30 unit deal in NY

5 Replies

Hi All,

I have a 30 unit deal in central NY that I am currently trying to fund. The issue im running into when contacting private equity firms is they say the deal is not big enough. I am trying to raise $300,000 (investment costs 1.35 mill) Where would you suggest trying to raise the additional equity? I have $100,000 of the $300,000 already so would only need $200,000. The numbers are awesome and I have a great performa with a waterfall that gives the investor an IRR of 16%. Please let me know your suggestions.

Thanks,

Jay Kiehn

@Jay Kiehn  If your BP profile is accurate it appears that you don't have a lot of experience in larger Multifamily projects so your best bet is the friends and family route. If you owned a lot of units already and had a good sized track record of performance in deals of similar character you would have an easier time attracting capital from other sources.  With a healthy track record investors would trust that you will execute this deal successfully, as you had done in the past.

Absent that track record, you are relying on your relationships to overcome the "trust factor".  These investors would be investing in your deal because they know you, like you, and trust you.  Go through your Rolodex and start identifying who might have an interest in partnering with you on the deal.  One thing you have working in your favor is that you can contribute a third of the capital yourself. If your investors know that you have skin in the game you'll mitigate some of their concerns.

It's important to remember that people don't invest in deals, they invest in people. 

Just as an aside, you'll most likely need more than $300K for a $1.35MM deal.  You'll need to raise enough to pay closing costs, have capital reserves, pay for any immediately needed repairs, first year's insurance premium and to fund any lender escrows.  You'll probably need at least $400K and perhaps more if the place needs work.  Before you go out there talking to potential investors, create a chart of sources and uses of funds and make sure that you are adequately capitalized. Nothing's worse than having to go out and raise more capital after you realize you came up short.  Your investors not only lose confidence in you, but they get diluted and no one is happy when they are diluted. Happy investors = happy life.  Angry investors = misery...and difficulty if you ever want to raise money for another deal!

@Jay Kiehn  as you've learned private equity firms don't do deals like this and they only work with experienced investors. @Brian Burke  was spot on about raising money from outside sources. 

Four other options for you are:

1) get the seller to carry back a second - some banks will let you get in for 5-10% down with a seller second if they like the deal

2) crowd funding ( probably tough if you don't have experience)

3) peer to peer lending (prosper, lending club, ect) not going to get you all of what you need but could work in conjunction with 1 and 2

4) wholesale it. 

If you do chose to wholesale it, I may be interested or know others who are. 

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