Where to take family RE business
Greetings all, first time poster on here.
My father owns two businesses that I'm currently working in. One is a CPA firm while the other is a real estate investment firm. At the moment I'm studying for my CPA whilst I divide my time between the two businesses.
I'm the sole individual in our family capable of taking over these businesses and they both generate very large incomes, so I want to do all I can to continue to build upon what my dad has created over these past few decades.
I love real estate and have been involved in that business on and off for the past 11 years. I only pivoted full time to the accounting and real estate 3 years ago. We own a few dozen properties across California, commercial and residential. I assist in acquisitions and management of the properties, and own a few residentials of my own.
My parents wanted to invest out of state and even out of the country but they never got around to it and it's been largely my dad working on his own for many years and to him, the CPA firm came first. I want to do what they didn't and take the real estate global.
With that said, I'm not 100% sure how to proceed. Essentially all of our acquisitions were made with cash and even though all the properties and the CPA firm generate lots of cash, it would still take years to purchase high-priced commercial properties. I was thinking of structuring a business around generating funds from outside investors and using their capital as well as ours to purchase assets, which each investor getting their share of the income relative to what they've invested in.
I have no idea how to even begin that process, however, or if that's even a viable business model for someone in our position. We could start using loans instead of paying cash and with debt so cheap, now would be the time I suppose.
I'm open to any suggestions on the matter and I appreciate your time.
What you are talking about is syndication. It's a very viable way to spread the risk and raise funds for new projects.
If I were you I'd start building connections with brokers and investors in markets that you want to enter. Real Estate is a connections business and you need to know the right people to get a good deal.
I'd also explore the possibility of incorporating debt into your investment strategy given rock bottom interest rates.
Thank you for the heads up on the name of the business model Colonizer, I will look into this and see how one would get started forming a syndication.
At the moment we're on pause regarding acquisitions and waiting to see what happens with the real estate market. There will be opportunities to pounce on.
You should be in attack mode, not putting a pause in all acquisitions. Once you see an opportunity (good deal) you should be ready to jump on it.
read a book on CRE maybe?
Shoot me a pm. I'm local in CA
I’d shoot for regional before you start going global. There’s a reason why even mega developers usually specialize in certain product types/regions.
Shoot me a PM. We partner/advise/invest with groups like yours, and look to invest into different risk profiles of asset classes.. if that makes sense.
You will absolutely use leverage in the US; it is plentiful, cheap, and easy. Especially if you own all your properties outright.
Do you have an understanding of costs of capital/finance, or is your background strictly in accounting? If you're looking to create an investment company from what your dad built, it sounds like you need to begin by assessing your portfolio's value and your own cost of capital, then looking for opportunities that fit your cost.
Honestly, my background is all in biomedicine. It's been about 3 years since I hopped on with my dad and went business/finance/real estate full time and I'm currently studying for my CPA. I know my way around financial statements and have an understanding of finance, but it's predominantly centered around accounting. I'm certain I could use a more immersive experience in finance separate from accounting.
Hey can I shoot you a PM on this too?
Me? yes of course
if you need an analyst, Iet me know
lmao hustle my guy. i respect the grind
Showing my parents this post next time they give me any shit.
You're thinking wrong side of the game dude - go LP with a good sponsor and just absorb everything.
Absorbing everything sounds good in theory.
But as an LP?
They are not remotely involved in the development process.
Can be as involved as they want to be, especially if they structure for it. Give me a check, I'll let you shadow me the whole time...
A couple qustions:
What is the value of the real estate portfolio?
What NOI does the portfolio generate?
What property types are they?
What property types overall do you have expertise in?
Do the companies have good banking relationships?
What is being done with the free cash flow from the businesses?
How much of the free cash flow are you able to reinvest into the business annually?
-Portfolio is valued at around $35 million
-NOI is around $1.5 million
-Single family homes and a mix of commercial properties including gas stations and a large-chain gym
-I have physical experience in single family residences predominantly from my own rentals. The accounting I do for our clients has given me good financial experience in other commercial property types as many of our clients are own and operate real estate businesses
-We have great banking relationships predominantly from the CPA firm. We have used that for real estate acquisitions, although not nearly enough since my dad likes to deal in cash rather than use loans
-Free cash flow from the businesses is essentially going straight to real estate acquisitions and management
-Aside from the basic annual expenses to keep the CPA firm going as well as the money required to support the family, the rest of the cash is going straight to savings for real estate. Same goes with the income from the properties.
Why are you looking to get into "high priced commercial properties?"
Before you take on investors to purchase a large commercial property I would make sure to get experience owning/operating a large asset first. it’ll be easier to raise capital and get better terms on fees/pref/promote if you’ve proven yourself.
If you’re all equity now with stable and safe cash flowing properties, take out a loan across the portfolio and use the proceeds as the equity piece to purchase a larger commercial asset.
This is what we're planning for our next acquisition. We picked up a large commercial property (gym) a little under a year ago. The CCR's preclude us to manage the common area of the entire shopping center which has been my responsibility so it's been good experience working with all the other parcels which are a mix of QSR's, retail, and a Home Depot.
We are looking to acquire another large asset (not sure which type yet). But with rates so low, I think we'll be using leverage for a much larger amount this time around.
Nisi tempora et at suscipit. Dolore repudiandae ipsam modi saepe.
Necessitatibus officia corrupti voluptas neque aut ipsam. Doloremque temporibus quis temporibus. Minima sint quis aut enim quam a natus.
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...
Voluptate tempora mollitia doloribus aut nostrum voluptas voluptates. Voluptatem repudiandae minus et dolores tempora reiciendis quis adipisci. Voluptates quia nostrum eum natus distinctio perferendis.
Repudiandae sequi minima rem et omnis a ad. Enim dolorum ipsum error voluptas saepe dolorem omnis. Enim iste pariatur odio quia.
Possimus et unde aspernatur aspernatur est occaecati. Ut cum eius porro nesciunt quis sequi. Ducimus nihil modi ea reprehenderit iusto mollitia natus excepturi. Ipsum molestiae dolorum perferendis rerum nihil facilis.