The most frequently asked question that we get is “how can I raise more money?”. Well Theo has put together a list of four ways you may not be currently using. Even if you are utilizing one or two of the ways, you can raise more money by using all four ways. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Joe Fairless: There needed to be a resource on apartment syndication that not only talked about each aspect of the syndication process, but how to actually do each of the things, and go into it in detail… And we thought “Hey, why not make it free, too?” That’s why we launched Syndication School.
Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to apartmentsyndication.com, or to learn more about the Apartment Syndication School, go to syndicationschool.com, so you can listen to all the previous episodes.
Theo Hicks: Hi, Best Ever listeners. Welcome back to another episode of the Syndication School series, a free resource focused on the how-to’s of apartment syndication. As always, I am your host, Theo Hicks.
Each week, every Wednesday and Thursday, the Syndication School series air on the podcast Best Real Estate Investing Advice Ever Show. We also post these a little bit later in the week on YouTube in video form, so you can listen or watch, either on the podcast or on YouTube.
Each of these episodes or overall series focus on a specific aspect of the apartment syndication investment strategy. For the majority of these series we offer a resource for you to download for free, whether it be a PDF how-to guide, an Excel template calculator, a PowerPoint presentation template – some sort of resource for you to download for free. All of these free resources and past Syndication School series can be found at SyndicationSchool.com.
This episode is going to be a standalone episode entitled “Four tips to raise more money from passive investors.” This is actually a response to a very common question that we receive. In fact, it was the most common question that we received at our Best Ever Conference, which actually you can buy tickets right now at BEC20.com (the third annual conference). This time I think we’re doing a ski resort actually, so that’s gonna be pretty cool; I’m looking forward to that. But one of the obstacles that a lot of investors had was how to raise money and how to find more off market deals.
We’ve put together a list of ways to raise more money, to find off market deals, and these are actually kind of matched together into four tips that’ll help you today start raising more capital from investors… And then one of these strategies will actually help you find more deals, as well as more investors.
Let’s jump right into it – the first tactic is to focus on building your sphere of influence. When Joe interviewed THE Robert Kiyosaki, Rich Dad Poor Dad, which is probably the number one response we get when we ask guests what’s their best ever book… This is episode 262. Joe got him on the podcast within his first year of podcasting, which is pretty impressive… But one of the things that Robert Kiyosaki said is that the richest people in the world build networks, everyone else looks for work. What this means is that the most important thing that you can do, short-term, long-term, in general, is to play the long game when it comes to real estate investing. And to play the long game, make sure that you’re staying relevant. To make sure that you are continuously building and growing your business, and not just doing a few deals and falling off, is to focus on building your network.
What we’ve found is that the best, most effective way to build your network, and what Joe attributes his success to a lot, is to create a thought leadership platform. Best Ever listeners, we are not going to go into how to build a thought leadership platform in this episode, because we’ve talked about this a ton on Follow Along Friday, and we’ve also got — it’s probably a six or an eight-part Syndication School series on how to build a thought leadership platform, why to build it, how to grow it… But just to quickly summarize what we’ve talked about in 2-3 hours of content on Syndication School, and probably another 20 hours of content on Follow Along Friday, is a thought leadership platform is going to be an interview-based online platform, like a podcast, which you’re listening to right now, a YouTube channel, which you might be watching right now, a blog, or an in-person event.
The keys to having a successful thought leadership platform, that has the purpose of, again, building your network and playing the long game, is number one, consistency – so whatever thought leadership platform you do select, make sure you’re doing it on a consistent basis… Whether that’s every day, multiple times a day, a few times a week, once a week – whatever it is, pick a time frequency that you’re going to create this content, and then stick to that for at least a year before expecting to see any crazy results. This is gonna be, again, a longer-term strategy. That’s why we have the world’s longest daily running real estate podcast… I believe we’re in the 1800’s now, so we’ve had an episode air for 1800 straight days.
Next is to identify what your unique angle is going to be. Don’t just have a generic, vague podcast or YouTube channel or thought leadership platform. Make it unique to you. Make it unique to your skills, make it unique to your experience, make it unique to your background. One example is that Joe has two clients that have a military background, and one was in the army and the other was in the airforce, so they created a YouTube channel called Joint Ops. It focuses on teaching people how to do lease options. Once they launched that, they were able to raise over six figures in money from passive investors by launching this brand.
So if you’re an engineer by trade, then have your thought leadership platform focused on some aspect of engineering when it comes to real estate. If you’re in sales, talk about sales techniques. If you’re in marketing, talk about marketing techniques. But you can be even more specific than that. If you’re in a certain type of sales, just talk about that sales technique, or just be creative in thinking about what your unique angle is going to be, using this Joint Ops, people with military backgrounds as an example.
Next is to start within your sphere of influence. When you’re starting out your thought leadership platform, as I’ve mentioned before, you’re not gonna see crazy results right away. You’re not gonna launch your podcast and then have a million downloads in the first month. I’m sure it’s possible and I’m sure it’s been done before, but if you’re starting from scratch, you’re gonna start at zero and will have to slowly work your way up… So focus on sharing your content with people within your sphere of influence.
