How many of you actually plan on going independent?

I have the desire to one day start my own development business and I read a lot of comments on here where people mention that they plan on one day starting their own shop or that's "that's the dream."

I was just wondering how many of you are taking the steps to make this happen? Also, how many people ever actually pull this off? I always hear about "local guys" who for years put together deals and are successful, but whenever I research the local firms in a local market, all of those guys have the typical backgrounds (MBA and solid experience at national firms).

So what are your plans for making it happen? Do you know anyone who actually has made it happen?

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Comments (56)

Best Response
Sep 18, 2017

It is definitely my intention and I know people who have pulled it off.

The big question for me, that I don't yet have an answer to, is "when." Sure I can make a plan such as "within 5 years," "within 10 years," "by the time I'm 35," "when I have X amount in cash" etc. but there are so many variables that it's hard to really put a definitive timeline on it. Some of those include:

1. The Market

This might be the biggest one, because it's not only my timing that matters, but the real estate market's as well. Ideally, I'd hit my stride just as a downturn was starting to turn around and I could buy land low, deliver rents way beyond proforma, and cash flow or sell for a fortune, but life doesn't always work out how you want it to. In development, you really need to nail your first couple deals. Old guys can get away with a bad one here or there because they have a track record. If your first deal or two are busts, you're looking for another position in the industry.

2. My Bank Account

This is a big one for me. My parents are solidly upper middle class, so while I didn't want for much growing up, I have 6-digit student loans and lack a billionaire father. When you are basically paying two rents every month to get your debt load down, it's difficult to A) Leave a well-paying job and start a business that doesn't make any money at the beginning and B) Secure a loan with an amusingly high debt to income ratio. Most likely, I'll have to start small on the side while still working - build a couple townhouses or a stand alone retail building or invest in a value add small office building and try to slowly increase my monthly cash flow until it gets to the point where I can do it full-time and build the fun stuff.

3. Current Company Compensation

Similar to #2, I also have to weigh the cost-benefit of leaving my current development firm. I make decent money here, but the people above me, at the level where I will be in a few years, make fantastic money. In 5-10 years, the owners are going to be a semi-retired investment committee some people above me will move on I'm sure, so there may be an opportunity to excel where I am, or at a similar firm like this. You make less money, but you have dramatically less risk. I'm not saying I'd do this forever and give up on the dream, but would I delay the dream a decade to put the theoretical kids through private school and buy a nice house? Perhaps.

4. My Experience Level

All I'll say about this is that the more I work in development, the more I realize how much I don't know. I understand that you'll never know everything and you learn a lot by doing, but if I'm going to have a competitive advantage in the market, I simply need to learn more - particularly construction. I have a master's degree in development and 3+ years experience and, without exaggeration, I learn multiple new things on a daily basis.

5. Debt/Equity Connections

I know so many people in this industry, both solid professionals and lackluster idiots, who have access to more capital through Daddy and Grandpa than you would believe. Some already "own" entire real estate portfolios simply because their family put their name in the ownership structure. They'll have no problem putting a couple hundred thousand down for a new development either because they can ask for it over Sunday dinner with the parents. Me? I have to work with what I have. I know of a brilliant guy in Nashville who essentially ran a development company for two silent partners for 15 years. When he went out on his own, though, he struggled to raise any money. His connections, in fact, were actually his bosses', and they didn't necessarily want to invest with him. I have a lot of networking ahead of me, both on the debt and equity side, and I'm working on it, but these things take a lot of time.

6. Partners/Employees

I am well aware of my own shortcomings in terms of development, both in temperament (I have a temper, I have a very forceful personality, and I like spending money) and knowledge base (construction, capital markets), Ideally, I would like to team up with people who are even-keeled, absurdly spendthrift, aren't afraid to stand up to me, and have a background as a project manager for a premium GC and/or a financial wizard from the REPE world to help offset my personal and professional "weaknesses." I see the benefits of this daily - the two partners of my company have wildly different skill-sets and personas - one only drinks Coors Light and drives a used pickup but knows numbers like you wouldn't believe while the other has a construction background, drives a Cayenne Turbo, and is brilliant with materials and design but can blow your budget with one chandelier. and both lean on our construction team on a daily basis. Luckily, coming from grad school, I know a lot of people in development - my best friend locally is in development, my girlfriend is in development, my classmates are in development, my co-workers are in development, etc. - but I don't know all that many REPE or GC people outside of the few I interact with. Getting that strong team is very important to me.

