Why is finding a real estate partner so hard?

Question

Hi All

I am kind of getting to the point of giving up. I have worked extremely hard to raise almost $6MM for a commercial project in Southern California. Everyone I have spoken to about this project love the idea. An ideal that is already proven with track record.

So why is so hard to find one more JV or equity partner for such a lucrative and high profitable project?

Can someone please shed some light and directions on this. I'm literally at a breaking point right now

Rich Weese · Answer

Samuel,

I'm on the board currently so I'll take a stab at answering your question. As someone who has the money, I find people that would like to be my partner every day all day long! The ones that are looking for the JV or money need to convince me that my money is in safe hands. I remember when I was very young and I looked at real estate and every project looked like a winner. Unfortunately, they were not all winners. I had to go out and do many of these deals on my own or with relatives or people that knew and trusted me first. When I built up that type of relationship, partners started coming out of the woodwork with money that wanted to be my partner. I started holding seminars to explain the four benefits of owning real estate. I held these in a 30,000 ft.² office building which I named Weese financial Plaza, even though I only had 1500 ft.² It was impressive for people to attend one of my seminars in a building with my name on it and they came with their checkbooks!

I was able to grow very quickly and when I grew tired of real estate at age 29, I had 206 different partners. Some of those were in as many as six different partnerships. I'm trying to explain it gets very easy when you have experience and a track record.

You did not list very much of the benefits this partner would have by partnering with you. Do you have a track record? Have you raised this type of money for a commercial project before? Do you have partners that will give you a good referral for these new people? Do you have the knowledge to handle a property of this size? Can you prove it?

This is probably only one 10th of the questions that an investor would have for you. Good luck. I would suggest you try on something smaller and work up from there. If I have misread you, I sincerely apologize.

Michael Guzik · Answer

@Samuel Babs That's a great question brother and I am sorry to hear that you are in that situation but don't give up man. One problem I believe is that people don't like to put money where their mouth is, they will say it's a great deal and blah blah blah but when you start talking money they back out. Secondly maybe you aren't in the right network and aren't speaking to the right people man. You can work hard all you want brother but if you aren't working smart it really is pointless. Quality over quantity my friend. Another thing I have seen many people ask right away is why aren't you investing money in this? That is a very common and honestly valid question. You are trying to get people to fork over their money but you yourself aren't putting any in the deal? Most people will see this and say no thank you because they feel like you don't really think it's a good deal. I'm not accusing you of doing this but just keep that in mind. Lastly man there is much more than just finding someone with money. I know you are desperate but you shouldn't just be wanting to work with and partner with anyone with money. There is so much more to that relationship than just the financials so make sure you actually like the person and that they are honest and ethical like yourself! I wish you the best of luck and I'm sure it will all work out. I know if you are like me I expect everything now and I believe God doesn't let things happen on my time schedule because I really do need to learn to be patient and trust that if I do things right eventually everything will fall into place.

Samuel Babs · Answer

@John holeman I sincerely appreciate your feedback. I definitely agree with some of the key principle points you highlighted but i have to disagree with some of the other points raised. My partner who did similar project had 0 experience in real estate when he did it. Had 0 track record or similar project to reference as his project was the very first in North America. If your points reflect reality, no one would have listened to him or lend him $80MM.  Lenders told him they have never seen a real estate deal with such a huge profit margin. They have loaned him another 80MM to expand the project to another state.

My point is having a real idea weighs more than money. Ideas are intelectual properties that could make you millions or billions i.e Facebook, Airbnb,  YouTube etc. My partner presold 70% of all units in 6 months before construction, which made it very easy to get the construction loan.

Lastly,  I didn't say I'm looking for someone to invest 6MM. I said I have potentially raised 6MM.

I received 2 offers last night with hard money lenders, only thing is with higher interest. But I don't mind at this point.

Account Closed · Answer

@Samuel Babs

If I'm reading this right you've raised almost 6MM!!!

Congrats!!!

Victor Menasce sheds light on the 5 key elements to raising $$$$ & in my experience raising capital he's spot on!!!

1) Relationships – we have to have the types of true relationships needed to take a deal across the finish line.

2) Trust – we MUST have trust built with our investors and with Strong Team of Operators at the helm it helps to instill their trust in you and your team as partners!

