DONT Take Soft Commitments. Ask Your Investors for DEPOSITS…

One of the biggest concerns that investors have when you put together a blind fund is, do I take all the money now, do I raise 5, 10 million dollars, what if it just sits in my bank account for the next six months? And the way that we typically address those issues is, we don’t want to take soft commitments, right? Because if you take soft commitments, then six months later you’ll go back and they’re going to come up with some excuses to why they don’t have the money, you know, some emergency or maybe another deal came across and they don’t have the money anymore. So you want to lock them in. And the way we recommend locking people in is go through the whole documentation, everybody signs the PPM, the subscription agreement, they commit for their amount, let’s say it’s 100,000, a 100,000 dollar commitment and you take a deposit, a 10% deposit, most of the people do 10, maybe 20, enough for them to be hooked in. So that when it’s time to acquire the asset and do a cash call, you do a cash call to them for the other 90% and if they don’t make the cash call, they lose that 10%, they forfeit that 10%.