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So you want to start a REIT?

SteveO

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I went to a convention that is geared toward putting the people with access to money (Broker/Dealers) with the people looking to raise money (sponsors).

It turns out that the measly $4,000,000 that I have raised in the past isn't even enough to warrant a conversation with anyone here. The smallest deal that I heard talked about was a $15,000,000 capital raise. People are talking about small $50M raises or $200M in 3 weeks!

There are other people like me here but they are trying to break into the business of private or public offerings. They are trying to determine how to get out onto the "platform" where the broker/dealers will be able to sell your deal to investors.

It turns out that there are a lot of challenges and a lot of big bucks need to be paid. My estimation is that you will need to shell out $200 to 500K or so to set yourself up. That will only get you part way into the "good ol' boy" network.

For starters, you will need years of audited financials (very pricey) on your self and business. This will be scrutinized by a third party "due diligence" representative that you will need to pay for. You will also need to pay for the dd for the deal that you want to put on the table. Once this is done, you will need to schmooze the companies with dinners (I have done this, steak and lobster for 30 people. Don't forget the drinks!)

You will also need to have a track record to show along with a product that will set you apart from the others.

The regulatory group that oversees this process holds a lot of power. They regulate the shit out of every part of the process which adds a lot of cost and time.

There are salespeople called wholesalers that will work as your reps to sell the product. You will need marketing materials along with a dog and pony show.

I had an "in" with a small broker dealer. It took a lot of work to get that. They went belly-up in 2010.



This looks like it is going to be a lot of fun!
 
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snowbank

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Not ready to state what it might be yet. I went to this convention to learn.

I know you've talked about your goals before and you've definitely got me curious because this seems to go down a completely different path. Keep me posted, interested to see what you end up doing!
 
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OGX16

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Very interesting, I was just thinking about what the process of starting a REIT would be like.
 

Tobars Dobbs

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Networking at conventions like that are always helpful. Are you referring to a public or private REIT? I'm sure you've been following what's happening in the real estate crowdfunding space. If not, I totally recommend digging into it if your looking to raise a real estate fund. It has, and will, continue to change capital formation for all types real estate deals, and asset classes. RealtyMogul.com, and RealtyShares.com seem to be the front runners in the space. However, their models revolve around funding individual deals from pools of investors, thus generating a fee. Crowdfunding will also work for raising a REIT. It is the future of real estate finance.
 
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SteveO

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Right now I am so busy. I have three deals under contract to sell and one that is up for sale. I am also just about to go under contract with a retail center to purchase.

I am not sure if I will pursue the route of starting a reit or not at this time. The question would be around timing. At some point I want to step out of the game again.

There is a reason that I was not looking at crowdfunding. I can't remember why right now but it may have something to do with audited financials. They are so incredibly expensive which really would eat into the cashflow. I will look it up again and report back.
 

Tobars Dobbs

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Right now I am so busy. I have three deals under contract to sell and one that is up for sale. I am also just about to go under contract with a retail center to purchase.

I am not sure if I will pursue the route of starting a reit or not at this time. The question would be around timing. At some point I want to step out of the game again.

There is a reason that I was not looking at crowdfunding. I can't remember why right now but it may have something to do with audited financials. They are so incredibly expensive which really would eat into the cashflow. I will look it up again and report back.
Awesome! Sounds like you have some great stuff happening. There's nothing like having a full pipeline of deals heading toward the finish line. Although you've stepped back from the fund for now, it might not be a bad idea to have a dialogue with realtymogul.com about the possibility of financing upcoming deals for you through their crowdfunding platform. Of course you know, you can never have to many sources for funding deals.
 

SteveO

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At this time I have plenty of funding. The problem is finding deals. Prices are high right now. There is the occasional deal that I am keeping my eye out for but they are few and far between.
 
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