What is your real estate end game and plan to get there?
I think it’s reasonable to say many of us here are aiming towards (and in some cases have achieved) executive level positions in real estate companies be it in property level acquisitions, development, private equity or a debt fund and the many spaces in between.
Most of us entered real estate because we wanted to be entrepreneurial (not be a perpetual cog in someone else’s profit machine), do our own thing ultimately, have assets that give us passive income (that matches the replacement salary of a VP/MD) in perpetuity and protect us from the lifelong need (and risk: fired any time, getting seriously ill and not being able to work, etc) trading time for money, and build a business at a scale that meets our individuals goals, abilities and comfort levels (and maybe have something to pass onto our family or next generation). A very broad sketch but directionally probably in line with what many of us want out of this industry and why we entered it.
The problem is that given the nature of the real estate business, the intense up front capital involved, the diversity and costs of skill-sets needed on a project or deal, strong local competition, etc, the aforementioned entrepreneurial “dream” can turn into a “tomorrow is always a day away” situation.
What are your long term goals and practicable and concrete strategies to avoid being stuck in ‘executive limbo’ forever?
Note: I agree if you are a CEO/CIO of a REIT or national development company and other such high echelon executive C-Suite roles then given the salary, carry and stock options (where applicable) the above case may not be relevant to you. In fact - this may be your end game (despite the fact that you could still get sick or fired or become a ‘persona non grata’ and the need for passive income in perpetuity arises again).
Goal #1 is to never sell my primary residence, and instead move into a new place once I can afford it and put the old one up for rent. Hoping to be able to do this 3-5x over my life time, which will give me a nice little SF/Condo rental side business. I currently only have the one I live in, but it's 50% rented out, and I've made back my entire down payment thus far in rent, am looking to upgrade in about 3 years from now. The goal from there is to 1031 the properties once I have build up enough equity and lever into a 4-8 plex.
Goal #2 is to syndicate deals for family and friends, have been in semi deep discussions with one friend about getting a deal going. Goal would be to do this full time if possible, once I got enough of a track record and had access to enough capital.
Goal #3 is what i think everyone in CRE wants, to own a huge portfolio of properties without any outside investors, and run the whole thing from the beach.
Nailed it
What is your plan if Biden’s plan to stop 1031 actually happens? I haven’t read up too much on this yet but I’m v interested since many companies rely on this
I'm still 20+ years out, so I've got some time to figure things out. At the end of the day, the main thing I am waiting on is for debt to be paid down/ off, so the 1031 is nice but not needed. A large tax bill will not stop this plan, just slow it.
End game would probably be coming back with enough cash and connections from other ventures and hire people that know the construction/legal side very well and design the units with clients myself with the arch degree I will then get. Sounds about right to me.
Realistically own about $25M of MF overtime. Would build this overtime with primarily full leverage (75%) and I/O. Aiming for suburban markets. Smaller properties in decent markets. Build it over time, while I continue to work a FT job. Nothing fancy, but about the most realistic option I have.
Unrealistic option, raise a ton of money from heavy hitters. Raise money from endowments and funds, grow to a $1B AUM portfolio and then after 20 years, decide to leverage up and buy out partners.
For me, I got into CRE a bit later in the game and I have a mountain of student loan debt I need to pay off before I can even think about doing my own thing.
I am fine with spending my career working for someone else. When I get into the later stages of my career I'll start slowly acquiring smaller properties that I can manage in retirement. This will lay the foundation of a family real estate business that my children can then grow to create financial stability for future generations.
Goal 1: [Day job steady cash flow] Keep learning, performing, climbing as an employee in my RE firm (semi strong regional) and go as far as I can here or start my own company in a similar space if rational.
Goal 2: [Long term planning equity growth, passive income] Buy small residential and commercial properties in owner-friendly locales with improving and strong micro fundamentals. After 10-12 years of holding them, separate the wheat from chaff and 1031x all the underperformers (leaving only A's or A-s) into 1-2 Big Box retail that has excellent externals (traffic count, pop growth, strong average income, municipal/local gov pro-development plan that brings better businesses into the area, multiple pads for redevelopment, fits the acq criteria of 3-5 major national retailers, etc) but a very low credit tenant with no options and 3-5 year expiring lease. Re-tenant with a well-fitting, agglomerative national and build out the pads concurrently with new credit tenant (having bought the property knowing it matched very well the acquisition parameters of several corp giants).
