JF1569: How To Raise Capital From Private Investors Part 3 of 8 | Syndication School with Theo Hicks
Now we know why people will invest with us, and which entity to use for the capital raise. Now it’s time we talk about finding the actual people and investors that will be investing with you. Theo gives us six great ways to do it today. And we’ll hear six more ways to find our passive investors tomorrow. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Joe Fairless: There needed to be a resource on apartment syndication that not only talked about each aspect of the syndication process, but how to actually do each of the things, and go into it in detail… And we thought “Hey, why not make it free, too?” That’s why we launched Syndication School.
Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to apartmentsyndication.com, or to learn more about the apartment syndication school, go to syndicationschool.com, so you can listen to all the previous episodes.
Theo Hicks: Hi, Best Ever listeners. Welcome back to another episode of the Syndication School series – a free resource focused on the how-to’s of apartment syndications. As always, I am your host, Theo Hicks.
Each week we air a part of a podcast series. This week’s podcast series is going to be a continuation of actually a six-part series that we’re doing… But all these series will be about a specific aspect of the apartment syndication investment strategy, and for the majority of these series we’ll be offering a document, or a spreadsheet, or some other additional hard copy resource for you to download for free. All of these documents, as well as previous Syndication School series episodes can be found at SyndicationSchool.com. As I said, this episode is going to be a continuation of a six-part series entitled “How to raise capital from passive investors.”
In part one you determined what your current mindset was towards raising money. We’ve talked about the fear people have about raising other people’s money, as well as how to overcome these fears, or really any other limiting belief that you have towards raising money from passive investors. Then we’ve also learned why someone would actually invest with you, and the answer isn’t money or returns, but it’s actually trust.
From there we moved into part two, where you learned the differences between a joint venture and a syndication. Essentially, a syndication has limited partners that are completely passive, and then general partners who are active in the business plan… Whereas the joint venture – everyone’s essentially a general partner, so no one’s completely passive. The people investing the capital also have some other role or responsibility.
Then we also talked about the differences between the two main apartment syndication offering types – the 506(b) versus the 506(c). I highly recommend listening to those episodes first, before moving into this episode, which is part three. We will begin to discuss how to actually find passive investors.
By the end of this episode you will learn the first six ways to find people to actually invest in your apartment syndications. Then in the next episode, tomorrow, we’ll talk about six more ways, so in total you’ll have 12 ways of how to find these investors.
Of course, this is assuming that you’ve listened to the previous Syndication School series and you’ve hit all of the requirements. If you don’t have the education and experience requirements, if you haven’t put together the rest of your team and the other things that we discussed, then you need to focus on that first, before acting on these… But at the same time, raising money is a long-term strategy, so you might be able to actually implement some of these right away, and then others you are going to want to wait until you’ve got other pieces in place.
For example, the number one way to find passive investors — and by the way, these are not in any particular order, so it’s not like number one is the best way… These are all great ways that have been used by others to find passive investors… But number one is going to be the thought leadership platform. The thought leadership platform is going to be your interview-based online service, essentially… A podcast, a blog, a YouTube channel where you have conversations with apartment or real estate or syndication professionals, and then write a blog post about it, record a YouTube video or podcast episode, and share that to a following for free.
Now, one of the reasons why a thought leadership platform is a good strategy for raising money is because of all the relationships that you’re building. So if you are going to do a podcast, for example, and you are going to interview different apartment professionals once a week, then you’re going to have 52 conversations a year with 52 different active real estate professionals. And if just a handful of those know someone, or they themselves are interested in investing in your deal, then the thought leadership platform is well worth the time.
Your relationships formed with the guests, whether it be them investing directly, or them providing you with a referral of someone else who invests, or… Again, we’ve talked about this before – even if they refer you to someone who ends up coming on your team, and then maybe in the future they invest, having the thought leadership platform and interacting with these guests, whether it’s tomorrow or in two years from now, will have a direct impact on your money-raising abilities. Additionally, you’ll have these people actually listening to your thought leadership platform.
Let’s say, for example, you create a thought leadership platform that is directed towards passive investors, which would be a brilliant idea, because if you are creating content directed towards passive investors, if you’re likely interviewing passive investors, which is the opportunity to find an investor and get referrals from them.
At the same time, you’re creating content that’s going to attract other passive investors that you haven’t met yet. In doing so, they will reach out to you… We’ll get into exactly how to do that in a second, but that’s just another example of how the thought leadership platform can help you attract passive investors, and that will be the listener base.
