"Am I experienced enough to raise outside capital?"

Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes

"Am I Experienced Enough to Raise Outside Capital?"

This question crossed my mind recently after reading a post and some comments discussing whether an investor is experienced enough to raise capital from outside sources. It got me thinking:

In your opinion, what are the minimum requirements someone should meet before raising money from investors (beyond family and close friends)?

What skills, experience, or track record do you think are essential to successfully and responsibly raise money from others?

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Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

It's really hard to gauge this question.

I think that the attempt to scale super quickly is more dangerous than whatever the first raise is.

A young investor with just 1-2 properties, 3 years into their journey could potentially be a great partner for friends and family. If this person raises $400K from friends and family to purchase a $1M 6-unit apartment complex, they might be a great potential partner. Especially if they put in $35K, or what amounts to most of the then total of their liquid wealth.

On the other hand, we saw experienced investors with really strong reputations scale from a few million to a hundred million, or, in some cases, literally billions of dollars, in AUM at the worst possible time between 2019 and 2021.

I'd rather invest with the local 26 year old who lives in their second house-hack, drives their 10 year old car, and is raising their first small apartment syndication that they will self-manage, putting their own money into the deal, than some 45-year old guru who is great at social media, with their ability to charm on TikTok, but really, their "secret" as an investor is their ability to (on a part-time, "passive" - for them, and remote basis) transform $300M in real estate into $215M between 2021 and 2025.

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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
1y
OP
First thing is to understand the topic is really Scaling. Getting financing from other people is really easy once you have your scaling approach down.
The answer to each of the below is different as you scale.
1. Skillset- first you do everything. Then you specialize or hire legal, operations, finance, investor relationships, concept, deal analysis, Which investment level your at determines what experience you need. If you can’t delegate then you become the choke point.
2. Experience- you have to build your skillset as you gain your experience at each level.

3. Speed of scaling depends on your ability to assess. Most of us already have the skill sets from our day jobs. We just don't realize those lessons learned apply to REI. Your background as a military pilot. Did you ever do a flight plan? Yes. Do the same thing for scaling. Look at your investment portfolio. It's great. But you reached or are near critical mass. You need a flight plan or no one should invest with you.
Actions. Develop a Scaling model. Break it down by component and assess each phase of your current model.
Finance- you’re moving into the commercial level. All of your money should be coming from one commercial lender, syndication approach or corporate model. If you take the individual investor model, you need to find a Whale. Otherwise you need to keep looking for individual investors.

Insurance- need a broker.
PM- farm out or you better be good at process management.
Facility operations-?????
Deal analysis-????
Investor relationship- ????
Financial management-????
You will literally have to turn cash down. And be more selective who you let invest with you.
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Clarase Mika
Real Estate Coach · Rhein-Nahe Region Germany & Worldwide · Member since 2023 · 23 posts · 14 votes
1y
The common advice is that you need years of experience, a massive portfolio, or a perfect track record before raising outside capital. But in reality, experience alone doesn’t necessarily make someone a responsible steward of investor money. I’ve seen seasoned investors mismanage funds just as I’ve seen newer investors deliver solid returns by being disciplined, transparent, and data-driven.

Rather than focusing solely on experience, I’d argue that the real minimum requirements are:

1. A Proven, Repeatable Investment Model - Even a small number of deals, executed consistently, can be more valuable than sheer deal volume.

2. Exceptional Risk Management - Knowing how to structure deals to protect investors first, even at your own expense.

3. Transparency & Investor Communication - Some investors fail not because they lose money, but because they mishandle expectations and trust.

The ability to raise capital isn’t just about personal experience—
it’s about how well you mitigate risks, communicate with investors, and execute your strategy. Curious to hear others thoughts: Do you believe experience is the primary factor, or are there other qualities that matter more?

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Gregory SchwartzBusiness Member
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Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
1y
Quote from @James Hamling:

@Gregory Schwartz it's rather simple nowadays:
He who can raise the $, can raise the $......
It seems last few years all the established norms went right out the window.
I mean come one, there was those out there pitching LP-$ for buying Radio Shack and doing some weird come-back thing with it, and people threw $ at em for it...... It's really hard for me to think there is any bar left out there after that.
Now if looking to do it RIGHT.....
I'd say the skills that matter most is whatever skills are required to make it happen. It's really just that simple.
And than, to be able to convey that fact.
If you can make me believe your vision makes $, and that your the guy to pull it off, I'm handing you $ in proportion to what my reward can be for it, and how certain I believe you can deliver on it.

This reminds me of how Alex Hormozie describes "the value equation";
Experience in this case is the factor that determines the likelihood of achievement.
[email protected]443-812-0357
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Gregory SchwartzBusiness Member
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Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
1y
All great advice! It’s always insightful to hear how others approach raising money and evaluate those who do. I’m also glad BP isn’t overrun with people pushing courses that promise to take someone from newbie to syndication expert overnight.

"All you need to raise money is a successful model! Sign up for my course and use my proven system to become a top syndicator."

