The Legal Way to Build Investor Demand Early - E1198 - RMR

So there is a question that I've gotten a lot recently because of how we think about raising money.

A lot of people come to us and before they work with us, they're like, I got to find a deal.

I got to find a deal so I can start raising money.

And I'm like, well, I hope you're not under LOI or even about to submit an LOI and you're about to put in 200 grand of earnest money before you even know if you can raise the money.

Please don't do that.

Please figure out how to build interest and excitement before you're doing that.

But then the next question that some savvy investors have asked me recently is, well, how do I do that compliantly? if I haven't even really created any offering documents yet? And that's actually a very good question.

Both of them should be explored, but I think you're a perfect person to have on to talk about that.

Before we jump into that, that's one of the things that you and I are super aligned on is like, how do we get interest, excitement, commitments, confidence before we go and put a $250,000 into a deal and then figure out if we can raise the money?

Yeah, it's a good question.

And it's easy to fall victim to over preparation and then never doing right.

So I don't want anyone to kind of hear what we're talking about now and thinking that, oh, I can never start because I've never talked to investors yet or whatever.

We're not necessarily saying that.

There have been plenty of people that I know, I'm sure you know as well, that have raised capital in a more stress inviting environment than they needed to, right? I guess what you and I are more saying is that you can relieve a lot of that burden in your raise, if you educate your investors beforehand, your potential investors, grow your Rolodex with maybe a sample deal, maybe that's commercial real estate, oil and gas, whatever that situation may be.

I think when you educate your investors before you ever have a deal, you'll even know if they're interested or not.

I think one big mistake people make is because they haven't coach their investors yet, like we're about to discuss.

They don't really know what their capital raising power is.

So now they're putting $10 million, $10 million properties under contract, which is at a minimum going to require probably a $4 million raise with the down payment reserves and whatnot.

And if you don't even know if you can raise four, you're having to bring in partners, you're relying on people that maybe you've raised with, maybe you haven't.

And There's just so much dominoing benefit that comes from putting in the pre-work before you even have something on a contract.

Definitely.

Essentially, you have to.

Once you see the way we do things, it's obvious.

But I'll give you a perfect example.

The last deal we did, and you helped us draft the documents on this, we bought a $10 million deal.