I was recently a speaker at Dan Handford’s virtual multifamily summit. The topic of my talk was how to attract passive apartment investors. More specifically, I provided 5 proven ways to attract passive investors based on my experience raising capital for over $470,000,000 worth of apartment communities, interviewing over 1,000 passive investors, and writing the best-selling book on apartment syndications – Best Ever Apartment Syndication Book.
The main thing I’ve discovered through my money raising experience is that passive investors don’t chose to invest with apartment syndicators who offer the best returns, who invest in the most favorable market, or who implement the greatest investment strategy. These are all reasons why someone choses to invest, but not the primary reason. Primarily, passive investors will invest only with someone they trust – both personally and as a business person.
And it must be both. I trust Jim Halpert from The Office as a person, but I would never invest in Jim’s apartment syndication because I don’t trust him as business/real estate person.
The best way to gain a passive investor’s trust is through time (to gain their trust personally) and expertise (to gain their trust as a business person). So, a more apt title to this blog post is “5 proven ways to build trust with passive apartment investors,” and here are those 5 ways:
1 – Thought Leadership Platform
A thought leadership platform is an interview-based blog, YouTube channel, or podcast on which you publish valuable content for free on a consistent basis.
You gain both types of trust with a thought leadership platform.
With a thought leadership platform, you are reaching hundreds of potential investors every day. This provides you with a head start in gaining people’s personal trust, because when you eventually hop on an introductory call with them, they’ve already heard you speak for hours. At the same time, since you’re interviewing other real estate experts and offering your own expertise on the apartment syndication process, you’ll become recognized as an apartment expert, which covers the “business person” type of trust.
My overall thought leadership platform and online presence (via podcast, YouTube newsletters, Facebook, and Forbes) has attracted a large portion of my passive investors.
2 – BiggerPockets
There are 1.2M members on BiggerPockets and only 6,702 (~ 0.5%) have received the “addict” award. To receive the addict award, you must visit the BiggerPockets website every single day for a month.
When I was first launching my apartment syndication business, I made it a habit to visit and engage on BiggerPockets every day, which is why I am one of the 0.5% who’ve received the “addict” award. And these efforts have paid off greatly, because another large portion of my passive investors have come from BiggerPockets.
To get the most out of BiggerPockets, you need to be engaged in the forums and member blogs and add value on a consistent basis. Set up apartment syndication and passive/accredited investor keyword alerts so you are immediately notified when those keywords were used in the forums.
Answer questions in the forums. Reply to direct messages quickly. Provide referrals to other investors in your market. Republish thought leadership platform content to the forums and member blogs.
In doing so, just like the thought leadership platform, you will build a personal connection with people you haven’t met in person, as well as become recognized as an apartment syndication expert, especially if you make it on the Top Contributors list on the multifamily or private lending forum.
3 – Create a Local Meetup
Creating a local meetup group in your market is very similar to a thought leadership platform. The major difference is that the meetup group is an in-person event. You will form personal connections with the followers of your thought leadership platform, but you can form deeper personal connections faster at an in-person meetup.
By being the host of the meetup, you will instantly gain the trust and respect of the attendees, and even more so after you host the meetup month-after-month and it continues to add value to their investing businesses.
Start small with a monthly meetup group in your target market. Then, slowly scale over time. Capture content provided at the meetup (via speakers or conversations you’ve had/overheard) and share it on social media, ideally on a Facebook community you’ve made for the group. On that same Facebook community, have attendees post their monthly goals. Also, use that community to create Facebook ads that target passive investors within a certain radius of the event.
Once you’ve successfully scaled your meetup group, the next step is to create a yearly, in-person conference, where you’ll gain even more respect and trust from potential passive investors – both those who attend and those who simply hear about how great your conference was.
4 – Transparent and Quick Communication
Who do you trust more? A colleague who is constantly shows up to work late, takes 2 to 3 days to reply to emails and texts, never answers their phone, and brings up problems without solutions? Or a colleague who shows up 15 minutes early, replies to emails within a few hours, always answers the phone, and is a problem identifier and problem solver?
It should be a no brainer. We trust people who are punctual, transparent, and quick communicators. And that also holds true for apartment syndications.
One of the voicemails I have saved on my phone is from a passive investor who was thanking me for my communication skills. He appreciated our monthly recap emails and the fact that we sent accurate distributions and accurate K-1s on-time. And I’ve received countless more phone calls, emails, and texts from investors saying the same thing, so what we are doing is clearly appreciated. Here is a list of what we do to ensure that we are effectively communicating with our investors:
- Send detailed, transparent monthly recap emails with images for all deals
- Send profit and loss statements and rent rolls on a quarterly basis
- Provide information on new business and economic developments in the surrounding market
- Send accurate monthly distributions on-time
- Reply to emails, texts, and voicemails within 24 hours at most
- Provide investors with cell phone number
- Record new investment offering calls to send to investors who couldn’t attend
- Send accurate K-1 tax statements on-time.
5 – Volunteering
Volunteer at a nonprofit organization that aligns with your values, interests, and beliefs. The primary reason is to give back. But while you are giving back, a secondary objective is to get on the board.
A board member at a nonprofit organization is likely affluent with a high net-worth and has a circle of influence consisting of other high net-worth individuals. So, find a nonprofit organization, volunteer for a few months, and work your way onto the board. Once there, focus on building genuine personal relationships with your fellow board members outside of volunteering (which covers the personal trust). Then, organically bring up passive investment opportunities and see where the conversations lead.
Let me reiterate: the primary objective is to give back. Do not show up to your first day of volunteering and ask others to invest in your deals. Focus on giving back. Try to get on the board with the intentions of giving back even more. When you are volunteering, focus only on volunteering. But once you start to build relationships with other board members outside of volunteering, you can begin to organically bring up things that interest you, with apartment investing being one of them.
There are many ways to attract passive investors and this list is by no means exhaustive. However, I have used every strategy on this list to raise capital for my deals (hence the “proven” in the title). I recommend picking one of the strategies that interest you the most and focusing on scaling it for at least 6 months. Once it is rockin and rollin, pick a second strategy and repeat until you’ve built yourself a passive investor lead generating machine.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.