At the end of 2017, we closed on our 12th property, which put our companies portfolio at over $250,000,000 (click Secret to Eliminating Competitors in a Hot Real Estate Market) to see the lesson I learned on our 11th deal). Since the quarter billion dollar mark was sort of a milestone, I thought it would be interesting to look at where my potential and current investors live to see if there was anything we could learn from it regarding how to find high net worth investors.Yes. Yes, there is.
Before we look at the stats, let’s define a couple things.
I define Potential Investors as those who are accredited, with whom I have a relationship, and who have expressed interest in investing with me but have not done so yet. Current Investors are accredited investors with whom I have a relationship that are currently investing in my apartment deals.
Now let’s dig into the stats of my real estate investor network.
Top 5 Cities with the most Current and Potential Investors:
- New York City: 18%
- Dallas-Fort Worth: 10%
- Los Angeles: 9%
- Houston: 5%
- San Francisco: 4%
So, out of all my Current and Potential Investors across the United States, 18% live in NYC, 10% live in DFW, etc. This makes sense for a handful of reasons.
First, they are large cities (ex. Population of NYC is 8M+).
Second, I lived in NYC and DFW, so I have family and friends there.
Third, our properties are in Texas, so DFW and Houston investors have a level of familiarity with the market they are investing in. They see the same thing we see in terms of population growth, job growth, economic outlook, etc.
Now let’s look at the Top 5 cities with the most Current Investors (removing Potential Investors).
Related: Top 5 Essentials for Raising Capital
Top 5 Cities with the most Current Investors:
- New York City: 18%
- Dallas-Fort Worth: 11%
- Los Angeles: 6%
- San Francisco: 5%
- Tied- Houston, Miami, Austin, and Seattle: 4%
Ok, still making sense and for the same reasons stated above. Large cities, places I lived, areas in which I have family and friends residing, and, in three cases, investors in the same state as our multifamily deals (Austin, Houston, and Dallas-Fort Worth).
But here’s where the wrinkle occurs.
Let’s look at all the equity my investors have contributed to my apartment syndications and what percent of the total invested dollars is attributed to each city where my real estate investor network reaches.
Top 5 Cities with Percentage of Investment Dollars in Deals:
- New York City: 18%
- Cincinnati: 13%
- Dallas-Fort Worth: 11%
- Miami: 7%
- San Francisco: 6%
what in the Cincinnati just happened?
Cincinnati isn’t a top 5 city of mine in terms of total number of Current Investors and/or Potential Investors. In fact, to dig deeper, Cincinnati only has 2.5 percent of my Current and Potential Investors living there. And only 3.5 percent of my Current Investors living there.
I am not from Cincinnati and, in fact, have only lived here for approximately 3 years. So, why does it represent 13 percent of all the equity invested in my apartment deals? The short answer is because I am actively involved in the local community. But that short answer doesn’t do the real lesson learned justice, so let me elaborate more.
Here’s how I did it:
- Host a local meetup. The first month I officially moved to Cincinnati (because my wife is from here and she’s the love of my life, so I followed her to the city and now we’re here for the long-term), I started a meet-up. If you have time to ATTEND a meet-up then you have time to HOST a meetup. It doesn’t take that much more effort to host than it does to simply attend and the rewards for hosting are exponentially greater. I did this to make friends in Cincy. I didn’t do it necessarily to generate a real estate investor network but that’s exactly what it did.
- Host Board Game and Drinks nights at your house. This Friday, my wife and I are having friends of ours, some of which are investors, come over to our house for a night of board games, drinks, and dinner. Hosting events at your house as couples, along with couples, is fun and goes a long way to continue to build your friendship with those locally.
- Consistent online presence that has an interview component to it. Or, in short, my podcast. I interview someone Every. Single. Day. on real estate investing and have released an episode for the last 1,197 days. There are multiple benefits for doing this and I won’t get into all of them, but I will focus on one of the benefits and that is that every time I interview someone, they then want to share it with their audience, which helps expand my reach. And, if I interview people in my local market, that introduces new, local connections to me, which can then turn into business relationships since I get to have dinner, drinks, etc. with them. Here’s a post I wrote on the step-by-step process to create a real estate thought leadership platform.
- Volunteer then become a board member for that non-profit. I had no intention to meet investors when I started volunteering for Junior Achievement. I have since realized, however, that by volunteering for a cause I feel strongly about (Junior Achievement helps kids in underserved communities learn financial and entrepreneurial skills,) I was able to connect with like-minded people and then become friends with them. I got on the board for JA in Cincinnati and have built friendships with people on the board, which then turned into business relationships where they invest in my deals. You could take the same approach, but make sure you genuinely believe in the cause and are doing it for the right reasons (i.e. helping further the cause’s mission) vs trying to grow your biz, otherwise, it will fall flat and won’t be fulfilling for you.
By doing these simple things, you can build a real estate investor network in your city that is perhaps stronger than any other network. When people personally know you, they are more likely to trust you, recommend you to others, and invest larger. The beauty in this is that it’s helpful for you, regardless of where you live.
Cincinnati is approximately the same size as St. Paul, Minnesota, Toledo, Ohio, Stockton, California and…Anchorage, Alaska. So, if you live in a city that is larger, then there’s really no excuse to not having all the capital you need for your deals. If you live in a city that’s smaller than Cincinnati (300k population), then you can still apply these principles, although it might require you to host your meetup in the next largest city next to where you live, that way you get better return on your time. Regardless, apply these principles and you will quickly build a local real estate investor network than can help you fund your deals.
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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.