Almost every rags-to-riches real estate biography that I ever read or learned about through having a conversation with that person (nb: sourcing off-market deals for acquisition and get to chatting, you see this fact pattern repeating itself over and over again) started with a guy buying a smallish property and trading up whilst keeping the gems (no matter the size, and usually vociferously regretting anything he ever sold) over a significant time horizon. Unless you are born into wealth, it's a credited path (and one that protects you from the consummate fragility that is your silent passenger whenever you work for someone else).
What biographies have you read? Looking for different one's on successful people in real estate.
These two are fun reads not dry at all albeit very nyc/development- centric:
The Autobiography of William Zeckendorf: Interesting to see what it takes mindset-wise, constitution, attitude and just daily preternatural energy level. An aspect overlooked in almost every re investment textbook and degree program mba or otherwise) required to build the real estate business that he did and the foresight, assertiveness and ingenuity he had with turning the East River, 42nd and 48th former slaughterhouse sites that would become the seat of the United Nations. He started as "lowly" rent collector for his parsimonious uncle, then office space rental agent and then IS brokering and moved up and beyond from there. Obviously nyc was a very different market and place back from a supply/demand, built environment and regulatory schemas, still a dizzying story of self-realization through real estate.
Skyscraper Dreams: This book tells the origin stories of NYC's famous real estate families such as Durst, Rudin, LeFrak, Fisher, Uris, etc with anecdotes on what caused their fortunes to rise, grow and maintain to this day or fall completely. This is a book to physically purchase not maintain a digital copy, and keep it around to review time and again.
I honestly don't think I'd want to own real estate on the side, sure the passive income is nice I just don't think I'm cut out for that type of work (but we'll see in 10-15 years when I'm deeper in the industry). Right now my end game is to be merchant developer (either for myself or for someone else) but to explicitly make architecturally significant buildings, primarily condos/sfh.
That's a hard combo to pull off.
One of the biggest criticisms of the merchant development world is that it is heavily disincentivized to build architecturally significant (aka expensive) buildings. Merchant developers will VE any significance out of their architecture in a second only to leave one exposed beam amidst the earth tone rectangles and pretend like it is innovative.
I say this as a self-loathing merchant developer.
I know it's really unrealistic... otherwise we'd be seeing a lot more interesting buildings around. But a man can dream.
Can confirm, that's what we do...
It's funny that you brought that up. I hate it, but some of our partners have a champagne taste on a beer budget and thus the VE shenanigans begin. And this is why a lot of neigubourhoods are NIBY. You show them gorgeous renderings of the development and they are effectively 'bait and switched' through VE.
When we are out in the market we always point out the "merchant layout" or "merchant plays" referencing the shittier site plans and ugly industrial buildings we see haha. Or when a broker sends us a flyer with a crazy maxed out site plan thats unfunctional to most institutional buyers we will joke and tell them "thats such a merchant layout!!" I mean thats the dream though. When you can promote out of it you'll VE the shit out of it to get your costs as low as you can.
I have some ex-coworkers who I still talk to regularly from my analyst days (development/acquisitions). Eventually, we plan to branch off and fund raise on our own. I think that's every CRE professionals' dream though.
1) Continue day job of developing class A assets. 2) Invest in small scale (2-4 unit) multi on the side 3) One day, meet somewhere in the middle.....
My goal is to have GP ownership in transactions.
The first and most clear path I can see is acting as a developer/GP on LIHTC transactions. This will require about $100k in predev cash. Now that I have a separate emergency fund set up and retirement contributions maxed out I can start focusing on setting this cash aside. I can probably get there much quicker by partnering with a friend, but I am not sure it is worth giving up fee
Another possible but unlikely way to do that is to continue working at the family office I'm currently at and hope that some day they want to give me a partnership opportunity (no precedent for this). If that opportunity came up it would be the preferable option as I would not have to reinvent the wheel from an ops perspective or ever take on significant guarantee risk.
A lot of the threads on here are full of people trying to move up a the corporate ladder of major REPE/Developers/REITs etc. So it is great to see others on here who do not have working for someone else as their end game.
My goal is to take my bonuses/commission from my job (fundraising/sales at a traditional asset management firm/alternative shop), set that aside in my brokerage account (a lot of very cheap stocks now!), grow it, maybe raise some money from LPs (basically any rich person I know, I was actually thinking my current landlord), then take that money and buy a small multi-family building in a busy and developing part of my metropolitan area. Outsource the property management so I can focus on the big picture and performing well at my current day job. Potentially make some incremental improvements in the areas that derive value (bathrooms, kitchen etc). Then either use a 1031 exchange into a larger property or hold onto it for the long term and reinvest the income from the first property into a down payment on another property.
