JF1759: How To Secure Commitments From Your Passive Investors Part 4 of 8 | Syndication School with Theo Hicks
We’ve created the investment summary, we’ve created an email to send to our investor database. Now it’s time for a conference call with your investors to secure those investments for your apartment syndications. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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“Determine what your main focus is, which should be capital preservation because that is the most important thing to your investors”
New deal offering email from one of Joe’s actual deals: http://bit.ly/newdealhighlands
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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 syndication. As always, I’m your host, Theo Hicks.
Each week we air two podcast episodes that are generally a part of a larger podcast series that’s focused on a specific aspect of the apartment syndication investment strategy. For the majority of these series we offer a document, a spreadsheet, a template, some sort of resource for you to download for free. All of these free documents and past Syndication School series can be found at SyndicationSchool.com.
This episode is a continuation of a series we started last week, or if you are listening to this in the future, the episodes that were seven and eight, before this episode. So this is gonna be part four of the series entitled “How to secure commitments from your passive investors.”
As always, if you haven’t done so already, I recommend listening to parts one through three in order to catch up, because we are building off of those first three episodes. In parts one and two we discussed the first step of the five-step process for securing commitments from your investors once you actually have a deal under contract. And again, you are doing this concurrently with performing due diligence and securing your financing. But in those first two parts we discussed step one, which is to create an investment summary, and we also provided a free investment summary template, that you can use to either use exactly to create your investment summary, or to use as a guide to create your own. What’s really important is making sure that you include all of the proper information.
Then yesterday, or the episode preceding this one, which was part three, we went over step two, which was how to create the e-mail to your investor database, and we included a link to an actual e-mail that has been sent out to Joe’s database of investors for a new deal. We went over the four goals of that, and how to accomplish those four goals.
One of those goals – the fourth goal, actually – was to invite your investors to the new investment offering conference call. The e-mail lets them know that you have a deal, the conference call lets them know more about the actual deal (or at least more than what was included in the e-mail) and it gives your investors an opportunity to ask you questions. So that’s step three, and we actually have a nine-step process for how to successfully implement and execute (and prepare, I guess) for your new investment offering conference call.
One thing I wanted to mention before I go into the conference call was one last part about your e-mail to your investor database that I forgot to mention, but if you actually click on the link you’ll realize and see what I’m going to say and you’ll know to do that – that is to use images in your e-mail. That’s one of the reasons why you wanna use MailChimp, because you can very easily upload an image to the e-mail just to show your investors a few images of the property.
So you can either just do one image, of the front of the building that shows the monument sign that says what the property’s name is, and then that’s it… But what we recommend doing is to obviously use that picture, but you also wanna use a few other pictures. What you’ll see in the sample e-mail is that the main image is actually a collection of four pictures; it’s got one big picture at the top, and then three smaller sub-pictures below. The main picture will be a picture of the actual monument sign, and below that you can do a picture of any aesthetically-pleasing aspects of the property. It could be the pool, it could be inside the clubhouse, the fitness center, the barbecue area, maybe an office or a business center… Anything that gets the point across that this is a very nice-looking property.
You also wanna include your logo. We have the Ashcroft Capital logo also included in that image… Again, just to give it an additional level of professionalism. So make sure you’re including at least one picture in your e-mail, and make sure that you have your logo.
If you wanna learn more about how to create that e-mail and what to include in that e-mail, and the four goals we accomplish, make sure you check out part three, which again, was aired yesterday, or if you’re listening to this in the future, the episode directly before this one.
As I mentioned in the episode about creating the e-mail, your fourth goal is to invite your investors to this conference call. In that e-mail you wanted to obviously invite them to the conference call, and then you wanted to provide the information about how they can actually join the conference. So the date of the conference call, the time of the conference call, making sure you put in the time zone, and then the phone number to call in, as well as the pass code to use once you dial in, depending on the service you use; most of them will have a dial-in number and then a pass code.
On this call you’re going to want to provide an overview of the opportunity to go over the deal in more details, as well as have some time left over at the end to answer any questions that your investors have.
Now, as I mentioned, we use FreeConferenceCall.com, because as the URL implies, it’s free, but more importantly, it actually records the conference call, which will come in handy once you are actually completed with the conference call.
Of course, there are other providers you can use, like Zoom, or Skype, or Google Hangouts, or whatever… It really depends on what you wanna use, what you’re comfortable with. If you’ve never used one before, FreeConferenceCall.com is very simple, so I’d just go ahead and use that. But if you’ve used Zoom in the past, then go ahead and use Zoom. It doesn’t really matter. The whole point is essentially can someone hear you is what’s important, and does it record the call.
