Advice on starting a RE investment fund
I'm considering starting a RE fund with my family. What advice or resources should I use to ensure this doesn't go south from the start. We have a great contractor and a relatively large pool of capital. Two of the investors have flipped houses in the past but do not have any real RE experience in terms of modeling and looking at data. Going back and forth on what to do with the properties ex. rent, flip, air bnb. The idea is very early stage and definitely has some kinks to work out but would love to hear what y'all can offer.
If you’re asking a forum made up of mostly undergrads and recent grads on advice for starting your own fund then maybe you shouldn’t be starting your own fund? For some reason people think that just by raising capital/a fund that they will automatically be successful, but capital is actually the last step…you need an investment strategy that meets your knowledge/skill set/ability to execute and only you can know what this strategy is. If you posted an investment strategy here and wanted us to poke holes in it then that makes sense, but I’m not sure what investment strategy advice to give you because I do not know your skill set/background/knowledge. But the fact that you haven’t really thought about this on your own tells me that you shouldn’t start your own fund and gamble other people’s money.
Fantastic answer
Appreciate the response, very insightful. I like your point on an investment strategy. It would be more small scale projects nothing huge.
I know you’re coming from a good place dude and we all started somewhere so I give you the benefit of the doubt, but this comes off as extremely naive. “Small” projects in RE are hundreds of thousands of dollars. You gonna front those shekels?
It’s your family, not mine,so I respect those boundaries, you do you - but if you think you’re going to step into a zero net sum game you have 0 experience or knowledge in against other investors with other people’s money and just “experiment”, you (and your parent’s savings) are in for a ruuuuuude awakening.
I’m looking out for you dude! Don’t do it!
Based on your post history, you’re a junior, perhaps a senior in undergrad?
My advice (and likely that of everyone else here with two brains cells to rub together) on starting a RE fund? Don’t.
Go get some experience first my friend. You have noooo idea what you’re getting yourself into.
Fair. Question, would you experiment in flipping properties and whatnot if you had access to the capital and family who is interested in helping?
Yes and no. My issue with your question is when you use the term “experiment.” I get what you are asking, but the term “experiment” doesn’t really give me the confidence in your ability to execute. For example, my family is in real estate and I have successfully pitched them on different investment strategies and investment properties that we have successfully executed. But I wouldn’t call what I did “experimenting” because I was confident in my investment strategy and was able to provide a compelling investment thesis to convince my parents to invest. When you say “experiment”, to me it sounds like what you are saying is “hey friends and family, why don’t you give me your money so that I can try to make more money and if it doesn’t work out then my bad.” Once again I get what you are asking, but the questions you are asking lead me to believe that you do not have the experience or knowledge to execute. Let me Give you an example of how wrong things can go in real estate. I am currently looking at a large single family property that has solid potential to be converted into 3 units through entitlements, but the problem is the seller is asking for a stupidly high price ($3.15mm). The deal only works at this number if 3 units can be achieved, but the seller refuses to take the ride with a developer and make the deal contingent on approvals. The property in its current condition is only worth about low $2mm. Now why doesn’t the seller just sell the property for its market value of low $2mm? Because they paid $3.25mm for it less than a year ago. The seller is a group of doctors who have 0 knowledge in real estate and had planned to convert the property into some facility for the hospital and thought they could easily get the entitlements. Well they couldn’t get the approvals and have no idea what to do with the property now. No developer will touch the deal even close to their asking without contingencies, which they won’t agree to. They are going to lose ~$1mm in less than a year
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