If you’re actively syndicating commercial real estate investments or thinking about making the leap from the passive to active side of real estate investing, one of the most important skills you’ll need is being able to find investors and raise private capital.
That’s because, even if you’re investing in real estate deals with your own money, sooner or later, you’ll be tapped out and won’t have any more ready cash to invest. Rather than waiting until that moment, you can start finding investors for your real estate deals NOW, even if you don’t currently have an investment opportunity under contract and ready for them to invest in.
In this article, we’ll share why you might want to consider syndicating your own real estate investments, the main roles and responsibilities in a syndication team, how to find investors for your real estate syndications (even if you don’t yet have a deal for them), and our insider tips for growing your investor base quickly and effectively.
Why Should You Syndicate Your Own Real Estate Deals?
Leading your own syndications is not an easy feat. In fact, there are endless moving parts, ups and downs, and surprises along the way. You need to be prepared for heavy competition for the best deals, creative solutions and out-of-the-box thinking, intense teamwork and partnerships, and a long-term horizon to reach true success.
That being said, if you’ve been investing in smaller rental properties and/or are familiar with the world of real estate syndications through passive investing as a limited partner, putting together your own syndications might be a logical next step to expand your portfolio, roll up your sleeves, and gain more control over the process.
Ability To Do More And Bigger Deals
One of the most common reasons for real estate investors to start syndicating their own deals is to gain the ability to do more and bigger deals. When you’re investing in your own deals by yourself, you may be limited by the amount of capital you have at your disposal, which could limit the size of the deals you can acquire or extend the timeline so you’re only doing a handful of deals at a time.
When you scale up to commercial syndications, you leverage the time, capital, and resources of others, which often means you are able to scale much more quickly and do more and bigger real estate syndication deals.
Access To Experienced And Professional Teams
Real estate syndications are a team sport. In order to truly succeed, you’ll need a team of people around you, each with their area of expertise and focus (more on that in a moment).
When you’re investing in smaller rental properties, you’re often working with smaller and less experienced property management teams as well. When you scale up to commercial properties, you often gain access to work with more professional and more experienced property management teams.
Economies Of Scale And Operational Efficiencies
In the world of real estate investing, when you get into larger commercial properties, you’re often able to leverage economies of scale and operational efficiencies, thus netting stronger overall returns on your investment.
When you’re investing in smaller rental properties, you’re not able to hire a full-time leasing agent or maintenance staff for your property. This means that when you need them, there might be longer timelines, higher costs, and other inefficiencies.
When you’re investing in larger multifamily properties (typically 75 units and above), you can often underwrite the deal to include a full-time staff member onsite, which can alleviate many of the inefficiencies with offsite management.
More Control Over The Investment
If you have the experience, interest, and chops to roll up your sleeves and do your own syndications, you’ll be gaining much more control over the investment than if you were to invest as a limited partner passive investor.
Of course, having more control also comes with more responsibility, but that control gives you the ability to execute on the business plan and make decisions on behalf of the investment as you see fit.
Create Win-Wins For Your Friends & Family
One of the biggest reasons that often leads real estate investors down the path of getting onto the general partnership side of a real estate syndication is the ability to help their friends and family gain access to opportunities they wouldn’t otherwise come across.
Perhaps you have a fair number of contacts in your existing database who are high income earners, tired of the stock market roller coaster, and want to get started in real estate investing but don’t have the time or interest to learn how to invest in real estate.
That’s where you as a seasoned real estate investor can come in and save the day, creating win-wins for them and for you. They get access to great recession-resilient and tax-advantaged real estate investment opportunities, and you get to expand your portfolio and perhaps go into real estate investing full-time if so desired.
Key Roles Within A Real Estate Syndication Team
As mentioned above, real estate syndications are a team sport, which means that your best chance for success is to work with a strong team. In order to put together that team and/or join an existing team, you’ll need to first assess your strengths and interests, to see how best you can add value to the team, as well as the skillsets you’re lacking that you’d be looking for in your partners.
