Real Estate Agent · Fontana, CA · Member since 2011 · 3 posts · 0 votes
Any advise? When starting out, what kind of deal structure should you use. I was thinking of puting together a fund and investing in a couple of properties over time and taking a small fee but share in profits later down the line. 3-5% Management Fee with maybe 30% profits later down the line after a preferred return of 10-15% for the investor.
Also for your first deal syndicating, what you should do is talk about your investments like you are doing it yourself. If you are talking to the right people, they will be interested, because if you don't come off like you are "selling" them, then they will sometimes ask if they can invest in you.
For example, I did a deal a few years ago (before I had my fund all set up). I was running everything through an LLC with partners taking equity positions as partners. I had this one project where the total cash outlay was 80k. I wrote a whole proposal thing and actually I had 2 people who were going to invest in the deal. A third person has been interested so I sent them my proposal and said something like... hey take a look at this deal. Is this something you are interested in? Unfortunately this deal is fully subscribed, I guess I could ask the other investors if they would like to take a smaller position... or I could lower my own equity position but that means I would have very little skin in the game(I made it seem like a real pain in the butt).
Next thing I know, I've got an investor throwing their money at me, threatening to get mad at me if I couldn't get them in on the next deal. Thats how you should approach it. Have a deal so good that people can't keep their hands off of you, and then exclude them (people want to be a part of something others are not apart of - exclusivity).
My advice would be to join up with someone else that is already working on raising funds. Once you learn what works and what doesn't you can venture out and start your own fund. Money is very hard to raise right now.
When you approach these folks you will need to have something of value to trade. Having some investors ready to go would be helpful. You can be a finder for them in trade for some dollars and learn the ropes.
Presenting deals would be useful too.
You can certainly try to do it alone as well, but the days of the lone wolf are over. It is very hard to get started in this environment and you will likely have more success hitching your train to someone else's in the short run.
Like any career - in Real Estate you don't start as CEO of a Wall Street hedge fund. Walk first before you try to be sophisticated beyond your experience. Investors have done it before and they are not going to trust someone without the specific experience it takes to be successful.
Unless you're at a big bank related fund like Goldman Sachs Asset Management or something, yeah you are on "Wall Street." But the best hedge funds are not on "Wall Street." Bridgewater Associates the biggest hedge fund in the US and is located in California. With that said....
Most important thing is your track record. This is the first thing will people ask for you - no one is going to invest in you if you can't show them your past deals. However, the thing about real estate is that you are able to actually develop a track record very quickly because you can flip a house or something within just a few months.
Also for your first deal syndicating, what you should do is talk about your investments like you are doing it yourself. If you are talking to the right people, they will be interested, because if you don't come off like you are "selling" them, then they will sometimes ask if they can invest in you.
For example, I did a deal a few years ago (before I had my fund all set up). I was running everything through an LLC with partners taking equity positions as partners. I had this one project where the total cash outlay was 80k. I wrote a whole proposal thing and actually I had 2 people who were going to invest in the deal. A third person has been interested so I sent them my proposal and said something like... hey take a look at this deal. Is this something you are interested in? Unfortunately this deal is fully subscribed, I guess I could ask the other investors if they would like to take a smaller position... or I could lower my own equity position but that means I would have very little skin in the game(I made it seem like a real pain in the butt).
Next thing I know, I've got an investor throwing their money at me, threatening to get mad at me if I couldn't get them in on the next deal. Thats how you should approach it. Have a deal so good that people can't keep their hands off of you, and then exclude them (people want to be a part of something others are not apart of - exclusivity).
Thanks for the great advise. For my first couple of deals I may have to partner with another syndicator seeing as how I don't really have the cash to have much skin in the game. I've been a finance analyst for years so my ability to analyze a deal or property is pretty good. Whats holding me back is having the ability to invest in the deal.
Not too long ago I recieved my CA Real Estate License so I'm also getting started as a real estate agent and I'm starting to see more and more deals (just some additional info about me, dont know if anyone would have something to add).