profits and charities is an effective, long-term approach to building relationships with high net-worth individuals. And I’ve raised millions of dollars through these relationships. You can read more about my specific strategy here.

 

Additionally strategies that I have found to be an effective ways to meet high net-worth individuals is to attend real estate conferences (more on this below), create a thought leadership platform (to build relationships in your sleep), get interviewed on other people’s thought leadership platforms and start a meetup group.

 

Now that you know where to go, what are you supposed to do when you get there? How do you approach the conversations? Instead of winging it, follow Jason’s three pillars for successfully building relationships: 1) rapport, 2) likability and 3) trust.

 

1 – Rapport

 

First, you need to build rapport. To build rapport, you need to focus on your non-verbal and verbal communication skills.

 

Strengthening your non-verbal skills – like body language – is time intensive, but well worth the effort. Amy Cuddy, a social psychologist, specializes in non-verbal communication. Here is her TedTalk, where she introduces her ideas. For a more in-depth explanation, Jason recommends reading her book “Presence.”

 

Effective verbal communication is all about asking the right questions. When meeting someone for the first time, instead of the standard “how are you doing?,” Jason advises that you ask questions like “what’s the most exciting thing that’s going on in your life right now?” or “what are you passionate about outside of work?” or “what projects are you working on that you’re passionate about?”

 

Jason said that asking these types of questions will “connect them to their emotional side, and we’re all emotionally-driven people.” Have them talk about the thing in which they’re most interested. Then, draw something from your experience or interests to find common ground. Jason said, “that person will instantly like you significantly more because you found some common ground and you’re discussing something that they want to discuss, not what you want to discuss.” At that point, the conversation will flourish naturally.

 

2 – Likability

 

The second pillar is likability. The easiest way to get the other person to like you is just listen. It’s not rocket science. “If you just look at someone and practice being present and don’t worry about who else is walking behind them, around them, you’d be amazed at how the tenor of your conversations and interactions will change, because they can tell when you’re distracted in the back of their mind.”

 

This pillar is simple – when having conversations, act as if the person sitting or standing in front of you is the most important person in the world. Listen intently and then, following the advice in pillars 1 and 3, build rapport and trust from there.

 

3 – Trust

 

Finally, the third pillar for building relationships is trust. The key to building trust is by showing them that you care. The most effective way to show that you care is by adding value.

 

Jason said, “You add value in the conversation in ways by suggesting things like maybe there’s a book, maybe there’s a person you can introduce them to, maybe you can say ‘I may have some ideas, let me follow up’ and then follow up with some ideas. You can also introduce them to people at the event.”

 

For those of you who are extroverted (or want to become extroverted), you can follow one of Jason’s favorite ways to add value to others, which is specific to events or conferences – he introduces strangers to other strangers. He will start a conversation with a stranger and, after asking the questions outlined in the section on rapport, will get the attention of another stranger nearby and say “Hey! You two should meet each other. I think you’d get along.” In doing so, next time he runs into either one of the strangers, they will introduce him to any one they know, or even other strangers. With this tactic, two relationships can turn into 10 or 20.

 

Another level to this approach is to invite a group of strangers out for a meal. Again, this is specific to an event of conference, but it could also work at a charity or nonprofit event or meeting too. “[My] other option is inviting people to go and get together for brunch, for dinner, for lunch, and just inviting a bunch of people along, because everybody wants to meet new people.”

 

Even if nothing comes out of the actual meal (which is unlikely), by being the influential hub that brought all these people together, they will be more open to hearing your ideas and will likely return the favor by inviting you to other events. One of Jason’s friends used this tactic and met the nephew of Jerry Jones, the owner of the Dallas Cowboys. Now, he gets invited to a few Cowboy games each year and sits in the owner’s box!

 

What is your most effective tactic for building relationships? Where do you go and how to you approach conversations?

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

bunch of money in hands

Top 5 Essentials for Raising Private Capital

Written By David Thompson, Thompson Investing

 

After 8 deals and $13 million raised in 18 months, I condensed my top ten tips to five essentials for successfully raising capital.  I continue to learn new things on every deal, but this is the best of the best so far.

 

If you can master the art and skill of raising capital, you have a big advantage.  It’s one of the top 3 skills in demand in this highly competitive and increasingly complex world according to Cal Newport in his book Deep Work.

 

Everyone seems to need capital to grow including startups, businesses, communities, nonprofits, you name it.  Even companies I’ve talked with that have a ton of experiences and rich capital sources are interested in talking with me because at the end of the day, it’s just human nature to grow.  A small firm can also negotiate better win / win terms from the operator’s standpoint versus wall street private equity that often may negotiate less than favorable terms with them.

 

Companies either want to grow bigger, faster, or take advantage of opportunities that often come in bunches instead of at systematic intervals.  Lack of capital stops ideas, companies and people from growing.  If you focus on this one skill you will have folks wanting to partner with you in a variety of areas.  Your goal will be to stay focused, establish key relationships with a few very experienced operators, build your reputation and network of investors by honing your craft and providing them with sound and logical opportunities while taking care of their needs.  So, here are my top 5 essentials for being successful in this area.

 

1) Partner with experts

  • You increase your experience and credibility faster when you are working with partners that are experts in what they do
  • You will be sharing good deals with investors in strong markets behind an experienced team
  • Your learning and development accelerates because experienced partners can share their knowledge. You’ll avoid newbie mistakes that can harm your reputation
  • Your brand becomes more known and credible building on an experienced partner’s track record

 

2) Be Yourself  / Authentic

  • Focus on education with investors as the primary objective
  • Don’t sell or appear needy. You have something that investors want
  • Being knowledgeable increases confidence and the investor will feel that you know what you are talking about. You will be more relaxed and natural when sharing the idea with investors.
  • Keep the message logical and simple. Frame the opportunity around a good market, a good deal with an experienced team behind it.  Share with them what’s driving value creation.
  • Prepare for investor questions: review my blog on 25 FAQs

 

3) Play to your strengths

  • Analyze your network and know where your investors are coming from
  • Focus on getting stronger in the areas of your strengths. Pick the top two areas you are finding most of your investors and develop a more comprehensive plan to further develop those areas
  • Don’t waste time in areas that aren’t working or are not natural paths for you
  • Bonus: Read StrengthsFinder 2.0 (Tom Rath) to help you understand the importance of playing to your strengths
  • Return customers and referrals are 85% of my business now so understand it gets easier over time

 

4) Raise min 25% more than you need

  • Know investors may change their mind for a variety of legitimate reasons such as pending job uncertainty, health or family emergency, unable to get liquid in time, etc.
  • Don’t be surprised when investors change their mind. Be mature and empathetic with the investor
  • Focus on building that long-term relationship so they are ready next time
  • To avoid big investor decommits, take half and put the rest on backup reserve in case you need it
  • Demand and interest increases when folks are put on backup. Psychologically, folks want in more when they can’t get in.  They assume they are missing out on a great opportunity

 

5) Develop a thought leadership platform for long term success

  • Building your brand requires a long-term strategy of developing content and knowledge share
  • Create good content for free and focus on educating others to increase awareness of your brand
  • Thought leadership ideas are blogging, podcast interviews, newsletters, videos, special reports, website, online forum or meetup group participation or start your own meetup group.
  • Most of my new leads today come from my thought leadership platform

 

In summary, building a foundation on these five essential factors will accelerate your capital raising efforts and enable you to add significant value to the partners you work with in your business while building an investor base that has confidence in the ideas you share with them.

 

cash in hand

5 Steps to Raise over $30,000,000 for Apartment Syndications


How do you raise private capital from high net individuals to invest in large multifamily deals? Well, that question assumes that 1) you have high net worth individuals in your network and 2) you know how to syndicate large multifamily deals. If you are like most entrepreneurs, neither of those assumptions are true. So, the real question is, how do I create a network of high net worth individuals, and how do I learn how to syndicate large multifamily deals?

 

Dave Zook, who has closed on over 2,800 units since 2010, has raised well over $30 million for apartment syndication deals. But, at one point he was like you. He didn’t have the connections, nor did he know how to invest in apartments. So, how did he get to where he is today, and how can you replicate his success?

 

In our recent conversation, he condensed his journey into a five-step process to raising millions of dollars from private money investors.

 

Related: How Do I Know If I’m Ready to Become an Apartment Syndicator?

 

Step #1 – Build a Reputation

 

Before even entertaining the idea of raising money for deals, Dave was already investing in multifamily utilizing his own capital. Also, he was running a sales and marketing company. Due to these successes, he was known by others in his local market to be a savvy entrepreneur who could effectively manage a business. “Having a good reputation in your local market is a great start,” Dave said. “We’re well-known in the community for the business we’ve done there.”

 

A reputation of previous business success, even if it’s not in apartment investing, is a requirement prior to raising money. No one will entrust you with their hard-earned money without having the confidence that you can navigate the syndication niche.

 

Related: How a Wannabe or Experienced Investor Can Obtain a FREE or PAID Real Estate Education

 

Step #2 – Tell Your Story

 

After building a business reputation, you want to locate the high net worth individuals in your current network and tell them your story. And if you are thinking to yourself, “Joe, I don’t have any high net worth individuals in my network,” then you need to continue working on that reputation. When you are performing at a high level, in either real estate or business, you will cross paths with these potential private money investors.  For example, prior to becoming a syndicator, I was a VP at a New York City advertising firm. When I decided to raise private money, people whom I created relationships with in that industry were some of my first investors, and they still invest to this day. They had seen my success in business (the advertising industry) and in real estate (I had purchased multiple SFRs and taught classes on how to invest in SFRs).

 

Similarly, Dave said, “what really helped [me] was I was able to show them what I was doing. I started in this business investing in multifamily on my own for myself. I had a tax problem. I needed some tax shelter. We got creative on that side, so I was able to approach some of the people that I knew that had some investable income, and I just told them my story.”

 

So, after building your reputation, use it as a selling point to the high net worth individuals you met along the way.

 

Related: Four Tips to Successfully Sell Yourself in Real Estate Investing

 

Step #3 – Get Investor Commitments

 

Once you’ve built your reputation and begin telling your story high net worth individuals, get them to commit to investing in a deal. For example, Dave’s first investors came from the members of a local bank’s board in which he was invited to join. He said, “I was invited to sit on the board of a local startup bank… I was listening to conversation that went something like this – These guys were talking back and forth, and I knew most of these guys around the table, about a dozen guys. They were talking about investing in this bank and wanting to know if it was a good idea, a wise investment. I heard conversations like, ‘Well, you may not see a return for 5-7 years, but it’s better than putting our money in a CD.’ I was just blown away. I was amazed at the conversation. I got to looking at what I was doing in the multifamily space and got thinking, ‘Man, how can I add value to these guys?’ It was about the time I had bought a couple hundred units on my own. I was sort of coming to the point where I was running out of cash. I had to slow down. Then I talked to another friend of mine who was on the board as well. I ran the idea by him about syndicating and teaming up with these guys. He thought it was a great idea. For the next deal, they come along.”

