Quitting finance to fix and flip or construction business in the US?
All,
As year end is approaching, I am having a lot of thoughts around my job while sitting with the family at home.
To give a bit of color on my background, I used to do development for a large US company in a top European country. I then did an MSc in Finance and switched to REIB to learn more about the financial aspects of the job, nurture a network with various teams and also to get better bonuses.
After 3 years at a US BB, I am about to be promoted VP, but I don’t see myself staying longer in the business. People above me all seem miserables, and their toxic behaviors just to get their million paycheck is not something I looked up to.
For some reasons, I always had this dream someday to start a business in the US. I currently have family doing well in Florida, working around home design / interior design. Unfortunately they cannot hire or sponsor me.
I have been studying the market a bit (despite way more research needed) and I am thinking about starting either a construction / general contractor or fix and flip business. Still need more time to figure how to launch one of the later, due to limited capital I will be able to invest. Also assessing the risk of entrepreneurship visa due to current administration.
Any thoughts on such a move? Do you know anyone successful in this line of business, whatever the state they started in?
Merry Christmas and thank you.
Starting a construction or fix-and-flip business in the US can be a rewarding but challenging transition, especially coming from a finance background. Based on the most helpful WSO content, here are some key insights and considerations for your situation:
1. Leverage Your Finance and Real Estate Background
2. Fix-and-Flip vs. Construction Business
3. Capital and Risk Management
4. Visa and Legal Considerations
5. Market Research and Planning
6. Challenges to Anticipate
7. Success Stories and Resources
8. Next Steps
While the transition from finance to entrepreneurship is a big leap, your background and skills position you well for success. With careful planning, market research, and a willingness to adapt, you can build a thriving business in the US.
Sources: From Real Estate Finance to Founder of Development Company - Q&A, Lunch & Learn -Ins and Outs of Construction, How many of you actually plan on going independent?, Life at Mega Developers, Thoughts on Starting Investment Bank/M&A Advisory for my Company
Thank you for taking the time to answer.
1. Unfortunately, not sure how to get citizenship / permanent residency quickly. My understanding is that I can go through entrepreneurship visa that does not allow this at the beginning. You need a large company with very strong historical financial statements and employ many US employees (which I intend to do) in order to qualify. I can explore alternative visas such as exceptional skills where you need to demonstrate that your skills will benefit the US economy, but I doubt that finance / real estate will qualify. It is usually for PhDs/athletes/media personalities…
2. Agreed. I also count on leverage my existing family network to I) put my hands on some projects at the beginning and II) raise some money as they work principally on luxury real estate across Florida (10m+ houses).
3. I do not qualify for such a program. I am a white male…
Probably not the answer you want to hear, but unless you have significant, previous experience in construction, this is a really bad idea.
Your desire to move into construction would be the equivalent of a tech banker/VC investor moving to software engineering. You don’t just make that jump because you worked in the tech vertical or in your case, real estate. The job and skill set are completely different with almost 0 overlap. Also, what I’ve found is that people who work in finance are usually big picture thinkers, but people on construction need to be very detail oriented and I’m not talking about aligning logo, catching spelling errors, and whatever else bankers care about. I’m talking about are all your bedroom egress windows within 44” from the ground? Did you remember to order tempered glass windows for the stairs and bathrooms? Did you remember do frame with 2x6 instead of 2x4 in order to meet insulation code? Are all your hallways at least 36” wide? Did you remember to order pressure treated wood for all exterior construction? If you’re working on a commercial building (3 unit or more), did you insulate and Sheetrock prior to running the duct work? Did you order the appropriate fire rated Sheetrock? Did your electrician install sleeves for all electrical wiring that penetrated through fire rated walls? This is just a taste of the code compliance that you need to think about as a GC. I haven’t even gotten into logistics and project management.
Now if you were a US citizen, then I would actual encourage and advise you to start with a small renovation and slowly learn from there, but since you are abroad, it’s just a lot riskier to make an investment overseas. I mean it’s risky even across state lines, let alone thousands of miles away. My advice for you would be to get a job in the US first and then consider purchasing your own property to live in first and renovate that. You need to mitigate your risk and it sounds like you would be taking on a lot of risk in your current position
Many thanks for the reality check. Better to realize now rather than starting and loosing all my equity in a project with minimal chance to get through.
To give a bit more color on my background, I did 2 years at a US developer in London (Tishman / Reality), 2 years at a good US value add fund, and after my MSc went to a US BB in REIB. I always tried to get in the US while at these companies, but unfortunately while NYC -> LDN was very common, LDN to NYC has always been impossible on my end. I also arrive at a stage where I am not sure the bank would allow me to move to the US, given the VP promotion will entice me to start developing relation with REITs / developers. If I leave, they basically have to recruit for another VP.