Glad to see more real, experience-based discussions happening here!
[email protected]443-812-0357
Schwartz Realty Group5116 Reviews
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James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
1y
Quote from @Gregory Schwartz:

Quote from @James Hamling:

@Gregory Schwartz it's rather simple nowadays:
He who can raise the $, can raise the $......
It seems last few years all the established norms went right out the window.
I mean come one, there was those out there pitching LP-$ for buying Radio Shack and doing some weird come-back thing with it, and people threw $ at em for it...... It's really hard for me to think there is any bar left out there after that.
Now if looking to do it RIGHT.....
I'd say the skills that matter most is whatever skills are required to make it happen. It's really just that simple.
And than, to be able to convey that fact.
If you can make me believe your vision makes $, and that your the guy to pull it off, I'm handing you $ in proportion to what my reward can be for it, and how certain I believe you can deliver on it.

This reminds me of how Alex Hormozie describes "the value equation";
Experience in this case is the factor that determines the likelihood of achievement.

1,000%
Alex Hormozie is one of the greatest marketers not just alive, but ever.

A person doesn't have to like these new realities but realities they are none the less. We are living in the age of marketing.

Think, how many people do we have today that are famous simply for being famous? Never did anything of any significance other than being known. They invented nothing, revolutionized nothing, just marketed themselves to fame.

And than, parlayed that fame into something of substance.

That's the new playbook.

Fact is a person could be the greatest ever at what they do and it will not translate to great success, and especially not the ability to raise $.

Unfortunately, yup, those with the marketing skills and diddly-squat know how can, and do, raise immense capital.

And it's because of us, people at large. Why do we engage in such? Why do we act on such? Because were lazy, L-A-Z-Y. And emotional.

Instead of digging in, researching the snot out of someone and writing out the facts, letting the facts steer, the vast majority engage in what feels good, what feels right.

Just take the week and tally how many times people use the word "feel". "I feel like it's...", "I feel like we should...".

What happened to THINK?

It's subtle, most are living in complete oblivion to it. But once you pay attention, you can't not see it again.
Somewhere along the way our society has moved to feeling centric vs thought centric.

I hear it all the time in consulting calls. People say they FEEL a property is right, or wrong, good or bad as an investment property. So I stop and say "great, that's good info. But what do we THINK about it?". And >90% of time, the answers change.......

This is why we've seen good marketers gain massive wealth selling a false narrative, then ironically, use that wealth from the marketing to actually do the thing they first pretended to have in spades, now only possible via the marketing $.

And few poo-poo them for this. No, instead they champion them for it with cult like fervor.
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Gregory SchwartzBusiness Member
OP
Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
1y
Quote from @James Hamling:

PREACH! Haha, I love this!
[email protected]443-812-0357
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
1y
Quote from @Gregory Schwartz:

"Am I Experienced Enough to Raise Outside Capital?"

This question crossed my mind recently after reading a post and some comments discussing whether an investor is experienced enough to raise capital from outside sources. It got me thinking:

In your opinion, what are the minimum requirements someone should meet before raising money from investors (beyond family and close friends)?

What skills, experience, or track record do you think are essential to successfully and responsibly raise money from others?
There’s some really good posts in this thread. Heck, I even agree with some of them! LOL

i have raised half a billion $ ($500 million) through syndication over the last 22 years.

Just because you CAN syndicate a deal, doesn’t mean you SHOULD. AND just because you have experience and a “good deal” doesn’t mean you will be successful trying to syndicate the deal.

The first criteria is does the sponsor have the general knowledge and experience in real estate, and the specific knowledge and experience in the property type/location to give the project the best shot at success? If the sponsor is lacking here there’s no need to go any further. Even if the sponsor lacking knowledge and experience can raise capital through syndication, their life will become a living nightmare of lawsuits, hostile social media posts, public ridicule, accusations, legal threats. Sound like some people we’ve previously “engaged” with.

The second criteria is if the deal is a “fit” for syndication. Excluding the periods of “tulip bulb” irrational exuberance, a property must produce enough of a risk adjusted return to satisfy both the ROI demands of the “limited partners”, and the income/time requirements of the sponsor. The vast majority of properties at their available prices will not meet this requirement.

Raising capital thru syndication is a lot more realistic if the sponsor has a significant amount of their own cash to invest. Nothing impresses an outside investor more than the sponsor stating that he’s funding 10-20% of the “deal” with his own cash - on the same terms as the outside investors.

The last of the most important criteria is that the sponsors interest be aligned, to the greatest extent possible, with the interests of the investors. Beside investing their own cash on the same terms, the sponsors return should be heavily weighted toward “carry” (receiving the bulk of their return as sponsor in the form of an interest in the property rather than cash) with that carry subordinate to the investors receiving their investment returns PLUS a minimum annualized return.

Here’s the bottom line; unless the deal is VERY large, or the sponsor is going to syndicate a large number of deals, the investor will make more money purchasing the property theirselves with a option low to moderate interest rate loan.
Private Mortgage Financing Partners, LLC
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