If you’re trying to raise money in today’s economy, you might have noticed it’s not as easy as it used to be. Before 2022, raising capital was a lot like fishing in a well-stocked pond: plenty of funds were available, and people were eager to invest.
But since then, things have changed. Investors are more cautious, and competition for capital has increased. Today, raising money takes a fresh approach, focused on communication, conservative strategies, and creative methods.
Here are three strategies for raising capital for multifamily deals in today’s real estate market, whether you’re looking to raise a few hundred thousand or a few million dollars.
1. Start Investor Conversations Before You Have a Deal
One of the biggest mistakes in capital raising today is waiting until you have a deal in hand to reach out to potential investors. To attract capital successfully, you need to start these conversations early.
Raising money now takes time and patience, and that means having your network warmed up and ready long before a deal is even on the table.
Here’s how to build relationships with investors early:
- Create an Awareness Campaign: Regularly update your contacts about your work in real estate, and share relevant articles, podcasts, or even market insights. But don’t spam their inbox! By consistently providing valuable information, you become a trusted source and make it clear you’re active in real estate investing.
- Build an Email List: Start compiling an email list of everyone in your network, from family to professional contacts, and engage them with helpful content and industry updates. You can also add value by offering something like a free resource or an informational webinar. This way, when you have a deal, your contacts are already familiar with you and your work and ready to listen.
- Be Available and Accessible: Make it easy for people to reach out. Using tools like Calendly or other scheduling apps allows potential investors to book a call with you directly, making it more convenient for them to connect
2. Take a Conservative Approach to Underwriting
In a market that’s more unpredictable, investors are looking for security. Gone are the days when you could assume aggressive growth or predict steady rent increases without question. Now, it’s important to keep your underwriting conservative.
Here are some key factors to focus on:
- Interest Rates: Assume they’ll continue to rise or at least stay high for some time. This way, you aren’t relying on rates dropping to make your deal work.
- Rent Growth: Be conservative with rent growth projections. If the market you’re in has seen 5% annual rent growth, consider projecting 2-3% instead. This gives you some buffer room and reduces the perceived risk for investors.
- Cap Rates and Market Conditions: Acknowledge that cap rates could fluctuate and build that into your projections. Many investors are more comfortable seeing a moderate, achievable Internal Rate of Return (IRR) over a high, aggressive one if it means less risk.
Investors right now prefer deals with realistic assumptions.
A conservatively underwritten deal that targets a 12-13% IRR will often attract more attention than one projecting a higher IRR with risky assumptions. As you share your deal, highlight how your conservative approach will protect their investment, which will reassure investors and make them more likely to work with you.
3. Get Creative with Your Capital-Raising Strategies
Raising money today also takes a bit more creativity. The traditional approach—holding a webinar to present your deal—is becoming less effective.
Many investors don’t want to sit through long presentations or commit to set schedules. To stand out, consider mixing up your approach with new methods that better suit investors’ needs.
Creative tactics you might try include:
Pre-Recorded Webinars
Instead of a live webinar, consider pre-recording your deal presentation and breaking it into shorter, digestible videos. Send these to investors in a drip campaign, giving them a chance to learn about the deal on their own time. Investors appreciate the flexibility and can engage when they’re ready.
506(b) to 506(c) Rollovers
If you have a deal set up under a 506(b) exemption, which allows you to raise from accredited and a few non-accredited investors, consider rolling it over into a 506(c) if it doesn’t fill up.
This lets you open up the deal to broader marketing (such as social media) for accredited investors. Just be sure to consult with your legal team to ensure you’re following SEC guidelines.
These methods allow you to market your deal in new ways, making it more convenient and engaging for investors. Many people have seen success using bite-sized content, as it aligns with how investors like to consume information today.
Final Thoughts
The rules of raising capital have shifted. In today’s market, investors are more cautious, and there’s more competition for their attention. By starting conversations early, adopting a conservative approach to underwriting, and getting creative with your outreach, you can still secure the funding you need to make your deal a success.
Capital-raising isn’t what it used to be. The current market requires more thoughtful preparation, transparency, and a willingness to adapt. If you implement these tips, you’re more likely to attract investors who are ready to work with you for the long term.
Whether you’re new to raising capital or a seasoned pro, these three tips will help you connect with investors and build trust in today’s market. Raising money may look different now, but with the right approach, you’ll be able to adapt and succeed.