While there are many different roles and responsibilities that go into making a syndication a success (including real estate agents, lenders, property managers, and more), there are 3 key roles within the general partnership / sponsorship team that we’ll focus on here:
- Acquisitions / Underwriting
- Asset Management
- Investor Relations / Raising Capital
Sometimes, one person might take on multiple roles. In other cases, each role might have an entire team behind it. Once you determine where you think you can bring the most value, you can then go on to find other real estate investors and partners to fill in the gaps.
Acquisitions / Underwriting
In order to put together a real estate syndication, you first need to find a good deal and ensure that the financials are solid and will deliver the returns your investors are expecting. This is where the acquisitions / underwriting person or team comes into play.
This person or team focuses on building relationships with commercial real estate agents, finding off-market deals, researching markets, underwriting the deals that come in, and doing due diligence to ensure the strength of a deal before putting in an LOI (letter of intent) to purchase the property.
If you’re considering taking on this role, you should be very comfortable networking with real estate agents and/or with spreadsheets and numbers. Often, you might be looking at dozens of deals a week, so you’ll need to be able to navigate the underwriting quickly and efficiently to separate out the best deals from the rest.
The second role in a real estate syndication is asset management – ensuring that the deal is on track with the business plan and projected returns, and making any strategic decisions on the fly as needed.
Often, the asset manager is involved in the deal as soon as the acquisitions / underwriting team deems it a viable opportunity. The asset manager often takes the lead in due diligence, getting estimated quotes on renovations and other work to be done, and executing on any value-add components throughout the lifecycle of the deal.
Investor Relations / Raising Capital
The third main role is the one we love and excel at, which is investor relations, investor education, and raising the capital needed to close the deal.
If you naturally love talking to your friends and family about the real estate opportunities you’re invested in or finding, investor relations and raising capital might be a great fit for you.
In this role, your job is to find investors for the real estate syndication deals you’re doing, make sure those investors are educated and ready to invest, work closely together with the acquisitions team to ensure that any opportunities are aligned with investor goals, and keep investors in the loop throughout the lifecycle of the deal via ongoing communications and updates.
Whether or not you decide to focus on investor relations as your predominant role in the general partnership team, having the ability to build your own investor base and raise capital is extremely valuable to any syndication. It’s also often the most time-consuming and trickiest part of syndication deals.
But don’t worry, that’s why you’re reading this and why you’ll have a strong foundation to get started in raising capital after you finish. In the remainder of this article, we’ll share with you tips on how and when to build your investor base, how to talk to investors, and more.
How To Find Real Estate Investors For Your Syndication Deals
Whether or not you’ve decided to focus on investor relations, knowing how to find investors for your real estate investment deals is an incredibly valuable skillset.
Building a robust real estate investor database doesn’t happen overnight, but if you do it right, your investors will stay with you for years to come – investing and reinvesting in your deals, and sending their friends your way too – thus exponentially growing your real estate investor list.
When To Start Looking For Investors
The biggest mistake we see many new syndicators make is waiting until they have a real estate investment deal under contract to start talking to investors. They work incredibly hard for many months, and once they finally have that deal under contract, they then turn their attention to raising capital.
The problem is, at that point, it’s often too late. You only have 60 to 90 days to raise the capital needed, while you’re also doing due diligence, securing financing, and more. This means that, whether you do it intentionally or not, you’ll likely end up pressuring your existing contacts to invest in the deal.
And if there’s one thing we know about investors, it’s that don’t like to be rushed, especially if they haven’t invested in syndications before. It takes time for them to establish that trust with you, even if they have an existing relationship with you as a friend or family member.
That’s why it’s best to start looking for and talking to potential investors long before you have a deal in hand.
Related: How To Talk To Investors About Money
How To Find Investors When You Don’t Have A Real Estate Investment Opportunity In Hand
The next logical question, of course, is how to find and talk to investors when you don’t have a deal in hand for them to invest in. Great question, and here’s how to do it.
To find investors before you have a deal in hand, start by sharing with them what you’re up to in real estate. Tell them how you got into it, the track record of your investments so far, the markets you’re investing in, why you love it, and more.
As you have these conversations, your friends and family will shift their perception of you and start to think of you as an experienced real estate investor and professional. As you share your progress and success, many of them will naturally wonder how they can get in on the action too.
