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Getting people to invest with you or for you in real estate can be a daunting task. Dan Handford, the Founder of the Multifamily Investor Nation, shares his tips on raising private capital for syndication. He talks about the investor triad of “know, like, and trust” that supersedes everything in anything you do and your capital raising efforts. Dan explains how to apply the triad in the investment and client space, as well as gives some advice on how to get people to know, like, and trust you. He adds that letting people see how much you know about multifamily or any niche is necessary, but adding value to your clients is the ultimate key to success.
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WS239: Raising Private Capital For Syndication with Dan Handford
Our guest is Dan Handford. Thanks for being on the show again, Dan.
Thanks for having me back on here, Whitney.
Dan is the Managing Partner of PassiveInvesting.com, an apartment syndication company that has $130 million and 1,300 doors. Dan is also the Founder of the Multifamily Investor Nation, a nationwide group of over 9,000 elite multifamily investors. Dan, thanks again for being here and I know we’re going to talk about some tips for raising private capital for any syndication. I look forward to getting into that because I know you’ve had a lot of success in doing that. Give the readers a brief bio about you, who you are. They can go back to WS14 and learn a lot about you where we discussed a lot more about your bio and who you are and WS225 and WS232 are where we discussed some different topics.
My background is in business. I have several different businesses and one of the reasons why I got into the multifamily space was from the tax advantages point of view. That’s one of the main reasons why I like multi-families from the advantages and from the tax side of things. I knew I wanted to play on a larger scale, which is why we started the syndication company, PassiveInvesting.com. That allows us to be able to acquire these larger assets by pooling multiple investors into each one of our groups. I didn’t know if it’s this much of a success, but that’s always nice to go to see you, your show, how it’s grown and how it continues to grow.
One of the things that I did want to mention before we got started is about the Multifamily Investor Nation Summit that’s coming up. It’s going to be an online virtual event. If you’re interested in the multifamily syndication space, you can go to MFINSummit.com and find out more information about it. We’ll have over 60 speakers there, a little over 1,000 attendees and it’s going to be a very cool event to be a part of. It’s at the live three-day online virtual. That means you don’t have to travel anywhere. You don’t have to leave the comfort of your home or office. We also still have networking opportunities virtually that we have available to you. We’re doing something very special for Whitney and what we’re going to do is anybody who uses your promo code, Whitney, to register for the event, all the proceeds from those ticket sales will go towards the Life Bridge Capital non-profit that supports children adoptions.
[bctt tweet=”If somebody doesn’t know you, they don’t have the opportunity to actually like or trust you.” via=”no”]
Thank you very much, Dan. I hope the readers will take advantage of that.
I want to get started here and talk a little bit about what I call the investor triad. It’s something that supersedes all capital raising efforts. It’s something that if you miss, you will have a hard time and you will have a challenging time being able to raise capital from anybody, whether it be an institution or whether it be from an individual or even a family or a friend. There’s this thing that I call the investor triad. What I’d like for you to do is get a piece of paper out and a pen. I want you to write a triangle on your piece of paper. On that piece of paper, you’re going to have the triangle, on the top of it I want you to write the word, know. On the one side to the right, I want you to write the word, like. On the point to the left, I want you to write the word, trust. There are these three things: know, like and trust. This is very important to understand because this will supersede everything in anything you do and your capital raising efforts. I see a lot of people that try to do various things and they forget this triad and they’re going to have a hard time raising money no matter how much money they have to be able to market their actual deal or their business in general. To get us started, I’m going to put you on the spot. Of those three things, know, like and trust, which one do you think is the most important?
They’re all very important, but they have to trust you for sure.
I travel around and meet with a lot of people. I ask them that question and that’s the number one thing that they say. I would contend with that and say it’s wrong. What you said earlier was all of them are really important, but the most important one is know. The reason why is because if somebody doesn’t know you, they don’t have the opportunity to actually like or trust you. We have to make sure that we’re focusing on that knowing part so that you can get them into your funnel, if you will, into your life, into your business to be able to start to like and trust you. I know you’ve had some SEC attorneys on in the past, they’ve talked about Regulation D 506(b) and (c) and there are different nuances there. One of the main reasons why most people do a 506(b) is because it’s usually with people that they know, like and trust.
Those people who know, like and trust you are the ones who are going to invest with you the most. You should focus on the note part so that you can start to get out there and network with people. It’s the reason why you’re doing this show. There are a lot more people that know you now that you’re doing this show than before you had this show. Now, they’re reading this blog every day and what that’s doing to these people is they’re starting to know you, they’re starting to like you and they’re starting to trust you because they read this every day. I think that’s one of the main reasons why people are reading this is because they know, like and trust you now. They read this, you’re genuine, you have a great story and you’re a great interviewer and you start to ask a lot of good questions, so they had to know, like and trust you. That’s why people will continue to follow you, but that’s also in the syndication space, the reason why people will invest with you at the same time.
