Real estate deal syndication has been around for a long, long time. Syndication is the pooling of funds from numerous investors to fund real estate projects. Sound familiar? Yep, it is basically the same as online capital-raising or crowdfunding, just that the latter is typically conducted online whereas deal syndication has traditionally taken place over the phone or in person. I intend to accomplish two things with this post: first, remind you how deal syndication can help you, and second, to discuss how you can leverage technology and social media to grow your investor base and achieve better terms.
1. Why Syndicate My Deal?
In short, here are a few reasons why syndicating your deal could benefit you:
– Diversify your investor base. Simply put, spreading the LP (i.e. syndicated) interests of your deal will help you avoid having a single almighty investor in whose hands your life rests.
– Deleverage your balance sheet and lower risk. You achieve this by putting up less of your own funds towards the equity and by requiring less debt for your deals.
– Do more and bigger deals. A bigger pool of funds can increase the quantity, size, and quality of your deals and, as a consequence, grow your business.
– Get better terms. Again, by diversifying your investor base, you may be lucky enough to get the funds without having to lose your shirt to a single almighty investor. Also, once you have established a solid track record, investors will be more forgiving when negotiating terms.
2. Why Work on My Online Presence?
For those of you who have worked at institutional real estate sponsors, I don’t need to remind you of the importance of investor relations activities. This is what allows these big behemoths to build, strengthen, and grow relationships with institutional investors and achieve the goals I outlined above.
However, deal syndication requires a lot of heavy lifting and puts pressure on the resources of smaller operators. Managing syndications and investor relations, together with all your usual workflow, is a challenge. The larger your network (which is a good thing, by the way), the more difficult this becomes.
But here’s the good news: technology has improved since the days of boardroom meetings and Telexes. It’s now possible to maintain a solid relationship with hundreds of investors by keeping them updated on your deals and your business by using a mix of social media, content marketing, and traditional investor relations activities. What’s more, social media now makes it possible to grow your investor following through “social proof,” rather than solely through the less scalable word-of-mouth and one-on-one outreach.