You're Not Ready to do Your Own Deals

You’re Not Ready to do Your Own Deals

Joe Stampone Featured, Start a Company 19 Comments

I recently turned 30 and have been working for Atlas for over 5 years now, which feels like a long time, but is nothing in the grand scheme of an entire career that could last 60+ years. We’re under contract on our 40th deal and at this point I have the core ingredients to do my own deals; the skill-set needed to execute all aspects of a deal, a network of investors, lenders, and brokers, and the grit to succeed as an entrepreneur, but I’m not ready to do my own deals.

Most young real estate professionals want to do their own deals, but greatly underestimate the difficulty and risks of going off on their own. Here are a few of my observations from watching several friends successfully and unsuccessfully do their own real estate deals:

  • It’s incredibly challenging to do your own deals during a hot market. Market timing, which is nearly impossible to gauge, is the biggest determinate of success early on.
  • Failure is not an option. Doing a deal and failing could bring damaging consequences to your career. You lose credibility with investors and the market when you put your neck on the line and you fail.
  • You can’t go out there and do what everyone else is doing. You need to bring something new to the market. There are too many smart groups already doing what you intend to do in your market, so it’s tough for you to compete.
  • The market doesn’t care that you went to a good school, have great working experience, and work hard.
  • At 25 or 30, you don’t have experience. You haven’t worked through multiple cycles and you haven’t built enough trust with your network. There’s no reason you can’t start a firm at 40, 50, or even 60, ages where you have the experience, a rolodex, and net-worth that will make doing your own deals much easier.
  • Intelligence, the ability to analyze deals, and a passion for the business does not guarantee success. You also need to be a ‘deal guy’ and have the ability to negotiate and assemble a great team to execute a specific investment strategy.
  • Luck plays a massive role. In order to be successful you need to match your experience with timing and great market opportunity. From there, it’s what you do with your luck that dictates your success.
  • Work-life balance doesn’t exist for entrepreneurs, especially early on. If you’re sleeping soundly at night, something bad is going to happen.

This post is not intended to deter you from doing your own deals, it’s intended to ensure you succeed when you ultimately decide to go off on your own.

Do you still think you’re ready to do your own deals?

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  • Erik Edeen

    Great humble post Joe. Nice narrative to hear from an opinion that I hold in high esteem.

  • Thanks Erik, I appreciate the support and feedback. Stay in touch.

  • Mark Kennedy

    Great post Joe. Also, all to often young players underestimate the emotional toll failure will take on your long term plans. Losing capital is the least significant; failure steals our passion and our confidence.

    It’s hard to buy when there is blood in the streets, if it’s your blood. Especially now, there are no high producing, cheap gold mines for sale – be the best pick and shovel seller you can be and wait until the time is right.

  • BruceREFM

    Hi Joe, thanks for sharing. You are one self-aware young man, which is rare. Don’t discount what you do have already in terms of experience, exposure, skills and passion. One thing you and the readers should know for sure is that an engraved invitation is not going to arrive by courier one day, telling you it’s time to become an entrepreneur. You must invite yourself, conjure up the courage, and willfully step forward into the void of no longer being employed by someone else.

    Important elements to success as a first-time entrepreneur include:

    1. the ability to envision opportunities, and communicate and sell your vision to others

    Currently you’re a buyer — you buy properties and services on behalf of the company. Before you get into the position to do either as an entrepreneur, you need to be able to sell yourself and your significant other on your viability and sustainability as a business owner/operator.

    Once you’re in business and doing deals, you’ll need to sell potential financial stakeholders on your integrity, reliability, trustworthiness, diligence, skills and smarts. The best way to sell is to show, not tell, so you’ll be best served to prove all of these characteristics through your actions (e.g., following through on your promises, producing polished investment memos that include mention of risks), and also through having a professional dedicated website for your company (it makes a big impression on how strangers perceive you).

    2. the ability and willingness to defer income and gratification

    Being a first-time, small-time business owner is a lesson in humility. Your initial deals will likely be a lot smaller and have less external appeal than the ones on which you’re working currently. The deals might be in tertiary markets, in sketchy parts of town, with low-credit tenants. Are you willing to do those kinds of deals to get started?

