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How To Get More Money To Scale Your Business

By Rick Melero

Now, if I were to sit down and write a blueprint for skyrocketing in real estate, here are 11 strategies I’d zero in on. We’re going to dive into each of these, unraveling the hows and whys, and I’m going to show you exactly how you can use them to your advantage.

1. Private Equity & Venture Capital

2. Crowdfunding

3. Real Estate Syndication

4. REITs (Real Estate Investment Trusts)

5. Government Programs

6. Institutional funding

7. Creative financing

8. Joint Ventures

9. Business Credit

10. Networking

11. Bonus Tip

Let’s kick off with the big guns of investment…

Private Equity & Venture Capital

When it comes to serious capital, private equity firms and venture capital funds are the big fish. We’re talking about institutional investors managing hundreds of millions or even billions in assets.

Now landing a private equity or VC deal is no easy feat. These investors are extremely selective, looking for proven operators with a solid record of generating strong returns.

They want to see you’ve successfully executed similar projects before.

And your experience managing large investments is key.

That said, if you can demonstrate expertise in deploying capital profitably, and pitch them an investment thesis that pencils out, you open the door to 7 or even 8-figure checks.

This type of deal can be an absolute game-changer, supercharging your real estate ambitions.

A few tips when seeking private equity:

– Target firms focused on real estate- do your research to find the right fits

– Prepare a polished pitch deck presenting your credentials and investment opportunity

– Be ready to undergo rigorous due diligence- they will vet you thoroughly

– Bring your A-game when negotiating- these are sophisticated investors

Landing private equity requires polish and persistence.

But it thrusts you into the big leagues, with access to the kind of capital reserved for major players.

Even a single deal at this level transforms what you can achieve in real estate. But what if you still need to get the resources or credentials to attract elite private equity firms? What if seven-figure checks are still a stretch? Not to worry- there are plenty of other avenues to tap into serious capital. You just need to get creative and leverage the options available to you.

This brings us to our next strategy…

Crowdfunding

Crowdfunding has taken off in recent years thanks to platforms like Fundrise, CrowdStreet, and others. These sites allow you to raise money from large groups of individuals to finance real estate projects. The benefit is you gain access to hundreds of thousands in funding from the “crowd.” Instead of chasing a few large investors, you leverage small contributions from many users. But to attract crowd investors, you need a compelling story. This means crafting a solid business plan, financial projections, and investment thesis.

Your ability to connect with potential backers and get them excited is crucial. Share your experience, vision, and how you’ll execute the project successfully. Some tips when crowdfunding:

– Research platforms specializing in real estate to find the right fit

– Set an attainable fundraising minimum and goal

– Get clear on your offer- equity vs debt vs revenue share

– Promote the campaign creatively on social media

– Follow up and build relationships with your investors

Crowdfunding requires effort but gives you access to an army of willing investors. And you build a fanbase excited to support your next venture.

Real Estate Syndication

Forming a real estate syndicate can be a powerful way to access capital for larger investments. In syndication, you bring together a group of passive investors to fund a deal. As the sponsor, you source and execute the real estate transaction while your partners provide the financing. They become limited partners in the deal. The leverage is you get to control a much larger asset using other people’s money. The profits are shared among the group based on the agreed-upon terms.

Some tips when syndicating a real estate transaction:

– Target high-net-worth individuals, families, or pooled investment groups

– Set minimums to be accredited investors (SEC rules)- Structure the partnership professionally with a syndication lawyer

– Be transparent and ethical when promoting the deal

– Make investors feel special and stay engaged

Syndication allows you to punch above your weight class in real estate. By tapping partners you multiply your buying power and expertise.

REITs (Real Estate Investment Trusts)

REITs (real estate investment trusts) provide another avenue to access significant capital. These are companies that own and operate real estate and trade publicly like stocks. Some REITs are willing to partner with experienced real estate operators by providing capital in exchange for an equity stake or preferred return. This gives you access to growth funding from an established real estate company without diluting your ownership in the asset itself.

