What do investors look for in new real estate ventures initiated on behalf of a residential redeveloper?
Even if you have no plan to raise capital, find partners, or sell your real estate business, it pays to know what investors are looking for. This not only applies to VCs, angel investors, and larger competitors that may be willing to buy you out, but to individual buyers and real estate investors that you may hope to do business with. You never know what the future holds, when you might need a cash injection, loan, or business collaboration. Today, a ‘startup’ can be a company that is five or more years old. In fact, Forbes data shows that the odds of scoring venture capital is much higher for companies that are at least 4 years old. So what do investors look for in a real estate company?
1. Integrity: Masses have tried guessing who Warren Buffett’s successor will be based on their experience. Yet, the most recent comments from Buffett and Charlie Rose have identified ‘character’ as the most important trait to exhibit. If investors have it, they’ll prioritize integrity and character in those they do business with, and invest in. No promises of returns or growth are worth the risk of doing business with people that don’t have integrity. Even if the investment is attractive, unscrupulous individuals will notoriously cause a world of problems to those around them.
2. Thorough Research: Thorough research is critical for the viability and success of real estate ventures. There has been a startup frenzy in the tech world, which has carried over to real estate. Thousands of new investors and business owners that have jumped into the industry since 2008. Sadly, many of these entrepreneurs have rushed into starting companies and buying properties with no real knowledge of the industry, the factors at play, or even the competition. Aside from being taken seriously, you can’t have any real expectation of success unless you’ve done your homework.
3. Passion: Passion sells. This is true when it comes to selling real estate, selling a business, and promoting investments. If you aren’t excited and charismatic, how can you expect anyone else to get excited enough to take action, and actually put their money on the line? This doesn’t just mean being passionate about the money making potential. Some may buy into that, but there are plenty of others promising big returns and money out there. What about real passion and caring about what you are doing? That might be caring about solving the affordable housing crisis, helping others build wealth, building real estate that is better for the environment, or even just creating the most beautiful and best designed units out there.
4. A Good Plan: It should go without saying, but you need a good business plan, solid system, and realistic projections.
5. An Edge: What differentiates you from the thousands of other property sellers, investment promoters, and real estate startups? What’s your edge? What is your unique selling point? What area are you able to outperform everyone else in? Is it in growth, market share, profit margin, scalability?
What it will do for them
What will investing in you, your business, or your product do for others? Beyond the money? There will always be another competitor that is willing to promise higher returns, or that has a longer track record, or more media attention in the moment. So what does your opportunity offer behind the money? If you would have been one of the first to invest in Uber, or Apple, or Google, you’d be feeling pretty god right now. The same goes for having bought and holding a prime Manhattan, San Diego, or SW Florida property. However, the monetary proceeds are just a part of that. Even among the most modest, there is a great feeling of having made a very smart investment. This can be far more valuable than any percentage rate return, or dollar amount in itself.