March 2, 2020
Joe Fairless

Multifamily Money Raising Myth Debunked

A common refrain I hear and read about apartment syndications is “you need a strong track record in multifamily to raise money.”

The idea is that no one will entrust you with their capital if you haven’t completed at least one multifamily transaction already.

However, this is a myth. And it is fairly easy to debunk.

If you needed a strong track record in multifamily to raise money, the majority of apartment syndicators wouldn’t exist. Sure, some operators have previous experience with large apartment communities. Maybe they had the capital to do their own large deals and transitioned into raising money to scale. Or maybe they worked for a large institution that acquired apartment communities. However, many more apartment syndicators – myself included – were never involved with large apartment communities before doing raising money their first syndicated deal.

At some point in every syndicators’ career, they are sitting where you are sitting now. They wanted to purchase large apartment communities using other people’s money. The ones who didn’t have previous apartment experience didn’t let the myth of a strong multifamily track record stop them from buying their first, and many more, deals.

If you too want to raise money but don’t not have a track record in multifamily, here are the three things you need to do:

1. Change Your Mindset

First, you need to change your mindset. Not only is the need to have a strong track record in multifamily to raise money a myth but also a limiting belief. It is just a story you’ve convinced yourself to be true. It may be a powerful story, but it is fiction nonetheless.

It is like watching a horror film about the boogeyman and then checking under your bed every night before you go to bed to make sure he isn’t there!

The boogeyman isn’t real. And neither is this limited belief.

The main difference between an apartment syndicator with a billion portfolio and an aspiring syndicators who is hesitates is the belief in this boogeyman.

The boogeyman isn’t under your bed. You don’t need a strong track record in multifamily to raise money.

For more practical advice for how to get your mind right, check out some of my success habits blog post by clicking here.

2. Business Experience

I guess I should have said that “you need a strong track record in multifamily to raise money” is only partially false. The first part is actually true. You do need a strong track record. But it doesn’t need to be in multifamily.

One of the two areas that every single-first time apartment syndicator had a strong track record in was business.

Investing in real estate is a business. And apartment syndications even more so. When you are an apartment syndicator, you are creating and executing a business plan. Therefore, if you have a strong business background, you have a track record creating and/or executing a business plan.

A strong track record in business doesn’t mean you’ve just graduate college and were hired by a Fortune 500 company. It doesn’t mean that you had a lemonade stand as a kid (but, surprisingly, this could help you raise money! Click here to learn how).

It does mean that you started your own business in the past. It doesn’t matter how small the company was. What does matter is that it was successful (i.e., profitable). It can also mean that you worked for a large corporation and were promoted to the level of director or higher.

If you created a successful business and/or were promoted to a high level within a large corporation, you have the skill sets needed to successfully execute a business plan.

3. Real Estate Experience

If you do not have a strong track record in business, then you need to have a strong track record in real estate. Even if you have a strong track record in business, having a strong track record in real estate as well is a huge plus.

You have more flexibility with the real estate experience. It can mean that you were an investor (i.e., wholesaler, fix-and-flipper, single family rentals, small multifamily rentals, etc.). It can mean that you were a property manager. It can mean that you taught other people how to become investors. It can mean that you were a broker or a realtor.

When you have a strong track record in real estate, you understand how the transactional and management process works. All you need to do now is use that same knowledge on larger apartment communities.

Believing that you need to have a strong track record in multifamily before raising money is a myth. As long as you have a strong track record in business and/or real estate, your money raising foundation is almost completed.

The last step is to get educated on apartment syndications. A good place to start is by reading my apartment syndication blogs here or by listening to our Syndication School podcast series here.

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.

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