I've seen a lot of great posts and wisdom shared in respect to raising capital on BP.
What's your best piece of advice for raising capital?
Most important piece of advice is to have a great deal. Numbers don't lie!
Be creditable. People invest because they trust you. If you don't have any experience or credibility yet, team up with someone that can get you into a deal. Even if you receive no financial compensation from helping a sponsor, you are cashing in on the credibility of being in the deal. Do that with a few deals and then venture out on your own. The sponsor comes first, the deal comes second.
I never try to sell my deals. I provide an investment opportunity. If they like the opportunity and trust me, they invest.
@Ryan Cox I 100% agree with @Jeff Greenberg . He is speaking from experience. I raise capital through syndication and everyone - mentors, investors, possible investors - have told me the same thing. We are investing because we know you are credible and capable. Working alongside experienced sponsors/mentors allowed the first (and second) to happen. My background and relationships have helped with the latter.
Apart from being a great investor, Jeff was also kind to share his thoughts with me recently. So I am partial to his advice :)
Find out what investor's goals are to see if there is a way you could help them get there. Know that just because an investor has capital to invest, it doesn't mean he/ she is the right fit or you are the right sponsor. Genuinely find out if you can help them.
Definitely learn the legal side of raising capital. You don't have to know it all but you do have know enough.
Above all, live and act with integrity.
“Hit ‘em where they are” not where they aint to butcher an old baseball saying.
What the others have said is number one but once you have that, go to every meetup and investor gathering you can find.
Be genuine and provide tons of value to others before you ask anything from them. It’s a long game, take some time to develop meaningful relationships and they will trust you.
If you don’t have experience, say so, don’t act like something you’re not, they will be able to see through you. I had ZERO experience in investment RE and was still able to get 14 investors for my first deal, a 48 unit.
Good luck on your journey!!
@Ryan Cox being successful in raising capital doesn't happen overnight.
My simple answer of advice is to be consistent and follow-through. Do what you say and communicate often with your investors.
It is unlikely that an investor will want to immediately dive head first into a business relationship with you. It is essential to keep your name and investment opportunities in front of them, yet without appearing too pushy.
In fact, following up with private investors can actually be considered more of an art than a science.
You may have heard of this from a sales perspective, studies have shown:
- 2% of closing the sale occurs on the 1st call
- 3% of closing the sale occurs on the 2nd call
- 4% of closing the sale occurs on the 3rd call
- 10% of closing the sale occurs on the 4th call
- 81% of closing the sale occurs on the 5th call
Would you agree that most people give up on the 1st or 2nd call?
It is important to set micro-goals for your follow up, such as obtaining a face-to-face meeting or extending an invitation for a more detailed discussion.
The way that you follow up is critical. How you do so can essentially set the tone about who you are and how potential investors will remember you. The process of following up can also entail being patient, especially at first as you begin to build good solid relationships.
Staying politely persistent with your follow up will eventually help you in building momentum.
I have yet to syndicate, but a wise syndicator named @reed goossens gave our community a great piece of advice. He said you can always start out by raising capital for a syndicator in small amounts. It will be easier to raise money for a syndicator who has a track record & a good deal.
Pros & cons to syndicating, but once you run out of money, that's the place to go
A lot of good advice above in regards to communication, credibility, and transparency.
One of the best ways I found to raise capital is to teach the concept of raising capital. And that can be done in a variety of ways. Whether you're teaching capital raising concepts to investors, or teaching about ways to access capital, like with Self-Directed IRAs, HSAs, or other capital strategies like tapping into your equity. All of these things help build credibility and spread awareness of your knowledge in the space.
Also, I've found it to be very beneficial to have a purpose bigger than you and your deal. Your mission, especially if it's a charitable one, oftentimes will help raise the money for you. It's easier to discuss, also it's way to break into donor circles.
Great advice so far. On top of being credible, which is very important, be honest and ethical. You can get away without that for a short period of time, but if you want long term success honesty and ethics is one of the most important factors.
Next after credibility, honesty and ethics, I would say build your network. Be apart of RE groups/run one, become a thought leader (blogs, youtube channel, podcast of your own or go on others, linked in, facebook, etc), Join non-profits and become a leader, get in with a group of successful professionals (Doctors, Lawyers, Dentists, Athletes, etc) and add value to their profession, team up with other syndication companies and talk about what you are doing with everyone that you know.
Your network starts slow, but grows quickly as you are consistent and persistent.
There's a lot of good advice above so no need to repeat those tips, so I'll focus on some that haven't been said.
If you believe that finding a good deal will lead you to the money, think again. It won't. This isn't about the deal at all, it's about you, the sponsor. That's what investors are investing in. The deal is important, but secondary.
Always be "raising capital" whether you have a deal to fund or not. This doesn't mean that you are depositing checks in a bank account, but you are developing your interest list so when you do have a deal you already have folks to talk to that already know your story.
Document your track record. People will want to know what you've done in the past. Be ready to show them.
Look in the right places--forget about trying to attract billionaires for your first real estate deal. If you are just starting out, look within your inner circle--the people most likely to already know and trust you.
Put away the powerpoint. People don't need blitz and bling. They want to hear your story and learn why you are the one that can and will give them more money back than they gave you. Some printouts of your financial analysis are fine so you can walk them through the mechanics of a deal or sample deal, but that's it. If you want slides, email them a deck after the meeting.
Set the correct expectations. You want to be a one-and-done-r? Set your projections too high. Want to be in the biz for the long haul? Use conservative assumptions, outperform on them, and watch your investors grow your network for you by way of referrals.
Give the best reporting in the industry. Too many sponsors think their job is done when they close the deal. That's just the beginning. Manage the deal well and report the results to your investors in a format that is useful to them. Show them if you are underperforming or outperforming on your original projections, and if you are underperforming, tell them why and what you are doing about it. Don't hide bad news. If you think this paragraph has nothing to do with raising capital, I'm here to tell you, it does. Good reporting results in tons of referrals, and a lot of investors will ask to see samples of your reports before they decide. If they don't like what they see, they pass.
Stop thinking of this as a real estate business. Raising capital from investors takes you beyond real estate and into the world of financial services. So act like it. You don't see banks talking about house hacks or Goldman Sachs issuing sloppy offering documents downloaded from the internet. Align yourself with professional legal and accounting counsel and remember that your competition for investors isn't other real estate shops, it's other investment products like stocks and REITS. Know your numbers and show people why this is a better choice for their dollars, and why you are the best choice to execute the plan.
Now I'll press "Post" and probably think of a dozen more...LOL.
For someone working on their first syndication deal I’m really enjoying the advice in this thread.
Some advice that resonated with me the most is that you should never stop raising money even when you think you have enough for the deal. Investors will inevitably back out or never transfer the funds. If you’re continuously raising money you will have a backup plan if this happens.
Also, always raise more capital than you think you need, especially when you’re getting started. There’s something that you will have underestimated or overlooked.
Look forward to hearing others advice!
It looks like you've already gotten great advice from some of the best in the business. So I just want to emphasize one thing: PATIENCE.
People are only going to invest with you and give you their hard earned money if they trust you, and building trust takes time. So just make sure you are in the game with a long-term mentality and build that trust patiently and by consistently adding value.
All the best!
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