5 Steps to raise money online for Real Estate
Being a real estate developer, when you’re ready to do a project you need the money fast. You scour the market, looking for the right deal. You find something where the numbers work. You’ve done your due diligence and get excited that this is going to be a great deal. Now the property is under contract and you’ve got 30–60 days to raise the money. If you think now is the time to go crowdfund this deal without a following, you’re setting yourself up for failure. I have found most successful crowdfunded raises go on the following path.
1 — Demonstrate your expertise
No one knows who you are or what you do at first. So you first have to demonstrate that you are good at X. Demonstrate your track record for building homes, flipping apartment buildings, or leasing warehouse space. Whatever it is that you do, investors need to be very comfortable that you have done it before and that most of the time you are successful at it. If this is your first time, partner with someone who has a track record. Think like the investor, would you put your money with someone doing something for the first time?
2–Grow your list
Now that you have a story to tell, go tell it. You will need to do some marketing without an offering to establish yourself. Marketing is not my strong suit, but there are many very good marketers to be had out there. The choices are almost endless. You will need to constantly be engaging your list, growing it, and marketing for new people that are interested in investing in your deals. Your list will either be growing or dying, so make sure you stay on the growing side.
3-Deliver value to your list
Now that you have some people checking out what you do and if you can enroll them in coming back, make sure there is something new for them to do or consume if they click on your marketing copy. There are three general categories that I like for creating content, education, opportunity, and thought leadership.
Education being something you teach to your readers. I find this one hard sometimes because I assume my readers know everything I do. I have to remind myself that I do have something to offer and not everyone knows what I do. Imagine that you had to teach your industry to a new hire. Write how you would do it. Don’t worry about giving away the secret sauce. You’re writing to investors. They will see how much you know, decide that is a lot of work, and invest with you instead of competing with you. This way you can do the work and the investor and get her return.
Opportunity content is a anything that shows opportunity based on what you know. Because you are a specialist in leasing warehouse space in eastern Topeka, KS you are likely a small subset of people who know that market well enough to identify what is a good deal and what isn’t. Anywhere your expertise gets traction is something you can share and readers will want to know about. This doesn’t have to be a specific deal. It can be about market conditions or how markets are changing.
Thought leadership is a bit of a buzz word and it’s actually pretty hard to do because everyone has already thought of everything right? There’s nothing new share. Well that is true to some extent. It’s likely that there may be other promoters doing something similar to you. However the market is large and everyone is not going to be familiar with everyone else all the time. Discovery is a major part of marketing. So even if you are doing something similar to someone else, put your spin on it and go for it. Just think about the number of providers there are for marketing services, self development, or vitamins. You’re always going to compete, so make your competitors compete hard to keep up with you.
So back to thought leadership, what is it? To me it is providing an insight or new way to do something based on the specific domain knowledge you have. It can be making predictions about where you see your industry or a trend going. It’s OK to be wrong, but if you make a prediction based on your expertise, readers will want to know what that is.
4-Do something that works
Now you have a decent following that is opening your newsletter and checking out what you do. If you’re a Real Estate developer, this is probably going to take you at least a year to get to in order to establish a track record of performance, even a short one. See what I said about partnering above. If you can record this history in the form of stories about each deal and how they worked, you give your potential investors something to desire. They want to be part of what you’re doing. It works, ok now I want to participate.
5-Invite your crowd to join you
Now you have a tribe of potential investors that have followed you for a year, read your content, watched your projects flip and make money. The tracks have been laid, the train runs, it shows up on time. Who doesn’t want to get on now? All of the previous steps have reduced the risk for your investors. Now your list is ready to invest in your offerings and they will.
If you go straight to the end, then you’re going to be disappointed going the crowdfunded route. You can use a broker dealer to sell your securities but that is going to come at a much higher cost. Getting it fast has value and you will need to spend for that. Even if you do use a direct sales team to raise money quickly, there’s no good reason not to do the above. A year is a very short time in the Real Estate business, and the sooner your start engaging your investors, the sooner you will be able to grow your list and raise money at a lower cost.