How to Raise Capital for Real Estate Syndications?

Question

Hi,

I'm diving into real estate syndications and working on raising capital for a couple of new development and value-add multifamily projects I have in the pipeline. One challenge I’ve encountered is that a lot of syndicators I’ve met seem to have wealthy family connections or a built-in network of high-net-worth individuals. Unfortunately, I don’t have that same advantage, so I’m looking for advice on how to raise capital without those existing connections.

Here are a few questions I have:

• 1. What strategies have you used to find investors when you don’t have a wealthy family network?
• 2. How can I build trust and credibility with potential investors when I’m starting out?
• 3. Are there any specific networking events, platforms, or communities you’ve found helpful in finding accredited investors?
• 4. What deal structures have worked best for you in making your syndication attractive to new investors?
• 5. Any legal advice or pitfalls to be aware of when raising capital?

I’d love to hear from anyone who’s been in a similar position or has advice on how to approach this. Thanks in advance for any insights or resources you can share!

Kevin Sobilo · Answer

@Imdad Rahman, you say your're just "starting out".

I sure hope you mean just starting out with doing a syndication? If not, the way you build trust is to take a step back and gain some experience investing first in some way shape or form.

Then you want to assemble a team who have the experience in all the aspects needed to make the proposed project successful. A deal is only a deal if you have the needed experience in place to make it happen. You didn't mention having any of that. Anyone can find a potential deal, but not everyone can actually take that deal down and make it a success!

Jay Hinrichs · Answer

my question is WHY U sound very successful today with your holdings.. why take on the risk of managing money for others and giving up 70 or 80% of the profit equity on deals you find .. do less deals and keep it all and have no liability to investors.

Just read some of the threads were good people got into syndication did not go right for one reason or another and now they have investors threatening them  suing them turning them into the SEC..

I would think long and hard about the positives and the negatives .. and if you wish to go forward you got some great advice above.. good luck.

Evan Polaski · Answer

Social media is a double edged sword, that I don't think a lot of syndicators fully understood when tapping into it.  It certainly makes reaching people, building an audience and being able to sell your courses/investments "easy".  But, that same ability that gives the syndicator the ability to reach so many, also gives the disgruntled investor a platform.  And clearly, the investor is a user of social media, since they found the syndicator that way...

Evan Polaski · Answer

@Jay Hinrichs, coming from someone that works in syndications, there is a part of me that agrees with you.  Running a syndication is certainly more work, different types of work, different personal and professional risks.

But beyond those risks, your investors are your bosses.  They may not have a ton of say directly.  They won't tell you you have to be at your desk from 8-5 with a one hour lunch, Monday through Friday.  But they certainly give you your work and you are beholden to keeping them happy.

Evan Polaski · Answer

@Imdad Rahman, ultimately I feel like I am echoing the others, but will add anyways, because I have a nuanced take.

1. Network/market yourself.  It sounds like you starting on a much stronger footing than many syndicators were when they got started.  If you already own shopping centers and apartments, have highlights of your performance.  From there, it depends on who you want to meet.  A) while there are a lot of groups that have, what I consider, a primary initial backer, most "syndications" are raised in $50-100k installments.  While this is a lot of money, most any mid-career professional likely has that available to invest (maybe not liquid today, but in general).  You will see many people starting thought leadership channels to create their credibility.  Blogs, podcasts, YouTube channels, advertorials in different publications can all be ways to start getting your name out there as someone to trust with investment funds.

2. Same as above.  Share your knowledge and experience.

3. Local meetups, REIA groups, and most valuable, building your own community, either locally or Facebook group, etc.

4. This comes after you start building a network.  Syndications are all about offering a product that your network is interested in.  Most common are private equity structures with a pref and waterfall on the equity side.  Some do a flat split with no pref.  A lot of investors today are leaning towards credit funds instead of equity.  But I always recommend starting to build the network, and as you have a better relationship with some members, ask for honest feedback.

5. Don't break SEC rules.

Gino Barbaro · Answer

@Imdad Rahman

You are in hunter mode right now as you start out. Going to events, telling everyone you know that you're in the business is where you need to start. And any family and friends may have friends that have money. Ask them if they know of anyone who is looking for an opportunity.

Building trust is done through building a brand, and becoming an authority on the subject matter. Creating content, on YouTube, articles, blogs, appearing on other people's podcasts are ways to spread your message. Looking into doctor/dentist groups that have capital to invest is also another avenue to access capital.

You want to transition from a hunter out there looking for investors, to a farmer who is cultivating investors with content and providing values.

Unfortunately, it takes time and effort, but it cane be done. And legal advice, you can not be compensated for raising capital unless you have a broker dealer licenses. I would visit https://syndicationattorneys.com/ for all the info you'll need on legal. And then I would schedule a call with @Kim Lisa Taylor

Gino

Chris Seveney · Answer

we have raised $30M last two years with no wealthy family and here is what we can share with the experience:

1. its all about networking and educating people on what you do. Its like dating, do not expect to close the deal on the first call, it takes 60-90 from that initial call to get someone to commit.

2. Trust and credibility is to share your experiences, what have you done etc. If you start telling people you never had a deal go bad etc. then they will not believe you.

3. Finding accredited investors is not easy. there are a lot out there but what is your differentiator from everyone else? Webinars and getting people to sign up for events is typically the most productive or dinner where you share what you are doing.

4. Each deal structure varies to be honest, no right answer here. Just make sure the risk/return profile matches.

5. Legal advice - get an attorney to draft the PPM and do a 506c and follow the rules. They are common sense but many still seem to ignore them.

Collin Campbell · Answer

Hey Imdad -

Honestly, I would just listen to the reputable companies out there that are doing a great job. I work for DLP Capital, and we do a great job of connecting with accredited investors and structuring deals. Other companies I look up to are BAM Capital and Origin Investments.

As far as legal advice, anyone in their right mind will tell you to hire an attorney.

As far as building credibility, make sure you are focusing on markets that you have a track record and expertise in. Nobody wants to give money to a syndication in Florida if you only have a track record in Mississippi.

Imdad Rahman · Answer

Yes just starting out doing syndications, should've been more clearer. Currently holding shopping centers, apartment buildings, and SFH.

How to Raise Capital for Real Estate Syndications?

Most Popular Reply