Real estate capital raising and syndication
How do I raise capital for a self-storage acquisition?
Short answer
Find the property first, then raise the equity against it. Operators I have heard from put together a down payment from private investors and have a lender cover the rest. Investors respond to a specific off-market deal, a simple one-liner and one-pager, and straight answers to their diligence questions. Many sponsors talk to a securities attorney about their offering approach before they start talking to investors.
Start with the deal, then raise the money against it. The self-storage operators I hear from usually get a property under contract or close to it. Then they bring in investors for the equity, and a lender covers the debt. Every deal is different, so treat what follows as how others do it and not as a formula.
Find a deal worth raising money for
Self storage is a fragmented business. One operator on a panel we hosted said literally 50% of the market is owned by mom and pops. Several operators on that panel said they buy off market or through brokers who give them a first look. They hunt for under managed, under enhanced or under expanded properties.
One of them said they were buying a property for almost a million less than it should be worth, because the owner did not know the right price. A story like that is much easier to raise money on than a vague plan to buy something someday.
Here several self-storage operators describe how they source off-market deals and what they look for in a property.
Summary and key takeaways from this video
How the equity and debt usually fit together
On the same panel, another operator described their structure in plain terms. They raise private equity for the down payment and sign on the debt. Their number was about 30% down. That was one operator's approach, so do not treat it as a rule. Your lender and your deal will set your own numbers.
"We raise about 30% down and then we sign on the debt. And the same as Raj, we find them where people don't know the value of their property."
How you present the investment to people matters just as much. Many sponsors talk to a securities attorney about how to structure the offering and how to approach investors.
Make the pitch easy to read and easy to trust
In a feedback session we ran on one-liners, the investors kept asking for fewer words. They wanted simple language and one or two credible numbers. One of them said the point of the one-liner is to get them to read the one-pager. The point of the one-pager is to get them to read the deck.
One investor also flagged a phrase that many storage pitches use. He said highly under-supplied markets can be a red flag in self storage. In his experience new construction follows, the market becomes over-supplied and pricing falls. If you make that claim, show the local supply data behind it.
At our capital raising boot camp I also pushed on diligence. Write out the 30 questions a sophisticated investor should ask any self-storage manager, and write all 30 answers. Hand them to the investor. When they talk to your competition, you will look prepared and open.
In this clip I explain why a one-pager, a one-liner, a one-minute video and written answers to 30 diligence questions set you apart.
Summary and key takeaways from this video
Investors tend to favor a clean deal with a clear structure and a prepared operator over a messy one.
From my books and event talks
One more thing that helps a storage raise is a narrow focus. If you tell investors you buy self storage in nine different countries and your team is two people, they will doubt you. If you say you only do self storage in Austin, Texas, they find it much more believable. A narrow focus can help your credibility. So pick a market and a property type you can speak about in detail, and say it plainly in your one-liner. An investor can picture a specialist doing the work, and that makes it easier for them to say yes.
"If you claim to do a very broad thing, like we invest in self storage in nine different countries and you have a two person team, the credibility perception of the investor is, okay, well, I kind of believe the guy who says I only do self storage and only in Austin, Texas. It is a bit more believable and credible, and it gives you focus."
Facts and figures
- One self-storage operator on our panel said literally 50% of the self-storage market is owned by mom and pops.
- One operator said they raise about 30% down from private equity investors and then sign on the debt.
- At our capital raising boot camp I recommended that raisers write out 30 sophisticated investor questions and all 30 answers to give investors.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Real Estate Investor Success Stories: Hear from 5 real estate investment firms who have raised $20M+, Real Estate Investor Success Stories: Hear from 5 real estate investment firms who have raised ov..., Top Investor Insights from the Event: Deal Structuring, Distribution & What Actually Wins. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around offering structure, investor outreach rules and offering documents. Do not use AI to write your own legal agreements.
Where to start
- Get a specific property under contract or at least in a letter of intent before you start raising.
- Work out your debt quote and how much equity you need to raise on top of it.
- Write a short one-liner and a one-pager in plain words with one or two real numbers.
- Write out 30 diligence questions with 30 answers to give investors.
- Talk to a securities attorney about how to structure your offering and how to reach investors.
More questions on this
Do I need a property under contract before I raise money?
It often makes the raise easier, because investors can see a real deal and real numbers. Some operators raise for a pipeline of deals, which many sponsors discuss with a securities attorney.
Should I market self-storage deals to the public?
How you market a deal to the public is something many sponsors talk through with a securities attorney before they start.
What should my one-liner say?
Say what you buy, where, and one or two credible numbers. Keep the words simple, since investors told us they want it short and direct.
Related questions
- How do I raise money for my first apartment deal?Start with the deal, because a good one is far easier to fund than most first-time sponsors expect.
- How much should a real estate sponsor charge in fees?A common structure I see is a 6 to 8 percent preferred return, then 20 to 25 percent to the sponsor, with higher splits above a second hurdle.
- What is the difference between a syndication and a real estate fund?A syndication raises money for one specific property or deal.
- How much of my own money should a sponsor co-invest?A sponsor should put in an amount that is meaningful to them, and there is no universal number.
Work through it with the waterfall calculator. See all real estate capital raising and syndication resources.