Overall, with your thought leadership platform, regardless of who you are interviewing or what the theme of the podcast or the thought leadership platform is, you are going to be transmitting to the world your intentions to raise money to purchase apartment buildings, and share in the profits.
So we defined our primary target audience and the secondary target audience in a previous Syndication School series, with the primary target audience ideally being our passive investors… We basically created a brand around that fact, and to attract that primary target audience. And in doing so, when you are creating these podcasts and these blogs and these YouTube channels directed at your primary target audience, you’re letting them know that you are raising money for apartment buildings, and you are going to obviously share in the profits with the people who invest in those deals… So anyone who comes across your content and sees that’s what you’re doing, if they’re interested, then they will reach out.
And then finally, the thought leadership platform is great – and this might sound repetitive if you’ve been listening to the Syndication School, but it’s super-important, and that is the credibility factor. Because if you remember, the biggest challenge you’re going to face as a first-time money-raiser, as a first-time syndicator and when you’re trying to find team members, is going to be the lack of credibility, because you’ve never done this before.
We’ve talked about all the different ways to promote credibility, but one way is the thought leadership platform, and the credibility will help you with the actual passive investors, because if you are, again, having all the conversations with investors, creating all this valuable content, you’re gonna be perceived as an expert, and it’s gonna give you additional credibility than someone who just has a LinkedIn profile or a Facebook page, or someone that they’ve never heard of before.
For those reasons, you’re gonna wanna make sure you have a landing page on your website in order to capture the information of these interested investors. So you’ve got your thought leadership platform, you’re transmitting to the world that you are raising money to purchase apartment buildings and to share in the profits with these passive investors. “If you’re interested, go to InvestWithJoe.com and fill out our landing page in order to learn more.” It’s as simple as that.
Then you’ll have their e-mail address and you’ll be able to move on to the communication phase of this, which we will be discussing in next week’s series, how to actually communicate with investors once you’ve found them.
And then also, besides your actual thought leadership platform, you will also wanna get interviewed on other people’s thought leadership platforms for similar reasons. You’re gonna be more credible by saying “Not only do I have my own podcast, but I’ve been interviewed on these five popular podcasts”, and you’re gonna get in front of more people, which will, again, allow you to form those relationships with the guests, as well as the listeners of their podcasts, and then you’re gonna have that credibility factor as well.
And then if you direct them back to your website, they’ll find your landing page, and boom, you have their contact information.
Most of these steps… I should have probably mentioned this earlier, but most of these – in fact all of these – the goal really is to get their e-mail address and to get them to agree to hop on a phone call with you… And we’ll go over strategies of how to do that.
Again, this episode, and then part four tomorrow, is just gonna be focused on how to find them. Next week’s series will be focused on what to actually do once you find them. So number one is the thought leadership platform.
Number two is Bigger Pockets. Do not underestimate the power of Bigger Pockets as it relates to networking, because at the end of the day, raising money is really gonna be about your network and people trusting you. So Bigger Pockets and other real estate related services or other services like Bigger Pockets – they attract both active investors and passive investors, or investors who don’t know if they wanna be active or passive.
Being someone who posts to Bigger Pockets multiple times a day, five days a week, for the past couple of months, I would say that the majority of the forum posts that would be relevant to syndicators are people who essentially say that they’re interested in getting into real estate, they have 50k or 100k saved up, but they don’t know what to do. They have a need, which is “I’ve got this money. I don’t know where to put it”, and they’re reaching out and most of the time they’re saying “Should I fix and flip? Should I buy a large apartment building myself?” None necessarily will say “Should I passive invest in apartment syndication?” because maybe they don’t know about that strategy, so a perfect technique would be to locate those types of posts, and then comment, adding value, saying “You could do fix and flip. Here’s the pros and cons of that.
You can buy your own building, here’s the pros and cons of that, but there’s also another strategy called apartment syndication, and here are the pros and cons of that.” See what they say, and if they respond and say “Oh great, thanks for the advice”, send them a DM and say “Hey, I actually am an apartment syndicator. Do you want to learn more, or do you wanna have a conversation about it” And again, we’ll talk about what to say during that conversation on a future episode.
