I’ve spent the past 4 years working for a start-up real estate investment firm. When I joined the company in early 2011, the partners had just closed their 2nd deal, had no website, and no office space. Now, 4 years later, the company has done 30 transactions, hired a team, built out our office space, and continuously refined our operations. Through that process, I’ve experienced first-hand the challenges of starting and growing a real estate investment firm.
I’ve been using a Google doc to track the challenges we’ve encountered. While this list is by no means exhaustive and many of the items are not unique to real estate investment, it’s a good taste for what you have in store when you chose to venture off on your own.
Over time I’m going to use this as a sort of guide to share some of the tools and processes that we’ve used to solve some of the endless challenges of building a company.
- Creating a name that is memorable and conveys the brand and doesn’t interfere with existing trademarks
- Finding a partner who compliments your strengths and shares a similar vision and integrity
- Writing deal memo’s that sufficiently pitch the upside of a deal and downside protection to the non-real estate professional
- Finding high-quality 3rd party property management for smaller assets in secondary and tertiary markets
- Cheaply building a website that conveys the brand and looks good, yet is also versatile/functional
- Sourcing debt for small, local deals
- Properly billing back deal-level expenses to the property
- Setting up new entities for each deal
- Setting up bank accounts for each deal
- Funding large deposits out of pocket prior to having debt or equity commitments
- Coming out of pocket for due diligence costs prior to being hard on a deal
- Providing high-quality investor reporting each quarter
- Ongoing lender compliance
- Timely providing K1’s to investors
- Updating investor banking info
- Working with a custodian when managing self-directed IRA money
- Approaching investors for a capital call
- Finding a quality attorney who protects your best interests, but is affordable
- Strategically building an investor base and cutting back investors on smaller deals
- Ongoing investor cultivation
- Determining when it’s worth hiring employees then managing them and building a culture that promotes creative thinking
- Staying on top of macro trends and market-level news
- Deal-level insurance; property, GL, umbrella etc. – tracking various renewal dates
- Company-level accounting
- Building a robust investor presentation with no track record
- Qualifying for your first few loans, signing recourse etc.
- Maintaining a strong work/life balance
- Scaling while remaining lean and entrepreneurial
- Sustaining your quality of life with unknown income
- Convincing sellers and brokers to award you the deal and that you’re capable of executing
- Tech Challenges; internal server, email set-up, security etc.
- Submitting and tracking lender reimbursement requests
- Tracking and completing property tax appeals
- Deciding if you want to have a partner or not
- Making sure the name you came up with has a URL which you like and is available
- Deciding on a niche you want to focus on
- Making sure you are in the right timing of the cycle so there are still opportunities left to pursue
- Getting the courage to leave a safe and steady job
- Dealing with rejection on multiple levels
- Finding and closing on your first opportunity
- Deciding on the type of equity you want to attract, private or institutional
- Finding and securing your first office space
- Negotiating revenue share for cable agreements
- Managing various participants remotely – equity partner, lender, property manager etc.
- Balancing endless calls, meetings, and emails with doing work that matters
- Managing the operating agreement and subscription agreement signing with many investors
- Finding mentors to help provide quality advice
- Accessing expensive data sources – CoStar, RCA, REIS, Reonomy etc.
- Effectively monitoring and documenting implementation of a value add program outside your hometown.
- Determining the best way to align third party’s interests (general contractors, vendors, property managers, etc.)
- Knowing when to step back and allow property managers to implement their dedicated portion of the business plan without interference
- Staying in the loop with the institutional world (capital markets) without the resources that come with institutional jobs
- Determining how to settle potential partnership disputes
- Designing a logo, business cards, deal memos, and your investor presentation
- Trademarking a name and mark
- Getting accurate DD materials in a timely fashion when dealing with unsophisticated sellers
- Monitoring 3rd parties when you’re not an expert; construction, architects, engineers etc.
- Determining if an investor is accredited without being overly invasive
- Uncovering investor needs by asking the right questions
- Articulating potential benefits of diversifying a portfolio with real estate to new real estate investors
- The art of a cold call/email to solicit new accredited investors
- Maintaining a robust deal pipeline
- How to procure off-market transactions
- Negotiating supplies and service contracts
- Knowing when to drop a deal/walk away by staying unattached/unemotional
- Determining when the time is right to develop a compliance manual or a policy and procedures handbook
- Finding, hiring, and managing interns
- Determining the best way to manage investor confidentiality when doing quarterly reporting
Post Publishing additions
69. Keeping track of all asset management activities including; tax protests, insurance/tax escrows, lender compliance, investor documents, 3rd party contracts etc
70. Determining year-end valued investor gifts
71. Creating interest-aligned bonus structures for property managers and regionals
What would you add to this list?