Regular readers of this blog have probably noticed a shift in our business here at Adaptive.
When I first started writing, roughly five years ago, we were knowledge-rich but capital poor. We knew a ton about buying, renovating, leasing, managing and selling apartment buildings from our experience doing 12 deals between 2008-2012 through Better Dwellings. But we lacked access to enough capital to take advantage of all of the opportunities we could see.
In order to survive this period, we did a lot of brokerage. Initially, it was just me. I brokered all kinds of deals, from condos to duplexes to larger apartment properties. When word of mouth and this blog brought in more business than I could handle, I brought on and trained sales agents to help.
Concurrently, we were doing tons of of fee development projects where we provided our expertise along the whole process of repositioning apartment buildings in exchange for cash fees. This is not a business we loved (because we had no ownership stake in the projects!) but the cashflow was incredibly important to us.
Also concurrently, we began to raise capital, initially in chunks of around $100k for discretionary investment funds and later via joint ventures where we partnered with wealthy families who provided all of the capital required for specific deals.
Along the way, as our assets under management grew, we de-emphasized our brokerage business. The reasoning was pretty simple: We could make more money from one small development deal than we could from overseeing several reasonably active sales agents… and we have the capacity to do 10-20 of those development deals at a time. And, on top of that, the brokerage business caused information leak, because our agents and (some of) our clients learned our model and copied it, competing with us for deals.
But now, we are considering re-building our brokerage business, in a slightly different form. Why?
Well, mainly it’s because we have a bunch of talented people working with us on leasing, etc. who deserve to have wider scope to make money as their skills and experience grow.
But it’s also because, at heart, we’re deal junkies who know a ton about buying and selling real estate in Los Angeles.
More to follow (maybe!).