As a real estate investment fund or a general partner (GP), finding the right limited partner (LP) investors can make or break a real estate deal. The right LPs can be hard to find if you don’t already have a functional network established. LPs can also be hard to keep if you're not using best practices.
Where Can I Find LPs?
The right LPs for your deal may seem elusive now, but once you get headed in the right direction, they will be easy to spot. You may already know this, but you can find LPs:
- Through your real estate broker.
- Through a real estate investing club.
- At industry events.
- Through friends and family.
- Through your bank or investment broker.
The first five avenues to cash flow are straightforward; talk to the people you know and attend events in your area, #IRLNetworking. Going online to search out investors, however, may seem a bit foreign.
Using online resources can help you find more investors suited to the deals you have available. For starters, you can check out sites like meetup.com for real estate investor groups. Other popular sites with networking capabilities and real estate investment groups include Facebook, LinkedIn, and Twitter. Additionally, there are services specifically for matching investors with general partners or investment firms. When venturing to these third-party investor matching sites, it is essential to do your due diligence, read reviews, and vet investors before jumping into any agreements.
Some reputable online sources also offer crowdfunding platforms for GPs and real estate investment firms. Crowdfunding might be a good solution if you are new to the business and are working at building your reputation as a GP or real estate investment firm.
Keeping Up Appearances
Your future in real estate deal-making relies on your reputation. First, you have to build one; then, you need to work to keep it pristine. Unfortunately, many GPs and real estate investment firms get ahead of themselves and make too many deals or get greedy and charge high fees (hidden or not). Here are some tips on how to keep your reputation clean and LPs interested when a new deal comes around.
- Integrity - Operate with integrity; you will have many opportunities to puff up returns or make things look better than they are. Resist doing this at all costs.
- Wait For The Right Deals - One bad deal can trash your reputation and end the career you have been working so hard at.
- Communication - Communicate accurately, often, early. Your investors want honest, timely updates. Don’t wait for an issue to be solved to address it with your investors. Always be 100% honest about the deals you present to people.
- Own Up - When something terrible happens like a flood, tell investors that you underestimated the flood risk in the area. Doing so will go over much better than trying to place the blame somewhere else in the long run.
- Be Fair - When real estate is on a tear, you might be able to pull the wool over some people’s eyes, but investors will eventually figure it out, and they won’t be there when the market takes a downturn. Charge fees, but be fair.
- Take it Easy - Taking on too many deals at once can lead to process inefficiencies and a loss of investor trust.
- Finesse Your Presentations - Make sure each investor has a clear idea and a stack of notes (or an amazing slide deck) to take home after making your concrete points about the deal.
- Learn to Build Financial Models - Build outstanding financial models of your investments or find someone that can.
- Raise More Than You Need - Always plan to raise more than you need to avoid a preventable capital call.I
- Impeccable Accounting - Keep books on everything within your company and never intermingle funds. Make sure you are not bleeding money in inconspicuous places, and robbing Peter to pay Paul almost always backfires.
There you have it, finding LPs will probably be challenging in the start, but you have options beyond asking family and friends. Start with your broker and networking online. As you gather people, be honest and yourself, and you will be well on your way to growing your real estate investment business.
The Agora platform offers dedicated fundraising customer relationship software designed to streamline your fundraising process. The software enables you to reach out to more investors with deals that might pique their interest. You can also securely share data and sign documents, and read more about what Agora offers here.