Last fall I spoke to a real estate class at my alma mater, the University of St. Thomas. A handful of students emailed me afterward, seeking advice on starting their own real estate firm. Their biggest hurdle is finding investors; even if they found a great deal, they don’t have a network of high-net-worth individuals needed.

In reality, there are countless examples of real estate founders who started with no network and created massive real estate firms. (I can’t say that I am one of those stories to be honest, I was fortunate to have a family friend invest $1.5M with me on deal #1, The Pineview Townhomes.) In today’s newsletter, let’s explore the most common paths to starting a real estate business with no wealthy family or connections to rely on.

Seek Out A Job That Prioritizes Experience

For a 20-something with big entrepreneurial ambitions but no access to investors or $, I recommend applying for a job in real estate. Be very picky about what type of role you take on. The goal is to work at a firm that can offer you as much real estate investing experience as possible. At this point in your career, experience is worth far more than the money you will make.

You want to pick a job that places you deep in the action on large real estate deals. The goal is to witness how the top operators find, underwrite, and transact deals. In addition, there’s an art to choosing which markets and neighborhoods to invest in, and you want to learn the art. Syndicated real estate deals are complex, and before you start your firm there is a ton to learn including investment structures, loan options, construction management, property management, etc.

What specific jobs should you seek out? When I assess the largest real estate firms in the Twin Cities market, the founders often started in one of these 3 roles:

1. Commercial Real Estate Broker

   Brokers get constant exposure to the top operators in the market, and they have massive earning potential. Brokers are frequently underwriting deals and discussing deal metrics with very smart investors. They have discussions daily with experts about market conditions, debt availability, and investment strategies. Lastly, real estate brokers establish valuable connections with buyers and sellers that can evolve into future partners or investors.

2. Analyst or Asset Management

   Analyst or Asset Management positions at established real estate firms can offer tremendous experience. Bonus points if you work your way up the ladder to higher-level roles in the firm. Make sure you choose a company that is closing multiple deals a year, executing on their business plan, and receiving glowing reviews from investors.

3. Real Estate Attorney

   Whether it was their initial plan or not, real estate attorneys often become great real estate entrepreneurs. They work closely with buyers and sellers in large transactions, gaining investing experience along the way. During law school and amongst colleagues, they also develop extensive networks of potential investors and partners.

Time To Leverage That Experience

Now it’s time to take the next step. You chose a career path carefully, and after 5-10 years in the trenches, you have the experience and pedigree investors want to see. Working alongside top operators has set the example of how a dynamic real estate firm should be structured and conduct business.

You started with no network but now have formed many connections over the years. It’s time to leverage that network for investors, partnerships, financing, etc. Build your investor list by reaching out to your favorite buyers, sellers, lenders, attorneys, etc. You’ve gained their trust over the years… bring them a juicy enough deal and you’ll be surprised how many want to invest.

PS: If you are employed at a real estate firm that offers equity, don’t overlook the prospect of building your fortune with them. Employees who receive equity in each deal can build incredible wealth.

Final Thoughts

Establishing a successful real estate firm without an initial network is entirely achievable. Aspiring real estate entrepreneurs can build the necessary skills and connections by seeking out roles that provide direct exposure to high-level deals and key industry players. Whether you choose to work as an analyst, broker, or in another related field, the key is to immerse yourself in the industry, learn from the best, and leverage every opportunity to form relationships. Over time, these efforts will pay off, enabling you to attract investors, identify profitable deals, and ultimately create a successful real estate firm.

Ben Michel - Principal
Ridgeview Property Group

Market News

ECB Cuts Interest Rates: Will the U.S. Fed Follow Suit?

According to an article by CNBC, the European Central Bank (ECB) announced a reduction in its key interest rate to 3.75% from 4%, citing an updated inflation outlook and the effectiveness of its monetary policy. Despite lingering inflationary pressures, the ECB considered it appropriate to ease monetary policy after holding rates steady for nine months. Markets had anticipated this 25-basis point cut, marking the first reduction since 2019. Economists predict one more cut this year.

ECB President Christine Lagarde stated that the decision was supported by all but one national representative and highlighted that future decisions would be data-driven, focusing on the overall inflation outlook and the effectiveness of policy transmission. Lagarde highlighted the reliability of ECB staff projections and the significant reduction in inflation from its peak.

Italy’s economy minister expressed hope for further rate cuts following this initial reduction. Other central banks, including Canada, Sweden, and Switzerland, have also recently cut rates. Hopefully, the U.S. Federal Reserve will follow suit.

CNBC (2024, June 6th). "European Central Bank cuts interest rates for the first time since 2019” https://www.cnbc.com/2024/06/06/european-central-bank-heads-for-first-rate-cut-since-2019-live-updates.html

Tips & Tricks

Terms:

Analyst Role: Real estate analysts research and evaluate conditions in the commercial and/or residential real estate industry. Industry conditions you may research and analyze include data on local, regional, national and/or international sales, acquisitions, trends and occupancy.

Asset Management Role: An asset manager oversees and strategically maximizes the value of a real estate portfolio. They assess the financial viability of real estate assets, formulate effective investment strategies, and implement measures to secure long-term profitability. Additionally, asset managers oversee property maintenance, tenant relations, lease agreements, and risk mitigation, ensuring that assets are well-maintained and continue to generate consistent returns.

Thank you for reading and your interest in Ridgeview Property Group. If you want to read more newsletters like this, click “Subscribe to The Ridgeview Report”. To invest alongside us in multifamily properties, click “Invest With Us” to sign up for the investor portal.

 
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