Joe has learned countless lessons managing over a billion dollars in real estate and a popular real estate brand. In his BEC2021 presentation, Joe shared these five evolutionary ideas that he has implemented in his real estate business to continue to grow.
1. Protect yourself from the biggest liability you’re currently not paying enough attention to.
For 99% of syndicators, the biggest liability they aren’t paying attention to is compliance. Sure, they work with attorneys to create their investment documents (emails, investment summaries, PPM, operating agreement, subscription agreement, etc.) and entities. They will also ask their attorneys questions as they arise.
The liability is due to the questions that aren’t asked. Since most syndicators aren’t legal experts, they don’t know the right questions to ask their attorneys, which puts them at risk.
Hire an in-house compliance person. This is a legal expert who knows what questions to ask to cover your blindside.
2. Bring the best out of your team.
When you are starting a new company, it is usually just you, your business partner, and maybe a few other people, like virtual or executive assistants. Job duties aren’t very defined since everyone is wearing a lot of hats.
Eventually, as you begin to grow, you bring on more team members and roles and responsibilities become more defined. This person is responsible for asset management, this person for investor communications, this person for underwriting, etc.
When it is just you and your business partner, compensation is usually tied directly to the number and size of deals completed. But once you become more like a company and bring on salaried employees, how each team member’s performance impacts the success of the business begins to blur. Also, their compensation isn’t directly tied to the number or size of deals. As a result, what motivates you and your business partner/s isn’t the same thing that motivates your salaried employees (i.e., the number and size of deals).
Create a single KPI for each team member. That way, they know exactly what is expected of them and are motivated to exceed that KPI in order to receive a bonus.
3. Enjoy better deal flow, deliver better and more stable returns, and create more sanity.
Most, if not all, syndicators start off raising money for individual deals. They usually have a list of passive investors who’ve previously invested in a deal or expressed interest in investing. Once a deal is identified, the opportunity is presented to this list. While the syndicators secure commitments, they work with their attorneys to create the deal documents and form the entities. After the deal is purchased, the search for a new deal begins, and the process beings anew.
There are a few drawbacks when it comes to scaling a business by raising money for one deal at a time. First, it limits your deal flow, because you are usually hyper-focused on a unique asset class in a single market. Second, it is riskier for passive investors, because their entire investment is used to fund a single opportunity. Lastly, there is more pressure on you, because of the race to raise all the money between contract and close.
Create a fund instead of doing single asset purchases. Creating a fund will increase your deal flow because you can be more flexible with the types of assets you target. It generates better and less risky returns because funds are spread across multiple deals and markets and less capital sits idle. And it creates more sanity for you, because the money is committed before a deal is identified.
For more on the advantages of a fund, click here.
4. Get better results on your thought leadership platform and in your commercial real estate business.
Something we focus on a lot at the Best Ever brand is the importance of a thought leadership platform. It is one of the best ways to build a reputation as an expert in your industry, which increases your credibility and ability to attract passive investors.
When you are first starting out as a syndicator, you are likely the main (or only) source of content. You are writing, editing, and posting the blogs. You are planning and hosting the meetups and conferences. You are scheduling guests, recording, editing, and posting the podcasts. You are the owner of one or more social media accounts. However, as your brand begins to grow, it can become a full-time endeavor. Eventually, you will get to the point where the time spent on maintaining and growing your brand is taking away from your focus on the real estate business. Either the brand suffers, or the business suffers.
Transition your thought leadership platform to other people once it matures. This is more than just outsourcing editing. This means having people who create the content, as well as an editorial director to manage all the moving pieces. They will focus on growing your brand, so you can focus on growing your real estate investing business.
5. Overcome the success paradox.
Feedback from others is one of the best ways to improve and become a better real estate entrepreneur and person. However, the more successful you become in business, the less likely you will receive constructive criticism from your team members.
Ask three people in your circle to provide you with honest feedback. Also, identify an event that occurred at least a month ago that didn’t go according to plan and think about how you were responsible for it taking place. Lastly, create a Google Form and ask your team members to provide you with anonymous feedback.
The Five Billion-Dollar Business Ideas:
Number 1: reduce your liability by hiring an in-house compliance person.
Number 2: set clear expectations and provide motivation for your team members with individualized KPIs.
Number 3: create a fund.
Number 4: focus on your investing business and hire others to maintain and grow your thought leadership platform.
Number 5: find three trusted colleagues to provide you with feedback, analyze past events, and ask for anonymous feedback from team members.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.