Big Mike and Big Kahuna “secrets” revealed! Mike and I will share our secrets on how to start build capital and finances in the Multi-family business.
Mike and I have known each other for almost five years. From those years, I have come to know how great he is in raising private money and raising OPM. He’s a good friend of mine and we’ve been in Collective Genius for four years. Mike is also a good chess player. He came from the Soviet Union and competed there for a couple of years, then went to the United States and played chess in his college years.
He started his career in software development for over 15 years. He finished this career in IT as a matter of choice in 2009 and started as a full-time fund manager. But as early as 2000, he was already a real estate investor. He has bought apartments and houses in New York City. As early as that, friends and colleagues have already recognized Mike’s record in the field and actually had his first funds from his friends and asked him to invest it. Now, Mike is on his fourth fund. He is an expert when it comes to financing fix and flip projects, bridge capital, and bridge loans. His flagship fund has been investing in equity of many deals, of data equity. Mike and his partners have done a few multifamily investments.
With that, Mike is here to give you some tips on how to smoothly drive the financial vehicle in Multi-family investments.
- How do you raise capital? You start with friends and family. That’s just basically it.
Most of our family and friends are not wealthy. Given the situation, we still start with them. Someone will put in a certain amount, and another relative or friend will put another. Add them all together and you can now decide for your minimum investment in the fund. As fund manager, you can take small investment as an exception even if you have a minimum that’s higher.
- Establish a network and build relationships.
Now that you’ve started to create funds from your closest social circles, you can now start to expand your network by asking your family and friends for referrals. Go ahead and ask them if they know someone who has a capital that’s waiting to be invested. Many of them might have old retirement accounts that are sitting and doing nothing, or they have been in stock market.
Broaden your network and build relationships. Your first step is trying to have people know you, like you, and trust you. That’s our starting point. If they know you, like you, and trust you, they will invest money with you or like that they will invest money with you. If they don’t know you, you could put an ad on The Wall Street Journal and nobody will invest with you because you have no track record, you have no reputation, you are nobody.
Having a great track record also helps a lot in building or strengthening existing relationships with other investors. With this, it’s easier to raise money, and move to the next fund.
- When you’re raising capital, find a partner.
One of the advantages of having a partner in this kind of business, is if you don’t have the ability to raise on business aspect, a partner who possesses that certain skill, track record can fill in for you. If you don’t know how to run a fund on the back end, then your partner can raise the money. You set up the back end, he’ll raise money. Partner with somebody who has ability to raise capital.
If you have a good structure, you have a good marketing business, you know how to find quality deals, then you could partner with people who can raise capital. That’s your opportunity.
- Raising money is all about relationships.
It’s about people that you know. You should make them learn how to like and trust you. ASt the beginning when you’re raising capital, sometimes it’s a little harder. But as you start building a track record, it gets a lot easier.
If you don’t have a track record but you know lots of people, sometimes you can borrow somebody else’s track record. If you don’t have credibility, you can borrow a partner’s credibility.
Not only you could borrow other people’s credibility and their relationships, it’s often easier to do it with partners. If you think you’re a big shot, great, if you can do everything on your own. But when you start, it’s a lot of heavy lifting. If you have some good partners, the expression is being careful who you partner with, but if you get good partners and then you complement each other, you could move mountains because you’re helping each other, and you have complementary energy and strengths.
- Learn how to open up and bring more investors.
Don’t be contented with one investor for one deal. Open and bring in a few investors. Syndication could be done simply. You could put together a private placement memorandum, an offering memorandum. That’s effectively your syndication vehicle, and you’re just marketing the product to investors. Hopefully, you have strong relationship with investors. When you have it ready, they are ready to receive what you must sell, per se. Remember, having a good track record is essential to attract other investors.
Now, these are just golden wisdom from the Big Kahuna and Big Mike. Remember if you’re just starting out and trying to put a deal together but you don’t have all the pieces just yet, don’t fret about it! Stay focused and be very strategic just like when you’re playing chess. You have to be smart on who you bring into your deal, know them, and at the same time, learn from them, and develop your track record.
