Don’t need anyone’s pity. Just a shitty entry in my internet diary.
I’m a director at a larger institutional firm on the multifamily side. Stated my own brokerage when I was like 23 so I could buy couple small condos. I’ve since sold them and am now buying 5-12 unit buildings with partners with me being around 10%-30% of the equity. Can’t go bigger yet because I still have a W2 and I’m not rich just yet. Naturally, also decided to start a property management company for the fees and because I think there’s a gap in the market in the tech side but that’s besides the point.
I’m just overwhelmed. Idk if I’m just bitter & frustrated, but I cannot stand 90% of the entrepreneurial people in our industry. I really need to find a cofounder at some point, but trying to pitch a startup to someone I respect who has a cushy 6-figure job working 50 hours a week with a wife (and maybe a kid or two) is a tough sell. The only people excited to work are the LinkedIn lunatics-type who like to pat themselves on the back and hear themselves talk. I believe if you want to raise real money one day (which I’m going to have to do next year to make the jump), real money likes to fly under the radar. I can’t stand social media, and I’d delete everything if I could. Trying to find like-minded people while working all the time has been fucking miserable. I know I can raise, but I can’t do it alone.
Anyways, I’m not looking for anyone’s advice or to find a cofounder on an online forum. I just came to complain, which I guess to some extent is just a derivative of the LinkedIn lunatics, but fuck you, you get my point.
That being said, If any of you are thinking about making the jump one day, it sucks. If you’re reading this thinking ‘oh he’s talking about other peoples posts on LinkedIn, not mine’, no, I’m talking about yours. Anyone who publicly posts ANY of their thoughts online (or even in random interviews for RE journals where your name is public) is either an ego maniac or just a moron.
Wish me luck (or don’t). I’m not shooting to compete with some bullshit REIT one day, I’m coming for you, Greystar.
haha that makes two of us - busy W2 + startup really gets you working. Setting up for success though, it'll all be worth it. :)
As someone who absolutely hates social media, I think it is just a pill you have to swallow if you want to get your name out there. If 100 people like your post on LinkedIn, its safe to assume that thousands of people will see it. If you're threading the needle on every touchdown but nobody is in the stadium, who's gonna draft you to the big leagues? I've never made a LinkedIn post, but some of the more successful young people I know are hammering away on there.
Since you mentioned your buying 10-30 unit apartment buildings - how are you managing them efficiently? I’ve looked at the space but I always found it was locals who were willing to run the asset on razor thin margins winning the deal. How do you manage? On site super? Off site super? How many hours per week does it take the super and what do you pay them?
I have 3 buildings, few dozen units. Quality product in an ‘up and coming’ area.
Two of them I bought with friends who put up like 5% of the equity but live there at cheaper rent. They handle any minor issues. All I do is log into my management software every day for notices, review work orders (prob 1-3 per week), accounting & AP, etc. Sometimes I’ll go out to fix minor stuff, anything time consuming I call a vendor. Not worth my time at this point in my life, but I genuinely enjoy a bit of manual labor. I renovated my first unit myself because I ran out of money.
On the leasing side, I have a couple undergrad kids who are just looking for RE experience who hang their license with me. They do showings and facilitate obtaining applications. Since I have to fly under the radar with a W2, I give them a good split. I also paid for their class and license under the condition they don’t post about my companies online.
Worked out so far, but they’re both too smart to be leasing brokers so will be sad to see them leave when they get real jobs. They each made like $30k in commissions last year helping their friends find apartments. I was pretty impressed. Would love to bring them back after I make the jump.
Thanks for the info! Would you mind if I DM you? I know you’re super busy but would love to connect for 15 minutes and discuss self management. I am trying to make the jump to buy my own small assets & keep getting bid out by locals running small multi with minimal payroll and R&M (as best I can tell from the sales brokers). I would love to briefly chat about management (payroll & R&M) and running on thin margins from a real operator.
You're doing all the wrong things yet it sounds like its working, great job haha
What’s W2 mean?
basically working for an employer
Ah ok thanks, online just showed me tax forms haha
Damn boy you hustling. Good luck to you.
Sounds like you're well on your way even though it's a grind right now! Would love to know a little more about your startup model...
