Regular readers know that Adaptive has a small but very active brokerage business. Figured I’d take the time today to explain where it came from and how it works.
Back when I was buying and renovating buildings through Better Dwellings, my first real estate vehicle, I started to get frustrated with the way the deals were being done. I would scour the market for a deal and then have to call a friendly broker up to get him / her to write on it for me.
After a while, it started to feel ridiculous to be handing brokers tens of thousands of dollars in buy-side commissions when I was doing all of the work. So, I went and got my license.
I did a ton of deals through BD and made all kinds of mistakes, many of which are documented in this blog. But I got very, very good at brokerage, particularly on the buy-side.
As BD was winding down in 2011-12, some friends came to me to ask if I would help them buy a home (not an apartment building). I wasn’t exactly flush with cash at that point, so I said yes. I did that deal and then several more. Those were the first deals I ever did for other people (in other words, my first as a real broker).
Eventually, so many people started asking me for help buying buildings that I could not service them all, particularly since I was by that point investing Adaptive Realty Fund 1 and also starting to work on fee-for-service projects.
At around this time, Marcus McInerney contacted me via the blog. Marcus had done a bunch of his own rehab deals in the Echo Park area and was clearly bright, honest and ambitious. We agreed that he would be the perfect person to help some of the people who were contacting me looking for help.
Marcus joined Adaptive as our first agent and he and I worked very closely those first six months or so to teach him our methods. He did so well that we brought on more agents, all of whom I have personally trained and whom I continue to supervise closely.
So, now, when someone contacts me looking for help buying an apartment building, here’s what happens:
- First, we spend a bunch of time discussing the prospective client’s resources, goals, expectations, etc.
- Then, I go away and consider which of the agents would be the best fit for that specific clients;
- If the client agrees with my suggestion, I make the introduction and then ensure that the agents gets off to a smooth start with the client
- As the client makes offers and, eventually, gets into contract on a deal, I am in daily contact with the agent (and, sometimes, the client) coaching, giving advice, and making introductions to relevant service providers
- Finally, if / when the deal closes, Adaptive takes 30% of the commission earned by the agent (obviously, the agent keeps the rest)
Right now, the brokerage represents a tiny fraction of Adaptive’s revenue. But, I love the work. And, over time, as we find really special people and bring them into the fold, I expect the business will grow into something more substantial.
But the only way from here to there is to keep helping smart clients do smart apartment deals. So that’s what we’re doing.