A thought leadership platform is so important and so powerful.
Some people will say, “I’ve asked my mother, which I know has money and she didn’t invest with me.” The investor triad goes deeper than just you. If you used to be a W-2 earner and you used to do whatever, maybe you say you are an engineer and all of a sudden you decided you’re going to start doing this multifamily space and do some investing. Your mom might not invest with you, not because she doesn’t know, like or trust you. She might not know, like or trust the deal or she might not know, like and trust you in the deal, because she knows that you don’t have the experience level to be able to take down that kind of an asset. It’s not just to know, like and trust you. It’s know, like and trust you. It’s know, like and trust that deal and it’s also somebody has to know, like and trust you in the deal. You could probably make a triad within a triad because you had the know, like and trust, but you also have you and the deal and you in the deal. You have to make sure that people know, like and trust you, which when you go back and you look at the 506(b) and 506(c), one of the nice things and the kind of the sexy things about 506(c) is that you can now start to market and advertise your deal, whereas in a 506(b), you cannot.
The problem is that people spend a lot of time and energy and effort and money, spending time trying to market for investors to be able to invest in the deal. If you don’t have a brand that does large enough, like some of these larger crowdfunding sites that do real estate, if you’re just starting and you’re trying to do a 506(c) and you’re going to spend money advertising like on Facebook ads or a TV ad or a billboard or however else you want to advertise your deal, I guarantee you that those people who are accredited investors, because you can only accept accredited investors. Those accredited investors are very rarely if ever going to invest in your deal because they don’t know you. In order to get them to know you, you have to do additional things.
One of the things that I’ll give you an example of is I know with you and your platform that you have here, it’s starting to grow and it has been growing rapidly. With my group, the Multifamily Investor Nation, we have almost 10,000 members as a part of that group now. When we started to consider doing a 506(c), it’s a little bit different than somebody who maybe doesn’t have a list or doesn’t have an audience. If I do a 506 (c), I’m still not going to go do TV ads or go on podcasts and blast about different deals. I’m going take that list of 10,000 people that I can’t market to right now under 506(b). I’m going to take that list of 10,000 people and I can start to market specifically to them. All those 10,000 people, they need that investor triad. Most of all of them know me. That’s how they found me. They know me and most of them if I ask, they’ll say, “Yes. I like you. I trust you. You haven’t given me any reason not to.”
They follow me, they sell the stuff that we’re doing and the value that we’re providing them. They already built up that investor triad. When we have a 506(c), we can now market to those people specifically because they already know, like and trust me. To use a 506(c) to your advantage, you have to advertise to people who already know you. That way you can build that relationship to have more success. If I have a list of 10,000 accredited investors who I have no clue who I am or 10,000 people that know me that might not all be accredited, I will raise more money to the people who know me than the people who are all accredited. They have a list of 10,000 accredited investors because those accredited investors are smart people and they’re not going to put their money anywhere if they don’t know you.
[bctt tweet=”Simply showing up is one of the biggest thing you can do to get yourself out there and connect with people.” via=”no”]
They’re accredited for a reason and they gained that status because they’re smart. I do hear that false assumption or belief often, “If I do a 506(c), then I could advertise and then I could gain investors that way.” Those people have no connection to you. They might see your ad or your billboard as you say, but if that’s the first time they’ve ever heard of you, they’re not going to make that decision fast enough to help fund that kind of opportunity.
You have to ask yourself, if you’re an accredited investor, which means you have some money, are you going to be sitting down watching a television ad and see some opportunity on the television and go, “I want to put $100,000 on that deal.” It doesn’t make sense. Why would anybody want to do that? Why would you spend the time and energy and effort and money marketing to that kind of people if they don’t even know you?
Any other techniques? It’s really networking but getting people to know you and to like you, to trust you, are there any other ways that you’ve found? Somebody that’s getting started, maybe they don’t have the meetup like we discussed or some other type of thought leadership platform yet. What are some other ways you found to get people to know you, like you and trust you?
When you’re first getting started, most common people that will invest with you are going to be the people who have known you for many years. They know your background and they know your experience level. Even though it might not be in multifamily or in syndication in general, they will most likely be the people that will invest with you, that would be investing with you. As long as you had that good background, they know, like and trust you obviously. When you’re first getting started, you’re going to have to educate them. You have to educate them on how much do you actually know. One of the things that I did in the very beginning is I started to align myself with other high-level multifamily syndicators and syndication groups that I could leverage their experience level to build up my own experience level with people that I know, like and trust.
