What Investors Care About Most When Evaluating Syndication Opportunities
When it comes to syndication investments, what do investors want most? GowerCrowd recently surveyed 40,000 investors to find out. Results indicated individuals seek capital preservation and communication above all else.
Is your fund delivering on both counts?
Let’s say you can confidently answer “yes.” That is fantastic. But how do you prove this to prospects? Word of mouth? Face-to-face meetings? Emails or phone calls? Content online? While each has its place, there is only one correct answer.
Top real estate syndicators have a top-notch presence on the internet. Maintaining a solid website and utilizing social media are no longer optional—they are musts. Even if prospects do not initially discover you online, they will absolutely look you up and use what they find to aid in their decision-making.
So, here is how to curate an online image that proves your syndication is worthy of investment, both from a capital preservation and communication standpoint.
How Do You Invest to Preserve Capital?
Real estate investors who are concerned with capital preservation understand that markets are volatile. Some may have experienced the ups and downs firsthand, others not, but all want to minimize risk by investing wisely.
The inherent beauty of syndication in real estate is that risk is spread out among a group of investors. Additionally, risk can be further reduced through proper due diligence. Sponsors should clearly outline the process they employ and the strategy behind it in their communications to gain investors’ confidence.
How are you being proactive when it comes to ensuring capital is preserved? And how well are you conveying this on the web?
How Investors Vet Real Estate Syndicators
In today’s fast-paced world, decisions tend to be made quickly. The more overtly content available online answers the who, what, when, where, why, and how of your business, the better. Because if someone is struggling to access information in one place, they’ll click away and find it somewhere else (and take their capital with them).
Whether you are a sponsor evaluating cosponsors, operators, or deals, or you are a passive investor seeking to pool your capital, putting together a cut and dry, hyper-specific outline for determining whether an opportunity passes the “sniff test” is the smartest way to make great decisions quickly. It is how the most brilliant minds arrive at predictability—or “the best kind of boring” in the investment realm.
If raising capital, consider relaying your decision-making framework to potential investors. Explain that every syndication opportunity you bring to the table has met specific criteria prior to entering the capital-raising phase. More specifically, demonstrate the thinking behind the decisions that are being made to mitigate volatility. Provide examples of how you have successfully navigated market swings in the past.
At the very least, assume investors are critiquing your investment opportunity by running it through their own framework. How will they view you from a capital preservation standpoint?
How Frameworks Inform Decision-Making
Here’s a high-level example of a five-part investment framework one might use to evaluate real estate deals, sponsors, and so on. For each bucket, several more specific questions would be posed to aid in the analysis. The overarching goal is putting a structure on something that is very complex in order to make a sound decision—and make it fast.
Prospective investors are likely looking for information surrounding the following topics. It is your job to ensure the answers are readily available on your website and social media.
1. Track record
What metrics are available that reflect past performance? What lessons have been gleaned, and how are those learnings being applied?
Who is associated with this investment opportunity? Are there any known financial “bad actors” involved? Or are the players on the team hidden altogether—if so, why?
To what degree is this team capable of navigating headwinds, volatility, dips in the market?
How, when, and with what frequency will performance be conveyed?
What is held in high regard by this team? Are they adhering to those principles?
In sum, frameworks like this are used like a code. Considering all points, one will arrive at a rating. Does the information you are communicating about your business pass, fail, or land somewhere in between?
With that, let’s discuss how communicating well can set you up for success.
How Do You Communicate With Investors?
Effective communication in real estate is paramount—the survey conducted by GowerCrowd is proof positive. And today, technology is the primary way people communicate. Prospective investors’ first impression of your company or offering will likely be informed by a quick Google search.
What will they find?
Consumers have come to expect a clean web presence—a website that looks great conveys professionalism and trustworthiness. But it cannot just look great. It must be functional, as well. It needs to communicate the information needed for an investor to make an educated decision.
Where Real Estate Investors Make Connections
To be clear, technology is not meant to replace all communication, particularly when it comes to relationship-building in real estate. Communication online should be a complement to alternative methods of interacting, a way to gain momentum. But facts are facts, and data show that, in sales, 57% of a purchase decision happens before ever speaking to an actual person. As such, it is your job to communicate your goals, objectives, background, et cetera online—everything a prospect would want to know to feel comfortable entrusting you with their capital.
If you consider yourself a “people person” to which this new school of thought does not apply, that excuse will no longer fly. Frankly, it stopped being valid five or 10 years ago, and it is costing you business. People connect online nowadays. The human relationship often comes later.
And realistically, the technology available today makes it easier to be more of a people person than ever before. With the phone you have in your pocket, you can communicate with a massive audience without expending nearly as much energy or time as you did in the past.
Let’s say video is a medium you would like to explore. Gone are the days of needing expensive equipment or purchasing airtime. Use your phone to record a 30-second clip explaining who you are and what your business does. Then, post this video on your website, on YouTube, on Facebook—for free. It is the perfect example of low-effort, high-impact communication.
