How can I raise a lot of money for a commercial property?

Question

I have a great deal but I don’t have money, I don’t have credit and I don’t know any investors. Also I’m new to this but I am certain I have an amazing deal!

What can I do to raise a lot of money?

I have reached out to some people who may be able to help and I have a few meetings scheduled. I just don’t know if they will be able to help or if I’m asking the right questions and the right people. Any tips are appreciated, thanks in advance!

Greg Dickerson · Answer

@Jasmine Moore you need to put the property under contract at a price that represents a really great deal with ample time to do feasibility and due diligence.

Once you have control of the property you will need to put together a detailed project deck to present to potential partners or investors. If you are looking for investors you will need to have an SEC attorney put together the offering and file all you paperwork with state and federal SEC.

Unless you have something substantial to contribute you will not be able to retain much equity if any at all. The key for you will be to get the property under control.

Don Konipol · Answer

@Jasmine Moore

I don’t know if the deal is great or not,  but based on the limited amount of information provided, I have my suspicions.

Many of us experienced investors, who have looked at, analyzed, rejected hundreds, sometimes thousands of deal offerings, know that inexperienced investors are often influenced by the wrong deal attribute, use incorrect analytical criteria, and place way too much emphasis on perceived potential.  Again, I am in no way providing an opinion on this property, as I don’t have any information on which to even begin.

So, I’m speaking in generalities.

1. The fact that two contractors and a property manager think it’s a great deal is close to meaningless, for two reasons.  First, they have an “axe to grind” as they stand to make money if you buy the property.  Second, neither profession has a thing to do with investment analysis.  It’s like saying my mailman thinks I’ve written a great letter and he should know because he delivers letters.  The person who may be qualified would be a professional writer, not the mailman.  You would need the advise and opinion of an experienced reals estate consultant, not a contractor, broker, salesman, or property manager.  Of course the consultants opinion isn’t free.

2.  Experience has informed me that no matter what reason the seller comes up with for selling the property, the almost NEVER are knowingly willing to leave money on the table.  Ay best the selling to someone I know will love the property is only a secondary motive, although overwhelmingly it’s a marketing tool to make the buyer feel “special”.

3.  Deals are only “great” deals if purchased significantly under market price.  I’ve purchased many a deal I thought had great potential; but when I paid market price for them I got a “fair deal”, not a great deal.  The work I did to increase the market value did not change paying fair market value to a great deal.  A great deal is based on current market value, not future market value.

4.  Inexperienced investors tend to (1) get exited about deals without having the experience, knowledge or ability to properly determine if indeed the deal is good, bad or mediocre, (2) take what the seller says as gospel not realizing most sellers will exaggerate, lie and or withhold vital information to get what they want, (3) engage people who will provide opinions for free rather than pay a competent professional, (4) get emotionally caught up in the deal and very defensive when receiving an opinion or information that doesn’t support their dream, and rationalize that more experienced people who point out flaws are “jealous, negative or haters”.

Btw, no one can provide any knowledgeable answers to your questions without first analyzing the deal, your ability to come up with a down payment, your credit capacity and banking relations, if you have a track record, your experience with similar property ownership, etc.  Someone may say “crowd fund the deal” and you may think that’s a great idea, but you can just google “how to finance real estate” and receive the same meaningless generalized financing suggestions.  I’m afraid your post shows how much you need to learn before you would be able to even attempt a commercial property investment.

Simcha Davidman · Answer

@Jasmine Moore welcome to BP!

How do you know it's a great deal? Feel free to post more info here and people will give their opinions on it.

Raising money is about building trust while building your network.

Who/what type of people did you reach out to? I'm hoping it was people with experience. You may have to give up (a lot) of the equity on this deal, if you don't have the money, credit, experience (I'm assuming on this one), ability to raise money, or ability to get a mortgage.

But don't stop just because someone told you no!

Bjorik Mutize · Answer

@Jasmine Moore welcome to BP and as some of the advice above, expose what you are doing to your network and also see if you can partner with an established operator in your area. Good way to see the real process/money raise process.

Excited for the updates!

Joel Owens · Answer

Jasmine if you are looking for funding or investors you need to create a Plus, Pro, or Premium account and put in the Real Estate Marketplace.

When you say (don't have credit) what does that mean? Do you have no credit score, bad credit score, good credit score but not high enough limits or income to purchase the property?

It sounds like you might be more of a deal finder getting paid real estate commissions on the deal. Maybe you could negotiate a few percent ownership in the deal. You would need to check proper licensing disclosures that you have a partial interest in owning the property to the seller and when you have to disclose by in the process.

Investors with capital if the returns are equal want to DERISK their capital and go with seasoned investors already. They do not want high risk/high reward. They want medium to low risk and HIGH reward. Investors tend to do that by investing with seasoned investors with a track record. Some might take a flyer on something risky if cash is small to them if they lose all the capital but has to be VERY,VERY enticing to them to stray away from their normal investing procedures.

No legal advice given.

Marcello Di Gerlando · Answer

@Jasmine Moore

Don't get discouraged. Take the time and make the effort to post details about the deal.

Simcha Davidman · Answer

@Jasmine Moore any time!

The two contractors and property manager would be a natural start.The pm definitely, and likely the contractors too, should be well connected with local investors.

Once you give up equity, you will not get it back. But consider it an investment in the future - with this deal under your belt, the cashflow you'll earn, any equity you keep,and the connections you make will all be worth more than any one deal will give you.

That being said, try to keep as much as possible. For example, don't offer more than someone would need/want to help you (how you would know this is a different question :) ). Don't negotiate against yourself. And the first person to talk in a negotiation loses, almost always. Be ok with quiet, and allow yourself time to think before responding.

Jasmine Moore · Answer

@Simcha Davidman

Also thanks for your helpful input!

Jasmine Moore · Answer

@Simcha Davidman

Thank you! I am certainly keeping that mindset of not accepting “No”. Also I keep trying to ask myself what do I need to make this possible instead of is it possible.

I know this is a good deal because I’ve spoke with two contractors whom I know personally and a property manager. I know the owner who I believe has been pretty transparent. The price is nothing in comparison to the properties potential and the owners want out but they care about who buys it and why, which is why I was one of the people they spoke with. It’s a rare property with high demand.

I’m now reaching out to leaders in the community for help. I’m speaking with people who help with loans and who have much more experience than I do.

Knowing I’ll have to give up a lot of equity, how can I work to gain any back? I hope that question makes sense.

How can I raise a lot of money for a commercial property?

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