Now, you’re not allowed to explicitly advertise on Bigger Pockets unless you are a pro member, and then you can explicitly advertise on the marketplace. So you could technically just create a post, once a week, once a month, asking for investors… Assuming you actually have a deal, you can ask for investors on that marketplace, assuming you’re gonna do that 506(c) and you’re allowed to attract investors… And you could also — again, I would probably ask your attorney first, to make sure you’re not violating any laws, but you can create a post in the marketplace before you have a deal, just to generate interest. And if you’re on Bigger Pockets, you’ve probably seen those types of posts.
And then you could also advertise on their podcast or in their newsletter as a sponsor, but that’s pretty pricey, and you probably won’t be doing that for at least a few years.
Now, I highly recommend getting a pro account, because not only will it allow you to post in that Bigger Pockets marketplace, but it will also allow you to add a link in your signature or your description, that will obviously link to your website, or I guess wherever you want it to link to. For us, we have a specific apartment syndication page where we have all of our blogs and videos, so that’s the link that I have in my signature. That way, if I am posting a ton, and people wanna learn more about me, they click on that link and they’re directed to that apartment syndication page, and now they’re on our website.
You also wanna make a strong biography page on your actual profile, that actually states your intention, so what are you trying to accomplish – well, we’re trying to raise money for apartments, to share in the profits. So if someone sees you’re posting a ton, and they click on your profile, they’ll see that’s what you do, they’ll see your website, they’ll click on your website and ideally get to your landing page.
Now, another strategy is going to be to post valuable content to the forums. As I mentioned, I post seven to ten times every day of the week, so five days a week, and the goal is to add value.
Here is the exact strategy that I use, and the reason why I am saying this is because it’s something that I think everyone should do, and there really isn’t a competition to see who posts to Bigger Pockets, although if you do follow the strategy, I can guarantee you that you will be on the top contributor list on the specific forum that you actually post to. For this case, it’d be the multifamily forum. I’m consistently in the top three top contributors for the multifamily forum by following this strategy, which honestly takes me one hour per day maximum… At least now that I’ve got a process down, which I had to determine by trial and error… But this is a very powerful strategy, and I’ll tell you why once I actually explain what the strategy is.
First, I go to BiggerPockets.com, I obviously sign in, and then I will go to my notifications first, because since I’m posting on an ongoing basis, I will want to go see if anyone replied to a comment that I posted, or mentioned me in a comment.
So you go there, you open up all those in new tabs, and you go through each of them. If someone just says “Thank you” or doesn’t necessarily ask you a question or something that you can respond to, just make sure you up-vote on that; obviously, if they asked you a question, answer that question.
Once I exhaust my notifications, I go ahead and delete all those, and then I will go to the keyword alerts next. The keyword alerts that I use are “passive investing”, “passive investor”, “syndication”, “crowdfunding” and “accredited”. I have more keyword alerts than just that, but these are ones that are relevant to specifically attracting investors.
Anyone who mentions those terms in their forum post, I will be notified via e-mail… But again, I just do it once a day, so I go through all of them one at a time. So I will go and I will answer any question, or reply to any thread that’s relevant… Because sometimes you might get a notification and the thread isn’t necessarily relevant, because someone just said “accredited”, but they were using it incorrectly, or they were kind of just mentioning it in passing and it wasn’t the main theme of the thread. But I’d say 50% of the keyword alerts are worth responding to.
Then once I’m done with the keyword alerts, I move on to the Commercial forum category, and the under Commercial there’s a multifamily forum. I will go over and look at the posts over the last 24 hours, and I’ll read the title, and anyone that seems like it might be potentially relevant and worth responding to, I’ll open that up in a new tab, read through the thread, and then formulate a response. At that point, if I’ve hit my 7 to 10, then I’m done.
I maybe only have five posts out of all of those, because it’s Friday and I didn’t have any notifications or keyword alerts – then I move on to the Commercial Real Estate category. So it’s Commercial Multifamily, and then Commercial-Commercial. I’ll look through there, and usually there’s not much going on in that forum. Probably only 10-15 posts every day.
From there, I’ll move on to the Private Money forum. I think the category is Lending, and there’s one of them that’s Private Money. In there you have a lot of people asking about either loan questions, or they’ll be asking about private money, so hard money loans, passive investors, things like that. That’s the forum where most people will post asking about “What should I do with all this money that I have?”
Then from there, if I still don’t have the 7 to 10, I will just go to the most recent posts and just start from the top, and go down, and keep replying to the forums until I have exhausted the day’s posts, or if I’ve gotten my 7 to 10.
