Introduction
Launching a real estate fund is an exciting step, but it’s not without its hurdles. From navigating securities laws to convincing investors to commit, new fund managers encounter a variety of obstacles. The good news? Most challenges are predictable, and with the right strategies, you can overcome them and set your fund up for long-term success.
Let’s explore the most common roadblocks and how you can avoid (or conquer) them on your path to becoming a successful fund manager.
- Navigating Legal and Regulatory Requirements
The Challenge:
Real estate funds must comply with complex securities laws at the federal and often state level. Missteps can lead to delays, fines, or even fund shutdowns.
How to Overcome:
- Engage an experienced securities attorney—ideally, one who specializes in real estate funds.
- Decide early on which SEC exemption you’ll use (such as Rule 506(b) or 506(c)), as this impacts who you can market to and how.
- Ensure your Private Placement Memorandum (PPM), operating agreement, and all subscription documents are meticulously drafted.
Tip: Learn what your syndication attorney won’t tell you about fund structures in my free training.
- Attracting Committed Investors
The Challenge:
You may have a strong network, but getting investors to actually write a check for your fund—especially if it’s your first one, can be tough.
How to Overcome:
- Build trust by clearly communicating your investment thesis and track record.
- Use a professional, transparent pitch deck (see [how to craft a winning fund pitch deck](#)).
- Offer frequent updates and educational content to keep investors engaged.
- Start with a “friends and family” round if needed, and leverage early commitments to attract others.
- Creating Compelling Deal Flow
The Challenge:
Investors want to know you have access to great deals. If you can’t consistently identify and secure solid opportunities, your fund will struggle.
How to Overcome:
- Develop relationships with brokers, wholesalers, and other deal sources before you launch.
- Systematize your underwriting process to quickly evaluate new opportunities.
- Communicate your sourcing strategy to investors so they’re confident in your pipeline.
- Managing Fund Operations and Reporting
The Challenge:
Running a fund means handling investor relations, compliance, accounting, and reporting—all while sourcing and managing deals.
How to Overcome:
- Use fund administration software or hire a third-party administrator as you scale.
- Set a regular schedule for investor reports and updates.
- Build a small, reliable in-house team or outsource specialized tasks.
Explore [the key roles you’ll need to launch and operate a real estate fund](#).
- Setting Terms That Balance Investor Appeal and Sponsor Incentives
The Challenge:
If your fund’s terms (fees, splits, preferred returns) are too aggressive, you’ll scare off investors. Too generous, and you undermine your own compensation.
How to Overcome:
- Research market standards for similar funds in your asset class and region.
- Be transparent about how fees/rewards align with performance.
- Be willing to negotiate, but know your minimums.
- Overcoming the “First Fund” Jitters
The Challenge:
Many sponsors feel they lack credibility or are hesitant to start due to fear of making mistakes.
How to Overcome:
- Leverage your track record from previous syndications or real estate deals.
- Bring on experienced advisors or partners to bolster your credibility.
- Remember that every successful fund manager started with their first fund!
Conclusion
Challenges are inevitable when launching your first real estate fund—but they’re also surmountable. By anticipating roadblocks and preparing solutions in advance, you’ll inspire confidence in your investors and set yourself up for rapid growth.
Ready to reduce risk and fast-track your launch?
Register for my free, on-demand training to learn how to launch your fund in just 21 days, with actionable strategies to address every major challenge along the way.