Raising Capital for Real Estate
Raising Capital for Real Estate

Raising Capital for Real Estate

I didn’t know much about investing, but the one mantra I heard many times was “buy when blood is in the streets.” Even with my limited knowledge, I knew the Great Recession was exactly the type of economic condition that phrase referred to. (Location 98)

To be blunt: Raising capital is the most consistently sought-after skill in the entire real estate sector. Regardless of the specific aspect of the business you focus on, the ability to provide equity for your firm’s purchases will always be needed and lucrative. (Location 347)

Personal freedom has always been extremely high on the priority list, so running a very large firm has never been my true goal, nor has it been to need approval of a board of directors filled with VCs. (Location 375)

I’ve learned that most people, myself included, struggle to accomplish anything meaningful if they’re not 100% focused on one thing for at least 60-180 minutes—especially if oscillating between different tasks. I’ve been able to overcome this by creating significant time blocks where duties can be batched, thus mitigating the cognitive fatigue associated with mentally shifting gears. (Location 426)

For example, hundreds of thousands of financial advisors take 0.5%-1.5% in annual assets under management fees for simply putting their clients’ capital in a series of investments that are meant to track the market. (Location 472)

If an in-person event doesn’t have the potential to bring $2,000 worth of value to my business, allowing me to have what I call a $2,000 Night, my time would be better spent focusing my efforts on something that could. (Location 549)

One key difference between successful real estate entrepreneurs and everyone else is their ability to leverage relationships to grow their business and solve problems if something goes wrong. (Location 610)

Rather than trying to politely end the conversation, listen to what they’re looking for. Think about the types of $2,000 Contacts they might need in order to have a $2,000 Night. (Location 615)

However, if I find myself talking with someone who’s interested in investing hard money loans for single-family properties, I make a mental (or physical) note to introduce them to any fix-and-flipper I meet that night. (Location 623)

I want to clarify this: The goal is not to introduce 25 people to another 25 people who may or may not be a good fit. If you do that, you start to become the type of person that is just “spraying and praying” contacts. (Location 628)

To attract and inspire a high-quality mentor, you have to explicitly and intentionally display what I call the Key Momentum Indicators (KMIs). (Location 702)

This sense of urgency, combined with a rock-solid plan of execution, is the most important determining factor of success. By intentionally demonstrating this trait, you’ll create the notion that you’re going to succeed, it’s just a matter of who wants to come along for the ride. (Location 711)

The faster you can take an idea from a concept to a fully executed project, the higher the probability is that you’re going to be successful. (Location 715)

Many millions of dollars can be made—or lost—in real estate. Small mistakes can be catastrophic. Before sending an email, issuing a quarterly report, or making an offering available to investors, every detail should be triple checked. (Location 722)

Due to the real estate sector’s scalability, relatively small teams can accomplish remarkable things. However, this requires individual team members to wear multiple hats with a high degree of excellence. (Location 732)

Attendees’ first impressions are crucial. In order to ensure that you start off with a bang, leave plenty of lead time so that you can conduct extensive marketing efforts prior to your first meeting. (Location 756)

Don’t establish a mastermind group’s schedule that you can’t keep for at least six months. From my perspective, this is the shortest amount of time in which you can truly identify if it’s worth your energy or not. (Location 760)

One good example of this is a monthly business book review club. Yes, you’ll have to read one book per month—but the books are already written. Another potential idea is to have a guest speaker every meeting. That way, the guests provide the content, as opposed to you. (Location 764)

An industry-wide faux pas is when novices provide investment advice to a mastermind group before they’re ever successful in real estate. (Location 769)

The program gives its members an over-the-shoulder look at everything we do at Asym Capital. We provide our members with the exact systems, processes, email templates, apps, closing scripts, and service providers that have allowed Asym to raise tens of millions of dollars. (Location 786)

Once you’ve gained confidence in your understanding of the real estate sector through the strategies outlined earlier in Chapter 3, it’s time for you to pursue live investment opportunities. (Location 813)

One of the most efficient ways to get this process started is to leverage the existing deal flow of an operating partner who already has a background in this business. (Location 814)

It’s very common for small real estate firms to have two main principals/partners: one who focuses primarily on the investor-relations side of the business, conducting capital raising duties, talking to investors, et cetera, while the other partner focuses on the operating side of the business and the implementation of the business plan. (Location 815)

To date, I’ve likely spent 10,000 hours working on this system, the very system that has allowed us to work with some of the best operators in the real estate business. (Location 822)

Real estate investments are illiquid investments in real property, typically with a hold period of five to 10 years. So, you have to be extremely careful about whom you choose as a partner and under what terms that partnership will operate. (Location 858)

