Two narratives here:
1. Find a good deal and capital will come
2. Have capital lined up and dry powder ready to go, good deals will come to you, or deal will become good because of your resources and scale
While there is truth for both, which one is more applicable?
| +43 | What should we be buying? | 27 | 4h |
| +30 | Uncertain of what To Do Next | 5 | 3d |
| +28 | Capital Restricted Developer | 2 | 3d |
| +25 | Where are free agents signing? | 8 | 3h |
| +23 | Laughable Job Posting | 4 | 3h |
| +23 | Warning: J. Shaw Recruiters | 5 | 3d |
| +8 | Development Budget: use RENTABLE or GROSS BUILDABLE sf? | 3 | 1h |
| +6 | First-year REPE analyst comp check (London) | 1 | 4d |
| +4 | Vandy MSF or NYU MSRE | 4 | 3d |
| +4 | In RE, what is the ONE software tool you couldn’t survive without? | 2 | 20h |
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Based on the most helpful WSO content, both narratives have their merits, but the applicability can depend on the context and specific circumstances:
Find a good deal and capital will come:
Have capital lined up and dry powder ready to go:
Which is more applicable? - For smaller, entrepreneurial ventures: The first narrative might be more applicable. Exceptional deals can attract investors even if you don't have capital initially. - For larger, corporate investments: The second narrative is often more applicable. Having capital ready allows you to act swiftly and leverage your resources to enhance deals.
In summary, the applicability depends on the scale and nature of the investment. Both approaches have their place, but the context of the investment will determine which is more suitable.
Sources: DCF Modeling Course ~ Pre-training text.pdf, Equity is cheaper than debt, isn't it?, Thoughts on acquisitions vs. development, What is the most clever, profitable RE deal you've witnessed?, How to source, finance and execute your own deal as a Junior?
I don't know about #2, but the first one is certainly wrong.
It's real estate. There is actual risk. No one is throwing money at someone who has no idea what they're doing, no matter how attractive the deal is, because there is always downside risk and the GP is the one responsible for mitigating that. This isn't banking!
1 is typically only true for experienced investors that already have a stable of investors
1 is true if you have a long history of performing and a pool of loyal investors - lots of shops out there that use this approach and can raise huge amounts of capital in tight windows without issue,
2 is the safer option for a less experienced shop who doesn't have strong certainty they can go out and raise. The idea of a deal "becoming good" because of resources and scale is ridiculous though. What actually tends to happen is a deal "becomes good ENOUGH" because they're sitting on a ton of dry powder they need to get out the door and they start making concessions.
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