Warrior’s Guide to Rental Investing and Management www.IRREIA.org
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Copyright © 2010 – Blake Ratcliff. All rights are reserved. You may not distribute this report in any way. You may not sell it, or reprint any part of it without written consent from the author, except for the inclusion of brief quotations in a review.
The Warrior’s Guide to Rental Investing and Management
Published by Blake Ratcliff
Smashwords Edition
Smashwords Edition, License Notes
Disclaimer
This book does not offer financial advice, investing advice, management advice, or other rental, financial, or investing advice. The reader or any other users of this information do so entirely at their own risk.
Using the advice of trained professionals for legal, accounting, financial, investing, or management advice is recommended at all times.
“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.” Theodore Roosevelt, 1910
Table of Contents
Chapter I - Raise More Capital Easier and Faster
A Top Tip for Principals Raising Capital
Keys to Attracting Investment Capital
A Great Rental Investment Presentation
2 Key Focus Areas to a Great Investor Presentation
Effective Investor and Debt Capital Source Development for Large, Complex New Construction Projects
Investor Equity Capital Raising Presentation Tips for Principals
Principal Credibility and Integrity is a Sought-After and Coveted Investor Objective
Raising Capital is Easier with a Great Looking Business Plan
5 Ways to Create Real Estate Investing Credibility
How to Get Funding for Investing
3 Reasons for Investors to Sign a Subscription Agreement
Choosing Your Property Legal Entity Structure
3 Reasons to Build Your Business and Real Estate Network
5 Steps to Begin Your Real Estate Investments
Required Material for a Commercial Loan
3 Key Contributions Great Partners Offer
Winning Executive Summary Presentation Tips
5 Steps to Begin an Incredible Business Plan
5 Elements of a Good Presentation
5 Steps Creating a WOW Factor Executive Summary
Creating a Winning Business Plan
Tips for Choosing Great Investors
Putting Your House in Order is the First Step to Successful Investing
What Tools Do You Need in Your Residential Real Estate Investing Toolbox?
Consumer Buying Habits Are an Important Rental Construction and Buying Concern
Constructing the Perfect Multi-Family Property
Eliminate the Homebuyer's Interest Write-Off?
For Most, Home Ownership Is a Poor Economic Choice
Reducing the Homeowner Tax Deduction Is Likely in the Next Decade
Chapter II - Streamline and Improve Property Management
Tips to Find a Great Property Manager
Raise Performance with Training
Drive Great Management with Training
Is Smaller Better or Is Bigger Better?
Property Management Priorities for the Decade
Setting Up Property Management? Early Testing and Modeling Mitigates Post-Closing Risk
Selecting the Perfect Management System
PropertyWare - A Great Management System
The Right Information at the Right Time Enables Great Management
Residential Real Estate Payroll Tax
The Number One Lease-Closing Rental Technique
3 Steps to Achieve Continuous Management Improvement
Turbo Tax Small Business - A Good Accounting Tax Filing Solution
A Good Glossary Helps Understanding a Business
4 Skills Every Great Property Manager Must Have
An Easy Solution to Prevent Accounting Nightmares
The Importance of Strong Reserves
Improve Property Performance with Effective Property Visit Plans
Property Management Modeling for Efficient Operations
Standard Operating Procedures Mitigate Risk
Minimizing Multi-Family Management Support
The Difference between Wants and Needs and How to Save Cash
A Career in Residential Real Estate is a Solid Plan
Chapter IV – Implement Great Due Diligence Ideas
Choosing Management During Due Diligence
The Perfect Due Diligence Plan
Initial Due Diligence Review - Save Tons of Time on Property Purchase Decisions
Rental Property Due Diligence - Demographics, Physical Condition, & the Ops Plan
First Due Diligence Requirement
5 Steps to Include in a Comprehensive Due Diligence Effort
6 Major Due Diligence Considerations When Analyzing the Area
22 Important Property-Specific Due Diligence Steps
Text Is an Important Marketing Frontier
Using SMS-Texting is a Critical Leasing Activity
The Rental Housing Market Demographics and Their Evolution
Using Promotional Merchandise to Draw Renters
Promotional Merchandise - An Often Under-Used Branding and Sales Tool
Free White Pages Tips to Pick Property Locations
The Most Important Rental Tool is Signage
5 Quick Ideas to Improve Your Website’s Leasing Performance
Chapter VI - Deliver Great Investor Communications
Investor Communication – A Key Strategy
Great Partner Communications is a Key to a Great Partnership
Organizing Your Financial Model
Conducting a Great Investor Communications Meeting
Investor Management and Investor Communications Are a Key for Winning Capital for Acquisition Growth
What Makes a Good Investor? What Defines an Investor to Avoid?