So before you actually hit Send on the initial e-mail to your investors, you obviously need to set up your conference, so you can include that information on the e-mail. If it’s your first deal or you’ve only done a couple of deals, we highly recommend having your investment offering conference call at at least two weeks – or I guess it could be exactly two weeks after you’ve sent out that initial e-mail, because you’re gonna need some time to prepare if it’s your first call.
Once you’ve done a few deals, then you can schedule it the next day, or later that night, or you can kind of prepare beforehand… But if this is your first deal, you’re not gonna be as efficient at due diligence, securing financing, creating the investment summary… So you wanna give yourself as much time as possible, because really, this investment offering call is your once chance to get your investors interested in investing.
Also, after that two-week period you’re gonna have some of your due diligence reports back, maybe you’ll have some information about the loan, and so that’s some extra information you can include in the conference call; you’ll be able to answer more questions without having to say “Oh, well, we haven’t gotten to that point yet. I’ll get back to you.” But also, if you came across any disqualifiers, like the environmental didn’t come back clean, and you back out of the deal, then you aren’t wasting your investors’ nights by talking to them about a new deal, and then you end up having to back out because of title issues, or survey issues, or something like that.
Plus, since you’ll have more time to prepare, you might be a little less anxious during this call… Because again, you’re talking to people who want to invest in your deal, so that could be nerve-wracking. So the more time you give yourself to prepare, the better, overall.
So the process for making sure that your new investment offering call goes as smoothly and as successfully as possible is 9 steps. This is essentially exactly what Joe does when he is preparing and executing his new investment offering calls. Now, he’s done 20+ calls, so if you’ve never done a deal before, I highly recommend following this advice, because it’s been a process of trial and error. All the good things, Joe has kept, and all the bad things, he’s no longer done… So everything we’re going to explain here is how to essentially perfectly execute your call.
I recommend using this as a guide. Any quotes, or anything that I say “This is exactly what Joe says”, you don’t want to say verbatim. You want to customize it based on how you personally communicate, as well. So this is a guide, not something that you want to use as a script.
We’re gonna go through as many of these steps as possible. I don’t think we’re gonna get through all nine in this episode, so we will finish off the remaining steps in next week’s episode, and then we will move on to the fourth part of the process for securing commitments from your passive investors… So let’s jump right in.
The first thing you wanna do is get yourself in the right frame of mind. For Joe, this means answering the question “Why am I presenting this opportunity to my investors?” That answer is gonna vary from person to person, but what you wanna do is you wanna open up a Word document – this is going to be your guide during the entire investment call – and at the top of the guide, in bold letters (you can underline it, you can make it a size 50 font, if you want to) you want answer the question and write out the answer to that question.
For Joe, it reads “I’m here to serve. I’m here to help my investors preserve their capital and then grow it. 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, and the world will be a better place because of it.” That’s what Joe reads and says to himself before he starts his call, to get him in the right frame of mind.
Obviously, you pick your own reason. It could be something similar, it could be something completely different, but ultimately, Joe thinks it’s best to have a purpose, a reason for raising capital, for syndicating deals that is much larger than just you and your business. That really gets you out of the way, and instead of you focusing on yourself and thinking “Oh, am I saying this right? What if I mess up?” – instead of focusing on that, you’re focusing on your investors, which is ultimately where it needs to be.
One thing that I remember Joe has talked about on Follow Along Friday before is how he’s so comfortable and confident speaking in front of people… At first, obviously, just like everyone else, he was a ball of nerves, and he realized it was because he was focusing on what he was going to say, he was focusing on how he was gonna feel, how it was gonna come across… Which is again, him focusing on himself. Whereas when he decided to say “Wait a minute, I’m actually presenting to these people. They’re all here to learn something, and they wanna learn something, so if I focus on how I can help them learn, how I can add value to them, rather than focusing on myself, all those nerves go away.”
Now, again, that works for Joe, and it might not work for everyone, but that’s why he has that as his reason… As well as he mentioned if people are able to make money, then that can free them up from spending time at work, and because he believes people to be ultimately good, if they have more free time they’re going to do more good. And if they’re doing more good, then the world will be a better place because of it.
Now, make sure that you remind yourself — I mean, I highly doubt you’ll do this, but remind yourself that this statement is for you, it’s not for your investors. So you don’t want to lead off the call by saying “Alright everyone, I appreciate you joining the call today, but I wanted to just say a quick little statement before we begin… I’m here to serve. I’m here to help you preserve your capital and then grow it. When you get the returns we’re projecting, you’re gonna be able to spend your time the way you wanna spend it, and the world is gonna be a better place because of it.”
