How to start and make a development & investment firm fastlane?

[Tyorke]

I work for a real estate development and investment firm in Manhattan...I'd like to own my own firm one day, preferrably before I'm 35-40. I'm 30 right now so I figure I have 5 years to continue learning, gaining experience and making all the necessary contacts.

I think there is a need for in the market for new residential apartment development and also the acquisition and rehab of exisiting apartment buildings.

1) How does someone start a firm and do their own deals in a difficult market like NYC?

2) I don't see how to make this a true "fastlane" venture without having to be present all the time. Any advice?

Thanks,
Tyorke

 

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[djs13]

Re: How to start and make a development & investment firm fastlan

2) I don't see how to make this a true "fastlane" venture without having to be present all the time. Any advice?

Welcome to the forums. I can't really help you with the real estate side of things. But as far as creating this idea into a business versus a self employed job, you should check out a book called "The E Myth."

Good luck!

 

[Tyorke]

Re: How to start and make a development & investment firm fastlan

Thanks...I've actually read "E-Myth" and what a great book it is. I'm concerned because I've seen many, MANY real estate businesses that are mainly "systems" - big home builders, large development firms, etc take a huge beating and some go out of business this past year.

The real estate business is very cyclical and it seems to me having a large infrastructure makes it difficult to weather downturns.

Not sure how to set up a system as just one guy - or maybe with a few partners.

 

[andviv]

Re: How to start and make a development & investment firm fastlan

Maybe your expectations don't meet reality due to the location?

I don't know that much about the NYC market and I have only the perception of dealing with politics, unions, excessive regulation and high costs... that sounds to me like the type of process/project that must be tackled by big organizations with big capital. You idea of a one-man shop may not work in that location. There is a reason why Sinatra sang "if I can make it there, I can make it anywhere", right?

Again, all of my comments are pure speculation, I have NO CLUE about the real conditions of that market or how the developers actually do it over there...

 

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[Sid23]

Re: How to start and make a development & investment firm fastlan

Interesting post. I went back and read your introduction http://www.thefastlanetomillions.com/your-goals-your-fastlane-plan/15359-need-advice-manhattan.html and it seems we have a lot in common. Granted, I'm on the other coast, but we seem to be in similar situations.

I'm not 100% sure what to tell you because I am struggling with the same dilemma myself. Andviv has a point where starting a firm in a market like NYC is going to be difficult. More difficult than say a firm in Boise, Idaho. Both have their challenges, but the way I see it is that it is easier to get a firm started in Boise, but over the long term you would probably make more money in NYC in many less deals. That brings up holding costs, which are inhibitive for many in NYC. You might make $5mm on a deal, but you also have to be able to hold a property through the entitlement process, design process, construction process until sell-out or lease-up. In my area, that is usually 5-7 years from beginning to end. Lots of holding costs and lots of time for things to go wrong.

In a smaller area, my guess would be you could do 2-3 projects in the time it takes to do 1 in NYC. But I may be wrong, I've never tried elsewhere.

Looking forward to more responses.

 

[KyJoe]

Re: How to start and make a development & investment firm fastlan

You are going to start small and work your way up. I know that sounds simplistic, but these all or nothing deals usally leave you with the nothing part. If you can get a "money man" to partner then you could move faster, although I prefer to be smaller and not take on any partners.

 

[rsant]

Re: How to start and make a development & investment firm fastlan

I work for a real estate development and investment firm in Manhattan...I'd like to own my own firm one day, preferrably before I'm 35-40. I'm 30 right now so I figure I have 5 years to continue learning, gaining experience and making all the necessary contacts.

I think there is a need for in the market for new residential apartment development and also the acquisition and rehab of existing apartment buildings.

1) How does someone start a firm and do their own deals in a difficult market like NYC?

2) I don't see how to make this a true "fastlane" venture without having to be present all the time. Any advice?

Thanks,
Tyorke

Tyorke,

Although I have no direct experience in finance or re, commercial property and rehab is something I intend to dip my feet into when the time is right.

In regards to your #2.

It's definitely a fast lane initiative, but I personally don't always associate "fast lane" with a project being "automated" 100% of the time. I think this is one of those things. In regards to not being "present", that's usually the case when your on top.

Are you looking into being an actual developer like kushman/tisch, spire? (sp?)

Also i am not trying to be pessimistic in anyway but when your competitors are those such I mentioned above, I would personally try to break the idea down smaller. You know and I know that you can turn to any site of development in this city and chances are you will see one of those names on the scaffolding's, permits, etc. They are monsters and only spreading outwards to the surrounding boroughs.

If your heart is in rehab, maybe you should go outwards in. Start from queens, brooklyn, bronx and go inwards.

If you are looking into breaking this down into a more specific niche in regards to some type of "automation" for this industry, let's brainstorm and talk. I also live here in ny, ready to listen and eager to input ideas.

-ray

 

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[Kontis]

Re: How to start and make a development & investment firm fastlan

Why don't you start with the boroughs surrounding NYC; i.e. Brooklyn & Queens.
With $1.5-3m you can purchase a nice mixed-use property that will give you a NOI of $100k+ depending on the lease's that were structured if you acquire a fully leased property.

The only developers making moves right now are the ones who have been holding property & have a lot of equity to build with. Right now NYC is in a buy & hold state unless you have tons of capital and have the patience to find a good deal. Hot areas in Queens where development sites are a dime a dozen are some area's of Astoria & Long Island City (consists of old factories/warehouses that have recently undergone re-zoning). As for Brooklyn you can check out Park Slope, Coney Island is up & coming, Green Point, Williamsburg.

