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Real Estate Angel Investor

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.

Helpful Hint

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.

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 Startups.co Network (www.Startups.co) 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.

Summary

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.