But above all else, ensure the online representation of yourself, your business, and your offering effectively communicates what you want it to. Make certain your content is polished. If you do not have the time or skills to accomplish this, hire someone who does. There are people out there who are willing to help for a very reasonable price—so reasonable, in fact, it might shock you.
If you are kicking the can down the road when it comes to building a website or social presence, just do it. It is critical, and you are late to the party. Hiring out anything you are ill equipped to tackle yourself will make the endeavor easier and more fruitful.
Think about it. If your content online is mediocre at best, prospects might look at it and say, “Okay, well, if they can't figure out how to do this, then how are they going to figure out how to do something as sophisticated as managing a $40 million real estate project?”
Why Social Media Matters in Real Estate
So, you have a website. It is well done and communicating everything it should be. Are you all set now?
Regrettably, no. Here’s why.
As of January 2021, there are approximately 1.83 billion websites on the internet. Publishing a website and calling it a day is comparative to advertising on a billboard in the middle of the desert—it is not that useful.
This is where social media comes into play. Your presence on social media is a chance to build a relationship on an introductory level. Think of your website as a center of gravity and the ring around it is social media. Social media content should draw people in toward the gravity of the website, pointing them in the right direction.
How to Build a Great Social Media Presence
When starting out, avoid getting lost in the minutiae, like which platform, posting frequency, or type of content is best. There is no need to delay creating an account or publishing a post until you have everything perfectly figured out. Instead, just focus on getting set up and beginning to engage ASAP.
Some people say you have to be everywhere: Twitter, LinkedIn, Facebook, Instagram, YouTube, the list goes on. Do not buy into this, either. Doing so can be detrimental in that it might mean spreading yourself so thin that you fail to generate deep, meaningful, engaging content—the kind that leads to real connections.
The key is being genuine. Yes, people would likely be interested in your take on serious topics related to your business, such as financial literacy, personal development, entrepreneurship, and the like. But you know what else people enjoy? Bad jokes.
Be yourself, be genuine, be relatable. That is what will truly resonate with others.
Along the same lines, what will not go over well is social media automation. Use the platforms properly in their purest form. A human being should be doing the posting. People are sophisticated these days. They do not want to be sold in an impersonal way. They know if you are being inauthentic. They want to know the real you.
So, are you authentic? Are you putting real stuff out there? Social media is your chance. It is the new cocktail party. And if you are not on there, you are missing the party.
This can be a difficult concept to embrace for those who are too focused on numbers. You might not understand the magnitude of a presence on social media if you cannot precisely measure it. What is the cost of a single lead? And how many leads will flow in from a single post?
Unfortunately, that is not how social media works.
Instead, it might go something like this. You are connected on social media to an active investor who has done a few investments with you in the past. But they get busy, they forget about investing for a while, they are living their life. Then, they see a post and remember: “Oh, yeah! I really wanted to invest $100,000 with that sponsor this year.”
Step back from the very transactional ethos, and approach social media from a different headspace. Because to really understand the value of digital marketing, you have to keep in mind the lifetime value of that acquisition. Over the long-term, if you communicate with that investor properly, they might end up investing millions with you. And the cost of acquiring that next investment is zero.
The Importance of a Strong Online Presence
To wrap up, your website and social media accounts should be treated as an online representation of you, your offering, and your business. Take stock of what you have put out there—and what you have not. Your prospects are certainly noticing.
If you are questioning whether you have room for improvement, try this exercise. Write down the characteristics and qualities you want to be known for. Then, reach out to someone in your network who is young—age 18 or 20. Ask them how your online presence does or does not reflect those qualities. And then, buckle up.
If you liked this article and would like to learn more about raising capital for real estate investing, check out some of the resources below:
If you have only just started in real estate development, have completed no deals, have no email list, but know you want the freedom and wealth being a real estate developer brings, then I suggest your first step is to start evaluating deals so you can recognize a good one when you see it.
Here’s where you should start. You’ll learn everything you need to know – the different types of real estate, different development strategies, how real estate cycles influence the market, and all about due diligence.
If you want to find deals and raise money for them so you can start your real estate development business, then learning how to conduct due diligence so you can pitch your deals better to investors is a great place to start.
If you’ve already purchased one or more real estate project and are seeing more opportunities than you can finance, then now is the time to start building your investor network so you can finance all your next deals quicker.
You’ve already got some momentum; now start finding and educating prospects about what you’re doing so you can build an email list of people to pitch to when you’re ready to raise money for your next deal.
This is what we build for private clients all the time – it’s called the Investor Acquisition System and you can access the entire program right here so you can find prospects, and convert them into being deep pocketed, repeat investors in your deals.
If you are a seasoned pro with multi-cycle experience, a substantial portfolio, a decent deal pipeline, and find yourself spending too much time raising equity capital because you’re still doing it in-person, then it’s time you put technology to work for you.
The wonderful thing about doing this is that you’re not going to be doing anything different than you’re already doing and, guess what, you’ll never have to sit through investor meetings again.
Sounds crazy I know, but I lay the whole thing out for you in this white board workshop where I personally show you exactly what it takes for you to transform your equity raising into a fully automated, capital raising machine so you can find new investors while increasing commitments from your existing network.