Are you interested in finding an angel investor for real
estate?
Finding an angel investor is critical to the development
of your real estate company. Investors
are willing to fund real estate businesses of all types, from residential and
commercial properties to time shares and senior assisted-living housing. Angels are usually better suited to real
estate companies than other sources of financing because they provide the right
range of financing for many residential properties while remaining flexible at
the same time. If you are looking for
deals of several million or more, you will probably need to pursue venture
capital or find so called “superangels” that invest large amounts. Alternatively, you may be able to get larger
amounts of funding from angel groups or a syndicate of angels.
What is the difference between VC's and
angel investors in real estate?
There are a number
of key differences between venture capitalists and an angel investor in real
estate. Perhaps the most fundamental is
the source of money for each. An angel
investor uses his own private money while a venture capitalist uses other
people’s money. Another difference is
that an angel may have several factors that determine whether he will invest
while the primary goal of a venture capitalist is to generate excellent returns
for his investors.
What motivates an angel investor?
There are usually more than simply financial reasons in
the decision of an angel investor to fund a startup company. Sometimes they invest in real estate in order
to continue using their experience and contacts. Others may be interested in helping another
entrepreneur succeed. And others may
enjoy investing in real estate but are not able to or do not wish to find
properties. These individuals may want a
role similar to a partner.
Once you discover the motivation of your angel investor,
you will be able to negotiate more effectively and look at the deal with more
realistic expectations. You should
consider the amount of control you are willing to leave in order to gain the
necessary amount of financing. Be
prepared to give up significant equity to gain a large amount of funding,
especially if your business is relatively new and lacking momentum.
You should be clear on both your role and the role of the
angel before receiving any funding. In
this way future problems can be avoided and you will be able to judge your
effectiveness in your role better.
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Helpful Hint
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In general, it is not uncommon for angel investors to
require a return of 20% each year or perhaps 10 times their money within five
years. Venture capitalists typically
want to see even larger returns because they realize that very few of their
investments will explode into great investments. But because venture capitalists do not know
which of them will bust, they need each of their investments to have the
potential to explode. You may run into
resistance from both venture capital firms and real estate investors for lack
of growth potential if you are in non-commercial real estate.
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How is real estate different from other industries in
obtaining funding?
Some angel groups and venture firms will not invest in
real estate. Before approaching either
for money, be sure they are interested in real estate investment. Otherwise you will be wasting your time.
In searching for an angel or venture capital firm that
has invested in real estate, you will also need to find investors whose typical
funding range is comparable to the amount you are seeking. Also, the investor needs to be willing to
invest in your location. If you fail to
find investors that satisfy each of these criteria, you will probably not have
great success. Most investors are
exposed to many more deals than they can fully consider, and if one is not in
their preferred industry, investment amount, or geographic location it may be
thrown out before even being read.
Is there a resource online to find angel investors
specializing in real estate?
There are resources that help you find angels in specific
industries. The Go BIG Network
(www.goBIGnetwork.com) allows you to find real estate angel investors based on
exactly the above criteria. With a
subscription you can search the contact information for any member, including
investors, job seekers, service providers, advisors, and anyone else in the
startup community. This allows you to be
proactive in seeking funding.
Alternatively, you can post a “Request” which is similar in concept to a
classified advertisement. Your request can
include a basic version of your business and your contact information. It is sent out to all investors that are good
matches to your business based on geography, industry, and preferred investment
amount. Finally, with a free membership
you can create a profile including your business details so that investors
browsing profiles can contact you if they are interested.
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Whether you find your angel investment from your rich uncle
Ted or a prominent angel investor group, it’s important to know that the
universe of angel investors looks like and what you’re really shopping
for. If all you need is a little bit of cash to be on your way, then
perhaps looking to your friends and family is the way to go. However,
if you think what you really need is a partner to grow this idea to the moon,
it may be worthwhile to pursue a professional angel investor as not only a
source of funding, but also a mentor.
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