Chapter VII - Magnify Asset Value
Emerging Markets Offer Great Construction Value
Buying the Right Property at the Right Price - Where is the Sweet Spot?
The Best Housing Value Choices for the Decade
What is the Ideal Apartment Design for Today’s Market?
The Commercial Real Estate "Crisis"
Single Family Homes and the Unexpected Likely Effects on Long-Term Value
Buy Rental Properties to Capitalize on Changes in Household Density
Residents are Focusing on Total Value. Are You?
The National New Housing Inventory is Forecast to Rise to 50% Rentals For the Next Decade
European Debt Malaise Drives U.S. Interest Rates Down For the Year
Owners Top Priority - Occupancy, Occupancy, Occupancy
The Greatest Rental Marketing Opportunity in History!
Rental Investing Has Changed Incredibly For Buyers and Sellers
Knowing the Market and Knowing Business is a Key Step as a Successful Real Estate Investor
Super Residential Real Estate Investment Result Step
Property Management's Focus for Investors is Subtly but Critically Different
3 Ways to Increase Real Estate Investment Synergy
Scaling and Maintaining Focus – The Investor’s Approach to Property Management
Important Investor Responsibility Issues to Assure a Successful Investment
Top Investing Opportunities - Which Markets Should You Choose?
The Top 2 Reasons You Should Invest in Rentals
7 Steps to Avoid a Bad Rental Investment
Residential Real Estate Investing Requires a Risk Mitigation Review and Return Proposal Analysis
Focus is a Critical Key for Principals
Rehab Projects Can Become Huge Disasters. Why?
Controlling Rental Investment Costs
4 Key Steps to Achieve Maximum Investor Benefit
The Quickest Way to Drive Rental Property Value
Market Trends - Tread Cautiously and Start Making Choices
Three Main Causes of Losing Your Investment
Major Factors Behind the Investment Principal's Success
Factors Behind the Investor Principal's Failure
Management Keys to Protect Capital Investment
Management Factors for Return Enhancement
The US Housing Market is Improving. What Are the Long-Term Implications For Investors?
A Top Investor Management Consideration - Revenue Generation Protection
Pre-Closing Steps to Create a Profitable Investment
3 Pitfalls to Avoid When Choosing Investment Projects
5 Characteristics of an Amazing Investment
The Top 5 Risk Issues for Investment Purchases
The Best Rental Investment Opportunity of the Crisis
A Winning Property Negotiation Technique
Great Tips to Make a Great Foreclosure Purchase and to Navigate the Evolving Commercial Crisis
5 Ways to Secure Your Business
4 Ways to Avoid a Personal Guarantee on a Loan
3 Key Steps for a Great Market Study
5 Winning Tips for Identifying Great Rental Property
3 Key Areas That Make or Break a Business Plan
The Best Types of Investment Properties
How to Buy Investment Property with Equity
Investment Direction Post the “Great Recession”
How the Internet Can Help With Property Investing
Investing in Residential Real Estate - Avoid These Mistakes
A Sure Approach to a Safe Investment That Protects Your Invested Capital and Assures Your Income
Key Financial Factors for a Residential Real Estate Investment
A Great Personal Finance Base Improves Investment Success
Sources of Important Real Estate Investment Information
Appendix B – Sample Executive Summary
Appendix C – Sample Business Plan
Appendix D – About the International Residential Real Estate Investors Association (IRREIA)
About the Author
Today, Blake Ratcliff is a principal in a multi-family-focused investment in the Washington, DC market – Capital Area Secured Assets, LLC (CASA). This investment group focuses on purchasing smaller multi-family properties in the immediate District of Columbia area and intends to expand outward over time. Besides acting as an investment manager and principal, he is responsible for the management activities of the company including marketing, leasing, accounting, resident management, customer service, maintenance management, compliance, and all other facets of the day-to-day operations.
