Purchasing a list of accredited investors

[Sergio Fetter]

Hi BP,

As I'm actively raising funds, and searching for investors for a syndication deal, I had multiples offers to purchase a list of accredited investors interested in the multifamily segment.

Has anyone ever purchased a list of that sort, and had any kind of success with it?

Thanks in advance.

[Andrew Cushman]

@Sergio Fetter, that's a good question.  Over the years I have had a number of list brokers reach out to me - some rather aggressively - to try to sell me a list of accredited investors.

I've never had any need to or interest in purchasing a list, however the one guy I did talk to for a few minutes gave what seemed to me pretty high prices for a product (the list) of unknown quality.  As @Ivan Barratt mentioned, by the time you get the list many other people likely have already tried to use it, and that's assuming the people on the list are actual accredited investors to begin with (which you basically have no way of verifying!).

@Percy N. really hit the crux of the matter though: people invest with you because they trust you and like you, and that comes down to relationships.  While I'm sure a small percentage of people do, I don't personally know anyone that has made a major investment from a cold call. The best way to get started is with your existing circle of influence, as well as the methods Percy mentioned.  The good news is this:  once you do a good deal or two with your first set of investors and prove yourself, they will start referring other investors to you and your business will start to grow exponentially from there.

Finally, what @Lennon Lee said is critical as you do NOT want to get on the bad side of the SEC!  If you don't solicit and only take investors that you have a preexisting relationship with at the time of your deal, you can syndicate under rule 506(b), which is generally cheaper, easier, and allows you to take "sophisticated" investors.  Once you start soliciting, such as mailing or calling a list, you have to operate under 506(c), which is more complicated and puts a lot more responsibility on you.  Both are valid ways to do it, just make sure you use the right way!

Good luck!

Andrew