3) Results – Sounds like You guys have the track record! You need to highlight your successes in commercial and business to get investors comfortable with you being the QB of the team!!!

4) A Compelling Opportunity – Pretty sure you have found this! Now to get it all down, in detail, in a deal pkg and offer the opportunity. Host a Webinar too so they can ask you questions live!  Make sure it's recorded so you can e-mail to those that couldn't attend!

5) Alignment – You won’t know where investors sit as far as alignment of capital until you finalize your deal pkg & present it to them; but, chances are some will say YES once their questions have been answered and they feel comfortable.

Hope This Helps!

To Your Wealth,

Dino

Tonnita Owens · Answer

I understand maybe you can start a meet up group. I would love to network with you.

Samuel Babs · Answer

@Ivan Barratt thanks for your feedback. I certainly agree with you. Funny enough things have dramatically improved over the last couple days. We now have a solid JV partner on board offering up to 90% of the remaining balance. Happy ending.

My advice to anyone starting up in real estate is, never listen to anyone that tells you its not possible. Anything is possible if you pray for directions and work hard and smart in networking with the right people.

Ivan Barratt · Answer

@Samuel Babs money always chases good deals! Something must be off! Fail forward and never give up! If you're not winning, train harder!

Samuel Babs · Answer

@Dino Pierce thanks for sharing those insightful points. Very interesting!

Account Closed · Answer

@Rich Weese I really appreciate you taking the time to give me some interested insight on my this topic. I completely agree with you.  @Fradel Schaechter and @Michael Guzik I also appreciate your encouragements, Thank you!

To answer your questions Mr Rich Weese, I have done the following to mitigate most if not all the risks for the investors

1. I have partnered with the founder and CEO of the company that successfully built similar project and grossed $50MM profit. He has the entire knowledge and experience necessary to carry out this project from scratch to finish, with track record. He has offered to come in @ 10% equity + project management.

2. I have potentially raised 90% of the required funds through the combination of Private lenders, land owner and syndicate investor.

3. Plan to presale 70% of 400 commercial condominium units prior to construction to gross $150MM, just like we did in the previous similar project.

The only missing piece is to have a JV or investor willing to show prove of funds needed to process construction loan, around 25 to 30%. This is where I am stuck. We don't even need money from this JV or investor. All we need is someone with strong financial backing.

This is why I feel like giving up as I am so close to close the deal.

Michael you're right. I am not networking with the right people, which is my weakness really.

Jon Holdman · Answer

I'm in a few partnerships.  Some good, some terrible.  Realize that anyone who might invest with you will have numerous other places they could invest.  Your opportunity has to be one of the best opportunities they have.  You're competing with all those other potential investments.  49% of nothing certainly is zero.  But anyone with cash always has somewhere they could put it, even if its just in the bank.

You need to have a proven track record of similar projects.  Partnering with someone helps.  But, from what you write, you appear to be the one trying to raise the cash.  So your lack of experience (as far as I can tell) is a problem.

You need to have your own money in the deal.  When someone says "I have a great idea.  You put in the cash, I'll do the idea and we'll split the profits 50/50" I'm VERY skeptical.  For a fix and flip where they're going to do the entire flip that might work because they're going to contribute a significant amount of labor vs. my investment.  If you're wanting to take a significant percentage with no cash on the line and not much labor to be contributed, its not a deal for me.  I've seen people say they have found a great apartment building.  They want you to fund it, they will hire a property manager and then step back.  That's worth a finders fee.  That's not worth any equity.

You cannot be pushy.  Two reasons for that.  One is that when you tell potential investors how wonderful their returns are going to be and insist they would be foolish not to invest, you're bordering on making promises.  Your private placement memorandum should, in fact, say just the opposite.  It should say "You will likely lose your entire investment.  Only a fool would invest in this deal."  Because if you make promises and they don't come through, your investors will use your promises against you in court.  Second is that it just doesn't work.  If you start pushing me to make the investment, we're probably done.

Finally, it needs to be straightforward.  This part of your post (I think this is you) rubs me the wrong way:

First you said you were looking for someone to invest $6 million.  But here you (I think) say you just need someone to show proof of funds.  Eh?  You need a bank statement but no further obligation?  That doesn't quite make sense.

Why is finding a real estate partner so hard?

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