To be able to help them and joining their partnerships and be able to help them in certain areas, whether it be bringing on investors or you’re working with investors, bringing on capital or various things like that. It allowed me, instead of me going to people that knew me as a businessman and all of a sudden, “I want you to invest in my multifamily real estate stuff.” They’re like, “What do you mean? I didn’t know you were in multifamily. Why would I put money with you? I have no clue that you even know anything about it.” If you’re new in this space and you started joining other people’s groups, guess what you can start to do? “I’m now joined there. I’m now starting to partner with this group. They have X number of years of experience and have X number of doors, X number in their portfolio.” You start to leverage the experience level of other people to be able to build your own credibility up with your own family and friends, so that they will be more commonly wanting to invest with you. One of the best ways to do that is to let your family know that you’re investing alongside them. If you don’t have the ability to get, try to get to that point where you can invest alongside your investors because it builds up your credibility even more.
The investor tribe for raising private capital. I appreciate, Dan, you going through that and the know, like and trust. Getting to know these people, meeting them somewhere is the hardest part. After we have a way to communicate with them, then we can begin to build that trust and them liking us.
Just like people that you have in your show, I know you’re always looking for guests and so they’ll be able to jump on and share your own experience and your background, your knowledge. It helps to build more of your awareness in the community so that you can build up that know, like and trust point, which is why I have it at the top of that triangle, but even starting your own meetups. In WS225, we did an episode on how to start your own meetup. What are some strategies to use and stuff like that? I’d encourage you to go read that. Also, you can start your own meetup, create your own authority platform and do exactly what you’re doing right now.
There are lots of different ways to get yourself out there and try to become more aware. I think one of the biggest things you can do is show up. It’s showing up to a lot of the events that are out there, start to meet people, greet people and try to provide value to other people. That’s one of the things that I try to do too is when I go and meet other people, whether it be at a multifamily event or even if it’s a local event in my own town, I try to provide value to other people. When I meet them, “What can I do to help you? What can I do to support you?” I get them to start talking about how I can help them and how I can support them. It’s a very valuable tool to have. Sometimes it’s connecting somebody with somebody else. That’s very valuable to be a connector of people at the same time.
I find that it can be as simple as saying, “How can I add value to you?” in that first conversation or so. They won’t even know sometimes how you can help them, but at least they know you’re willing. At least they know that they can reach out to you at a later time. It builds a little more likability there that they see you’re willing to help them instead of asking first. Dan, I appreciate your time. I like the investor triad and how you laid that out, the know, like and trust because those elements are crucial if you’re going to raise any capital. For anybody to hand you $50,000, it’s a big deal. They’re going to have to trust you but they have to know you first. Tell the readers another time about how they can get in touch with you and also about the Multifamily Investor Nation Summit.
For those of you who are interested in possibly joining us, and then our multifamily syndication group as a passive investing partner, you can go to PassiveInvesting.com. There’s a form there on our website. You can join us. Jump on a call with me. We can talk a little bit further about some of the things that we’re working on and see what your investment goals are and see if it might be a good fit for our group. I also would love for you to join our Multifamily Investor Nation group. You can go to MultifamilyInvestorNation.com. One of the things we mentioned earlier is that the summit that we have is coming up on June 27, 28 and 29. You can join us there. We have over 60 speakers and over 1,000 attendees. One of the things that we do at this event is every attendee gets access to the contact list of the other attendees. You can continue that networking and building your own database with other multifamily investors that are attending the event. You can go to MFINSummit.com to find out more information about the other speakers, including Whitney here, who will be speaking at the event. If you use the promo code, Whitney, to register for the summit, we’ve decided to go ahead and donate all of the proceeds from those tickets sales to the Life Bridge Capital non-profit that supports the children adoptions.
Thank you very much for that support, Dan. We’re grateful for that. I hope the readers will use that promo and help support as well. I hope the readers will also go to Life Bridge Capital and connect with me in the Facebook group, The Real Estate Syndication Show so we can all learn and grow our businesses together from experts like Dan. We will talk to each of you next time.
Important Links:
- PassiveInvesting.com
- Multifamily Investor Nation
- WS14 – previous episode
- MFINSummit.com
- The Real Estate Syndication Show – Facebook group
About Dan Handford
Dan and his wife, Dennae, along with their 4 children (3 girls and a boy), reside and work in Columbia, SC.
Dan has an extensive successful background in starting multiple seven-figure businesses from scratch including a large group of non-surgical orthopedic medical clinics located in South Carolina. His family of companies have annual budgets in excess of $10MM.
He is the founder of the Multifamily Investor Nation where he educates a nationwide group (9,000+ members) of multifamily investors on how to properly invest in multifamily assets.
He is the co-host, along with his wife, Dennae, of the Tough Decisions for Entrepreneurs podcast which can be found on iTunes and Google Podcasts.
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