So, yeah I'll be a full fledged developer one day, but the when, the what, and the with who? Who knows. The best I can do is keep learning, keep making money, and keep making connections so that whenever an opportunity presents itself I'll be ready.

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Sep 18, 2017

Thanks for the reply. I definitely feel like the biggest factors are timing and connections (finding equity). That anecdote about the guy in Nashville who couldn't find money after 15 years of doing deals is what scares me

Sep 18, 2017
ThatGuy111:

Thanks for the reply. I definitely feel like the biggest factors are timing and connections (finding equity). That anecdote about the guy in Nashville who couldn't find money after 15 years of doing deals is what scares me

I have good anecdotes too, however. Another guy, a buddy of mine,, started out as a bit of a developer for hire. He was good friends with a lender and one day the lender told him that there are rich people out there who have land and money and who want to get into the game but don't know what they're doing so they can't get a construction loan. So my buddy, who had about 4 years of development experience and a grad degree at this point, just started working for developer fees. After a few years of doing this, on all sorts of random projects, he suddenly had a fantastic track record of running projects, even though he personally had not put his money at risk. He and the GC he used on most of those deals became friends and they teamed up to build townhouses. They are killing it.

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Sep 20, 2017

This is point is easily solved by hiring a broker. I see this all the time. Very experienced guys coming from top shops like related, lightstone, thor etc go out on their own and start a shop, but when time comes to cut checks for their first deal they get nothing but crickets.

Nov 7, 2017

Are you saying hiring a debt broker? So you would present the plan bring it to HFF or some other debt intermediary they would pitch it banks/equity for a fundraise and you just pay 1% off the top for that service?

Nov 7, 2017

Yep, it's incredibly difficult to raise money. People with 25 years of experience at elite companies still struggle to raise money, despite the world being awash in invest-able cash.

Sep 18, 2017

Well said. Also, I priced daycare the other day and almost got a vasectomy...

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Sep 18, 2017
Count_Chocula:

Well said. Also, I priced daycare the other day and almost got a vasectomy...

Hah, continuously moving to more and more expensive cities doesn't help that

Nov 28, 2017

Ha! I have told my friends the best form of birth control is to take a look at my daycare bill!!!

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Nov 28, 2017

We're in the same city, and that doesn't surprise me one bit. Trying to fight the wife for one more year of being DINKs

Nov 28, 2017

This should be a whole other topic. WTF, with some friends just hiring nanny's, I cannot believe how expensive that crap is. IDK why I feel so bad about buying a nice car now.

Nov 28, 2017

I hate kids, but my boss routinely brings in his 3 toddlers who, for whatever reason, love me despite my disgust with them. It's definitely a form of birth control. Almost makes me want to turn gay. Hmm...

Sep 18, 2017

Outstanding post. This post applies to pretty much any form of entrepreneurship. +1

Sep 19, 2017

This is great, man. The part about fundraising is so true. I'm in REPE and if you talked to everyone at the firm 9/10 people would probably tell you getting the capital on board is the hardest part. It's difficult even with a good track record, let alone if you don't have a meaningful one to speak to.

"Who am I? I'm the guy that does his job. You must be the other guy."

Sep 20, 2017

To your point about risk/reward, I kind of wish I would get fired. Otherwise, I feel like I'm going to remain a "wantrepreneur" rather than an entrepreneur forever--in other words, one foot in, one foot out of entrepreneurship. I don't think a person can really excel when he or she is lukewarm.

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Sep 20, 2017

Shit like this is why you get my vote for one of the most helpful/informative/relatable members on this site.

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Nov 22, 2017

+1

"Capitalism: God's way of determining who is smart and who is poor." Ron Swanson

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Sep 18, 2017

All lot of senior guys at solid development shops have no reason to leave. They can pull in 7 figures working 40 hour weeks while taking almost 0 risk (relatively speaking, anyway). They can also personally invest in deals they are working on or in side deals.