200 Meter Rapid Fire Results
Prior to CASA, beginning in 2005, Blake assembled a portfolio of 1,000 units supported by a management company of 60 staff and contractors that he founded and developed in the Southeastern United States (Alabama, Georgia, and North Carolina). This included several dozen investors, over $5,000,000 in equity capital, and tens of millions of dollars of debt. During the course of this activity, Blake enjoyed extraordinary returns and devastating losses as he bought, grew, and eventually divested this portfolio in early 2010.
Blake has played a pioneering role developing online leasing, marketing, management, and investing concepts in the multi-family industry. The Company developed and fielded cutting-edge lead identification and closing approaches using a combination of VoIP, online application processing, online lead qualification, real time payment processing, etc.
His company was completing leases with prospective renters in Afghanistan and Iraq through an online application, qualification, and electronic signature process as early as 2008. Almost 10% of leases were completed sight unseen with the first resident meeting at key pickup to move in. Blake believes that an opportunity exists for managers to gain a real operating advantage by understanding the cycle of behavior consumers demonstrate while shopping for and selecting a rental home. Additionally, he believes there are hidden revenue opportunities in gaining a greater understanding of resident behaviors and priorities once they move on the property as a renter. Blake’s significant experience with applied statistics is a major component of his examination of this area.
He is applying this expertise to develop new marketing, product, and lead management for potential new revenue streams in the rental market.
Blake
operates the International Residential Real Estate Investors
Association (IRREIA) organization and website. IRREIA was
established in February 2010 to provide education, information,
networking, and resources to rental investment principals, investors,
managers, and operating staff. Today, the association has over 1,500
members.
Blake has various other business interests in the Government Sector and sometimes provides investment and executive management consulting and support to a wide range of investment groups, companies, and individuals for operations varying from manufacturing to technology services to real estate investment planning in the United States and around the world.
Blake is a father of 4 children and married to the former Sara Boney, a University of North Carolina graduate, a former Congressional Chief of Staff, and current U.S. Navy executive. Blake serves on the board of trustees for the Union Institute and University. Additionally, Blake has completed the United States Marine Corps Marathon twice – in 1998 and in 1999. Blake is a scuba diver and an avid reader.
The Past
Blake has had the
opportunity to write 100 or more business plans, a similar number of
financial models, return tables, sources and uses, executive
summaries, market studies, and other investor-related documents. He
expects that he has delivered 10X as many presentations on the
subject of business opportunities. An engineer, he has been accused
of being a CFO. As an operations executive, Blake has developed
standard operating procedures, staffing plans, training plans,
reporting systems, and service plans minimizing cost, maximizing
revenue, and assuring high and increasing service levels.
Blake is a United States Naval Academy (USNA) graduate, former Marine Officer, former USNA 1984 class president, and a sometimes speaker on business issues. Over the past 30 years, he has held a wide range of executive management positions including CEO, Founder, COO, VP of Operations and Engineering at 9 startups and served in varying capacities at two Fortune 500 Companies (Springs Industries and General Electric). Additionally, Blake has served on the board of two privately held companies, has worked as an independent contractor, and spent a short time as an executive recruiter.
Between 1995 and 2003, Blake was part of the management team or part of the investment team for 9 different startups (WinStar Wireless, Dyntel, Ntegrity Communications, Apartment Communications Inc, China Wireless, Chinawave, WorldNet, Stox.com, and others). At these companies, Blake developed his skills assembling business plans, developing organization and entity structures, supporting investor activities, providing investment presentation support, and deploying and executing business plans. The largest grew to from 33 to 2,000 employees in three years. Some never made it to active operations. In two cases, he served on the team launching businesses successfully in Beijing. One of these still survives today as Tiangui or Goldtel and is led by Peter Wei, a Chinese entrepreneur. Blake raised or assisted in raising tens of millions of dollars for these activities.
