In every real estate transaction, there are many different tasks that must be completed to get across the finish line. During the acquisition phase of a multifamily transaction, one of the largest tasks is the capital raise which must provide sufficient funds to pay for the down payment, closing costs and perhaps rehab expenses on the property. Over the next few weeks, we will look at different aspects and tools we use to successfully raise funds and partner with passive investors for our multifamily deals. Here are three steps we take when preparing for the funding of our multifamily deals.
1. Spend Quality Time Educating our Investors
Whether you are an accredited or sophisticated investor, at Apogee we focus on meeting you right where you are by providing the information you need to make an educated decision when investing with us. Many investors, may have a general grasp on real estate or investing principles however this could be the first time they have encountered investing in a multifamily syndication. This means there will be a knowledge gap to fill including a discussion of how such a deal produces returns, how it is structured, risks to investing and advantages to this type of investment. As we initiate these conversations early on with potential investors it provides them the opportunity to ask questions and even do their own research prior to having to commit to a given investment opportunity.
2. Provide a Sample Deal
As we are talking to our investors about partnering in a multifamily syndication, one tool that is incredibly useful is a “sample deal.” A sample deal is a past deal we have worked on that is representative of the type of deal we are currently looking to find. While investment theory and explanation are important, having an example of what an investor could expect to see is perhaps the best way for our potential partners to ask the pertinent questions that they will need answered before making a commitment to a given deal.
3. Request a Soft Commitment
Once we have thoroughly answered our potential partners’ questions and they have expressed an interest in passively investing in a future deal, we request for them to complete a soft commitment. A soft commitment is simply a non-legally binding commitment (in writing) that states they would like to invest a specific amount of money into our next deal. The investor should understand that they will have the opportunity to review the specific deal before making a final commitment but that this is an important step that should not be taken lightly since this commitment helps us gauge the total funds available before going under contract on a potential opportunity.
Our approach to raising capital and partnering with passive investors is simple. We proactively help our investors understand the different aspects of multifamily real estate investing so that they too can confidently invest in future deals. If you have questions about our approach to raising capital or what it means to invest passively in a multifamily syndication feel free to reach out to us on our website or schedule a call .