Raising Capital

[Denayer Burns]

I'm creating a document, something of a business plan to present to investors with whom I have established relationships.  I want to be concise and professional but effective.  What do potential investors want to see in that document?  What are important elements to include?  Basically, what's going to make them want to invest with me?

[John Blackman]

We create a 9 slide power point deck for our investors for each deal that covers the following items.

1) Map, tell a story about the neighborhood

2) Plan for the deal.  Is it a buy and hold, a flip, what are you doing?

3) Map showing nearby comps within 1 mile

4) MLS list of those comps, their prices, DOM, $/ft, year built etc.

5) Pro-Forma showing investor contribution, our contribution, debt, expected return for best case and worst case. ROI for best case and worst case.

6) Equity requirements - What are you going to spend all of the equity on

7) Profit Potential - spell out how you're going to make money.  How much will the investor make?  How long will it take?

8) Schedule - Month by month what will happen?

9) Risks - Everything that could go wrong

Addressing the above in a white paper format can certainly be done but it isn't as catchy as bullet points and pictures. The above is what an investor really needs to know. Once they pass that litmus test and want to do the deal, then show up with your business structure. Are you going to do a Joint Venture, a LLC, a member managed LLC? How will the investors stake be secured? What is your partnership agreement?

For the doc, I would spend time on your venture agreement whether that is a joint venture, a new LLC, or a Private Placement. That doc will establish and tie the deal together. I would seek a real estate attorney to help you craft one. Once you have a good agreement (it will cost you some dough to create one) you can reuse it on all of your future deals, as once the investor does one deal with you, they will easily sign the same agreement on the next deal.

Good luck.