How to Raise Money From Family Offices for a Real Estate Syndication
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A family office is a private firm that manages the money of one wealthy family (a single-family office) or several (a multi-family office). Sponsors approach them because one family office can fund a large share of the equity in an apartment deal. They are not a shortcut, though: most invest through people they already know and trust, they ask for a track record, and they take weeks or months to decide. This post covers how to approach them, what they expect and how to handle accreditation.
Who counts as a family office investor?
The SEC defines an accredited investor to include a family office with at least $5,000,000 in assets under management that was not formed to acquire the specific securities and whose investment is directed by a person with enough knowledge and experience to evaluate the risks. It also covers the family clients of such an office (17 CFR 230.501). Many family offices invest through an LLC or trust, so you will also see the entity tests (an entity with more than $5,000,000 in assets, or one whose owners are all accredited). Ask which test they rely on and keep their answer in the file. In a Rule 506(c) raise you must take reasonable steps to verify, such as recent financial statements for an entity (SEC, Rule 506(c)). See accredited investor verification and entity requirements.
How do you get in front of one?
- Ask people who already know you. Your lender, broker, attorney, CPA and existing investors often know a family office that fits.
- Show up where principals are. Real estate conferences and investor associations put you in a room with their staff. See trade groups and investor associations.
- Build a record they can read. Case study of what you have done, with real numbers and what went wrong. See what a track record should show.
- Offer a co-investment seat. Many offices prefer to invest beside an experienced operator rather than back a new one alone.
What will a family office ask for?
| Request | What to have ready |
|---|---|
| Sponsor background | Bio, bad actor questionnaire, references |
| Track record | Deals, dates, outcomes, including losses |
| The deal | Offering memorandum, underwriting model, third-party reports |
| Terms | Fees, waterfall, related-party fees and who can remove whom |
| Alignment | Your own co-investment |
| Reporting | Sample quarterly report |
Answer questions in writing and keep the same version of the numbers for everyone. Anything you tell one investor you must be willing to put in the offering documents for all.
What about fees and finders?
Paying a person for bringing in investors can make that person a broker, which requires registration. The SEC's safe harbor for issuer employees (Rule 3a4-1) is narrow (17 CFR 240.3a4-1). Read paying capital raisers before you promise a fee to anyone who makes an introduction.
Our take
Treat a family office as a long relationship, not a lead. The sponsors who win them usually did something simple: kept their promises on a smaller deal, reported honestly, and let the office watch them work. Start by earning that record with the friends and followers who already trust you.
Trade-offs and who this is not for
- Not for a first deal with no record. A family office will ask for what you have not got yet.
- Slow. A decision can take longer than your contract's timeline. Do not count on one check.
- Common mistake: sending a mass email to a purchased list of family offices.
- Not a substitute for counsel. Structure, side letters and fees need a securities attorney.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from friends and followers who already trust them, under Rule 506(b) or 506(c). We are software, legal document preparation, escrow coordination and verification services. We are not a law firm, broker-dealer, investment adviser, funding portal, bank or escrow agent, and we do not hold investor money: investors wire their money to escrow at Enterprise Bank & Trust, in the deal's name.
DoorRaise keeps the deal in its own company with its own documents and a deal page, and runs an accreditation check on every investor, in 506(b) and 506(c) raises. Flat fees, never a percentage of the raise (see pricing). Create your free sponsor page.
FAQ
Can I email family offices cold about my deal?
Not safely in a Rule 506(b) raise. A cold pitch to people you have no relationship with can be general solicitation, which is allowed only in a Rule 506(c) raise with verification.
Do family offices have to be accredited?
In a 506(c) raise, every purchaser must be accredited and verified. A family office usually qualifies under the family office or entity tests, but you still need to check.
How big a check can a family office write?
It varies by office and by deal. Do not assume a size. Ask about their typical range early so you do not plan around money that will not come.
Do I need a placement agent?
Not required. A placement agent is a registered broker-dealer paid for raising capital. Talk to a securities attorney before using or paying anyone.
Sources
- 17 CFR 230.501, definitions including family offices
- 17 CFR 230.506
- SEC, Rule 506(c) and general solicitation
- 17 CFR 240.3a4-1
This article is general information, not legal, tax or investment advice. Talk to a securities attorney before you approach family offices or pay anyone for introductions. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.