Investor · Hanover, MD · Member since 2017 · 10 posts · 15 votes
Some multifamily gurus teach students to focus on finding the deal and not raising money. Through our journey growing our syndication business, we have heard this notion propagated a few times. I am interested to know what other syndicators think. Does a good deal always attract the right money? Is this a viable strategy?
Total BS. People don't invest in deals, they invest in people. If they don't know you they aren't going to suddenly trust you enough to part with six figures just because you all the sudden found a "deal."
Total BS. People don't invest in deals, they invest in people. If they don't know you they aren't going to suddenly trust you enough to part with six figures just because you all the sudden found a "deal."
Good deals (real ones) are harder to find than capital right now. But that doesn't mean random people will invest with you (assuming you're structuring the deal that you can even advertise to random people), so that means you will still need to focus on building that investor database.
Like most "truisms", there is some truth to that statement, but perhaps not as much as we would like. For example, let's say you find a smoking awesome deal that would return investors 14-15% cash on cash ROI year over year and 20% on the back end within 3 years at the point of sale. Seems like just about anyone would jump on that!
But if you fail to advertise that opportunity where the investors are, then no one will know about it. If you fail to develop relationships, no one will trust that the deal is as good as you say it is. Finding a great deal doesn't mean strangers whom you have never met are going to start calling you and throwing money at you. So now is the time to lay the ground work. In the old days, farmers called this "prepping the soil", and you start doing that a couple of months before planting. Dig out those old rock. Mend those fences. Fill in the gopher holes. Same here: start prepping your garden of investors now...3-6 months before you need them to be ready. Trust takes time to cultivate.
My recommendation is this: start building up a "call list" of people who have capacity. You don't need to sign them up for anything specific today, but have a list of numbers to start dialing when that sweet deal comes along that you only have a few days to tie up and the Sellers demand proof of funds. You don't want to have an excellent deal fall thru because you don't know anyone who has money.
Odds are if you find a small group of investors who have money, they will know other people who have money. Wealthy people tend to hang out together and tell their buddies when something good is happening. So even if you don't have 100 investors, you can raise the pool really quickly once you lock in a deal if you've got a handful of well-connected money people.
Some multifamily gurus teach students to focus on finding the deal and not raising money. Through our journey growing our syndication business, we have heard this notion propagated a few times. I am interested to know what other syndicators think. Does a good deal always attract the right money? Is this a viable strategy?
You need to line up the money first. Either through your own network of investors or through a network of others who have investors ready to go. Either way there’s not much point in hunting deals until you know you can get it done when you find it.
Some multifamily gurus teach students to focus on finding the deal and not raising money. Through our journey growing our syndication business, we have heard this notion propagated a few times. I am interested to know what other syndicators think. Does a good deal always attract the right money? Is this a viable strategy?
A good deal is only as good as the person running it. You will not just find money just because you have a deal. You are spinning two wheels at the same time and both need to be properly paid attention to; deals and money.
"Find the deal and the money will find you"? No way. I don't think good deals are found I think they are made. Or at least you can't rely on them being good unless you can make them good. If it was good right out of the chute the current owner would hang on to it.
I certainly would not invest with someone whom I did not know and who did not have a stellar track record of prior success.
An inexperienced operator can turn a gold mine to rubble and a skilled operator can accomplish the reverse.
Without experience you should not be looking for a deal or money instead you might try finding an experienced operator who is willing to take you on so you can work and gain experience and make contacts.
Ahhh, @Leslie Awasom which came first, the chicken or the egg? I'm fortunate enough to have co-founded a company with two seasoned real estate investors, who thrived during the great recession and have a proven track record, which predicates investor trust. It's much harder to convince potential investors, that proforma numbers, or actual numbers for that matter, will produce any given return without first having practical experience.
Thanks for all the useful insights. This a myth we had to face early in our journey. Imagine sitting in front of an investor you are meeting for the first. And attempting to do your very first capital raise with a deal in hand and deadline to close. Recipe for disaster!!! Learned the hard way! Trust goes further than numbers. Your investors must trust you to want to business you. Regardless of how smoking hot your deal is
There is some middle ground...if you find a great opportunity and have been networking with experienced sponsors, you may be able to assign/partner with them on it. There are some sponsorship groups where this is their entire business model...the student army. And it happens outside of that model as well.
There is some middle ground...if you find a great opportunity and have been networking with experienced sponsors, you may be able to assign/partner with them on it. There are some sponsorship groups where this is their entire business model...the student army. And it happens outside of that model as well.
Came here to say this. Usually this mentality leads to an inexperienced sponsor landing a deal but with nowhere to go and a deadline to hit, so you go to the person that you know can raise the money. Not saying is a bad way to go, since something is more than nothing, and the experience of going through the entire transaction is very valuable with experience on your side, but I believe it makes sense to do both paths. Network with everyone, Brokers, investors, experienced sponsors, etc. So if you get any deal, you can pounce on it no matter the size.
your network is your net worth . Finding a great deal is only 50% of the solution ..you must have folks in your network that know you like you and are willing to do business with you ! that’s why a network of like minded investors is so important in this field
Not sure who’s teaching that, but it’s wrong. A good deal will help bring investors on board, but you need relationships and trust first.
