GettyGetty
There are many ways to succeed in the world of real estate, but no skill is more consistently valuable than the ability to raise private capital. Even if your focus is exclusively on the operational side of the business, this is a skill that virtually every real estate professional should acquire.
With that in mind, let’s discuss the four stages of raising capital. The steps this series will discuss can help you garner attention from investors, build a sales funnel, receive verbal commitments and eventually close deals. These are the very means by which our firm was able to raise over $20 million in private capital from more than 250 investors.
1. Initial Outreach
First impressions are absolutely critical, especially when it comes to others trusting you enough to invest their hard-earned capital. For first-time capital raisers, the initial outreach should be straightforward. Explain that you’re working in the real estate sector with a significantly experienced team, and ask them if they would like to receive updates when investment opportunities become available.
Here’s an example email for initial contact with friends and family:
[First Name],
I hope you are doing well. I wanted to reach out and let you know that I recently partnered with [Company name and brief description]. There is not an investment available at this time, but would you like to be kept in the loop if/when a new opportunity comes up?
Thank you,
[Your Name]
Short and to the point, this email doesn’t put any pressure on the recipient because you’re not offering an opportunity upfront. Additionally, it signals that finding the right opportunity takes time, which increases the credibility of your investment vetting process. In my experience, it is helpful to ask permission before you forward investment opportunities to an unexpecting recipient.
2. Lead Capture
You’re likely to receive several positive responses from this initial email, but you’ll eventually run out of people in your direct network. This is when you’ll need to focus on acquiring new leads. My favorite acquisition strategy is driving traffic from advertisements, blog posts or other marketing avenues to a landing page that prompts potential investors to provide their names and email addresses in exchange for a free e-book. Of course, it is important that the topic and content of the e-book aligns with the investment opportunities you will eventually make available to them.
Remember, first impressions are very important. The e-book has to add significant value to the reader, while mirroring your perspective on investing. It should be approximately 10,000 words, or about 35-45 minutes of reading time. Our recent release, Little Boxes, Big Profits, could serve as an example.
While authoring my first e-book, a helpful strategy was to create a clear outline and title that communicated what investors would receive in exchange for their email. For example, “Five Tips for Reviewing Your First Passive Real Estate Deal” or “Seven Reasons Multifamily Apartments Are Still Incredible Investments” are titles that directly communicate the value investors will get from your download. (Bonus: Having a structured title like this makes the e-book much easier to write.)
Once you define your tips or reasons, write them out, back up your claims, create an introduction and conclusion, and voilà! You’re well on your way to becoming an electronically published author.
3. Lead Nurture And Follow-Up
One of the biggest mistakes new real estate entrepreneurs make is underestimating the amount of follow-up and time it takes to build trust and close deals. If you’re new to the sector and believe that because a lead offered their email they are ready to wire you $100,000, you should know that this is simply not the reality of this business. In fact, we’ve had instances where an investor sat on our mailing list for over two years before finally making an investment with our firm. During the lead nurture and follow-up stage, three stages of contacting your lead are:
• E-book distribution (lead capture mechanism).
• Email drip campaign.
• Phone call(s).
The best way to ensure potential investors receive adequate follow-up is an extensive (12 to 52-plus sends) email drip campaign, sent out on a weekly basis. This consistent communication will make investors feel comfortable conducting business with you, while learning more about your outlook on various investment-related topics.
To kick off the campaign, one of the first emails should be a request to set up a one-on-one call to learn more about each other and find out how you can best collaborate. If the potential investor doesn’t schedule a call on the first attempt, follow up three to four days later. Introductory calls are critical in the business of investments, so make sure to send at least one follow-up request if they don’t respond the first time.
To effectively nurture leads, the goals when creating follow-up correspondence are:
• Build trust.
• Establish credibility.
• Educate investors in a way that aligns with your firm’s investment perspective.
• Stay in touch.
Remember, these three initial stages are meant to create relationship-building opportunities that will help close a deal down the road. Potential investors will only commit funds to firms with an intriguing lead capture mechanism, consistent and valuable follow-up, and a brand infrastructure that establishes credibility. There are many books on the topic of “closing the deal,” but the reality is that the closing conversation will be significantly easier if you take a more serious approach to the lead-nurture portion of the funnel. We’ll go into even more detail in Part II of this series, which will cover stage four: Communicating to Influence Investors.