This post will be short, sweet, and full of purpose. Around The Commercial Investor and Dandrew Media, we talk a lot about hard money lending.
However, we get an astounding amount of questions regarding private money investing. Many of you are specifically asking what exactly a private money fund manager does…
To tell the full story about my thoughts and feelings on this could span many articles (I’ll make a note to put those in the machine for the future), but for today I’ll share with you the five core functions any Private Money Fund Manager should be fulfilling. You’ll even get the downloadable PDF blueprint of the graphic below for you to keep on hand at the end of this post.
Use it as a reference, or something to throw on the desk of your PMFM the next time you think they’re slipping…
Will any of these surprise you? Let’s find out.
1. Deal Sourcing/ Origination
The PMFM must have strong marketing experience or sales desk experience to bring in a consistent deal flow.
This is where almost all newbies fail right out the gate.
They must be able to prove that opportunities exist and your fund will be competitive with others.
RELATED: 9 Deal Sourcing Secrets for a Solid Deal Flow
2. Underwriting
Next, they must be able to show that they’re able to “structure away the risk” from your investors and have clear and detailed guidelines as to what they will underwrite, and what they won’t.
3. Manage Borrowers
A PMFM isn’t afraid to ask the borrower for the keys.
Making the borrowers create a business plan and forcing them to adhere to it, will ensure that if things go wrong early, they can act fast.
RELATED: How to Pre-Qualify Any Commercial Deal in 90 Seconds or Less
(IMPORTANT: I’m spelling out in easy, step-by-step detail the 3 BIG commercial “buckets” that bring in the bacon this Wednesday, August 17, 2016 at 2 PM EST. Join me for this hit the ground running, pay attention, take action strategy session called 3 Secrets to Commercial Investing Success. Spots are limited and, as of right now, I have no intentions of doing a second broadcast. Register now.)
4. Capital Raising
They will need to be fundraising consistently and constantly finding new qualified investors, in a pooled format.
Not on an ad hoc, deal-specific basis. They should be able to share how they do this.
If you haven’t read The Definitive Guide to Commercial Real Estate Capital Raising, stop and go do so now.
Not to be confused with maintaining investor relations. They must be able to show that they can balance this and Deal Sourcing / Origination concurrently.
If they stop any one of these two and they’ll go out of business immediately.
5. Fund Administration
Maintaining relationships with current investors, accounting, and distributions. They should outsource this to a credible fund administration firm.
This task doesn’t generate revenue for you or your investors.
Lastly, and most importantly to understand, is that every function affects the others. Three out of the five just won’t cut it.
So, surprised? Think of anything I forgot? Let me know in the comments.
Download The Five Core Functions of a Private Money Fund Manager here.
(IMPORTANT: I’m spelling out in easy, step-by-step detail the 3 BIG commercial “buckets” that bring in the bacon this Wednesday, August 17, 2016 at 2 PM EST. Join me for this hit the ground running, pay attention, take action strategy session called 3 Secrets to Commercial Investing Success. Spots are limited and, as of right now, I have no intentions of doing a second broadcast. Register now.)