Rinse and repeat until I have a large portfolio and can create independent multi-generational wealth and not have to rely on large corporations that will lay you off the second they perceive you as being not worth what you are paid.
To start your own thing in real estate, and since it’s so capital intensive:
My end goal has been to build up some equity in several projects/properties; get a consistent cash flow that is basically a good salary; and then work on projects I find interesting. Do that until I don’t have the mental capacity to work any longer. I find the most interesting projects are those that impact my community, my past, my hometown. That’s what drives me more or less. Find solutions that improve a place and is financially feasible. It’s likely I might leave real estate for something else I’m passionate about in my mid-40’s: teaching high school history, US foreign policy, or some kind of social venture, or something that would bring export dollars to Hawaii to diversify the economy.
I’ll go back to corporate if I have to. I just love this industry. Never was a go independent or bust person, although I always talked about doing my own thing with colleagues, I have no problem working for someone else as long as I find the work interesting. Young monkeys pay your dues. I can’t help you if you are a couple years out of college and want to start a fund. I’m not wealthy enough to be an LP and a lot of the judgement and expertise I’ve learned was on the job.
Probably much less aspirational than most on here but keep grinding away in the corp life (would like to get to a point where I'm pulling in $200k+) while saving up for SFR's and 2-4 properties eventually. Would like to build up to 20+ units but nothing too crazy. Maybe invest in some deals as an LP here and there. The goal is to have some decent passive income coming in to where I can semi-retire early and just work remotely as a consultant or something taking a fee per deal. The plan is still in the works and I change my mind frequently so we'll see.
I understand the entrepreneurial types who want to do their own thing, myself included. But IMO, climbing the corporate ladder isn't the worst thing in the world either. If you play your cards right, you're making multiple six figures, putting less of your own capital at stake, and hopefully working with people you like while doing something you're passionate about. Worst case scenario is you lose your job and you find another one. To me that doesn't sound too bad. Interested to hear what others think about this perspective.
If you're making "multiple six figures" it's likely going to be a demanding role and over time you will resent working so hard for only a small piece of the pie.
I've been an entrepreneur and also worked a demanding job as an employee. The one major thing that most would-be entrepreneurs underestimate is the mental pressure associated with being the last line of defense. The buck stops with you. All major complaints and issues flow up to you, and anything that goes wrong with the business could leave you in financial ruin. Entrepreneurship can be a lonely road and leave you feeling anxious all.the.time.
A demanding role working for someone else can also be a source of psychological stress, but you generally have a much bigger safety net and collective resources to lean on in bad times, which is almost non-existent when you start as an entrepreneur. There's something to be said for a predictable paycheck every 2 weeks.
If (and it' a big if) you strike it big as an entrepreneur, then the pros outweigh the cons I listed above.
Own junky commercial buildings in notoriously crime-ridden areas Start stopping by and hanging out with the tenants who seem most likely involved in illegal activities Start bringing drinks when I stop by, start drinking with them Get involved in their lives, start bailing people out financially, doing people favors Start brainstorming business ideas with these new friends Put money together with my new friends and start buying huge amounts of drugs and then trying to get rid of them as fast as possible through cold-calling, networking, etc Start paying off cops, donating huge amounts to local campaigns, be a nice person in the community who helps people in huge ways
This is how greatness is achieved
Sounds like a mission from Grand Theft Auto!
LOL. would make a good movie. You wanna be a screen writer?!
Becoming president is pretty en vogue - so that.
I have more than one goal for myself.
1. Get into the industry - either dev or brokerage and then dev.
2. Do that and build capital+knowledge+connections and get to a point where I'm running deals. Also do smaller deals on the side, either with my own cash or freinds and family.
3. Have some decent income from those properties. Find a partner(s) who'll back me and jump into bigger deals. At this point I have my own shop and am raising larger and larger amounts of capital.
4. Grow that little shop as much as I can, donate a lot of money and die.
As African American, the only options has been entrepreneurship from the onset. Corporate America positions were never made for black people.
Literally see my career as just part of the story to tell to build trust with potential investors and deal experience on some else’s dime.
It already hard enough to get to a point where you get deal participation and carry. The good old boy network barely lets black people work in commercial real estate finance and strategy positions. Leasing, property management, and HR seem to be prominent landing spots.
With that being said, good old boys clubs makes it damn near impossible for minorities to get to C-level position. I’ll bet on myself instead waiting to my till late 40’s or 50’s to get a seat at he table. I’m just going to build my own table.
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