Part time comm. RE investor - Posted by Chaz Jonson

Posted by Chaz on March 23, 2007 at 13:47:45:

David,
It Depends of the firm. There is no common range.Most use the Lehman scale(google it). One thing about this business is, it’s not cookie cutter no two deals alike and that even realtes to fee’s.

As far as business broerage goes, MnA folks sell businesses, business brokers sell jobs. A big diffrence. Most business brokerage deals are seller financed,that’s because there are not properly structered by the business owner(another monster) and most business listed by biz brokers don’t sell. MnA deals require outside finnacing and and understanding of Private Capital Markets. In all actuallity business brokerage can be a difficult feild to enter as well. Because the business are so small lenders/investors will not provide the capital to do the deal

Part time comm. RE investor - Posted by Chaz Jonson

Posted by Chaz Jonson on March 22, 2007 at 20:16:37:

Greetings,

Currently my business is a Mergers and Acquisitions advisor and I have no desire to change careers as what I currently do is very rewarding. I am considering buying Ray Alcorn’s “The DealMaker’s…For Comm. Realestate”. I certainly have always wanted to own commercial RE but I only want to own it as a part of my overall portfollio. Is it possible to get involved in Comm. RE investing without pursuing it as a fulltime career? I don’t know how to gage how much RE is needed but as far as cash flow is concerned I am looking in the ball park of $25,000 a month is what i would like to earn per month from comercial RE.Credit and cash are no problem’s here. Any direction from the investors on this site would be great?

Re: Part time comm. RE investor - Posted by john

Posted by john on April 13, 2007 at 15:37:47:

I agree with Ray. Do high quality Triple Net Lease properties. If you have to partner up with someone to do your first deal go for it or maybe you start small, and then gradually trade up to the bigger properties. My only recommendation is that you buy property in high foot traffic areas…Since you are not a speculator, you need to build or buy where the demand already is and then sit on that property!

Re: Part time comm. RE investor - Posted by DavidHe

Posted by DavidHe on March 23, 2007 at 09:19:23:

Chaz,
This may be somewhat off track, but I would like to ask some questions about your own career, as I am interested to switch to the M&A field, so it would be great if you can provide me some insight in this industry
1 - what is the nature of your business, eg. helping business looking for acquisition targets?
2 - do you concentrate in a certain industry, or you concentrate in certain size of companies
3 - what is the expected profit in this field…can you provide me some general idea
4 - what background do I need to get into this field and establish my own company?
5 - is CFA useful… or MBA?

I am from Canada, hope you don’t mind provide some suggestion to me.

Thanks so much!!!
David

Re: Part time comm. RE investor - Posted by ray@lcorn

Posted by ray@lcorn on March 22, 2007 at 21:22:28:

Chaz,

Yes, you can defintely be a direct ComRE owner yet remain a passive investor. The triple-net, credit-tenant market is designed specifically to appeal to passive portfolio ownership, and even retains the tax benefits to a point.

However, realize that it is a crowded field, with a ton of capital chasing a finite number of those types of deals, and the competition has driven returns to single digits. There is a lot of product available, in almost any deal size from $500T up. The range of pre-tax, unleveraged returns is 6%-8%, and leveraged returns average 8%-10%. At that level, the income you desire would require about $3mm-$3.75mm equity with normal leverage of about 75%.

The book is designed to be used as a guide in making the necessary decisions about property types, deal structure, financing and tax efficiency. Whether you are full- or part-time, active or passive, these principles will always control the investment parameters and it’s ultimate performance. I hope you will find the book helpful, but if does not meet your expectations there is a 60-day, no questions asked, 100% money back guarantee.

ray

Re: Part time comm. RE investor - Posted by Chaz

Posted by Chaz on March 23, 2007 at 12:57:34:

David, I’ll try to be breif. I don’t want to discuss non RE topics on this forum. Just out of respect for the forum users. If you want to leave an email addy for more detailed info feel free. But you did ask a question and you deserve a response.

First off unless you are planning to work for a MnA firm or investment bank I would advise you to have well over $100,000 in cash reserves. If you want to establish your own firm(and this does not included any employees) it could take you up to 2 years to get just 1 client and another year to complete the deal,so you are looking at 3 years without cashflow!Also, most M&A(MnA) folks have other streams of income because the amount of time it takes to close a deal can be months. I am a business appraiser as well, so this keeps cash coming in monthly so I can keep the bills paid. Some MnA folks are Business Valuation experts or maybe a CPA. The bottom line is to have a cashflow stream coming in until you get enough deals flowing in to a point that you don’t need to do deals anymore. That process takes years to do.

