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- Jul 24, 2007
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My company has been working on setting up deals with investor money for about a year. We have successfully raised about $4M in this time. A lot of effort has gone into finding money which I will recap shortly.
Money for deals is not as easy to come by now as it was a couple of years ago. I would suspect that the appetite for real estate in general has affected this which is tied to the overall ability to get funding. Some of the primary sources for investment have dried up for the time being. While this will mean that the ability to find better deals is on the rise, the underwriting standards will make them harder to take down. This means that there will likely be less leverage.
The sources that we have gone to are as follows:
Friends and family
This is basically your own network of people that you know that trust your ability to do these deals.
Equity Partners
These are typically sophisticated investors, groups, or fund managers that specialize in real estate deals. They like to find local operators that have a track record of success. They usually operate within a defined box of criteria that you would need to fit into. They like their investors to put funds into the deal so that there is "skin" in the game. Most of these types of investment groups already have plenty of deals and "managers" that they are working with. It is difficult to break into their world. Because of the effort that goes into the evaluation of these deals, they like to see projects that are greater than $15M. I have seem some that go smaller but the pool of managers goes up exponentially from there.
Broker/Dealer Network
These are people that place money for accredited investors. They have a pool of opportinities to draw from. Getting their ear is difficult due to the amount of investments and investors that they are working with. You will need to spend a lot of time if you choose this route. First the company will need to qualify you and your project (3rd party due diligence) which you will pay for. Then you will need to spend countless hours selling the sales agents on the merits of the deal. Again, you need to have something that stands out as the agents have plenty of deals to look at.
You will need to hire an attorney of study and fully understand the securities regulations. All of these types of deals have strict guidelines for what you can and can't do. I'm not trying to scare you, just make sure that you are aware. As my attorney once said "There are a lot of felons out there that don't even know it". It is never an issue until there is a problem on a deal.
Money for deals is not as easy to come by now as it was a couple of years ago. I would suspect that the appetite for real estate in general has affected this which is tied to the overall ability to get funding. Some of the primary sources for investment have dried up for the time being. While this will mean that the ability to find better deals is on the rise, the underwriting standards will make them harder to take down. This means that there will likely be less leverage.
The sources that we have gone to are as follows:
Friends and family
This is basically your own network of people that you know that trust your ability to do these deals.
Equity Partners
These are typically sophisticated investors, groups, or fund managers that specialize in real estate deals. They like to find local operators that have a track record of success. They usually operate within a defined box of criteria that you would need to fit into. They like their investors to put funds into the deal so that there is "skin" in the game. Most of these types of investment groups already have plenty of deals and "managers" that they are working with. It is difficult to break into their world. Because of the effort that goes into the evaluation of these deals, they like to see projects that are greater than $15M. I have seem some that go smaller but the pool of managers goes up exponentially from there.
Broker/Dealer Network
These are people that place money for accredited investors. They have a pool of opportinities to draw from. Getting their ear is difficult due to the amount of investments and investors that they are working with. You will need to spend a lot of time if you choose this route. First the company will need to qualify you and your project (3rd party due diligence) which you will pay for. Then you will need to spend countless hours selling the sales agents on the merits of the deal. Again, you need to have something that stands out as the agents have plenty of deals to look at.
You will need to hire an attorney of study and fully understand the securities regulations. All of these types of deals have strict guidelines for what you can and can't do. I'm not trying to scare you, just make sure that you are aware. As my attorney once said "There are a lot of felons out there that don't even know it". It is never an issue until there is a problem on a deal.
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