Now, as I said before, one of the benefits of this is that I can guarantee that if you follow this for at least a month, you’re going to be in the top contributor list for the multifamily forum… Obviously, unless every single person listening to this does it, then you might not be in there… But I have been in the top contributor list for the past few months just by following that strategy. But also, just by posting for a few months, you’re gonna start getting a ton of private messages and direct messages. Most of them are just them thanking you for replying to their thread, and “If there’s anything I can do, let me know.”
Even if one out of ten out those messages is someone who might potentially invest or be a potential investor, the strategy is well worth it, because this strategy is essentially free; I think the Bigger Pockets membership is like $100/year, so for $100/year if you can get one investor who invests $100,000 in your deal – or heck, even $25,000 in your deal – that’s a pretty good return on investment.
So not only do you have the ability to obviously reach out to passive investors or potential passive investors directly yourself, you will also start to get direct messages from interested investors as well. Obviously, not every single direct message is gonna be like that, but it is a possibility. But then as I stressed, do not expect to see results for a few months. Don’t expect to post five to ten times a day for a week and then all of a sudden you’ve got an investor asking to invest a million dollars in your deal.
This strategy, as well as the majority of these strategies are longer-term in nature, so six months at minimum for all of these strategies until you’ll start to see any sort of results… So make sure you stick to it.
And lastly, in addition to posting content to the forums, you can also post content to the member blog. Bigger Pockets has a member blog function where all the various profiles and members can post blog posts on one centralized location. So for you, the easiest way to create a blog once a week/once a month would be to repurpose the content from your thought leadership platform.
If you interviewed someone let’s say for an hour, you can probably break that into 2-4 blog posts. If you do one interview a month, you can post 2-4 blogs to the Bigger Pockets blog, as well as to your own blog.
You could also write about a certain lesson you learned based on a deal you’ve actually done, or based on a specific aspect of the syndication process you’ve recently gone through. Maybe you’re finding success using a certain strategy for your thought leadership platform – write about that. Maybe you found a team member in a unique way – write about that.
So that’s number two, and I think that’s something that’s going to be pretty important, that really anyone can do right away, and benefit from finding passive investors. That’s the Bigger Pockets strategy, and I highly recommend that you follow that one.
Number three are going to be attending real estate meetups. These are really any type of event that other real estate investors attend. First, you can actually attend these meetups and conferences and seminars in person. Obviously, you are not allowed to explicitly advertise for money, so you can’t go in there and say “Hey, I am Theo. I raise money for deals. Who wants to invest?” You’re not allowed to do that, unless you’re doing that 506(c), but still, talk with your securities attorney about that… But you are able to focus on building relationships.
Again, this raising money part is gonna be all about the relationships, the trusting relationships in particular. So you’re going to need to come in with a plan of how to build these relationships, how to approach these relationships. There are really two approaches to forming relationships – the broad abroad and the hyper-focused approach.
The broad approach would be you walking into the Best Ever Conference 2019 with a stack of business cards at a networking event, talking to people for two minutes, handing out a business card and then leaving, and trying to hit as many people as possible.
The hyper-focused approach would be – again, using the Best Ever conference as an example – you attending the Best Ever conference, and then during all the networking sessions you are trying to find that one person that you hit it off with, and then focusing on building that relationship for the rest of the day.
We believe – and I’ve found – that the hyper-focused approach is much better than the broad approach, because (and it’s pretty obvious) if you just handed a bunch of business cards… Yeah, I’m sure they’ll remember you, but you’re not really standing out. Whereas if you focus on the hyper-focused approach, you’re gonna build that personal relationship, which will give you that connection and will create trust.
So here is Joe’s three-step approach when he attends these types of in-person events. Again, this could be a monthly meetup group, or it could be a three-day conference that’s happening once a year.
As I mentioned, part one would be to focus on creating one new relationship. If it’s a multi-day event, try to focus on creating one new relationship per day.
Number two, when you are actually speaking to these people, you want to ask them personal questions, with the purpose of learning about their goals and why they’re attending the event. So your main outcome of these conversations should be “What do they want to achieve by attending this event?” So why are they there? Are they trying to find a team member? Are they trying to find a new investment strategy? Passive investors? Why are they at this conference?