1 - what is the nature of your business, eg. helping business looking for acquisition targets?

I am 100% involved in acquisitions. We M&A folks just say “MnA” because the words flow and people are accustomed to hearing it like that. Most mergers are not successful,beleive it or not. My day consists of finding sellers and matching them with highly qualified/motivated buyers(Private Equity,other businesses,etc…)It’s a extremly detailed and emotional process.It’s so much more involved,but this medium does not allow me to go into details

2 - do you concentrate in a certain industry, or you concentrate in certain size of companies?

$5mill to $150mill in yearly revenues is my “sweet spot”. It’s a good makrket for those that can do deals in that range(known as the middle market)

3 - what is the expected profit in this field…can you provide me some general idea?

I won’t answer this question. Althogh very rewarding,you don’t get into this to get rich.I am not saying this pertains to you,but a lot a of guys hear about all of the Billion dollar deals being done via TV or read some biz journal(CNBC for ex.) and think “WOW,this is were I need to be”, but the reality of it is M&A is not glamorous at all. Most M/A folks will never in their career do a multi-billion deal. Most of the large deals you hear about on TV are a extremly small % of the overall amount of deals being done. You may hear of 12 to 24 large deals(publicly traded companies) a year,but in reality there are thousands(privately held companies) you don’t hear about,and 1 out 3 deals actually close! This is a tough business and it’s not for the faint at heart. YOU MUST LOVE THIS BUSINESS TO BE SUCCESSFUL.So putting that to the side. Ask yourself, do I have a burning passion for the “Art of The Deal”? Without a doubt you must answer… YES! If you can’t, I highly explore other options for your career. It’s not enough to say " I always wanted to do this" this not a hobby!

4 - what background do I need to get into this field and establish my own company?

Industrial psychology/Finance/Accounting. Extremly high level of motivation and self confidence(can you sit in a room of CEO’s and board members and convince them to let you sell thier $100 million dollar company?, Most people don’t have that kind of confidence). SALES AND MARKETING skills are a must. You can be the best financial analyst but if you are lacking in sales( I am not talking about selling like some used car salesman,this is a very high level approach) and marketing,you will have a really difficult time. And also,starting an actuall full service MnA firm may be a strech. Not to say it can’t be done or that you can’t do it. But once you see the compliance issues involved, just that alone will cause you to want to remain a 1 or 2 person shop and work on really small deals (1 to $10mill in revs, which is are buy the way what most of your deals will be anyway). Also, if your working on deals over $53 million in revs a yr, you need to have a Series 7 license. It gets tricky after $53 million. The SEC. gets involved

5 - is CFA useful… or MBA?

CFA is helpful and even the MBA. But not needed. I only have a Bach. of Scince-Finance degree.But I have Wall St. experience going for me. A MBA(from an IVY) is great if you want to work at the big name Wall St. firms.

It was never my desire to spend my career working at the big corporate firms. I could better help you if I knew a little more about your background(work/education) There are ways to get into MnA, you just have to know where to look for open doors. I hope this helps. To be honest I know comm RE is not easy at all, but I think you may be more successful doing it if you are already involved with it,more so than MnA,especillay if you don’t have the background/training. I love what I do but I want to give the most realistic view. Your question is very common, I get it all the time. In MnA there is no “training period”. That being said CEO’s/owners are not going to let a “rookie” sell their multimillion dollar company without the savvy to do it. You get the Savvy by doing it. It’s a catch 22… . I would really think this through, Comm RE is actually a great place to develop the business skills needed. I hope this helps

Re: Part time comm. RE investor - Posted by Chaz

Posted by Chaz on March 23, 2007 at 12:54:05:

David, I’ll try to be breif. I don’t want to discuss non RE topics on this forum. Just out of respect for the forum users. If you want to leave an email addy for more detailed info feel free. But you did ask a question and you deserve a response.

First off unless you are planning to work for a MnA firm or investment bank I would advise you to have well over $100,000 in cash reserves. If you want to establish your own firm(and this does not included any employees) it could take you up to 2 years to get just 1 client and another year to complete the deal,so you are looking at 3 years without cashflow!Also, most M&A(MnA) folks have other streams of income because the amount of time it takes to close a deal can be months. I am a business appraiser as well, so this keeps cash coming in monthly so I can keep the bills paid. Some MnA folks are Business Valuation experts or maybe a CPA. The bottom line is to have a cashflow stream coming in until you get enough deals flowing in to a point that you don’t need to do deals anymore. That process takes years to do.

1 - what is the nature of your business, eg. helping business looking for acquisition targets?

