You’re Under Contract But Don’t Have the Money Raised: Here’s What to Do

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You managed to get a killer multifamily deal under contract but don’t have all of the money raised — what to do?

This “fear of success” keeps many newbie multifamily investors on the sidelines. They’ve been looking for deals while trying to raise money from private individuals. They come across a good deal but don’t have all of the funds committed yet.

And so they STOP pursuing the deal.

Because they’re afraid.

This is a mistake for at least TWO reasons:

Reason #1: They underestimate the value a good underwritten and pre-negotiated deal.

Especially these days, finding good multifamily deals is tough. So when you have a deal that you have at least verbal agreement from the seller on a number that makes sense after rigorous and conservative underwriting, you have something of value.

Even if you DON’T end up closing on the deal, there will be a LONG line of people who would die to get their hands on a deal like that.


Reason #2: You should always walk through open doors until they close

In my 11 years of being a full-time entrepreneur, I have learned that the universe gives you opportunities all the time. Many times we don’t see them — or more frequently, we fail to take advantage of them because we’re afraid.

Related: How I Raised $5 Million to Buy an Apartment Complex in 2 Weeks — While on the Beach

I have found that when we walk through the open door presented to us, magical things happen that we never thought possible.

Therefore, it’s a new rule for me that if a door opens that is aligned with your purpose and goals, you should keep walking through the door until it’s permanently closed. Don’t give up until then.

The “Worst Case Scenario” Exercise

Sometimes we fail to do something because we’re afraid of what COULD happen — even if the likelihood of that happening is remote.

One exercise I like to do when I’m afraid is to write down all of the “bad” things that could happen. I find that once I see them on paper, they don’t seem that bad, and my fear becomes manageable to the point where I can continue to take action.

Let’s do that exercise for this particular situation.

Let’s assume you found a 15-unit apartment building, analyzed it, and made an offer. The seller countered, you sharpened your pencil, and continued to negotiate a price works.

It’s actually a smokin’ hot deal.

But you need about $250,000 in cash to close on this deal, and you’ve only raised $50,000 of it from friends and family.

Let’s further assume that you chose to continue walking through the open door. You decide to submit a letter of intent.

In the time it takes to negotiate and sign the letter of intent, you have three to five extra days to call potential investors.


You also decide to work on Plan B, which is to call other potential investors who might be interested in buying this deal from you. You could either partner with them, refer the deal to them, or wholesale the deal to them.

To pursue this plan of attack in parallel, you visit every real estate club meeting in a 20-mile radius and pitch your deal. You call brokers, property managers, and other professionals who might be able to put you in touch with owners of similar buildings. You network on sites like the BiggerPockets to look for people who already own multifamily buildings like this.

You get the letter of intent signed. You now have seven business days to submit a purchase contract. Getting the contract ratified takes another five days. You now have an extra two weeks to raise money or find another buyer or partner.

Now you have 21 days to complete due diligence. This gives you at least an extra two weeks to raise the money or find another buyer.

Since submitting the LOI, you’ve had almost an entire month to raise the extra money or to find someone else who would assume the contract. This is probably more time than you realized!

You have a good deal, and plenty of people are either looking for somewhere to put their cash or to buy a multifamily building that has been hard to find.

Worst case, if despite all of these efforts you FAIL to raise the money or find a single person who wants the deal you’ve delivered to them on a silver platter, you can always exercise the due diligence termination clause in your contract.

Related: 8 of the Best Ways to Raise Capital for Your Investments

If you construct your contract correctly, you can terminate the contract for ANY reason before the due diligence period expires.

(While you can exercise this clause for ANY reason whatsoever, I would caution you to either have a GOOD reason or at least try to preserve the respect of the broker. Otherwise, you will quickly develop the reputation for “not closing” and wasting everyone’s time).

What’s the Lesson?

Once we complete this “worst case” exercise, we realize that there’s a good chance you’ll actually raise the money.

But if you don’t, then it’s even more likely that you’ll find another buyer or partner who would die to take this deal off your hands and add it to their portfolio.

And in the off-chance neither of these materialize, you can exercise your contract termination clause.

So your “worst” case isn’t really that bad after all (that’s lesson #1).

And lesson #2 is to keep moving forward through open doors until they’re permanently shut. I have found time and again that magical things happen when you do.

What door did you walk through, and what happened? Or what door did you fail to walk through and why?

Let me hear from you!

About Author

Michael Blank

Michael Blank is a leading authority on apartment building investing in the United States. He’s passionate about helping others become financially free in 3-5 years by investing in apartment building deals with a special focus on raising money. Through his investment company, he controls over $30MM in performing multifamily assets all over the United States and has raised over $8MM. In addition to his own investing activities, he’s helped students purchase over 2,000 units valued at over $87MM. He’s the author of the best-selling book Financial Freedom With Real Estate Investing and the host of the popular Apartment Building Investing podcast Apartment Building Investing podcast.


