What are key stakeholders looking for? A guide for real estate business owners

As your real estate business grows, there comes a time when you realize that in order to scale up to the heights you desire, you need to welcome in new partners. Whether these are banks or lenders or private investors, finding and landing the right help is an artform. And the more you know, the more seamlessly the process will go.

Today, we’re going to outline exactly what each stakeholder will be looking for when evaluating your business. Let’s dive in.

Banks and other lenders
Before you reach out to a bank or other lender, be sure to have the following information at the ready:

We’ve said it before and we’ll say it again: Cash is King. Never underestimate the role that cashflow will play in landing your company in bigger and better places. Banks will want to ensure that your company generates enough cash to make the investment secure. You’ll want to provide:

– Cashflow and net income projections
– Estimate of projections of future capital expenditures
– Sensitivity analysis in the case of  increased interest rates

Most recent financial statements
It is important to disclose and keep financial reporting organized. When working with a bank or other lender, these statements will add significant value.

Do you have all the details ironed out for your budgetary requirements?  Make sure you take into account potential increases in the costs of materials, foreign exchange and borrowing costs.

CRA obligations
You’ll be required to be up to date with all taxation requirements, so be sure to remain on top of paying your tax bills. Ensure you have copies of all recent taxes returns and notices of assessment.

How fast could your company divest of its assets in the event that this is needed? Are you asset rich and cash poor? What is your plan to address this?

Can you cover the cost of carrying debt? You’ll likely need to provide a net worth statement for the guarantors.

Reference letters
On rare occasions, the bank may want to see a letter from your accountants or lawyers. If this is the case, it’s helpful to have your partners at the ready, prepared to craft a letter on your behalf.

Other lenders
Do you have an existing lender? Provide the bank with information about who this lender is and the details of the other debts.

Property as security
If your company is pledging a property as security, you will need to provide appraisal reports and a title search to back this up.

Management and team
Provide the bank with information about your management group and key individuals, including their contact info, similar to how you would include in a real estate business plan.

When approaching investors to help you grow your real estate business, you’ll want to prepare to provide the following:

Subscription agreement / offering memo
Let your investors know about their options if they decide to exit early. Provide them with this information up front to smooth the process.

Business Plan
Stay tuned for our upcoming blog post in which we detail how to structure (or remodel) your real estate business plan. Your business plan is an important document that can be shared with investors when the time comes.

Distribution plan
Let your investors know how they will receive their money. How much? How often? When will the payout be? Spell this out for them and remember: Regardless of how much they might like you personally, ROI is the real reason for this relationship.

Exit strategy
What are your expected profits? What will the gains be at that time? Share your schedule and projected milestones.

How often will you be providing reporting? Quarterly? Annually? Your accounting partners will be able to shed some light on which method is best for your unique business needs.

Tax implications
How will your investors be taxed on this investment? How will it be structured? Is it a joint venture? A partnership? A corporation?

Name your risks and share what actions you’ve taken to mitigate them. Every investment will have risk, but your investors will want to feel assured that your company has anticipated the risks and put strategy in place in response.

Debt obligations
What current debt do you have? What type is it? Disclose this information so that the investors can make an informed decision.

Have you allocated a certain amount of profit towards the fees to operate and administer the project? Are those fees being paid to a related party of the manager or promoter?

Management and team
As above, provide the bank with information about your management group and key individuals and include their contact info.

Prepare and prosper
As with any other action in life, preparation is the key to success. Approaching lenders for support is a big step that shouldn’t be taken lightly. It’s worth it to seek the advice of a subject matter expert who can help you to gather all your materials up front and speed the process along.

The real estate experts at Zeifmans have more than 6 decades of experience supporting real estate businesses in accessing the capital they need to succeed. Reach out to our team today to learn more about how we can help.


Q&A with Partner, Jennifer Chasson

Q&A with Partner, Jennifer Chasson

With over 25 years of experience and 100+ successful transactions under her belt, Partner, Jennifer Chasson, brings invaluable expertise to the table. Whether it’s guiding as an advisor, mentor underwriter, ...