6 Most Effective Ways to Raise Capital for Your Upcoming DealsInvesting in real estate can be extremely lucrative. However, in order for a deal to be successful, you will need to have access to a reliable capital stack. Real estate, after all, represents the largest asset class within the United States and is an asset class that is heavily capital-dependent. There are many different ways to acquire the capital needed to finance a project, with some being much more effective than others.
Project sponsors will need to keep many things in mind when exploring their capital options, including marginal interest rates, decision-making rights, investment timelines, and many others. Failing to create an efficient capital stack can cause syndicates to decrease their ROI and miss their earnings objectives. This is why it is so important to explore many different financing options and also develop an effective fundraising strategy.
Whether it’s your first deal or you have been in the real estate industry for years, knowing how to effectively raise capital will be extremely beneficial. Below, we’ll discuss six of the most effective ways to raise capital for your upcoming deals. By taking the time to understand and implement these time-tested strategies, you’ll be well on your way to securing the capital you need.
1. Use Real Estate Syndication SoftwareIn the digital era, finding liquid, accessible capital is easier than ever before. Thanks to the passage of the JOBS Act (2012), along with other vital pieces of legislation, real estate syndicates can now engage in crowdfunding efforts much more easily than they could in years past. The key to raising money for a real estate venture online is to choose the right real estate syndication software.
One good example of this software is SyndicationPro. From a centralized platform, sponsors can manage investor CRM, automate their fundraising, communicate via the investor portal, and also distribute ACH payments as needed. Essentially, this type of software is designed to streamline capital fundraising and make the entire process much more efficient.
2. Diversify the Capital StackThere are countless different ways to access the capital you need for your upcoming real estate investment—there is no need to limit yourself to just one source of financing. Acquiring capital through many different sources, though potentially more time-consuming, can help you diversify your capital stack and access a wider pool of resources.
In addition to raising money through crowdfunding, consider turning to lenders that offer investment-specific loan programs. If funding is really limited, you might also consider using a hard money lender, though these lenders typically have relatively high-interest rates. Other forms of financing you might consider include home equity products (such as a HELOC), peer-to-peer (P2P) lending, and many others. Be sure to take the time to understand the benefits and drawbacks of each of these financing options.
3. Attend Trade ShowsTrade shows help create excellent opportunities for fundraising and building long-term relationships. When attending a trade show, you will have the opportunity to present your business or investment to a range of different people and will have direct access to a (usually) captive audience. The trade shows you attend don’t need to be limited to the real estate industry—essentially, anytime there will be a large gathering of possible events, you’ll have an opportunity to attract new capital. Trade shows connected to general finance, law, insurance, and other related industries will all allow you to make your investment pitch.
4. Continue Building Your Personal NetworkAt both a small scale and a large scale, networking plays a critical role in real estate finance. Your personal network—people who you know beyond the crowdfund—will often be among the most captive audiences you’ll encounter and, at the very least, will likely consist of many people who will be willing to give you investment referrals. Your personal network doesn’t need to be limited to just your immediate family and friends. Anyone with who you have an ongoing relationship can potentially become a part of this network. Think about the people you see on a regular basis—local businesses, your accountant, your doctor, partners from previous projects, and anyone else who might be interested in investing in real estate.
5. Have a Team of Lenders on StandbyIf you are seriously committed to the real estate investment space, you need to actively be building your “go-to” team of possible lenders. Rather than scrambling and making frantic calls every time you’ve initiated a new project, it’ll be much better to have a team on stand-by that knows you, is familiar with your syndicate, and can help immediately get a loan in motion. By having many different borrowing options available, you will be able to obtain liquid loans with more desirable terms, such as a lower interest rate. Additionally, these lenders will already be deeply entrenched in the real estate and finance communities—they may be able to connect you with potential investors and other useful resources.
6. Expand Your Digital Fundraising EffortsBillions of dollars are poured into the real estate investment space every month. As time goes on, more and more fundraising is being done entirely online. The shift to digital fundraising has helped not only “democratize” real estate investment, as a whole, but has also helped many syndicates significantly decrease the amount of time it takes to raise funds. There are many ways to effectively raise capital online.
Having reliable fundraising software will be a great way to get started and also help automate some of your most time-consuming tasks. Beyond the software, you should consider engaging in a broad social media campaign. Platforms such as LinkedIn, Facebook, Twitter, and Instagram have helped even highly sophisticated sponsors finance their projects. Investing in digital marketing, such as search engine optimization (SEO), can also help your firm expand its digital footprint.