I have been networking and there are no clubs or meetups anywhere near me, and I keep getting great deals but cant find a sponsor. Ive had some act like they want to, I do work for them, then they ghost me after using me. Right now I have a large but great deal and as usual no sponsor so I cant ever close. Not sure what to do anymore.
Thanks! Yeah, I actually just did that on a very large deal that I had that I couldn’t take on, but I was screwed over and they ended up stealing the deal away from me and taking everything even though they said they were going to pay me for doing everything for them and finding it for them and all that. It seems to be a common theme. Am I supposed to get people to sign a contract before I even send them deals?
Hi Sandra - In my experience most GP's adhere to the following trajectory.
1. Establish Track Record (Small Deals & Personal Equity): Most GP's start by acquiring/developing smaller properties where they alone can fund the equity side of the capital stack (IE - no raise). Maybe they raise some equity direct from immediate family (IE - mom/dad/sister/brother/grandparents/uncles/aunts/cousins), but the majority of the skin in the game is the GP's own. The goal here is to establish track record and operating credibility, because frankly no LP with half a brain is going to roll the dice on an inexperienced sponsor without operating experience.
2. First Raise (Midsize Deals & Small-Moderate Family/Friends Raise): After the new GP put points on the board and establishes operating track record, they begin raising small-moderate equity commitments from family & friends who will co-invest as either LP's or JV equity partners. Once the equity commitment(s) / fund is raised, the GP finds deals and deploys the raised capital. Assuming the GP is any good, their deals will go well and they'll make their investors (and themselves) money. This further solidifies their operating & returns track record, which paves the way to market your firm to professional investors & LP's outside your direct bubble of family & friends. Once you have a marketable track record, you can start the "ramp up" phase.
3. Ramp Up (Bigger Deals & Moderate-Big LP Raise): Once the GP establishes track record and operating prowess, they start marketing equity raises to professional investors & LP's outside their immediate circle of family & close friends. Depending on how good the GP's prior returns have been & marketing strategy, they can raise 70-95% of the total equity required to take down their next deal. Because the GP has track record, it's easier to raise capital from LP's. Reason being? The LP's aren't worried that you'll blow their deal up.
Based on what you're saying, sounds like "your" LP investors aren't really you LP investors. These LP's are blowing you off. I guarantee that these same LP investors are telling 20+ other GP's the same thing... "bring me a deal and ill bring you the equity". IE - they're stringing you along to get exposure to deal flow, and they're not making any tangible or material commitments to being your financial partner, unless it's an absolutely incredible deal that they cannot afford to miss out on. Frankly - this space has become extremely saturated over the last 10 years - so the odds that you find this one "diamond in the rough" deal is relatively low all things considered.
I recommend taking down smaller deals with your own / immediate family equity first to establish track record. If you need additional capital outside what a traditional bank or credit union would give you on the debt side, maybe start exploring higher leverage private credit / hard money options. Granted - these hard money guys don't play around with their rates and fees - but they'll get you more leverage and help you keep the equity requirements lower so that you can build up a strong track record and start taking down deals with your own / immediate family equity.
Once you've got the track record, then LP's will be more inclined to forward commit and tie up their equity in a dedicated fund that your firm controls. This way, you have your cap stack sorted up front and you can fully focus on identifying and taking down deals.
IDK if any of this helps but this what I have observed / experienced among the clients we work with.
I dont live in Tampa, that was just the only option to post. Tampa is where the property is, I live in Melbourne FL, but there are only meet ups in Orlando, Miami or Tampa looks like, and I can’t go to any of those. I don’t live near any of them and I’m chronically ill.
Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
2y
Hi Sandra - It might be worth it to make a trip to one of those meetups. Greg posted some great options for Tampa. You can also try looking on meetup.com for virtual options.
Thank you, I tried meetup and found there isn't any either. I cant drive many house away to go to these things because im disabled and cannot even stay in hotels because of it. Its weird that there are none anywhere else. I thought there would be considering the area.
I have been networking and there are no clubs or meetups anywhere near me, and I keep getting great deals but cant find a sponsor. Ive had some act like they want to, I do work for them, then they ghost me after using me. Right now I have a large but great deal and as usual no sponsor so I cant ever close. Not sure what to do anymore.
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
2y
Yeah...I'm in Tampa and I feel ya. It's been my experience that people talk a good game, but get serious alligator arms when it comes time to reach their checkbook. Perhaps you can be more specific on what deals your referring to. What types of deals are they? What do the deals look like? What are you asking for? That will help us provide you with better answers.
I would wholesale the deal if I can't find investors. At least earn a fee for finding a great deal. You can also look for smaller deals that need less capital to raise.
Thanks! Yeah, I actually just did that on a very large deal that I had that I couldn’t take on, but I was screwed over and they ended up stealing the deal away from me and taking everything even though they said they were going to pay me for doing everything for them and finding it for them and all that. It seems to be a common theme. Am I supposed to get people to sign a contract before I even send them deals?
