For those of you who’ve been following our adventures at Wildhorn Capital (of which we celebrated our first year this month) you know we’ve been able to accomplish some big things in a relatively short amount of time. Within the span of 6 months we closed on a 192-unit apartment complex AND a 253-unit complex. Finding and fighting for those deals was intense to say the least. Funding these deals was a whole other challenge.
The combined purchase price of these two properties was just shy of $40 million. To close them we needed to raise over $16 million in equity from investors. Those are pretty big figures, and it required us to be in full fundraising mode for the entirety of Q4 ‘17 & Q1 ‘18. Since our most recent close, we’ve received a TON of questions (and lots of congratulations) around how in the world we’ve been able to raise equity at that pace, all without taking a single dollar from an institutional equity partner.
In this article we’re going to share the requirements and regular habits that have allowed us to raise equity at this level. All of these are things we’re doubling down on this year as we continue to chase great investment deals for our investors and expect to need double that amount of equity over the next 12 months.
Find great deals It all starts here
Having attractive deals for investors is everything. Without that, it would be hard to raise a nickel. For us, we have a formula for finding deals that can produce above average returns. We target a diverse set of growing Southern metropolitan areas to search for properties that have a solid value-addValue-add is a strategy where an investor or property owner seeks to increase the value of a property by making significant improvements or changes to it. The goal is to enhance the property's appeal, functionality, and income-generating potential, which can lead to higher rental income, increased property valuation, and improved overall performance. View Definition opportunity. Financial requirements drive us to look for a Cash on Cash return of 8.5%+ annually and an Equity MultipleEquity multiple measures how much an investor's initial equity investment will grow over the holding period of the investment. It provides a way to understand how much money an investor can expect to receive back compared to what they initially put into the investment. View Definition of close to 2x. This means that investors can expect strong annual cash dividends during the hold period before doubling their money at the end of our expected 5-year hold. We’ve been focused on building out a team (more on that below) to make sure we can see all the deals that might work, underwrite them and chase the good ones. There are tons of bad deals out there, but when you have a good one, conversations with investors will start themselves.
Meet new people I have a goal of meeting 5 new people a week
Many of those are face to face meetings, which I prefer. In order to do so, we’re always out networking and sharing our enthusiasm about the business, providing value and giving back. This is huge. We truly believe in providing value to everyone we meet, investor or not. My business partner hosts a weekly podcast aimed at sharing investing secrets and tips with his audience. We write two articles (just like this one) per month. We mentor people. We take coffee. We golf. And we love doing all of it. I’m not an extrovert by any means, so this isn’t the most natural thing in the world. But when you’re passionate about what you’re doing, and you have a good product to offer (see point above) its a lot easier to get outside your comfort zone and meet new people.
Build quality relationships Quantity WITH Quality
We’ve written a lot about relationships in the past, and truly believe real estate investing is a relationship business above all else. Once we meet people, we follow up. As mentioned above, we see how we can provide value to that person. My favorite part of this business is the relationships we get to build. Good relationships take time, so we think long-term. We’re not afraid to introduce an investor of ours to non-Wildhorn investment opportunities. We want everyone in our ecosystem to be successful, whether they are our partners or competitors. Sound crazy? This is an industry with a limited number of players. We talk with many investors who are constantly looking to diversify with multiple sponsors on deals in various locations. Our mindset is to add value everywhere we can, and enjoy watching people around us be successful. A rising tide lifts all boats–ours included!
Establish a Qualified Team
We look for partners who share our values and interest, which is always focused on protecting our investors and giving them strong returns. Remember, this is a team sport and there’s no way we could do it on our own. Within Wildhorn each of our partners are bringing their individual professional strengths, personal investors and relationships into each deal. We’ve also strategically curated relationships with outside Sponsors and Equity sources who can bring their investors into the deal. Of course this isn’t scratching all the other operational actors on our team. They ensure that we’re able to find, win and operate great deals. Without them we wouldn’t make it very far. As we’ve written before, we want to have a wide variety of team members, all playing to their strengths.
Be Relentless Maintain energy and discipline
Set daily, weekly and quarterly goals that support the above points and laser focus your energy to hit them. All day every day, look for opportunities to build your network. Do what you can to help people and deepen relationships. The only way for this to work is if it’s incorporated into your lifestyle, 24/7/365. If this intimidates you, don’t let it! It will take time, but you will find your own methods and a mindset that allows you to thoroughly enjoy the entire process. It could be on the golf course (like it is for me), volunteering locally, at happy hour, anything that you enjoy doing and gets you out with others.
Have you had success raising capital? If so do these tenants ring true? If not what’s currently holding you back?
Like always, I’d love to continue the discussion. Don’t be a stranger!
Written by Andrew Campbell
Andrew Campbell is a native Austinite and Managing Partner at Wildhorn. He is a real estate entrepreneur who first broke into the business in 2008 as a passive investor. In 2010 he transitioned into active investing and management of a personal portfolio that grew to 76 units across Austin and San Antonio. He earned his stripes building and managing his personal portfolio before founding Wildhorn Capital and focusing on larger multifamily buildings. At Wildhorn, he is focused on Acquisitions and maintaining Investor Relations, utilizing his marketing and communications background to build long-term relationships.
