How To - Approaching and Presenting Projects to Investors?

Question

A bit of a newbie to real estate investing and still in process of completing Brendan Turners book Rental Property Investing. I've been doing a bunch of real estate investment research, reading a lot of books, but finally getting to put the books into practice.

Just started a small LLC with a couple of friends and in the process of purchasing a building. Our end goal is to be able to convert this two story building into Multi-use; first floor being commercial and second renovated apartments. The first floor is completely leased. But the second floor will be the main project as it will require renovations. We did the numbers prior to investing on the structural analysis and architect. Numbers look great even with just the commercial use. Yet, I am having a bit of difficulty delivering my pitch. Any ideas on how one would approach an investor to invest in your project? What information would be best to present? Is there an order to presenting the information?

Evan Polaski · Answer

@Noe Hernandez, as noted there are some investors (typically the ones you know and trust you) that will partner with you by just talking through the project. There are others who will want a full business plan. There are some that will take a one-pager.Being new, your most likely investor(s) will be people you have a relationship with. Friends, family, co-workers are the most common. But any investment presentation, to me, should be a full business plan. Details on what you are doing, how you will be doing, why (financially) you think it is worth the risk, and why the investor should be willing to take the risk.Jonathan points out some great points that should be addressed or considered in the business plan. As a new person, you need to show investors that you have considered and are potentially already addressing the risk areas.

Jonathan Greene · Answer

I'm sure you've done the due diligence on the mixed-use conversion to add residential upstairs? Have you taken into account what the renovations upstairs may do to the existing tenants downstairs? Noise, people going in and out, damage? When doing construction with tenants in place in the same building, you want to watch out for constructive eviction claims along the way. If it's your first project, it's a hard sell to outside investors you don't know. What do you need money for? If you have multiple people in an LLC, you should have planned to support the renovation on your own because you would need a compelling ask to get people you don't know to hop in on something like this in my opinion.

Nathan Gesner · Answer

I'm sure there are many ways to skin this cat, but I don't think you need to kill yourself. You need to show the numbers in a way that is easy to read and understand. It can be done on a single page using Excel. You could use the BP calculator, which would also show some graphs and spice things up.As you grow and become more in tune with what your investors want to see, you could refine your reports to give them what they want.Another easy (but expensive) option would be to invest in a syndication or partnership headed by someone with a lot of experience. See how they do it, copy, and adjust.

Noe Hernandez · Answer

@Evan PolaskiThanks for taking the time to read my post and provide good feedback as to what are looking for in an investment presentation. It's interesting that my team lead has said similar thing today. Yea I am reaching out to family and friends. Great points on what to put on a presentation. I will keep that in mind when working on the structure of my pitch. Thanks!

Noe Hernandez · Answer

@Jonathan GreeneThanks for taking the time to read and provide feedback. Great questions. The current commercial tenants are aware that our team is taking the step on purchasing the building with plans to convert the second floor into apartments. Yes, one of the big hurdles we are planning for is preventing down time or nuisances to the first floor businesses caused buy the renovations (installation of new electrical, plumbing, and HVAC system). We don't have all the details yet on the plan but we have some in mind, like working with the contractor to do majority of the renovations after business hours. Great advice to watch out for. Yup. I agree that it is hard to sell to outside investors (experiencing that myself as a newbie). I have received good feedback from our team lead. This is his 5th project but also first with other team members. Long story short, he has had the desire to teach others how to do this and has decided to teach me and another friend of mine. (Reminds me Robert Kiyosaki). He has a couple of investors partnering with us who have invested in his previous projects but he also is encouraging the team to learn on how to get investors involved with projects... Hence, I am learning and putting into practice about getting investors involved.Being honest with you, we just don't have all the liquid cash. Hence, why we are getting investors involved. Everyone in team has already put in a share based on percent ownership of the LLC. My team mates and I are doing all the work so the investors will get paid with interest and would be willing to keep investing on future projects.

Noe Hernandez · Answer

@Nathan G, thanks for your time in reading my post and for the feedback. It is very encouraging to know and be reminded not to go nuts over strategies on getting investors to partner with us. Also thanks for the reminder on using the BP calculator.