Real Estate Investment Companies That Prepackage Investment Properties
A Potential Exit (Or Entry?) Strategy Model
In the early 1990's I interviewed with many different real estate investment companies as I pursued my real estate career ambitions. And when I say "different", I mean they were different in more ways than just being separate companies. I talked with large property management firms, commercial real estate agents, land and real estate developers, land assembly companies, etc. But there was one real estate investment company that really peaked my interest.
I had just graduated with an MBA in finance, and I was ready to make my mark in the real estate investment/development industry. To be honest, my original plan was quite typical of many entrepreneurial types. Work for someone else, gain experience, then set out on your own. Luckily (in hindsight) that didn't happen and I ended up starting my own commercial real estate investment firm right away.
During the process of interviewing with these real estate investment companies, I met with one particular organization that had a very unique business plan. They bought existing apartment properties, cheap, turned them into condos, renovated them to look like new, and then sold the individual units to "real estate investors". Now, I know the concept of a condo conversion isn't exactly unique, but the way that they packaged the finished product up (including property management, financing, etc.) and sold it to investors was unique in my opinion. This was about 15 years ago now and I believe this concept is quite a bit more popular today.
Unfortunately for the end investor, they pay full retail value for the property and only profit if the property appreciates due to market pressures. The investment companies that sell these developments typically market them as positive cash flow investments, but I wouldn't count on it.
The big picture sales pitch goes something like this. Instead of buying one ten unit apartment building in one city, you can buy 10 individual apartment condos spread across the country (or the world for that matter) and diversify your risk. Sounds good in theory, but I would still recommend buying an apartment building (the correct way of course) over this investment plan any day.
As far as the job went, it turned out they were looking for people to sell the end product to investors, while I was more interested in participating in the acquisition of the properties. We went our separate ways. That real estate investment company ended up going out of business a few years later (I'm not sure why exactly) while I went on to start my own commercial property acquisition and management company which is still active today. I suppose I made the right choice in hindsight.
What's The Main Thing I Learned From These Real Estate Investment Companies?
Answer: Add value.
In order to be truly successful in commercial real estate you must know how to add value to a deal. And many times it is the ability of the investor (ie. you) to spot "hidden" value in deals in order to determine whether or not it is in fact a "good deal". This ability comes form experience and education. I can help you here with getting started on the education side, but gaining the real life experience is up to you.
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