Real Estate Investment Channels - High Net Worth Individuals

In the first post of this series, Building a Successful Real Estate Capital Markets Group, we went over some of the basics of reaching out to new potential investors as well as the importance of keeping track of all your interactions with them. I also introduced four different capital channels to consider as you transition away from getting investments from friends and family and into large-scale commercial fundraising. This post takes a look at high net worth individuals (HNWI), also called accredited investors, and where to find them.

Tapping into a network of new direct accredited investors can be the most challenging and rewarding channel. If done properly, this channel has the ability to spider and grow more quickly than any other channel. 

There are some 12 million accredited investors in the United States. That’s a lot of prospects. Therefore, it is crucial to have a well-defined idea of who your target audience is. Some common metrics to understand before starting are: Age, Industry, Interests, Job Title (useful for LinkedIn), Income Range, and Geographic Location. Having a well-defined outline of an ideal client will save your sales team time and give them direction on how to utilize company resources properly (time, marketing dollars, social media channels, prospecting vs proposals, etc).  

Capital market players needed for the High Net Worth Individuals channel

Sponsor Principals​ - AKA, you.

Tip- For larger webinars and presentations, hearing from principals or asset managers is the most impactful strategy. To build trust, individuals like to hear from the source with the most expertise and knowledge of the markets and the assets being bought. It is also invaluable practice for your investor relations team to hear you in this environment.   

Investor Relations - On a smaller team, this individual may represent multiple departments (marketing, internal and external wholesaler duties, business development, etc). Their main responsibilities are maintaining relationships with the current investor base and finding new opportunities.  

Where to find accredited investors  

There are essentially endless places to look for accredited investors. I remember a friend at Northwestern Mutual literally went down the yellow book pages (in the year 2010) and had success! While I don’t suggest this strategy, it does illustrate the abundance of opportunities for success with this group. Here are some of the best ways to find accredited investors.

• LinkedIn​ - No brainer. If you are targeting a very specific group of people, this is a great channel. You can set filters for most of the metrics mentioned above and more. With LinkedIn Sales Navigator ($70/month), you can send up to 250 direct messages a day.  

Tip- Similar to email signatures and canned responses (which we went over in the previous post), create an intro message in Word and copy/paste. Start the message with a personalized sentence with information from the prospect’s LinkedIn page. 

• Crowdfunding platform ​- Sponsors that have a solid strategy and good track record should engage crowdfunding platforms. This form of investing is becoming more and more popular with HNWIs.​ Crowdstreet and Cadre are both great options.  
• Real estate podcasters ​- There are many successful professionals whose primary job is not in real estate or finance but who share their strategies for increasing wealth over podcasts. These individuals profit through a contract with partner sponsors. Be wary of posers, but this can be a lucrative and repeat channel. Two great examples are Joe Fairless and Buck Joeffrey.    
• Using influencers - Similar to real estate podcasters, there are many influencers who give financial advice on various social media channels. Finding the right influencer can be tricky if you aren’t already savvy with social media. In that case, use a firm like Upfluence.   
• Buying a lead list ​- These lists can be a crap shoot, so lead companies should be vetted carefully. 
• BONUS CHANNEL - If you went to a large university for college, chances are they have an alumni directory. The level and amount of information will vary, but utilizing that experience and bond can be compelling. This applies to other personal connections as well. Any lead list that you can obtain that connects back to a common interest or shared experience significantly raises the chances of getting a conversation started.   

What are High Net Worth Individuals looking for?

As previously discussed, there are around 12 million accredited investors in the United States. That much opportunity also provides A LOT of competition. In my opinion, the baseline checkboxes for what a direct accredited investor is looking for are track record, adequate returns, and appropriate asset type. Let’s take them one at a time.

Track Record

A good track record does not mean you have 100% wins and an IRR comparable to KKR’s latest global RE fund. What it does mean is that you can easily and sufficiently explain your losses and what you’ve learned from them, and then hopefully you also have a few recent wins to show what you’ve learned in action. In addition to performance, investors want to know that you will do everything in your power to do what you say you’re going to do. So, if your strategy revolves around a 5-7 year hold, can they trust you to actually do that?

Returns

To work smarter not harder, align your ideal client with your buying strategy. If you are targeting a 15% IRR because you have a value add approach, don’t reach out to the 65-year-old who is about to retire. Instead, find the 40-year-old who is crushing the corporate world and looking to speed up his chances of retiring early!

Asset Type

Similar to returns, different investors are excited by different types of real estate. Unlike returns, what asset type an individual is partial to may have to be uncovered in your first discovery call. “Hey, Joe with XYZ calling, it’s a cold call, so feel free to hang up. I’m also a [college/university name and mascot] (hopefully laughs). Quick question, do you invest in industrial?” If you are calling high net worth individuals that are also in commercial real estate, I’ve found they usually enjoy talking about the asset classes that they work in best. 

If your asset or fund does not check all three of these boxes, investors will go to one of the 1,000 other products on the market and choose one that does fit their specifications. Therefore, do research on some of your bigger competitors and see what the baseline is — and then beat it.   

Lastly, and often most importantly for repeat clients, is a great purchasing experience and ongoing process. By ongoing process, I don’t mean sending out K1s on time every year (although you should do that). I’m talking about answering a client question that can easily be found on the front page of your website. Sending the Happy Holiday emails to the investor that committed $1,000,000 and to the one who committed $50,000. Being transparent about the good news and the ugly news. 

Chances are you are already doing most of this, but to quote Mr. Buffet, “It takes 20 years to build a reputation and five minutes to ruin it.” Providing world-class service and keeping track of the big picture and the nuances is made a lot easier with a software like Janover Connect. Remember, you only get one shot at first impressions, so try not to blow it!

In the next post in the series, we’ll take a look at another channel for large-scale commercial real estate fundraising: broker-dealers.