Tips when seeking REIT funding:

– Target REITs that invest in assets similar to yours

– Highlight your real estate track record and credibility

– Be flexible on deal structure- REITs prefer predictable returns

– Prepare reports on the business plan and financial projections

– Leverage any existing relationships you have

Partnering with a REIT can be lucrative if you negotiate favorable terms. Make sure the deal structure aligns with your investment objectives. It opens the door to funding from major real estate enterprises to scale your strategy.

Government Programs

Don’t overlook government-sponsored programs as a source of attractive real estate financing. There are a variety of options that provide cheaper capital than traditional lending. For example, the SBA offers several loan programs to support small business investing. The 504 loan provides up to $5 million for commercial real estate at below-market interest rates. USDA Rural Development offers affordable loans for income-producing rural rental housing. Fannie Mae and Freddie Mac have multifamily loan programs as well. The key is researching to find a program that aligns with your investing strategy and location.

Tips for tapping into government real estate financing:

– Hire advisors familiar with relevant programs to guide you

– Be ready to provide extensive documentation

– Make sure your project satisfies geographic and use requirements

– Have patience- approval times can be slow depending on the agency

– Refinance into conventional loans once stabilized

While more rigid, government financing provides inexpensive long-term capital. This can make certain projects viable and enhance your returns.

Institutional Lenders

Major financial institutions like banks, credit unions, insurance companies, and pension funds have enormous capital available for real estate lending. Tapping into these sources provides low-cost leverage compared to other financing options. But you need to build relationships with decision-makers at these organizations. They operate based on trust and proven track records. Earning their confidence takes time but opens the door to flexible working capital.

Tips for accessing institutional lenders:

– Target lenders already active in your local market

– Highlight your experience and past projects

– Start small- prove yourself with a few deals before requesting larger loans

– Maintain professionalism and transparency

– Be a reliable borrower by making payments on time

Institutional lenders want to work with experienced sponsors they can count on. Become one of their go-to partners for deals. This unlocks abundant low-cost capital to scale your real estate strategy. Let me know if you would like me to expand on any part of this section or move on to the next financing option!

Creative Financing

When traditional lenders slam the door, get creative with your financing. There are endless ways to structure real estate deals to get projects funded.

For example:

– Seller financing- have the seller provide financing by taking a note

– BRRRR method- use rehab funds to refinance into conventional loans

– Trade equity for capital- give up ownership percentage for funding

– Bond deals or fund publicly traded stocks

– Barter services for capital if you have a valuable skillset

The key is thinking outside the box. Real estate is flexible if you understand finance. By getting creative, you can fund deals that otherwise may not work.

Tips for creative financing:

– Know your numbers cold- analyze deals from every angle

– Build relationships with motivated sellers and partners

– Seek win-wins- the best deals work for everyone

– Get help from advisors- CPAs, attorneys, brokers

– Be ready to sell your vision- believe in your deals

With the right approach, mindset, and relationships, you can structure almost any deal. Don’t take no for an answer- get those creative juices flowing! You’re right, thanks for the feedback. Here’s a draft on joint ventures that aims to shake up the structure a bit:

Joint Ventures

When it comes to financing bigger deals, two heads (and wallets) are often better than one. Pooling resources and expertise through joint ventures can be a game changer. But how do you find the right partner? And how do you structure the agreement to make it a big win for both sides?

Let’s dig in…

The Partner– seek out complements, not clones. Find someone who brings different skills and connections to the table. Real estate operators should partner with capital sources, brokers with contractors, and so on. Diversity and synergy maximize potential.

The Deal– look for strong projects but run the numbers yourself. Never take a partner’s projections at face value. Independently assess the business plan and verification. Is the upside truly there?

The Terms– define equity splits, duties, and timelines upfront. Ambiguity creates issues down the road. Set milestones and schedules to hold each other accountable. And don’t neglect to consult a lawyer.

