If you’re starting out in the multifamily investing game, you should be able to increase your investor base. For many first-timers, this is one task that passes off as a complicated challenge. For one, there are no guidelines as to building your syndication from the get-go.
I have had a lot of students who asked me about how I managed to grow my investor base when I was starting out as a multifamily syndicator. Prior to that, I was involved in buying single-family homes. After I attained a great measure of success, I decided to expand into acquiring multifamily investment properties. I have to tell you, it was not easy for me since I had to start from scratch. I didn’t know how to go about it.
Eventually, everything was set in all the right places. The more I delved into multifamily investing, the more knowledge I acquired. I also developed an effective strategy for growing my investor base. For this, I would use what I call my circles of influence.
A circle of influence includes the relationships you share with people who are already familiar to you. If you are starting out as a syndicator, you need to leverage the people within your circle to form a solid foundation. This would take several steps.
Imagine yourself in the center of the circle. Your goal is to move as farther away from the center as possible. As you move, you need to pass through several relationship levels:
They share direct relationships with you, so it’s best to start building your investor base with your parents, siblings, cousins, and even distant relatives. Write down their names on a spreadsheet and ask if they have cash in savings or self-directed Individual Retirement Accounts (IRAs). They can use their IRAs in acquiring multifamily investment properties. Once you have gathered enough financing from the first level, you can proceed to the next.
Your friends are the people (outside your family) who put a lot of trust in you and believe in your capacity to achieve greater things. You can also ask them if they have extra savings lying around which they can use to invest in the business you’re creating. Deliver a good pitch and they will definitely join as equity investors. Be sure to show them all the advantages to investing in Commercial Real Estate as “Passive Equity Partner Investor”. I require my students to putting together a powerful “Credibility PowerPoint” and a strong Business Plan and Brochure to show in simple easily understandable ways all the benefits and returns when investments are made in syndicated offerings.
If you have worked as a broker, CPA, entrepreneur or an agent before, you can use the networks you have built to further develop your investor base. Look at the list of clients you have worked with and look for people who can pass off as Class-A investors. It’s an added advantage if your previous clients indicate a high level of trust in you. Another advantage of leveraging previous clients is that it gives you access to an even wider network of potential multifamily investors for your syndication.
This is the last layer of the circle you need to go through. It’s also the most difficult to penetrate. Nonetheless, if you managed to get investors from local chambers of commerce, toastmaster, wealth and philanthropic and exclusive real estate clubs, you are able to access larger funding pools. In other words, you will be able to get “high rollers” to invest in your syndication. Apart from that, inviting such Class-A investors can positively impact your reputation, thus enabling you to attract more investors into your base.
As you can see, your circles of influence are a great source for people who may want to form your investor base. However, you still need to provide these people with an irresistible pitch and convincing presentation. You need to prepare a good speech and introduction to outline the reasons why they should invest in multifamily properties. Be confident when delivering your pitch. It will be your best tool for building your investor base!