A
t
Navy and in the Marine Corps, Blake spent time in uniform in Lebanon,
Japan, Okinawa, the Philippines, Hawaii, California, and Virginia on
various assignments, deployments, and exercises. He’s watched
tracer in the hills in Lebanon and seen the sun set over Pacific
military facilities.
In the Marine Corps, Blake was a communications officer specializing in field telecommunication systems and plans. Besides spending several years in this capacity in the US Marine Corps field units, Blake spent a year as a communications instructor after being trained by the Corps at the United States Marine Corps Communications Officers School.
Blake grew up on a 1,100 acre cattle ranch in central Oklahoma. On the ranch, he learned to ride about the time he learned to talk. Blake herded, branded, birthed, and performed all manner of cattle ranch “stuff”. He spent much of his childhood hanging out on the banks of Oklahoma’s North Canadian River where he spent a lot of time fishing and hunting.
Introduction
This anthology is organized with the idea that many readers might enjoy a ranging set of discussions on various real estate investment and management topics. Additionally, readers may further enjoy seeing the thoughts from the perspective of manager, leasing agent, principal, or investor, depending on the subject.
As a management executive, investor and principal, I’m often surprised at how often books offer high-minded thoughts with no clearly performable punch line. With that in mind, each item included seeks to provide some concept or subject with an actionable discussion. The actions and solutions I recommend will help you improve your investment management, investing and property management game.
Chapter I - Raise More Capital Easier and Faster
Raising investment capital can be one of the most frustrating, and at the same time exhilarating, aspects of property acquisition. This section exposes and explains the processes, the experiences, and the considerations that enable successfully completing this business.
No principal ought to be surprised by how difficult raising capital can be. At the same time, the ability and the approach to raising capital is a constantly changing affair as market conditions and motivations evolve.
A Top Tip for Principals Raising Capital
The single most important step principals must accomplish to develop investors is to establish their own credibility, reliability, and integrity. In short, their reputation and the investor's confidence in their reputation is the single critical element needed to reach agreement terms.
This is not to say that the quality of the plan, the presentation, the proposed terms are not important. They are of tremendous importance, but not until investors develop confidence in the principal as someone that they can trust with their capital and that they will find the investment experience satisfying.
How does a principal go about accomplishing this end?
First, the principal must not rush the investor. The principal must allow the investor the time to become comfortable with his leadership and approach. This means taking the time for the investor to become thoroughly comfortable with the principal as an individual who operates in a reasoned and safe way that will protect his interests.
Next, the principal must demonstrate his or her credentials to the investor. Obviously, the investment documents are part of this process. However, substantial support can come from references, anecdotal experience, and discussion over processes, procedures, approaches, as well as the principal’s way of thinking. References from people who can speak about their confidence and positive experiences are an especially effective way to support this goal.
Finally, if you can gain the investor's agreement, take the time to show them the operation and the projects that you have and / or are entertaining purchasing. The time together on such a trip seeing the facilities, meeting the management staff, viewing the issues first hand, understanding the respect your work draws, and experiencing the work in progress are a tremendously strong method of bringing home the reality of your business opportunity.
In my own experience, if you can gain an investor’s attention for three hours or more on your project, the probability of investment rises dramatically. Principals who believe their personality and charisma can win over an investor in a shorter period of time are deceiving themselves. Trust and confidence develop by spending time getting to know the principal as much as from the facts of the deal. A deal can be incredible, but if the investor can't get comfortable with the relationship with the principal, the investment becomes highly improbable. Further, I would argue that an investment without the trust and confidence of both parties is not in anyone's interest. So, start building the relationships you need and the investment capital will likely follow.
Keys to Attracting Investment Capital
Take it from an experienced executive manager who has participated in literally dozens of investment opportunities in real estate, technology, and services: the fact is, raising capital is not easy. The second fact is, great return prospects are not enough. The third fact is, experience matters - a great deal. At the same time, raising capital is not magic either. Perseverance, thorough planning, good documentation, and an investment proposal that is fair to all parties are a great start on the process of successfully raising capital.
You ask, "So how do you successfully raise capital?"
