Raising Money, Finding Deals: What Kind of Skills do you Need?

[Shafi Noss]

Hi everyone,

In books, podcasts, and from the pros, I hear the same thing, that MF investing is about finding money and finding deals. What does life look like for someone who specializes in each of these, are they compensated differently, what kind of skills does each role need to be successful?

[Khizar Hanif]

Start with a solid business plan and find a niche. Build a list of investors in your personal network who may trust you as a person (if you don't have the track record). It doesn't always require experience, it varies from person to person but I find that if people know you as an honest and trustworthy person and you are a hustler, it can work. First deal may not be a huge deal. Let your investors know what you want to do and what kind of deal you are looking for. Have the capital in place before finding the deal, that way you are ready to execute when the right opportunity presents itself. Don't wait until you find the deal to start raising capital. 

There are deals out there, but they are not all deals to everyone. A good deal for you may not be the right deal for me, which is why you need to know what you're looking for and have a solid business plan. Network with brokers and get to know people in the game. Having a particular niche and knowing what you are looking for will show people that you're serious. Don't just say "I'm looking for MF". Tell them how many units you are looking for and in what market, and whether you're looking for something that's stabilized or has some value add/improvement potential. Get to know them and get on their mailing list. You will underwrite 100 deals to find the 1 that works, don't get emotional. Stay positive. 

There are many ways to be compensated as a syndicator but don't get greedy, this should not be your initial focus. Keep your investors happy and when you build your foundation for your syndication business you can start becoming more aggressive with your syndication structures. You want to eventually get to a point where you don't have to raise capital and people are asking you to take their money because they have built a relationship of trust in you and have had a positive experience. In some cases, you may even have to give away most of the deal to just get started. 

Consult SEC attorney to make sure you follow the guidelines for raising capital. After the first successful deal using OPM you can start to raise capital from those outside your personal network using your previous deal and track record. 

I raised 950k for my first syndication (3.5MM new development) from investors in my personal network. No syndication experience prior to, and my terms were pretty aggressive. However, I was only able to do that because I put in 30% equity myself. I also took a developer's fee and had a waterfall split 70/30 after a 12% preferred. This is a build and sell play (townhomes). Be ready to answer the question "what's your skin in the game?" It's a lot of work and raising capital is probably the most nerve wracking thing I've done but it's worth it. You should constantly be reading books and listening to podcasts.

There are tons of resources out there for raising capital and finding deals from great people like @Matt Faircloth. Read his book "Raising Private Capital". Read Joe Fairless' book "Best Ever Apartment Syndication Book". Listen to @Michael Blank podcasts and purchase his Syndication Deal Analyzer to start underwriting deals and get familiar with the process. Fall in love with the process. 

My apologies for recurring use of word "deals" but that's what this is all about, right?