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Updated almost 8 years ago on . Most recent reply

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Taylor L.
  • Rental Property Investor
  • RVA
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Handling this potential investor objection?

Taylor L.
  • Rental Property Investor
  • RVA
Posted

I've been discussing potential investment opportunities in apartment syndications with my network, and the toughest objection I've come across is...

"What if I need to get my money out early?"

Now, this is certainly a reasonable question and a valid concern for someone to have. I get it. Crap hits the fan and things can go very wrong with life and personal finance. 

However, if this mentality is someone's inclination, I'm not sure how likely they are to actually become an investor. It shows how they see money and investing.

My response typically looks something like...

  • You can, but these aren't intended to be liquid investments. Don't invest your bottom dollar in anything and we will not accept your bottom dollar anyway.
  • Typically the sponsor will have first right of refusal to buy.
  • The sponsor will also have veto power regarding who you sell the investment to, if the sponsor refuses.

So how do you handle this objection? 

Most Popular Reply

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Joseph Gozlan
  • Real Estate Agent
  • Plano, TX
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Joseph Gozlan
  • Real Estate Agent
  • Plano, TX
Replied

@Taylor L. I have a little different approach. I don't buy a property I wouldn't want to own completely myself so what I tell them is this:

First, you can't sell your shares in the first year. This is SEC rules (rule 144) not ours. 

After the first year, you can sell your shares to anyone you want with one caveat, current members of the LLC have first right of purchase at the same price you can find a buyer on the outside.

I also tell them that if they ever need to get out before the hold period ends they should reach out to me first. In most cases, I would be able to buy them out. 

Think about it, 2-3 years down the road you will know exactly how much the property is worth. If you followed rule #1 of real estate "make your money when you buy" then the property is worth more than it was when you bought it so being able to offer your investor to get their money out at what they paid for would be a steal!

if I could buy my investors out in every deal we do I'd be very happy...

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