Over my past 4 years working at Atlas Real Estate Partners we’ve closed on 30 deals. While we’ve learned a ton over that time, we still encounter countless issues that every start-up real estate investment firm will face like these 70+ challenges of starting and growing a real estate investment firm. These are the challenges that I’ve experienced first-hand and over time I’m going to use the list as sort of a road-map to help you navigate the treacherous path of starting your own real estate investment firm.
Today, I’m excited to share the story of Michael Rabin, founder of Fortified Property Group and fellow NYU Schack grad. I thought it was an interesting time to interview Michael because he recently made the decision to go off on his own and just closed on his first few deals.
It’s a unique time to chat with Michael because it provides a real-time account as to why he decided to go off on his own, what’s surprised him, and advice he has for aspiring entrepreneurs who are not far behind him.
Tell us a bit about the Fortified story. How’d you decide the timing was right to go off on your own?
I’ve always worked in small entrepreneurial environments knowing both that I wasn’t a corporate guy and that one day I wanted to work for myself. Additionally, my most recent experience (the prior 6.5 years) lent itself to a very autonomous role, one where I was overseeing all aspects of acquisitions and asset management for the firm I was working for. I eventually got to a point in the learning curve and responsibility set where the only distinction between running my own deals and someone else’s deals was that I was taking a salary in lieu of a larger share of the upside. When the decision to making the entrepreneurial leap came down to trading current dollars (i.e. salary) for substantially larger future dollars, it became a no brainer.
What has been the biggest challenge of getting your shop up and running? What’s been the biggest surprise?
Fortunately, no dramatic challenges yet. However, it’s important to note that the earning fundamentals of a real estate investment business are not like that of an operating company or service-oriented company where accounts/clients create reliable income streams. We are in an “income-lite” business at the corporate level. While transactional fee income (e.g. acquisition fees, asset management fees, property management fees) can help pay the bills, they are only a means to an end (i.e. staffing up and building a portfolio). Furthermore, the act of buying a deal doesn’t necessarily translate into immediate earnings. So, there is a real challenge in trying to survive on the bare minimum while investing and re-investing dollars into your venture.
My biggest surprise is the graciousness that I’ve been met with since I’ve embarked on my own venture. The real estate community has been incredibly helpful and supportive in offering resources, making introductions, providing guidance, etc. I think that many people in our business are benevolent to those who try to strike out on their own. I also think there’s a pay-it-forward type of attitude that exists, particularly among real estate veterans who understand what it takes to get to where they did.
What’s one thing you believe that nearly no one agrees with you on as it pertains to the real estate biz or running your own shop?
You can’t underwrite a deal to achieve superior returns to the market. Our business is too efficient. As Howard Marks of Oaktree says in his book ‘The Most Important Thing’, “the best investor achieves market-level returns while bearing below-market risk.” With some combination of skill and luck, many investors can outperform the market once in a while but I can’t tell you how many times I’ve heard “this is the best deal I’ve seen in a long time.”
In 140 characters or less what’s one piece of advice you would give to young real estate guys thinking about venturing off on their own.
I have a few pieces of advice. One: Chart a path. Determine where you are in your career relative to where you want to be and highlight what the gaps are. Then, develop a plan to fill them in. Some examples:
- Attending four networking events every month and getting ten business cards at each event
- Making one new broker introduction every day
- Reaching out to one new potential investor every two weeks
- Looking at two new deals each day
- Assembling the deal professionals you don’t already have in your roster so that you’re prepared to transact
Second piece of advice: Network tirelessly. You never know where an introduction may lead. In many cases, getting deals done is about being in the right place at the right time and the only way to achieve that is through having relationships in place.
There are a few points that Michael makes that really resonate with me and seem to be consistent among successful real estate entrepreneurs; he always had the desire to go off on his own, he built his career around preparing to do his own thing, and he is a tireless networker.
I want to thank Michael for his time and insights and wish him the best of luck as he navigates the challenging, but never boring world of entrepreneurship.
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