Before raising money for your first deal, we thought the reason accredited investors would passively invest in our deal would be as a result of return. However, because there are other syndication and investment avenues which an angel investor can be, offering solid returns can not be the driving factor. So, if returns aren’t their primary motivation, what's? We now have refined the passive investors’ three primary reasons for investing in a flat syndication:
1. My cash is in good hands
2. I will be updated on relevant info on the sale
3. The process is hassle-free
Need #1 - Is my take advantage good hands?
The main objective when managing other people’s money needs to be capital preservation. Like all investment, you can find never guarantees - not for returns or the preservation of capital. So, I want to realize that you're proactively mitigating any major risks from the following these investing principles:
1. Don’t upgrade on appreciation
2. Don’t over leverage
3. Don’t get instructed to sell
I additionally should trust you like a person. I want to have a good feeling about you and truly believe that you've my favorite interests in mind. This trust is made by the length and quality of our relationship and also by you demonstrating your expertise by your experience, your team or maybe your thought leadership. With this trust, I will be certain if you'll have good sense, make good decisions, conservatively underwrite the sale, perform all the research before purchasing a condo possibly at a nominal amount, meet the projected returns you outlined. Finally, I want to realize that you are a responsive communicator. If there is a problem with the offer, I would like you to not only notify me of the issue, but use a proposed solution as well. And if I find you using a question or concern, I expect that same lightning quick response with an answer.
Need #2 - Will I discover status updates about the deal?
Additionally, I would like to be provided with ongoing status updates in the project. On a consistent basis, I would like a director level - not just a CEO or entry-level employee level - update on the deal with supporting data. To achieve this, the syndicator must provide their investors which has a monthly email update which includes the following information:
1. Distribution details
2. Occupancy and pre-leased occupancy rates
3. Actual rents vs. projected rents
4. Capital expenditure updates with pictures of the progress
5. Relevant market and/or submarket updates
5. Any issues, plus your proposed solution
6. Any community engagement events
Need #3 - Is the procedure hassle-free?
Finally, I would like a hassle-free process. The reason I am a passive investor is because I would like to park my cash in a good investment without having to concern yourself with doing any of the day-to-day operations. I'd like a monotonous investment with practically no surprises. All I must do is browse the monthly email updates and receive my distributions. So, to effectively provide investor distributions, set up a direct deposit, as opposed to sending checks within the mail. Basically do connect having a concern, I want an instant resolution with minimal backwards and forwards. Therefore, you must proactively address potential concerns inside your monthly updates and when a venture capitalist includes a concern, have a solution available before replying.
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