What can you do when a deal comes along that’s too great to pass up, but you don’t have the capital?
Rather than going to the bank for a high-interest loan, there’s a HUGE opportunity if you know how to raise capital.
The money is out there … if you know WHERE to find the right people and HOW to build a relationship with them.
We call it syndication, and help others learn the secrets of how to do it.
We spoke with Victor Menasce, expert real estate developer and author, who’s raised more than $300 million in his career. He’s also teaching others how to raise capital, using five elements in his book … Listen to our show for the whole story!
In the studio and behind the microphones for this enlightening edition of The Real Estate Guys™ radio show:
- Your capital captain host, Robert Helms
- His “Captain Crunch”-eating co-host, Russell Gray
- Capital expert, Managing Partner of US Real Estate Partners, and author of “The Great Canadian TakeOver,” Victor Menasce
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The 5 elements of raising capital
How do you feel about asking people for money?
“Most people are uncomfortable asking for money,” said Menasce, “but I look at it differently. I give people the opportunity to collaborate on a project.”
Menasce lives with his family in Ottawa, Canada, and saw a huge opportunity to develop and redevelop neighborhoods in the U.S. after the 2008 recession.
In his book, “The Great Canadian TakeOver: How Savvy Canadians are Profiting Wildly from the Meltdown in U.S. Real Estate,” Menasce dishes details on how his company raises capital, using five elements … relationship, track record, trust, compelling opportunity, and alignment.
1. Relationship
Don’t have huge figures in your bank account, but want to get to know those who do? People with wealth are just like anybody else. They don’t want to be used.
If you meet someone who’s a billionaire and you’re not, your connection to them has to be about something that is not money. As soon as they sense you’re interested in their money, their radar goes up.
But how do you meet these kinds of productive people?
THINK … where do the wealthy hang out? How can you get in the same room?
“Those who are wealthy are often involved in philanthropy,” said Menasce. “You don’t need to be wealthy to volunteer for charitable causes or attend fundraising events.”
Those who are wealthy often make time to enjoy themselves in country clubs and athletic events.
It doesn’t matter what it is, but it’s essential to have common interests beyond money: golf, deep-sea fishing, live theater, etc.
“Every potential investment is a long-term relationship,” said Menasce. “Focus on the relationship. That’s what matters most.”
His rule of thumb is to have at least SIX interactions with someone before you ever ask them about investing.
2. Track record
Rookies looking to find investors say, “I don’t have a history in real estate. How can I prove I’m worth taking a chance on?”
Be around highly productive people.
“Business is a team sport,” said Menasce. “Work with someone who has a track record. Then you can borrow some of their credibility.”
Consider how others see you and the questions they will ask: Who is the team? What is their reputation? What relationship do I have with the team?
“People are not going to want to place money with an individual,” said Menasce. “People don’t invest in solopreneurs – they invest in businesses.”
3. Trust
There’s a psychological contract in trust. You have to earn trust over time.
“It’s built through actions, not words,” said Menasce. “Do they do what they say they’ll do? Can you trust them to keep small commitments?”
Trust often boils down to the little things … and both parties need to earn trust for raising capital to work. It goes both ways.
Here are a few questions to think about:
- Do you arrive at meetings when you said you would?
- Do you deliver on information or details you commit to research?
- Do they show a respect of your time?
- Do they listen when you’re talking?
You don’t continue in a relationship (business or personal) if you can’t trust someone.
4. Compelling opportunity
The definition of a “compelling opportunity” is in the eye of the beholder.
“What might be compelling for you, might not be for someone else,” said Menasce. “But remember, a truly great deal attracts capital. All good deals get done, and quickly.”
Some people chase deals with “scarcity mentality,” which Menasce advises against.
“When you see bidding wars, that’s scarcity mentality” said Menasce. “The truly great investors and developers are making the pie bigger. They create it. They are not deal-chasing, they are deal-creating.”
5. Alignment
Probably the most complex of the five elements in raising capital is aligning goals for the money and the project.
You need to create straightforward criteria.
For example, when looking at a potential real estate deal, think: What’s the rate of return? What’s are tax consequences? What is the cap rate?
It has to make sense to you AND your investors.
“When something almost works, it’s seductive,” said Menasce. “Don’t waste your time or their time. If there’s any element that’s forced, it’s not going to work.”
Remember, just like in dating, people are not attracted to desperation.
“If it’s a win-lose relationship, I don’t want to do it, even if I’m on the winning side,” said Menasce. “It’s critical to get alignment. If you don’t have it, walk away and find someone else.”
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