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As a general partner (GP) in commercial real estate, you’ve probably encountered this scenario: You’ve raised half the equity for your deal, but you’re struggling to get the rest of the funds committed. Maybe investors are wary of the current economic climate, or perhaps they’re taking a “wait-and-see” approach. If you’re finding it hard to secure the remaining dollars, you’re not alone. Many GPs face similar real estate capital stack challenges, especially in volatile times. Here are some strategies to consider when you’re unable to get investors to commit to the deal.
1. Broaden Your Search
If your current network of accredited investors isn’t coming through, it may be time to look beyond the traditional sources of capital. One potential avenue is to tap into unaccredited investors who can still play a key role in funding your deal. The challenge with unaccredited investors is ensuring that they meet the legal requirements to invest in certain types of deals. This is where Covercy’s platform can help. By using Covercy, you can easily manage and onboard unaccredited investors while guiding them through the accreditation process. Covercy streamlines the complex steps required to get them accredited, opening up a wider pool of potential capital for your project. This allows you to cast a broader net without the administrative burden, helping you close your deal more efficiently.
2. Lower Minimum Investment Amounts
One way to increase interest is by lowering the minimum investment threshold. This tactic allows you to tap into a broader pool of potential investors. Many GPs find that offering lower minimums for the first wave of investments—especially if they frame it as a “test” or “probationary” investment—can help attract the capital needed to close the deal. While this may result in more administrative work, it can be a necessary step to get the deal over the line and build trust among new investors.
3. Adjust Your Underwriting Assumptions
If you’re looking to attract investors who are more conservative in today’s market, make sure your underwriting assumptions are extremely conservative. Demonstrating that you’ve taken a cautious approach in your projections will give potential investors more confidence in the deal, especially if they are worried about economic uncertainty. Strong, conservative underwriting helps mitigate risk for both you and your investors, ensuring they feel comfortable with the numbers you’re presenting.
