Finding investors for syndication

[Dennis Johnson]

Lot a topics and subjects on syndication, having a mentor is very important and helpful now that is out the way.   How can one find reputable investors that would consider doing a syndication with a newbie.   Found a very good deal and spoke with a couple of investors and they have given there opinion on if the price is right they would be in but to keep from loosing the deal is there a specific number of investors to shop the deal to or just go with anyone that can help get it done.   

[Jonathan Twombly]

@Dennis Johnson  It's frequently said in real estate that, "If you find a great deal, the money will come to close it."

This is guru-talk to sooth the nerves of people who suspect it's hard to raise money - and are right.  People don't want to talk about how hard it is to raise money.  It's bad for the coaching business.

That statement is correct only IF you have already built a network of potential investors.  This involves time and effort.  Here's what I recommend that you do, based on my past experience.

1.  Figure out what you want to invest in, and why you want to invest in that kind of property.

2.  Put together a team of professionals - the people you will need immediately once you find a deal to close it.  This includes:  a real estate lawyer, a syndication/corporate lawyer, a real estate accountant, a mortgage broker, a contractor, an insurance broker, and a real estate management company, at the very least.

3.  Create an investor "deck," which includes your bio, the bios of all the professionals above, a description of the kind of properties you want to buy and why, and a sample deal with projections.

4.  Create an investor qualification form that captures a potential investor's name, contact information, accredited or sophisticated investor status, and how much they are willing to invest if you find a deal that they like.

5.  Make a list of everyone you know who might be interested in investing, and who is also an accredited or sophisticated investor, and make a guess as to how much they might want to invest.  Then, take 25% percent of that number.  This is the absolute highest number you should assume that you are going to be able to raise from your friends and family.

6.  Create a spreadsheet for investor contacts that includes their name, contact information, date you first met them, date you gave them the qualification form, date you received it back, date you spoke with them about their objectives, how much they want to invest, and any comments you want to capture about their job, willingness to invest, available assets, etc.

7.  Start talking to everyone about your real estate plans.  Give them the investor deck from (3) above and the qualification form from (4) above.  Start tracking them on your spreadsheet (6).

8.  Find out a way to keep in touch with all these people, whether it is through regular phone calls, a newsletter, etc.  You don't want them to forget about you between the time that you talk with them the first time about your plans and the time you actually get a deal.

9.  Be sure to ask every person you talk to whether they know anyone else who might be interested in investing too.  When you send out newsletters, etc., be sure to ask there too.  If you don't ask constantly, people will not remember to make referrals.

10.  After a while, your investor spreadsheet will start to have a total dollar figure from all the people who have said they are interested in possibly investing.  You should assume that the actual amount of money you can raise from these people is 25-35% of the total number you have accumulated.  In other words, if your friends and family have in total said that they are willing to invest $1,000,000, you should assume that you will be able to get only about $250,000 when you have an actual deal in hand.  It's not that people were lying; it's that life happens to them.  I can't tell you how many people in the last few years told me that they were going to invest with me, and then decided to buy a new house with the money instead, or invested in something else before I found a new deal for them.

11.  While you are doing this, you must continue to look for deals to feed the machine.  You need to be constantly looking for deals and looking for money to do the deals.

Hope this helps!