August 28, 2012
Won't You Just Introduce Me to a Rich Guy?
We get dozens of requests every week from would-be syndicators asking for help. They don't ask for help in structuring their deal. They don't ask for help in marketing. They don’t seem to care much about picking the right properties. They don't ask for help in being especially compliant with the law. Their primary concern is raising capital, and they always want to know who could raise capital for them.
The conversation goes something like this: if you would just introduce me to a rich guy, I will do the rest. Well my answer to them is “no you won't”. You won't be able to do the rest, because if you don't do the planning and organizing part first, getting the money from a rich guy will never happen.
Investors that are flush with cash have tons of options. In good economies and bad ones, they have more options than anyone else. And the guys that have the most cash have the most options.
So the first question that someone has to ask before they approach someone with a wheel barrel full of money is “what do they need me for?” What do I bring to the table? Most promoters have never considered this and they just take for granted that if they could get in front of a rich guy, that the rich guy would roll over and give them a bunch of money.
And by the way, novice promoters usually also feel that in addition to all of the money that the rich guy will invest, the fundraiser is going to get a giant cut of the deal. And why shouldn’t they get a big cut, after all, they found a real estate deal.
This may come as a shock, but people who buy real estate have a very specific compensation formula that's been well defined by the industry over many years and it works out to about 3%. If you’re lucky, maybe you can get a little bit more.
But the money is not in the real estate. The money is in controlling the money.
Let me repeat that: The money is in controlling the money.
If you can control the money, you can control the real estate. And if you don't learn how to position yourself properly, you'll never get a hold of the money. In order to successfully deal with an investor, you have to:
1) Demonstrate that you are an expert in your trade and that they can trust you to be a steward of their capital;
2) You next have to show them a deal that they can say “yes” to; and
3) You have to make sure that deal is one that you want to say “yes” to because you're going to be stuck with this deal for a long time.
And once you've done these 3 things, you have to convince the investor that of all of the options they have, that yours is the best. I usually draw analogy between investors putting money into deals and gamblers who go to the racetrack. Although investors try to be more scientific or think that they are being more scientific, the mentality is the same. At the end of the day, investors have many choices, like gamblers have many horses, and they each pick one and they put their money on that deal.
So if you think that it's all about getting introduced to a rich guy, you’re absolutely incorrect. Part of it is about building a network of investors that have the cash to invest, but that's only the beginning. People don't write checks just because you've knocked on their door or paid them a visit some way. They write checks because they trust you, because they like the deal that you've put on the table, and because they believe in what you’re doing. And most importantly, they believe that you have the ability to execute and make the deal work out.
These topics are the vast majority of what we discuss at the Deal Making Symposium and Syndication Seminar. They are the most important concepts for anyone who is raising capital whether for real estate, venture, or for some other type of business to thoroughly understand.
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If you have an opinion or thought on this topic, please write a comment in the form below. Share this blog with your friends. Thank you for being one of our loyal readers. We appreciate you and are rooting for your success. Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenues and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and is an astute investor.
Joel is CEO of Bullseye Capital , a full-service real estate company supporting owners and buyers of real estate assets with brokerage, leasing, property management, and mortgage services. Joel is also the founder of the Bullseye Capital Real Property Opportunity Fund, LLC which is an investment company that acquires distressed real estate by working with accredited investors.
A leader in real estate syndication, we offer seminars to assist others in acquiring the skills needed to raise syndicate capital to acquire properties. Imagine knowing how to pool funds to purchase any real estate investment, whether single family, multi-family, commercial, or anything else. For more information and complete details, please go to http://www.syndicatefast.com/.
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