Raising capital for real estate investments is among the most crucial tasks real estate syndicators need to master. Your credibility, industry experience, and salesmanship matter to convince potential investors to become a part of your real estate syndicate.
As syndicators, you must adopt the ideal plan of action to raise funds for your real estate deals faster. This article takes you through some significant Dos and Don’ts to raising capital for real estate investments.
Understanding the things to do and mistakes to avoid will help you raise funds faster and take the success of your real estate syndicate to new heights.
Let’s drill down the crucial things you must include in your plan of action when you raise capital for real estate deals:
Prepare Your Success Story
Potential real estate investors love to work with industry leaders - experienced syndicators who possess a successful track record of making real estate syndicates successful.
Present yourselves as their ‘mentors to be’ - to guide them through their real estate investment journey. Create an impressive business profile showcasing your experience in the real estate industry and achievements in the recent past.
Ensure you highlight all your successful real estate syndication projects and other news-worthy performances in the real estate investment management arena in this robust profile. That helps you convince potential investors to pour their investment into your ongoing and upcoming ventures.
Prepare an Investment Pitch
The next crucial aspect is the ‘pitch’ - emphasizing what your investors will get if they decide to work with you as a passive investor. This pitch must be ‘intent-driven’ and ‘result-oriented.
- The pitch should be educating, informative, and compelling at the same time.
- Educate your potential investors on why investing in real estate syndication is beneficial;
- Inform them about your expertise and experience in the industry, and
- Convince them to become a part of your venture.
Summarize Your Deal by Aligning it to Investors’ Goals
You will be more confident while pitching your investment opportunity when you have a lucrative real estate deal in hand. Your pitch should include the deal-specific details and the ROI you promise to the investor.
The second significant aspect while presenting your deal is to align it to the particular investor’s financial goals.Some accredited investors with an incredible net worth and considerable investing capacity may be interested in a long-term game to multiply their investment.
Millennials, first-time investors, maybe looking for some assured passive income out of their considerably lower investment.
Your pitch should sound satisfying to almost every kind of real estate investor. You need to tailor it accordingly by acquiring information about the investors beforehand.
Adopt Technology-driven Investor Portal
Leverage a well-designed investor portal like SyndicationPro right from the beginning of your real estate syndication journey. The real estate syndication software helps you accelerate your investment management business in many ways, including
- Managing your communication by bringing all channels to one dashboard,
- Automating your workflow to take your potential investors through the sales funnel faster,
- Closing more deals in less time,
- Achieving better sync between your sales and marketing teams,
- Accelerating your fundraising process through ACH Payments integration.
Now, here are some mistakes you must avoid when you raise capital for real estate syndication deals:
Looking For Investors While Having a Deal
To succeed as a real estate syndicator, you need to look for profitable real estate deals and potential investors at the same time.
If you start thinking of finding investors for fundraising after having a profitable deal, you may require unnecessarily extended time to acquire the property. That may hamper the overall profitability of your syndicate.
Sounding ‘Needy’ or ‘Desperate’ While Pitching the Deal
Convincing potential investors to put their money into your ventures requires excellent salesmanship spirit. However, exerting too much ‘pressure’ on someone showing interest in your deal may ‘scare’ him up. Don’t make your follow-ups too aggressive.
Manage your tone to sound professional. Let your potential investors take their time to decide and answer all their queries meanwhile. It’s about building trust in you.
Fundraising Only to Close the Deal
Real estate syndication is always a long-term game. You may need capital beyond closing the deal and acquiring the property. You may need to upgrade the property, adding some amenities to have high-paying tenants. Property management and upkeep, taxes, and other expenses may prevail throughout the holding period.
You cannot expect all the residential units in the multifamily property to be occupied on the very first day. Marketing the property to attract tenants may take some time and requires a marketing budget to execute campaigns. So, never stop your fundraising process just after you close the deal.
Not Studying the Legal Aspects
Raising funds for a real estate project involves regulations enforced by the Securities and Exchange Commission. Along with that, your syndicate should follow several federal and state-specific laws.
There may be legalities related to renting out your residential units to tenants, their consumer rights, collection of rents, and much more.
You must be aware of these various legal aspects as a syndicator. Violating any laws may bring you and your syndicate into deep trouble.
Here is an infographic to briefly showcase the fundraising process suitable for real estate syndication. The graphical representation and brief explanation will help you remember these pointers for a long time.
To Wrap Up
The article takes you through things you should do and avoid while raising capital for real estate syndication. The subsequent infographic briefs on how your workflow should be for capital raising. We hope that various angles and perspectives on real estate fundraising will help you raise capital for your real estate deals cleverly and efficiently.
Switch to SyndicationPro today to manage your communication with potential investors and automate the fundraising process.