Given my background and what you stated, if one had the opportunity to raise 2 to $5m, would it make more sense to launch a small investment management company and take it from there? I am also open to buyout small franchise / home service companies (like cleaning, tree trimming, even pool cleaning in Florida…), car washes, parking strip… or to start from scratch if I can’t raise this amount. Anything to make a small business grow and be profitable within a 2-3 years timeframe (necessary to get the investor visa reapproval)
Is there a business out there that genuinely interests you or that you care about?
Right now you seem a bit all over the place: construction, house flipping, investment management fund, franchise, home services, etc.
I second what CRE said. Do you have a business that genuinely interests you? Do you actually enjoy real estate or does it just pay the bills? I understand where you’re coming from. You’re tired of the corporate life and want freedom. I get it, but you based on your current thought process, you need to be very careful about your next step. A couple weeks ago, I commented on a post where the OP randomly bought a landscaping business that he had no experience in and ran it into the ground (https://www.wallstreetoasis.com/forum/off-topic/i-left-wall-st-to-buy-a-business-it-was-the-hardest-year-of-my-life). You don’t want to do what he did.
I don’t think you should give up on doing your own real estate deals. Given your background in real estate and ability to raise some capital, real estate makes the most sense if you wanted to do something more entrepreneurial. I’m just saying that quitting your job cold turkey, leaping head first into investing in a foreign country, and GCing a project without any prior construction experience, is a bit too aggressive of a step. Your general idea of doing real estate on your own is not unreasonable, but your plan and execution needs a bit more work. Rome wasn’t built in a day. Take it step by step. First figure out a plan for your visa/residency/citizenship status and how you’re actually gonna get your ass over here. Then figure out your job situation. The reality is that you will likely need to get a job in Florida both for visa sponsorship and income. Once you’ve cleared those two hurdles then you can really begin to think about doing your own deals.
Also, regarding your resume, although it is very impressive in the corporate world. It is virtually useless in terms of doing your own investments and actually running the operations. I say this not to diminish your achievements, but don’t misconstrue your experience at tishman as transferable skills and knowledge to running your own renovation. As someone who has worked at a large developer and does my own real estate investments and renovations, the experience is almost completely irrelevant
I find it weird on this forum how so many people in finance want to start a business in an industry that they have zero operational experience in.
Same as search funders or people in generalist PE?
It’s the Dunning-Kruger Effect. Many users went to top schools and work at very competitive firms and as a result believe that if they can achieve all of this, then surely they can operate a small business that was started by an uneducated immigrant. But I think what many of these users lack is necessity and desperation. Many small business owners had no choice. They either succeeded or starved. They have no safety net.
OP here
Not sure about small businesses like laundromat, tree trimming etc, but if I was to start a real estate development or fix and flip firm in the US, even if I went to a top European school and got BB name / top developer and PE names on my resume, I would be at huge risk while launching my firm. Failing in the US would be catastrophic as no reputable firm in Europe would take me back after leaving the industry, let alone take me back at VP level. I also do not come from a wealthy family, so no safety from an income perspective.
There is also an element where the people who had no choice were probably more willing to put in some of the less pleasant work.
The Wharton grad might be interested in buying a small business and growing it, but it's unlikely they'll be doing the actual work. Yes, go buy an exterminator... but I imagine most MBAs simply won't want to be the guy fumigating the house. If you aren't willing to get your hands dirty, you won't understand the business, and I think that probably applies here, too.
If you're on the fund side, your interaction with your general contractor is pretty limited. You simply don't know what the ins and outs of their day looks like, you just see the bits where they've polished it all up and come to you with a question or solution.
I have a different perspective. I know nothing about how to navigate the citizenship side of things, so I will not speak to that. As for starting a construction business.. I actually think it is one of the best risk/reward things you can do today. Smart, conscientious, and financially literate types are a very rare commodity in the construction world. Anyone who has managed any reasonable size project knows this.
Of course you don't know anything about construction, neither did people who started in construction! Its ok. It just means you need to be reasonable about the projects you start with. Pick a trade that is repeatable and consistent and look for quality cash work as a subcontractor to start. Avoid insurance work. Your goal should be to get in with the high quality GCs in your area that get all of the big project work. Carve out a niche with them and do whatever you can to crush your portion of the projects.
"Smart, conscientious, and financially literate types are a very rare commodity in the construction world"
Do you mind elaborating? How much financial literacy is needed in construction?
"Pick a trade that is repeatable and consistent and look for quality cash work as a subcontractor to start. Avoid insurance work. Your goal should be to get in with the high quality GCs in your area that get all of the big project work."