You're doing it backwards. Find sponsor(s) first, deals second. If you don't have sponsorship, by definition you don't have a deal - full stop.
in some aspects, but but I'd argue in development you have to find land and partners at the same time. you have to have a competitive advantage and local knowledge. may not apply and probably different sectors. we break development up into multiple raises like Series A, Series B, etc in venture debt and discount equity tranches based on what stage the investor comes in for higher returns it's earlier like when we are investing in engineering services etc we recapitalize and spend our money with an equity sale and recapitalization. structured finance is so interesting
Thanks! Yeah, I actually just did that on a very large deal that I had that I couldn’t take on, but I was screwed over and they ended up stealing the deal away from me and taking everything even though they said they were going to pay me for doing everything for them and finding it for them and all that. It seems to be a common theme. Am I supposed to get people to sign a contract before I even send them deals?
Any deal with anyone should be preceded by an NDA or Contract. Standard practice and the veriage should prohibit the person from doing any deals directly with the parties you are in negotiation with. Pretty common practice.
Thanks! Yeah, I actually just did that on a very large deal that I had that I couldn’t take on, but I was screwed over and they ended up stealing the deal away from me and taking everything even though they said they were going to pay me for doing everything for them and finding it for them and all that. It seems to be a common theme. Am I supposed to get people to sign a contract before I even send them deals?
Hi Sandra - In my experience most GP's adhere to the following trajectory.
1. Establish Track Record (Small Deals & Personal Equity): Most GP's start by acquiring/developing smaller properties where they alone can fund the equity side of the capital stack (IE - no raise). Maybe they raise some equity direct from immediate family (IE - mom/dad/sister/brother/grandparents/uncles/aunts/cousins), but the majority of the skin in the game is the GP's own. The goal here is to establish track record and operating credibility, because frankly no LP with half a brain is going to roll the dice on an inexperienced sponsor without operating experience.
2. First Raise (Midsize Deals & Small-Moderate Family/Friends Raise): After the new GP put points on the board and establishes operating track record, they begin raising small-moderate equity commitments from family & friends who will co-invest as either LP's or JV equity partners. Once the equity commitment(s) / fund is raised, the GP finds deals and deploys the raised capital. Assuming the GP is any good, their deals will go well and they'll make their investors (and themselves) money. This further solidifies their operating & returns track record, which paves the way to market your firm to professional investors & LP's outside your direct bubble of family & friends. Once you have a marketable track record, you can start the "ramp up" phase.
3. Ramp Up (Bigger Deals & Moderate-Big LP Raise): Once the GP establishes track record and operating prowess, they start marketing equity raises to professional investors & LP's outside their immediate circle of family & close friends. Depending on how good the GP's prior returns have been & marketing strategy, they can raise 70-95% of the total equity required to take down their next deal. Because the GP has track record, it's easier to raise capital from LP's. Reason being? The LP's aren't worried that you'll blow their deal up.
Based on what you're saying, sounds like "your" LP investors aren't really you LP investors. These LP's are blowing you off. I guarantee that these same LP investors are telling 20+ other GP's the same thing... "bring me a deal and ill bring you the equity". IE - they're stringing you along to get exposure to deal flow, and they're not making any tangible or material commitments to being your financial partner, unless it's an absolutely incredible deal that they cannot afford to miss out on. Frankly - this space has become extremely saturated over the last 10 years - so the odds that you find this one "diamond in the rough" deal is relatively low all things considered.
I recommend taking down smaller deals with your own / immediate family equity first to establish track record. If you need additional capital outside what a traditional bank or credit union would give you on the debt side, maybe start exploring higher leverage private credit / hard money options. Granted - these hard money guys don't play around with their rates and fees - but they'll get you more leverage and help you keep the equity requirements lower so that you can build up a strong track record and start taking down deals with your own / immediate family equity.
Once you've got the track record, then LP's will be more inclined to forward commit and tie up their equity in a dedicated fund that your firm controls. This way, you have your cap stack sorted up front and you can fully focus on identifying and taking down deals.
IDK if any of this helps but this what I have observed / experienced among the clients we work with.
Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
2y
Could be 1 of 2 things: either you think they're great deals but they're really not OR they are great deals and these sponsors are going around you to get the deal directly.
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
2y
@Sandra Brothers, there are a few meetups in the local area. There is Central Florida REIA, BREIA which meets at Hell 'N Blazes and (I attend this one) Space Coast Investors. They are all on Facebook.
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
2y
I've gotta be honest- most of your responses are you can't do this or you can't do that...you've gotta go 200% if you want to be successful in REI. Your competition will do everything they can to win, if you aren't willing to do that, they'll take over your market.
Secondly- I disagree with some of the advice above. If you have great deals, the sponsors will come. If you are having trouble, it's one of these two reasons; you aren't marketing properly OR your deals just aren't good. Most of the time, especially with new investors, they don't understand the market well enough to negotiate truly good deals. They THINK they have a great deal, but it just isn't.
Regardless, I'd get to those meetups and network- any of the problems you are having will be solved through networking with experienced investors.
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