Finding investors for syndication

12 Replies

Lot a topics and subjects on syndication, having a mentor is very important and helpful now that is out the way.   How can one find reputable investors that would consider doing a syndication with a newbie.   Found a very good deal and spoke with a couple of investors and they have given there opinion on if the price is right they would be in but to keep from loosing the deal is there a specific number of investors to shop the deal to or just go with anyone that can help get it done.   

I find that the best place to start is with friends and family. I find that by sharing my enthusiasm about a deal and the story around the deal with friends and family, they tend to become advocates and help refer others they know who might be interested. 

I don’t know how much you’re raising, but I would recommend keeping the investment minimum to $50k+, to minimize the number of investors needed. 

Figure out exactly how much you need to raise, and see if the investors you talked to already would like to reserve a certain amount. That will help you determine how much you need to raise. And always raise around 25% more than you need, in case people change their minds. Good luck!

@Dennis Johnson  It's frequently said in real estate that, "If you find a great deal, the money will come to close it."

This is guru-talk to sooth the nerves of people who suspect it's hard to raise money - and are right.  People don't want to talk about how hard it is to raise money.  It's bad for the coaching business.

That statement is correct only IF you have already built a network of potential investors.  This involves time and effort.  Here's what I recommend that you do, based on my past experience.

1.  Figure out what you want to invest in, and why you want to invest in that kind of property.

2.  Put together a team of professionals - the people you will need immediately once you find a deal to close it.  This includes:  a real estate lawyer, a syndication/corporate lawyer, a real estate accountant, a mortgage broker, a contractor, an insurance broker, and a real estate management company, at the very least.

3.  Create an investor "deck," which includes your bio, the bios of all the professionals above, a description of the kind of properties you want to buy and why, and a sample deal with projections.

4.  Create an investor qualification form that captures a potential investor's name, contact information, accredited or sophisticated investor status, and how much they are willing to invest if you find a deal that they like.

5.  Make a list of everyone you know who might be interested in investing, and who is also an accredited or sophisticated investor, and make a guess as to how much they might want to invest.  Then, take 25% percent of that number.  This is the absolute highest number you should assume that you are going to be able to raise from your friends and family.

6.  Create a spreadsheet for investor contacts that includes their name, contact information, date you first met them, date you gave them the qualification form, date you received it back, date you spoke with them about their objectives, how much they want to invest, and any comments you want to capture about their job, willingness to invest, available assets, etc.

7.  Start talking to everyone about your real estate plans.  Give them the investor deck from (3) above and the qualification form from (4) above.  Start tracking them on your spreadsheet (6).

8.  Find out a way to keep in touch with all these people, whether it is through regular phone calls, a newsletter, etc.  You don't want them to forget about you between the time that you talk with them the first time about your plans and the time you actually get a deal.

9.  Be sure to ask every person you talk to whether they know anyone else who might be interested in investing too.  When you send out newsletters, etc., be sure to ask there too.  If you don't ask constantly, people will not remember to make referrals.

10.  After a while, your investor spreadsheet will start to have a total dollar figure from all the people who have said they are interested in possibly investing.  You should assume that the actual amount of money you can raise from these people is 25-35% of the total number you have accumulated.  In other words, if your friends and family have in total said that they are willing to invest $1,000,000, you should assume that you will be able to get only about $250,000 when you have an actual deal in hand.  It's not that people were lying; it's that life happens to them.  I can't tell you how many people in the last few years told me that they were going to invest with me, and then decided to buy a new house with the money instead, or invested in something else before I found a new deal for them.

11.  While you are doing this, you must continue to look for deals to feed the machine.  You need to be constantly looking for deals and looking for money to do the deals.

Hope this helps!

The info that has been provided thus for is very helpful, @Jonathan Twombly , i have a partial team so far looking for the real estate lawyer and corporate lawyer, any examples of an investor deck you could recommend?  Thanks for the direction @Annie Dickerson

Not really per se an investor book but Jake & Gino has a podcast that discusses a "Credibility Book". I found it very helpful and actually am creating one based on their guide. This has definitely aided me during introductions to brokers, mtg brokers, property mgmt companies, and other potential team members. Additionally, it's an a great accompaniment with any LOI.

Podcast:

Gateway #3, Gaining A Competitive Edge In Multifamily Real Estate Investing

Guide:

Link to WheelBarrow Profits download library

It always pays to talk to a Syndication Attorney before getting too far down the road with talking to investors. You want to make sure you understand securities laws and what rules will apply to your offering so that you don't "poison the well" by advertising when you want to include non-accredited investors, etc.

Once you understand the legal framework (both for securities legal compliance and corporate structuring) that will likely apply to your offering, you will be able to speak to potential investors much more confidently about expected returns, timing, splits, etc. It's best for you to take control of this early on so you don't make promises that you can't keep and then have to go back with a different offer after you get the correct advice.

Hi Dennis,

Friends, family, co-workers, whatever it takes to start.  But if this is to be a long term business for you, I've synthesized what I've learned on raising millions in this space to 5 essential points that may help you.  If you can think bigger than transactional and more along the lines of a long term sustaining business, you'll be going in the right direction.  Reputation is everything in this business so my #1 advice is partner with experts.  Learn and develop your reputation off the experience of others.  Then, you can do your own deals later when you have built that confident, trusted investor base since you then become credible.

https://www.biggerpockets.com/blogs/9145/67627-rai...

@Dennis Johnson

Hi Dennis,

I would consider bringing on a syndicator for your first deal and sharing the deal. Investors always say they have money if the price is right, but when the rubber hits the road, they disappear.

@reed goossens is a very reputable and super knowledgeable syndicator who started his career this way. Bringing the deal to a syndicator and then waking through the entire process with them.

10% of a deal plus an amazing learning experience is better than 100% of nothing.

Just my opinion. I have yet to syndicate, but I would follow his strategy if I had to start syndicating from scratch.

Gino

If it were the first deal even second one. I would not really want to touch it. “I’m out” per shark tank.

How I wish to find a good assisted living operator but especially in that area it’s extremely hard to find someone who has gotten over the hurdle of 2 deals.

A syndicator business is a house of cards of working with the right person. Every deal is like putting your brand on the line. And your brand and reputation is everything.

thanks for the info @Gino Barbaro i will search for @reed goossens and get a little insight from as well.  @Lane Kawaoka thanks for the input, would you suggest that building trust in a person is more important than the deal itself.

@Dennis Johnson - I want to address "just go with anyone that can help get it done."

No. 

Although all money is green (at least US money is...), all investors are not equal. You should research your investors the way they research you. A bad investor will ruin the deal for everyone. 

We just had our big conference and our keynote speaker made told a story about a difficult investor - at the end of the day, he told the investor to shove the prospectus up his butt; he didn't even want his money. 

Get your message out there, stay consistent, worry not about what the competition is doing, and the money will come. This is true with almost any business model, not just finding investors for real estate. Best of luck!

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