Syndication 101: How to Present a Deal To Investors
Let’s get into presenting a deal to your investors by looking at one of my recent deals.
Want more articles like this?
Create an account today to get BiggerPocket's best blog articles delivered to your inboxSign up for free
On this deal, the total raise was $2.7 million of equity. Most of that went to capital improvements and a portion went toward the down payment. I didn’t have that cash lying around, nor did my partner. So, we did a syndication and went out and raised the money.
If you are committed enough, even if you don’t have the cash, there is always a way. One of my favorite quotes is “creativity follows commitment.” So, if you’re committed enough, you’ll find a creative way to come up with the funds.
How to Find Investors
The next question I know you’re asking is: “Where do you find investors?”
Start with your friends and family, your power base, because people do business with people they know, like, and trust. Then, start to branch out to other investors.
One strategy I was able to leverage is digital marketing, pushing content out there via my podcast and being on others’ podcasts. BiggerPockets is a phenomenal tool in and of itself as a way to find investors and collaborate with others.
At the end of the day, it’s all about value, value, value. What I mean by that is for someone on the other end who has the money in the stock market or retirement funds and it’s just sitting there or not getting the returns that they want, that’s the value that you offer to them. You’re providing them an opportunity.
The go-to in terms of raising money for this is not only were we calling investors, but we also got through the due diligence in the feasibility period and we got the green light that everything looked good and promising. That’s when we started to raise money and notify our investors that, “Hey, the opportunity is now available.”
How to Sell the Deal
From there, the next thing was doing a webinar. There are a couple of things investors will want to see:
- What is your business model?
- What is your actual plan for this deal? (Maybe you’re doing value-add, putting in the necessary improvements to push up the value of the deal and then selling.)
- What are the numbers? The numbers are very, very crucial in terms of what investors want to see. What is the cash-on-cash return? What is the internal rate of return?
- What is the actual property like? They want to better understand the market, the floor plan, the unit mix.
- What is the average rent, and what do you plan on pushing the rates up to? What are comparable properties to verify what you’re pushing those rents up to?
- What’s in the area? Think about the crime rate, the school district, the median income associated with the property.
These are all the things that you want to touch on to give your investor-partners all the information that will help them understand the deal and make their decision. Of course, you always encourage them to do their own due diligence on top of everything that you provide to them.
One of the things we detail in our presentation is that the market in Indianapolis is very diverse in terms of the businesses headquartered downtown and the attractions. You’ve got Simon Property Group, which is one of the largest real estate investment trusts in the world. You’ve got Eli Lilly, which is one of the largest pharmaceutical companies. You’ve got Anthem Blue Cross Blue Shield insurance company. So, it’s very diverse. You’ve also got the Indy 500, which is one of the largest attractions in terms of racing.
Toward the end of the presentation, you open it up to question and answer. What I’ve found is investors really like to dig into the numbers and ask, “Did you stress test it? What are your assumptions in terms of your underwriting?”
That’s why it’s always key to have someone who knows numbers, because they will definitely press you on that. You want to ensure that you’ve got it down beforehand.
In the presentation for this deal, we include how many units, the age, the overviews of the layout, all the various floor plans. Just an overview in terms of the current state of the units and then the general economics on the market.
And then at the end, you have your call to action: “Visit here to do your due diligence and invest.” Always having that call to action is very critical at the end.
Everyone has their own go-to strategies when raising money from investors. Ours is phone calls, touching base with those investors, plus the webinars and email. Even before that point of offering the deal, you still want to nurture those relationships—not only reach out when you actually have an opportunity.
What’s your go-to strategy when reaching out to investors?
Tell us how you get buy-in on your deals in the comments.