Question about Sourcing Capital as a New Firm with Zero Track Record
Hello everyone, I am a junior in college and am majoring in Real Estate at a prestigious college in the US. 

A friend and myself have been talking about starting our own acquisitions firm directly after we graduate. We know we have the fundamental skills to locate and invest in the right properties, but are biggest concern is where to source capital.

My friend has plenty of internship experience in development (Both luxury MF and LIHTC) and is working in industrial development this summer. I will be working on the debt side in portfolio management and Loan underwriting at a bigger insurance company in their commercial loan fund. 

We believe that we could pull together capital through friends and family (we both understand/are involved in sourcing capital for a PE firm), but I don’t think we will be able to scale adequately or/and source enough capital through friends and family. 

I don’t want to take any higher risk debt , like mezzanine, on properties at such a young age in case something does go wrong and we are stuck with a loan with a 10%+ int rate. 

We have been thinking about taking the first 3-5 years post-grad and working in the industry to build a track record that we can use to help get our feet off the ground, but I really don’t want to wait on my dream. I’ve never been so sure and committed to anything like I have been with starting my own form with my buddy, but it’s a scary thought to go directly out of college as if we fail, it will not look great when trying to get back into the industry. 

I know the “correct” thing to do is to work in the industry then start a firm, but I wanted to hear more thoughts on this. Does anyone have a similar experience or know anyone that has done something similar? 