So it seems like you're not collecting any fees on the investment and you're making money off ownership. Are you a long-term cash-on-cash holder, or are you looking for mid-term appreciation then sell and rinse repeat, or a mix of both?
Curious about your plan to be self-sustaining. If long-term cashflow holder, in order to be self-sustaining - what would your debt structure and cash-on-cash look like, and how much total equity is that?
Made up numbers but here's a reasonable path to that: 60% LTV at 6% interest (I/O) on $10mm of assets getting 6% CoC gives you an annual return of $240k that you could live off of. That's a 6-6.5% cap rate depending on capex which is a realistic assumption for up and coming multi. That means you would've needed to put in $4mm of equity (or $3.8mm if you're 95% of it). That's a lot of required equity and not something easily achievable, esp if you don't want all of your NW tied up in RE. Just an example to see if I can understand your mid-term RE play here and how some of us might be able to replicate without a lot of capital starting out.
You don't need to hear but great job with what you're doing - diving head first into RE with a great job + side job. Living all aspects of the industry is a goal of mine and luckily I'm moving in that direction. A lot of work but you're setting yourself and your family up for major success - kudos brotha!
You’re on the right track but overestimating my equity. Net I’m just over like 15% of the equity (a bit higher on a smaller building). I’m pretty leveraged up given it’s a startup, but I can run lean so we have no coverage issues.
It’s about $6MM of property, I have about $300k of equity, 70% leveraged give or take. Going-in cap is about 6.5%, all-in year-1 yields are closer to 4.5% after closing costs, but it’s close to a tax-free coupon for investors on the K1 with depreciation & cost segregation, etc.
Here is an honest look at how much I make from this:
Acquisition fees: $75,000 (1.25%)
Management Fees: $25,000/yr
Leasing Fees: $10,000yr/ (gross to me, actual amount higher but I have to pay my brokers)
Asset Management Fee: $0. I do it for free as an incentive to all early investors for trusting me. However, i have the right to charge 1% of all gross revenues whenever i want (not worth it for now, will wait for a recap).
Promote: No promote. Everything is Pari-Passu as another inventive for early investors. I’m also a believer in never selling shit unless I absolutely need to or I get such an amazing private offer I’d be dumb not to take it.
Other brokerage income: $10,000/yr, my share of the split whenever my brokers do other outside deals.
Fixed costs (insurance, wework, signage, admin expenses, etc): $10,000/yr. I have no employees and don’t pay anyone a salary.
So net I make a whopping $35k per year off fees, plus distributions. From a yield perspective, if you want to include fees + distributions it’s about $50k/yr which is like a 17% yield on $300k (if you want to look at it that way), but man is it a lot of work. I guess there’s an argument to view the acquisition fee as an early promote too, but I don’t like to view it like that.
In order for me to make the jump, I need to either triple the portfolio (not preferable) or raise $20MM in discretionary capital. I cannot get much bigger without a capable partner. I don’t have the time and my W2 pays too much. Want to make the jump in a couple years before I get too tempted to take the golden carry handcuffs at my W2.
If you’re curious about my age, I’m 28. Bought my first multifamily building just after my 27th birthday. Took me years to get this off the ground starting at 23, 100% bootstrapped. I’ve also probably spent $40k on legal fees & startup costs alone. For example, one of my domain names & trademarks was $10,000 all-in. Had to save up for that in my early 20’s, but I think it’s important to do it ‘right’ first. Rome was not built in a day.
To those who don’t come from money, if you want to follow a similar path one day just know it takes years to do this and countless hours doing administrative bullshit. Start small. It all starts with 1. I do not recommend just buying a 10-flat with no real-world experience even if you have the money (your job experience doesn’t count). It’s totally different when it’s your money vs someone else’s. Get a RE license, buy a shitty condo or duplex, live there, fix it up, and sell it to get your feet wet. I would not skip that step if you don’t come from money.
If you come from money, you don’t need my input. Just find your niche and go buy stuff, charge your acquisition & asset management fee, and hire a trustworthy manager.
Love reading this whole story so much! This is very inspiring to read and very well timed. For context, I'm 27, have been working in development for the last year, and prior to that worked in construction for a few years then went back to school (MSRE). The goal in my head has always been to go off on my own in some fashion, and have been putting in real effort lately to do the exact same thing as you are doing now.