It takes a lot of time to gain the trust and gain the viewership of strangers… But you can get instantaneous results by sharing it with your current sphere of influence. So send it to all of your family members, send it to all of your friends; you can even send it to your work colleagues, depending on if there’s some sort of conflict of interest and you don’t want them knowing that you’re spending all this time on real estate… Then don’t do that. But focus on your sphere of influence that you already have.
For example, for Joe’s first deal, he raised a million dollars from a combination of his work colleagues, people he knew from volunteering, people he played football with, played softball with… But actually none of it came from his family members. It came from friends of family members, but none of it actually came from family members. So focus on not only trying to grow your thought leadership platform within your current sphere of influence, but heck, try to raise capital from them as well.
And then lastly, to tie it into a larger distribution channel. This is pretty simple, and it’s kind of something that you’re naturally gonna do anyways, but… Whatever content you’re creating, make sure that it is on a platform that already has a large built-in audience. For example, if you’re gonna do videos, YouTube. If you’re gonna do blogs, post them on Bigger Pockets, post them on LinkedIn, post them on Facebook. If you’re gonna do a podcast, do it on iTunes. Leverage the existing channel of these large networks to grow your thought leadership platform.
So that’s the long way of saying that one tip for raising more capital is to build your network, and the best way to build your network is through a thought leadership platform, because you can network with people all across the world while you’re asleep. That’s probably one of my favorite things to say.
Number two is to ask better questions. What does that mean? Joe was talking to a client, and he asked them to tell them what’s the best thing that’s happened to them since the last time they spoke. And the client in particular said “Oh, since the last time we spoke things haven’t been too bad.” And while that may seem kind of innocuous and not really telling, if you kind of dive into it, what they’re actually saying is that things aren’t going good, at all… Or at least they’re not going good, because they’re saying “It’s not that bad.” So the point of that is to focus on the language and the words that we’re using.
Even though this person said that things aren’t that bad, they’re still using the word “bad”, which is a negative word… And Joe is a big believer in that using these negative words, using “bad”, “poor”, “don’t”, “can’t” put us in the wrong mindset. So the same thing applies to you. So you’re asking yourself “Why can’t I raise more money?” or “Why can’t I find a deal?” or “What happens if I raise money and I don’t find a deal?” or “What happens if the deal doesn’t work out?” or “What happens if I can’t raise any money at all?”
So instead of asking yourself those questions, or rather than having these negative questions, these “What if I can’t do something?”, “What if this doesn’t happen?”, “What if something bad happens?”, instead focus on asking better questions. These are questions that don’t have the built-in assumption that something is going to go wrong.
To reframe some of these questions, you would say “How do people who are great at raising investment capital and finding deals do it?” That generates more creative, generates better answers, more positive answers, because you can say “Oh, well Joe makes a thought leadership platform, so maybe I should make a thought leadership platform.” Whereas if you ask yourself “Well, what happens if I raise money and I don’t find a deal? What happens if I can’t raise money?”, you’re thinking about “Well, then I’m not gonna meet my financial goals, and I’m not gonna be able to afford my house, I’m not gonna be able to eat, and I’m gonna starve, or be homeless, or something.”
So you’re kind of spiraling downwards into a negative rabbit hole, as opposed to spiraling upwards into a positive rabbit hole by asking yourself “Okay, well what can I do to raise money? What are the people who are successful at raising money doing?” That’s gonna generate much more positive thoughts, which is going to put you in a better mindset, which is going to increase the likelihood of you actually raising the capital… Whereas saying “Well, what happens if I can’t raise capital?”, you’re more likely to not raise capital at all.
So that’s something you can quickly do by shifting your mindset into asking these better, more positive questions, as opposed to these negative-sounding questions.
Number three is to create opportunities. This is something that can apply to both raising money, as well as to find deals. So what can you do to create the most amount of opportunities, that will allow you to raise more money. So what are things you should be doing that will give you the opportunity to raise more money? Not necessarily 100% definitely walk away with a million dollars in commitments, but something that has the chance of getting you more private money investors – volunteering, going to meetup groups, doing a conference, starting a thought leadership platform, going to Bigger Pockets forums, starting a blog. All these different things are you putting yourself out there, putting content out there; it’s not necessarily directly going to get you private money right away, because you’re not walking up to someone and saying “Hey, do you wanna invest?”, but you are creating the opportunity to eventually get leads and raise capital.
Now, when it comes to finding deals, the same thing can happen. Rather than sitting back and passively waiting for deals to be sent to your inbox, you can go out there and create opportunities. You can go out there and proactively find deals, through off market marketing strategies, like direct mail, cold-calling, things like that — but think more unique than that. Here’s an example to kind of get the juices flowing… So one way that Joe was able to find a deal in a hot market was they were looking at an on-market apartment opportunity; I forget the deal’s details specifically, but it was something along the lines of the on-market deal was made up of two and three-bedroom units. Since it was on market, the price kept getting bid higher and higher. But the market was great, the value-add opportunity was there, and they really wanted this deal.