Of course, how much capital you intend to raise is important. If you don't have the resources to raise $1,000,000, you need to seriously consider finding something more consistent with your own experience. If in general, you can get to any goal you outline, then you need to collect the experience and contacts to get there before undertaking raising capital.
In my opinion, most who seek to raise capital have not collected the experience or credentials they should have before undertaking the task. This is a tough premise because many spend their entire careers collecting credentials and never quite having "enough". I'd describe “enough” as follows:
You should have demonstrated profit and loss experience;
You should have managed capital;
You should have developed and executed business plans;
You should have proven sales and marketing experience.
While you can always seek additional roles and responsibilities, these are the basics. If you don't have these under your belt, there are lots of ways to get there. Find a group that is rolling out services and volunteer to help in some way. Join a real estate investment club. Develop relationships that bring you closer to investment community activities.
While one could argue for more experience, this will cover the bases.
Next, either lead or join a group bringing an investment to the market. Know you will be overwhelmed as you bring all the pieces together or help others do so. The key is to find a resource that can let you know that you've covered the investment bases. The main one you should have is a business plan.
Every complete business plan must include:
Financial model,
Sources and uses,
Clear investment proposal,
Clear return plan,
Strong risk mitigation,
Convincing management plan,
Convincing sales and marketing plan,
Convincing market study
Good executive summary,
Investment documents,
Organizational documents. And
The exit plan
Bring these attributes together, and you are on your way to a potentially successful investment that will attract investors. Reiterating, you must have credible experience and a complete, well-thought-out plan with all the necessary elements to allow evaluating, completing and operating an investment.
A Great Rental Investment Presentation
Often principals prepare business plans, develop financial statements and projections, and begin reaching out to their contacts expecting their good looks, exceptional personality, and reputation to draw capital. Perhaps this was enough in 2005. But in the year 2010, times have changed. The landscape is different now. First, you may have to contact a much wider group of investors. Second, even experienced investors focus on substance and preparation. Third, investors need very clear and detailed help understanding the commitment they are making, the risk mitigation included, the preparation applied, and the process this investment will go through. Presenting your investment with these requirements in mind is a key step toward accomplishing your goal. The process of putting that presentation together then becomes critical.
What are the steps to developing a great rental real estate investment presentation?
The major steps are:
Prepare a presentation that presents the investment fully.
Rehearse the presentation, developing compelling supporting information and highlighting defining investment factors.
Study your audience so that you are fully prepared to answer their questions and inspire confidence.
Ensure that all your equipment and materials are prepared and ready to distribute to the investors.
Let's discuss each item in more detail.
The presentation should:
Define what the investor is buying, what the total investment is, what the terms of the investment are, what the return is projected to be, what the risks to the project are and what the risk-mitigation steps will be.
Define targeting the purchase project or projects.
Provide a clear description of management, marketing and leasing, maintenance and support, and accounting and finance.
Explain the exit.
Define the financial and operational assumptions underpinning the investment.
Provide photos of the project or representative photos of the projects intended for acquisition.
The presentation should be an easy read and the slides structured to provide a reasonable amount of information. Break up information if you have more than 7 items on a chart.
Prior to your presentation, you should plan and conduct two or three rehearsals. The rehearsals will tighten up the presentation material and will allow you to organize thoughts and key points for each page. Work during the rehearsal to develop a pointed, sharp, compelling, emotionally commanding presentation. At the same time, the rehearsal should help you keep it brief.
Focus your presentation on the intended audience. Understand their knowledge base. Try to determine what questions they will have. Rehearse your answers carefully.
Before the presentation, review your material, review your handouts, examine the room condition, check your equipment, check your appearance, and verify attendees. Check the night before and arrive early to recertify at the time of the presentation.
Taking this approach will provide a sharper, more effective presentation and may be the difference between success and failure.
2 Key Focus Areas to a Great Investor Presentation
How do you create a great investor presentation? After all, you aren't meeting with investors to gain their good will. You are seeking their support with their valuable capital. The fact is, a great investor presentation is not magic. Instead, a great presentation is a combination of quality, relevant information combined with intense preparation.
