Mortgages & Creative Financing

Syndication 101: How to Present a Deal To Investors

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
233 Articles Written
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Let’s get into presenting a deal to your investors by looking at one of my recent deals.

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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.

Related: How Self-Awareness Can Lead You To Syndication Success

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.

Related: Tech Is ‘Democratizing’ Real Estate—Creating Big Opportunities for Syndicators & Investors

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.

Related: The Key to Selling? Fewer Sales Pitches

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.

Related: How to Pitch to Investors So They Bite

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.

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded Sonder Investment Group, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to wholesaling and scaling a business.
    Shawn Costley Investor from Huntsville, AL
    Replied about 1 month ago
    Hi Sterling! Great article and video as usual! In your discussions you use the term “stress test“. Can you elaborate a little bit more on what that is and what the response would be if someone asked do we stress test figures?
    Justin G. Investor from Indianapolis, IN
    Replied 29 days ago
    Please see below
    Justin G. Investor from Indianapolis, IN
    Replied about 1 month ago
    Shawn- Stress test the underwriting. -How much can the vacancy rise on the asset and still achieve an acceptable DSCR? (Break even occupancy would be 1.00 or above) -If you have a floating rate, how much can the interest rate rise and the asset will still have an acceptable DSCR? These are just a few and your lender will also run these scenarios. It’s useful to put metrics like these in your analyzer so you can be prepared to answer these questions from your investors.