Now, there was also another opportunity across the street, that was made up of mostly one-bedroom units, and they thought that it would be a great natural referral source if someone comes to the two to three-bedroom units and says “Well, the two-bedrooms are a little bit outside my price range, and I don’t really need that much room.” Well, if you own the property across the street, you could say “No problem, we’ve got a property across the street, same area, same management team, same amenities. The only difference is [unintelligible [00:15:45].09] over there.”
Plus, because of the economies of scale and the ability to get the off market deal at a reduced price, they wanted to pursue that opportunity for those benefits… So their broker reached out to the owner, and ultimately they ended up buying the deal across the street, as well as the on-market deal. So they bought the on-market deal, and the off market deal… And because of the benefits, the advantages of the off market deal, they were able to pay a little bit of a higher price for that on-market deal.
Now, if they didn’t create the opportunity by reaching out to the owner across the street, they probably wouldn’t have bought either deal. But by being creative, thinking strategically, reaching out to the owner across the street, they were able to turn zero deals into two really amazing deals, which I believe they still own to this day.
So this is a more general piece of advice about creating opportunities. I gave a couple of specific examples, but the way you create opportunities is gonna be unique to you… So again, ask yourself better questions, and ask yourself “How can I create more opportunities to find more investors? How can I create more opportunities to find off market deals?”, and then see what answers you come up with… Rather than saying “Well, what happens if I can’t find any deals? What happens if I can’t raise any money?” Because they’re all kind of connected to each other.
The fourth tip to raise more money from passive investors is to partner up. So rather than trying to go at things alone, find a business partner. When Joe was a solo investor and he was working on his business all by himself, he was able to purchase four single-family homes and one large apartment building, and then he says that his business was a little stagnant for a few years. But once he partnered up with someone – and when it comes to partnerships, we’ve got some Syndication School episodes, as well as blog posts about partnerships… So if you just go to JoeFairless.com, type in “partners” in the search box, all of those blog posts and Syndication School episodes will come up… But you wanna find a partner who complements your strengths and helps you with your weaknesses. So what you aren’t good at, they are good at. What you are really good at, they’re not necessarily the best at.
Well, when Joe partnered up with this individual – as you guys know, Frank – his business skyrocketed. Now they have over — I believe they have 700 million in apartments under management. So he went from four single-family homes and one apartment, to 700 million dollars in apartments under control, by in a sense partnering up with someone else.
One more piece of advice on partnering is that if you wanna find the perfect partner – as I mentioned, it needs to be someone who complements your strengths, as well as helps you out with your weaknesses – well, you need to know yourself. You need to know what you’re good at and what you’re bad at, you need to objectively analyze yourself… Because obviously, everyone has weaknesses. So if you’re saying “Well, I don’t have weaknesses at all”, well you probably don’t know yourself and you’re not gonna be able to find the best partner… So figure out what you’re not good at, or what you don’t like doing; that way you can find someone who does like doing that, and is good at it.
It’s gonna take some time to know yourself in the context of real estate investing, if you haven’t done a deal before or haven’t done many deals… But as you do deals and you experience the ups and downs of buying the deal, underwriting it, due diligence, closing, managing, selling, you’ll start to realize what you like and what you don’t like, what you’re good at and what you’re not good at… And then look in the mirror and ask yourself “What am I good at and what am I really bad at?” Then build your team around those answers, and once you do that, your business is going to begin to skyrocket.
For example, for Joe, after his first syndication deal, he realized that he was really good at raising money and really good at marketing, but he was not so good at underwriting and asset management. Well, he found a partner who has an institutional background, so he’s phenomenal at underwriting and phenomenal at asset management. As a result, they complement each other perfectly, which is why they were able to scale so quickly. Whereas if Joe thought he was really good at underwriting, thought he was really good at asset management, and brought someone on to do capital and marketing – well, they might not have scaled, he might not have done any more deals just because he’d be pulling his hair out from underwriting, because I know how much Joe does not like underwriting deals.
So those are the four ways for you to raise more money from passive investors. Some of them are longer-term strategies, but some of them are instantaneous things you can do right away. Number one is to build your network by creating a thought leadership platform, which is one of those longer-term strategies. Number two is ask better questions, so shift your mindset from asking negative questions like “What happens if this bad thing happens?” to “Well, how can I make this good thing happen?” or “What are successful people doing that result in this good thing happening? …raising money, find deals.” Number three is to create opportunities. So instead of sitting back and waiting for money to come to you, waiting for deals to come to you – well, go out there and create opportunities, the example being Joe going out and reaching out to the owner across the street and buying the package of deals, as opposed to just the on market deal.
And then fourth is to partner up with someone who complements your strengths, as well as helps you out with your weaknesses, which requires you knowing what you’re good at and what you are bad at.
That concludes this episode. Until next time, make sure you check out some of our other Syndication School series episodes about the how-to’s of apartment syndication. Download our free documents. All those can be found at SyndicationSchool.com.
Thank you for listening, have a best ever day, and we’ll talk to you tomorrow.