5 Common Reasons Why Real Estate Syndicators Fail

During my time in this industry, I’ve seen many real estate deal sponsors fail to close a deal and walking out from real estate completely; but why?

Where some of them are doing great with deals, the majority is failing to hold their ground, mainly because of some common mistakes they made in approaching a deal or how they run things.

1. Not having a structured approach to a deal

Crowdfunded real estate or as we call it – syndicated real estate deals, can be structured or approached in different ways. Equity crowdfunding, donation based or debt options are popular. Also, there are regulation; A, D & A+ filings along with other variations.

Despite having several options for raising money and distributing returns, sponsors still find it difficult to draw investors’ attention, mainly because they fail to approach the deal or structure it correctly.

Without making the structure appealing to your target investors, there’s no guaranteed way you can get partners and good deals.

2. Not having enough to seal the deal

Not raising enough money is one of the main reasons the deals are not closed. This can happen for several reasons. Either the investors are not interested in that deal or the assessment of total expenditures, including; legal fees, marketing, researching, etc. was in correct.

To make sure this doesn’t happen, it’s best to approach a deal only if you think that your investors will be interested in it. Also, if you are having trouble assessing the cost for the deal or if you don’t have time to do it, hire someone who can help but never approach without assessing the total cost.

3. Using Software

Sponsors these days have a number of options to raise the money for the deal. They can either do it offline or leverage existing 3rdparty crowdfunding portals or simply launch their personal web portal with the help of a white label syndication software.

To run things better for the team and attract more money from their investors,it’s important to make the whole process smooth and easy to follow.

4. Get Organized with the Legal Paperwork

The legal paper work and laws are cumbersome in real estate. Without knowing them and understanding properly, it is not easy to stay away from lawsuits involving the investment & return terms, ownership, etc.

Also, the Feds, CFPB, and SEC won’t be leaving you any holes where investors& sponsors can escape from the complications. That’s why it’s important to be in touch with a good law firm who has a lot of experience in this particular sector.

Also, it’s important to have agood attorney, experienced in the field as well. And while making the decision regarding the attorney and the law firm, it’s best to budget the fees and expenses.

5. Keep the investors involved with deals

Investors are always looking for options where they can invest and get the return as soon as possible. They don’t like to stay idle, they get impatient too quick. That’s why it’s important that you offer them new deals and opportunities to invest. If you can’t provide them with ample opportunities to invest, chances are they will put a hold on any business relationship you have with them.

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