If you were brand new to the apartment syndication niche, it is unlikely that you would be able to raise over $1 million for your first deal. It would be even more unlikely that you would be able to raise over $1 million for you first deal AND your second deal. However, a client of mine, David Thompson, was able to accomplish this improbable feat.
How did he do it?
David was able to raise millions of dollars on his first two deals by leveraging his natural networks – three in particular. In a conversation on my podcast, David explained how, through his personal network, BiggerPockets and local multifamily meet-ups, he was able to acquire private capital so that you can work towards replicating his success.
1. Personal Network
The individuals in David’s personal network who invested in his deals were family, friends, and work colleagues. They knew him personally, so a level of trust was already in place. AND they knew about his real estate background.
Prior to entering the syndication niche, David’s real estate experience was:
- Over 5 years of experience purchasing single-family residents
- In a previous career, he managed a $2.5 billion investment portfolio and raised over $1 billion in funds for acquisitions.
Needless to say, his personal network already perceived David as a successful investor and entrepreneur, even though it wasn’t in apartment syndication.
Within his network, the two-main money raising avenues were through his wife’s network and a past business associate. 70% of the capital he raised came from these two sources – 35% from the former and 35% from the latter.
His wife’s network was a natural path because she had personal, trusting relationships with people who were interested in real estate and who had cash readily available.
And the past business associate is someone that he used to work with in the high-tech sector; this person was David’s biggest contributor.
Based on David’s success, how can you leverage your personal network of existing relationships to raise private capital?
Do you have family members or spouses with access to cash? Or maybe they have someone in their network – someone who is one or two degrees of separation away?
Or have you been or are you currently involved in the high-tech, legal, or medical industry? This is a gold mine for raising money. Many of your associates are making good incomes, but they likely don’t have the time to be active in real estate investing. However, they are savvy enough to understand that real estate is an important and effective method of investing.
BiggerPockets was another network that David leveraged to raise money. 25% of the capital he raised came from BiggerPockets. Social media outlets, like BiggerPockets, that focus on real estate education tend to attract investors who are actively looking for opportunities.
However, you aren’t allowed to advertise for a specific deal on BiggerPockets or on really any social media outlet. That’s why instead, David frequently posted valuable content – in both the BP blog and forums – and created biography page stating that he was a syndicator. When someone read a piece of his content and clicked on his profile, they’d discover that he raised private money for deals. If they wanted to learn more, they would reach out to start a conversation. Then some of those conversations turned into relationships, and some of those relationships turned into business partnerships.
Therefore, by posting valuable content and creating a biography page, David accomplished the same goal without explicitly advertising for money. But keep in mind that this is obviously a more long-term approach. You need to establish yourself as a recognized expert by consistently posting informative blogs and answering questions first. That means not getting frustrated and giving up if you haven’t raised a single dime after a month of two.
3. Local Multifamily Meet-ups
The third network that David leveraged to raise money were local multifamily meet-ups. Although, he expected to be more successful at raising money at meet-ups than he actually was. It seemed as if this would be an event that would naturally attract investors. However, David discovered that many of these people wanted to be active in real estate, rather than passive investors. Also, many of them weren’t accredited investors.
David Thompson was able to accomplish an improbable feat for his first two multifamily syndication deals. He raised over $1 million for both deals. He was able to do so by leveraging three of his pre-existing, natural networks:
- Personal Network
When raising money in your personal network, David recommends finding people who are in the high-tech, legal, medical, or similar industry because they likely make high incomes but don’t have the time to actively invest themselves.
To raise money on BiggerPockets, since you can’t actively advertise deals, instead, David advises that you frequently post valuable content and create a strong bio page that explains that you raise money for multifamily deals.
- Local Multifamily meet-ups
David’s third money raising network was local multifamily meet-ups. However, much to his surprise, they were the least successful of the three.
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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.