Managing Partner and Co-Founder at Brahmin Partners - I work with .001% of investors to build a lasting legacy by…
Want to spot a novice real estate GP? Look at their budget. Here’s the dead giveaway: They don’t budget for marketing—or for raising capital. They’re operating on razor-thin margins, assuming the deals will sell themselves or that capital will magically appear when it’s needed. It won’t. This is the Achilles’ heel of many first-time fund managers. They ignore the time, effort, and expense it takes to secure investors. And when banks and institutions stop lending, these GPs are left scrambling—or worse, going broke. The hard truth is: Raising capital is not optional—it’s survival. If you’re a first-time GP, you need to understand what your investors expect and budget for the resources to meet those expectations. Investors know there are expenses involved, and they’re prepared to cover them—as long as you’ve done the work to build trust and demonstrate a clear plan. Ask yourself: - Are you investing in the tools, time, and relationships needed to raise capital effectively? - Do you have a contingency plan for when lending dries up? - Have you budgeted for success—or are you hoping to get by on luck? The market doesn’t reward hope. It rewards preparation. If you’re not budgeting for raising capital, you’re not just putting your deals at risk—you’re putting your entire business on the line. The best GPs know this. Do you?
Salvatore, this is a vital discussion, and your points resonate deeply. In our work representing investors, we’ve seen how essential it is to go beyond just budgeting for capital raises. Stress-testing proformas and budgets is critical, as is conducting robust due diligence—not just on the project, but on the GP’s staff, the CM’s team, and the design consultants. Engaging a third-party review of the project and exit strategy adds a safeguard for investors, ensuring that risks are fully assessed. Even when numbers work on paper, poor operational management can turn a strong deal into a nightmare without proper oversight. Your insights here underscore that success lies in preparation and proactive risk management—great points!
The frustration is that these guys give sellers hope. He ties up their property while he's getting his ducks in a row. This guy is part of the reason why sellers have such pie in the sky expectations on pricing. I am edged out of deals by first timers who are not writing in enough spread and not enough reserves. I'm just now seeing deals that were done in 2021-22 that are going south bc of the lack of appreciation for disciplined underwriting. The weak hands are washed out but a new one is born every hour.
I often see minimal opex reserves, which is concerning.
Ryan Elsey
6d
You forgot "always purchases 'below replacement cost'".
Judgment Day is coming for a lot of commercial real estate deals.
You forgot the "Graduate of Grant Cardone" scaminar.......
This is such an eye-opener. It’s easy to think a good deal will sell itself, but the reality is different. Budgeting for raising capital and marketing isn’t just smart it’s survival, as you said. Something first-timers (and honestly, even some experienced folks) overlook!
Great advice. For those who are looking to raise capital for their first real estate deal, it's important to develop a strong investment thesis and a compelling business plan.
Making debt and equity investments over $7 million for multifamily and CRE. Multifamily loans between $2 million and $7.5 million considered selectively for well-qualified sponsors.
6dAs a lender, I saw this so many times in 2021-2022! Buyer pro formas that left zero room for error. Buyers who assumed perfectly flawless executions and no real plan other than cap rate compression with plans to buy at a 3.5% cap and sell at a 3.00% cap! Prior to the run up, many deals were constrained to 80% LTV and may have had 1.35-1.45x DSCR, leaving room to make up differences elsewhere....... not so any more......