An Ultimate Guide to Raising Capital for Your Next Real Estate InvestmentRaising capital for real estate investments can be a challenge for both new and seasoned investors. If you are looking to level up your ability to raise capital for your next multifamily real estate deal, you’re in the right place.
Experienced capital raisers claim that even after multiple successful raises, they don’t always know how much they are going to be able to raise on their next real estate investment.
This is proof that it’s common for real estate investors to be fearful and uncertain about where they’re going to get the funds they need.
If you’re uncomfortable with capital raising, but know it’s what you need to grow your multifamily business, that’s okay.
Keep reading, and we’ll break down the steps you can take to raise money for your next real estate investment.
Step 1: Generate Investor Leads to Raise More Investment CapitalThe first step in raising more capital for your next real estate deal is to generate more investor leads.
Like a sales pipeline, investor leads are the lifeblood of your real estate investor database. Experienced investors are always growing their real estate investor database so that they have multiple investors ready to deploy their money into their next investment opportunity. If your goal is to raise capital for your real estate deals consistently, you need to be reaching new potential investors every week.
Now, you might be asking yourself, “Where do I get investor leads?”. That’s a great question—and it has multiple answers. The secrets lie in how successful commercial real estate investors have raised capital for years. Some might use some of their own money, but for the most part, they’ve built a network of sophisticated, accredited investors, and private money to raise capital for their deals.
You can start by reaching out to your personal network. Oftentimes, you’ll find investors in people you don’t expect. As cliche as it sounds, don’t judge a book by its cover. Reach out to a family member, friends, and well-known acquaintances, and update them on your involvement in real estate. See if they might be interested in investing their personal capital into one of your deals. Tapping into your network is a great way to raise money.
Many investors have utilized social media to find investors and start raising money. On social media, you can document your real estate journey, and educate your followers on what you do. This will give people the opportunity to get to know you, learn about what you do, and develop trust in you. People invest with those they know, like, and trust. That’s human nature. Social media helps you gain momentum when raising money for your investment opportunities by building relationships with people through content.
Social media can also help you become a thought leader. A thought leader is someone who is an authority or expert in their field. Thought leaders are those people you see and hear about constantly in the real estate space. Your reputation will precede you as a thought leader. Also, most thought leaders provide some form of education. This makes you look more credible and trustworthy in the eyes of prospective investors.
Along with social media, there are multiple ways to position yourself as a thought leader.
To raise money and source more investment capital as a thought leader, you can:
- Write a book
- Host a podcast
- Create a YouTube channel
- Post consistently on a particular social media platform (Instagram, LinkedIn) and collaborate with other real estate thought leaders
At these conferences, make sure to get any potential investor’s contact information. Even if they have your business card, you still want some way of getting back in touch with them to follow up. Get an email, or phone number, and leave a note to remind yourself of their name and where you met. Writing down any important personal information you learned about the investor is also helpful for follow ups.
Step 2: Nurture Investor LeadsOnce you have an investor in your database, your focus becomes nurturing that relationship. Start by following up with them. This can be via email, phone call, or text message. The important part is to continue the dialogue, and learn more about them and their financial goals. Do they want cash flow? Are they more motivated by a higher return on sale? Or do they want to take advantage of depreciation?
Keep in mind, the SEC has strict guidelines that outline the procedures for a real estate investor who wants to raise money for their real estate deals.
You should consider using an email sequence to continue to build rapport with your investors. In these emails, you can tell them a little more about yourself and your company, and give them a general idea of how your real estate investments work. This positions you as an authority, since you are educating them. It also gives them important information they can use to determine if your real estate deals are a good fit for them.
You should encourage your prospective investors to book a call with you. This phone call is a great opportunity for you to learn more about their financial goals, and match the right investment opportunities with the right investors.
Once an investor joins your investor database, you should ask them for a soft commitment. This lets you know how much investment capital the investor has before you close your next deal. Having soft commitments from every investor in your database allows you to know if you need to find more investors, or if you need to find bigger deals before you sign a purchase agreement for a property. Through the reservations module in SyndicationPro, you can showcase your upcoming deals to secure soft commitments.
Step 3: Present Real Estate InvestmentsInvestors you’ve qualified should be separated from the rest of your investor leads. Many investors organize these investor leads in a real estate CRM, like SyndicationPro.
Once you have a deal, there are certain steps you can take to raise more investment capital from your investor database.
Tell your investors the story behind the deal. Here are some questions to consider:
- What is exciting about the market?
- Why are you excited about the deal?
- What makes you confident about this deal?
- What opportunities are there to add value?
Make sure you reinforce the credibility and track record of your team on any webinar presentation of a deal. This is an opportunity to demonstrate to your investors why you’re someone they can trust with their own money. If you don’t have a track record, make sure your business partners on the deal do.
Another email you can send investors is one that creates a sense of urgency. Without being dishonest, you can send your investors an email explaining that there is limited space in the investment opportunity, so they should reach out to you if they are interested in learning more.
Raising Capital Doesn’t Have to be Complicated
- Don’t start raising capital once you have a deal. Start now by attending conferences, posting on social media, positioning yourself as a thought leader, and reaching out to your personal network.
- Nurture relationships with your investors, and educate them. Get on a call with your investors and make sure you understand their financial goals.
- Create anticipation and a sense of urgency with emails during a capital raise. Show them why you’re excited about a deal, and why they should have confidence in you and your business partners by reinforcing your track record.
Bonus Tip: Using a real estate investment CRM will make you look more credible and professional to your investors. Book a call with us today to level up your capital raising business.
Raising money to fund your real estate projects doesn’t have to be difficult if you follow the path other investors have taken. Connecting other people’s money with investment opportunities is a service to others, so don’t be afraid to make it known! Leveraging other people’s money is the key to building your investment portfolio, and helping more passive investors reach their financial goals.