Hi all, long time no talk with most of you.
Very quick background – I’ve been in real estate for the past 8 years (5 in development, 2 in asset management) and for the past 8 months I’ve been working for an apartment investment firm and I’m one of two individuals responsible for presenting new acquisitions opportunities to our company's President. We buy large apartment communities throughout the US - usually 150+ units and deals over $10,000,000. Our President makes the final decision as to whether or not we pursue a deal. I get paid a salary, plus I get a sizable commission on any deal we buy. Most of the deals are in the $10-20mm range and the target (agreed to in writing) is that on that deal size I’ll make a commission between $15,000 - $30,000 per deal. Our goal is 4-5 deals per year, although this year we are struggling to buy properties because the apartment market is so hot and good properties are being bid up very high and usually to a point where they no longer make sense. So in the 8 months I’ve been with the firm, we haven’t bought a single property. We have made about 60 offers though. My initial plan was just to focus on this opportunity 100% for 2 years as the market was primed for acquisitions and my salary plus my commissions would put me in the upper 100s or lower 200s per year. I would then use the excess as an investor in the deals as well. But it is looking less and less like those projections will come true.
Recently, I’ve been approached by a friend who owns a food delivery business (and comes from a very wealthy family of entrepreneurs) about starting a residential real estate brokerage, after we’ve both had terrible personal experiences with real estate agents/brokers and heard story after story from our friends about poor customer service from agents. I have never been a full time agent, but have a license and represented myself on a deal last year and did another deal for a friend. On the deal I did for myself, my counterpart was an agent in the top 1% of agents in our state, and I found her to be incompetent, a terrible communicator and overall very hard to work with. On the deal I did for my friend, the buyers of his home were 2 doctors who were very demanding and difficult to work with. The other agent told me at closing this was the most complicated, difficult deal she’d done in 30 years. I didn’t tell her it was the first deal I’d ever done :eusa_clap: It was tough, no question, but if that’s the toughest deal ever I could sell houses with my eyes closed. My friend has no real estate experience, only his disgruntled experience of hiring and firing 4 agents recently while trying to buy a foreclosed condo. He has good business sense (and business genes) and deep pockets. He’d be the $$ and I’d run the real estate portion of the company.
Our plan would be to start small with the brokerage and just hire exceptional agents as we find them. So we would both continue our other businesses full time and do this on the side, until it got built up to a point where we might jump into it full time. Or most likely I would run the business full time and he would be the financial partner.
I’ve tried running both of these opportunities (my current job and this new opp) through MJ’s CENTS model to see how they shake out. My current job is great on most fronts, except control, which effects my income/investment potential. This new opportunity is good, but lacks the commandment of entry, at least in my opinion. I’d be very curious to see if you guys think anything is missing in my analysis. Thanks!
Current gig:NEED – yes, good clean apartment homes always needed; market booming currently; long term demographics favor apartments
ENTRY – very tough to buy 100 unit + buildings, takes mgmt expertise, high amounts of capital
CONTROL – my boss / company has all the control so this FAILS; he decides what to offer on and what not to and my commission is based on buying deals so if he chooses not to buy for a year, I make no commission
SCALE – our business scales well; company owns over 6,000 apartment units, I’m allowed to defer part of commission into deals as part owner of the deals and/or invest my own money in deals (obviously very small % owner)
TIME – It is not hands off for me currently as I am scouting new opportunities, however, as I increase my ownership in deals it will be over time (but slow process)
New opportunity:NEED – In my experience, most real estate agents are not good communicators, not good at customer service, etc. We can be MUCH better. People will continue to buy homes over time. Sales, prices, multiple offers already common in my area and are starting to become common for good, move-in ready homes in most neighborhoods
ENTRY – 90 hours of classroom instruction, pass two exams, hired by an agency on usually 100% commission (our plan is exceptionalism)
CONTROL – I would be 50% owner of the company and own real estate brokerage, high level of control
SCALE – the more solid agents we find and hire, the more homes sold, the more $$ we make; we can also scale into speaking gigs/seminars (we are both great speakers/presenters), website, etc
TIME – with the exception of the initial start up, our time is spent managing the business, not selling homes
Very quick background – I’ve been in real estate for the past 8 years (5 in development, 2 in asset management) and for the past 8 months I’ve been working for an apartment investment firm and I’m one of two individuals responsible for presenting new acquisitions opportunities to our company's President. We buy large apartment communities throughout the US - usually 150+ units and deals over $10,000,000. Our President makes the final decision as to whether or not we pursue a deal. I get paid a salary, plus I get a sizable commission on any deal we buy. Most of the deals are in the $10-20mm range and the target (agreed to in writing) is that on that deal size I’ll make a commission between $15,000 - $30,000 per deal. Our goal is 4-5 deals per year, although this year we are struggling to buy properties because the apartment market is so hot and good properties are being bid up very high and usually to a point where they no longer make sense. So in the 8 months I’ve been with the firm, we haven’t bought a single property. We have made about 60 offers though. My initial plan was just to focus on this opportunity 100% for 2 years as the market was primed for acquisitions and my salary plus my commissions would put me in the upper 100s or lower 200s per year. I would then use the excess as an investor in the deals as well. But it is looking less and less like those projections will come true.