 

Due to his business reputation, he was invited onto the board. Due to his previous real estate experience and successes, he had a compelling story to tell. With this combination, he was able to raise private money for his first syndication deal. “I needed $850K to get the deal done,” Dave said, “and I went to see some of these individuals. Some guys that I knew were able. It was about getting around the right people and about having a good relationship in the community, and being able to go out there and talk to people that knew and trusted me.”

 

Related: A 5-Step Process for Raising BIG Capital for Multifamily Syndications

 

Step #4 – Increase Investor Network Through Referrals

 

Once you gain your first investors and complete a deal or two, as long as those deals were a success, your current investors will refer you to their other high net worth friends. From there, it’s a snowball effect.

 

Dave said, “If I would pinpoint and go back to each one of those [investors], a lot of the guys were from referrals. People that invested with me and then said ‘Hey, I’ve got a friend,’ and they’d give me a third-party endorsement, and we ended up doing a deal together. One thing led to the next, and the next thing you know they’re a really faithful investor.”

 

Related: Three Ways to Cultivate Word-of-Mouth Referrals

 

Step #5 – Retain Current and Referral Investors

 

Finally, once you receive a new investor, either your first investors or through referrals, retain them by continuing to syndicate successful deals. As long as you consistently provide your investors with a solid return, you will not only continue to receive more referrals, but those current and referral investors will come back deal after deal. For an example, Dave said, “We [recently] closed a 373-unit building. We’ve raised $3.5 million. About 85% of those investors had invested with me on other deals. So, they were current investors and just coming back for another round.”

 

Related: 16 Lessons from Over $175,000,000 in Multifamily Syndications

 

Conclusion

 

For those aspiring entrepreneurs who want to become multifamily syndicators, starting from scratch, the 5-step process is to:

 

  • Build a business or real estate reputation in your target market
  • Convey your reputation to high net worth individuals in your network through storytelling
  • Get investors to commit to your next deal
  • Increase your number of private money investors through referrals
  • Retain your investors by consistently providing a solid return on investment

 

Related: 6 Creative Ways to Break into Multifamily Syndication

 

 

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large apartment complex real estate investment

4 Legal Ways to Get Paid Raising Capital for Apartment Deals

 

A question I receive all the time is how can I make money from connecting syndicators with high net worth individuals? Unfortunately, it is not as simple as going out into the market and just doing it. There are rules and regulations around the money-raising business, and the main issue is making sure you aren’t performing broker dealer activities. If you are doing so without the proper certification, you are breaking the law.

 

Amy Wan, a crowdfunding lawyer who was named one of 10 women to watch in the legal technology industry by the American Bar Association Journal, is an expert on the rules that regulate the money raising industry. In our recent conversation, she provided four ways you can legally raise money without being a broker or a dealer.

 

Disclaimer: The purpose of this blog is educational purposes only. This is not legal advice. Consult with an attorney before taking any action!

 

What is a Broker Dealer?

 

There are four things that regulators look at when determining whether someone is engaging in unlicensed broker activities. Amy said those four things are:

 

  • “Are they taking transaction-based compensation? Transaction-based compensation is basically payments based on the transaction amount – how much money they’re bringing to the table. [For example], commissions, straight up commissions – that’s definitely transaction-based compensation.”
  • “Are they soliciting or going out and trying to find potential investors?”
  • “Is that person providing advice or engaging in negotiations? Are they helping to structure this deal in any way?”
  • “Do they have previous securities deals experience or history of disciplinary action?”

 

If you are involved in the activities outlined above, you are engaging in broker dealer activities.

 

Assuming you want to raise money without getting your broker dealer’s license, here are four options to pursue.

 

#1 – Become the Issuer

 

As a broker dealer, by definition you are selling securities to other people. So one option is to sell securities to yourself by becoming a part of the issuer. Amy said, “If you become part of the issuer, and what that means is you’re not just raising money, you need to be doing other things that area a little bit more day-to-day. But if you are part of the management or the GP or whatever it is who’s the active sponsor, then suddenly you’re not selling securities for others, you’re selling securities for yourself.”

 

The key here, and to most of the other options I will outline below, is to perform additional duties on top of raising the money. Amy said, for example, “maybe the guy helps them set up their bank account. Maybe he advises them on what strategies they should use for student housing, or any other area that maybe he can contribute. Maybe he’s helping out with property management, or helping with monthly distributions. Something that’s not purely just the raising capital. If he is involved actively in some of the day-to-day AND he’s raising capital, suddenly we’re not raising money for other people. We’re raising for the money for ourselves and that’s okay.”

 

Related: 6 Creative Ways to Break Into Multifamily Syndication

 

#2 – Give Class B Interest

 

Your second option is similar to the first, but instead of being a part of the issuer or management, you’re a part of a separate entity. The syndication can be structured with two classes of ownership interests. One is class A, which is for the investors, and another is class B, which goes to you.

 

When following this strategy, Amy said, “instead of them being a part of management, they’re not actually a part of the owner or the issuer anymore. They are a separate entity. You are giving them some of the class B shares, even though they’re not actually part of the management.”

 

However, just like option #1, you want to perform additional duties on top of raising money, and the compensation cannot be based on how much money was raised. “If you give a guy maybe 5% of whatever the class B interest is, if you make it not transactional-based compensation – maybe he gets 5% regardless of whether he brings in a million dollars or a hundred thousand – that starts looking a lot less like being a broker dealer,” Amy explained.
“And again, just as with the last example, even if they’re not a part of the management, it’d be nice if they could provide some sort of additional service. Maybe it’s them personally guaranteeing the loan. So even if they’re not bringing capital, they’re helping you get capital from the bank because they’ve signed the loan documents.”

 

#3 – Charge a Finder’s Fee

 

For a more creative option, you can charge a finder’s fee. However, just like the previous two options, you need to be careful to not tie the fee to the amount of money raised so it’s not transactional-based compensation. It should be a flat fee.

 

You also need to be careful when soliciting investors, which applies to all four options. Amy said, “when we’re soliciting investors, what we don’t want to do is to pre-screen or to recommend an investment or anything of the sort. But if it’s a mere e-mail introduction to someone who’s just interested in learning about multifamily apartments generally, and the person happens to know that this guy also happens to be interested in investing in real estate, that on its face is okay.”

 

When doing investor outreach, you don’t want to say something like, “Hey, Joe has this amazing 250-unit apartment complex that he’s raising five million dollars for. You should take a look at this.” You want to do soft introductions and nothing more.

 

#4 – Become a Consultant

 

The last option that Amy sees a lot is to negotiate with the issuer to become their consultant. And again (sounding like a broken record), the compensation structure cannot be based on the amount of money raised.

 

As a consultant, Amy said, “they’ll sign a consulting agreement. The consultant has to do a number of things. One of them could be going out and helping to raise capital or make those introductions. But it has to be that this consulting agreement is not merely raising. What we’re paying the consultant is not based on how much capital this person brings in, and as is the general theme here, they should have some sort of other job too.”

 

Conclusion

 

In order to make money by raising capital for apartment deals, you must avoid performing broker dealer duties. Your four options are:

 

  • Become part of the issuer
  • Give class B interest
  • Charge a finder’s fee
  • Become a consultant

 

Finally, before doing anything, run your plan by an attorney. Amy offered to provide advice or connect you with an attorney. You can find her at www.bootstraplegal.com.

 

Related: 4 Skillsets Needed Prior to Raising Private Money for Apartment Deals

 

 

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email messages on a smartphone

Why You’re Not Receiving a Response When Messaging a Big-Time Investor

 

If you want to meet with an experienced, big-time investor, simply sending them a message on BiggerPockets or an email, for example, and inviting them out to lunch, coffee, or a phone call isn’t the best approach.

 

But why?

 

That approach might work for real estate brokers or newer investors because offering to grab a coffee with them is fulfilling a need. If the real estate broker is interested in gaining you as a client, they can accomplish that by accepting your invitation. For the newer investor, every interaction they have with a fellow real estate professional can lead to an opportunity, no matter how small, that will have a significant effect on their business. And I am sure they would both appreciate the free coffee or lunch.

 

However, if you want to get face-time with a more seasoned investor, don’t expect to do so without offering something more in return. Of course, there are exceptions, but typically they don’t need someone paying for their coffee. And if the purpose of the meeting is for you to pick their brain, they really won’t be benefiting from that either. Also, the more successful an investor is and the larger their portfolio, the more coffee and lunch invitations they are receiving. Maybe you catch them at the right time and they accept your invitation, but most likely, they will decline because they have much more important things to do with their time. Therefore, you will need to approach them at a different angle.

 

Chris Tracy, who has been active in the world of real estate for five years, ran into this problem. He was ready to make the jump into the big leagues (from small residential to large multifamily investing), which required connecting with big-time investors. In our recent conversation, he explained the best way stand out from the crowd of coffee/lunch invitations and to link up with veteran investors.

 

When reaching out to experienced investors, Chris says, ask yourself, “what are their needs?” Again, if you ask a big-time investor out to coffee to pick their brain, are you fulfilling one of their needs? The answer is no.

 

“I see a lot of these people on BiggerPockets,” Chris said, and “you always see that comment in the forum where people would say, ‘Hey, I need a mentor. I’d love to meet up and have coffee.’ Well, I’ve got news for you. The guy that owns a huge portfolio [doesn’t] have time in [their] day to go out and have coffee with all kinds of random people that want to mentor them. [They] don’t have time for that.”

 

Instead, when sending a message, focus on adding value. As an analogy, Chris said, “If you’re trying to learn how to play basketball and you want LeBron James to teach you how to play basketball, learn what LeBron James needs.” The same applies for real estate investors. Chris said to learn “what the needs are of the person and bring value to them, and say, ‘Hey, do you need anyone to help you underwrite deals? Do you need anyone to help you make phone calls? I’ll bring you deals. What do you need?’ Not just, ‘Hey, can we do lunch?’…That would be much more attractive and appetizing, and you’d have the better success…if you can just focus on bringing value.”

 

If you want to really stand out, instead of asking “What are your needs?” in your message, do some research, anticipate their needs, and proactively add value without even asking them what their needs are. For example, I had someone reach out to me recently who researched my background, discovered that I was looking for apartments in the Dallas area, and offered to not only find me deals, but to conduct the on-the-ground due diligence as well.

 

Even if your offer isn’t what they are looking for, who cares! Most likely, no one has done that for them, at least not recently, and you’ll standout regardless. You’ll definitely receive a response, at which point you can discover (or they will disclose) a need they have, you can fulfill that need, and start to build a relationship.

 

Conclusion

 

When reaching out to experienced, big-time real estate investors, don’t invite them to coffee or lunch to pick their brains. You will typically get rejected or not receive a response. Instead, ask them what their needs are.

 

To increase your chances of a response even more, proactively address their needs by researching their background, and when initially reaching out, either offer to fulfill that need, or even better, have already done the work to fulfill that need.

