After months of conducting market research, analyzing data and trends, and structuring an upcoming project, a real estate syndication is finally ready to pursue a new project. They know exactly what kind of property they hope to develop, where they hope for that property to be located (not only the market, but the specific plot of land), and they know what rents will need to be charged for the project to be profitable. As this point, the only thing the syndication is missing is its investors.
Where will the money come from?
The first place to turn, depending on the firm’s financial situation and track record, could be a bank to apply for a commercial loan to cover as much of the cost as they can get. However, while there is nothing that makes this option formally off-limits, the debt service commitment will skew a prudent firm’s entire risk-reward calculus, inclining them to take on less debt as a bulwark against a downturn in the economy. Rather than pushing for as much leverage as possible from a bank, a well-developed syndicate will turn to its network of potential investors to organically raise the equity capital it needs to fill the funding gap.
If the firm has just one “go-to” investor, they will soon discover that putting their eggs in one basket was likely a poor idea; as soon as this investor vetoes the project (or demands unreasonable deal terms), the syndicate will be back to square one. With two possible investors, the firm will still be in undesirable position, but at least it will have options. With one hundred individuals within the network, the odds of success will improve—with millions of possible investors, the likelihood of succeeding will be even better.
It’s a party—everyone’s invited
In the digital marketing space, when all else is equal, it is better to have more friends than to have fewer friends. Now, in this specific context, what constitutes a “friend” will differ from its normal usage. These are not the people you will be telling your deepest secrets to, nor will they be the people you go out with on the weekends (well, in some cases, they might be). But your friends—your pool of possible investors—will be the people you can turn to in time of need. They are the people that you can count on and, so long as you can keep mutually benefitting from working with one another, they are the ones you’ll be able to count on for many years to come.
The crowdfunding era has tremendously altered the typical relationship between the sponsor and their pool of investors. Nowadays, it is highly probable that the sponsor and an investor will only very infrequently communicate with one another directly and it is even more probable that they will never meet in person. Naturally, this begs the question: without any direct interaction, how can a sponsor effectively find the “friends” they need to complete a project?
This is where sustained digital marketing efforts and well-constructed public relations campaigns can make such a major difference. By consistently publishing useful content, for example, you can add value to another person’s life. As they are explaining to people in real-life about how lower interest rates have created new real estate investing opportunities, people might ask them where they found such information—while they won’t necessarily say, “I heard it from a friend”, they will likely remember that you were the original source and you were the one who added value to their life.
In the digital world, businesses of all kinds are constantly forming relationships with real people, whether or not they consciously care to admit. For these relationships to yield any sort of tangible outcome, you’ll need to consistently tend to this relationship and allow it to organically grow at all times. You might not know exactly who is listening, but you do know that somebody is listening. Somebody, in a world of two billion internet users, wants to learn more about investing in real estate. If your firm can position itself to be the one that answers their questions—which is often the underlying goal of any digital marketing effort—then you just might be able to establish a crucial friendship that can last for many years to come.
Calling your network of possible investors your “friends” might seem a little trite or cliché, but using this term can serve a very valuable purpose: this term helps reinforce the notion that these individuals are not just possible ATMs, but are real human beings with real human needs. By continuing to remember the human element of digital and content marketing, your firm will be able to develop the fruitful and authentic relationships it needs, not just for the upcoming project, but for whatever projects you might have in store for the future.
The democratization of the real estate industry, made possible through new crowdfunding laws, has helped restore the human element that the industry as a whole has largely been missing. The investor, the sponsor, and everyone else involved in the project might all have distinct titles, but they are all still human beings.
And what could be more human than wanting to have a few more friends?
Adam Gower Ph.D. is an authority in content marketing and online communications for the real estate industry. He has more than 30 years and $1.5 billion of transactional experience in commercial real estate finance and investment. Today he builds best of class digital marketing platforms for private clients so they can raise more capital online and provides online courses for those who want to do it themselves – all at GowerCrowd.com and learn more about how to syndicate real estate projects online, click here.