Developer · Philadelphia, PA · Member since 2019 · 29 posts · 8 votes
Hello BP family !
My Business Partner and I have recently purchased a three family property in Newark, NJ.
Since then we have been working multiple hours everyday learning the craft of pooling private money and Structuring syndication like deals.
We have identified our target market and cultivating a team in our target area.(Philly)
Our Focus:
C class 20 - 30 Units Value Add Deals.
A few of my close high networth friends have approached me with interest in investing in our upcoming deal.
I haven’t completely mastered the craft of Structuring private money deals. && I don’t want to risk losing their interest. I believe I should at least offer them a sample deal (which I am learning)of what could be beneficial to them in the near future(1- 2 months when we find a deal)
Are there any suggestions or things I should mention or look out for in various initial interactions to cultivate a strong investor list.
Apartment Syndicator · Charleston, SC · Member since 2016 · 973 posts · 728 votes
6y
@Markus Jackson you should review other investment opportunities to see how groups are structuring deals. If you only have a few investors you might want to consider a Joint Venture (JV) versus a syndication but speak to an attorney before making a decision
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
6y
@Markus Jackson the first step is to finish educating yourself. Next make sure to study the laws regarding raising capital and courting investors. Then contact an SEC attorney to prepare your offering and double check you are in compliance with all the laws.
Apartment Syndicator · Charleston, SC · Member since 2016 · 973 posts · 728 votes
6y
@Markus Jackson you should review other investment opportunities to see how groups are structuring deals. If you only have a few investors you might want to consider a Joint Venture (JV) versus a syndication but speak to an attorney before making a decision
Cost Segregation Expert and Investor · Lakewood, NJ · Member since 2017 · 1k+ posts · 1k+ votes
6y
@Markus Jackson Find a good securities attorney, and have them help you structure the deal.
For the potential investors, create a power point of a sample deal OM (it doesn't even have to be one you've done yet), that should be a good talking point for investors to see what an actual apartment deal business plan looks like.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
6y
Run the numbers! If you're targeting those 20-30 unit properties, surely you've looked at a few and done the math. Write down the business plan in a concise, clear way, and present it to them. Ask them if your plan fits their goals and if it does, ask how much they'll want to invest when you bring them an opportunity. As @Danny Randazzo said, deals of this size might work best as a JV structure.
Investor · Charlotte, NC · Member since 2017 · 791 posts · 479 votes
6y
@Markus Jackson it sounds like your off to a good start. When raising capital make sure you spend time with an SEC attorney so you are staying compliant. After you know the rules I would suggest this:
Start telling everyone in your immediate circle who the new you is and what you're up to. Become the expert in the real estate space. Ask your network this question on an individual basis, who do you know that might be interested in investing in real estate? People will refer friends and the people who you're asking the question to if they're interested will self select themselves. From there, you will naturally grow over time. There are no shortcuts to raising capital.
Once people start finding you and wanting to hear more about your investments I would ask them what types of returns they're looking for. Money is made in the money. Your cost of capital will determine how competitive you can be on deals and ultimately how much ownership you can keep in a deal.
You received a lot of great suggestions already. In addition to building your team, you should also reach out and network with the experienced operators locally and virtually. Ask about their experiences to determine what to do and what to avoid.
Also, here's a post to help you understand how to find investors for your deals:
Additionally, @Matt Faircloth is going to be presenting at our next meetup in the City. So if you'd like to see him live, you're welcome to join us in November:
Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
6y
When I bought my first 35 unit deal (seems so long ago!lol) I was able to use my sec attorney to simply form a SPE for my $ partners and me. Pre-existing relationship + small deal made it comfortable enough to not go the PPM route. Used PPM once I graduated to big deals and lots of investors. *Speak with an attorney on this!*
Rental Property Investor · Redondo Beach, CA · Member since 2018 · 7 posts · 4 votes
6y
@Markus Jackson
I have not syndicated yet but am learning.
Partnering with someone who is experienced seems like a good bet. They will want to do it if the numbers make sense! I may have someone I could connect you with.
Also, have you joined other investor lists to see how they present information? Many of them do webinars. You can learn what questions investors ask and ask questions yourself!
London · Member since 2019 · 722 posts · 386 votes
6y
Markus,
Well done on making progress and educating yourself. When reaching out to other investors, be careful
The conversations you are having could be tainting the waters. Less likely when you do not have a deal into which they can invest now. If you are over the line, you might have to avoid any investments with the individuals until some time has passed. To demonstrate that you did not take part in an illegal solicitation.
Second, if they are not accredited, you may be looking at dead-ends. Working with investors are not accredited requires things you do not presently have. SEC filings, etc.
Third, some might call it a JV. A JV can very easily be a securities offering even though you spelled it JV. More so if you expect more than 1 investor to passively invest (pooling funds). While people think you can avoid syndication by labelling stuff a JV, it could still be a crime. Ignorance of the law is not a valid defence.
Lawyers who contribute here on BP will reference the Howey Test. See below.
Howey Test: https://www.investopedia.com/terms/h/howey-test.asp The Howey Test determines that a transaction represents an investment contract if "a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party,"
The link goes to a longer explanation. Investopedia is like Wikipedia for investors.