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

 

filling out survey

The 4-Pronged Test to Raise Money Legally and Avoid Fines, Lawsuits, and Jail Time

Have you ever thought about raising money from private investors and buying large multifamily buildings? If so, it’s important to know if you must adhere to the SEC guidelines. If you fail to do so, you will be susceptible to fines, lawsuits, and maybe even jail time.

 

In fact, the SEC’s main revenue stream comes from pursuing syndicators who break the “rules.”

 

In a recent conversation with Jillian Sidoti, an attorney who’s an expert on money raising techniques for real estate investors, said the SEC “runs on fines. That’s how they make money. That’s how they justify their existence, by generating revenue through fines. They’re looking for people who are not following the rules.”

 

Fines from the SEC can be problematic, but Jillian said the larger threat, in regards to breaking SEC rules, are your investors. “If you don’t do right by your investors, that not doing right by your investors [and] not following the law in the first place is going to be exhibit A against you in the trial against you when your investors come to see you [in court],” she said. “It could just be you having a falling out with an investor, or an investor needs their money back in the middle of the project. How are they going to get it back if you’re not very willing to give it to them [or you can’t give it to them]? They’re going to sue you and they’re going to use all of this evidence against you in order to get their money back.”

 

How can you avoid the wrath of both your investors and the SEC? It’s fairly simple: Don’t make the biggest legal mistake Jillian comes across – not understanding the difference between what a security and a joint venture is. And there is a lot of disinformation out there.

 

“I often hear people say to me, ‘Well, if I just use a joint venture agreement or call it a joint venture, then that’s not securities and I’m in the clear,’” Jillian said. “I’ve sat in a seminar where people say, ‘If you just use a joint venture agreement then you don’t have to worry about any of these security’s laws and you can do whatever you want,’ and that is simply not true.”

 

Raising money for a deal and believing that securities laws do not apply to you (because you think it’s a joint venture) can land you in a lot of legal trouble down the road. It is not worth pursuing the short-term benefits of a joint venture.

 

How to you know if securities laws apply to you? Jillian provided a simple 4 prong test, commonly known as the Howey Test. If these “prongs” apply to your situation, then you must adhere to SEC securities laws, which means it would highly benefit you to find a good securities attorney like Jillian.

 

Here is the 4-prong Howey test to differentiate between a security and a joint venture:

 

  • Investment of Money: this will be a given since investors are giving you money to invest in a deal
  • Expectation of Profit: of course, your investors expect to make money, which is why they are investing with you, so this will apply to your situation
  • More than One Investor (i.e. common enterprise): This doesn’t mean “do you have one investor?” If you have only one investor period, you and that investor form the common enterprise. Again this will apply to your situation
  • Through the Efforts of a Promoter: This is the “prong” that mainly differentiates a security from a joint venture. If you doing all the work and your investor or investors are passive, it qualifies as a security.

 

If your situation meets these four-prongs, it is an investment contract and you are required to follow SEC laws. According to the SEC, the definition of an investment contract is “an investment of money (#1) in a common enterprise (#3), with an expectation of profits (#2) based solely on the efforts of the promoter (#4).”

 

For more on the differences between a security and joint venture, read Joint Ventures or Securities – What’s the Difference? And of course, consult with a securities attorney.

 

Conclusion

 

When raising money for deals, in order to avoid fines from the SEC or losing potential lawsuits from your investors, you must understand whether or not your situation is regulated by the SEC. This is determined by the 4-pronged Howey Test:

 

  • Is there an investment of money?
  • Is there an expectation of profit?
  • Is there more than one investor?
  • Is everything done through the efforts of a promoter?

 

If the answer is “yes” to these four questions, you are regulated by the SEC and must adhere to their rules.

 

 

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4 Skillsets Needed Prior to Raising Private Money for Apartment Deals

Want to become a multifamily syndicator but lack the commercial real estate experience? No problem!

 

When I bought my first apartment, a 168-unit building in Cincinnati, my previous real estate experience only included four single family rentals.

 

How did I make the jump from four units to 168? I cultivated the following four skillsets.

 

#1 – Trustworthiness

 

First and foremost, people need to already recognize you as a trustworthy person. If you can’t look yourself in the mirror and say “yeah of course people find me trustworthy,” then forget about raising private money. Why would someone entrust you will thousands of dollars of their own capital if you have a history of untrustworthiness?

 

#2 – Proven Track Record

 

Assuming you are already trustworthy, you will need a proven track record. However, this track record doesn’t necessarily have to be real estate related. Having prior real estate experience, whether it’s wholesaling, fix-and-flipping, etc., is a plus but not a requirement. If you don’t have real estate experience, then you must have a proven track record in a professional career.

 

Now, if you just graduated college, have no real estate experience, and have been working in a corporate job for a few years, you will not be set up for success. Examples of a proven track record in a professional career would be if you had entrepreneurial experiences in college, you bought and sold a company, you started your own company, or you’ve held high-level responsibilities at a corporate job. For example, I was a VP of a New York marketing company prior to raising money for my first syndication deal.

 

Experiences like that would be compelling to private money investors. It shows that you have the business foundation required to handle managing other people’s money.

 

Ideally, you would have a combination of the two, but either or would suffice.

 

#3 – Resourcefulness

 

Another skillset is being incredibly resourceful.

 

I believe I am the most resourceful people on the face of this earth. I will find a way to make things happen. I will talk to enough people. I will do whatever it takes. That is a core, guiding belief of mine. And let me tell you, making the leap from single-family residences to a 168-unit required a lot of resourcefulness.

 

I believe we have to be resourceful as multifamily syndicators because challenges will come up and there’s not necessarily a roadmap for how to complete a deal from start to finish. Therefore, resourcefulness is a must.

 

#4 – Understand the Numbers and Terms

 

Finally, you’ve got to know how to run the numbers and understand how to analyze deals. You don’t need to have 10 or more years of experience analyzing deals because you can partner with someone, like I did, who has that experience. However, you still need to have a basic understanding of how the numbers work and of the multifamily lingo. The last thing you want to have happen is speak with a private money investor who asks drops terms like gross rent multipliers or internal rate of returns and you have no clue what they is talking about.

 

 

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4 Principles to Source Capital from High Net-Worth Individuals and Find Off-Market Deals

In February 2017, we hosted the first annual Best Ever Conference in Denver, CO. To kick off the conference, I gave a keynote address (to watch my address, click here).

 

The conference was unique in that I asked each attendee to submit the answer to the following question: What are current obstacles you are trying to overcome in your real estate business? Rather than create a conference the way I wanted to, I created it around the personal obstacles of each individual attendee.

 

After read over one hundred submissions, the common thread I found between everyone’s obstacle was two-fold: raising more money and finding more off-market deals.

 

In keeping with the personalized theme of the conference, I formed my keynote address so that at its conclusion, all attendees would have practical takeaways for how to raise money and find off-market deals.

 

Here are the four tactics I provided:

 

1 – Build Your Network

 

When I interviewed Robert Kiyosaki (listen to the full interview here), he said, “the richest people in the world build networks. Everyone else looks for work.”

 

The most important thing that we can do to play the long game in real estate investing is to build a network. I have found that the best way to build a network and what I attribute to the majority of my success is to create a thought leadership platform.

 

A thought leadership platform can come to life in one of four ways: 1) a podcast, 2) a YouTube channel, 3) a blog, and 4) an in-person event.

 

The keys to having a successful thought leadership platform or network are:

 

Consistency – For example, I host the world’s longest running daily real estate investing podcast.

 

Identify what your unique angle will be – I have two clients with military background. One was in the Army and the other was in the Air Force. They created a lease-option business and YouTube channel called “Joint Ops.” Due to launching this brand, they now raise over $200,000 a month in private money.

 

Start within Your Sphere of Influence – When you are starting a thought leadership platform, you are not going to get instant results from people who don’t know you. However, your sphere of influence that already exists will begin to know what you are doing and you will start to become the thought leaders within that sphere. It takes a lot of time and consistency to get strangers into your sphere, but you’ll get instantaneous results from people who already know you (i.e. friends, family, work colleagues, etc.). That’s how I raised $1 million for my first deal.

 

Tie into a Large Distribution Channel – Don’t recreate the wheel. Leverage an existing channel with a large network. For example, with a YouTube channel, you have access to millions of potential viewers. With a podcast, you can tap into the billions of ears on iTunes. With a blog, post to your own website, but also to BiggerPockets, LinkedIn, Medium.com, and social media to begin to create a following. With a meet-up, it’s a little trickier. However, someone in my network moved to Atlanta, partnered up with an existing meet-up host, and had 90 investors at his first meet-up!

 

2 – Ask Better Questions

 

Whenever I have a meeting with a client, I always ask them to tell me what is the best thing that’s happened to them since the last time we spoke. For some of my newer clients, their response will be, “oh, not that bad.” While that may seem innocuous, when we dissect it, what are they saying? They aren’t saying things are good, that’s for sure.

 

We have to be very careful with our language. Even though they are saying they aren’t bad, they are still using the word bad, a negative word. As far as I’m concerned, this puts us in the wrong mindset. The same applies to the questions we ask. When I was reading through the obstacles of the attendees of the conference, I read things like, “What happens if I raise money, but I don’t find a deal?” or “What happens if a deal doesn’t work out?” or “What happens if I can’t raise the money.” Instead, we have to ask better questions that don’t assume we are going to fail. Re-frame the question to “how do people who raise money and find deals successful?” Model them, stick with them, and grow together.

 

3 – Create Opportunities

 

To find deals in a hot market, we have to be creative and create our own opportunities. Read here for an example of how I was able to find an off-market deal while touring an on-market deal and added both to my portfolio.

 

4 – Partner Up

 

When I was a solo investor, I purchase four single-family homes and one large apartment building, and then my business remained stagnant for a few years. Once I partnered up with someone who complements my strengths and helps me with my weakness, my growth skyrocketed; I was able to added over $100 million worth of properties to my portfolio.

 

To find the perfect partner like I did, it’s important to know yourself. It takes a little bit of time and experience, but after completing a few deals, look in the mirror and ask yourself, “What am I really good at and what am I really bad at?”

 

Build a team around those answers and once you do that, your business is going to flourish.

 

Personally, after my first syndication deal, I realized I was great a raising money and marketing, but I was terrible at underwriting and asset management. My partner has an institutional background, so he is phenomenal at the underwriting and asset management. Therefore, we complemented each other perfectly, which is why we’ve been able to scale so quickly.

 

Conclusion

 

In order to raise more money and find more deals, you must:

 

  • Build your network through a thought leadership platform
  • Re-frame your mind and ask better questions
  • Create opportunities rather than wait for opportunities
  • Partner up with someone who complements your strengths and weaknesses

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

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investment insurance currency

5 Creative Ways to Raise Private Money with a 506(c) Offering

 

Back in 2015, I had Mark Mascia on the podcast to discuss how to best qualify a development deal (read: How a Billion Dollar Developer Qualifies a Deal). Since then, Mark has transitioned from being a billion dollar developer to a half a million-dollar syndicator. He currently controls over half a million dollars in retail and medical office space.

