Raising Capital for JV

7 Replies

Hello BP Crowd I’m in a Minneapolis and in the market for a 5-20 unit. I’ve just got done with a refinance of a 3 unit that I was able to pull out $65k from after purchasing in May. I would like to add value to a 5-20 unit but I need partners. Since I’ve never raised money for a deal before I don’t know what I don’t know. From initial conversations the people I know that are potential investors are not very excited about buying right now. My question is how can I add value to these more established investors that don’t “need” to invest. What can I present to them that might build my credibility. For example if I came prepared with the details of the deal I just finished to at least show them I’m not a complete newbie would that be valuable or would that come off as naive because it’s not the same type of investment as a 5-20. For those of you that may have partnered with an up and coming investor (read less experienced). What made you believe in those people OR was it all about the deal that they presented? Anything helps. Thanks! Justin

Do you have a deal in mind or is this just something you are thinking about?

I am not sure how much experience you have outside of the triplex above, but if you don't have experience in something that big, it might be a stretch to sell someone on you being an experienced business partner to lead a deal that big.  It doesn't hurt to try, but it might be hard to find serious investors.

1-4 family properties are looked at more like a single family residence and 5+ are looked at differently.  Financing is different as well as the way the value is derived in an appraisal.  If you haven't done so already, I would recommend you look more into the differences.  It might be hard to get a lender to borrow on a property like that unless you have a strong partner with a history of doing similar projects as the lead.

I'm not sure which investors you have been speaking with that are not very excited to buy, but it likely relates to the strong real estate market and the fact that there are not as many deals around at this time.  I have been looking for multi-family for a bit in the area, and it is hard to find much of anything that makes any sense to an investor.

Justin feel free to reach out directly. I have been doing this for some time and can offer what insight I have. The key is having a deal ready to go at a price that makes sense. Raising money has never been easier since it is sitting on the sidelines looking to get in the game with a great property.

I invest most of my resources toward finding off market deals for this reason. I recently found a few :-) 50 plus units and so far have no issues finding interested capital interest.

Hi @Justin Elliott ,

I'd recommend putting together a sample deal package for your in-person meetings. Find a deal that has enough information (Loopnet, an Offering Memorandum from a commercial broker,...) and adjust the sales price numbers. When meeting with potential investors, be very clear that "this" is not a live deal, but a deal similar to what you're looking for.

It's much easier to go over something that looks 95% alike to what you will be showing them when you find a deal, but it also gives you practice on your presentation and highlighting why your deal is worthwhile (refinance in 2 years, great cap rate, value add opportunity,...)

My two cents: You are better off sourcing a new deal, pitching that to investors, than selling past success.  "Site control" (sourcing a new deal under contract) is typically one leg of the stool--the others are capital and experience (such as rehab & project management, etc.).  To be clear, not just site, but pro-forma to show the potential returns based upon your experience (say your 3 unit).  That said, jumping from a triplex rehab to a 5-20 unit rehab is apples and oranges.  I suggest locate something smaller, say a 6 to 8 unit or a 4 plex (which you can source a 30 year fixed loan on) and work your way up.

@Justin Elliott I'm with @Brad Schaeppi .  Your talking completely different deal types with a different skill set needed.   Get another slightly larger deal under your belt or offer your $65K plus your hustle to other investors and see if you can get into a syndication and learn from them.  If you do this you will 1. know what they like & want in from a deal 2. gain their trust 3. learn what you do not yet know about larger deals.  

Sure people brag about getting a large apartment with their first or 2nd deal on BP all the time, but they don't tell you what happened 5 years later.  I'm always curious to see how many worked out.  There is a learning curve to this process and the bigger the deal the more acceleration you have.  Which is great if your on the correct path, however, if your wheels then are not pointed in the right direction you can crash and burn quicker too.

@Justin Elliott depending on your track record you may have to focus your energy on friends and family.

If you want to build a sustainable syndication business you need to build your brand to get greenfield investors.

I was approached by a realtor/broker/developer to do a larger storage project.  It was bigger than my previous project but he knew that it wasn't a huge stretch.   I hate to just echo what others have said, but a little more experience would go a long way.  I don't think you necessarily have to do this with a 20 unit building however.  I'd think that you could get similar experience by having 3 or so 3-4 unit buildings and managing a property manager who would be taking care of them for you.  This would allow you to get the "process" worked out a little better so you can help the investors see the transition from what you currently do to the new building.  

I also love what @Tim Swierczek suggested.  Try to get on a team who is actively buying and managing properties and help out.  Hell, if you brought $200k+ of you and your friends' money to a deal, I'm guessing they would see a lot of value in that.  I also doubt they'd have a problem with you helping to manage the property managers.  This might be your opportunity to cut your teeth, and get a return for you and your friends' money!  

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