Developer · Philadelphia, PA · Member since 2019 · 29 posts · 8 votes
6y
@Alina Trigub
Great suggestion I will continue to seek guidance and learn more seasoned investor experiences. At this point I need to understanding the art of communication and how to relay our vision via power point or excel!
Also I will be attending the meet up event with the link you provided! Thank you !
Developer · Philadelphia, PA · Member since 2019 · 29 posts · 8 votes
6y
@Ivan Barratt this is great information thank you! At what point did you decide to transition from a SPE(special purpose entity) special structure contract to larger deals. At what point did it not make sense any more? The number of investors ? Or the $ amount. I am currently researching/ learning about both.
Developer · Philadelphia, PA · Member since 2019 · 29 posts · 8 votes
6y
@Deborah Shieh thank you Deborah, I actually have not solidified my name on a passive investing list.( if you have any suggestions or can refer me I would love to have that opportunity)
That’s a great note! Thank you. I am originally from Los Angeles, California and appreciate Philly very much!
Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
6y
@Markus Jackson a couple deals later I syndicated a 60 unit project with several investors. ppm, while perhaps not 100% necessary; became mission critical from my perspective.
@Markus Jackson you should review other investment opportunities to see how groups are structuring deals. If you only have a few investors you might want to consider a Joint Venture (JV) versus a syndication but speak to an attorney before making a decision
I agree with Danny. Joint venture specially with 20-30 units is the way to do it.
Don't do it alone. JV with a more experienced syndicator. By doing so, you leverage on the experienced syndicator's deal, experience, network and resources. Also, you don't 'lose' the interest of your cash investors and more importantly, by leveraging on a more experienced partner, you also minimize their risks of losing money. Of course, vet the experienced syndicator. You want someone who has not lost money ever for their investors and have been around for at least 10 years and have even survived the Great Recession of 2008-2009.
You definitely don't want to lose interest, so you can start by getting "soft commitments" from family and friends, as you continue to learn the game and build your team.
For these smaller deals, you can certainly partner with investors through a JV (or LLC) structure in order to take down the assets.
You should never try to save money when it comes to speaking with a lawyer so that you are well versed with the risks and can mitigate the risks as much as possible.
Good luck and stop plugged to BP! You'll thank me later...
Lender · Hoboken, NJ · Member since 2016 · 70 posts · 25 votes
6y
@Markus Jackson Please reach out if you need any help underwriting the deals (financial analysis and JV equity waterfall). I recently completed my M.S. Real Estate Finance & Investments from NYU Schack Institute of Real Estate.
Developer · Philadelphia, PA · Member since 2019 · 29 posts · 8 votes
6y
@Ola Dantis
“You definitely don't want to lose interest, so you can start by getting "soft commitments"
- Very True 3 of my buddy’s mentioned to me that they are ready to invest but at this point I haven’t figured out the structure of a power point or excel document offering.
Building relationships more importantly, and targeting investors for an opportunity to take down more assets will be my KEY Focus. Thank you!
haven’t completely mastered the craft of Structuring private money
deals. && I don’t want to risk losing their interest. I believe I
should at least offer them a sample deal (which I am learning)of what
could be beneficial to them in the near future(1- 2 months when we find a
deal)
(Having a sample deal package ready when you're meeting one on one with investors preps and seasons them for future opportunities that may come down the line when you're ready to lead a syndication on your own with your partner. Since you have access to high net worth individuals maybe you and your partner should considering partnering with experienced operators and bring those resources to the table and now what happens is ... you go bigger and further now. You learn much more by being with an experienced operator. Not only that but you use their credibility to help sell the deals to your investors. You use that deal as marketing tool to attract more investors. It's easier to sell what you're doing if you're actually doing it. Plus as i just mentioned you will attract more eyes this way.)
Are there any suggestions or things I should mention or look out for
in various initial interactions to cultivate a strong investor list.
(It's all about the investors never about the sponsor. This is the mindset you need to have going in. Find out what their needs are? Are they investing in anything now? Is it working for them? Are they happy or just merely satisfied. Can Markus show the investors something that can be just as or more beneficial that can work for them? Can you educate them on asset allocation and diversifying into alternative investments such as syndications? The questions you ask will give you all the answers you're looking for to know whether you can assist them with their financial goals.)
Rental Property Investor · Redondo Beach, CA · Member since 2018 · 7 posts · 4 votes
6y
@Markus Jackson
So far I’ve spoken with good egg investments and the real wealth network. There are so many, but they are jotbthe easiest to find. I know synidicators on the podcast will sometimes mention their website, which is where you can sign up to be on their investor list.
Note: if you are not an accredited invest, you need to be at least a sophisticated investor. Even though the SEC does not have set rules for what a “sophiaticated investor” is, many of these syndicators do.
Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
6y
Continue to educate yourself and keep learning as much as possible. As far as your investors, keep talking about what you are doing and allow the interest to continue to grow. As you get comfortable you will be teaching them what you learned and getting them comfortable to the process of syndications. If you have invested in a syndication previously, you can show them the model and returns you have received in that investment to build more interest. Friends and family tend to like the idea of following and trusting what you have done or are currently doing. This will be the cultivating process of your investors as you continue to learn. Basically teaching what you are learning and doing. Happy investing!