The first key to a great presentation is cool, calm, detailed confidence in the material you are presenting. Reaching this level requires you to know your business plan thoroughly. You must be well versed in your marketplace. You must demonstrate a thorough understanding of industry standards. The investor has to sense your competence during the meeting. And, perhaps more importantly, the information, positions, and issues you hold up as critical items must stand scrutiny outside of the investor presentation.
So, you have to demonstrate a combination of verifiable competence and confidence. How do you accomplish this? Besides knowing your business, your presentation should include verified and proven facts and figures. At the same time, clear and simply presented facts and figures keep the investor engaged and on track. Causing the investor to have to figure out the information being presented is a sure-fire method for killing your opportunity's chance of success with the investors.
The second key is to deliver a sharp, professional, attractive, and thorough presentation in a combination of reports, presentation materials, and oral delivery that supports all of the information you provide to the investor. For investors, this presentation represents the likely best view of the kind of work you do and probable future results from the entity he is investing into. Your investment presentation needs to deliver the image of quality, efficiency and effectiveness that you expect from your company and that the investor can feel comfortably meets his expectations.
This implies that you should come to the presentation with a very sharp presentation to share with the investors, complete with well-organized background and support information as well as access to resources and information that answer any additional questions or needs that arise. In effect, you are showing the investor that you can deliver, that you are well-prepared and researched and not flying by the seat of your pants, and that you don't act impulsively, choosing instead to support your work with the right resources and support. If you tie these two key issues together, you will be on your way to delivering superb business presentations to investors.
Effective Investor and Debt Capital Source Development for Large, Complex New Construction Projects
Large projects present a different problem for principals and are normally not possible for unproven investors. The fact is they are often outside the reach of smaller investors. Generally, large project principals must demonstrate a capacity to deliver such projects, including financial and executive management for the work. Further, the investment size must increase by a large multiple. Minimum initial project funding will require investors able to place $100,000 to $200,000 and actual project investments tend to run from $1 million upward. Few individual investors have this capacity. So, where should a principal with a large project begin?
First, the principal should seriously assess whether he has the experience, skills, and resources to complete the project. The assessment should focus on weaknesses for all key areas to completing the project. Next, the principal should close all the non-capital weaknesses by identifying and committing credible resources for those requirements. Verbal commitment is not adequate. Firm written commitments, background information, references, and sample work product will build a compelling investor presentation.
Second, assess whether you know prospective investment sources with capacity and potential interest in the project. Determine how you can develop sources if they are not available to you. Meet with your best sources and assess what their investment requirements are and what their capacity will be. If they themselves are not interested, work with them to determine how best to enlist their support in developing more appropriate investment resources.
For this purpose, you should speak to:
The largest business owners you know;
The highest-positioned bankers;
Other investors;
Politically connected individuals;
Country club members; and
Other large project principals you may know
In reverse order, let’s consider other factors. Principals are unlikely to share their active project investors. Working with investors requires diligently avoiding confusing the discussion. Because of this, their active investors will not be yours. Instead, focus your attention on investors that they've identified, but are unable to bring into their projects because they are not a good match. Should your project fit better, you may have identified a good source.
Recognize that developing investors is never easy. However, once you have a set of good investors you can steadily build on the foundation over the course of time. For all but the principals, this is a matter of spending time with key contacts (and recognizing that you can only effectively work with a relatively limited few) developing trust, confidence and understanding. At the same time, you must carefully refine your plan and presentation to be confident and compelling.
Summing up, large project investment is a two-step process. First, you must have the credentials and team to carry off the project credibly creating investor confidence. Second, you must develop investors with adequate capacity and interest in your project.
Investor Equity Capital Raising Presentation Tips for Principals
Raising capital is a critical skill and requirement for investment principals. The organization and management of this process is challenging. The experience, credibility, and skill needed requires years of practice, exposure, and serious focus. Most never really feel fully comfortable performing the effort. Developing a solid concept and format eases the process dramatically.
Tip #1: A standard presentation organization helps get the process off to a good start. I typically include an opening chart that gives a "teaser" description of the investment. Next, a very brief chart about the principals allows for introductions at the presentation. A good investment requires a positive economic environment. Because of this, I always lay out the situation framing the investment. Next, cover the basic terms of the investment. Describe what the investor will be investing, key terms affecting capital, and what the investment purchases. Explain management, operations, and funding for these items. The closing section includes sources and uses, financial terms, return expectations, and the exit.