Maybe you can get away with that, but you don’t wanna read that to your investors; it could sound a little crazy and maybe turn some people off.
So for Joe’s particular statement, he knows that if he is able to accomplish this goal, if he’s able to serve and get that point across to his investors during the call, then it’s going to be a win/win for both Joe, because he’s gonna get the capital he needs to buy the deal, but also for their investors… Again, because of the fact that they’ll have more money and won’t have to focus on just raising capital, and they can focus on other things that they like.
Overall, part one is whatever you need to do to get yourself in the correct mindset, and to not be anxious and to make sure that you are focusing on adding value to your investors; that’s what you need to do before the call. That could be a statement, that could be you just reciting something in front of a mirror, that could be you meditating… Whatever you need to do to get your mind right needs to be the first step before you even prepare for the actual call. So that’s number one.
Number two of nine is to determine what’s going to be your main focus. So instead of getting in that service, that other mindset, you also want to determine what’s going to be the main points of focus for the investment call. Again, this could vary from person-to-person. However, from Joe’s experience, the main focus for all of this calls is capital preservation. Not making them money, but making sure that at the very least he preserves the money that they’ve given him, and not losing their money.
The reason why this is the main point of Joe’s conference call – or at least a part – is at least in part due to the interesting psychological concept which you may or may not have heard of before, which is called loss aversion.
Essentially, loss aversion is people’s preference to avoid losing money more than actually gaining money. In other words, the feeling that people get from losing five dollars – the magnitude of that negative emotion from losing five dollars – is of greater magnitude than the positive feeling they get if they’ve made five dollars.
So from Joe’s experience, and also after interviewing over 2,000 different real estate professionals on his podcast, this concept of loss aversion definitely plays itself out in real estate. People would much rather not lose $100,000 than actually make $100,000. So that’s one reason why capital preservation is the main focus.
The second one is pretty obvious, but if Joe or if you lose your investors money, then it’s a lot harder for you to reach your financial goals, and it’s a lot harder for you to continue to grow and scale… Because if you lose your investors money, again, you might be able to get them to invest again, depending on how you handle that situation, but you’re likely not going to retain 100% of those investors, which means you need to go out and find more money, but now your credibility has taken a hit and you have issue finding capital, so… You’re kind of hurting yourself as well.
So number one, your main focus is the preservation of your investors’ capital. The two reasons why is 1) that concept of loss aversion, and 2) the fact that you’re losing other people’s money doesn’t work for you, giving you selfish reasons, like “Well, then I’m not gonna make money either, because of the fact that they’re probably not going to invest in my deal again.”
So those are the two things you wanna do before the call. Number one is to get your mind right, to get in that service, that other mindset, and number two is to determine what your main focus is, which should be capital preservation. Maybe you can have a couple other things you wanna focus on as well, but the number one thing should be capital preservation, because that is the number one most important thing to your investors.
Number three – pretty simple, and this is when we actually begin to execute the conference call… So you call in, you make sure everything’s working, maybe test it the night before to make sure that it’s actually recording the call… Maybe have your friends, or your wife, or your husband, or your girlfriend/boyfriend or whoever, call in and stay on the line for five minutes, maybe sing you a song, and then you can go back in, make sure that they actually recorded it and the recording is clear… Maybe you sing a song too, to test out that your audio clear on your end; make sure that you’re in a place that’s got good cell phone service, because you don’t want the call dropping while you’re doing it. Or if you’re doing a Zoom or something online, make sure you’ve got good internet that’s not gonna be interrupted.
Then obviously call in, and once you call in, step three is going to be to start the call with a welcome. What Joe does is at the start of the call he welcomes everyone who is on the call, thanks them for taking the time to attend, because typically these things are occurring at night, because the investors have jobs during the day… So “Thanks for stopping by at 8 o’clock at night for a few hours in order to attend the call.” Unless you’re a neurotic mess, you probably don’t need to prepare the welcome, you’re one-sentence opening; just say “Hey, thanks everyone for joining the call today, and welcome”, and that’s it.
Then once you’ve actually welcome everyone, a good next step – number four – is to provide a summary of how the conversation is going to flow. [unintelligible [00:18:20].08] what you should do as well is let them know right from the beginning that there’s going to be a Q&A session at the end. So it’s not a chronological summary; you wanna get the most important thing out of the way first, and probably the number one thing that they’re thinking of, which is “Well, are you just gonna talk at me, or do I have an opportunity to ask you some questions about the deal as well?”
