Think you need an Ivy League education or 20 years of experience on Wall Street to set up a fund?
Once you've done a handful of syndications, you can easily launch a fund of your own and simplify the process of raising money for multiple real estate deals.
Bridger Pennington is Cofounder and CEO of Fund Launch, an education platform that helps aspiring fund managers launch, build and scale a fund. Fund Launch has served more than 20K students with its hundreds of videos and dozens of downloadable assets.
Bridger also serves as Founder of Black Bridge Holdings, where he established multiple funds and facilitated more than 326 transactions across a variety of industries.
On this episode of Financial Freedom with Real Estate Investing, Bridger joins Garrett and me to discuss what differentiates a real estate syndication from a fund, describing when it's appropriate to start raising capital through a fund and how the process changes.
Bridger walks us through the pros and cons of raising money with a fund, explaining how it allows you to scale your business faster and close on a good deal more quickly.
Listen in for Bridger's insight on generating excitement around investing in a fund and find out how to launch a fund of your own and raise a huge pool of capital from investors for real estate deals!
Bridger's background in raising capital through funds
- Founder of 2 debt, 3 investment and 1 hedge fund
- Started creating online content for aspiring fund managers
What differentiates a real estate syndication from a fund
- Syndication raises money on deal-by-deal basis
- Buy 30+ apartment complexes with pool of money in fund
When you should think about raising money through a fund
- Already done handful of syndication deals
- Want to scale proven model
The benefits of raising money with a syndication
- Fast and fairly inexpensive to set up
- More tangible to invest directly in property
The disadvantages of raising money through a syndication
- Investors can sue each other
- More difficult to scale
The benefits of raising money through a fund
- Legal protections much stronger
- Portfolio diversified among deals
- Allows you to scale much faster
- Access to lower rates, better terms at bank
- Close on good deal tomorrow
How raising capital changes with a fund
- Must sell existing investors on benefits
- Can also go to family offices and institutions
How to generate excitement around investing in a fund
- Marketing as new deals added to fund
- Larger investors typically need less hype
How a capital call typically works
- Call in percentage of capital for deal you have lined up
- Investors have legal obligation to wire money in 10 days
The waterfall structure for a real estate fund
- 2% management fee on capital raise
- First 8% of return goes to investor
- 9th and 10th percentile to fund manager
- Split remaining return 80/20
The typical size of a real estate fund
- Average target of $25M to $30M raise
- Usually takes 6 to 12 months to fill
Connect with Bridger Pennington
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