 

When raising money for his deals, he elected to use the 506(c) offerings over the 506(b) offering. The main difference is with 506(c), Mark is able to publicly advertise for accredited investors for his deals.

 

Related: 506b vs. 506c, Which Money Raising Structure Should You Do? VIDEO

 

Mark said, “the first and foremost reason that we like [506(c) offerings] is because we can talk about what we’re doing actively, and not have to keep everything a secret or know you personally before we talk about it.” Since he is able to publicly advertise for his deals, he doesn’t need to have a personal relationship with his investors, which in turn, enables him to utilize more creative techniques for finding investors.

 

When Mark first began raising money, his capital came from a single source – family offices, which are offices that manage the wealth for high net-worth families. However, he realized, “we just don’t want to have any sort of single source of capital, just like we don’t want to have a single tenant or any single property that can sort of wipe out our wholes business.”

 

Now, Mark focuses on not only diversifying his investments, but also his investors. He said, “every deal we do, we have the ability to raise all of the funds from these large, big-pocketed family offices, but we specifically chose not to (for two reasons). One, so that we can keep relationships with our friends and family and other investors who have been with us for a long-time, but two, to meet new investors.”

 

With the 506(c) offering, Mark is able to advertise his deals, which is the main source of his new investors. In our recent conversation, he provided the 5 advertising methods he uses in order to find these new investors for his deals.

 

1 – Crowdfunding

 

Mark’s first method for obtaining new investors is through crowdfunding. He said, “Every deal we do, we do a portion of it crowd funded, which is really nothing more than just advertising online through one of these third-party platforms for new investors. So it’s straight general solicitation out there, advertising on the website, and they advertise on other platforms. But they’re aggregating individuals who are interested in investing in real estate and putting our deal in front of those eyeballs. So every deal we do, we reserve a least a few hundred thousand dollars for that specific purpose.”

 

For a deal Mark is currently working on, he is using the platform CrowdStreet. However, he mentioned he’s used just about ever crowdfunding platform out there and doesn’t have a specific favorite.

 

The benefit of crowdfunding is that Mark finds investors that he wouldn’t have been able to find otherwise. “These are people that I would otherwise have never met in my life that are interested in investing with us, and some of them have already invested with us. It’s a great opportunity to grow your network of individuals that either might be interested or are definitely interested in investing.”

 

Related: Best Crowdfunding Crash Course Ever

 

2 – Facebook

 

For the deal Mark is currently working on, he opened up the deal to investors on Facebook for the first time. He said he’s trying out Facebook because, “We’ve heard in the past a lot of great reviews from friends about how they acquired investors that way because you can be super targeted. We know very clearly that 90% of our investors are 40 years and older, live all over the country but mainly in population centers of 100,000 people or more.” Educational attainment (college educated) and professionals (doctors, lawyers, executives, and small business owners) are also target criteria.

 

Related: The 4 Keys to Building Relationships on Social Media

 

3 – Newspapers

 

Mark also puts advertisements in the local newspaper. “We are also trying old school newspaper advertising because our investor base tends to be a little bit older. In some cases, we have investors 70, 80, 90 years old and newspaper still happens to be a very relevant source for those people.”

 

His current deal is located in Spartanburg, South Carolina, so he’s taken out ads in local papers in North and South Carolina. “[I’ve taken ads out in] markets that are very close to these areas. Charlotte’s an hour away. Greenville is about 45 minutes away. Charleston. Those types of things because people tend to like investing locally, even though long-term I think that’s a bad strategy, it’s a great gateway if they can drive by the property and see it.”

 

4 – Webinars

 

In addition to crowdfunding, Facebook, and newspaper ads, Mark also does webinars. In adherence to the “be everywhere,” “blanket/carpet” marketing strategy, he wants to advertise on as many platforms as possible.

 

Mark said, “The webinar was helpful because we get one-on-one questions. We get a bunch of people and interest built around that specific concept of hosting a webinar and you can record it and then send it to others, so it gives you sort of a platform and another contact point to reach out to people.”

 

5 – Referrals

 

Mark’s final advertising strategy is good, old-fashioned referrals. He said, “The referral [is] probably in everyone’s experience has been why you start with your friends and family, because they know you… If you perform for them, they will refer you to their friends and family, and so on and so on. That’s typically been the best source for us overall.”

 

When finding new investors through referrals, the most effective method is through social proof. Mark said, “What I’ll try to do is people that do know each other or people that don’t know each other, some of the family offices that didn’t know each other, I introduced them to each other. Now they know each other, so when I say, ‘XYZ family office is investing. Don’t you guys want to invest as well?’ they go ‘Oh yeah, of course. If they’re invested, we’ll do it too.’ So there’s a little bit of trying to get people in the same room or same social network of some sort, even if it’s just because I introduced them, so that there’s that social proof aspect where people feel obligated or inclined to invest because of someone else.”

 

Related: 4 Non-Obvious Ways to Raise Private Money for Your Deals

Conclusion

 

Raising money using the 506(c) offering allows you to publicly advertise for investors. The top 5 advertising methods Mark uses to raising money for his deals are:

 

  • Crowdfunding
  • Facebook
  • Local newspapers
  • Webinars
  • Referrals

 

Did you like this blog post? If so, please feel free to share is using the social media buttons on this page.

 

I’d also be VERY grateful if you could rate, review, and subscribe to the Best Ever Show on iTunes by clicking this link: http://bit.ly/2m2XyM1

 

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presenting

7-Steps to Presenting a New Apartment Deal to Your Private Investors

Last week, my partner and I presented a new multifamily deal to our private investors. Our current approach is to set-up a 60-minute phone conference using the free software at www.freeconferencecall.com.

 

For those who are currently raising money for deals, or expect/desire to raise money for deals in the future, presenting a deal to investors can be a stressful experience, especially if it’s your first time. In order to mitigate the stress, preparation is a must. That being said, I wanted to share how I prepare and structure my presentations for investors.

 

1 – Get Your Mind Right

 

First, you have to get in the right frame of mind. What I mean by that is you must answer the question, “Why am I presenting this opportunity to investors?” I write the answer to this question at the top of the Word Document outline I use as a guide when presenting a deal.

 

At the top of the document, in bold letters, reads, “I am here to serve. I am here to help my investors retire, do what they want with their money, and ultimately do what they want with their time. When they get the returns we’re projecting, then they’re going to be able to spend their time the way they want to spend it.

 

If I accomplish the goal of this statement, it is a win-win for both my business and for my investors. A personal belief I hold is when people spend time how they want to spend it, they will naturally gravitate towards doing more altruistic things. I’m not just helping my investors make money, but I am helping them have the financial freedom to do what they want with their time, which in turn, will result in more altruism and philanthropy in the world.

 

So, starting out with the right mindset, as well as coming from the heart and knowing that you’re there to serve the investors is the foundation for a successful conference call.

 

2 – What’s Your Main Focus?

 

In addition to getting myself in the “service” mindset, I also remind myself what my main point of focus is – capital preservation.

 

This became my main point of focus in part due to an interesting psychological concept called loss aversion. Loss aversion refers to people’s preference to avoiding losses relative to acquiring an equivalent gain. In other words, people’s negative reaction to losing $5 is greater than the positive reaction of gaining $5. Through personal investment experience and after interviewing 1000 real estate professionals, I have the anecdotal evidence to support this concept as well.

 

Assuming you are conservatively underwriting a deal (which you should) then capital preservation needs to be sprinkled into the discussion with investors.

 

3 – Introduction

 

Now that my mindset is right and I’m focused on capital preservation, I’m ready to start the actual conference call. I start every call with an introduction, which is a simple summary of my background.

 

Additionally, I provide my email address and ask the investors to send any and all questions to me so that my business partner and I can answer them during the Q&A session (see step 6).

 

4 – Deal, Market, and Team

After I’ve provided my bio, the call is structured into three categories.

 

  • The Deal Details
  • The Market Details
  • The Team Details

 

I’ve already determined the main highlights of the deal, so before going into granular details on the three categories, I provide a high level overview of the deal. The overview explains the main reasons why I like the deal. I do this because I want to focus on and continue to reiterate these main points throughout the call. I don’t want to discuss these three data points and have everyone’s mind swimming in numbers. I want to make sure that the points I want to make about the deal are clearly and consistently communicated.

 

For the investor call I had last week, the two main points for that deal were exceptional location and a proven business model with a proven team. I led off with that, and that was the theme throughout each of the three categories.

 

Next, I went into each of the three categories and explained the highlights of each.

 

When I say something like, “It’s an exceptional area,” I will follow it up with, “and here’s why,” versus just throwing out hyperbole. You always want to have stats to back up your claims, and if you want to take it to the next level, tell a story as well.

 

For example, the deal I presented to investors last week was in Fort Worth, Texas. I mentioned that it’s an exceptional location. The population is growing, and as a reference point, the U.S. Census Bureau named it the number one fastest growing city in the United States, with a 47% population growth from 2000 to 2015.

 

I could have left it there with that stat. However, I went on to explain why the population is growing. I mentioned job growth, job diversity, and gave some specific employers. This was the macro level overview for the market.

 

Then I went into the micro level for the submarket. I talked about the school district and the specific employers within a 3-5 mile radius.

 

Overall, it’s important to know what you’re talking about (obviously), but mention the numbers and the reason behind the numbers, rather than just stating statistics. Tell a story, and then make sure you are hitting the points you need to hit, which are the ones you’ve predetermined are the most important selling points or desirable attributes for the particular opportunity.

 

5 – Dive into More Details

 

I present steps 3 and 4, which takes about 15 minutes. Then my business partner talks for another 20 minutes. He explains the business model in more detail, the financing we are obtaining, etc.

 

6 – Q&A

 

Finally, the rest of the call is the Q&A session to answer the questions investors emailed me. I will reply to some of the emails while my business partner is speaking, but most of the questions are addressed at this point.

 

At the conclusion of the Q&A session, the conference call is completed.

 

7 – Send Recording to Investors

 

Since I record all conference calls, I will send out the link to the recording to all my investors. I do this because probably around 40% of the investors aren’t able to attend the call.

 

Conclusion

 

My conference calls with investors consist of 7 steps:

 

  • Get my mind right
  • Determine my main focus
  • Introduction
  • Three categories – deal, market, team
  • Dive into more details
  • Q&A
  • Send recording to investors

 

When you follow this 7-step formula, it makes for a very concise conversation and you’re able to have an effective call.

 

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I’d also be VERY grateful if you could rate, review, and subscribe to the Best Ever Show on iTunes by clicking this link: http://bit.ly/2m2XyM1

 

That all helps a lot in ranking the show and would be greatly appreciated. And if you have any comments or questions, leave a comment below.

 

 

 

Money-Raising

My Four-Step Apartment Syndication Money-Raising Process

I was recently awarded another apartment deal. Here is a link to an article I wrote about the main lesson I learned: https://joefairless.com/find-deals-hot-market/

 

However, prior to putting the property under contract, I already started the money-raising process.