It’s also critical that you choose your partners strategically. Focus on partnering with or hiring individuals who enhance your strengths and supplement areas in which you may be lacking. (Location 864)

When working with other firms, my speed of implementation frequently gets bogged down if a key decision-maker is not as dedicated to accomplishing their goals in a short amount of time. (Location 869)

Once you’ve identified your Unique Ability, it’s time to outsource virtually everything else. There is an abundance of websites and platforms to help you outsource the tasks that aren’t your Unique Ability, but I’ve had the most success with Upwork (www.upwork.com). (Location 896)

The more time spent working within your Unique Ability, the faster your business will scale, the more enjoyable your job will be, and the more you can work without experiencing burn out. (Location 901)

One of the most straightforward ways to raise capital for real estate deals is to create a private debt instrument, which essentially is an IOU that grants an investor a pre-determined rate of interest. (Location 916)

However, because the debt instrument is a private agreement between two parties, the collateral of a loan can be anything that’s agreed upon, including a car, personal property, or even another IOU. (Location 919)

Most private loans can be created with low startup costs. While it’s suggested that you have your counsel draft the documents of the loan, the attorney fees should be relatively affordable, given that the transaction is fairly straightforward. (Location 929)

this. Suffice it to say, however, that the main challenge here is a lack of scalability. To create a new deal for each investor, rather than one large deal for multiple investors, your efficiency decreases and overhead increases. (Location 940)

I have to break it to you, though: Non-accredited investors will invest the least, cause the most headaches, and, most importantly, are likely to invest far more than they should in your offering from a portfolio allocation standpoint. (Location 1110)

When it comes to investing in and raising capital for syndicated investments, one of the most daunting parts of the process is drafting a private placement memorandum (PPM). A PPM is an extremely dense and lengthy risk-disclosure document that includes the offering’s operating agreement, as well as numerous other sections that are mostly designed to disclose information to the investor and better protect the issuer. (Location 1201)

From my perspective, if you’re raising more than $500,000, or are raising capital from more than 10 investors, it’s both economically viable and prudent to have your attorney draft a full PPM. (Location 1212)

Consider your audience when creating your website’s aesthetic and choosing the type of content you publish there. Before you get started, be conscious about the specific target demographic you’re focusing on. (Location 1372)

Again, it’s not simply about constant contact, it’s about constant content. But how do you start? Just like you would with any significant project: time batch large tasks to improve efficiency and get the most done in the shortest time possible. (Location 1407)

Again, what are the two most important characteristics of a high performer? They have a sense of urgency for accomplishing their goals and a high speed of execution. (Location 1413)

Once you’ve completed the task of creating 100 topics, I suggest putting them all in Excel and ranking them 0-10, with 10 being the highest quality, most aligned with your brand, and most compelling to your audience. (Location 1428)

The first 10 topics at the top of your Excel spreadsheet should be articles on your website. It would be remiss of me to not mention search engine optimization (SEO), although I believe the actual content is much more important than keyword density. (Location 1430)

Once you’ve established which topics you are going to cover, it’s time to create some amazing articles. In order to write these articles as quickly as possible, I suggest time batching this task as well and establishing a recurring content creation schedule. For example, write from 7:30 a.m.-9:00 a.m. every Monday, Wednesday, and Friday, completing them one by one. Another option would be to solely write from 9:00 a.m.-2:00 p.m. every Thursday. Regularity will be key in completing this massive task as efficiently as possible, thus reducing procrastination and the cognitive fatigue associated with trying to spontaneously remember to write on certain days or randomly jotting down notes in between phone calls. Pick a schedule that works for you and stick to it. (Location 1434)

The first draft of these articles will likely be filled with mistakes, but turn off the parts of your brain that want to edit and perfect each word and commit to writing in a free-flowing manner. Burn through the words and once you’ve covered the topic adequately, you can go back, potentially with a copyeditor, and wordsmith what you wrote. (Location 1440)

The completed articles should be 1,000-1,500 words, offering enough detail to establish your expertise in the space and educate your potential investors. (Location 1443)

From those 90, there are likely 52 topics that can be used for outgoing email blasts. Why did I specifically choose 52? Because if you were to draft and send one of these emails out each week through a drip campaign, it would provide regular, informative content to a new investor for an entire year. (Location 1447)

Emails should be shorter in length, roughly 300-500 words, and should be written with the intention of intriguing the readership. (Location 1449)

The goal of these emails should be to attract them back to your website, rather than make their heads spin with tons of data or long-winded explanations. (Location 1451)

