MB 067: The 5 Key Elements of Raising Capital - With Victor Menasce

Most of us feel uncomfortable asking people for money, yet as apartment building investors we must raise capital to operate a successful business. Today’s guest argues that he doesn’t ask people for money, but offers opportunities to collaborate on projects that are a good fit for individual investors.

Victor Menasce is managing partner of US Real Estate Partners LP and author of the book Magnetic Capital: How to Raise All the Money You Need for ANY Worthy Venture. He spent the first 25 years of his career in high tech, achieving success as a microprocessor designer. But the frequent travel was a strain, and Victor realized that the days of building wealth in that industry were over. In search of a career that would have a meaningful impact, in an industry known for creating wealth, he started investing in real estate as a side hustle. His first projects involved medium-term executive rentals for parliamentary and embassy staff in Ottawa as well as local rent-to-own transactions. Victor then expanded to US markets and transitioned to real estate full-time.

His current specialty involves building new apartments in an infill urban setting across multiple domestic and international markets. Leveraging the skills around raising capital he developed in the tech industry, Victor has become an expert in helping investors divert their money from high-risk equity markets into safe multi-family real estate assets. Today Victor details the five key elements of raising capital and explains why some people repel the very money they’re trying to raise. Listen and learn from a developer who has raised more than $300 million in his nine-year real estate career!

Key Takeaways

[7:01] Why Victor views real estate as a team sport

• Foreigners viewed as risk (lenders perceive lack of recourse)
• Local partner facilitates investment

[7:47] The most difficult part of Victor’s transition from full-time job to real estate

• Used savings to invest
• Caused stress as savings dwindled
• Chose wrong partners early on

[10:00] Why some repel money when they’re trying to raise it

• Mistake to skip steps in basics of human relationships
• Can go from natural progression to ‘creepy’ very quickly
• Pace conversation so doesn’t feel forced

[11:17] The first key element of raising capital – RELATIONSHIPS

• Build genuine relationships with prospective investors
• People don’t want to be used
• Forcing a connection pushes people away

[15:18] The second key element of raising capital – TRACK RECORD

• Proof of results necessary in raising money
• If just getting started, partner with someone who is established (borrowed credibility)

[17:42] The third key element of raising capital – TRUST

• Goes beyond ‘dealing with honest person’
• Includes alignment of intention
• Decisions happen quickly when trust exists
• Employ ‘trial close’

[20:09] The fourth key element of raising capital – COMPELLING OPPORTUNITY

• ‘Compelling’ in eye of beholder
• All good deals get done
• Consider creating your own deal (scarcity vs. abundance mentality)

[25:40] The fifth key element of raising capital – ALIGN PROJECT GOALS WITH INVESTOR

• Must be a good fit (i.e.: shoe shopping)
• Different segments/classes of investors
• Criteria include rate of return, control structure, tax consequence, security, risk, etc.
• Sophisticated investors clear on all criteria

[30:55] The biggest mistake entrepreneurs make

• Raise too little money
• Delays, increased construction costs may leave you short
• Victor recommends securing extra 5% equity
• Hard to raise money when desperate

[33:28] How to invest like a billionaire, even if you’re not

• ‘Buy on the line, move the line’
• Identify dividing line between ‘hot’ and so-so neighborhood
• If line arbitrary, purchase 5-10 on depressed side
• Move line and you set value

[35:36] Victor’s advice for people hesitant to ask for money

• Reframe as opportunity to collaborate on project

Connect with Victor

 victorjm.com

Resources

 Magnetic Capital: How to Raise All the Money You Need for ANY Worthy Venture by Victor Menasce

 Magnetism Scorecard

 Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki

 Free eBook: The Secret to Raising Money to Buy Your First Apartment Building