Tip #2: Don't write a presentation and simply show up for the meeting. Preparation is key. Realize and ensure that the presentation is not the in-depth description. The in-depth description should be reserved for the business plan and subscription agreement. That said, the presentation, if the investor engages, will be practically as in-depth as the business plan in that you should seek to fully engage the investor, providing and explaining the details and intricacies of the investment. This means preparation includes planning to drive home the key points and ensure answering critical questions.
Tip #3: Complete a Q&A preparation. Spend time developing the questions and issues investors will raise. Prepare clear, cogent, effective answers addressing each question and each issue. If necessary, bring background material to address the issues.
Tip #4: Seek commitment at the meeting. Don't go to the trouble delivering a well-prepared, complete presentation and fail to ask for the sale.
Tip #5: Have a clear plan to follow up and complete the closing process. Investors are busy people. Executing an effective plan communicating with them and setting the clear expectation in their mind of what that plan will be says a great deal about your organization and respects the limited time that they have available.
Principals should never give a presentation without adequate preparation. Having a plan for the presentation will organize your thought process, make your points more compelling, and significantly increase your opportunity for success.
Principal Credibility and Integrity is a Sought-After and Coveted Investor Objective
Investors are seeking solid credibility and integrity from the principals who put their capital to work. This is a major driver behind the search for and attempt to verify experience and business sense. Investors feel that if they can establish solid experience credentials and proven skills, they are establishing credibility. Unfortunately credibility is perhaps more difficult to determine than simply nailing down the principal's past experiences, identifying their supposed skill sets, or checking references. Additionally, assuring integrity is perhaps even more difficult to clearly define and assure. As principals, we should seek to make the determination and certainty of integrity and credibility an obvious conclusion rather than a game of hide and seek.
How Can a Principal Confirm Credibility and Assure Integrity?
Create a clear, verifiable resume that demonstrates experience in the necessary operating skills, highlighting key areas such as accounting, customer service, marketing and leasing, maintenance and capital improvements, purchase and sales activities, banking services and activities, investor communications, etc.
Join and actively involve yourself in industry education and development. Participate in industry publications, prepare papers and articles, and otherwise strengthen your reputation through observation and interaction.
Participate in conferences and events locally and nationally, developing a broad range of contacts and network resources.
Develop a deep understanding of terms, tools, and resources within the industry.
Integrity:
Prove through your actions and interactions with bankers, lenders, legal associations, vendors, employees, and customers the quality of your word, the sincerity of your actions, the forthrightness of your behavior, and your general honesty.
Participate in activities and organizations providing proof and testimony of your integrity through community service, charity, and mentoring activities.
Create processes and approaches to develop employees and colleagues that speak for your own integrity.
Demonstrate care and attention to the terms of your agreements, proving your intent to follow and abide by the terms, through your concern about what the terms are. Work to assure such terms are fair and reasonable for you and for others joining you in these agreements. Concern and consistent delivery of fair agreements is great evidence of integrity.
Creating clear perceptions and verifiable credibility is a difficult but worthwhile task. Generating this reputation in the industry and among your colleagues is a great path to gain support and increasing influence in the real estate business. A reputation of fair dealing, effective action, competent performance, and reasonable decision-making increases a principal's investor support and capacity.
Raising Capital is Easier with a Great Looking Business Plan
Why is great format a big deal for raising capital from equity participants and lenders? Doesn't it seem like the bankers should only care about the numbers and the facts? Aren't investors focused on returns and not "soft shoe" items such as business plan format? That is how it would seem, but if you jump to that conclusion you are placing a lot at risk on the assumption. Doesn't it make sense that investors would consider that the effort and presentation of your business plans may reflect how you like to operate your investments?
You see, your business plan is much more than a simple statement of your plan to operate the investment project. For investors, it becomes a metaphor for how they may expect you to run your business. Given that investors are often putting very large amounts of capital into an investment, the clarity, detail, organization, and physical attractiveness of the document becomes quite important. Additionally, subtle additions add a great deal to the presentation.