Creative Ways to Raising Capital?

Question

Hi, I am looking at a 7M deal and can put in 500K which obviously less than the ideal 25-30%. I am open to other creative capital raising methods except syndication.

Brian Adams · Answer

@Karthik Ramachandran if you are the sponsor of a syndication and depending on how you setup your operating documents, you call the shots on the game plan and splits.

My guess is you meant to say the majority of the cash flow instead of the "majority of NOI".

If you are putting a deal together with investors, it only makes sense that your investors will also want a piece of the cash flow.

If you are just getting started trying to take down larger deals, be prepared to give more of your deal away. I know this was my case when I started and my guess is it happens to first-time syndicators.

Greg Dickerson · Answer

Syndication is simply pooling investor capital. You would be the syndicator/sponsor so you would be bringing on investors not other syndicators. You would determine splits and returns. Also keep in mind if you are looking to do a JV with a complete passive investor that would be a security and does require filing and exemption with state and federal SEC.

John Casmon · Answer

@Karthik Ramachandran if you don't want to syndicate, your options are to JV with another investor or get a seller-carry back. You can explore an institutional investor such as a family office or an individual who can bring the balance of the funds.

Crowdfunding is another option, but that's basically syndicating. Out of curiosity, why are you against syndicating this opportunity?

Bryan Hancock · Answer

If you're excluding syndication you could ask the seller to carry a note and subordinate to the lender you use, but would have to cover this in your global cash flows used to qualify for the underlying loan.  This would largely be considered as "de facto equity" by the bank if you find the right lender.

You could also structure this tranche of capital as a form of preferred equity and ask the seller to ride along in the deal and pay them back out of cash flows or on a refinance at a later date.  You could also JV with the seller or bring in an active partner with major controls provisions to avoid "syndicating."

It's really unclear what your goal is with avoiding the syndication route.  I find that most people don't really understand syndications well and on get pretty poor feedback on forums along with other great feedback, which confuses them about what is good information.  If you could describe what your goals are and start from there it would probably help people providing feedback to do a better job.

John Casmon · Answer

@Karthik Ramachandran you're going to give up $$ either way. The question is do you want to give up cashflow, equity, or cashflow AND equity. As the driver of the deal, you create the structure and the terms as others pointed out.

Or you can wholesale the deal AND retain a GP equity for finding it. Be careful on boxing yourself in and limiting your options.

Alina Trigub · Answer

@Karthik Ramachandran

Wholesale your deal, and then some to generate enough cash so that when you have your next $7M you can buy it yourself.

Taylor L. · Answer

Yep. If you want to keep the whole deal to yourself then you need to bring the money to the table yourself. That might not be possible, so partnering with others is actually a good solution. They are going to want a piece, and that's okay.

Having a piece of something is far, far better than having 100% of nothing. Plus if you partner with an experienced syndicator, your odds of success go way, way up if you do not have experience running this size of a deal.

Jacob Blackett · Answer

Have you had a bad experience putting together a syndication? It's a very equitable way to structure the deal and especially if you're co-investing a significant amount you can keep a lot of the deal yourself, and complete control so it's very clean. If you're short capital, you'll have to give up a portion of the deal to whoever is bringing the shortfall, unless you get the seller carry or you have a wealthy & charitable friend who's bored with investing and just wants to hook you up 😉

Karthik Ramachandran · Answer

@john - I'd like to keep the majority of the NOI. Syndication means I have to find syndicators, split the pot and more importantly align on goals, desires etc.

Ellis San Jose · Answer

Joint venture

Creative Ways to Raising Capital?

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