Thank you.
[{"id": "i2zvng9", "text": "Talk to some debt brokers at the big shops and see what they tell you.", "replies": [], "depth": 1}, {"id": "i304o96", "text": "Internships?\n\nYou don\u2019t need no stinkin\u2019 internships. \n\nJust get a good deal under contract. Money will come. \n\n/s\n\nHow much do you have to start? Unless it ends in 6 zeros, I don\u2019t think anyone will take you seriously. \n\nFind a deal, bring it to a GP and ask to learn. That\u2019s the best way if you don\u2019t want to work full time for someone else. \n\nYou also need to be prepared to feed yourself for 12-24 months without any income. Is that doable?\n\nAlso, don\u2019t lead with prestigious college\u2014no one cares. Least of all in real estate.", "replies": [], "depth": 1}, {"id": "i30gdj6", "text": "I would argue that you are at the perfect age to take big risks on big returns.  *IF* you can find someone to roll the dice on you, go as hard as you can.  \n  \nYou will never have more energy and more dumb luck (and more time to recover) than you do now.  \n  \nSource:  I bought my first multi family property at 24 and took risks that would not be advisable to someone my age now.", "replies": [], "depth": 1}, {"id": "i30i08k", "text": "In my experience. Capital is the least difficult part of real estate. Money is ample and via friends, accredited investors, and equity funds you should be able to raise some. The issue primarily is that you have zero track record and no experience actually owning and operating real estate at any level. I\u2019m sure from an underwriting and deal sourcing perspective you have the skills to analyze and find properties but the main issue is your going to be looking for millions to 10\u2019s of million in capital from people who are going to look at you and ask what besides a four year degree is the evidence you can run these deals. Have you managed a multi-million dollar portfolio, have you handled a GC that\u2019s running at 15%+ Cost in an inflating market with variable labor and material pricing, are you able to offer a preferred return that\u2019s more competitive than the hundreds of other funds with a more established track record. Additionally if you plan to develop and build there\u2019s no way IMO that if your looking at 1-3 year permit timelines plus two years to build that you can attract capital that wants to wait three years from two guys with no experience. Your head is in the right space but you just don\u2019t have enough experience and even if you did I wouldn\u2019t take the risk. If you lose all your friends and families money in your first deals how will that reputation and loss change the relationships you have will all these people. My suggestion would be for you both to get jobs in the most relevant parts of real estate which would be asset/portfolio management and potentially debt and equity capital sourcing. Crush syndications on the side as you learn and work in these roles. 3 years down the line if you\u2019ve crushed 6-10 deals and have a ton of high level knowledge and experience that will be the best time to create your fund.", "replies": [], "depth": 1}, {"id": "i32aq6v", "text": "When I got started I was in a similar place to you. I needed to borrow the credibility of other people. Cut people in on the deal in exchange for adding their track record to the \u201csponsorship team\u201d. You will always need to raise some friends and family capital alongside any Equity shops that you uncover. \n\nOne other thing to consider is Earnest money deposits. It\u2019s not uncommon to see substantial six-figure (or more) deposits and usually nonrefundable. If you can find a JV partner it will help with that as well it shows their commitment to getting the deal done. I would be Leary of people who won\u2019t put up some of the EMD along side you but assure you the deal will get done together. Got burned in that situation once or twice.\n\nUltimately, finding the right JV partner comes down to knowing exactly what you are looking for and meeting a ton of people trying to find the match. Good luck OP!", "replies": [], "depth": 1}, {"id": "i32py6r", "text": "Nobody wants to give you money if you need money. They only wanna give you money because you can earn more somewhere else at a higher rate than what they\u2019re giving you", "replies": [], "depth": 1}, {"id": "i35g9py", "text": "This won't be popular but the best course is to start building your network and one of the best ways is to go to guru events. Hear me out.\n\nYou can start networking while in school and even while working after you graduate. For your actual company, you and your partner will more than likely need a **lead sponsor/GP group** to learn from, a **network of passive investors**, **risk capital** (for EMD, 3rd party reports, loan deposits etc), and an **investor or partner** with significant net worth and liquidity who is willing to *sign on loans*.\n\nInternships will help you learn and jobs at firms will give you financial security while you learn, but you and your partner should be going to every CRE meetup you can find. Search out commercial real estate Facebook and LinkedIn groups to join and network in. You should be quickly getting up to speed on how to raise capital from friends and family via private placement syndications. Learning how to raise capital early is critical and will never go away. If you can easily raise capital, you will have a leg up over those who solely thought that being real estate entrepreneurs was about their excel spreadsheets and tenants &amp; toilets. Never forget this.\n\nCurrently Multifamily has the widest bootstrap education opportunities for CRE entrepreneurs. Multifamily is the new wholesaling/flipping and the world of MF gurus teaching how to syndicate capital and acquire properties is wide...The space has been democratized and learning how to buy multifamily has been distilled into chunks that more and more people can understand, making them just dangerous enough.\n\nYou will quickly find groups and people who have scaled to 6000+ units within 5 years in some of the hottest markets. For better or worse. This is typically the result of networking and many in groups that have realized the power of passive investing even as active sponsors.\n\nChoose your guru well though. Some of the well-known ones are Sumrok, Lindahl, Khlief, Bratz, Jake and Gino, Michael Blank, Joe Fairless etc... There aren't many in office, industrial or hotel. There are quite a few in mobile home parks, self-storage and other sub-asset classes. You can end up spending up to and over $30k with coaching programs from each of them..that's the game, so be careful. Most on the list above are very legit even if the guru system sucks.\n\nKnow upfront, many of the guru education programs are also to either show people how to do it as active investors or show people how hard it actually is so they become passive investors. I would wager 2 out of every 10 end up doing anything significant in terms of active sponsorship. The remainder either fall off or realize it's too hard and invest passively (which there's nothing wrong with and is a wealth builder).\n\nI'd also be figuring out what my superpower was and how I can quickly become proficient in that to bring value to a potential partnership. Without getting into the problems with FINRA and the SEC, at least one has a $$$ program with a passive investor ecosystem built into it. \n\nI'd also be figuring out what my superpower was and figuring out how I can quickly become very proficient in that in order to bring value to a potential partnership.\n\nHere are some of the things that I see established sponsors/firms typically need. These can be areas where you might have a superpower and might bring value in return for equity and learning opportunities:\n\n* Underwriting\n* Capital/equity raising\n* Legal expertise (real estate, SEC and taxes)\n* Accounting expertise\n* Investor relations\n* Marketing/Funnels\n* Graphic artists\n* Finance/Capital markets expertise\n* Asset/Property Management\n* Site visits/Ability and freedom to travel for tours\n* Market/Demographic expertise\n* Construction/renovation expertise\n* Supply chain expertise\n\nThis is my truth and I have direct experience and knowledge of what I've written here.\n\nGood luck!", "replies": [], "depth": 1}]