Switching from brokerage to investment?
Any tips? I work for one of the big 4
[{"id": "eyqra1z", "text": "No tips- but interested to hear from others", "replies": [], "depth": 1}, {"id": "eyqv3b2", "text": "You have to drop the brokerage mindset that encourages you to stretch assumptions when analyzing an asset. This can become almost subconscious but a good buy-side professional is obsessed with downside protection and stress testing before acquisition.", "replies": [{"id": "eyr4i9j", "text": "This right here, keep the optimism but lose the rose colored glasses.", "replies": [], "depth": 2}, {"id": "eyr9jkx", "text": "this. never stretch an assumption farther than you can verify otherwise you will be left holding the bag. i hate seeing pro formas from brokers about \u2018PGI based on market rents and capital investment\u2019 without actually doing any research on the building or the market. Sure you could maybe get those rents, but how much more is it going to cost me based on the state of the building? and why are you pricing the building on those rents now vs when i get them after putting in CapEx? you have to remember that the extra money you once wanted somebody to pay for the asset because it went to your pocket is now money that you can\u2019t spend on improving/maintaining the property. Buy the data, not the story\n\nI watched this happen with my the office building my dad is in earlier this year. 60yr old 4000SF Class C office building in a desirable market but has 30yr of deferred maintenance, is severely under-parked and if you tear it down, due to zoning changes you\u2019ll be able to build less than 30% of the original square footage. Was cash flowing roughly $90k annually with no management fee or DS. Broker came in and looked at all the other office space in the area rent and said \u2018if you rent it all at market and reconfigure the units you could get $500k annually. Asking $3.5M\u2019. I looked at it and laughed as well as plenty of my friends and other investors. A tenant rep (bruh.....ur a broker w/ a fancy name) came in a paid full ask. Three weeks later my dad asked me to look at his new lease he was being asked to sign....raising rent 300% and going NNN with the only new provision being \u2018re-striping the parking spots\u2019 is a farce and i let the new owner know that before informing him that my father would be moving to the Class A office space down the road with ample parking that was asking 75% of his rent and Gross. I asked him for his investment theory on the building and he said he didn\u2019t have one. I then asked him if he really thought he was going to get market rents at the drop of a hat and he said \u2018well i planned on putting money into the place but with the purchase price being what it was there\u2019s not much I can do that will have any real impact so i figure i\u2019ll just get some working capital from rents and start reinvesting it back into the place.\u201d The building has been vacant since March, thanks to a broker being good at his job and a \u2018tenant rep/advisor\u2019 buying the story rather than the data\n\nThe biggest difference you need to understand is risk. As an investor, you are exposed to every risk imaginable when it comes to the asset and it\u2019s your ass on the line if it goes south. As a broker, i assumes you\u2019re only concerned with the sale and if that doesn\u2019t go through, oh well....on to the next one. Identifying your level of risk tolerance early on will help you when analyzing deals and working through assumptions.\n\nSorry for the rant. I have a notable chip against brokers due to most of my interactions with them and am happy for those who want to join the other side", "replies": [{"id": "eyre7td", "text": "Sounds like a bad buy but to be fair to the broker, it\u2019s the purchaser that bought the unbelievable value-add story and is probably going to pay for it now. Brokers get a lot of (often justified) hate but they have a tough job and even unscrupulous brokers will sometimes uncover a real opportunity that others would have missed with a conventional mindset.", "replies": [{"id": "eyrg7kz", "text": "I give the broker full credit on this one, he got the family that owned it an extra $1.5M+. The guy who bought it was sold on the name of the city it\u2019s in, not the actual asset. it\u2019s a bummer all around though because 4 small business had to relocate after being there for 15+ years (my father was there for 22) and the building is now empty. It has potential but it needs the right team (value add/rehab developer) and needed to marketed that way instead of being sold as investment grade on a phony pro forma assuming a sub 2 cap\n\nBrokers have a tough job because they are at the mercy of everybody else. nobody selling, don\u2019t eat. nobody buying, don\u2019t eat. it\u2019s in their best interest to create transactions, regardless of wether or not that\u2019s what\u2019s in the best interest of the owner/investor. and when your goal is to complete a transaction vs the long term success of the asset, of course you\u2019ll look over the blemishes and juice the numbers and say whatever you have to for the sale to go through\n\nI\u2019ve found that those \u2018real opportunities\u2019 only exist if you get there before the broker or after everybody else has told said broker to kick rocks and you\u2019re the only one still at the table", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "eywelr6", "text": "Very good point. You have to underwrite much more conservatively. The best investment shops say no to a lot of deals. As they say, you make your money when you buy.", "replies": [], "depth": 2}], "depth": 1}, {"id": "eyskjl2", "text": "Brokers tend to focus on the past (sales and lease comps) investors need to focus on the future.", "replies": [], "depth": 1}, {"id": "ez5pf7e", "text": "YES .... put yourself into the buyers shoes (and I mean REALLY pretend it's your money and your deal) and anticipate everything they are going to need.  Know the most important numbers.\nRun buying scenarios over and over, until you feel comfortable enough to buy an asset for yourself.  That's the info a buyer will want.  Also, like everyone else has said \"be opportunistic but dump the best case scenario BS\" \n\nYou should have been doing this anyway on the brokerage side.  You have no idea how many brokers I come across that have no idea what is important to the investor and it immediately becomes crystal clear that they are not an asset in the negotiations.  Don't be that guy !!!", "replies": [], "depth": 1}]