3.B5. Finding + Working With Investors

How to Attract Investors in Real Estate

Understanding Investor Engagement

• The speaker emphasizes the importance of being viewed as an expert in real estate investing, which can be achieved through consistent deal-making and communication.

• Building a platform for sharing experiences is crucial; this could involve attending local Real Estate Investment Associations (REIAs) or sponsoring events to present oneself effectively.

• Social media serves as a powerful tool for showcasing projects, challenges faced, and successes, allowing potential investors to become familiar with the speaker's work.

Legal Considerations in Fundraising

• Caution is advised when publicly soliciting investments; legal structures must be adhered to avoid complications. Only approach individuals with whom there is an existing relationship.

• The "indirect ask" strategy is recommended: instead of directly asking someone to invest, inquire if they know anyone who might be interested. This reduces pressure on both parties.

Leveraging Existing Relationships

• Engaging current investors for referrals can expand your network; even without a specific project lined up, building relationships early is beneficial.

• Mastermind groups are highlighted as valuable resources for networking. While most members may also seek capital, some may have funds available or expertise that aligns with your needs.

Partnering Strategies

• Forming partnerships can enhance project success—consider collaborating with experienced developers or those who bring financial resources while you manage operations.

• It's essential to understand that not all investors are equal; due diligence on potential partners is critical before accepting their investment.

Presenting Your Deal Effectively

• When preparing investor proposals, authenticity matters. The speaker prefers a personal touch over formal institutional presentations while ensuring thorough underwriting practices are maintained.

Proposal Structure and Investor Engagement

Creating an Emotionally Engaging Proposal

• The proposal should be visually appealing, incorporating images or renderings to emotionally engage potential investors. This helps them feel connected to the project.

• Include a summary of key details such as real estate location, size, cost, and proposed structure in every deal presentation for consistency.

Ownership Structure and Financing Terms

• Clearly outline the proposed ownership structure and financing terms. It's important to provide conservative estimates based on preliminary discussions with banks.

• Communicate the long-term strategy for property investment, emphasizing a commitment to holding properties indefinitely while remaining open to reassessing opportunities periodically.

Identifying Risks and Mitigation Strategies

• Discuss three primary risks: construction risk, financing (time) risk, and absorption risk related to new units. Each risk must be addressed with mitigation strategies tailored to current market conditions.

• Provide financial projections along with sensitivity analysis as part of the underwriting process. Utilize summary sheets from previous materials for clarity.

Engaging Investors Early

• Encourage proactive engagement with potential investors even if no current projects are available. This can help gauge interest for future opportunities.