Once get to that point, you can put together a sample syndication deal. Don’t worry – this doesn’t have to be anything elaborate. Even just a simple Word document with a bullet-pointed list of the criteria, business plan, and ballpark projected returns for a sample deal will work.
Then, walk your prospective investors through the sample opportunity and say, “I don’t currently have a deal under contract. But, I’m actively looking, and once I do, it will look similar to this sample deal. If I were to get a deal like this under contract, would you be interested in investing? And if so, how much do you think you might want to invest?”
Then, start to keep track of these “soft” commitments so you get an idea of roughly how much money you might be able to raise once you have a deal in hand.
Expanding Beyond Friends And Family
For most syndicators, raising capital begins with talking to friends and family. However, once your friends and family invest with you in a deal or two, then what? If you don’t continue to grow your investor base, you’ll find yourself tapped out, just as if you were investing on your own with your own money.
That’s why it’s essential to think ahead and build a brand to attract investors outside of just your friends and family.
Start by figuring out your target audience. Create an investor avatar – a fictional person representing your ideal investor. Figure out their gender, age, career, income, family, etc.
Once you have a clear idea of your target audience, their pain points, and their aspirations, you can start to build a brand that’s geared toward helping them overcome their obstacles and reach their goals.
Growing Your Investor Base
In order to find the right investors for your deals and continue growing your investor base, you’ll need to continue to stay top-of-mind with your investors. The best way to do this is through educational content – blog posts, videos, podcast interviews, social media posts, and more.
Through sharing your insights and knowledge, you are building trust with your investors. Each piece of content you create will not only educate your investors, but it will also demonstrate your expertise in the topic.
Sending out regular communications to your investors via newsletters, social media posts, and other content will help remind them that you’re actively out there looking for deals.
It will also help them feel like they’re part of the process, give them multiple touchpoints to continue to get comfortable with the idea of investing with you, and give them a glimpse into your communication style for if and when they invest with you.
On top of that, here are some additional tips for growing your investor base:
Tip #1: Be organized and prepared
Prepare important documents (like investment summaries, timelines, private placement memorandums, etc.) well in advance so investors see that you’re organized and on top of things.
Tip #2: Practice your pitch
Be sure to practice your deal pitches, investor call scripts, and even your elevator pitch for your business. This will assure your prospective investors that you are knowledgeable, experienced, and confident. For bonus points, create a list of FAQs (frequently asked questions) for your investors, to let them know you’re proactively anticipating their needs and questions.
Tip #3: Be transparent and proactive in all your communications
Your investors are looking for clues about your integrity, especially if they are thinking of investing $50k+ with you over several years. If any surprises come up or things don’t go according to plan, be fully transparent and proactive with your investors so they don’t feel like they’re in the dark.
Tip #4: Listen to your investors
Your investors are your best source of knowledge when it comes to growing your investor base. Ask them what interested them about investing with you, what they’re looking for, what their risk tolerance is, and more. Then, use that information to find the right opportunities for them.
Tip #5: Find a mentor
If you’re new to the world of real estate syndications and raising capital, the fastest way to reach success is to find a mentor and follow in the footsteps of someone who’s already attained massive success. If you’re interested in learning more about our mentorship program, click here.
Are You Looking To Syndicate Your Own Deals?
Syndicating your own deals can be an exciting yet daunting prospect. Likewise, finding investors for your real estate endeavors can be both fun yet overwhelming.
For our own real estate syndication journey, we’ve been fortunate to achieve massive success within a short amount of time – we co-sponsored 25+ commercial real estate syndication deals and grew our investor base to thousands of accredited investors – all within the first 3 years.
The #1 reason we were able to achieve such massive success in such a short amount of time was because we didn’t do it alone. We found mentors, coaches, and partners to help show us the way, avoid major pitfalls along the way, and focus on the most important strategic initiatives to grow our business and investor base quickly.
If you’ve read to this point, we know you’re serious about syndicating your own deals and finding the right investors for those deals. If you’re looking to accelerate your success, avoid the roadblocks we experienced along the way, and shortcut your path to your goals, we invite you to apply for our mentorship program – the Real Estate Accelerator.
The Real Estate Accelerator is packed full of everything you’ll need to excel in building your own brand, attracting investors for your deals, and raising capital so you can do more and bigger deals. Apply today.