The end of the year is usually a time to wind down, but if you’re in real estate, it’s the perfect moment to raise capital. Recently, we pulled off something big—raising $7 million in just a month. Here’s how we did it and how you can, too.
Depreciation: Your Secret Weapon
Depreciation isn’t just a tax benefit; it’s a golden opportunity to get investors on board. A lot of people made more money than they expected in 2024 and were scrambling for tax deductions. By focusing on this need, we raised $3 million tied specifically to depreciation, with the rest flowing in from related conversations.
How We Set It Up
We had a $10 million property in Cleveland with a cost segregation (cost seg) study in hand. The study projected $1.1 to $1.8 million in first-year depreciation. With that, we offered two ways to invest:
- The Depreciation Play:
- 5% preferred return.
- $100,000 investment gets $100,000 in depreciation this year.
- Bonus equity valued at $40,000 to $50,000 per $100,000 invested.
- The High-Yield Option:
- 10% preferred return.
- No depreciation in 2024.
- Same equity structure as the depreciation-focused option.
This setup allowed us to cater to all types of investors. Some needed the tax benefits, while others, like those with self-directed IRAs, wanted high returns. Everyone left happy.
What Happened Next
Our initial goal was to raise $3 million for the depreciation-focused class. Thanks to a simple email, we ended up with $7 million. People reached out about the depreciation benefits, but many decided to invest in other ways after talking with us. One standout investor—a government contractor and full-time real estate pro—took the entire $3 million depreciation-focused tranche.
Tips for Raising Capital
- Start Conversations Now: Sometimes, all it takes is an email or social media post to spark interest. Don’t wait—get the word out.
- Get a Cost Seg Study: These studies show how much depreciation your property can offer. With just a couple of days’ work, you’ll have the numbers you need to attract investors.
- Offer Choices: Investors have different goals. Some need tax write-offs, while others want higher returns. Give them options, and you’ll raise more.
- Reconnect with Old Investors: Use this time to catch up with previous investors. We had someone who quietly invested $400,000 in the past come back and commit $3 million after one phone call.
What You Can Do Right Now
- Look at your properties and see which ones could use a cost seg study.
- Get those depreciation estimates and build an offering around them.
- Send emails, make calls, and post online. Highlight how investing now benefits them before the year is up.
- Be ready to adjust your pitch based on what your investors need.
The Bottom Line
By addressing specific needs like tax deductions, you can create long-term relationships and raise significant capital. Don’t let these opportunities slip by. Start now, and who knows? You might just pull off your biggest raise yet.