When I first launched Asym Capital, I took about one month to write all of the articles, and then I drafted 52 emails over a few short weeks. Because the articles are evergreen, some of them are still used to this day. In fact, people frequently comment or have questions regarding content I wrote years ago. This is one of the reasons why it’s critical to ensure that the topics aren’t time sensitive and can add value for the foreseeable future. (Location 1456)

Now that you’ve created the content for 10 articles and 52 emails, what do you do with the remaining 38 topics? If you think there’s something of substance left on the list, there’s no reason for it to go to waste. (Location 1465)

When it comes to getting significant results efficiently, there’s no better mechanism to educate investors than an eBook. They’re free to distribute, can be jam-packed with information-rich content, and are an excellent way to supplement your emails and articles. They should be roughly 7,000-12,000 words in length and discuss a particular topic that directly aligns with your firm’s investment strategy. (Location 1485)

At this length, it will take most people about 30-45 minutes to read and should provide enough insight to thoroughly analyze, defend, and justify your thesis of a particular investment or your strategy as a whole. (Location 1487)

The easiest way to structure an eBook is in a numbered list format, for example, 10 Ways to X or 10 Things You Need to Know About X. In fact, the first eBook I ever authored was Rest Easy Real Estate: 11 Ways to Avoid Investment Nightmares. (Location 1489)

Most books and eBooks are not read to completion, so don’t wait until the very last minute to direct your readers to your investment opportunity. Keep in mind, your eBook is probably free, so don’t feel uneasy about pitching. (Location 1500)

Use data from objective third parties and provide sources so that readers can confirm the information’s legitimacy if they choose to do so. (Location 1504)

Again, since your eBook is most likely going to be free, many people will simply skim through the content. Use this to your advantage. Don’t hesitate to use large headers above important paragraphs, bold fonts, and colored text to highlight the most compelling narratives. (Location 1506)

Investors may have questions about the specifics of a particular offering, but you likely will not need to explain the big-picture thesis of the asset class if they’ve already read your eBook on the topic. From a scalability standpoint, this makes a huge difference. (Location 1513)

To put it bluntly: Write an eBook if you want to be successful. Even in the worst-case scenario where you spend tons of time writing it and literally no one reads it, you still get bonus #2 above, which I’d bet will more than make up for the time you invested in the writing process. (Location 1518)

From an influencer’s perspective, nothing is more powerful than literally being plugged in to someone’s ears, especially if you’re talking about topics of interest to them. You can make a huge impact just by sharing ideas, but if the listeners actually implement what you’re advocating, it may completely change their life’s trajectory. (Location 1525)

a. Name of the podcast b. Link to the podcast in iTunes c. Number of Twitter followers d. Number of comments in iTunes e. Host’s email f. Podcast’s alignment with your eBook topic (this could be a numeric value, such as 1-5) (Location 1541)

If you’ve ever taken a cursory glance at the study of sales psychology, you probably know that people largely base their purchase decisions on emotion, rather than analytics, metrics, graphs, and data points. (Location 1576)

At its core, the ES is a business plan for the investment that outlines the strategy, summarizes the plan for implementation, justifies the thesis, and provides background on the key parties involved. (Location 1582)

Your ES needs to look nothing short of spectacular. This is why it’s critical to hire an all-star graphic designer who can really make your offering deck stand out; it should be like love at first sight. (Location 1652)

If you’re going to use images of the property, only use top-quality photographs taken by a professional photographer. You can hire a photographer on Thumbtack (www.thumbtack.com), which will give you access to photographers in virtually any city in the United States. (Location 1660)

Your ability to present effectively should not be one of them. It’s not enough to simply repeat the content over and over until you “know” it. In order to achieve mastery, record yourself giving the presentation and analyze it, take notes, and find ways to make it better, punchier, and more compelling. (Location 1700)

Because I’ve found the Q&A section to be a critical part of the webinar presentation, I recommend being prepared; in the event no one speaks up, you can say something like “we actually have a few questions sent in via email,” and jump right into your pre-written questions. (Location 1711)

Yes, the material is almost all the same, but some people learn better through presentations, rather than reading it themselves. Plus, the more times it’s communicated, the more likely the information will sink in. (Location 1718)

Whatever the issue is, address it and let them know if the matter is going to be resolved or, if it can’t be, apologize for the inconvenience. If it suits your personality, it helps to have a few phrases prepared for situations like this, such as, “Just so you know, I prefer to present in a sauna, so this is actually perfect.” (Location 1783)

This paradigm is something that Elon Musk took so seriously, Tesla eliminated the in-person sale experience completely. He realized the potential competitive advantage he could create by controlling the entire process, ensuring clients didn’t encounter the stereotypical pushy car salesmen. (Location 1843)

