A question I often hear from my students and others who are just learning about multifamily investing through syndication is: “What are the fundamentals I need to know to grow my investor base?” Clearly, that’s huge and super important. So, let’s do recommendations on the best way to get started on that.
Begin by creating an Excel worksheet that will list all the people in what I call your “circle of influence.”
Look at all the people you know, starting with your relatives. This is the first tier. I have to say, though, that when I was starting out and was unsure of whether I’d do well in this business, I didn’t want to get my relatives involved. But you can, so write down their names. And then within that group, ask yourself who are the ones who, in their retirement accounts, might like to invest in your deals using their self-directed IRAs, for example.
Think about the close friends you have known for 5-10-15 years who believe in you and what you’re doing and may want to know about multifamily investing. So, your close friends are the second tier in your circle of influence (after your relatives), and third would be those you know from your church. And let’s say for example you had been a broker, so a fourth one will be your clients. So, you want to go back and look at the database of those people you have sold the homes to, that you have built relationships with. I’ll bet you’ll be totally flabbergasted when you learn how many of those people are earning only 1% or 2% in their retirement account. And they will be flabbergasted, too, to learn that you can offer them a preferred rate of, say, 8%. If you give them 8% … oh my gosh, I mean you just quadrupled their returns! And they are equity investors with you. You are bringing them in as Class A members into the syndication. They don’t get on the loan, you qualify for the loan, they are passively investing in your deal so that they get quarterly returns and when you sell the property, they will also profit.
You also can join the local real estate investor club or associations and meet many, many prospective investors. Also, start going to Chamber of Commerce meetings and you will find a lot of high-net-worth people from your community right there. Toastmasters is another group I recommend. I love Toastmasters because they are able to not only teach you about giving a program, but also skills in how to present yourself, how to use body language, gestures; you know, you talk with your eyes and you talk with your mouth and you talk with your enthusiasm. So, you will learn a lot, along with making friends with the other members who are mostly investors, entrepreneurs, business owners, etc. They have breakfast meetings or lunch or dinner meetings, so you could do it no matter what kind of schedule you keep.
Finally, one very important thing you need as you are working to increase your circle of influence is a well-practiced elevator pitch. Meeting someone is easy, but now you want to get them interested in what you have to offer and you have just a short window of time to do that. It’s called an elevator pitch because it needs to be short and to the point, but interesting … something you could say to someone in the time it takes an elevator to take them to their destination floor.
It could go something like this:
“Hi, I’m Vinney and I’m always looking for equity partners to invest in commercial real estate with my company. We look for the assets that have a value play, a momentum play, which means they are cash-flowing right now, providing value via the rents plus via the profits we share with investors when we sell the asset. If you are interested in learning more, let’s set up a time so we can go over a few things in more detail and see if this is something for you. Even if it turns out not to be right for you at this time, it doesn’t hurt to explore the possibilities.”
So those are some ways to expand your circles of influence and build an investor base.