  1. Pat Marco

    ?you wrote:”you visit every real estate club meeting in a 20-mile radius and pitch your deal”
    That would be an infraction of the SEC regulation. If you wish to raise capital in this manner, you must be an Issuer also called a Sponsor and have filed your syndication offering with the SEC or just join one of the few syndications that allow you to become an instant co-sponsor to raise capital under their exemption (legal work and submittance to SEC done in one day) – you would just pay that syndication a small fee

    • Michael Blank

      Hi Pat … you bring up a good point. You *do* have to be mindful of SEC regulations. Unless you file the proper exemptions you should NOT solicit strangers. When I brought up the idea of visiting REIA meetins, I was assuming you are already a member and know many of the members there. Before speaking to strangers and specifically solicting money for a specific deal, you should definitely check with your SEC attorney. However, you’re good with anyone you have a prior relationship with. Thanks Pat!

  2. Curt Smith

    Pat good question. We’ll see what Mike says. My study re your question and what I did on a mobile home park deal that closed was to market for partners who are LLC members in proportion to their funds contribution. Anyone can enter into a business relationship without SEC regs involved. This is my view re the line between a passive lender vs an active business partner.

    Definately the SEC regs are involved if you are looking for lenders who get a fractionalized note at a fixed interest rate. Even a participation add on does not move the money person over the line to active investor. Having a business management say (a vote in the LLC) and each partner having a real estate back ground, IE being a member in some REIA…

  3. Pat Marco

    The only way to avoid the potential risk of breaking the SEC rules in this type of capital raising is to bring other investors as “partners” with proportionate voting rights and power. Which as you may know from experience is a recipe for conflict and litigation. If one is in a hurry, it is best to seek co-soonsorship with an existing fund manager who would be willing to add you on (I only know of a hand full of funds that would do that!)

    • Pat Marco

      Please allow me to clarify as this may create a liability under the SEC rules to investors reading your post and your reply.
      You clearly do not have an offering filed with the SEC to do any general solicitation whatsoever. But, Your rebuttal was and I quote: “you’re good with anyone you have a prior relationship with”
      But this in NOT true because if you wish to solicit from individuals with whom you have a prior or an existing substantial relationship, then you must have at minimum already filed a RegD offering for a “private solicitation” under RegD 506 B.
      I like your article but am sorry i must warn readers that without the proper exemption filing, raising capital could get people in trouble especially that the SEC is going through extensive efforts to catch ffenders since June 19, 2015 when they rolled out their latest rules (in your profile you seem to have been involved in syndications so I am surprised you would not just file for a syndication or join companies that can let you co-sponsor and even do public solicitation within 24 hours of contacting them – I know of a couple of these if you would like a referral)

  4. Sachin Acharya

    Great article!

    I am in a similar situation right now where I am walking through every door. I have an amazing deal and I have the challenge of raising the down payment for it, or find a partner, or find a cash buyer and get a referral fee. So for me this motivation is perfect timing.

    Sachin Acharya

  5. margaret smith on

    So interesting, and a very common situation, I am sure, for many of us. I am a hard money lender, helping investors fund their rehabs and vacation houses. Often the deals keep coming in, but I am out of funds. Lately, I am hitting up my friends for their spare cash and self-directed IRA funds. I have found that the few people I am close to, and that have funds, and that understand my business, will give me an unsecured Note at a particular rate. I add it to my own funds, or simply use it all to fund one deal (single family houses), and charge a higher rate to my Borrower, with a secured Note and Mortgage. My friend is totally passive, and not dependent upon my one deal or a specific piece of security to be paid back. Under the terms of our unsecured Note (which is very short!)- my friend has the right to sue me for everything I’ve got until made whole. This is no different than any Note, BTW- just no mortgage attached. If I run into any difficulty (ie. my deal doesn’t cash out when planned) , our Note says that her interest rate goes way up in the event of a default! My friend can’t wait for our term, and her Note, to be overdue! If I want to pay her back with any other funds that come my way, I can- and cash in on that extra interest rate myself.
    No SEC here!

    Michael, I shall follow this thread with enthusiasm. Sachin, I too would love to know how your deal progresses. Good luck!