Equity is the hardest thing to find. Starting out as an independent developer you'll more than likely need a trusting relationship with someone who will go at-risk on pursuit capital (earnest money, design, due diligence/consulting fees, etc.) and who has a balance sheet and balls to guaranty the construction loan.

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Nov 28, 2017

I'm interested too.

Nov 28, 2017

Given the large number of incredibly qualified college kids on this board with extensive experience in starting their own investment bank, I can't imagine that you would get anything but insightful, on-point advice.

Nov 28, 2017
djia5000:

Given the large number of incredibly qualified college kids on this board with extensive experience in starting their own investment bank, I can't imagine that you would get anything but insightful, on-point advice.

awesome.

Nov 28, 2017

Kids in my high school started their own investment banks all the time, it was no big deal.

Nov 28, 2017

ask your md

Nov 28, 2017

LOL, good stuff guys, keep it comming

Nov 28, 2017

pretty difficult i think, not sure though

Nov 28, 2017

My friends and I started an investment bank after we dropped out of college. Everyone said we were crazy, but we were determined. We put in 200 hour weeks even when deal flow was light and believe me, it was light in the beginning. Clients laughed at our pitchbooks which consisted of us handing out crayon-marked construction paper detailing our capabilities, but eventually our dogged pursuit of excellence gained us our first deal. We did an IPO of my friend's sister's lemonade stand that was a huge hit with institutional investors who liked the solid revenues generated by sweet, sweet lemonade on a warm summer day. Years later, we became the top bank on wall street and that bank is called GOLDMAN SACHS.

Nov 28, 2017
JuwannaMann:

My friends and I started an investment bank after we dropped out of college. Everyone said we were crazy, but we were determined. We put in 200 hour weeks even when deal flow was light and believe me, it was light in the beginning. Clients laughed at our pitchbooks which consisted of us handing out crayon-marked construction paper detailing our capabilities, but eventually our dogged pursuit of excellence gained us our first deal. We did an IPO of my friend's sister's lemonade stand that was a huge hit with institutional investors who liked the solid revenues generated by sweet, sweet lemonade on a warm summer day. Years later, we became the top bank on wall street and that bank is called GOLDMAN SACHS.

U MADE MY DAY!!!!!!!!!!!!!!!! ROFLMAO!!!!!!!!!!

Nov 28, 2017

Anyone catch that show on Dateline(?) about the kid who started his own hedge fund and these investment bankers and even other hedge fund managers gave him $$$$ (how funny is that?) and then it turns out he was a fraud and he's now in jail?

Nov 28, 2017
aadpepsi:

Anyone catch that show on Dateline(?) about the kid who started his own hedge fund and these investment bankers and even other hedge fund managers gave him $$$$ (how funny is that?) and then it turns out he was a fraud and he's now in jail?

Yeah, I've heard about that. I think his mom was a real estate agent in Greenwich and he was a NYU student -hilarious.

Nov 28, 2017
zk1085:
aadpepsi:

Anyone catch that show on Dateline(?) about the kid who started his own hedge fund and these investment bankers and even other hedge fund managers gave him $$$$ (how funny is that?) and then it turns out he was a fraud and he's now in jail?

Yeah, I've heard about that. I think his mom was a real estate agent in Greenwich and he was a NYU student -hilarious.

Yes, and the mom's in jail too, right?

Nov 28, 2017
aadpepsi:
zk1085:
aadpepsi:

Anyone catch that show on Dateline(?) about the kid who started his own hedge fund and these investment bankers and even other hedge fund managers gave him $$$$ (how funny is that?) and then it turns out he was a fraud and he's now in jail?

Yeah, I've heard about that. I think his mom was a real estate agent in Greenwich and he was a NYU student -hilarious.

Yes, and the mom's in jail too, right?

I believe so. I would love to know which law(s) they predicated the arrest upon. In theory, one needn't be an established "street" star to raise HF money.

