What is a Real Estate Sponsor?
Sponsors are everywhere. Sponsors are in every market all around the country. But what is a Real Estate Sponsor?
Real Estate Sponsors are individuals or real estate investment companies that acquire, manage, and operate real estate investments on behalf of investors. Real Estate Sponsors source investment opportunities, perform due diligence, arrange financing, raise equity, manage each asset invested in, and ultimately determine the optimal time to dispose of the property.
In this article, I am going to discuss the ways that I go about finding Sponsors in the market to co-invest with. One thing has become abundantly clear from my discussions with prospective real estate investors. Many people are looking for investment opportunities to increase their passive cash flow and grow their net worth. However, many people either do not know Sponsors personally or they don’t know methods to find Sponsors to invest with.
While there are a multitude of Sponsors in the market and there are a variety of ways to find real estate Sponsors in the market, it’s rationale that investors find it difficult to figure out who to invest with since they don’t know who they can trust, who the Sponsor really is, and what the Sponsor’s track record really is.
I use a handful of methods to find new Sponsors to co-invest with because at the end of the day, I believe in diversification. I am a Sponsor of real estate investment myself, and I do not solely invest in my own deals. Even I invest with other Sponsors who I know, like, and trust.
Friends and Family
My first recommendation for finding real estate Sponsors in the market that you may be able to co-invest with is through your family and friends. Especially for those who have not been in the market regularly and who don’t know a lot of Sponsors, talking with friends and family who have passively invested in real estate deals in the past is a great way to build up a list of Sponsor you can invest with too.
I have been fortunate in that I have been able to meet a lot of real estate Sponsors in the market. And I have come to know, like, trust, and invest with a number of these Sponsors across the United States, and in my case, in a couple of other countries as well.
One of the things you can do is have conversations with people at barbecues, at family parties, at restaurants, at networking events, or even at playgrounds or schools. Wherever you are and having a conversation with friends and family, you can let them know that you’re interested in investing in real estate. You can also discuss your desire to not only invest directly on your own, but that you’re also looking for real estate Sponsors who you may be able to co-invest with using smaller dollar amounts.
I personally find it important to sprinkle my net worth around into various investment opportunities. And many family and friends may have already invested with Sponsors that they like. Learning about Sponsors from friends and family is a good way to be able to talk with someone that you already trust, and then be able to get introductions to Sponsors who your friends and family know, like, trust, and have invested with. My friends, family, and I are regularly passing around information about Sponsors that we have invested with. We discuss which Sponsors have been communicative, which Sponsors we feel have not been that communicative, and which Sponsors we also feel have done good jobs for us in the past either financially or on the communication side, or both.
Colleagues
Another avenue to explore to find real estate Sponsors in the market is through colleagues or ex-colleagues. One thing that I have seen in the market is that there are a number of real estate Sponsors who have made money in another field and who are now having some strong success in the real estate investing market. If you have an ex-colleague that you know, like, and trust who is now involved in real estate investing, that can be a good way for you to access additional deals. These colleagues may not necessarily be the first in your mind initially specifically related to real estate, but if they’ve made money in another field and now they’re doing well in real estate investing, it wouldn’t hurt to at least have them as a source, especially if you know, like, trust, and respect them because these colleagues often times can carry forward their business acumen, their processes, their operations and their financial stewardship into real estate, which may give them the ability to further grow.
Real Estate Crowdfunding
A third way that you may want to consider finding real estate Sponsors in the market is through trusted crowdfunding sites. There are currently a number of crowdfunding real estate platforms in the market. And a lot of these platforms are doing a good job vetting Sponsors. Not every single real estate crowdfunding platform or crowdfunding platform for that matter is equal. Some of the crowdfunding platforms are doing a better job than others and we will showcase those in the future.
You need to be careful when deciding whether to invest with what I like to call “randoms.” Randoms are people that you just find on the Internet that happen to be very good with some sort of Facebook or Instagram marketing who may not actually have the expertise that you’re looking for. There seems to be a lot of self-proclaimed gurus that are in the market right now that are very tech savvy, but may not have the experience or the business acumen or the history with real estate investments that you may want them to have to be comfortable investing with them. So that’s why I say that it is good to use some real estate crowdfunding sites, as there are a number of platforms that are doing a good job of vetting Sponsors.
I have invested with a number of Sponsors on deals across the country. And I have learned about many of those Sponsors from crowdfunding platforms. I then conducted further research with people that I know in the market. One benefit I have is that I know a lot of real estate professionals across the country, and I’m able to give some of those folks a call and see if they’ve either had experience with a particular group that I want to work with, or if they have a colleague or a friend who may have experienced working with that group. Often times, I get my initial recommendation from the crowdfunding site, but then I do that extra layer of due diligence on my end just to make sure that I not only like the deal but that I also like the Sponsor.
Look No Further than Guardrail Finance
A fourth way to find a real estate Sponsor or Sponsors is to look no further. Caveat: this is now a shameless plug for Guardrail Finance.
Guardrail Finance is a real estate Sponsor and we act as a fiduciary for our investors. We align our interests with that of our investors where we are also co-investing our capital in each deal that we do. We have a number of investors who are family and friends who participate in our deals in addition to investing my personal money in each deal I Sponsor.
We try to do a good job with communication. We try to do a good job on following up on issues at the property level or specific issues that an investor may have related to their particular tax situation. We try to provide information whether good or bad in a timely way.
We are a real estate investment company and we are a real estate investment banking firm. We have a lot of connections. We have a lot of experience. We have the ability to not only do the due diligence, but to also finance the property through our capital sources and our relationships, and we also have the knowledge and wherewithal to handle the operational aspects related to owning and operating real estate. We also have the capability to sell or recapitalize assets.
Our 2021 investment thesis is geared towards workforce housing, industrial properties, and medical-related properties. We will also be sourcing other deals on an opportunistic basis, but those are the three property types that we plan to focus on in the foreseeable future.
In this article, I provided ideas about how to find Sponsors that you can co-invest with. I showed you four ways to find Sponsors to invest with. Although the fourth way was a bit of a marketing pitch for Guardrail Finance, the truth is that we would welcome the opportunity to assist you, and to be another Sponsor in your quiver. Please sign up on our Investor Management system if you would like to learn about real estate investment opportunities that we present in the future.
Guardrail Finance’s goal is to assist clients and investors with growing both their passive cash flow and net worth through real estate financing and real estate investing.
As always, feel free to forward this article. If you liked it and thought that it was useful, please send it on to people that you know who could benefit from reading it, or who could have an interest in learning more about real estate.
Until next time, let’s continue growing our passive cash flow and net worth together!
-Robert Newstead