Updated: Jan 9
Many young syndicators start raising capital from family and friends on their first several deals. Raising money from family and friends is intuitive and natural to many; however, the downside of this strategy is that your capital sources is limited to who you know. You might be lucky to know many wealthy friends and family members that can invest in real estate, but many don’t have that solid network.
Instead, you can expand your network and raise capital from investors who don’t know you (yet). On my first deal, I’ve raised capital from both family and friends and from strangers (accredited investors). About 75% of the capital came from the last group, so I quickly realized that this should be my main strategy. In this article, I will share how I did it.
Before explaining each of the 3 tactics I recommend, which I used when I first began syndicating properties, I’d like to share my basic philosophy on attracting investors. I call it the “don’t ever do the hard sale” approach. The best way to attract strangers who have the potential to become investors is by providing them with something that has real value without asking for anything in return or trying to sell them anything. Provide knowledge, ideas, strategies - whatever you feel is right for the moment, but don’t ask for anything in return. Don’t try to sell anything or discuss any particular deals.
By taking that approach, you build rapport and trust with potential investors. The fact is, most people are expecting you to ask for something, and when you don’t they’re pleasantly surprised. By providing value without being asked for anything in return, you’re showing that you value that person and you’re being genuine and sincere.
Here are the top three creative tactics I use to expand my reach and attract investors who used to be complete strangers to me.
Creative Tactic #1: Host a Meetup for Investors
A meetup is the ideal forum to disseminate your information, knowledge, and investment ideas to a group. You can discuss previous deals, multifamily market trends, industry knowledge or any other subject you feel would be of value to potential investors. When I did this, I found that after the meetup people came to me to ask about investing in my future deals.
Over time, people who attended my meetups became investors in my syndications. I never asked for anything, and I never tried to sell anything during my meetups. The best part of a meetup is that it’s face-to-face; people can see how passionate you are about your topic, as well as how sincere you are in providing information without asking for anything in return. Most importantly, this is all done before you even have a deal to present.
There are several key advantages to hosting meetups. First, it’s an opportunity to demonstrate your expertise to a targeted group of people who don’t know very much about you. In the syndication business, having a successful track record is one of the “gold standards” for investors looking to invest their money. A meetup gives you the opportunity to talk about that record.
In addition to demonstrating your expertise and success, a meetup is a great way to build goodwill with potential investors. If you lead the meetup with value and provide valuable information and ideas, you have a good chance of converting attendees into investors over time.