Myself and a past classmate are taking steps to acquire a building in the same unit range as you (5-15 is our goal), however neither of us have true experience doing it, just our day jobs (me in dev and him in AM). I know its going to be a very steep learning curve, but we are both driven and have the time and energy to do it now, so I dont see why I would wait any longer. I also don't feel the juice is worth the squeeze for a single family/ condo/ or even duplexes in my area.
Curious, what parts of the whole process did you find most difficult? Things I worry about are securing financing and setting up any required legal structures, as, like you said, I want to do this right and have it set up correct. I have minimal of my own equity (could come up with $60-80k) and I have a network I could raise from. I know I can manage construction well, but I do worry about trying to flip units while working a demanding day job. Im willing to put in elbow grease after work, and during weekends so some of this will be mitigated.
Also, for deal flow, are you talking with brokers who specialize in this class, searching CoStar/ Crexi, or what is the best way you have found to sourcing these deals?
Thanks for reading all this, would love to DM and chat as well if you have the time. Happy to virtually buy you some coffee or a drink as well for more of your time. Genuinely serious about this.
Good luck to you, hope it all works out.
Love that you have grit and are willing to hustle. I am an early 30's CRE banker in the multifamily space. Is there any opportunity for both of us to work together in some capacity? Would love to be a partner and be a resource in anyway I can. I am exploring opportunities outside of my day job. Let me know if I can PM you.
Sure thing
Building something genuine in this field is difficult, and the isolation of doing it correctly is frequently the most difficult aspect. Your candor cuts through the clutter. Continue to push.
Couple things
My advice is pretty simple. Stick to your day job. Until you humble yourself to have the right entrepreneurial mindset you will never make it.
This is coming from someone who has made it.
You are trying to do something entrepreneurial while working for someone else. Thats shady. If you want to do something entrepreneurial you need to leave your firm and jump into the deep end of the pool. You need to have a mentality you will do everything possible to succeed. You will treat your investors no matter how small as the most important people on earth.
Sorry kid but you clearly do not have what it takes
Now if you read all that and said f@ck yes I do then good maybe I am wrong.
But you still need to leave your job and jump into the deep end of the pool if you ever want a shot at making it. Burn the ships like Cortez. And maybe humble yourself a bit
Why do you believe it’s shady? For me, my company doesn’t operate in the same asset class I’m looking at so I don’t see how it would be shady. If you aren’t letting your outside work affect your day job why should it matter at all?
When you take a salary from a firm, you owe that firm all your effort and skill. If you have a side hustle you are not giving them 100%.
More importantly you can never truly succeed as entrepreneur unless you go all in
Without commenting on any of the rest of it, this is actually a myth. Cortez did not burn his ships! He was actively committing treason, so what he actually did was use those ships to found a town at the site he landed, have himself elected mayor (or whatever the position was actually called) and then used that executive authority as a pretext to involve himself with the Aztecs and Tlaxcalans and all the other native people.
Obviously once he took half the wood and fittings off the ships, they sank.
History is fun.
Et quos facilis aut ut eligendi. Exercitationem quia labore maiores earum est omnis. Provident voluptas assumenda laboriosam earum in. Ipsum sit quasi nobis rerum dignissimos consequuntur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Ut ad maiores sunt harum. Laboriosam rerum eos quia omnis. Quis a voluptatum earum. Veritatis vitae sed quam nam odio id delectus nostrum. Molestiae dignissimos delectus rerum temporibus inventore asperiores et praesentium.
Eaque consequatur eligendi eos odio. Ad in ut vel itaque. Et neque sequi porro amet voluptatibus a voluptatem. Sequi error et itaque optio est minima earum. Molestiae atque voluptatum iure eos sunt nostrum dolore. Doloremque rerum qui optio cupiditate quo. Iste eum enim et non aut molestiae eaque asperiores.
Ut facere velit rem ipsum eaque nihil aut. Laboriosam temporibus ut velit et dolore nihil veniam. Tempora sunt et corporis et. Voluptatem explicabo et quia odio vel laboriosam.
Qui molestiae voluptatem nihil commodi harum quia. Enim sed placeat est eaque est. Dolore qui nisi nihil pariatur iste. Architecto rerum velit nulla tempore consequuntur. Itaque ea et dolorem aut earum ut.