2014: The ‘Year Of Fundraising’ For Real Estate
2014 could easily go down on record as the ‘Year of Fundraising’ in the real estate industry, if current trends continue. Lack of capital or access to credit has notoriously been one of the most common excuses for individuals not to get into real estate investing or do more of it. However, there seems to be little to justify those excuses this year. Money is becoming even easier to get for real estate investing as mortgage lenders loosen up, individuals get itchy for better returns and new ways of raising money or increasing liquidity emerge.
So where’s the money, how much is out there, and how can you get some of it?
$1 Billion Becomes Pocket Change
Once investors get into real estate, $1 million soon becomes a very negligible number. Millions are earned, raised and blown every month. Bloomberg News recently covered TPG Capital, a giant private equity firm whose new real estate division is working on raising $2 billion. This is a follow up to the firm’s last investment property fund which is said to hold about $2.3 billion in equity, across just 10 deals. However, this quickly becomes measly pocket change when news broke of a new 2014 global real estate report that saw 451 funds actively raising $150 billion. This is more than double last year’s fund raising of $76 billion, and even more than the $141 billion raised in 2008.
Why All the Investment?
Real estate is still the hottest investment vehicle on the planet and big fundraisers and individuals alike know it, and want their slice of the pie. Much of the slower activity over the last couple of years hasn’t been because there wasn’t money out there, it was just being stashed away until the dust settled and the timing was right. Now confidence is back, everyone is desperate for returns and there are billions of dollars going up for grabs.
Where’s all the Money?
- Banks recapitalizing after selling REOs
- Commercial mortgage lenders
- Hard money lenders flush cash from investing
- Private equity funds needing outlets for the billions raised
- Individuals with retirement funds, severance packages, savings and inheritance money
- Venture capital firms
- Angel investors
How to Raise Funds
So with all this pent up cash waiting to be invested, how can more individual real estate investors and smaller real estate investment firms benefit and leverage funds into the real estate investments and projects they are working on?
There are actually many ways to tap into the billions being pegged for real estate investing this year:
One way is to keep preforming well with the real estate investments you are already working on, and keep on working the system. As others see you are successful, both institutions and individuals with capital will want a piece of that, will want to participate in your success and see what you can do for them. Often times, they’ll even reach out to you to see if you can use their money.
With lenders becoming more competitive and aggressive about putting their capital to work, this can be an easy and straight forward way to find leverage. Now raising money from the public and private investors has become even easier with the assistance of crowdfunding and an increasing number of crowdfunding platforms popping up.