I'm a bit confused what your advice actually is. Are you advising OP to pick up a trade and then go work for a large GC? GC's don't hire the trades in-house. They usually hire them as 3rd party contractors.
Financial literacy: In my experience (property owner side of 10 projects 500k-10m in value) contractors constantly struggle to manage cash flows. Call it what you want, maybe its poor project management, but at the end of the day managing liabilities and payrolls is something I see contractors consistently having issues with. It is the thing that as an owner I feel puts the most strain on any of our deals.
I am advocating for him to start his own construction business. Find projects that people need help managing and manage the work on behalf of the owner. A friend with a kitchen remodel, their own house flip, etc. They have the designs and you have the people to do the work.
Hell, go buy a small construction business if you want. I have two friends who bought remediation businesses in the last 5 years. Both have pivoted (coincidentally) to garden variety commercial contractors. They routinely are bidding on work from the large contractors in town. Another friend started a commercial roofing business 7 years ago. He has since grown the company to 20m in revenue. They all started doing small projects with the contractors they could find and values they could bankroll. They all were from different backgrounds, attorney (disbarred), analyst F500, car salesman.
The product is simple, someone has something they need built and you build it per the design instructions. The execution is the hard part. Contract negotiation, finding quality employees, managing cash flows, bidding work effectively. All of those things can be learned. You just don't want to take on more than you can handle to start.
Hi, OP here, thank you for such a perspective!
Out of curiosity, what was the SDE or EBITDA from the businesses they acquired at start? Did they finance acquisition by doing equity + SBA loan? Also, how did they manage to learn about the sector while coming from obviously very different industries (cars, law…)?
Is it realistic to scale enough to pay myself and survive with a family of 3 within 1 or 2 years, living decently?
Both took over middling businesses. The owners were old and the infrastructure within them was negligible. They made a small down-payment (somewhere 50-250k) and seller financed the rest. What they really bought was a pipeline of work and a niche to operate in with some contractor connections. They didn't make anything for the first few years. Honestly I think this year was the first year they were really doing well (year 5-6).
They learned by doing. They shadowed the owners for a period of time and then literally had to do the job. Oddly they both started in remediation/demo and have since pivoted to general contracting.
Your last question is an easy one to answer. Of course it is realistic. Of course it is not realistic. Everyone's wherewithal is different. These guys had very little opportunity cost and a ton of grit. Neither are overly intelligent. Both had kids and an insane work ethic. This was an opportunity that needed to work for them.
This is the thing I think most people miss. Entrepreneurship is way harder than a desk job. There is way more stress. If you have the pedigree and network to get a high paying job at a company with an ambitious founder that has a high rev per employee number, that is a better choice all day long.
My message is for people like me who didn't have those opportunities (mine for mostly self inflicted reasons) who are capable enough and on the fence about doing something.
Of all the really wealthy people I know, NONE of them are wealthy due to their raw intelligence. By being on this website you clear the baseline hurdle. You've got the horsepower, but only you know if it is the right choice for you.
I don't deny that some contractors struggle to manage cash flows, payroll, liabilities, etc..But i don't think this is a "finance" knowledge issue, but more of a cash flow management/project management issue. Without more context, it's hard to say what the cause is. If it's merely a matter of the contractors not knowing how to use excel or quickbooks to manage cash flows, then sure perhaps that is something OP could bring to the table that others do not. But if the issue is that the contractors can't generate enough business or if customers don't pay on time or have gone belly-up in this environment, then I'm not really sure OP's finance knowledge is really any help. Either way, although cash flow management is important, I don' think this is anywhere close to OP's problem. I think OP's major hurdle (other than getting over here) is how to gain experience and knowledge in the most cost effective and time sensitive manner, which as you said below could take years.
I think if we focus on his question which was, "does anyone know anyone in this biz and how they started" it will help frame this going forward.
I happened to know two people who did exactly what he is asking. I mentioned they were not rocket scientists, had no prior experience, and ultimately where they are today. These two ppl are not outliers, their outcome is the norm if you control for conscientiousness and intelligence. My opinion is informed by the 8 different contractors I have worked with and their brand new fleet of wrapped trucks/month long vacations/massive homes. Every single contractor I actually want to work with has a 6 month backlog. I am confident that the avg person can get to that point, but yes it will take some time and money and hard work along the way.
I can't comment on if that is a fair trade to the OP and I don't think he wanted me to.
That's fair. I got carried away with how bad of a trade off your two friends needed to make. Not that it was a bad decision on their end since I assume they are happy. But 4-5 years making nothing is brutal.
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