What Investors and Partners Look for in a Proposal?

Question

In the same spirit of @Karen Margreaves "Skin in the Game" thread; I've seen a lot of people inquiring as to what investors and/or potential partners look for when deciding who they will work with.

Some of my thoughts are around some common sense concepts like: referrals from others, and building relationships via being involved in RE types of organizations. However, my query is around the actual proposal and how it should be presented; especially if you have no prior experience and/or significant money to have a lot of financial "skin in the game." As an investor or partner, what are you looking at when you are viewing a proposal? Do you prefer brevity (ie, high-level information on the potential project) to even determine if you would be interested to request more information? Or, do you want as much detailed information as possible?

Also, if the person doesn't have the experience and finances equivalent to you, what can make their proposal attractive in your eyes? Example, if a prospect has a multifamily property in their sights, and they have no significant money to purchase it, but they can manage the rehab as well as the management of the property, would that be of significant value to a potential investor or partner to take a chance on that person? Perhaps the money split for the first deal would be heavily in the investors/partners favor for the first deal, ie 70/30, but as they work together more, it may become more equitable.

I'll be curious to see everyone's responses!

Don Konipol · Answer

If general partner has no money and limited experience, here's what it would take to have me take a look at actual deal

1- Experienced RE consultant hired to analyze project

2- Experienced property manager on board

3- Money partners getting preferred return plus 95% or more ownership.

4- GP getting no upfront fees and no cash out until investors are repaid

5- GP can get bonus payments both yearly and at sale based on certain targets.

After GP gets experience and track record, their split can increase significantly.

Amazing how many proposals I see which are produced by fantasy of what the syndicator "wants" or "needs" rahter than what the money wants or needs.

The ultimate example was one in which the GP admitted no experience and no money; he wanted 50% ownership and $50,000 up front in his pocket to replace income from when he lost his job.

The deals are out there. The fact that you responded to a Loopnet listing and negotiated a market rate deal is not worth the money giving you 50%. If you want to be successful with limited partner money you have to provide a framework that meets the limited partners need and wants. That's how I raised in excess of $80 million in the last 13 years from limited partners.

Chanté Owens · Answer

I'd enjoy hearing from others too. Perhaps we;'ll get a gentle stream of replies over time.

Thanks for your post, Jay!

Jay S. · Answer

Great info here....but only one post!?

Chanté Owens · Answer

@Don Konipol Thank you! I appreciate your detailed response. I do agree that when you are (essentially) coming from a place of limited resources (especially for your first deal), it may not be in your best interest to make a lot of financial demands (as you alluded to in your example).

Personally, I think the experience and learning is worth the high premium of the money being received. Once you get that one or two deals under your belt, you are no longer a "newbie," that doesn't mean you have the experience of someone 10+ years doing it, but if you are relatively successful in your first few deals then it speaks to your ability to "do what you say, and say what you do."

What Investors and Partners Look for in a Proposal?

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