Nov 28, 2017

I once asked the founder of an investment bank how he "did it." What he told me was:

You can't start it looking to get rich. You do it because you enjoy it and it is what you want to do in life.

From what I've seen, you really have to start small. Reputation is everything in this business and until you establish yourself, you just won't be able to compete. My opinion would be to work up to MD level, get an amazing rep, then start your own firm and bring with you co-workers. Otherwise you may find yourself struggling for a long time.

CompBanker

Nov 28, 2017

the only people i've heard of

Nov 28, 2017

Wasn't it extortion charges? I dunno. I think the kid is actually also seeking an appeal?!?

Wasn't it even worse in the sense that the kid's business counterpart was a b-school professor from NYU or something?

Anyways, I still find that story completely amazing. Moreso knowing that legit IBers and HF managers gave this kid their money to manage. That' a hoot :-)

Nov 28, 2017

I wonder if he ever met any of his investors face-to-face?

Nov 28, 2017

Yes! The show discuss how all of his presentation material were filled with phony BS and none of the IBers or HF guys clued in. He was such a smooth talker. It shows ya how greedy folks in the biz are. They just want "IN" to the next hot sexy HF and they won't really do due diligence on an investment opportunity.

Nov 28, 2017

Do you know how much he was able to raise?

Sep 19, 2017

Development would be fun, but honestly my main exit plan is to just buy smaller multifamily deals, then gradually trade up for more and more (relatively) passive cash flow. I'm on the REPE side though, so my learning curve on development would be greater (contacts, entitlement process, etc.).

"Who am I? I'm the guy that does his job. You must be the other guy."

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Nov 28, 2017

What experience do you have running a business and what type of business are you trying to start?

Nov 28, 2017

Did 3 years MBB, ran my own business for 18 months, and just jumped over to VC. Happy to share my perspective if you want to PM me :)

In terms of your first question... as with everything, it depends. When it comes to giving you money: yeah, investors are pretty effective. Aside from that, there's a LOT of variability.

Nov 6, 2017

Cool. You can use the copy/paste function...

Nov 6, 2017

Sorry, I'm not following...

"Who am I? I'm the guy that does his job. You must be the other guy."

Nov 6, 2017
MonkeyWrench:

Sorry, I'm not following...

It's a formatting error. Someone was spamming the RE forum earlier today and their contribution to this thread was copy and pasting one of my paragraphs. It seems that @WallStreetOasis.com or someone deleted their post, but my reply then got attached to the next most recent post.

All good with you, @MonkeyWrench

    • 1
Nov 28, 2017

The vague classic, start a business. Depends on the type of business.

Nov 28, 2017

If you want to start a business, go ahead and do it just like the majority of businesses in the world - without wasting time in finance picking up bad habits.

Nov 28, 2017

Why finance and not some other field? (If at all that is needed since college grads are doing it without any xp)

Nov 28, 2017

+1

Nov 6, 2017

Like CRE said about Debt/Equity connections... I think that's the most important piece

I work for a small, very unique shop where we do Commercial RE and invest in PE/VC. Although, I'm just doing accounting at the moment, I get exposure to anything I want to and can sit in on/participate in anything. My first few weeks there I noticed my access to capital is huge. If I can throw them solid RE deals or invent a product, they'd be more than willing to fund it.

If you have rich uncles or friends that are more than willing to loan/invest, then get your experience down pat. Juice the first few deals and you're set

Nov 7, 2017

Anyone here a equity broker or worked with one?

I'm curious to know the chances of a group like HFF equity capital markets getting funding for a a former exec from a good shop with decent experience. I am sure equity brokers know from the minute they see a firm trying to raise capital, if they will even be successful.

Nov 7, 2017

I fully intend on going out on my own at some point, and I feel like I'd learn more of the "entrepreneurial" side of the business at a smaller/leaner shop than a more institutional firm. RE Development is only part of the puzzle for smaller shops, and I feel like I'd learn more about operating a small business by working for one, rather than working for a Hines, Related, etc. Not saying that I'd turn down an offer from one of the large institutional players if it presented itself, but I'm not really actively seeking them.

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Nov 7, 2017

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