This is obviously the endgame for most. But how does one try to align their path/know when they are ready to go out on your own, and how to find a financial backer?
Ideally, with over 10-years experience in acquisition and or capital markets? How much a of a track record do you need for LP's, and how much of your own capital do you need even assuming you can syndicate out a HNW for the co-gp? Would it take a track record of $500mm with acquisitions and a track record of $1b for development? What am I missing?
Assuming you have an acquisition track record and capital markets relationships, how does one make this happen?
Write up a business plan and socialize it with some of your really good clients. See if they will co-GP deals with you – as in: you source the deal, execute the business plan, and asset manage it either under their watch or in tandem with them for a piece of the promote.
Your business plan will have to be complementary to their overarching strategy but not directly competing with them. Delicate balance.
You’re effective non-salaried acquisitions + asset management head for them but it will give you a track record of doing deals “on your own” and not under an employer.
This is what we’re doing and it’s working successfully. We’re able to leverage all of our partners front/back office, asset management infrastructure, balance sheet for the debt and institutional LP capital relationships.
In the spirit of fairness, we’ll give these guys a piece of our platform-level GP for putting us on once we’re a real outfit that has scaled.
I've done it - not with 50 years experience either (am in my early thirties). I took my balls and went for it for one whole year. It failed. I am back in employment. However I raised $20m twice so let me walk you through my process:
I was in one of the largest city in the world and just started trolling website and contacts to find deals. I underwrote in a year about 30 deals. Went to large and small PE funds where I knew someone to get cash - this narrowed down to roughly 10 funds. I used to work in one of the largest REPE shop for a couple years before and before that I was in a totally different industry (trading). I ended up having a PE fund who backed me on two deals - they liked my ambition (I was alone mind you). Most PE shops will back you if you bring some $50m+ deals, however, it's extremely hard to source one where you have an angle unless you have a mate at CBRE, JLL etc... in one of the mega teams, and even so...
So I focused on value add properties, two mixed office/resi deal with planning (one was to add an extra floor) the other deal had no planning but I wanted to add 3 floors and put a change of use in it. So very intense projects. I underwrote the shit out of them. The guy who backed me was roughly my age, and I had worked with him when I was in REPE so we had mutual respect for each other. A lot of the PE funds I went to had very specific criteria for deals - and it's very hard to source. Some PE funds will see you, but you know they are binning your presentation when you get out of that room and just laugh about it afterwards. I had ex-colleagues at other funds who would talk to me. So essentially I had a strong network in PE funds that I could leverage on. Sourcing was the toughest bit.
I got 2nd and 3rd on both bids I ended up doing with a PE backer - so never got to actually acquire the fuckers (in hindsight with Covid that's a good thing). I had a side business that I grew managing properties and that kept my family alive (my wife doesn't work), I spent zero of my capital but we lived in a very tight budget with kids and airbnbing our house to go on holidays (took two nice month long holidays where we made money net). What I am trying to say, is that it was hard. I was constantly stressed trying to get deals done.
When covid started it was the end of me, I was selling a property, sale fell through. I was adding a floor to my house - cash was getting low. It was all a bit shit and stressful - I went online on Linkedin one evening, read about a job that basically fitted like a glove (not in Real Estate) - applied, 22 online interviews later they hired me. Now I am breathing again, I have a salary coming in every month. Plenty of cash flow to finish adding a floor to my old house (about to sell it ASAP). I rent a big house with not a care in the world (no more ownership except for rentals that I own), my side business is still working and bringing in $5K a month with no vacancies (in Covid I had 3 vacancies at once), side business includes mainly properties that I own and a few I manage. While $5k might seem like a decent amount of cash if you are out of undergrad, but if you live in NY or London with kids, a car, and a mortgage it's tough to make it work.
None of the backers I had cared if I put my own cash in the deals. I'd be happy to talk more about it - but only on here, no PM please as want it to benefit everyone if I'll spend time. I am taking a breather now, I am looking again at deal in the new city I moved in - except I'll be doing them with my own cash when the house sells or I'll fund but I am definitely not leaving my job again with nothing ready. HOWEVER, I could never have underwritten and sourced all those deals had I been in employment - so interesting to see what will happen. I will likely do smaller deals for the time being, buy REITs - lever them with interactive brokers and call it a day for the next year ahead.