Financing a Commercial Real Estate Investment

[Deion Alaei]

Hello,

What are some suggestions or advice can anyone offer in regards to finding investors for a commercial property investment. If the debt financing portion of the price is already covered, how would one go about finding investors to cover the 20-30% of the purchase price? Are Real Estate Investment Banks the only option? What does one do when they're struggling in trying to figure out where or how to find investors? It should be helpful that a property is established and has great financials, tenants, and overall quality. If anybody has any suggestions of words of advice, I'd greatly appreciate it. Thank you.

[Brian Burke]

Deion Alaei, for most investors the difference between the loan and the total capital needed is the hardest component of the capital stack unless you have a lot of your own money and just fund the deal yourself.

For those that do not, finding investors is about the only way. While it is great that you have the loan already, and that the property is established and has great financials, the real test is YOU. Investors will want to see a viable property and strategy, but they also want the investment sponsor (you) to have a track record, and they have to trust you. If you have a track record and investors that trust you, then you just have to form some type of entity (usually an LLC) and have a securities attorney draft a private placement memorandum and related subscription documents and operating agreement, and you can admit your investors into the LLC in exchange for their capital (and some equitable division of the profits).

If you don't have investors, but do have a track record, you need to get out and network with people to find high-net-worth individuals that are seeking alternative investments. It's a bit of a needle-in-a-haystack, but that's how it's done...word of mouth. You can't advertise (yet), you just have to become known.

If you don't have a track record, you need to get one. This means doing whatever deals you can with the resources you have and build it larger and larger, the old fashioned way. As you do this, you'll meet investors along the way and build and develop relationships. These relationships will be very important as you grow, because these people will be your investors or will refer you to other investors.