A Student of the Real Estate Game

(ASotREG)

What I Learned in 10 Years Working for a Real Estate Owner/Operator

Jul 3, 2021 | Career

I recently celebrated my 10-year anniversary with Atlas, where I joined as the first hire in May 2011. When I started with the firm, I was single and living with two friends in NYC. I’m now married with two kids and a dog and live in the Jersey suburbs. A lot has changed, both for me personally and for the firm.

It’s been a wild ride over the past decade; we bought 50+ deals with a market value over $1.3B, our investment strategies evolved, the team has grown, shrunk, and grown again. We’ve made many mistakes, and I’ve learned a ton.

I took some time to reflect on my experience over the past 10 years and share some of the lessons learned, in no particular order:

  • Reputation and relationships are everything. Real estate is an insider’s game, and the playing field isn’t level. The groups who win deals and get favorable terms are the ones with a stellar reputation, a history of doing what they say they’re going to do, and those who have established personal relationships with decision-makers within the industry.
  • If you control capital you control the terms. Groups who control capital have all the leverage. If you can raise flexible capital, you can control the terms with partners, can seamlessly launch new investment strategies, and can eventually scale up to do larger deals. Execution is by no means easy, but if you can get deals done and raise capital, you can attract talent to help with the execution.  
  • Learn to negotiate when you have no leverage. Starting out, no one knows your company, you have no track record, and you bring nothing to the table. You need to appear in control when you have no leverage/options. Find people who can do this and ride their coattails.
  • It’s better working for partners than a single individual founder. I have a great relationship with both founders of Atlas, however they are different people with unique skillsets and worldviews. They balance and challenge each other, which is a key aspect to company’s success.
  • Don’t be greedy. The benefit of joining a small firm early is the opportunity to get promote in deals earlier than at an established firm. Don’t worry too much about your salary. The goal is to own a small piece of a big pie. Add value and help the firm grow and the compensation will come along with it.  
  • Timing is everything. We bought multifamily in FL from 2011-2013. You can imagine how those deals are performing today. We’ve returned ~1.5x – 2x+ of investor’s capital and continue to generate strong cash flow. It was nearly impossible to mess those deals up.
  • Don’t obsess over the ones that got away. We also passed on deals during that same time period that would have been a home runs. Move on. We were lucky to acquire deals at a basis that looks incredible today.     
  • Closings never go smoothly. This is a commonly known pain point in real estate, but it’s worth reiterating. No matter what, closings will come down to the final hours and there will be bumps along the way. Work with good 3rd parties and be prepared for the inevitable hiccup.
  • Overcapitalize deals. Deals always require more money than you think and you’ll never to mad about having too much. Having additional reserves provides downside protection, enable operators to be nimble with their business plan, and the funds can always be returned to investors if they are not needed.
  • Capital raising is about telling a story. We raise capital from HNW investors who have an emotional connection to real estate. Yes, it’s an investment, but HNW investors are investing in people and stories. Tap into that.
  • Culture is established by actions, not words. Building culture is difficult. It’s not what you say on your website, it’s what you do when times are tough. It’s how you treat investors when deals underperform. It’s how employees act when no one is watching.
  • Hire people who give a shit. Hire people who care about the company and care about their work in general. Everyone at the firm needs to identify with the mission of the company and buy into the culture. If they don’t, it’s easy to become an undifferentiated/uninspired company.
  • Stay organized and keep partners apprised of what you’re working on. Set deadlines for deliverables and do your best to stick to them. Put your ‘to-do’ list into a project management software and share it with the partners so they know exactly what you’re working on at all times. The last thing you want the partners wasting time on is managing employees.
  • Track your accomplishments. At a small firm, you are inherently a jack of all trades. It can be difficult to define your role. When it comes to annual reviews and compensation discussions, be sure you can clearly articulate your accomplishments, quantitively when possible. Track these in a Google doc throughout the year so you don’t forget them.
  • Embrace technology. When starting out, the firm will keep overhead low and unlikely to invest in expensive software such as Costar or Juniper Square. Find inexpensive and versatile tools like Monday.com to optimize your workflow. Test technologies. As small firm the ability to test/fail/adjust is a competitive advantage. Do this at both the corporate and property-level.  
  • Investors are your clients. Investors are the lifeblood of your company. Treat them well and be transparent. Provide them with an 11-star experience.
  • As you scale, delegate. You have a fixed amount of time each day and most days consist of fire drill after fire drill. Start by delegating the menial time-consuming tasks, slowly eliminating all non-value-enhancing tasks. The goal is to focus all your energy on important, money-making tasks.  
  • Execution without vertical integration is difficult. When you’re starting out you have to rely heavily on 3rd parties. Align interests and manage them closely, but allow them to do what they do best. Execution won’t be perfect, but you can do a great job with the right partners.
  • Long-term thinking and hold periods are powerful. When holding assets long-term, you allow value to compound and avoid value-eroding transaction costs and return-killing taxes. We buy value-add deals and develop properties in growing markets across the southeast. Time and compounding are very valuable, but structuring deals with investors to enable long-term holds is not easy.
  • Founders need to relinquish day-to-day operations in order to grow. As an employee, your job is to free the founders up to focus on activities that drive the highest value to the firm. At Atlas, this is partnership structuring and capital raising. Build trust with the partners so they can get out of the weeds and focus on growing the firm.
  • Don’t over-negotiate docs: Be smart and fair, but don’t over-negotiate. If you’re viewing a partnership through a worst-case scenario lens, it’s not going to work out.
  • Technology will change everything. Don’t underestimate the power of technology and the impact it’s having on the world. Asset classes are merging, the office and retails sectors are forever altered, where people are living is changing, and what we consider a hobby today will be a full-time job tomorrow. These all have massive impacts on where we invest, what we invest in, and how we execute investments.
  • Build your personal brand. Even though you work within an organization, you should be building your personal brand. Engage with smart people on Twitter and learn out loud. It’ll benefit both you and the company long-term.
  • Flows over pros. Invest in asset classes with tailwinds because cap rates are driven by the flow of funds. If a lot of capital is chasing an asset class such as multifamily and industrial today, you’re going to see cap rate compression.  You can make a lot of mistakes and do well in these sectors.
  • It’s hard finding a job you love. Most people hate their jobs, complain, and do nothing about it. Working for a small owner/operator can be frustrating at times, but I love what I do and the people I work with. I remember that when times are tough.

I’m proud of what the Atlas team has accomplished over the past 10 years and feel lucky to work for a company that remains nimble, is forward-thinking, and has the desire to grow.

If you would have told me just a few years ago that we’d be working on 3 ground-up developments totaling ~$200M in total development costs, I would have said you’re crazy. But that’s the reality of working for a growing firm with great talent.

People over-estimate what they can accomplish in a year and under-estimate what they can accomplish in a decade.