Recently, I’ve been approached by a friend who owns a food delivery business (and comes from a very wealthy family of entrepreneurs) about starting a residential real estate brokerage, after we’ve both had terrible personal experiences with real estate agents/brokers and heard story after story from our friends about poor customer service from agents. I have never been a full time agent, but have a license and represented myself on a deal last year and did another deal for a friend. On the deal I did for myself, my counterpart was an agent in the top 1% of agents in our state, and I found her to be incompetent, a terrible communicator and overall very hard to work with. On the deal I did for my friend, the buyers of his home were 2 doctors who were very demanding and difficult to work with. The other agent told me at closing this was the most complicated, difficult deal she’d done in 30 years. I didn’t tell her it was the first deal I’d ever done :eusa_clap: It was tough, no question, but if that’s the toughest deal ever I could sell houses with my eyes closed. My friend has no real estate experience, only his disgruntled experience of hiring and firing 4 agents recently while trying to buy a foreclosed condo. He has good business sense (and business genes) and deep pockets. He’d be the $$ and I’d run the real estate portion of the company.
Our plan would be to start small with the brokerage and just hire exceptional agents as we find them. So we would both continue our other businesses full time and do this on the side, until it got built up to a point where we might jump into it full time. Or most likely I would run the business full time and he would be the financial partner.
I’ve tried running both of these opportunities (my current job and this new opp) through MJ’s CENTS model to see how they shake out. My current job is great on most fronts, except control, which effects my income/investment potential. This new opportunity is good, but lacks the commandment of entry, at least in my opinion. I’d be very curious to see if you guys think anything is missing in my analysis. Thanks!
Current gig:NEED – yes, good clean apartment homes always needed; market booming currently; long term demographics favor apartments
ENTRY – very tough to buy 100 unit + buildings, takes mgmt expertise, high amounts of capital
CONTROL – my boss / company has all the control so this FAILS; he decides what to offer on and what not to and my commission is based on buying deals so if he chooses not to buy for a year, I make no commission
SCALE – our business scales well; company owns over 6,000 apartment units, I’m allowed to defer part of commission into deals as part owner of the deals and/or invest my own money in deals (obviously very small % owner)
TIME – It is not hands off for me currently as I am scouting new opportunities, however, as I increase my ownership in deals it will be over time (but slow process)
New opportunity:NEED – In my experience, most real estate agents are not good communicators, not good at customer service, etc. We can be MUCH better. People will continue to buy homes over time. Sales, prices, multiple offers already common in my area and are starting to become common for good, move-in ready homes in most neighborhoods
ENTRY – 90 hours of classroom instruction, pass two exams, hired by an agency on usually 100% commission (our plan is exceptionalism)
CONTROL – I would be 50% owner of the company and own real estate brokerage, high level of control
SCALE – the more solid agents we find and hire, the more homes sold, the more $$ we make; we can also scale into speaking gigs/seminars (we are both great speakers/presenters), website, etc
TIME – with the exception of the initial start up, our time is spent managing the business, not selling homes
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