The Communication– consistent transparency between partners is crucial. Disagreements happen but overcome them through open dialogue. Leave emotions out of business decisions.

The Exit– have a plan in place for winding down the JV upon completion of the project or investment period. Think through scenarios like buyouts, refinancing, or sales on the open market.

Joint ventures done right can catapult your investing to the next level. Just be selective in your partners and vigilant in structuring terms. Execute smoothly and both parties win big. Let me know if you would like me to expand on any aspect of joint ventures! Ready to move to the next strategy whenever you are.

Here is a draft section on utilizing business credit to finance real estate investments:

Business Credit

Don’t rely solely on your personal credit to fund deals. Establishing business credit unlocks an entirely new realm of financing options outside of consumer lending.

Some advantages of business credit include:

– Higher Limits- business credit cards can have 10-100x higher limits than consumer cards

– Keep Personal and Business Finances Separate- business credit protects your assets

– Easier Approval- business credit is based more on operations than FICO scores

– Build Credit Quickly- new businesses can establish credit lines faster than personal accounts

Keys to tapping business credit:

– Formally establish your real estate business as an LLC

– Get an EIN from the IRS

– Open checking accounts and merchant services

– Apply for vendor accounts with suppliers- use them consistently

– Apply for business credit cards and cash cards

– Build relationships with equipment leasing companies

With dedication, you can access hundreds of thousands of business lines and cards. This gives you ample purchasing power to fund deals and growth.

Let’s move to the final strategy…

Here is a draft of the final section covering networking for financing real estate deals:

Networking

Who you know is sometimes even more important than what you know when it comes to funding deals. Strong networks lead to capital sources, opportunities, and insider knowledge.

Some keys to effective networking for financing:

– Attend real estate conventions and conferences. Mingle not just with sponsors but with investors and lenders.

– Get active in your local real estate meetup groups. Don’t just pitch deals- provide value

– Reach out to money partners you already have a relationship with. People want to work with friends.

– Partner with brokers, attorneys, and other professionals. They have deep connections.

– Don’t forget online networking on social media, podcasts, and forums. Provide insight and information.

– Hold regular in-person meetups or mixers for your network. Keep contact alive.

– Always be warm, sincere, and helpful. Relationships drive this business.

By continually expanding your network, you widen your access to serious capital. But focus on authentic connections, not just transactions.

Bonus: Become an Expert at Raising Capital

As a final tip, make raising capital a core skill just like finding deals or managing projects. Study funding sources, structures, and regulations just as you would real estate valuations or ROI calculations. Understand what motivates different capital partners whether they are banks, private investors, or family offices. Know their criteria and objections. Master communicating returns in their language- be fluent in IRR, cash-on-cash, and equity multiples. Stay up to date on market conditions and trends influencing capital- interest rate movements, regulation, and new technologies.

Read books like David Teten’s The Power of Alternative Investments. Listen to podcasts like Capital Club. Attend REFI conferences. Make financing your deals as much a part of your brand as the projects themselves. Become known as a real estate investment expert AND capital raising expert. Wear both hats proudly. The best sponsors view raising capital as a continual process that enables bigger and better ventures. Adopt this mindset to take your business to the next level.

Raising capital to scale your real estate investments takes dedication and creativity. But mastering financing is how the biggest players transform their businesses. I’ve covered the full spectrum- from tapping elite sources like private equity and REITs, to crowdfunding, syndication, and networking. You now have a roadmap to take your funding to the next level. Remember, bringing on a capital partner should accelerate your strategy, not divert it. Seek fits based on your model and expertise. Choose partners wisely. Make raising capital a lifelong pursuit- stay on top of emerging options and keep expanding your network. Become a student of negotiating the optimal deal. The projects you can take on are directly tied to the financing you secure. With the right capital sources, your real estate ambitions have no limit. Now it’s time to put these strategies into action. Be bold in seeking capital and judicious in deploying it. The next phase of your real estate journey starts today.