A Student of the Real Estate Game


Wall Street Lawyer Turned Real Estate Investor Finds Success in Multifamily Investing

Nov 29, 2015 | Career, Entrepreneurship, Multifamily, Passive Investing

I first met Jonathan Twombly at the Harvard Club in Midtown NYC.  Over lunch Jonathan shared his career story, describing how he transitioned from Wall Street attorney to real estate entrepreneur. With no traditional real estate training, Jonathan has been able to acquire his first few deals and build a nice platform in just a few years. As a full-time real estate professional, I have an appreciation for how complex real estate can be and how challenging it is to do your first deal. I was inspired by his story and invited Jonathan to share it with you first-hand.

Enter Jonathan:

Who is Jonathan Twombly

Jonathan Twombly is managing member of Two Bridges Asset Management LLC, which invests in multifamily properties in the Southeastern United States.  Two Bridges, which was founded in 2013, acquired approximately $20 million worth of assets by January 2015, and is closing in on 500 residential units.  Jonathan is a former Wall Street lawyer and a graduate of Harvard College and Columbia Law School.  He’s a member of the board of directors of the Harvard Real Estate Alumni Organization and the Brooklyn chapter of the Entrepreneurs Organization.  He writes about multifamily real estate at his blog, The Mortar.

My Start in the Real Estate Business

I never expected to be in the real estate business.  I was trained as a lawyer, and practiced on Wall Street for more than a decade – as a litigator, no less, not a real estate or corporate lawyer.  I even took a detour to in my thirties to pursue a PhD in Japanese history.  I had been interested in real estate as a kid, because my father was a professor of architectural history and an expert on Frank Lloyd Wright, so I spent my childhood looking at buildings.  But I never thought of real estate as a possible career.

Things changed when I was years into my legal career.  I became frustrated by how un-entrepreneurial Big Law was, and I hated being tied to a system in which the only way to make more money was to work more hours or find people to do it for you.  Law was the ultimate exercise in trading your life for money, because no matter how brilliant a lawyer you are, ultimately you are compensated by the hour.  I wanted something that was scalable, where you worked hard up front but had an asset that would pay you over time.

I began looking into finance on the recommendation of friends who thought I had the right mental makeup to be an investor.  But then the crash of 2008 came, and not only was I lucky just to have a job, but it also seemed pointless to try to compete, as a career changer without experience, with thousands of experienced finance people who were now looking for jobs.

Then, in 2011, I was laid off from my law job.  I was not really surprised, as the work had been slow for a long time, and I had been networking a lot to prepare for next steps.  I had no stomach to look for another law job.  After all, how do you try to convince someone to hire you for a job you don’t want?  I took this opportunity to ask myself what I really wanted in life, and I found I really wanted to pursue a career in commercial real estate.

I started meeting with everyone I could find who was in the field.  An acquaintance who is a broker for Colliers told me frankly, “At your age, and with your background, the only way you’re going to break into this field is if someone takes a liking to you and offers to go into partnership with you.”  A few weeks later, I met someone who was in the process of forming a multifamily investment company, and she asked me to join her.  I consulted a couple of very successful friends about this opportunity, and they both ended up saying that, if I went for it, they would invest money with me.  I decided that the universe was telling me I should say yes to this opportunity.

How I Started Two Bridges

Two Bridges Asset Management My first partnership ended after about 18 months with us having gotten close on a few multifamily deals in Louisiana, but being unable to close them.  Even though this was very frustrating from a financial perspective, it was an incredible learning experience, as I became exposed to many aspects of the business, from sourcing deals, to underwriting them, raising equity, securing debt, and doing diligence.

When that first partnership ended, I knew I wanted to stay in the real estate business, but I was not sure exactly how.  I talked with my original investors, and one of them offered to become a silent partner in a new business.  That partnership is Two Bridges Asset Management.

Why We Invest in the Southeast

People are always asking me why Two Bridges, which is located in New York City, invests exclusively in the Southeastern U.S.  There are a number of reasons.  First, real estate in the New York area is prohibitively expensive, with very low yields.  Either you have to invest with low leverage and a very long time horizon or you need to assume more risk than I am comfortable with, by doing redevelopment deals or deals with very high amounts of leverage.  So, from the start, I was looking at other markets.

Second, the Southeast jumped out at me for a number of reasons.  When Two Bridges started in 2013, the 2010 census data had recently come out.  I sorted the data, and eliminated everywhere the population had grown more slowly than the country as a whole (which would eliminate the entire Northeast anyway) and every market west of the Mississippi River.  What then jumped out was the Southeast, especially North and South Carolina, but also Georgia and Virginia, which were all adding population very fast.  Once I dug deeper, I found that those states were aggressively courting business, and South Carolina in particular was landing some really big names, like Boeing, BMW, and Michelin.   When I dug even deeper, I found that in many markets, particularly smaller ones, supply was not keeping up with demand.  New supply was heavily concentrated in Class A, as it is pretty much everywhere, even though the explosive population growth was taking place among the Class B and C renters, who were moving there because of the lower cost of living.   I thought there was a mismatch of supply and demand that created a great opportunity.  Our thesis has been borne out in practice, as we have strong occupancies, rising rents, and little competition from new supply at all our properties.

The Most Challenging Aspect of My Job

The most challenging aspect of my job is having to run the entire business, so I cannot just focus on investing, asset management, and business development.  I also have to keep on top of all the administrative details of running a business.  Fortunately, we are on an upward growth path, and I will be in a position to start delegating more before too long.  I’ve also brought on partners who each have years of experience in the multifamily business, and not only is it great having other people to divide the work, but it is also great to have people to bounce ideas off.  Working on your own can be quite lonely at times.

What I Would Have Done Differently Had I Only Known . . .

I am self-taught in this business.  I did not know a lot about dealing with lenders, and how your personal balance sheet limits the deal size you can do.  I bit off a lot right away – we wound up buying 400 units in the first two years of operation.  Were I starting again knowing what I know now, I think I would have started out doing smaller deals, but more of them, rather than fewer larger deals as I have done.

My Own Blog – The Mortar

I recently launched my own real estate blog called The Mortar (www.themortarblog.com).  I launched it for a number of reasons.  First, I think that blogging is a great business development tool.  I’ve come to appreciate that, in this business, your network is very important, but it’s slow going building a network one person at a time.  Blogging is a great way to reach more people and establish authority in the field.  Second, even though my academic career did not work out, I am still a writer and teacher at heart.  Blogging provides a great outlet for me to write, share my thoughts with the world, and help people who are a few years behind me find information that was not available to me when I started out in this business.

Advice for People Starting Out in the Real Estate Investment Field

I feel like I’ve done this the hard way – coming from a background outside the real estate field, with few contacts at all in the field.  I had to build everything from scratch – my knowledge, my network, my skill set.  So I am a bit envious of people who come from a real estate background where they got paid to learn the business and develop a network.  My advice to people starting out is, if you can, go to work for an established real estate investment firm before going out on your own.

However, I am living proof that it is possible to succeed in this field even if you come from the outside.  You will have to work extra hard to establish your credibility, but it can definitely be done.  You will be surprised how much you can accomplish through your existing network of people who are not in the real estate field.  And you should also network purposefully in the real estate field, taking advantage of opportunities for leadership.  For example, when a call for board members for the Harvard Real Estate Alumni Organization went out, I hesitated at first because I felt unsure of myself.  But I raised my hand, got selected, and it’s been a great platform for meeting people and establishing my own position in the field.

I want to thank Jonathan for sharing his story and launching The Mortar to help aspiring entrepreneurs overcome the fear of starting their own firm. Feel free to leave any questions you have in the comments.

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