 

In this post, I wanted to walk you through how I approach raising money for my deals, which begins before I am awarded the deal.

 

Step #1 – Am I capable of raising X amount of dollars?

 

First and foremost, I make sure that I have the equity lined up before I get awarded to deal. That doesn’t necessarily mean that I know exactly who will be investing what amount. I just want to know that I have the capability of raising the amount of money required.

 

For example, for the deal I was recently awarded, I will have to raise between $7 million and $8 million. Based on experience, I am confident that I will be able to his that number. However, if the number were $25 million or $50 million, it would be a different story.

 

Step #2 – Who will be the investors?

 

Once I believe I have the capability to raise the required amount, I start to identify the specific investors that will bring the equity, at least conceptually. They don’t have to be the exact people who end up investing at closing because things usually change when you start speaking to investors. Some invest more, some invest less, and some don’t invest at all.

 

For this step, I list out all the names of the investors whose goals are in alignment with this specific project – which I already know based on previous deals and/or investor conversations. Then next to each name, I write down the amount of money I believe they would invest, which includes a low amount and high amount. That allows me to identify the number of investors I will likely need for the deal.

 

For this step, I input all the information into an excel document entitled “Money Raising Tracker” that I created from scratch. If you are interested in using my tracker for your deals, email me at info@joefairless.com and be sure to mention “money raising tracker” in the subject line.

 

Step #3 – Create a One Page Deal Summary

 

Next, I create a one-page document with a high-level overview of the opportunity and send it out to the list of investors created in step #2. At this point in the process, I may still not have been awarded the deal, while in other cases, I have. However, if I haven’t been awarded the deal, I would feel comfortable sending out the one-pager to investors anyways, as long as the contract is scheduled to be in place in a few days.

 

The reason why I create the one-page document and send it out to investors is because it let’s me get the opportunity in front of the investors while I work on completing step #4, which is…

 

Step #4 – Create Detailed Marketing Package

 

Finally, I will create a marketing package that is more robust and detailed compared to the one-pager from step #3. It has everything from the projected returns to the market information to the business plan to the team and everything in-between.

 

This document usually takes about a week to a week and a half to prepare. While I am doing that, I don’t want to sit on my hands. That is why I send out the one-pager with the high-level overview of the opportunity so I can gauge the initial interest of my investors.

 

Bonus Step

 

One additional step I take on my deals is hiring a videographer who has a drone. They go to the property and use the drone to record videos, including shots of a birds-eye view, the units, the amenities, and close by retail. Then, we make a video compilation and send it to the investors. It really helps bring the project to life.

 

Depending on how robust you want the video, the cost can be anywhere from $1,000 to $5,000. But it’s certainly worth it.

 

Conclusion

 

My four-step money raising process is:

 

  • Determining if I am capable of raising the required amount of money
  • Filling out my “Money Raising Tracker,” listing potential investors and the low and high amount they may invest
  • Creating a one-page document that provides a high-level overview of the opportunity
  • Creating a detailed marketing package

 

Finally, I will hire a drone videographer to create an investor video, which is a compilation of different shots of the property and surrounding areas.

 

 

Did you like this blog post? If so, please feel free to share is using the social media buttons on this page.

 

I’d also be VERY grateful if you could rate, review, and subscribe to the Best Ever Show on iTunes by clicking this link: http://bit.ly/2m2XyM1

 

That all helps a lot in ranking the show and would be greatly appreciated. And if you have any comments or questions, leave a comment below.

 

 

 

 

Thought Leadership

How to Raise $5M in ONE WEEK Through a Powerful Thought Leadership Platform

Kathy Fettke, who is the co-CEO of an investment club with over 24,000 members that helps people become “job-optional” through cash flowing real estate, is one of many speakers who will be presenting at the 1st annual Best Real Estate Investing Advice Ever Conference in Denver, CO February 24th to 25th.

In a conversation with Kathy all the way back in early 2015, she provided her Best Ever advice, which is a sneak preview of the information she will be presenting at the Best Ever Conference.

What was Kathy’s advice? She outlines all the advantages of creating a powerful thought leadership platform, including how she was able to raise $5 million in ONE WEEK!

Kathy’s Real Estate Background

 

According to Kathy, until about 10 years ago, she was a happy housewife. She used to be in the broadcasting industry, working in a newsroom for years. After marrying and having a child, chasing fires in the newsroom was no longer an alluring concept, she reports. Kathy made a choice to be a stay-at-home mom and life was great. But that all changed when her husband came home from work and said that the doctor told him that he had six months to live. The news shocked the couple and pushed them to make a few decisions about their life together. In the end, it was discovered that Kathy’s husband had been misdiagnosed.

Kathy faced a situation that is most people’s worst nightmare: how would she live without her husband? Since she no longer had a career, she also had to figure out how she would cover the bills and feed her family on her own.

At this point, all Kathy had was her podcast, “The Real Wealth Show.” Using this platform, she interviewed as many wealthy people possible. The goal was to see how they created their wealth because she needed to replicate that success. However, the podcast wasn’t making any money, and Kathy needed to monetize it immediately. To solve that problem, she started bringing on sponsors, most of whom were previous guests. It was around this time that Kathy found out that her husband had been misdiagnosed. That was excellent news, but that’s not the only good news. By then, Kathy’s podcast was gaining momentum, so she stuck to it!

“The Real Wealth Show” is a weekly podcast on all the different ways you can make money as a real estate investor. Each week, a different investor is featured as Kathy asks great questions on how they built their wealth. Every episode covers a different topic such as leverage, tax benefits, asset protection, inflation, how to buy right, triple net leases, credit repair, and more.

Over time, the podcast grew to the point that Kathy was able to turn it into her business, Real Wealth Network, which mimics the information found in her podcast. It offers information to help their members succeed by providing free content, including weekly blogs, newsletters, and webinars.

 

Best Ever Advice: Success Leaves Clues

 

Kathy’s Best Ever Advice is to “make sure that you have someone helping you that has done what you want to do. To many people take advice from people that just want to make commission or they have never done it before.” She continued by saying, “that was the problem in 2006 when so many people jumped into real estate without any experience or knowledge. They were getting advice from real estate agents, [who] are in it for the commission and most aren’t investors, or getting advice from neighbors, and it doesn’t work that way.” Many people who took this path ended up failing. Kathy believes this resulted in investors getting a bad name and being blamed for bringing down the housing market.

Advice in Action #1 – You don’t have to fall into these same traps. If you are going to buy an investment property, make sure you are getting advice from someone who is not going to make money off of you or, if they are, that there is an alignment of interest in the deal. Instead, work with someone who has successfully invested more than once; someone who can actually help you and look out for your best interests.

Kathy says this is the main reason she created her Real Wealth Network. She was desperate for financial information because she didn’t know how she was going to pay a $4,000 mortgage and take care of the kids if her husband were to die. Getting a job was out of the question because she didn’t want to be away from her children. Kathy wanted to understand how to invest properly, but couldn’t find anyone that had her best interest at heart. Therefore, instead of simply settling for bad advice, Real Wealth Network was born.

 

Putting Advice into Action

 

After Kathy’s show increased in popularity, and after she had spoken to countless self-made millionaires, it was time for her to get out there and take action herself. During a time where her local market – California – was overheated, Kathy and her husband refinanced their home and took the cash out to purchase five investment properties in Texas. Part of what Kathy had learned from interviewing millionaires is the importance of market timing. California was in a bubble while Texas was undervalued. Based on that information, Kathy decided that Texas was the better market in which to invest. Buy low and sell high is the name of the game. However, it wasn’t easy when it came to investing in an out-of-state market.

When they first went to Texas to meet with real estate agents, Kathy and her husband realized that they were being perceived as “California money.” Kathy said, “[the agents] were like sharks and were trying to sell us $400,000 to $500,000 properties in Texas. Terrible investments!” But Kathy continued by saying, “over time, we found the right people. The people who understood and owned 40, 50, 60 investment properties in the area [and] property managers who knew where the rental demand was.”

After successfully investing in Texas, Kathy set out to replicate her success in other markets. She and her husband went out to different emerging markets where they knew there was job and population growth. Then, they focused on building a team in each of those markets. Kathy and her husband met with more and more success.

As Kathy’s investment career was taking off, her listeners became interested in learning more about how she was able to purchase investment properties all across the nation. As a result, the Real Wealth Network, which recently eclipsed over 24,000 members, emerged.

The Real Wealth Network enabled Kathy to help educate even more investors on how to be successful and is a great network for referrals. It is such a good referral network that Kathy was able to leverage it to raise $5,000,000 for a deal in one week. The combination of her podcast, her business, and the network she created made people flock to her for advice and guidance. Kathy proved herself a trustworthy go-to person in the industry, which made people comfortable and trusting enough to send her a $100,000 check without even thinking twice!

Advice in Action #2 – Think having a platform like the Real Wealth Network would benefit your business? Yep, thought so. Start small by interviewing people for a blog, podcast or YouTube channel then grow from there over time. I’ve seen first-hand how having a platform can grow business exponentially. You’ll learn from people you interview and you’ll get additional opportunities through the network you’re spearheading.

 

 

Want to learn more about real estate thought leadership, as well as information on a wide range of other real estate niches? Attend the 1st Annual Best Ever Conference February 24-25 in Denver, CO. It’s the only real estate investing conference whose content and speakers are curated based on the expressed needs of the audience. Visit www.besteverconference.com to learn more!

 

Related: Best Ever Speak Brie Schmidt Sneak Peek How to Avoid the Shiny Object Syndrome in Real Estate Investor

Related: Best Ever Speaker Kevin Bupp Sneak Peek Lessons Learned From Losing Everything During the Financial Crash

Related: Best Ever Speaker Theresa Bradley-Banta Sneak Peek Don’t Invest in Real Estate on Unfounded Optimism and Emotions

Related: Best Ever Speaker Linda Libertore Best Ever Success Habit of the Nation’s #1 Landlord Aid

Related: Best Ever Speaker Kevin Amolsch Why Moving at a STEADY Pace is the Secret to Real Estate Success

Related: Best Ever Speaker Bob Scott and Jimmy Vreeland How to Acquire over 100 Properties in 24 Months Utilizing the Lease-Option Strategy

Related: Best Ever Speaker Jeremy Roll 3 Essential Factors of Diversification in Passive Real Estate Investing

Related: Best Ever Speaker David Thompson 3 Ways to Raise Over $1M for Your 1st Real Estate Syndication Deal

Related: Best Ever Speaker Al Williamson 4 Ways Showing Leadership Increases Your Property’s Value and Rents

Related: Best Ever Speaker Mark Ferguson The Most Commonly Overlooked Expenses in Real Estate Investing

Related: Best Ever Speaker Marco Santeralli 10 Rules of Successful Real Estate Investing

Related: Best Ever Speaker Steve Bighaus What’s the Cheapest Loan Program in America

Related: Best Ever Speaker Mark Mascia How a Billion Dollar Real Estate Developer Qualifies a Deal

Related: Best Ever Speaker Reed Gooseens Guide to Systematizing Your Real Estate Education

 

 

one-million dollars in a case

3 Ways to Raise Over $1MM for Your 1st Apartment Syndication

If you were brand new to the real estate syndication niche, it is unlikely that you would be able to raise over $1 million for your first deal. It would be even more unlikely that you would be able to raise over $1 million for both of your first two deals. However, a client of mine, David Thompson, was able to accomplish this improbable feat.

