Bharat Sangani: closing capacity before the investor negotiation
Bharat Sangani described a rule his real estate business generally followed: it would have enough money to close a deal itself before entering it. He explained the rule through the negotiations it affected.
The deadline changed the negotiation
He described the pressure created when an investor could demand changed terms because a transaction needed to close. Having another source of closing capital, in his account, meant he could decline that request.
Capacity and actual funding were different
Sangani said he showed that the money was available even when outside investors supplied the funds. His example distinguished the ability to complete the purchase from the source eventually used.
In Bharat Sangani's words
"we will not enter into a deal that we do not have enough money that we can close the deal by ourselves" (Bharat Sangani, Family Office Club event talk introduced by Richard C. Wilson)
How to use this
- Identify the source of closing funds before relying on an outside commitment.
- Separate demonstrated funding capacity from the eventual source of transaction capital.
Questions and answers
What did Sangani want established before entering a deal?
Enough capital to close without depending on the outside investor.
Did he say that reserve always funded the purchase?
He said the demonstrated capacity could remain available while investors supplied the money.