Capital Calls: What to Know Before You Put In More Cash

You invested in a real estate syndication, fund, or partnership. Now, the operator is coming to you asking for more cash. Whether expenses went up, income went down, mortgage rates had to be refinanced, or a combination of all three, you’re on the line—do you put more cash into the deal with hopes it saves your principal, or do you walk away, take a loss, and try again? This is what we do when the capital calls come our way.

A “capital call” is exactly what it sounds like—an operator is calling for more capital to be invested in a deal. But, more often than you’d think, you don’t have to say yes. Kathy recently told an operator “no” when they needed another sizable investment. Why? The money wasn’t going to the right place, and it wouldn’t have saved (or improved) the deal. 

So how do you know when you should put in more money? Today, we’re talking all about capital calls—when to invest, when to walk away, what to ask for, when there’s fraud, and the three rules we personally follow before putting another dollar into the deal. More capital calls are coming, and you'd better be prepared before they do. 

In This Episode We Cover

Capital calls explained—when it’s to improve a property vs. delay an inevitable loss

Three rules Kathy and James follow before putting any money into a capital call

When to (sternly) say “no” to an operator who’s trying to pocket your extra investment

Signs that it is worth it to invest more and your return will be saved (or increased)

The four people who must look over the documents with you before you invest and during a capital call

And So Much More!

Links from the Show

Join the Future of Real Estate Investing with Fundrise

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On The Market 214 - What to Know About “Capital Calls” As Multifamily Syndications Get “Squeezed” w/Brian Burke and Mauricio Rauld

James' BiggerPockets Profile

Kathy's BiggerPockets Profile

Grab the Book on Syndication Investing, The Hands-Off Investor

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