    Are you able and willing to not have a high salary for the first X years? Are you willing to have no office or a very modest office for the first Y years? Are you willing to be a “nobody” and toil away in obscurity for Z years?

    Are you willing to grow your firm really slowly while you watch your fellow age cohort members making 7 figures working for prestigious firms?

    3. the drive to do whatever it takes to keep the ship afloat

    Are you willing to bootstrap your ambitions by doing consulting work along the way?

    Keep up the great posts and introspection.

    Bruce

  • BruceREFM incredibly well-stated. It’s one thing coming from me, but another coming from someone who’s living the entrepreneurial grind.

    The biggest misconception is that entrepreneurship is sexy. The media showcases the companies that made it, without focusing on the process. As we say here at Atlas – “Timing, perseverance, and ten years of trying will eventually make you look like an overnight success.”

    – Biz Stone, Twitter Co-founder

  • @disqus_Bj6wkIr6qu:disqus that’s an awesome point and probably the biggest impact of failing. It’s easy to make the money back, but hard to regain the confidence and grit it takes to be a successful entrepreneur.

  • cjwill2112 .

    Joe – overall, pretty discouraging and disappointing stuff. I disagree and am armed with a plethora of living examples/counter-points to every bit of your disheartening PSA.

    Finding success at doing your own deals does not come without tremendous risk. Some succeed and some don’t, but please refrain from attempting to avert aspiring entrepreneurs out of your own fear of failure.

  • Daniel Black

    Joe- Great post, may i recommend checking out https://sitezeus.com/ to help start!

  • I greatly appreciate your opinion and welcome you to share what you’ve seen. Most post isn’t intended to say you can’t do your own deals, it’s a cautionary tale based on what I’ve seen over the past 5 years of real estate professionals trying to go off on their own and do their own deals. Feel free to email me at joe [at] asotreg.com if you’d like to discuss further.

  • Tracie Copeland

    Joe, I think this is a pretty wise position to take. It’s easy for us young professionals to get hot under our asses thinking that we know it all, especially coming off a few successful deals. It takes character to sit back and say, wait a minute – maybe I’m not ready. As the broker-owner of an independent real estate company, I’m regularly met with choosing between feel like a know-it-all, and forcing some humility. Take your time, learn everything you can – it will pay off in the long run! Check out my brokerage at http://www.copelandcompany.com.

  • @traciecopeland:disqus I completely agree, although it’s a tough balance to strike. There’s an element of entrepreneurship that requires a leap of faith and belief in yourself that you’ll figure it out and be successful. It becomes very tricky when other people’s money is involved.

  • Kevin

    But don’t you work for a firm that was founded by two partners that were probably 30 or 31 when they started it? If they had followed your advice above, you wouldn’t have worked on all those deals the last 5 years.

  • @disqus_i5bhmsoe5w:disqus it’s true. However, the Atlas partners will be the first to admit that our timing played a key role in our success. Had the partners started the company today, knowing what we did then, they’d have no chance. Check out this post – http://astudentoftherealestategame.com/what-we-learned-over-4-years-of-running-our-own-real-estate-investment-firm/

  • Kevin

    I don’t know, Joe. I respect your opinion and it was a really good article but I’m still having a tough time wrapping my head around why it would be tough for the Atlas founders now opposed to five years ago. Regardless, a good discussion. So are you starting Stampone Capital at 40?

  • Ha! In short, it’s because we didn’t know what we didn’t know. We made mistakes, many of them, however because of our good timing those deals still did really well and enabled us to grow our investor base and do more deals. Had those deals failed, we wouldn’t have been able to scale up the way we did. In terms of Stampone Capital, I love the team I work with, I’m learning everyday, and have limitless upside.

  • Sean Sweeney

    In my opinion, Joe is 100% right about the timing. Hard to start a successful firm at or near the peak of a market. It’s not being scared or chicken, it is being smart.

  • @disqus_Yb9e0YwsSg:disqus it’s nearly impossible – II would love to see some stats on successful firms started in 2010-2013 versus 2015 – today. It’s so hard to be successful even with the market going in your favor.

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