What We Learned Over 4 Years of Running Our Own Real Estate Investment Firm

Joe Stampone Start a Company 13 Comments

Atlas Co-Founders Alex Foster and Arvind Chary

Atlas Co-Founders Alex Foster and Arvind Chary

Last week, Atlas Real Estate Partners co-founders, Arvind Chary and Alex Foster spoke to a packed room of Columbia University MSRED and Business School students. I have a slight bias, but I thought it was one of the more engaging real estate talks that I’ve heard, and based on the sheer number of questions asked and students who hung around afterwards to chat, I think the audience agreed.

When I was in grad school I listened to a number of high-profile real estate entrepreneurs speak. They’d discuss their latest mega-project and provide some high-level advice to young real estate professionals, but something was missing; I wanted to know what it was really like being an entrepreneur. I didn’t care much about what it’s like to build a downtown high-rise or work with large private equity funds. I just couldn’t relate.

I wanted to know what getting started in the entrepreneurial world was really like. Alex and Arvind covered how they did their first deal ($2M deal), raising money with no track record, and obtaining a loan with no balance sheet.

However, what I found most interesting was everything they learned over the past four years going from two grad students sharing their friend’s office to building a $400M portfolio.

Here are some rough notes from their talk:

  • Get a partner
    • Provides different personalities and strengths
    • Enables you to bounce ideas of each other
    • Facilitates quality of life and taking breaks while other person covers
  • Don’t be Greedy
    • Take smaller pieces of the pie and focus on the long-term partnerships
  • Get lucky/timing is everything
    • Talent and hard work are essential, but there’s nothing like getting there early and being pushed ahead by the powerful trends in demographics and taste that follow
  • Reputation is everything.
    • Always do what you say you’re going to do and help others not because you believe it will indirectly benefit you, but because you can.
  • Closings never go smoothly
    • Prepare for the road bumps with lender, equity, title, seller, etc.
  • Share in fees and promotes, to align interests
  • It’s all about relationships
    • Always keep in touch with old co-workers, friends, and classmates.  When we were starting out we got in touch and met with 300+ people we had met over the years.  They were the ones that helped us raise money, find deals, find service providers, office space and at gave us good advice. Keep meeting with those people as the company grows and try to facilitate intros which will be beneficial to the people that helped you out.
  • Have a good attorney
    • You get what you pay for – don’t skimp
    • You need an attorney looking at all of the “what ifs” and protecting your interests while you focus on the business issues.
  • Reverse Financial Engineering
    • When numbers look too good, beat them up. It’s better to be conservative and beat your projections.
    • Leave room to refine your model in due diligence
  • You always need and will spend more money than you think
    • Overcapitalize
    • Beef up capex budgets and reserves
    • Avoid capital calls
  • When pitching investors, presentation is half the battle
    • Tell a story with the presentation
  • Find investors that need you

The overriding take-away from talk is that no matter how smart you are, going off on your own hard. It takes a good partner, great timing, and a lot of luck.

What do you think?

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  • Jeremy Reynolds

    Great post, Joe. I’m just getting into commercial real estate investing and trying to learn so I have one quick question. In the post you mentioned to “Avoid capital calls”. Can you please explain what that is and why to avoid them? Thanks a lot for all your posts. They’ve been very helpful (and interesting) in my learning.

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  • Felipe Althoff

    Great post Joe, accurate and consistent information. You approached points that actually make all the difference when planning a new business and especially in the maintenance of success.

  • CRE

    Felipe: I assume he means avoid short term investors. Don’t take someone’s investment money if you think they are going to want it (call it) back in a year or so. Investment’s take a while to spring profit– your investors shouldn’t expect to see capital gains 6 months into the deal. Seek investors who understand what type of project they are putting their money into. They may get 8-12 percent ROI but it might take a few years.
    This is a great blog for ambitious CRE workers

  • Felipe Althoff

    The question is from Jeremy. I understand that a cash call is when a CRE company asks the investor for more money than originally planned, lowering the ROI.

  • John

    Very Informative Post! Regarding, “you always need and will spend more money than you thin”

    1. Overcapitalize
    2. Beef up capex budgets and reserves
    3. Avoid Capital Calls

    Do you have a general rule of thumb to go by for reserves? Or use the following assumptions:

    Property Value: $1,000,000.00
    Loan: $300,000.00
    CAP Rate: 7%

    I have heard that an investor should be able to cover all the expenses for 6-24 months for each property?

    Appreciate your time!

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  • Hi Jeremy,

    A capital call is when you go back out to your investors, post close, and call more capital. There’s provisions in the operating account which dictate the specifics of a capital call (how they’re diluted if they don’t participate), but my advice is to over-raise capital upfront so you never have to go back out to your investor base and request more capital.

    Thanks for reading!

  • Hey John,

    There’s no one size fits all approach. Look at your specific deal, put together conservative estimates, then add some cushion on top of that. Investors don’t mind if you return capital you don’t need.

    Thanks for reading!

  • Felipe, you’re correct. In this case I’m referencing going back to the existing investors in a deal and calling more capital from them.

  • Thanks Felipe. I’m working on a venture that will dig into each of these items in greater detail.

  • MK

    Hi Joe,

    What kind of software do you use in Atlas? What do you use for project management and document management? I work in a real estate development/investment firm in Eastern Europe and we’re looking into updating our software.

  • @MK, we don’t have a software we use internally, however we’ve used Basecamp for many one-off projects. What challenge specifically are you trying to solve?