Real estate capital raising and syndication
How much of my own money should a sponsor co-invest?
Short answer
A sponsor should put in an amount that is meaningful to them, and there is no universal number. The right figure depends on the deal, your own means and what your investors expect. A token amount rarely reassures anyone. Many sponsors talk to a securities attorney about how to describe the co-investment before they raise.
Why I will not give you one percentage
I do not have a magic number, and I would be wary of anyone who gives you one. The amount comes from the deal itself and from what your investors will accept.
What I can tell you is what the money signals. When you invest alongside your investors, you show them you believe in the deal. When you invest nothing, they ask why. Many sponsors are not able to write a large check, and that is fine. What matters is that the amount is real to you and that you explain it plainly.
Skin in the game is only one part of the pitch
I have seen sponsors obsess over their co-investment and ignore everything else. Investors look at the whole picture. They look at your track record, your terms, your fees and how you communicate. A smaller co-investment with clear terms and a strong history often beats a larger one with a messy structure.
Here I explain why I treat capital raising as its own business, separate from sponsoring or operating the deal.
That point matters here. Many of us start out doing everything ourselves. Over time you learn that raising capital and running the deal are different jobs. Your own money is one piece of how you show you are serious in both.
Flexibility on terms can matter as much as your check
Think about who your first outside investor will be. In a recent webinar I answered a question about bringing in an anchor investor for an emerging manager. I think it can work well. Some sponsors offer that kind of investor a break on fees for every million they put up, up to a certain level. That kind of flexibility can sometimes do more for you than a bigger personal check.
"I think far too many people fail to raise capital because they're stingy on their fees and their terms. They're nuts, they're not flexible."
In this webinar I talk about anchor investors, fee breaks and how family offices think about control.
Summary and key takeaways from this video
Family offices also differ a lot. Larger families tend to want more control or at least more transparency. A family that made its money in real estate may feel it can just do the deals itself. Know who you are talking to before you decide how to present your own commitment.
Using your own capital alongside other people's
Isabelle describes how her family office, built on real estate development, began adding outside capital to its own.
Isabelle's family office came from real estate. They made a deliberate decision to supplement their own capital with outside investors. They have now done over 100 real estate transactions. Putting your own money in and bringing in partners can work together.
Many sponsors talk to a securities attorney about how to describe the amount in their offering documents. This page is education only and is not legal or investment advice.
More from my talks
When I look at a sponsor, I ask one plain question: how much skin do they have in the game? If they are just starting out, a smaller amount can be understood, because a start-up has an honest excuse. But if they are successful people with very little of their own money in the deal, I cannot take it to investors, and we cannot raise money for them. So whatever figure you choose, be ready to explain why it is the right size for your situation.
"And finally, how much skin do they have in the game? If they don't have very much skin, the only excuse is that it's a startup. If they're successful people and they have very little skin in the game, they can't get my money, and we can't raise money for them."
On the record
- Isabelle's family office has done over 100 real estate transactions and over 300 venture capital investments.
- Her family office began supplementing its own capital with outside investors about 7 years before the interview.
- Families in the five to forty million range often cannot insist on full control of everything in their portfolio.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: How This Family Office Invested in 300 Startups & Built a Town for AI, Capital Raising FAQ Webinar, Top 3 Insights on Structuring Investments - PODCAST - Family Offices & Family Office Club. 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 co-investment disclosure, offering documents and investor agreements. Do not use AI to write your own legal agreements.
Next moves
- Write down what you can commit without straining your finances.
- Ask two or three likely investors what they expect from a sponsor.
- Decide on your fee and term flexibility before you pitch.
- Consider asking a securities attorney about how your co-investment is described.
- Say the number plainly in your first meeting.
Follow-up questions
Is there a set minimum a sponsor should co-invest?
There is no universal number. Investor expectations and the terms of each deal tend to set the real standard. Many sponsors talk to a securities attorney about how to approach it.
What if I cannot afford a large co-investment?
You can still raise capital. Focus on your track record, fair terms and honest communication. Some sponsors also offer fee breaks to early investors.
Do family offices expect to see sponsor money in the deal?
Many do, because it shows alignment. Larger families also tend to want more transparency from independent sponsors.
Related questions
- How can I raise capital for land development?To raise capital for land development, I start with the structure.
- What happens to investors when a syndication deal goes bad?When a syndication goes bad, distributions usually stop first.
- What is a preferred return in a real estate syndication?A preferred return is a stated annual return, often quoted as a percentage like 8%, that investors in a syndication get paid before the sponsor shares in profits.
- How do I find passive investors for syndication deals?Start by putting out useful content so passive investors come to you, then double down on what gets the strongest response.
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