Lessons from Commercial Real-Estate Financing for an Entrepreneur Looking for Funding

Whether you are trying at an online crowdfunding site or traditional funding sources, you know how hard it is to get funding, especially if you are new. And since startup investors are mostly inundated with the investment options, they can be as picky as they want. That’s why it’s hard for entrepreneurs to showcase their capital raises that convert a potential investor into an actual shareholder.

Raising capital for your real-estate startup is different from early-stage fundraising. Entrepreneurs can pursue their company’s financial needs in multiple tiered phases that are seed, series A, and the bridge rounds over the time of their business life-cycle. But real-estate developers usually need to round up all the debt or the equity capitals for any project before they can even break ground.

The effectiveness of any commercial real-estate model typically lies beyond a pre-packed investment’s convenience. Actually, it lies within the nature of inherent values of any investment opportunity that is communicated to the investors within a package.

These following characteristics are common in, however, not exclusive to CRE financing and why & how an entrepreneur should have incorporated the qualities into his/her fundraising strategies.

 

Transparency and Disclosure

If the CRE sponsors fail to disclose any project’s inherent risks to their investors, they will most certainly face legal repercussions. Besides, most of the CRE investors have personal preferences for risks. Some of them like low risk and some of them goes for higher stakes. Real-estate offerings files are typically loaded with intel on different risk-factors and feasibility involved in a deal.

Entrepreneurs should start packing all the honest details into the offering files to help the investors to determine how any startup investment fits into the portfolio.

 

Focus on the Returns

For most investors, the appeal of the CRE lies solely on the consistency and predictability of the cash flow. Sponsors typically craft their offerings to clearly display the projected incomes, returns, and time horizons because they know that earning from CRE investment is the primary investor’s motivator.

For avoiding being entirely pinned down to the investors’ expectation, the entrepreneurs are mostly hesitant for making authenticate return projections in the capital-raise materials. In the end, numbers are the kings.

 

Defined Plan

Renovating or building a property needs wealth, oversight,and coordination. Sponsors won’t have the slightest chance of getting any permits, investments, loans,and approval without any specific project plan. Sponsors point out project timeline and the detailed, clear and the long-term intentions for a property in their files.

Entrepreneurs scarcely lay down their plans for business with clarity, especially on the earlier stages of fundraising. However, having firm business plans on the paper helps to get some credibility for the capital raising. This eventually helps close investors.

 

Insider information

Local knowledge is everything in the real estate. If a sponsor keeps it to himself, no investor will take his deal.

Most real-estate professionals incorporate intel on the neighborhood, local development, and property value into the deal material. Especially, when operating in a niche or hard-to-get sectors, the entrepreneurs mustn’t forget to provide the investors with competitors, market trends, etc.,which will help them get up to speed.

 

For more info, please visit: Charles K Carillo

Posted in Real Estate Tagged with: , , ,