The Banker Thought They Were Dealing Drugs
“Yeah great, build a micro-resort, but I don’t have any money.” I’ve heard some version of this plenty of times. It’s the biggest objection people have to getting into real estate. And I’ve got an answer for you today that might blow your mind.
Rewards-based crowdfunding.
I personally know close to a dozen folks who have used (or are using) this strategy to raise anywhere from $400,000 to $1,000,000 plus — without giving up a cent of equity.
You don't have to have an audience already, and you don't have to have experience. You need $10,000 to $15,000 of initial capital, and (here’s the important part), unquenchable passion and determination for the one-of-a-kind idea you want to build. And a bone-deep desire to host others and give them a life-changing experience: the heart and soul of hospitality.
So here’s the exact playbook these folks have all used.
You have a dream to build a micro-resort. Call it three to five unique structures nestled in nature, in a good drive-to market, two hours or so from a metro area. And you’ve secured the land for it, by either:
buying it outright with cash
financing it through a community bank loan, or through a USDA type loan
just getting it under contract with a long option period (ideally, you already own it though)
You spend that $10,000 or so designing and refining your plans, converting those to renderings, and developing a landing page with all the information. Your story, both written and in a short film, the project renderings, the projected numbers, all of it.
Then you begin testing ads through Meta: Facebook and Instagram both. You can dial in exact demographics, income levels, and geography. This shortens the learning curve dramatically. And then you experiment like crazy. The ads make a pitch that goes something like this:
“Hey! We are Isaac & Helen and we have a dream to create a Nordic-inspired micro resort on our 5 acres here in the heart of Texas. But we need your help. In exchange for pre-booking your own experience here in this dreamy little world we’re creating, we want to give you 30% off what everyone else will pay, and xyz special perks to make this the best weekend ever. Together, with your help we can create something like nothing else!”
At first, maybe the ads only ask for a $1 deposit. This allows you to soft-qualify potential crowd funders and let the algorithm figure out who’s actually interested.
After 30 days or so, you dial in the exact ad creatives that work best, then increase that deposit to $50. Now they must put $50 down just to become eligible to pre-book. This is genius because it not only qualifies these leads as serious, but it can essentially pay for the ad cost as you scale ad spend to find and reach your target audience. In general, these qualified leads cost around $50 each in our experience, making getting them a break-even.
Within 2 to 3 months, you've built up a list of a few hundred to a thousand folks who have each put $50 down.
All along, you’re warming this audience with personal email updates on the progress. On the appointed day, the campaign goes live. You open the calendar up 12 to 15 months in advance. Or maybe you don't show a calendar at all. You just give them the opportunity to book a two- or three-night stay. You divide the experiences into a few different packages, set an end date to the pre-booking window — maybe 30 days. This is when the big money comes in. $1000 deposits, $2000 deposits.
That is how you raise up to $1 million or more without giving up any equity.
(You get to set the rules, refundable or nonrefundable. Just be upfront and clear about it. I recommend making everything refundable, and planning on a 10 to 15% cancellation policy)
My friend Tanner, who was in my first cohort of the experiential hospitality masterclass, masterfully pulled this off. He and his wife Melissa raised a little over $800,000 a year ago. Just a few weeks ago, they opened the doors to Cypress Resort, a spectacular hospitality retreat in the mountains of North Georgia. One of the brilliant things they did was invite some of the pre-bookers out for the groundbreaking ceremony. Brought them out for picnics. Asked for their input on the design. You can imagine the sense of pride and ownership every one of those folks felt, and the word of mouth that rippled out to their friends and family.
My friends Seth & Tori, who I’ve previously written about, have probably the craziest crowdfunding story of all. After their first treehouse rental venture collapsed due to the town zoning issue, they moved states, and — using Google Earth — found a tract of mountaintop land in the middle of nowhere. It wasn’t officially for sale, but they befriended the owner and got it under contract for $12,500 an acre.
But the bank didn’t exactly get it. So Seth & Tori took matters into their own hands.
Using their last $500, they commissioned renderings and pitched the idea directly to their Instagram audience, inviting them to pre-book stays at this yet to exist resort. In just five weeks, they raised $1,000,000 without giving up a single share of equity. They didn’t spend a penny on ads.
Seth told me with a chuckle about his banker calling him up: “Hey man, um, yeah, there’s been a ton of money deposited in your account in the past few weeks, and uh, you don’t even own that land yet. You guys, uh, dealing drugs or something?!”
Seth inwardly pumped his fists a little. I can relate.