What’s great about the Q&A is that most likely if one investor has a question, then other investors probably have that exact same question, so rather than answering the same question via e-mail 50 times, you can just get it out of the way one time. And of course, as I mentioned, your investors are likely going to want to ask you some questions, because we’re talking about $50,000 or $100,000+ that is on the line, and they’re not just gonna do it based on information you’re providing to them, because you might be leaving some things out… So they can go ahead and ask you really whatever question you want, and in a sense put you on the spot to answer it.
We’ll go over a little bit more about how to prepare for that Q&A session later on into the process, but one quick tip and something else you wanna do before – or at least be prepared to do before the call – and this will help you make your Q&A session more efficient, which is to provide your investors with an e-mail address (or an e-mail address), and again, you can do this at the beginning of the call, after the welcome, when you are summarizing the call… So you wanna give them an e-mail address and tell them that they can e-mail you their questions as they come up during the conversation, or any prepared questions that they’ve prepared to ask before the call. The reason why you want to do that is so that you don’t forget any of the questions, and so they don’t have to interrupt you during the conversation.
Now, I’m pretty sure using FreeConferenceCall.com you can automatically mute everyone except for the host… But if you’re using a service that doesn’t do that, 1) you probably wanna use the service that does that, because if you’ve got 1,000 people on the phone at once, and 1% of them aren’t muted, that’s 10 people that don’t have their cell phones on mute, which means you’ve got background noise from ten different phone calls. So if a baby cries, or if they just don’t realize they aren’t muted and start talking, if they’re in noisy areas, it’s gonna bother everyone else. Plus, again, you don’t want the call to be constantly interrupted by questions. You’d rather just gather all of them and then answer them at one point towards the end… Because from your perspective, that’s gonna interrupt the flow, and secondarily, it can make the call last a lot longer than it needs to be.
So ask them to e-mail you the questions, and then depending on how you’re gonna go about doing the FAQ section, either one person can have access to that e-mail and they’ll do all of it, or you have one person that’s reading through the e-mails… I think what Joe does is he gets them on a Facebook message. I think his business partner collects all of the questions, and then messages them to Joe one at a time, so that he can go through each and every single one of them one at a time, without actually missing a question by reading through the entire list.
That’s just one quick tip, and you don’t have to do that. You can have people interrupt in the middle, you can just have them ask questions at the end… You can say “Hey, has anyone got any questions?” and then let people butt in, but again, that can get confusing and tricky with thousands of people on the call. What if you ask for questions and all 1,000 people ask a question at once? So the best way to go about the Q&A is to tell them in the beginning “Hey, we’re gonna do a Q&A session at the end of the call. The way it’s gonna work is please e-mail us any questions you have, either right now or as they come up throughout the call, to firstname.lastname@example.org. Then at the conclusion of our presentation we will go through and answer those questions one by one.”
So that is number four… You wanna summarize the flow of the conversation, specifically explaining that there’s gonna be a Q&A session, and then whatever else you’re gonna talk about during your call, explain that as well.
Number five, and this is where we’ll end today’s conversation, is to introduce yourself. After you’ve welcomed everyone, after you’ve summarized the call and explained how the Q&A session will work, then go ahead and provide a brief biography of you and your business partner, or anyone who is going to be presenting on the call. If it’s just you, give a bio on yourself. If it’s you and your business partner, give a bio of you and your business partner, or let them give any introduction… Again, you can approach it however you want to, but the point is to introduce yourself and why the investors should be listening to you.
Explain your background, specifically what’s your business and real estate background as it relates to raising capital, and why they should be giving you their money; explain what you do for the syndication business – do you raise capital, are you gonna be the asset manager, are you the one who underwrote the deal…? Explain your strengths as it relates to this particular deal. If you’re the person that’s gonna be doing the asset management, you can mention your asset management experience; if you underwrote the deal, explain how many deals you’ve underwritten, and dollar amounts… And then you can also explain your overall investment goals – how many deals you wanna do this year, things like that. Then have your business partner or business partners do the exact same.
That’s number five… That’s more of the preparation for the call and some logistics of the call. Six through nine are the meat of the presentation, and we’re going to stop here for today and get into the meat of the conference call conversation next week.
In this episode we got through steps one through five of the nine-step process to a successful new investment offering conference call. To listen to parts one through three, as well as the other Syndication School series about the how-to’s of apartment syndication, and to download those free documents for this series and all other series, visit SyndicationSchool.com.
Thank you for listening, and I will talk to you next week.Follow Me: