How do people raise capital to purchase multifamily?

[Austin Fowler]

Looking to learn more from people that have bought at least one multifamily property using OPM. Would love to hear the details. How did you get started? Did you have the capital ready first and then find the deal? If you found the deal first, how long did you have to raise the capital?

[Arn Cenedella]

@Austin Fowler

My advice is to work in both simultaneously. 

How much capital can you raise?

Truth is until you try you won’t know. 

If you don’t know how much capital you can raise, how do you know what purchase price you can pay? Answer is you can’t. 

If you don’t know your maximum price, how do you know what type of property to look for?

No sense looking for a $5M which will require $1.5M to $2M in cash if you can’t raise that amount. 

Good rule of thumb:
Actual capital raised will be one half of what you expect to raise. 

Best bet for first time capital raisers is friends and family your social and professional spheres. 

The other question is:

What experience do you have in commerical real estate? Investors will only invest with sponsors who have greater knowledge and experience than they do. If they know as much as you do, why would they invest with you?

Not being critical just trying to level set your expectations here. Far too many new investors have believed the “go big or go home” gurus and lost their shirt. 

Start small - get some small wins - build your resume - have success and then based on that track record start to scale. 

Start talking to your close circle:

Hey Joe I’m starting to look for a small MF property to buy. Would you be interested to take a look if I find something good?

Do this with 50 to 100 people. 

Maybe 25 express interest. 5 may end up investing. 

My advice is look for something where you can find 1/2 the deal yourself. You need to be in a position to “back stop” the capital if your raise falls short (which it probably will). 

So $1M property you will need $300K $400K to buy. If you have $150K to $200K on your own you only need to raise 150 to 200. That’s maybe 4 investors. 

One must also gauge where there sphere is financially. Is the average person in your network making $100K $200K $500K a year? It matters. 

Set a realistic target goal  start looking start talking to people no pressure just share what you are doing those interested will self identify  

Hope this helps  

arn