I see at least ten quality deals a week from people in need of equity, up several fold from last year. It seems there are limitless opportunities in the market right now, return projections are as high as I have ever seen them and people are coming up with brilliant and creative solutions. Unfortunately, on the other hand, capital is as scarce as I have ever seen it. So I thought I’d write a quick article to give you, the brilliant real estate entrepreneur, the best shot at capturing what little is out there.
Item #1 – the game has changed. Not all that long ago, it was commonplace to see things like master-leases, proforma net operating income with expense reduction plans and next years’ rents. Those days are long gone – perhaps forever. Especially gone are the days of collecting large acquisition and securitization fees upfront. The good news is that fundamentals never go out of style. Stick to the fundamentals, and be honest. This will at least keep you from getting doors slammed in your face.
Item #2 – be cognizant of securities laws. If what you are doing is selling a security, then do it right. Create a private placement memorandum and adhere to the general solicitation rules. Savvy investors will ignore your project unless the I’s are dotted and T’s are crossed. It will also help a great deal to use a reputable law firm for your ppm. Investors want to see that someone super-smart has looked at your structure and disclosures.
Item #3 – spell out your track record. Good or bad, get it out there right away. Nothing will anger an investor as much as finding skeletons in your closet. If you lay it out upfront everyone understands that mistakes happen to the best of us, the important thing is what you learned from them and how you acted when trouble started. On the other hand, if you don’t have a track record, then get one. Partner with someone that has one. In today’s environment no track record = no funding.
Item #4 – contribute a significant amount of your own money. Investors want to see the deal guy putting skin in the deal, lots of it. If you don’t have it, then partner with someone who does. Again, no skin = no funding.
Item #5 – create high quality marketing materials. Investors want to know you are legit and nothing spells legit like quality. There are large numbers of talented marketing designers out there scouring for work. It is likely the most opportune time to get this work done on a budget.
Item #6 – network (but be conscious of general solicitation rules). I have noticed more people are willing to listen these days, which is a big change from a few months ago. Take advantage of this, but don’t be pushy - investors are still reeling. Work your network to find people who might be interested in seeing your deal now or in the future.
Item #7 – get your name out / build your profile. Ten years ago, having a website bought you credibility. It is not that simple today – you need to have a complete online presence. Think “viral”; build an online network. Put your entire resume on LinkedIn and use it, send it to people. Build connections and show people who use the internet to ‘check you out’ that you are legitimate. Be careful, however, the opposite can happen if do it half-assed. A short resume, small network (or the wrong network) can do more damage than good. Also avoid overselling yourself. There are numerous scammers in the social networking world. Try hard not to look like one.
Item #8 – hire someone to raise capital for you. With capital as scarce as it is, you’re likely going to need to go to an expert. Make sure the broker you are working with is registered and in good standing with FINRA, www.finra.org.
Hope that helps. Feel free to contact me with questions.
Todd
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