It’s not as easy as you think to raise money in advance. We have had many clients try to do this with very limited success. Most have gone back to raising funds when they get something under contract or have a specific project to invest in.
There are two ways you can do it:
- Set up a Fund that pools funds in advance based on its business plan and then buys property that meets its criteria as it sees fit (usually only successful after you have a significant track record and a marketing machine in place to promote it). There are many “fund” documents that simply sit on a shelf and never raise a dime or have very limited success.
- Collect funds via a limited Subscription Agreement in a Securities Escrow account and get further authorization from investors to release the funds when you have a specific property under contract.
The first deal is always a hard raise, but it gets easier each time.
The best hedge against tough raises is to:
- Have a healthy database of investors in place and regularly communicate with them so that when you have a deal they are ready to invest with you (SEC says the average raise is $1.5M with 14 investors; if you have 3 to 4 times that many in your database, you should be able to fund a $1.5M deal), and
- Give yourself at least 90 days escrow and a 30-day extension for a “financing contingency” that gives you time to raise the money and close.
We have a Clients-Only Facebook Group where we hold training on developing an investor marketing program and offer live interaction between us and new and seasoned clients. If you are a previous client, look for your invitation (or request one if you haven’t already received it). If you aren’t a client, you can become one by joining our Annual Retainer Program which gives you 3 hours of legal consultation over the course of a year and a $1,000 discount off your first syndication. This allows us to review and provide guidance on your specific marketing materials.
We also have an Online Store at www.SyndicationAttorneys.com for Investor Marketing Materials where you can purchase products to promote your business that are professionally edited and designed to enhance your credibility with prospective investors.