I've been buying real estate for over 10 years now and a few years ago decided to buy & hold multifamily apartments. I currently own & operate just under 100 apartment units in Florida. The last purchase was the first time I didn't use my own capital to buy. I raised $320k to buy a $1,075,000 investment (22 units) that was 15% below market value. One investor funded 100% of the capital for 80% equity. He's projected to get over 10% cash on cash (a conservative estimate).
Where I'm getting at is I've been very lucky to find decent deals similar to this the past few years. After the last deal & the first partnership, I realized I can put together these syndications more often if only I met more people who would qualify for this type of arrangement. Being introverted, I don't go out too often, I don't network or mingle and have trouble "getting out there".
What are you doing to meet other potential partners? Do you see any of the crowdfunding options being valuable?
Thank you for your input.
Tony, as a closet introvert myself I will tell you that you need to get over that hurdle. Join toastmasters or any other organization or group that will push you out of your comfort zone.
Trust me, pushing yourself out of your comfort zone, makes the next push easier. I can tell you that from an introvert, to a person that now runs two rei clubs and have been onstage in front of thousands of people.
This is a people business, and you must be able to talk to people to be successful.
@Jeff Greenberg is exactly right. Business in general is easier if you're willing to go out there and meet people, but something like syndication makes it at least doubly so. That said, if you can find a 'money partner' who is willing and able to do that piece of it, why not partner up? You should always be focusing on your strengths and outsourcing the stuff you don't like to do. So at the very least you need to network and find this person.
I'm ok with public speaking since I've been selling real estate since I was 19 (33 now), but I guess I only network as needed, but I certainly don't look forward to it. Perhaps networking is apart of the syndication business and I have to add it to my schedule if I'm going to grow it.
For me, selling real estate has always been lots of mailers + cold calls so not too much networking which is why it's translating into my actions for growing my syndication business. Perhaps with syndication, I'm going to have to do the networking events as you two are suggesting.
Any thoughts on the crowdfunding models such as Realty Mogul, etc?
Thank you for taking the time to chime in!
I have experience raising significant capital and started w/o experience in sales/marketing. On the contrary, I realized that wasn't the key to it. The key is allowing your passion and knowledge of the opportunity to shine, anticipate investor questions and answer confidently. Most of all, be authentic. You are really educating folks about MF since most folks that invest with us started out never knowing what this is all about. That puts you as educator, not from a pushy sales position. The latter doesn't work anyway.
I have a lot of podcasts on my BP profile and here are some blogs that might help you position this for success. If you want to learn how to raise capital, learn about it and get yourself out there. Study other successful capital raisers. You might also develop a thought leadership program that increases your credibility w/investors (i.e. podcast interviews, blogging, newsletters, special reports) that you can send investors / prospects.
The other thing you should consider is partnering w/someone who has a capital raising focus and you focus on the deals. Why try to learn everything, do what you love to do, find and put together deals, team w/someone who loves to educate investors and raise capital for these deals. Typical split shares I see if 70/30 to LP/GP. If you and your partner are GP, for bringing all the capital to the deal you might give up 1/3 of that 30% or 10% of the whole deal but you don't have to worry about that part of it. In the end, to get bigger, you need to have a team and focus on your strengths. You'll grow bigger and faster w/a team approach.
@Tony Nguyen syndication is heavily dependent on sales/biz dev/networking (whatever you want to call it). If you're not good at or don't have the skill sets you'll need a partner that is; even if you crowdfund.
We're testing realcrowd as a platform and another means of raising capital however we started by networking and building relationships. Crowdfunding could be a nice ancillary stream of capital; not the end all be all.
@Tony Nguyen - you SO can do this. I don't mean to get all "rah rah. motivational speech" on you, but I truly do mean it.
@Jeff Greenberg 's advice is so valuable. He has slowly but surely built himself a great network of investors that trust him. I have clients that don't have near the experience you have or the property advantage you have and they are able to raise capital.
I wish you all the luck in the world. I recently responded to a post somewhere on this topic. I will try to find and backlink.
@Jillian Sidoti of course. It would be my pleasure.
Even though I realize that what I do is sales, I do not think of it as that. I totally agree with @David Thompson . Be yourself, be real, be passionate about the opportunity that you are offering. It is not like a car salesman that may never see the customer again. You will be married to the investor for a long time, tell them the truth, be transparent. I hate sales, but as David said, educate. I enjoy sharing the opportunity. We are providing a service, something that they cannot do on their own, with returns that it unlikely that they can get on their own.
If you would have told me 10 years ago that I would be raising capital from investors, and raising over a million dollars in less than a week, I would have called you insane. Here I am going from a 1.5 raise right into a 1.7 raise, with a 3 mil raise coming around the corner.
