Sample Deal Package--Beneficial or Waste of Time?

Question

Hi All,

Hope everyone's the long weekend! I've been a big fan of @Michael Blank and have been consuming his podcasts, syndicated deal analyzer, and most recently, his new book. He speaks a lot about creating a Sample Deal Package, in which you underwrite a potential deal and use that to speak with prospective investors and lenders. The goal here is to get a lot of the big questions and inhibitions about investing with the Syndicator out of the way without any time crunch so that when there's a real deal on the table, the Syndicator would ideally be able to tap into these investors and get them on board relatively quickly. More info here: https://www.biggerpockets.com/renewsblog/2013/12/23/raising-money-to-invest-in-apartment-buildings/

My question is for all the experienced MFH syndicators & investors--does this sample deal actually work? Does it actually help show credibility to a prospective lender or investor? Or does it sound like you're being too sales-y or talking out of your @$$? As a new investor to MFH, I'm conscious of not coming across as genuine and I certainly don't want to waste anyone's time. I just finished my sample deal--I have a presentation & a written doc--both that outline my buying criteria, planned scope of work, projected financials, management team, and more. But now I'm wondering what to do with it and if it's worth using when speaking to potential investors, lenders, brokers, etc.

Hope this makes sense. I'd appreciate any honest thoughts and advice. Thanks in advance!

Scott Morongell · Answer

@Snehann Kapnadak the sample deal package is ideally for potential investors. It's used for showing them what you're looking for and what the potential returns could be. It's helpful for investors to see something on paper or pdf (my personal opinion). When I first got into the business I made one and added some facts as to why I believe in MF all together. It has helped me grow my portfolio to over 650 units.

Snehann Kapnadak · Answer

@Scott Morongell Thanks for the insight, so did you include a section of your management team and background of the market? That's what I have but I'm wondering if it's redundant. I guess I'll keep practicing it on investors and will tweak it where needed.

Thanks @Jorjio Hopkins, I'll keep your tactics in mind as I continue practicing.

@Tony Akhigbe Thanks, glad to see I'm kind of on the right track. After you present the SDP, do you ask for verbal commitment of $X000? Or do you leave it open to how much they want to commit? I know this all depends on the deal but was wondering if people still ask for verbal commitments and if they're even useful.

@Matthew Baltzell Thanks for the boost of confidence :) I'll continue working to improve my pitch!

Matthew Baltzell · Answer

@Snehann Kapnadak you're over thinking this. There is exact answer. Everyone does something a little different.

What Michael Blank is suggesting does make sense. By making a SDP you show you've taken some actual action. Everyone has read lot's of real estate books, but who really takes action? It's the people who consistently do, who'll become successful.

I say if you have already made the SDP then use it. You'll never know if it's effective or not until you try. Hell, you might even be able to improve upon it!

So, go out there! Start talking shop. It'll feel awkward at first, but you'll feel more and more comfortable over time:)

Tony Akhigbe · Answer

@Snehann Kapnadak from the description of your process, I think you already have a good grasp of how to use the SDP, so you should be able to tell if it works or not for you very quickly. I've found it a big help, I don't think I'd have been able to paint as good a picture as it does. I tend to follow your process myself (I've focused on friends so far). I never bring up the SDP till at least the 2nd or 3rd meeting (your step 2). Then I usually email it to them, give them some time and discuss it at a later meeting/call. The response has been very positive after the SDP.

Jorjio Hopkins · Answer

Hi @Snehann Kapnadak,

I think you already have a great approach that will work well!  Honestly, the more you practice, the better you'll get and the more comfortable you'll feel discussing with and without the SDP.

I typically try to let whoever I'm speaking with steer the conversation.  I like to let them tell me everything I need to know about their desires and current situation.

Once they request more information you can bring out the SDP and discuss your team's credentials and background on how your company operates.  Then show them the SDP and gauge how much detail they require.

If they are engaged and asking questions then you can spend time explaining things more thoroughly.  If they seem distant and just listening then I would keep things simple and ask them if they need anything explained further.

Snehann Kapnadak · Answer

Hi @Jorjio Hopkins thanks for the response. Noted on not being too sales-y. How much of your SDP talks about a sample deal vs. about your company, team, and general acquisition strategy? Or do you have 2 SDPs depending on how savvy your investors are about real estate?

Here's my general process:

• I tell family and friends about how I invest in real estate and gauge their interests.
• If they seem savvy enough to generally know about the stock market and basic investing, I ask them about their current returns and how they may be able to get a better return through real estate. I walk them through the numbers of my SFR & show them my intentions of scaling by getting into MFH. If they're still interested, I tell them that I've noted their interest and I'll follow up with them again with a formal plan of a sample deal so they can get a better sense of the numbers I'm projecting. I plan to use the SDP here and get a few verbal commitments if possible.
• If they're not involved in investing yet but are curious, I try to give them a high-level overview of how REI can possibly beat the market (cash flow, appreciation, tax benefits, etc.). If they're interested in learning I tell them to look at BP haha and try to steer the conversation into #1 above.

In your experience do you think this is the right approach? Thanks again for your help!

Jorjio Hopkins · Answer

Hi @Snehann Kapnadak,

It largely depends on how you present the information.  If you present in a sales-y manner then it may not be received well.  However, if you first gauge their interest and genuinely try to help them achieve their financial goals, then it's simply you presenting them with information that will help them make an informed decision when your next opportunity comes along.

The Sample Deal Package (SDP) plays a large role for me when talking with potential investors who already know a bit about real estate.  If you're dealing with someone new to the space, I found that you have to first learn about what their current returns in the market are, then progress to educating them on the multifamily space prior to presenting the SDP in another meeting.

What's the ultimate goal you're looking to achieve through using the SDP?  If aren't comfortable presenting the SDP to potential investors/partners then look for another path that can help you achieve that same goal.

Sample Deal Package--Beneficial or Waste of Time?

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