Critiques on the Plans of a Student

2 Replies

Hello readers!

Before I begin I just want to mention that I am currently a finance student at a university here in the United States so please excuse my ignorance. 

For a while now, I have had a strong urge to sponsor commercial real estate investments via private capital funding. Some of you may know this from a recent post I just made. Now, however, I am looking to do it during school so I can hit the ground running after... I know crazy right! Maybe a miracle can happen to make it work. 

So I began conjuring up anything that can entice investors to give me a chance with 0 track record and would like anybody's opinion on it. In order to minimize risk these are the things I thought of.

I first thought of the least riskiest investment strategy: Core/Core+. For the financial analysis, I would make sure ~100% recovery for the investors in the base case, downside case, and the "oh my god" downside case. I also do not plan to charge acquisition fees or management fees. I may not even take out a portion of the cash flow or disposition. PPM(506c) and due diligence documents are also crafted by credible firms. 

As you can see I don't really seek money, but rather experience; I, myself, may even lose money doing this. Whatever makes the investors happy with their decision.

This was a short rant, however I can now have it criticized on if it will work. Any feedback is appreciated!

Thanks guys,

Kenny Adilet

My thought is that it would not be fruitful.

Investors are looking for experience. If you are offering nothing to yourself as the sponsor then less motivation to find great deals.

Essentially you would be playing with people's hard earned money to try and gain some experience which would likely be bad.

Why not intern while in school at a commercial firm that has a fund or is syndicating with a focus on their capital raise department?

You could get valuable experience while not directly putting money's people at great risk due to lack of experience. An investor should want great upside to the sponsor to keep them motivated to do well for all involved. If a sponsor takes a bunch of fees upfront and little to nothing on the back end then they are rarely motivated to get top value out of the asset over time.

@Joel Owens is right.  Rather than looking to invest using other people's money before you have any experience, you should get a job working for someone who syndicates deals.  That way you would gain experience, be able to siphon off a portion of that person's good reputation when you are trying to attract investors yourself, and you will make money in the process rather than potentially losing it.

Most successful syndicators are looking to systemitize their businesses, and would like to hire someone at a low cost to do the work they don't enjoy doing.  Take advantage of that.