Be passionate about your deals and share with everyone you talk to.
I've done several interviews and podcasts on the subject and enjoy sharing ideas in this area and in general how to start in the business. As Jeff mentions, it would be my pleasure.
@Jeff Greenberg As Jeff mentions, its building relationships. Call it traditional but the vast majority of folks I talk to get an education from me on the niche (apts and why I like them), market, deal and team behind it. I can easily spend an hour w/them going over this, answering questions, etc. This is hard to get this quality time and knowledge from a sponsor by going to a portal and reviewing crowd funding offerings or getting calls from a broker who is marketing a deal.
There are avenues for capital but the "sticky" capital is what you want. Over 50% of my investors on any deal are return investors from previous deals and another 30-35% of investors are referrals from these investors....so maybe 15% are new relationships I've been building thru networking. Treat these folks right, give them good, solid deals to consider, under promise and over deliver and they will come back. Getting started is the hardest part but know it gets easier if you treat folks right and the return investors and their referrals become the foundation for future capital needs.
Very well said @David Thompson
@David Thompson - Solid advice and thanks for the podcasts. Your idea of partnering with someone who focuses on raising capital is very smart. In a way, I guess that’s similar to how I’m horrible at designing artwork so I hire someone else to handle it for me. In this case, leveraging on someone who has capital raising experience, but lacks MF experience may be beneficial. I’ll definitely think about this, thanks.
@Jillian Sidoti - Thank you for the “rah, rah”! I have trouble meeting people, not so much talking to them. I guess that’s what networking events are for, right?
@Jeff Greenberg - Thank you for the advice, I’ll definitely dig in.
Message me privately let’s keep in touch here
@David Thompson - I just read your blog post. I have a question about the following paragraph;
- 5) Relationships are key - I had three main buckets where I got my investors from: former work contacts, friends and family; local apartment meetup groups; and BiggerPockets (BP) network. By far, the best source were people that had a longer relationship w/me in some capacity. BP ironically was not the best source for me. Building relationships and trust take time and physically seeing the person I think helps.
What question(s) did you ask to start a conversation about the possibility of them investing with you?
Not speaking for David, but as for myself, at REI event, meeting, seminars, etc., I always ask people what they do in REI. Typically they will then ask me what I do. I tell them what I do and see if the conversation brings on more questions.
If it is not an REI event I still like to lead the conversation to what kind of business someone is in. Again that typically comes back to the question of what I do.
If the questions move on to gathering more details about specific deals, I request that either set up a separate appointment, or even find a place where we can talk privately and find out if our investment criteria's are compatible.
It's relatively easy at networking events if they are small enough where host goes around and asks folks to introduce themselves (30 sec) on what they do and what are they interested in learning, who are they interested in meeting, etc. Listen to others and seek them out after the meeting and say "hi, I learned that you have interest in passive investing in MF", I introduce myself and ask about their experiences, interests, etc. I then tell them what I do and if they are interested in meeting in the next few weeks for a coffee to share some ideas.
That first 1x1 meeting is just understanding what they know and more of an education on our model, maybe share w/ them a past closed deal. I'm focused on education sharing, suitability / fit (accredited or not, etc) and timing (liquidity / capability) . If that goes well, I then just let them know that I have a monthly newsletter and will alert them to future deals that may be of interest to them. I have started a relationship and they may or may not participate in future deals but that wasn't the whole point. I have folks in my network that have not done deals but have referred me to others. Keep your eyes open and no time with folks is wasted if you keep that in mind.
In larger networking events, don't focus on speed dating (meeting as many folks as possible) but maybe say hey, I'm going to meet 3 to 5 folks while I'm here. Just have natural conversations w/folks maybe asking them where they are from, what is their focus (REI has a lot of areas of interest), what is their background in REI, etc. I look for commonality when I talk to folks (where they are from - I can almost always find a connection there w/someone, if their background is MF, syndication, passive investing...then that's another common factor we can share, etc).
You may want to read a book or two on basic communications skills. I find folks like to talk about themselves in general so asking some basic questions that require more than a "yes or no" response opens the conversation and those thoughtful few questions get the ball rolling. If there is interest and commonality, see if you can connect in a few weeks (phone, email, in person all may work) and again, I look to at least get folks on my monthly newsletter so I can continue to educate and share ideas w/them. In sum, don't be myopically focus on finding that perfect relationship, develop quality contacts, get those folks in some type of thought leadership program you may have (your distribution list for newsletter or blogs, etc) and before long, you will have relationships beneficial for both parties.
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