With 23 years of experience in the industry, Troy Fullwood outlines the process of raising capital from institutional investors. He reveals all the resources and tools necessary to capture their attention, build the relationship and get the funding.
WHO IS TROY FULLWOOD
-He has been in the note buying business for 23 years, over 15,000 note transactions. 1st Lien performing and non-performing notes. Got into notes because he didn’t want to do fix and flips.
PRIVATE CAPITAL VS INSTITUTIONAL CAPITAL
-Private capital: Individual with money to invest. It can be easier to obtain, but it comes with “emotions.” The individual will typically be limited to the scope of their investments. This is also a limited source of funds. They receive a healthy return on their money by lending to
-Institutional side is unlimited
IT IS EASIER TO GET INSTITUTIONAL MONEY
-Because institutions must constantly deploy capital to earn money. Investors typically think only of banks as institutional funds. Other institutional sources include: Private equity funds, fund-to-fund funds, endowments, pension plans, life insurance companies.
INSTITUTIONS ALLOCATE CAPITAL – KNOW YOUR SOURCES
– Institutions allocate capital to certain types of industry. If you go in requesting funds to build multifamily, that institution may
WHERE TO FIND INSTITUTIONAL CAPITAL
-Go to FamilyOffice.com. Family offices are hedge funds that manage wealthy family money. They are very approachable. Raising institutional capital is 90% relationships, 10% business plan.
STEP 1: CREATE A BUSINESS PLAN
-Have your business plan, which can be elaborated by one of the many services available. Then write an executive summary based on that business plan. Capital investors only want to see the executive summary.
STEP 2: CREATE AN EXECUTIVE SUMMARY: A SUMMARIZED BUSINESS PLAN
-Essentially, an executive summary is a summarized business plan into 2 pages
-What is your goal? What is the current condition of the industry? Who is on your team? Case Studies with verifiable data.
THE BUSINESS PLAN IS YOUR MODEL, THE EXECUTIVE SUMMARY IS THE DOOR OPENER
-The institutional source has only 10-15 minutes to consider your summary. Either they are interested or not. Do not try to “Sell” them on the idea.
PITCH DECK: BRIEF PRESENTATION OF A BUSINESS PLAN
-What is the problem? How are you going to solve it? Why are you the person to solve it?
-The executive summary is a brief business plan summary written in short paragraphs. A pitch deck is a power point summary of the business plan. Written versus visual.
Executive Summary Example:
–What is your goal or How are your solving a problem? Building multifamily housing in Pensacola, FL.
–What are the current market conditions or What problem are you trying to solve? Provide data that supports the need for multifamily in that area. HUD.gov, articles showing the lack of housing in that area, etc. Have as much documentation as you can.
–Who is your team or why are you the person to solve the problem? Have bios on yourself and your entire team. Include testimonials about each person.
THE BUSINESS MODEL
-The business model is a detailed explanation of your business (20-30 pages). Your business plan must be transparent and include the possible negative risks of the deal as well.
HAVE SUPPORTING CASE STUDIES FOR YOUR BUSINESS MODEL
-Example: You want to build multifamily in
FOR INSTITUTIONAL CAPITAL, THINK BIGGER PROJECTS
-Commercial, Industrial Commercial, Retail, Hospitals. Note: Hospitals typically do not own the buildings they occupy.
FAMILY OFFICE MONEY START AROUND $10 MILLION RAISE
-Have a very dialed in – Buy, fix, hold to develop cash flow from that. Debt service that capital.
BUILD OUT YOUR TEAM
-You, your partners, you accountant, legal firm, title firm. Have all of them write testimonials on your behalf. Put the bios of your entire team. IMPORTANT: Have testimonials in your business plan.
THE EXECUTIVE SUMMARY
-Respect the time of institutional investors, the executive summary should be to the point, no fluff. With emails, get to the point.
WHERE DO FIND INSTITUTIONAL INVESTORS?
-FamilyOffice.com is the best source. It is around $400 to buy their database of all the hedge fund managers of the institutional funds. Review the hedge fund managers website. Find your niche. Send a personal email to the hedge fund manager, not a bulk email. Do not contact them through Linked In. Initial Email example: “I was on your website, saw that we are in the niche. I think there might be some synergy or partnership opportunities. I have attached my executive summary. If you are interested, I would like 15 minutes to discuss this with you.”
Put the onus on them, do not insert yourself into their situation. You will get red flagged very quickly.
EMAIL SUBJECT LINE IS IMPERATIVE
-Example: “Increase Returns in the Real Estate Field”, “Would you be interested in this?”
-You have 3.6 seconds to capture someone’s attention through email.
THE 15 MINUTE CALL ALLOWS THEM TO ASK YOU QUESTIONS
-The institutional investor will ask you questions about the executive summary you sent if interested. They will ask for the business plan. They will have their analysts review the summary so the data must be accurate. Reverse engineer the relationship, when you send them an executive summary, ask in what other areas are they are investing.
HAVE A PROFESSIONAL IMAGE
-Including a professional email signature with your contact information, a professional website, Linked In. Clean up your Facebook so that you look professional because they will research you.
THANK YOU CARDS GO A LONG WAY
-Send a thank you card. Handwritten. Have an attitude of gratitude. Don’t just ask for the money, you must earn the right to ask for the money. Discover the things that they are interested in and build a relationship. For example, find out where they went to college. Send them a hat, shirt or something from that college.
HOW TO GET TO THE YES
-Find the correct audience for your business plan. They will control the entire process. They are trying to get to know you better. If interested, they will make a proposal. It may not fit, but
WHAT IS THE PERFECT BUSINESS PLAN?
-The one you believe in. It will attract the money because it is about the relationships, the numbers can always be changed.
1.What is the definition of lien position how is the lien position determined?
2.Other than banks, what are sources of institutional funding?
3.What is the best source to find institutional capital?
4.What is Step One to getting institutional capital?
5.What is Step Two to getting institutional capital?
6.What is important to include in your executive summary?
7.What is the perfect business plan?
GET THE ANSWERS
#RaisingInstitutionalCapital #HowToRaiseCapital #RealEstateInvesting
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