I recently had an investor call with Bob Dreher, SVP of Investor Relations of Praxis Capital. For those of you who have been following/listening to Left Field Investors (LFI) for some time know, we think highly of Brian Burke and his team at Praxis. Many of us have read Brian’s book, The Hands-Off Investor, and use it as a reference for much of what we do. Brian will be our LFI monthly meeting speaker/guest on April 26th so please be sure to attend or catch the recording afterwards.
Anyway, Bob was gracious enough to have our scheduled call run 30 minutes past the allotted time as we both were really enjoying the conversation. Frequently, I find this to be the case – the sponsor or a team representative is a wealth of knowledge, which you want to capture all you can, and they are genuinely interested in hearing your journey, goals and why you are reaching out to them and their operation. (And unfortunately, sometimes they aren’t and are simply checking the required SEC box so you can receive information and invest, but this is rare.)
The toughest part is taking action by holding that first call because it’s scary, daunting and/or overwhelming! You feel like they know everything and you know very little. However, one of the advantages of a community like ours is that going into these conversations you may know people who have already held discussions with these sponsors and/or their teams. Mentioning being a part of LFI or other groups can ease the uncertainty and it opens other doors… like lower minimums.
Praxis has a published minimum investment of $100,000 which they do not deviate from often, with reason. However, because Bob is familiar with our group and we have a few members supporting Praxis deals already, he is willing to work with our members on minimums. This is not to say Praxis will accommodate the request every time but I highly doubt this would have been offered up had I not asked. It is always in your best interest to ask the question especially when you are new to the sponsor and want to get a feel for their process. The worst they can tell you is the minimum is non-negotiable. While this does happen and is perfectly fine, what happens more often is the sponsor will lower the minimum, especially if there are others you can bring along due to your involvement in investing groups. Sometimes it may be a one-time offer on your first deal but on other occasions, it may be extended to several deals. Regardless, do not underestimate the knowledge you gain from asking questions nor the advantages of being in a group of like-minded individuals.
This is just one example of countless other similar results from asking sponsors about minimums. Just keep in mind that there will be very relevant reasons they will not be able to drop the minimum: they don’t need to given their repeat investor interest, partners in the deal won’t allow it, it’s costly and time consuming for them to have more investors than fewer (think about it in terms of communication, distributions, issuing K-1’s, etc). Take action, schedule the call and make the ask if a lower minimum is of interest to you and your goal for funding the deal.
Sean Donnelly is one of the founders of Left Field Investors. He began investing in real estate in 2007 when he bought a flip at auction with a friend. While the market tanked shortly after, the multifaceted benefits of real estate investing became clear. He currently owns single family and duplex rentals but has shifted to investing primarily in passive commercial real estate syndications.
Nothing on this website should be considered financial advice. Investing involves risks which you assume. It is your duty to do your own due diligence. Read all documents and agreements before signing or investing in anything. It is your duty to consult with your own legal, financial and tax advisors regarding any investment.