 

David is also one of many speakers who will be presenting at the 1st annual Best Real Estate Investing Advice Ever Conference in Denver, CO February 24th to 25th.

 

 

In a conversation with David in October of last year, he provided his Best Ever advice, which is a sneak preview of the information he will be presenting at the conference.

 

What was David’s advice? He explained how he was able to raise millions of dollars on his first two deals by leveraging his natural networks.

 

David raised over $1 million for both of his first two deals from three different natural networks: personal network, BiggerPockets, and local multifamily meet-ups.

 

1. Personal Network

 

David’s personal network includes family, friends, and work colleagues. These are the individuals that already knew him AND knew about his real estate background.

 

Before raising money these two deals, David already had real estate experience

  • Over 5 years of experience purchasing single-family residents
  • In a previous career, he managed a $2.5 billion investment portfolio and raised over $1 billion in funds for acquisitions.

 

Needless to say, his personal network already perceived David as a successful investor.

 

Within this network, the two main money raising avenues were his wife’s network and a past business associate:

 

His wife’s network was a natural path because she knew many people that were already interested in real estate and had cash readily available. Also, she had already built trusting relationships with these individuals.

 

The past business associate is someone that he used to work with in the high-tech sector. This is David’s biggest contributor.

 

Advice in Action: If you have been or are currently involved in the high-tech, legal, or medical industry, this is a gold mine for raising money. Many of those people are making good incomes, but they likely don’t have the time to be active in real estate investing. However, they are savvy enough to understand that real estate is an important and effective method of investing.

2. BiggerPockets

 

BiggerPockets was another network that David leveraged to raise money. Social media outlets, like BiggerPockets, that focus on real estate education tend to attract investors who are actively looking for opportunities. While David couldn’t advertise for his specific deals, he was able to portray the same message by posting valuable content and creating a strong bio page. As a result, whenever he posted content to the forums responded to another real estate professional question, investors that view his profile would know that he is a real estate syndicator that raises money for his deals.

3. Local Multifamily Meet-ups

 

The third network that David leveraged to raise money were local multifamily meet-ups. Although, he expected to be more successful at raising money at meet-ups than he actually was. It seemed as if this would be an event that would naturally attract investors. However, David discovered that many of these people wanted to be active in real estate, rather than passive investors. Also, many of them weren’t accredited investors.

 

Now that we’ve learned David’s three go-to money raising networks, let’s dive into the actual deals!

 

Deal #1 Money Raising Breakdown

 

For David’s first deal, he had 13 total investors.

 

In regards to the percentage of dollars raised from each of the three main networks:

 

  • Personal Network = 70%
    • Wife’s network = 35%
    • One past business associate = 35%
  • BiggerPockets = 25%
  • Local Multifamily Meet-ups = 5%

 

Interestingly enough, the number of investors from David’s wife’s network and BiggerPockets were essentially the same. However, the amount invested differed. David believes this difference can be attributed to the existing level of trust he had with his wife’s network. Since BiggerPockets is online, those investors didn’t know as much about him or his background, aside from the information in his posts and bio. So it makes sense that they would invest less on average.

 

Another interesting point: David didn’t have much success with referrals. He asked for a few but didn’t feel confident enough to ask for too many since it was his first deal. However, he believes that referrals and repeat investors will make up a larger portion of the money raising pie moving forward.

 

This was experienced first-hand when David raised money for his second deal…

 

Deal #2 Money Raising Breakdown

 

For David’s second deal, he had 15 total investors. Of the original 13 investors from the first deal, 5 were repeat investors for the second deal.

 

In regards to the percentage of dollars David raised from each of his three main networks: his wife’s network, the one business associate, and BiggerPockets accounted for over 90%.

 

Advice in Action: As you can see, for David’s first deal, 70% of the money raised came from 2 networks. For the second deal, over 90% came from 3 networks. Therefore, David recommends that you focus the majority of your efforts on the natural paths that result in the largest percentage of money raised. Spend a much lower amount of your time focusing on the remaining 10%-30% that come from many other misc. sources.

 

Conclusion

 

David Thompson was able to accomplish an improbable feat for his first two multifamily syndication deals: he raised over $1 million for both deals. He was able to do so by leveraging three of his pre-existing, natural networks:

 

  1. Personal Network

 

When raising money in your personal network, David recommends finding people who are in the high-tech, legal, medical, or similar industry because they likely make high incomes but don’t have the time to actively invest themselves.

 

  1. BiggerPockets

 

To raise money on BiggerPockets, since you can’t actively advertise deals, instead, David advises that you frequently post valuable content and create a strong bio page that explains that you raise money for multifamily deals.

 

  1. Local Multifamily meet-ups

 

David’s third money raising network was local multifamily meet-ups. However, much to his surprise, they were the least successful of the three.

 

 

Want to learn more about raising private money for your deal, as well as a wide range of other real estate niches? Attend the 1st Annual Best Ever Conference February 24-25 in Denver, CO. It’s the only real estate investing conference whose content and speakers are curated based on the expressed needs of the audience. Visit www.besteverconference.com to learn more!

 

 

Related: Best Ever Speak Brie Schmidt Sneak Peek How to Avoid the Shiny Object Syndrome in Real Estate Investor

 

Related: Best Ever Speaker Kevin Bupp Sneak Peek Lessons Learned From Losing Everything During the Financial Crash

 

Related: Best Ever Speaker Theresa Bradley-Banta Sneak Peek Don’t Invest in Real Estate on Unfounded Optimism and Emotions

 

Related: Best Ever Speaker Linda Libertore Best Ever Success Habit of the Nation’s #1 Landlord Aid

 

Related: Best Ever Speaker Kevin Amolsch Why Moving at a STEADY Pace is the Secret to Real Estate Success

 

Related: Best Ever Speaker Bob Scott and Jimmy Vreeland How to Acquire over 100 Properties in 24 Months Utilizing the Lease-Option Strategy

 

Related: Best Ever Speaker Jeremy Roll 3 Essential Factors of Diversification in Passive Real Estate Investing

 

classified seal

4 Non-Obvious Ways to Raise Private Money For Apartment Deals

Last Updated 6-20-2018

 

As a real estate entrepreneur, both syndicating large apartment deals with investors and coaching others to do the same, I am always brainstorming new and unique ways to raise capital. While it’s important to confirm existing money raising techniques to reinforce their validity, it’s even more important to seek out more effective ways in order to climb the real estate success ladder and go from outstanding to extraordinary.

 

Assuming you are equipped with the skills needed to raising private money for apartment deals, here are the 4 not-so-obvious methods I’ve identified to effectively raise capital.

 

1 – Master the Art of the Phone Call

 

We get so caught up in emails, texting or messaging on social meida that we forget the art of the phone call.

 

For one of my earliest syndications, I had an investor that I knew was interested in my next deal. But, when I had the deal under contract, I emailed out the offering to my investor database and this investor never responded. Rather than giving up and assuming he wasn’t interested, I picked up the phone and gave him a call. Good thing I did, because he decided to invest in that deal, and ended up investing BIG TIME in my future deals.

 

From this experience, I realized that there are a lot of different ways to send and receive communications, but different people prefer different methods. For example, I am very responsive to emails and I always pick up the phone, but I hate text messaging. Someone else may never respond to emails, but love to text. Therefore, it’s important to understand your target investor and their preferred method of communication. With the upper age range of my target investor being 65, I have found that phone calls have been the most effective method for bringing on and retaining investors and business partners.

 

2 – Send Out Investor Qualifiers

 

Qualifying investors prior to finding a deal is great technique, especially if you are concerned about having investors tell you that they are interested in your next deal, but when the time comes, they end up backing out.

 

Have your investors fill out an investor qualifier document prior to bringing them a deal. This gets them involved early on by reading through something and writing down their information. It doesn’t have to get personal or require a bank statement. It just has them express that they are a qualified, accredited investor. While it’s not legally binding, it establishes more of a commitment level since they are signing some documents. I’ve found this to be an effective way of mitigating the number of times an investors says “yes I’m interested” but then backs when I have a deal under contract.

 

3 – Increase Your Responsiveness

 

My clients who are very effective at raising investor capital are outstanding at being responsive. My business partner is also very good at it. And I like to think that I am good at it too! One of the most important things for me in a business partner, whether it’s an investor or someone I am doing deals with, is to have an open line of communication and being able to talk to them very easily whenever it’s needed. And vice versa.

 

We are in an industry where things move quickly. There are a lot of distractions, but people expect to hear back from you ASAP, especially investors and business partners. At the very least, you need to set expectations on your responsiveness. This doesn’t mean you should be waking up in the middle of the night to respond to emails – unless that’s what you want to do. But if one of my investors, clients or business partners has a question, I am on top of it immediately.

 

I like to jump on things quickly and nip them in the butt before they turn into a monster. The worst thing that can happen is to let a tiny problem fester and grow into a behemoth. This is avoidable if you make the commitment to address all questions, problems, or concerns as soon as they happen.

 

4 – Build Relationships as a Couple

 

When you build relationships with investors as a couple, it makes a huge difference because it adds another dimension to the relationship. Ultimately, your goal is to build a friendship with your investors. So, if your significant other is getting to know their significant other and they become friends, that’s going to help from a long-term perspective.

 

Obviously, this is something that is really only relevant to those that have a significant other.

 

For everyone that has a significant other, I highly recommend building friendships through couple’s dinners, evenings out, or weekends away. It definitely adds a level of trust and credibility because they get to know you and your family on a personal level.

 

I have found this to be one of the most effective ways to get a ton of investor referrals.

 

Conclusion

 

I know that at least one of these money raising tips – starting to use the phone more, sending out investor qualifiers, being quick to respond, and building relationships as a couple – were a surprise to you. And quite frankly, they were a surprise to me as well. I just uncovered these things when I was assessing what was working and what wasn’t working that wouldn’t be obvious from a money-raising standpoint.

 

How about you? Comment below: What are some non-obvious ways that you have been able to increase your business’s efficiency, whether it be raising money, finding leads, locating deals, etc.?

 

 

Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com

 

company meeting

How to Overcome Objections When Raising Money for Multifamily Investing

Last week, I explained how one can know if they are ready to become a multifamily syndicator and buy apartment communities with investors while sharing in the profits. Essentially, the two requirements are (1) establishing an education and (2) having experience being successful in real estate investing and/or business. Now, that sounds fine and dandy, but even if you have met both requirements, potential investors may still have objections:

 

Well, I see that you have prior success working for a large corporation, but that doesn’t make me feel any more comfortable giving you my money to investing in real estate.

 

Or…

 

It is amazing that you’ve been able to flip all those properties, but you haven’t done anything in the multifamily realm. I don’t want to be your test subject.

