How to start an International RE family office
Hi everyone, am currently finishing up my first year of being at a BB industry group. I have an interest in Real Estate and am certified in ARGUS and REFM courses. I will be coming into some money soon and combined with my personal savings I will have around 2 Mill USD. I have always wanted to invest in RE and the math/logic makes more sense to me than finance does.
With this in mind, I have been trying to lateral to REPE to no avail and now that I will be coming into this money, I decided why work at an REPE firm when I can do something on my own for myself. I know I do not have experience but how should I approach accomplishing my goal? Try to get into REPE, learn as much as I can and then start off on my own?
I have the capital, but do not know the means if that makes sense.
Sorry dude but $2mm is hardly enough capital to do any real investing in the real estate world.
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My guy has zero real estate experience, hardly a year of any work experience whatsoever, wants to start an "international family office", and you're dishing out advice like you're on BiggerPockets
Good luck finding a lender willing to let someone with no real estate experience "mortgage the hell out of everything".
$2M is technically enough to buy $13.33M of properties (85% LTV lol), but there's no way any bank is gonna lend 85% LTV to a young adult with no experience. OP you should jsut start small, maybe like a fourplex or duplex and work your way up.
REPE are mostly allocators, very high level. You want to go work for a sponsor to see the intimate details of how properties work.
Sponsor: finds the building, raises the debt and equity, finds the tenants, fixes the building up, manages the building, manages the sale/refi process when ready
LP: provides most of the money to do all of that. opines on major strategy/leasing/capex decisions.
$2MM won't get you anywhere if you're interested in CRE. It's enough to partner up with somebody and get some extra cash flow from buying a few small resi properties.
Your best bet is get into REPE or into an investments/development role at a GP, get 5-10 years under your belt and move up the ladder at least to a manager/VP position where you can show that you've run deals before, then go out and start on your own.
The $2MM will be a good contribution if you wanted to do development as the GP for your equity portion if you start out doing one project at a time. But yeah, if you're thinking starting a family office to purely be a capital partner, you're not even close.
You also need to understand if you want to be a high level capital allocator (REPE) and just put money into projects/deals you think are going to generate the type of return you want and let the GP/Sponsor handle it from there, or if you want to be involved at the property level (development, asset/property management, basically getting into the nitty gritty to figure out what levers you can pull to increase the value of an asset).
Don't have $2 milly but I'll work for you if I can finally do acquisitions lmao
/s
First deal: 18 month value-add reposition of a distressed multifamily asset in an emerging growth market.
Aka flipping an old duplex in Nashville.
it’s a three step process...
Step 1: Be a family with a lot of money Step 2: Open up offices internationally Step 3: Be an International Family Office
check back when you achieve Step 1
So some real advice here...
$2mm is not a lot of money, but it seems like a lot at from your perspective. My advice is to save/invest it and do so fairly conservatively. Pursue your career, if you want to pay for a super expensive MBA do it. Want to travel, sure do it.
But seriously, don't go out like some big investor, you will be wide open to scams and crazy stuff. Don't tell anyone, especially people you may date, just let it be your thing.
As your career is more established and you are secure in your own right, then you may want to join in some deals as an LP, or better co-GP. But earn your right to invest in those, don't try and buy your way in (you don't have enough chips anyway). That's why I suggest investing conservatively now, you may want to deploy it in 5 to 10 years, that is the horizon I would personally go with. At one year into the industry, you are at no place to make the plays you will want to. Thus, hold that dry powder, let it get a safe, shitty rate of return, in 5 to 10 years, start making some place bets. Where will be obvious then.
Sure this is great conservative advice. But let me give a counter point. Don't be so career minded. You need to take real risk to be highly successful. So many people would kill to have 2 million at a young age to deploy into starting their OWN business. In 5-10 years you'll probably have a family and be risk averse working a boring job for someone else. There will never be a better opportunity in your lifetime to start out on your own than today.. I'm not saying quit your job immediately, but if you have carefully thought out a plan that you are passionate about, send it.
Fair point, but without some experience and battle testing, do you think starting in your early 20s is the time? If you the idea for the next Facebook or something truly novel and time sensitive, don't let having the 2 million be the maker or breaker. Clearly, not the nature of the post.
If the OP or anyone really has the skills and ability to do their own thing, the fact that they have the capital or not really shouldn't change it. My point, is that they will likely get much better, smarter, and capable in 5 to 10 yrs longer. Then, they can actually use their wealth strategically.
To do so now makes no sense and 2mm is absolutely way too little to 'retire' on, thus I don't see to many legit options. The real value of any savings/retirement plans/investments is optionality. The option to withdraw and use when opportunity presents. No offense to the OP, or anyone young, but what value would you have at this stage of the game. Get experience then start. I mean who would add investment dollars to someone starting a firm who happened to come into money??? That makes no difference, remove the money, and it falls apart.
Conversely, breakaway with a track record, reputation, and a network... then boom, you have a shot at real traction in your own RE ventures. Oh and if you can actually capitalize part of the deal, start-up costs, operating costs etc. from savings, then you are way better off. That is the path I'm suggesting.
The @Redever post nailed it. To add to that, be looking for opportunitoes to work for or meet mid-level (ie not institutional) shops in the market where you want to live. If you work for one, you'll learn the business and about transactions, investment strategies and leasing & management, and get an idea how, when, and where to deploy your own capital. If you can't get on with a RE principal right away, one idea is with a mortgage brokerage team. With the right team, you'll meet tons of principals, underwrite different product types and strategies, and be able to network. Potentially you'd be meeting people you would kick in equity with.
Anyway, the idea is to listen to Redever, don't be in a hurry to deploy your money, learn, and network.
I agree with the sentiment above. Let your money grow for a decade, get some experience, and re-evaluate.
I would like to counter the points above the $2MM isn't enough to get started investing in real estate or enough to open your own firm. Assuming you have a track record and the right connections, you could certainly start a company with that amount. I'll share a couple of examples of things I've seen people do.
1) You could do 90% LP / 10% GP deals at ~65% LTV and buy ~$60M in property. Use your fees to keep the lights on and then realize a 3x+ on your money at exit. 2) Same as the above but you could do a programmatic JV at a lower GP % than the 10%. To keep it simple, lets assume you were able to drop your GP% to 5% which would essentially double your purchasing power to $120M. This allows you to buy more property (and get more fees), but crosses your promote. It also cuts down on your time negotiating JV docs as you do so up front. 3) You could raise a GP "fund". Using the same assumptions as the above, you could contribute 10% to the GP fund and raise the remaining 90% for a total of $20M. You could then do 90 LP/10 GP deals with the $20M GP fund at ~65% LTV to buy ~$600M in property. You've effectively levered your money 300x and if you hit the top tier of your promote in a good amount of these deals, congrats you'll never have to work again.
Me neither. Their most recent episode has a guest who was an insurance salesman who started off buying houses and now owns almost 1,000 self storage units with like $60m in equity. The dude is probably like 45. And he is just now starting to do syndication. This guy was not an analyst who worked his way up and learned the "ins and outs" of the deal process for 10+ years to gain credibility. He even lost money on his first deal but he gained experience.
There are so many people (I mean no name people who will stay no name people) on that podcast who started out buying SFRs and are now buying 16+ unit deals only 5 years later and they are working for themselves they dgaf about being some analyst running spreadsheets on trophy assets. Where do you think each will be be in another 5 or 10 years?
There is nothing wrong with slogging it out under someone else's name for 10 or more years but it's not the only way to do it.