Financial Freedom with Real Estate Investing MB278: Raising Money Through a Fund vs. Single-Asset Deals – With Joe Fairless
The vast majority of multifamily syndicators don’t stop with one property. And with each new deal, we start the stressful process of raising money all over again. But it doesn’t have to be that way! So, how does it work to raise capital for multiple deals through a fund?
Joe Fairless is the Cofounder and Partner at Ashcroft Capital, a multifamily firm that invests in 200-plus-unit value-add deals. The Ashcroft team has a portfolio of 38 properties, and in February of 2021, they pivoted from raising money for individual deals to raising capital through funds.
On this episode of Financial Freedom with Real Estate Investing, Joe joins me (and the attendees of Deal Maker Live) to discuss the pros and cons of raising money through a fund. He explains the benefit of being able to spread out your capital raise over time, bring on investors whenever they’re ready, and comingle money among deals. Listen in for insight on how Ashcroft structures its funds and find out if YOU’RE ready to start raising money for multifamily through a fund!
Key TakeawaysHow Joe achieves work-life integration
- Systems, people in place to run business when away
- Blurred lines between personal/professional life
How Ashcroft Capital structures its funds
- Class A — 10% preferred return, virtually no upside
- Class B — 7% pref with 70/30 split on upside
The downside of raising money for funds
- LP gets average of all deals (miss out on lightning in bottle)
- GP misses out on investors who prefer individual deals
Joe’s take on the advantages of raising money for funds
- Don’t have to land on specific equity amount for each deal
- Spread out capital raise over time
- Bring investors on whenever ready
- Creates consistency for investors (GP can comingle money)
When you should consider raising money through a fund
- Acquired 5 multifamily deals
- At least 2 exits under belt
The pros and cons of using Rule 506(c)
- Can advertise deal publicly but accredited investors only
- Don’t have to document preexisting relationship
Why Joe’s fund raises money for both class A and B properties
- 20% of investors class A, 80% of investors class B
- Class A shares upside over 10% for less risk
Connect with Joe Fairless Resources
Learn About Michael’s Mentoring Program
Access the Recordings from Deal Maker Live
Join the Nighthawk Equity Investor Club