 

 

How do you overcome these objections, aside from responding with “just trust me?” These objections are quite real. If you haven’t successfully completed a syndication deal before, then all the education and unrelated past success may mean nothing to potential investors. Therefore, to squash these objections, surround yourself with the right team members. Having a knowledgeable, tried and true team is the main way to offset any lack of experience you may have.

 

Here are a couple tactical things that you can do to build the right team and eliminate any investor objections:

 

Property Management Company

 

One of the most vital team members that can aid in addressing investor objections is a property management company that specializes in apartment communities.

 

Why?

 

  • By going in the deal with you, the property management company will have their own skin in the game. They are incentivized to make sure that the deal goes smoothly.
  • Since they have past and present experience managing apartments, they should have case studies that show their success. You can use their case studies as proof that your team has the credibility and experience to successfully manage the deal.

 

Also, you may even have the added bonus of the property management company bringing in investors of their own.

 

Experience Syndicator

 

Another tactic is to find another experience syndicator that has already done what you are trying to accomplish. An applicable Tony Robbins’ quote is “success leaves clues.” We aren’t the first person to ever live. Nor are we the first to invest in real estate or raise money for apartment communities. Therefore, you don’t have to start from scratch. Instead, go out, find the best of the best in our given field, and follow the breadcrumbs they’ve left behind to replicate their success. They can help you along the way. And, you can leverage their experience to get the deal done and gain that credibility your investors are looking for.

 

 

A property management company and experienced syndicator are just two examples. However, there are many other professionals you can add to your team whose experience you can leverage – CPAs, attorneys, brokers, agents, etc. Ultimately, overcoming investor objections boils down to the team you surround yourself with and how you leverage those relationships to create credibility for you and your business.

network

How to Raise $1 Million for First 2 Real Estate Syndication Deals

 

If you were brand new to the apartment syndication niche, it is unlikely that you would be able to raise over $1 million for your first deal. It would be even more unlikely that you would be able to raise over $1 million for you first deal AND your second deal. However, a client of mine, David Thompson, was able to accomplish this improbable feat.

 

RELATED: Working in Apartment Syndication – What’s Possible in One Year!

 

How did he do it?

 

David was able to raise millions of dollars on his first two deals by leveraging his natural networks – three in particular. In a conversation on my podcast, David explained how, through his personal network, BiggerPockets and local multifamily meet-ups, he was able to acquire private capital so that you can work towards replicating his success.

 

1. Personal Network

 

The individuals in David’s personal network who invested in his deals were family, friends, and work colleagues. They knew him personally, so a level of trust was already in place. AND they knew about his real estate background.

 

Prior to entering the syndication niche, David’s real estate experience was:

 

  • Over 5 years of experience purchasing single-family residents
  • In a previous career, he managed a $2.5 billion investment portfolio and raised over $1 billion in funds for acquisitions.

 

Needless to say, his personal network already perceived David as a successful investor and entrepreneur, even though it wasn’t in apartment syndication.

 

RELATED: How Do I Know If I’m Ready to Become an Apartment Syndicator

 

Within his network, the two-main money raising avenues were through his wife’s network and a past business associate. 70% of the capital he raised came from these two sources – 35% from the former and 35% from the latter.

 

His wife’s network was a natural path because she had personal, trusting relationships with people who were interested in real estate and who had cash readily available.

 

And the past business associate is someone that he used to work with in the high-tech sector; this person was David’s biggest contributor.

 

Based on David’s success, how can you leverage your personal network of existing relationships to raise private capital?

 

Do you have family members or spouses with access to cash? Or maybe they have someone in their network – someone who is one or two degrees of separation away?

 

Or have you been or are you currently involved in the high-tech, legal, or medical industry? This is a gold mine for raising money. Many of your associates are making good incomes, but they likely don’t have the time to be active in real estate investing. However, they are savvy enough to understand that real estate is an important and effective method of investing.

 

RELATED: 4 Principles to Source Capital from High Net-Worth Individuals and Find Off-Market Deals

 

2. BiggerPockets

 

BiggerPockets was another network that David leveraged to raise money. 25% of the capital he raised came from BiggerPockets. Social media outlets, like BiggerPockets, that focus on real estate education tend to attract investors who are actively looking for opportunities.

 

However, you aren’t allowed to advertise for a specific deal on BiggerPockets or on really any social media outlet. That’s why instead, David frequently posted valuable content – in both the BP blog and forums – and created biography page stating that he was a syndicator. When someone read a piece of his content and clicked on his profile, they’d discover that he raised private money for deals. If they wanted to learn more, they would reach out to start a conversation. Then some of those conversations turned into relationships, and some of those relationships turned into business partnerships.

 

RELATED: The Secrets to Starting a Relationship with Someone You Don’t Know

 

Therefore, by posting valuable content and creating a biography page, David accomplished the same goal without explicitly advertising for money. But keep in mind that this is obviously a more long-term approach. You need to establish yourself as a recognized expert by consistently posting informative blogs and answering questions first. That means not getting frustrated and giving up if you haven’t raised a single dime after a month of two.

 

3. Local Multifamily Meet-ups

 

The third network that David leveraged to raise money were local multifamily meet-ups. Although, he expected to be more successful at raising money at meet-ups than he actually was. It seemed as if this would be an event that would naturally attract investors. However, David discovered that many of these people wanted to be active in real estate, rather than passive investors. Also, many of them weren’t accredited investors.

 

RELATED: How to Make Over 6-Figures with This Simple Networking Strategy

 

Conclusion

 

David Thompson was able to accomplish an improbable feat for his first two multifamily syndication deals. He raised over $1 million for both deals. He was able to do so by leveraging three of his pre-existing, natural networks:

 

  • Personal Network

 

When raising money in your personal network, David recommends finding people who are in the high-tech, legal, medical, or similar industry because they likely make high incomes but don’t have the time to actively invest themselves.

 

  • BiggerPockets

 

To raise money on BiggerPockets, since you can’t actively advertise deals, instead, David advises that you frequently post valuable content and create a strong bio page that explains that you raise money for multifamily deals.

 

  • Local Multifamily meet-ups

 

 

David’s third money raising network was local multifamily meet-ups. However, much to his surprise, they were the least successful of the three.

 

 

Did you like this blog post? If so, please feel free to share it using the social media buttons on this page.

 

 

Also, subscribe to my weekly newsletter for even more Best Ever advice: http://eepurl.com/01dAD

 

                       

If you have any comments or questions, leave a comment below.

 

 

 

 

private money

8-Step Outline for a Successful Private Money Investor Call

Here is the outline that I utilize to successfully prepare and present to potential private money investors. This specific outline can be followed verbatim for presentations to investors AFTER you already have a deal.

 

 

1. Welcome

 

Welcome and thank the potential investors for taking the time to attend the call.

 

 

2. Provide a summary for what they investors can expect

 

Outline the flow of the presentation and what I am going to be talking about. Then, explain that there will be a time for a Q&A session at the conclusion of the presentation.

 

A quick tip for an efficient Q&A session: Provide the private money investors with my email address. Say that they can email me their questions as the come up during the presentation. In doing so, they won’t forget their questions and they won’t have to interrupt the presentation to ask a question.

 

 

3. Introduce myself

 

Provide a brief bio, including my background, what I do, what are my strengths, and what are my overall investment goals.

 

 

4. High Level: Explain why this is a good deal

 

First, list the top factors that I look at when evaluating a deal. For me, I look at the deal itself, the market, and the team. However, this will vary from investor to investor, depending on your strategy.

 

Next, provide a high level explanation on the reasons why this deal stands out, in regards to each of the top factors that I look at when evaluating a deal.

 

Here is a list of questions I answered for each of my top factors:

 

  • The deal
    • What stands out about the deal?
    • Has the business model I plan to implement been proven?
    • How does this deal compare to other deals that I have done in the past?
    • What is the upside potential?
    • Will I put in new upgrades? If so, how will that affect the bottom line?
  • The Market
    • How well do I know the market?
    • How does the submarket compare to other submarkets in the same area?
    • What makes this submarket a good location to invest?
    • What is the demographic that will live in the property? Where do they work, go to school, shop, etc. and how close are these to the property?
    • Do I own any other properties in the area?
  • The Team
    • Who is apart of the team?
    • Are they invested in the deal?
    • Have I worked with them in the past?

 

Finally, quickly summarize this entire section.

 

 

5. Go into more details

 

Provide more details on the business plan. There really is not a right way or a wrong way to do so. However, below is an outline for how I personally provide my private money investors with details on the deal.

 

  • Overall Plan
    • What is your overall real estate plan? (i.e. value-add multifamily)
    • How does this specific deal fit into this strategy?
    • What are my target markets and submarkets? Why?
    • Why do I target those specific markets?
  • The subject market
    • Economy, jobs, rent projections, vacancy projections, etc.?
    • Do I own additional properties in the area? If so, how is that advantageous for this deal?
    • Other location advantages? – Accessibility to highways, X minutes from downtown, etc.
    • What is the competition in the area?
    • What is the demographic?
    • What are the rentals comps?
  • Exterior and Interior
    • What is the current condition of the property?
    • What, if any, are recent upgrades? (Be specific i.e. what, how much?)
    • What do I plan to upgrade, fix, replace, etc. on the exterior? Will that have a positive affect on income or expenses?
    • What do I plan to upgrade, fix, replace, etc. on the interior? Will that have a positive affect on income or expenses?
    • Any other projects? (Exercise room, pool, repaving the parking lot, water conservation, etc.) Will that have a positive affect on income or expenses?
  • Other
    • What aspects of the exterior and interior plan make you attracted to the property?
    • How will I mitigate risk?
    • What are the underwriting projections?
      • Rent growth, vacancy, cap rate, etc.?
    • What is the debt situation?
      • Loan type, terms and conditions, interest rate, refinancing, etc.?
    • What is our exit strategy?

 

 

6. Conclusion

 

Conclude with a bullet point summary of why I like this deal.

 

 

7. Q&A

 

Read and answer the questions that have been emailed to me.

 

Here is a list of questions that I received during my most recent private money investor call:

  • How do you perform renovations with people currently living in the units?
  • How long have the current owners had the property?
  • What is the number one risk with this investment?
  • What is the frequency of investor payouts?
  • Why is the current owner selling

 

 

8. Next Steps

 

Conclude the call by thanking everyone for joining the call. Let them know that they can email me any additional questions that they have. Finally, let them know what the next steps are for those interested in investing in the deal.

 

United State capital building

A 5-Step Process For Raising BIG Capital For Multifamily Syndications


In my conversation with Richard Wilson, who is an investment advisor for millionaire and billionaire families, he laid out a 5-step process that has allowed him to raise over $3 billion in private capital. The 5-steps are (1) analyze (2) position (3) architect (4) execute (5) iterate.

 

Step 1 – Analyze

 

Richard finds that many people skip the first step. They come into the investment space without understanding their competition, without listening closely to the potential investors, or not even knowing if the investors are interested in the asset class they want to raise capital for. Others try to raise capital when they aren’t experienced or “mature” enough.