From what I have been seeing, my opinion is affordable housing is in demand and will be in demand. i.e. college kids and single parent households.

 

[Jito]

Re: How to start and make a development & investment firm fastlan

Why don't you start with the boroughs surrounding NYC; i.e. Brooklyn & Queens.
With $1.5-3m you can purchase a nice mixed-use property that will give you a NOI of $100k+ depending on the lease's that were structured if you acquire a fully leased property.

The only developers making moves right now are the ones who have been holding property & have a lot of equity to build with. Right now NYC is in a buy & hold state unless you have tons of capital and have the patience to find a good deal. Hot areas in Queens where development sites are a dime a dozen are some area's of Astoria & Long Island City (consists of old factories/warehouses that have recently undergone re-zoning). As for Brooklyn you can check out Park Slope, Coney Island is up & coming, Green Point, Williamsburg.

From what I have been seeing, my opinion is affordable housing is in demand and will be in demand. i.e. college kids and single parent households.

When you say "affordable housing", do you mean government subsidized housing?

 

[Kontis]

Re: How to start and make a development & investment firm fastlan

When you say "affordable housing", do you mean government subsidized housing?

No. I am referring to the landlords who charge top dollar and won't give anyone a break. For example, We own a 3-family home near a private university. Many of these student's got scholarships or partial scholarships and pay the difference to attend. The new freshmen that attend the university have priority over the upper-classmen when it comes to housing. Thus, the junior's, seniors, etc. are forced to move off campus or rather live off campus because of the rules, crappy dorm rooms, or whatever reason they may have. There are many of these apartments sitting vacant for months after months because of firm pricing that is not within reason. Landlords advertise new luxyrt apt's that are $#!&holes that not even a broke college kid would live in. I have gone out to see what is available and how to price our apartments and they are no more than renovated rooms with white sheetrock walls, cheap kitchen appliances that you can pick up from any low-end retail outlet and cheap wood flooring and carpeting. Basically the apartments are livable but not affordable to them nor would anyone in their right mind pay this price to live here. BTW, do not offer more than a 1-2 year lease.
We on the other hand, have a renovated 3 family, 1 entrance with master staircase leading up to 3 floors each with door on the landing for that floor. All renovated bathrooms and modern kitchens with quality furnishings (got to love being an industrial real estate broker and working with manufacturers). The bedrooms get painted bright colors which makes them seem appealing and trendy with a decent carpet. We include the utilities and give them a reasonable price. Most 2 bedrooms range from $1350-2,000 depending if the utilities are included, most the time they are not. We have a 2 bedrooms with a living room, EIK - modern kitchen approx. 10 years old with new appliances, 1 bath (brand new everything except bathtub), 2 bedrooms with wood paneled walls that have been painted and new commercial carpet. One of our tenant's needed a 3 bedroom and had absolutely no luck finding any 3 br apartment within $2,000 anywhere near the school. The tenant's were stand up individuals, decent money for college kids, parent's willing to give extra months of security deposit and guaranteed a rapid move-in. So we used the living room as a third bedroom. We rented it out for $1600/month all inclusive... sounds cheap, yes. Not good for landlord? great for landlord. Tenant's guarranteed to stay for 4 years minimum with rent increase after the 2nd year. This saves up the move-in/out period and loss of 1 month's rent during this transition period, etc.

Basically in a nutshell what I am trying to convey is that many NYC landlords are greedy money hungry individuals. I am not saying this is a bad thing but they sky-rocket, not appreciate the value gradually but sky-rocket the price of apartments that are predominately occupied by college kids and young professionals who are just starting out which causes them to live check to check.

Sorry if I hi-jacked the thread. I just wanted to give a vivid example of our current market in some areas of Queens. Not all tenant's are good tenant's or decent individuals but if you are a decent landlord who is not all about ripping people off and making sure you get every last dollar that you are asking (if you are already $200 - 500 over market value) then you will have many inquiry's from dozens of quality tenants.

 

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[RealOG]

Re: How to start and make a development & investment firm fastlan

No. I am referring to the landlords who charge top dollar and won't give anyone a break... then you will have many inquiry's from dozens of quality tenants.

Dang dude, you sound bitter! My sis lives in NYC too and there are many expensive apartments out there. She lives in East Village and her place is pretty run down, yet pays huge for it.

Thats capitalism. Face it, the market dictates what people are willing to pay. People dont pay more than what something is worth to them when they buy it.

Imagine you were the landlord and could get $500-$700 more per unit on your rent. Would "give a break" to these folks just to be nice? What if it was needed to pay your mortgage?

 

[Jito]

Re: How to start and make a development & investment firm fastlan

Thats capitalism. Face it, the market dictates what people are willing to pay. People dont pay more than what something is worth to them when they buy it.

Without getting too far off topic, I would say part of the problem is rent control. And rent control is anything but capitalism.

 

[Kontis]

Re: How to start and make a development & investment firm fastlan

Dang dude, you sound bitter! My sis lives in NYC too and there are many expensive apartments out there. She lives in East Village and her place is pretty run down, yet pays huge for it.

Thats capitalism. Face it, the market dictates what people are willing to pay. People dont pay more than what something is worth to them when they buy it.

Imagine you were the landlord and could get $500-$700 more per unit on your rent. Would "give a break" to these folks just to be nice? What if it was needed to pay your mortgage?

No not really. If they needed it to pay their mortgage why is the apartment sitting on the market for 6-9 months rather than 1-2 months? I do believe in a profit otherwise there is no reason to be in this business or any business for that matter; but they are driving up prices and having vacant apartments flood the market. But who am I to complain, they just make me look better and keep me at 0% vacancy
Cheers to free market value! :banana:

 

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