    • Pat Marco

      You wrote that your friend is totally passive and other friends have IRA money etc which means you are making all the decisions for these investors with an expectations of profits – you fall under the SEC securities laws. You must consult an SEC attorney to file form D with the SEC (not looking for any work as o am retired – just telling you how securities work and you are engaged in an activity whereby should something go wrong, you would be in a lot deeper trouble than you realize if any of your so called investors friends talk to an attorney)

      • margaret smith on

        Hi Pat-
        I thank you for your input. We need to hear more from experienced professionals as we all try to learn the ropes on these regulatory issues. However, I will say I ran this by my very astute RE attorney, and as my investor friend is not secured by real estate, a promissory note between two parties does not involve the SEC. As a personal courtesy, I let my friend see some info about the property I am currently investing in, and view it with me once it is ready for market. If there are any problems with the investment, she is well aware of what I am dealing with, and more willing to lengthen the term of the note to help me out- but under no obligation to do so. This is what financial (friends and relatives) can do, and institutions cannot.

  6. Jerry W.

    Your article gives me a lot to think about. lack of personal financing for the down payment has been the roadblock I that has kept me from doing a few deals. None of those are big multi family deals, but the principle is the same.

  7. Mark Robertson

    Michael – great article!

    Sachin, looks like we’re dealing with similar opportunities and I can relate to what you’re going through.

    I just completed my letter of intent over the week-end and will be working on financing as well.

    My first order of business yesterday was to contact the bank that holds the current mortgage and ask what they require to finance the purchase. They already know everything about the property and its past performance. With the exception of a couple of items I have the same “plan of action” Michael mentions in his article. I can walk away at any time, but it’s important for me to get the deal done. I don’t want to be known as the guy that couldn’t get the deal done!

  8. Sachin Acharya

    Mark, you are right that we are very similar situations. I too can walk away from this deal but I really want to make this happen. If I had the cash it the success I guess it would have been a low hanging fruit. The thrill is in the chase.

    Something interesting happened this weekend. I met someone at a meet-up. After the meet-up we went out for dinner, and at the end of the evening I offered her a partnership on this deal. She was kind of taken aback. She was like, you just met me a few hours ago and here you offering a partnership? I said, I have 3 reasons. First, in these few hours I could sense that you value integrity which is the most important thing I look for in the people I choose to do business with. Second, I’m asking you out, it’ll be a business deal backed by strong legal paperwork. Third, this deal is so awesome I want a piece of the pie.

    But you know what, I think I oversold. I haven’t heard back from her yet. I guess the lesson learnt is not to sound desperate.

    Stay tuned for more updates. 🙂

    Sachin Acharya

  9. margaret smith on

    Hi Chin-
    You are so right, and yet… THIS is our business ! As professional real estate transaction specialists- We should have at least 2 exit strategies lined up at contract signing! So your favorite may be to buy the property, or to partner on it– but you should also be working the seller financing possibilities, or taking “subject to” the underlying mortgage, or using assignment of contract method, in the event you cannot come up with the funds. Be very vocal about your deal, everywhere you go- and go many places, in person and by phone and by email and by social media! If you can’t do these things, this may not be the business for you, at least yet. Go sell houses as an agent, or get a sander and a paint brush, or get a property management license, or offer services to other investors- something safer, with more instructions. Investing takes a particular kind of entrepreneurial spirit, not for the faint of heart!

    Many well-intentioned offers to purchase don’t materialize, for so many reasons. Don’t be afraid to go for broke on a good deal, learn who is who in your investment community, build relationships in a serious way–and learn from it!

  10. The only problem is if the building owner doesn’t roll over. Know the specific law in your state regarding real property contracts with an emphasis on default, liquidated damages clause, and specific performance rights of either party.

    In California, for example, residential property owners apparently have the right to sue for specific performance regardless of what the contract says.


    Of course, all of this can be avoided if the investor simply purchased an option. Unfortunately, most pursuing the wholesaling strategy don’t have enough cash to create the proper consideration required of a decent sized building or will simply get laughed out of the room asking for an option.

    Many will say that owners will accept whatever default escape hatch was written in the contract 95% of the time. Tying up property without the capacity to perform is just begging for legal action. Better make sure your assignment networks are in tip top shape before going with the strategy.

  11. James Masotti

    Thanks for refreshing this article Michael. I’m recently came across a small apartment that I like which has some nice value add. Been trying to think for the past week how to work on putting a deal together and appreciate this insight.

  12. Last year we started walking through open doors and kept knocking until one opened, and then kept on knocking till we reached out goal of making our first real estate purchases.
    We live in Central Europe, but investing in central PA.
    Living on a minimal income
    But had a dream of buying investment property in a local PA market.

    Connected with a local mentor
    Ended up closing on three rental property, 6 units during our 6 week stay in the U.S.
    Knocked on 20+ different financing options, found a great portfolio lender, and three private lenders to see the dream become a reality!
    In negotiations now on our next 2 unit purchase!

    When one door closes find a new door to knock on and see what will happen! Every step along the way is a huge learning process.

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