 

Before starting, you need to know what is going on, in regards to your marketplace, investors, and competition. That comes through analysis. A deep analysis enables you to emulate the best practices. This is the most simple and common sense step – look around through networking and research to determine what is going on in your specific niche. Do not rush into investing without conducting a thorough analysis because if you do, the subsequent steps are not going to mean anything. This is the foundation that you will launch from; don’t skip it!

 

Step 2 – Position

 

Positioning means that you know what you want to stand for and how it sets you apart from the competition. Richard provided a beautiful analogy to explain positioning:

 

In Rio, Brazil during the most recent Olympics, you would have found over ½ million people on the beach at once. If you Google Image search “Rio Beach Olympics,” it will look like a massive blob. It would be impossible differentiate from person to person, so you wouldn’t know who was the tallest, oldest, youngest or sharpest looking person. If you were a real estate investor attempting to position yourself on the beach in Rio, how would someone know if they could trust you with their money? They wouldn’t. You would be a generic face that is only provided them with your title, so why would they trust you?

 

Instead of positioning yourself on a Rio sized beach, define a “sand box” that you want to play in that only has 1 or 2 main competitors. Also, try to position yourself at the top end of that niche or in the most profitable, easy-to-move-in, or the one with the most low hanging fruit.

 

It is really important to not position yourself by trying to be everything to everyone. Figure out the valuable “sand box” that, no matter how long it takes, you will have the conviction to become the dominant force in and reach the top. It must be worth any amount or magnitude of work, even if it takes 5 to 7 years to get there.

 

Ironically, by having that conviction, combined with having a long-term vision versus a short-term vision, you will actually get to where you want to be faster. When you are all-in, your passion, conviction, and long-term mindset will be projected onto others. You will come off as the person that knows their stuff, is connected, has the off-market deals, and has the ability and focus to actually execute and follow through.

 

Step 3 – Architect

 

This is the most critical step and is also the step where the most people get lost. Many people might have a niche or two that they want to go after, but they don’t have conviction. As a result, they never architect. Even those with high conviction, another common mistake is that they stick to the old school money raising methods. (i.e. call through their lead list, reaching out to their network, cold calling, etc.)

 

At this point, you should have already selected the “sand box” you will be playing in. Now, it is time to build your sand castle that will attract the investors. Richard believes that the best and most efficient sand castle is an investor funnel. He provided another beautiful analogy on how to catch a fish that explains the old school vs. ideal approach to an investor funnel:

 

Old School Mentality: Going to a lake to catch a fish dinner and blindly stabbing a spear into the water, hoping that you will eventually catch something.

 

Ideal Approach: Going to the part of the lake where the fish are jumping out of the water and right into your boat. Minimal effort is required.

 

When Richard began his investor advising business, he only reached out to a single client. From that one client, every other client cold called him, asking for his business. He attributes this success to the value he provided to the initial client, but more importantly, the valuable content he architected and put out in his space. Here are some tips on creating content in tandem with an awesome funnel:

 

  • The top layer of your funnel consists of valuable content
  • Examples of valuable content to attract individuals to enter the top of your funnel
    • Books, podcast, hosting or speaking at conferences, blog posts, article writing, PR writing, white papers, YouTube videos
  • Create evergreen content
    • The fundamentals of your space
    • content that will still be true 10 years from now

 

Here is a real world example of a client that Richard obtained from architecting a funnel:

  • Top of funnel
    • Someone purchased a book that he wrote
  • Next layer of funnel
    • Because of the book, they figured that Richard was the expert in that field and gave him a call
  • Bottom of funnel
    • They invested with Richard without even meeting him in person

 

That is an example of how powerful the funnel can work for you!

 

Another example of the power of the funnel is how to promotes long-term growth and exposure. For example, when Richard hosts a live-conference, he creates a ton of connections. First, 700 people attend the event in person. Secondly, the individuals that attend the conference will discuss it with family, friends, and business colleagues, so now they know who he is too! Finally, Richard finds that for every 1 person that attends his event, 100 people will visit the event page online. Combined, that is thousands of connection made from only one conference.

 

Step 4 – Execute

 

Richard advises that you execute in a systematic way. You need to put systems in place that allow you to delegate as much as possible. You need to have capital raising habits. Every single one of your habits are either helping or hurting. Therefore, it is important to understand the key performance indicators (KPIs) you are measuring for your team and for yourself. Then, take inventory on your habits and determine which ones are having positive or negative effects on the KPIs. Having KPIs allows you to tangibly understand what is critical to pushing the ball forward every single day, every single week, and every single month.

 

Richard and his team run KPI reports at the beginning of each day, at the end of the day, weekly, and monthly. Also, they create and update a one-page document (i.e. one pager) that explains their capital-raising plan.

Step 5 – Iterate

 

During his 10 years as an investment advisor, Richards has discovered many valuable opportunities via iterations of his current business (i.e. businesses within businesses). It is important to always look for more valuable ways to use your time. One of the best ways to do this is by leveraging your current business and relationship to create new opportunities. Identify a niche within a niche, and then run that through the same 5-step process. By leveraging your already existing content and riding the momentum of your first business, you may be able to create something that is worth twice as much or more. Be creative here!Dan Kennedy believes that the worst number in business is one – having one business model, one way of making money, one way of attracting investors, etc. When you have a nuanced, multi-dimensional business, you have a competitive advantage in the marketplace. Also, you will have layer upon layer of ways to attracting capital and executing deals. Iterations from current practices is the most effective way to create additional layers and dimensions to your overall business.

 

 

real estate building blueprints

3 Ways a 23-Year-Old Investor Funds Million Dollar Deals

 

In my conversation with Devan McClish, who has completed over 60 deals and is currently building 26 properties at the ripe age of 23 year old, he explains the trick that has enabled him to create such a large business at such a young age: using other people’s money!

 

Devan’s real estate philosophy is to only focus on finding deals. Then, once he has obtained a deal, he makes it his life’s mission to find the money to fund the deal. Everything else is secondary.

 

Just because you don’t have any money doesn’t mean that you can’t invest in real estate. When Devan came out of college, he didn’t have any money at all. However instead of going into another profession, he decided to just focus on finding deals, finding funding, and then figuring everything else out later.

 

In regards to “finding the funding,” Devan has found success in three main arenas:

 

 

1. Google Search

 

Devan met his largest investor to date using Google. When he was 19 years old, he typed “top real estate investors in Nashville Tennessee” into the Google search function. He sent introduction emails to the top 50 hits that were returned. Out of the 50, only one responded.

 

Devan sat down for coffee with the investor that responded and explained his business plan. Fortunately, the investor offered him free advice and said that if Devan brought him a deal, he would analyze it with him and see if it was a good deal.

 

Over the next few years, Devan brought this investor numerous deals. Upon analysis, the investor continually concluded that the deals weren’t good. Finally, Devan brought him a deal that the investor approved of, AND he invested in it! Devan made the investor a good amount of money on that deal, so they partnered again and again.

 

Eventually, it got to the point where the investor was comfortable enough to invest $350,000 into a new construction deal. Since Devan had a track record of never losing money and always making money, the investor had no problem investing such a large sum of money.

 

2. Local REIA

 

Another arena that Devan has found investors is at the local REIA group. He has found that while most attendees have never done a deal or have only done a few, they do have cash. That is why they are there. Typically, 60% to 70% of the people at the meetings have over $100,000 in their pocket that they want to put to work. All you need to do is have the courage to walk up to them with a deal and say:

 

Hi, my name is ____________. I noticed that you said at the beginning of the meeting that you are a cash buyer. Well, I have a deal. I am not interested in selling it to you but I am interested in partnering on the deal. Here are the numbers. Does this deal sound good to you?

 

1 of 2 outcomes will happen:

 

  1. They aren’t interested. Therefore, you walk up to someone else and repeat the statement above. Most of the time, if it is a good deal, someone is going to listen to you.
  2. They say “yes” and you say, “lets go talk about the deal further.” At this point if you don’t like what they have to say, that is fine. You aren’t obligated to have them invest in the deal. You walk away, find someone else and repeat the statement above.

 

 

3. BiggerPockets

 

Devan met his second biggest investor on BiggerPockets. Every time he sees a new member post an introductory message on the forum, he sends them a DM inviting them to sit down and talk real estate. On one such occasion, he sat down with someone that had a very good paying w2 job. Devan explained that he focuses on new construction and asked, “If I bring you a good enough deal, would you take a look at it?”

 

A couple of weeks later, Devan found a deal. He presented it to him, showed him the deal financials and asked if he was interested in investing? In this particular situation, Devan needed to close on the deal in 17 days, so they would have to pay all cash. The investor agreed and invested $200,000.

 

Start Locally

 

Google searching for the areas top investors, the local REIA, and BiggerPockets are three real world examples of ways Devan has been able to raise capital for his deals. However, if you are just starting out, Devan recommends that you begin with local investors. With nonlocal or out-of-state investors, it gets a little more complicated and more importantly, it is harder to truly know those people. You need to sit down with these people and build a relationship. Keep in mind; you are interviewing them just as much as they are interviewing you.

 

private money

List of Questions Asked on Buyer-Seller Call for a $20MM Apt. Building

In my conversation with fellow multifamily syndicator John Cohen, who is in the process of closing on a 240-unit apartment building for over $20 million, he provided a list of questions that you should be prepared to answer during the best and final buyer-seller call.

The objective of the best and final buyer-seller call is to provide the seller with information about your business plan that convinces them to award you with the deal. Therefore, the more prepared you are to answer the seller questions, the more appreciative, comfortable, and trusting the seller will be, and the better chance you have of being awarded the deal.

Here are a list of questions that John was actually asked and prepared to answer during his best and final buyer-seller call, which resulted in him getting a 240-unit apartment complex under contract for over $20 million.

Main Questions

1. Who you are?

2. What do you own in the area?

3. Who is your manager?

4. What is your business plan?

-What is your budget breakdown?

-What is your detailed plan?

-What opportunity do you see here?

5. What are you attempting to deliver?

-How long do you plan on holding the property?

-What is your financing?

–How will you be securing debt?

–What did you underwrite?

–What type of loan?

–What is the LTV?

–What is the rate?

–Can I see your term sheet?

-What is your renovation plan?

–Estimated budget?

–Rehab plan?

—Interior?

—Exterior?

—Common area?

Additional Questions

6. Tell me about your team?

7. Tell me about the investors?

8. Do you have an approval process?

9. Is your equity ready?

10. Have you toured the property?

11. Has the equity toured the property?

12. Is any surprise going to come up?

Bonus: Three Questions to ask the seller

1. Why are you selling?

2. Is there any reason why we would not be awarded the deal?

3. What else do you own? – See if there are other investment opportunities

 

John is a firm believer in putting all of the cards on the table and coming prepared. The seller will appreciate that and you will gain their trust due to your proactive transparency.

 

What other questions have you been asked on a best and final buyer-seller call?