In the world of real estate syndication, attracting the right investors is key to your success. These investors aren't just bringing funds to the table; they're your valued clients, and essentially, ensuring their satisfaction should be your top priority.
We’ve done several research and had a chat with 44 accredited investors to get the inside scoop on what really gets them excited when they're checking out an offering. Along the way, we've picked up some valuable insights about them and their preferences.
So what's really on your potential investors' minds when they're thinking about investing into real estate? Let's dive into these three key factors.
So, your potential investors are evaluating your latest opportunity. What's the first thing on their minds? Returns, of course! It's the same for them as it is for you. They need to see the numbers stack up favorably.
One of the investor-respondents summed it up nicely, saying:
"Obviously, the most important thing is returns. Is the return above a certain level for me to even go into researching that deal?”
"There's two things that are are absolutely top of mind for me and the rest of it is all just supporting information. How much money am I going to make and when am I going to make it?"
Here's how you can take things a step further:
Cash-on-Cash Returns and Equity Multiple: Recognize that new investors may be more concerned with cash-on-cash returns and equity multiple. These metrics offer a clear picture of what they can expect in the near term, which is reassuring for those seeking steady gains and lower risk.
Internal Rate of Return (IRR): On the other hand, seasoned investors, who've been through a few real estate deals, are likely to dive deeper into the numbers. They'll examine how the investment has historically performed over time through IRR analysis. By highlighting both metrics, you can cater to the needs of both new and experienced investors, while also educating the former on the intricacies of investment performance.
Pro Tip: Go the extra mile by providing historic returns. Sharing this data transparently gives your investor-clients an in-depth look at your track record.
Understanding that importance, we have learned that 26 out of 44 respondents agreed that return projections are the first thing they consider. This is an opportunity to showcase your consistent track record and instill confidence in your investor-clients.
As a real estate syndicator, you are responsible for not just the investment but also the team behind it. Your investor-clients are deeply interested in the expertise of the individuals steering the ship.
One of the respondents put it this way:
"I focused on the quality of the project and the quality of the sponsor team. If those two check out, I want to invest."
Another investor doubled down:
"I am starting to learn that the sponsor is very important. Initially, I looked at a bunch of deals and thought 'the internal rate of return is all important.' Well, there's more to it than that"
This underscores the importance of the sponsor team.
Here's how you can work on this part:
Qualifications: Showcase the qualifications of your team members. Highlight their expertise and experience in the real estate industry. This provides reassurance and confidence to your investor-clients.
Market Dominance: Emphasize your strong positioning within a specific market location or asset class specialty. When investors see you as a reputable player, they are more likely to trust your offerings.
Transparent Communication: Commit to clear, frequent, and transparent communication. Your investor-clients appreciate being kept in the loop about project developments, challenges, and successes. Honesty and transparency are key to building and maintaining trust.
Investors aren't just looking at the numbers; they're also evaluating personal alignment. Your investor-clients want to know if they genuinely believe in the project. Several factors play a role in this assessment:
Location: Does the market's geographic potential align with their beliefs? Your investor-clients may be evaluating the location's growth prospects and economic outlook to determine if it fits their investment philosophy.
Asset Class: Does the asset class resonate with them? Some may have preferences for certain types of real estate assets, such as residential, commercial, or industrial properties.
Alignment: Emotional alignment is critical. Do your investor-clients feel secure and confident about the project and your team? Provide them with the opportunity to understand who you are and what you're offering through a compelling presentation that addresses their concerns.
Here are what some investors had to say about the market, asset class, and personal alignment:
"Is it a hot/growing market?"
"At the moment everything has been pretty much multifamily for me, you know, because I think it's safer for now. That may change, you know, later on, but in this environment I think is where I feel more secure."
"Sometimes it's the type of the asset like the ones in the Life Science projects. I just think that there's certainly a shortage of that sort of thing."
Your investors are your clients. They're taking a good look at those return projections, sizing up your team's expertise, and making sure they vibe with your deal on a personal level. This strategy works whether you’re raising for individual assets or you’re raising for funds.
Essentially, by showcasing your track record, team credentials, and the compelling nature of your investment offerings, you can build trust and confidence among your investor-clients, which will eventually lead you to successful partnerships. Remember that earning your investors' trust is key to your success in the world of real estate syndication.
We have an all-in-one platform that expertly guides your potential investors through their investment journey, nurturing them until they're fully prepared to make that final commitment and we’re excited to share it with you. Let's get in touch! Book a call with us via this link.