The reason you wanna know this is because once the conference is over, you want to follow-up with this person, whether it be on LinkedIn or e-mail, and add value. And you will add value by helping them solve the goal that they had for attending the event.
For example, if they said they were attending the event because they’re trying to find a business partner, then I would go home after the event and send them a colleague request on LinkedIn, and reach out and say “Hey Joe, I wanted to follow up. It was great meeting you this weekend at the Best Ever Conference. You mentioned that you were trying to find a potential business partner; I hope you were able to find a couple of names.” And I’m gonna pause – at this point you would either solve the problem yourself, or you would send them a referral to someone who might be able to help them.
Continuing on our example for that person who’s trying to find a business partner, I would either say “I’m actually looking for a business partner as well, and based off of our conversations it looks like our skills complemented each other. Let’s set up a phone call to discuss it more.”
Or if I did not wanna be their partner, or we were at different parts of our business and our careers, then I would say “I hope you’re able to find a business partner. In the meantime, here are three names of people that I know are actually searching for business partners as well. You should definitely reach out.”
That’s the three-step approach. Now, again, these are long-term approaches. Just because that person needs help with something that wouldn’t necessarily help you raise money, that’s not really the point. The point is to add value, and do something for them, and then who knows — maybe you never hear from that person again, and maybe you do this 20 times and 15 people you never hear from them again, but five of them a few years down the road actually took action on your advice, have a business partner, and now they’re willing to partner up, or they’re willing to bring you deals, or they’re willing to raise money for your deals.
You really never really know where any relationship might lead. I never knew that when I got coffee with Joe 3-4 years ago that it will lead to me recording a syndication school podcast series, but it just started off by me helping him with his podcast. The connection between me helping him with his podcast, to now obviously recording this podcast, as well as in the process of launching my own syndication business – it would have been impossible for me to actually foresee. You need to have that same approach when you are attending these meetups, as well as following really any of these strategies, is that it’s all about forming relationships, and you do not know where these relationships will lead. Maybe they lead nowhere, and maybe this person is gonna be your next business partner.
In addition to actually attending these meetups and conferences, you can actually create your own meetup or conference. I’m not going to focus on this one, because the benefits are going to be the same as attending other meetups, except for the added credibility factor, because you’re the man in charge, you’re the woman in charge, so that comes with an extra level of credibility than just attending these conferences in person… And there’s also benefits of organizing an event, and the marketing to get people to actually show up, and speaking in front of people, and things like that. But again, it’s all about building relationships, and in order to learn about how to create a meetup group, you can read a blog, which is “To source real estate deals and generate more wealth, start a monthly meetup.” That is a blog post that we wrote that has three strategies for how to start a meetup group. Or really, it’s actually just three different meetup structures for you to choose from, and like the thought leadership platform, it’s all about being consistent, because your first few meetups you’ll only have a handful of people show up, but if you stick to it, just like everyone else who has a massive meetup – they started out with a few people attending; stick to it and you can create a massive meetup in your market.
Now, you could also create what I wanna call a virtual meetup, so to speak. This would be like a Facebook community, for example. The Best Ever Facebook Community that we have, where people can join and ask questions to other active investors, and then we’ll post content and questions for engagement there… You can do this in addition to the meetup in person, or instead of; ideally, do both, but a Facebook community is another great way to attract potential passive investors through, again, forming these relationships… Because for our Facebook community we’ve got over 1,000 active investors who are on there, and again, we don’t know where any of these relationships could lead in the future.
I know I said I’d go over six this episode, but we’ve hit our 30-minute mark, so I’m actually gonna stop here, and ideally I’ll go over the rest… So I’ve done three, and I’ll do nine in the next episode, because these first three were really not the main or most important strategies, but they’re the most in-depth strategies, just because we’ve done all of these and we have a lot of information to provide for how to replicate these strategies.
These other ones we’ve also done, but they are a little bit more simple and not as in-depth. Again, the first three that we went over in this episode are 1) your thought leadership platform, 2) Bigger Pockets, 3) real estate meetups. For all of those we went over in-depth strategies for exactly what you need to do in order to start cultivating relationships in order to attract these passive investors.
As I mentioned, that’s the conclusion of part three. In part four we’re going to discuss hopefully the next nine strategies. In the meantime, to listen to other Syndication School series about the how-to’s of apartment syndications, and to download your free document, visit SyndicationSchool.com.
Thank you for listening, and I will talk to you tomorrow.