Strategies for Raising Capital for Real Estate Funds

Goals

Identify successful capital-raising strategies for real estate funds between $10 million to $50 million to inform a marketing strategy for Valiance Capital.

Early Findings

Related Findings

  • Real estate funds were struggling to raise capital in 2019 in part due to years of rising prices.
  • While a substantially larger firm, Blackstone raised a record $20.5 billion in funds in Q3 2019. To raise such record funds in a slump, Blackstone created a diversified portfolio of funds with different strategies and goals to appeal to a wider swath of investors.
  • Rental apartments (in domestic and foreign markets) are a market seeing a growing amount of funding from investors and would likely see higher returns on marketing investment.

Strategy: Give Realistic Expectations of Returns

  • For real estate funds in general, giving potential investors a realistic expectation of what their returns will be is key.
  • Having too much confidence or over-selling the potential return will prompt investors to believe that the fund is a high risk investment.
  • The potential gains from underestimating returns and delivering more later are much greater due to fostering a better relationship with the client (and thus serving long-term goals for future investments).

Strategy: Connecting with the Audience

  • In 2017, Origin Investment raised $4.4 million in a single week from 16 separate investors with high net worth.
  • Part of Origin Investments's strategy was to connect with its audience, per Ben Harris, head of investor relations for Origin Investments.
  • Recognizing that there are many investors scouring the internet for many investment opportunities, Harris recommends identifying and empathizing with this search and speaking to investors' pain points.
  • New investors in particular may find the field intimidating and the potential for failure to be high, so firms that take the approach of being an informative and supportive ally in providing them with a greater understanding will have a better connection.

Summary of Early Findings in Relation to Goals

The first hour of research involved outlining the project to determine if the requested information is available. There are helpful strategies available that are generalized to real estate funding overall (one of which is provided above); the research team can continue to provide similar examples if desired. Additionally, there are strategies that are more specific to smaller funds (also provided above) and this research can be continued.

Based on our early findings, we recommend the following next steps to inform Valiance Capital's marketing strategy:

Proposed next steps:

You need to be the project owner to select a next step.