How to raise money and structure a deal.

[Matthew W Croulet]

Hello, I'm new to the forum, and I was looking at a couple of deals that are worth a couple of millions of dollars. While I was looking at these deals, I was wonder how would I be able to organize a partnership where I can raise millions of dollars. I was wonder is there a book or posts I should look into to learn how to structure and find people who want to do this? Any help would be fantastic. 

[Jonathan Twombly]

Originally posted by @Matthew W Croulet:

Hello, I'm new to the forum, and I was looking at a couple of deals that are worth a couple of millions of dollars. While I was looking at these deals, I was wonder how would I be able to organize a partnership where I can raise millions of dollars. I was wonder is there a book or posts I should look into to learn how to structure and find people who want to do this? Any help would be fantastic. 

 Hi Matthew,

The hard truth that many people don't fully appreciate is that, no matter how good a deal is, you won't be able to raise money unless you have already built an investor network ahead of time.

You need to dig the well before you need the water.  If you wait until you need the water to start digging, you will die of thirst.

Looking at deals is a good way to familiarize yourself with the market and give you something to talk about with potential investors.  You need to build an investor list, and it must be really big, because most people who say they will invest with you never will.  You should assume that your conversion rate will be 25% max.  So, if you go out and network and collect commitments before finding a deal, and you have total commitments for $1,000,000, you should assume that you only have $250,000 to work with.

You should also remember that commercial property (i.e., anything with 5 units or more) has a different kind of debt than residential property.  So, let's say that you raise $1,000,000, you cannot buy a $4,000,000 property unless you have a $3,000,000 net worth. (Or your partners do.)  If you and your partners don't have that net worth, then you must find a balance sheet partner who does, and you will have to give them part of the deal.

If all this seems daunting, if you really have found a good deal, perhaps you can find a qualified, experienced sponsor who will take the deal and give you a piece in return for finding it.  That is probably the quickest way to get started if you really have found a great deal but don't have the funds and the balance sheet to take it down yourself.