If You Want Money, Ask for Advice; If You Want Advice, Ask for Money


There are a number of things that you can and should do as you venture out in your capital search. In our on-going capital markets series, Steve La Terra, Managing Director of Advisory, provides insights learned over a 20-year career as a real estate investor.  During his career, he has raised private investment capital, private equity, institutional capital and debt.  His insights may be valuable as you look to finance your next investment opportunity.

The previous blogs in this series highlighted the various investor “types” and illustrated how your deal will be “viewed and processed” by a potential capital source. This blog provides a few insights that should make your capital search more efficient and successful.  These insights and techniques can be employed by almost anyone, and have been proven to increase the chances of a successful raise substantially if diligently followed. They include:

  • Keep detailed notes – seems simple, but it’s not.  Be sure to include names, titles, contact info, times and dates contacted, method of contact (email, phone, etc.), unique insights that were shared, etc.  Reference these notes frequently.  If you make contact with a potential capital source, make sure to ask about investment preferences in terms of dollars, deal types, structures, time frames, etc.
  • Ask for referrals – you will be turned down more than you ever imagined. KEEP GOING…“No” doesn’t mean your deal isn’t worthy, it just isn’t right for everyone.  If you receive a “No”, always ask: “I understand my deal is not right for you, but would you recommend that I speak with anyone (warm referral)?” and/or “Is there something about my deal that would prevent you from recommending it to someone else?”  If you receive a “Yes”, it is especially important to ask for referrals since they are already bought into your deal.
  • Provide a sophisticated cash flow – your cash flow needs to demonstrate competence and understanding of the interdependence of inputs. Include an inputs page that shows the impact of various adjustments to the inputs (sensitivity analysis) on returns.
  • Packaging – uderwrite your deal first.  Have a Market Study, Appraisal and evidence of the deal’s feasibility. Don’t forward a broker package without analysis. Send your presentation in one .pdf attachment that showcases the relevant facts up front and in a concise manner. Don’t overly explain or justify in a package. Be honest. Exaggerated claims may disqualify your deal as being out of touch.
  • Personal presentations – if you are asked to present your deal in person or over the phone, begin with the story and quickly explain the financials. Every source wants to make sure that the story is compelling and that the returns align with the story and perceived risks.
  • Be transparent – if the source is still on the phone after a few minutes, they will ask questions. Make sure that you explain both positive and negative aspects of your deal. No deal is perfect and capital recognizes this. If your conversation moves to the cash flow, make sure you can easily explain all of your assumptions.

Realize that your relationship with a capital partner is a two-way street.  While capital may initially have more leverage than you as an operator, you will make the ultimate call as to whom you invite into the deal.  It is important to have an alignment of vision, not just an alignment of interest with your capital partner. A good capital partner is nirvana; a bad capital partner can devastate a business. Choose your partner wisely and make sure there is a fit.

Contact us to discuss how we can help with your next real estate development.

Steve La Terra, Managing Director – Advisory Phoenix