RE Development Capital Raising Best Practices
To understand best practices for raising equity for real estate development projects.
- A primary "rule" of raising RE capital is to invest in yourself. Investors will want to see a personal stake in the project.
- Real estate developments must have a project plan. This includes specific requirements and needs, robust capital estimates, investments needed and profit expectations.
- There are four primary sources for capital for RE development: private/hard money lenders, self-directed accounts, private placement memorandums and wholesaling.
- Soft skills required to attract capital are seasoned experience, team cooperation, passion, tenacity, flexibility and knowledge. Furthermore, one should emphasize the opportunity that investing brings.
- When approaching private money lenders, the most common source of RE capital, FortuneBuilders advises following the "six Ps": "Protect their capital
, Promise realistic returns
, Prove your potential
, Procure a great deal
, Provide your track record
and Promote relationship building."
- Some developers choose to use a third party to assist them in raising capital, such as RealtyShares.
- Crowdfunding is also a major source of real estate capital these days. One must first decide whether they want debt or equity funding.
Proposed next steps:
You need to be the project owner to select a next step.