When it comes to real estate, if you use pushy sales tactics, it might not just create an uncomfortable feeling for the potential investor, it could result in a massive headache from a legal perspective later down the road. (Location 1846)

I fell in love with the syndicated model completely, as soon as I was introduced to and understood it, for all the reasons I’ve addressed many times in this book. There was, however, one big disincentive to starting a real estate investment company focused on the syndicated structure: (Location 1851)

Overcoming this educational hurdle seemed like such a challenge that it was going to limit my potential investor pool and, therefore, deteriorate my bottom line. (Location 1858)

The first step in this process is to create a systematic sales funnel that’s efficient and scalable. Your ever-growing infrastructure of educational content is certainly going to help, but at the end of the day, you’ll likely need to communicate directly to potential investors before they’ll move forward. (Location 1890)

While some people are huge proponents of in-person meetings, I usually avoid them due to the inefficiency associated with driving around in traffic, as well as the increased likelihood of the meeting attendees being late or missing the meeting altogether. (Location 1894)

Hey [insert first name], Great question. Would you be interested in setting up a call for us to discuss in more detail? I’m happy to correspond via email if that’s your preference, but I always prefer to jump on a call so you can have the opportunity to ask follow-up questions. If that works on your end, please let me know some of your free times this week for a 30-minute call. Alternatively, you can follow this link to see my free times and select a 30-minute block that is convenient for your schedule. [insert link to scheduling app] Thanks. (Location 1909)

From my perspective, there are usually two main types of calls to conduct with potential investors during the sales process: (Location 1922)

With so many real estate deals in the market and very little difference between each company’s respective offering decks, investors need to have a thorough understanding of who you are as a person, or they’re unlikely to move forward. (Location 1935)

Hey [insert first name], this is [insert your full name] with [insert your company name]. Is now a good time for you? Great. Just to let you know, I have us blocked for 30 minutes and I have another investor call that starts right at [insert current time plus 30 minutes]. So, if it’s ok with you, let’s jump right into it. (Location 1954)

First, I’d love to hear more about your background and your experience in the real estate sector. Then, I’d like to share a bit about my background and our investing strategy as a company, and where we see the opportunity currently in the marketplace. Afterwards, I’d be happy to answer any questions you have. Sound good? (Location 1961)

Describe the point in your investing career when you realized that traditional investments weren’t going to get you where you wanted to be financially. For a lot of people, 2008 was a major wake-up call. (Location 2008)

Hey [insert first name], I hope you’re doing well. I wanted to follow up and see if you had any further questions about our current offering. If so, please follow this link [insert link to scheduler] to schedule a 30-minute or one-hour block that’s convenient for you. Of course, if you would rather correspond via email, that’s no problem. As a reminder, the commitment deadline for this offering is [insert date], and we anticipate it’ll be oversubscribed prior to that date. Thank you. (Location 2049)

Simply being an expert isn’t enough. You must be able to communicate your knowledge effectively and confidently, which will only come with practice. (Location 2069)

Use your CRM software or set an email reminder to ensure they receive the information, then ingrain that answer in your memory for the next time the topic comes up. (Location 2092)

You may encounter potential investors who aren’t familiar with the passive approach to investing or have already had success in real estate as sole owner/operator. From their perspective, why should they relinquish control to the operating partner when they can probably handle it all themselves? This is common, especially when dealing with accredited investors, so don’t be discouraged. (Location 2115)

It’s critical for investors to understand on the front end that investments in syndications should always be considered illiquid and non-transferrable, meaning that any dollars invested shouldn’t be needed during the duration of the hold period. Just be upfront about this, and it’ll alleviate future headaches. (Location 2169)

It’s true that most commercial loans are non-recourse, meaning that if the borrower defaults, the bank seizes the property, but can’t pursue the borrower personally. However, there are many cases where banks have circumvented those clauses and pursued the loan guarantor, especially if they believe the GP acted in bad faith. (Location 2290)

I won’t sugar coat it: There’s a considerable amount of fraud taking place in the investment world. Savvy investors need assurance that they won’t end up on the next episode of American Greed on CNBC. (Location 2342)

When it comes to securities, the reality is you can’t be compensated for brokering them without a license. The best and most common way to overcome this challenge is to become a member of the GP and a fully integrated partner of the firm, one who’s assisting the firm in ways other than just raising money. (Location 2681)

If you’re not interested in becoming a member of the GP, another potential option is to create your own investing entity and receive the compensation created at the investing entity level. (Location 2687)