Even crowdfunded deals have a good amount of equity coming from friends and family. The rest invest because of the story and experience of the sponsor, then the deal.
Some multifamily gurus teach students to focus on finding the deal and not raising money. Through our journey growing our syndication business, we have heard this notion propagated a few times. I am interested to know what other syndicators think. Does a good deal always attract the right money? Is this a viable strategy?
You need to line up the money first. Either through your own network of investors or through a network of others who have investors ready to go. Either way there’s not much point in hunting deals until you know you can get it done when you find it.
Leslie,
I agree with Greg. You have to line up the money ahead of the deal. In our seminars, my capital-raising expert coined the phrase: "You have to dig the well before you're dying of thirst." In other words, you have to start NETWORKING with people - starting with friends, family and work colleagues - so you can get referred to people with money. What you're doing when we say "lining up the money" is not asking for capital commitments upfront but finding out first - who are the people with the money, and who among them like and trust you enough who will invest if you find the right deal and how much can they invest.
You do this private capital finding everyday/every week even before you have a deal, while you're getting a deal and even after you get a deal. Lining up the money is part of an apartment syndicator's "way of life". If they're good at finding deals, they will always need private money.
@Leslie Awasom yes, if you have a good deal it will sell in a week or less, IF a good deal. I say it all the time, find the deal the money will find you. I sell deals in a few days. Having done about 500 over the last 7 years so I am not speculating
Seems like some contradicting advice on this thread. People say that investors will invest in the person, but if the person doesn't have a deal or has never done a deal, who would invest in someone with no track record? On the flip side if you had a great deal, investors would actually know what they are investing in. My point is without a track record, you really do need show you are capable of delivering. Maybe the solution is to not attempt syndication for your first deal. Look for one or two partners to fund most or all the deal. After you have a couple under your belt, it gives you credibility to seek funding.
Here is a good question, on bigger deals how far out is closing? I thought we were talking months.
Some multifamily gurus teach students to focus on finding the deal and not raising money. Through our journey growing our syndication business, we have heard this notion propagated a few times. I am interested to know what other syndicators think. Does a good deal always attract the right money? Is this a viable strategy?
For Syndication your credibility is more important than your deal. It's who you know and who they know. These are usually accredited investors who have CPA's, attorneys and business people to bounce ideas and deals off of, plus their own experience. You can have a potentially great deal but one or more are going to ask about your experience and credibility. If you don't have the background they will look elsewhere. They made their money by doing "safe" deals not by taking risks with inexperienced investors as passives.
For selling single family it's having the deal first. Anytime I offer a House or Turnkey I get flooded with people I've never heard of asking about the deal.
@Leslie Awasom KEEP IT SIMPLE!! Find a good deal, send it out to your network, or simply post it on the local RE sites, it will see in a day, IF good...
@Leslie Awasom To me this is a myth and there are many factors involved. If you are an established investor with a great track record then yes, find a deal and the money will come. But if you are just starting out or have a limited track record/team by your side then the money is tougher to come by (depending on your network). You should always be raising money (always be closing) even when you do not have a deal. Build up your investor database so you don't have to worry about this when you do have a deal. Or partner with proven investors and you will attract capital much easier.
Good to see you being active @Leslie Awasom. It's like the chicken and egg thing, which came first? You can find a deal but you have to actively be building your investor database. Keep building those relationships for when you do have a deal.
Personally, if I don't know you, you don't get my monies for your knock it out of the park deal. Just put yourself in their shoes and think about it from the investors perspective. Happy investing!
Total JUNK! they tell you to find a deal and the money will come, but why? Well, they've probably have done a few deals and have a decent investor base built up. They teach you just enough to be dangerous but leave out the vital fact of how important capital really is. So you lock up a great deal, have your non-refundable earnest money hard already and now you PANIC! Raising the money is 1 piece of many moving parts once a deal is under contract. If you have preconditioned and vetted investors you will not raise the money in time. So, what do you do? Well, 99% of investors will run right back to the guru who taught them enough to get this far and cry out for HELP! What they do not understand is the guru will end up taking 90% of the GP from you leaving your efforts, time, and risk disproportionate to your compensation in the deal.
MORAL OF THE STORY IS FIND MONEY WAY WAY WAY BEFORE FINDING A DEAL!!!!
This is can be a long sophisticated answer that can be multi-layered.
But ultimately capital drives everything, I have several clients or potential borrowers call with amazing “off market” deals or a listing that they want to rehab and flip or refi Into a long term program, but they don’t have the capital to put the 15-25% down.
My ultimate take yes is to start getting in to right circles with like minded investors, slowly pulling the capital together!