How to source, finance and execute your own deal as a Junior?
As a junior (before associate/associate level), how do you learn how to:
- source a great deal
- find debt and equity
- negotiate
- structure an airtight deal
Obviously this will be for a small deal, because noone is going to trust you with serious ca$h since youre still young, but who are the gatekeepers for smaller deals within CRE?
At bullet point number 1 is where i percieve there to be the largest difficulty - given that everyone wants good deals.
The last 3 bullet points all seem like any kind of negotiation which you could translate from anywhere in life, but you are never going to be presented the chance to do these at work (for either an AM,PE/Capmarkets team).
Context (did 1 years internship at a top 5 AM manager worldwide, about to start at a "sell side" domestically dominant shop doing rotations across all their functions)
Thank you for taking the time to read this. Look forward to hearing what people have to share!
You learn all of the above by getting reps in with someone else's money.
Source deals for someone else in your day job, secure financing for someone else in your day job, etc. You do this enough and the individuals you interact with recognize that even though Mr. Boss runs the company, you are the person executing at every step. Plus, it gives you some time to build a net worth, which - at least for me - is the biggest impediment.
On some deals I have financed, the GP was relatively young with a big pocketed guy also on the carveouts. The guy with the B/S then charged a “Guarantor” fee at closing. That team has run this structure on a bunch of value add deals that have been successful.
That's the dream.
@Malta" - when you get good at programming, you need to make a sugar daddy app for real estate. Connect me with rich people (tech bros are fine) who want to play developer.
You learn to source by hitting the pavement, calling people nonstop, and building up a reputation that you know you're shit. Helps to be good at a specific niche, too. That way, when someone has a project that they think requires a certain execution, they come to you because they know you can get it done.
Finding debt and equity is the easiest - you hire a broker to go to the capital markets and call it a day. You'll overpay for very little service but it is what it is.
And structuring an airtight deal? Hire a lawyer. A good one. Know what business terms you want in the contract, make that abundantly clear to your attorney, and follow along on the redlines so you see where changes are being made and why.
I don't agree that finding equity is the easiest. That's actually one of the most difficult aspects of real estate. You can find a great deal, finding debt is easy, but the equity piece is very difficult if you're starting out. I agree with the lawyer part, never skim on lawyers, a good one will save your life. I had a professor in college that said everyone needs a good lawyer, accountant, and doctor (specifically in this order).
Finding equity is easy. Finding cheap equity is tough.
If you can't find money for a deal, you should take a look in the mirror and start rethinking your assumptions. Sure, some LP might ask you to give up half your promote, but they'll come in. If you can't get a partner to put in cash at all, the problem is with your deal and not the capital markets. Good rule of thumb in life, actually - if you're the only person thinking a certain way or seeing value in whatever you're doing, it's far more likely that you are wrong about something on a fundamental level than that everyone else around you is.
Not to be snarky... but you learn this by watching your 'seniors'. It takes time, like Gladwell's 10,000 hours to get good time. Don't stress it, focus at being the best analyst or whatever your role is.
With that grand statement.... sourcing deals is really a matter of relationships. Who knows you/your firm and what they do/buy/build. That is really the game, making sure your firm's name and reputation is inline to be called by the best opportunities.
But, you don't just wait for the phone to ring... You call on owners/brokers to turn up off-market deals. That can be researching property records, finding true owners, and finding a number to call the principal or their rep (believe it not, but google searches of owners' name can be a winner strategy).
Thank you - you're right about watching seniors. Dont worry about being snarky :).
The thing i need to do is to be the best at modelling, but thats pretty straightforward. This however, is a whole different ballgame, which is why i posed the question.
I fundamentally disagree with Gladwell. 10,000 hours are not the same quality.
How did your best/most rewarding/most productive relationships come about?
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