On one of my latest articles I shared some of the lessons I learned from attending a family office real estate conference. If I had to summarize those lessons in three words, they would be Focus on Relationships.
We all know how important relationships are in the real estate game, specially if you are in the capital raising arena. So rather than expanding on what should be obvious by now, I’m going to trust that you already know that your main focus should be building solid trust-based relationship with your network if you hope to ever be successful in raising capital for real estate investments. Or in life, for that matter 😉
But what comes next?
Say you have great relationships with the people in your network and that you have put a lot of effort to show everyone that you have integrity and that you are actually a trustworthy individual, awesome! Now you have a great investment opportunity and you want to present it to some potential investors that already know and trust you… But does that mean they will blindly invest with you? I’d say not necessarily.
So I think the point is clear. While building relationships and trust with your investors is paramount, there are other things to consider to improve your capital raising efforts.
1- Start Getting “Nos” out of the way
While the last thing you want to do is to become a “salesman” for an investment opportunity, just like in sales, this is a numbers game. Even within your solidly built network of potential investors, the majority are not going to invest in a deal with you, ever. It’s all good, the idea is actually to identify those that are going to say yes, so start getting the “nos” out of the way.
It’s very important to quantify your efforts, again, it’s all a numbers game. How many “Nos” do you need to get a “Yes”? Run your numbers and get going.
2- Don’t have preconceived notions about anyone
It’s very common for capital raisers to go ahead and eliminate someone from their potential investors list just because the investor has passed on one, two, or even three deals. Don’t be that guy/gal that takes it personal and creates a false image of the investor in their mind. Understand that timing is a very important factor when it comes to an investor deciding to invest or not. Maybe they are not ready today, but they will be ready tomorrow.
Take the time to get to know your prospects at a personal level if possible. Understanding their personality without judgement or preconceptions will allow you to identify the right investors for different investment opportunities. Remember you are building partnerships and it might be the person that you initially thought wouldn’t be a good fit that ends up being the right partner. A solid relationship can weather the storm when times get rough.
3- Do the right thing, whatever it takes
Have you ever had a deal go south? Yes? Great! Sophisticated investors are going to want to hear why it happened and more importantly they are going to want to hear how you handled it. In the end, if you did good for your investors then, chances are you will do good for your investors if/when it happens again.
Spend less time selling and pitching and more time understanding what an investor is really looking for and what is actually of value to them. Sometimes the investor is not in a position to understand the benefits of an investment and it is your responsibility to actually identify those benefits for them and present them in a way that is clear. Do the right thing and focus on adding real value to the investor by actually making their lives better. Never sell or offer an opportunity to someone if you don’t genuinely believe that is going to benefit them.
4- How you get paid is more important than how much you get paid.
Understand that when it comes to investment opportunities, having everyone involved be on the same page before moving forward with the deal is of utmost importance. Being able to set everyone up for success under a win-win situation is the name of the game and should be your priority at the time of structuring your deals. It’s all about alignment of interest and the investor is going to want to see that they are being protected and that it’s not going to come down to a situation where you are making money while they are losing their investment.
Structure the deal to protect the investor first, and in a way that their decision to invest becomes a no-brainer. Be willing to leave money on the table today, it will pay off in the long term.
5- Be the authority
Be knowledgeable about your whole industry, business model, and target audience. Then share that knowledge through a platform of your choice that has the ability to reach your target audience. Speak with authority, even if your knowledge is not unique. It doesn’t have to be, as long as it’s meaningful, specific, and actually relevant to your investors.
Put yourself in your audience’s shoes and write from their perspective. If you take this into consideration you obviously know that an immediate “in-your-face” pitch will not work. Be consistent, remember, you are supposed to be playing the long game.
6- Clarity is key
Maximizing the amount of time that you spend with potential investors is very important but actually not wasting their time is more important, so efficiency is the goal and clarity is the key.
Be able to stand out and clearly explain the opportunity and what your strategy is without any “fluff”. At the end of the day, if a potential investor leaves the meeting with the ability to clearly explain to someone else what you do and what your unique offering was, you’ve won.
Know that in a crowded space investors are actually trying to “eliminate” your proposal rather than “say yes” to your offer. With that in mind, and even more important than a differentiating factor, is your ability to have absolute clarity in your message and the way you present it.
If you are like me, then you are not raising capital once and done! So value your relationships, respect the process and reap the benefits.