What are some of the best resources for starting to raise capital as an emerging RE developer?
Often times people start with friends and family in country club deals but I was wondering what institutions back smaller deals for small RE developers (if any at all).
General rule of thumb is that your first money has to come from professional contacts that know you and have done deals with you for some time. That forms your initial capital base. That can be your old boss, people who did syndicate deals with you in the past, former co-workers who have money, PE funds that you worked with on deals, etc. Later, you will need to cultivate your own non-close capital sources. That's harder. For that you need to have a track record and portfolio of previous projects, and then go in over time and build those relationships. Generally getting a warm intro to those LPs is best.
So step by step: 1) find and underwrite some good potential deals 2) circulate the deals with related parties that can finance you 3) exit those deals successfully and have a portable track record 4) let others know you're looking for capital sources. Attend conferences. Network. 5) over time show your deals to capital sources and build comfort and relationships
Really helpful advice, thanks for that earthwalker7 - A lot of parallels in sourcing deals in RE and VC.
What if you're missing those professional contacts right now, how would you recommend going about gaining them? I don't work in PE, so not sure what the right approach is to starting to build up that network.
Well, I'd say it's much easier to raise for RE than VC. Mind you, I said "easier" - not "easy". No capital raising is easy. The good thing about RE is it's an asset class that everyone can understand - including mom and pop investors and your own close circle of friends. So, if you're working in RE now, the goal is to find a good project and to be able to get some of the business partners that you know and work with to back you. If you're NOT in RE, the key will be to find a good project and get your family and friends to stake you. Ultimately it's not easy - but it is straightforward. 1. find a good project 2. underwrite it effectively 3. present the opportunity clearly to others, and get them to buy in 4. deliver good results
Where to find? Industry events would be my first choice. Go to ULI meetups, and to the big annual conferences. You can look at Preqin - which is an investor database. There's family office databases floating around - but hard to crack in to those unless you are referred in. You can check your alumni. Word of mouth.
Thank you!
Did you create 62 extra accounts to give you bananas
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