I am 100% involved in acquisitions. We M&A folks just say “MnA” because the words flow and people are accustomed to hearing it like that. Most mergers are not successful,beleive it or not. My day consists of finding sellers and matching them with highly qualified/motivated buyers(Private Equity,other businesses,etc…)It’s a extremly detailed and emotional process.It’s so much more involved,but this medium does not allow me to go into details

2 - do you concentrate in a certain industry, or you concentrate in certain size of companies?

$5mill to $150mill in yearly revenues is my “sweet spot”. It’s a good makrket for those that can do deals in that range(known as the middle market)

3 - what is the expected profit in this field…can you provide me some general idea?

I won’t answer this question. Althogh very rewarding,you don’t get into this to get rich.I am not saying this pertains to you,but a lot a of guys hear about all of the Billion dollar deals being done via TV or read some biz journal(CNBC for ex.) and think “WOW,this is were I need to be”, but the reality of it is M&A is not glamorous at all. Most M/A folks will never in their career do a multi-billion deal. Most of the large deals you hear about on TV are a extremly small % of the overall amount of deals being done. You may hear of 12 to 24 large deals(publicly traded companies) a year,but in reality there are thousands(privately held companies) you don’t hear about,and 1 out 3 deals actually close! This is a tough business and it’s not for the faint at heart. YOU MUST LOVE THIS BUSINESS TO BE SUCCESSFUL.So putting that to the side. Ask yourself, do I have a burning passion for the “Art of The Deal”? Without a doubt you must answer… YES! If you can’t, I highly explore other options for your career. It’s not enough to say " I always wanted to do this" this not a hobby!

4 - what background do I need to get into this field and establish my own company?

Industrial psychology/Finance/Accounting. Extremly high level of motivation and self confidence(can you sit in a room of CEO’s and board members and convince them to let you sell thier $100 million dollar company?, Most people don’t have that kind of confidence). SALES AND MARKETING skills are a must. You can be the best financial analyst but if you are lacking in sales( I am not talking about selling like some used car salesman,this is a very high level approach) and marketing,you will have a really difficult time. And also,starting an actuall full service MnA firm may be a strech. Not to say it can’t be done or that you can’t do it. But once you see the compliance issues involved, just that alone will cause you to want to remain a 1 or 2 person shop and work on really small deals (1 to $10mill in revs, which is are buy the way what most of your deals will be anyway). Also, if your working on deals over $53 million in revs a yr, you need to have a Series 7 license. It gets tricky after $53 million. The SEC. gets involved

5 - is CFA useful… or MBA?

CFA is helpful and even the MBA. But not needed. I only have a Bach. of Scince-Finance degree.But I have Wall St. experience going for me. A MBA(from an IVY) is great if you want to work at the big name Wall St. firms.

It was never my desire to spend my career working at the big corporate firms. I could better help you if I knew a little more about your background(work/education) There are ways to get into MnA, you just have to know where to look for open doors. I hope this helps. To be honest I know comm RE is not easy at all, but I think you may be more successful doing it if you are already involved with it,more so than MnA,especillay if you don’t have the background/training. I love what I do but I want to give the most realistic view. Your question is very common, I get it all the time. In MnA there is no “training period”. That being said CEO’s/owners are not going to let a “rookie” sell their company. I hope this helps

Re: Part time comm. RE investor - Posted by chaz

Posted by chaz on March 22, 2007 at 23:52:00:

Thanks Ray, I will certainly purchase your guide. I am sure it’s going to be a challenge involved in accomplishing my goal, but it could not be any more difficult than the types of transactions I work on now. I am certainly up for the challenge. If I can accomplish my goal over a 3 to 5 year period that would be just fine with me. Although I am only 33y/o’s I am still planing my “golden years” as well as my wealth building strategy. Is 3 to 5 years a realsitic for a goal of $25,000 per month or should 7 to 10 years be more realistic do to the nature of the competition?

Re: Part time comm. RE investor - Posted by DavidHe

Posted by DavidHe on March 23, 2007 at 13:34:43:

Chaz,
Thanks a lot for your quick and detailed response.

For the profit in this industry, can you tell me the general way M&A firm get paid? For example, do M&A firms get paid a certain percent of the selling price of the firm? If yes, what is the common range of percentage? And is it usually paid by the selling firm?

From what you described your work, is it similar to what business brokerage firm do? Or what you are doing is at a higher level?

Thanks again for your time.
David

Re: Part time comm. RE investor - Posted by Chaz

Posted by Chaz on March 23, 2007 at 13:52:56:

My appologies for the typos I was getting a phone call at the time of getting your email. Also I forgot to add, You get paid by the firm/person you are representing(buy side or sell side). And yes, a much more higher level.