Commercial real estate ventures are often very expensive and require multiple sources of funding. Typically, about 70% of the project can be financed with long-term loans, but the remaining 20% (accounting for 10% of your own equity) must be financed with outside equity. The investors providing this equity can be difficult and expensive to find at times.
Commercial real estate ventures offer three things to equity investors. First, investors are entitled to receive a portion of the net operating income from the project through a dividend. Secondly, investors are entitled to their share of the profit when the commercial real estate is sold. And finally, investors are entitled to a portion of the tax write-offs associated with the real estate project - namely, the interest payments.
Now, all of these may seem like great reasons, but it can still be hard to find investors willing to jump on board. One of the best ways to find investors is to talk to your accountant. Those that deal with high net worth individuals may be working with clients that are in need of a tax write-off - something that real estate investment can offer. Other financial professions may also be able to offer referrals.
Another source of equity is the seller. Those that are selling existing buildings may be interested in becoming minority owners while those selling land may be able to offer similar terms. Another thing to consider for land owners is a land lease over 100 or more years. This option saves you immediate money up-front and can lessen the amount of money that you need to borrow and raise.
The last resort is a broker, who can cold call their clients until they create a suitable list. Unfortunately, they charge a hefty fee, so this should be used as a last resort. In the end, it can be extremely hard to find suitable investors, but there are several sources to check before laying out the cash for an expensive broker!
