New to investing and hitting the ground running...

[Nicolas Castellanos]

Hello all,

My good friend/business partner and myself currently run a business with 50+ employees and have been stashing away cash over the last couple of years to support a venture into franchising or real estate. Due to several factors, the biggest being that we already have relationships with attorneys, bankers, mentors in the business, appraisers, insurance brokers, and contractors (the business we run has electrical and general contractors), we have decided that real estate is the ticket.

We have already worked with our attorney and CPA to get an LLC rolling and we submitted our first offer yesterday. We are happy where we are at, but we are taking a few leaps that are advised against when reading books, listening to podcasts and doing any basic beginners research on this topic.

Here are the areas of concern:  The property that we have decided to pursue is outside of our state  AND the property we have decided to pursue is much larger than what we expected to be our first.

Reasons for making this choice despite conventional wisdom: The property is out of our state of residence, but is in a location that is near a long-term job site where our business has a significant presence, hence, we will be spending lots of time in this area regardless. The other factor is that we have some "insider information" that relates to the project we are working on in the area. Basically, we know there will be an influx in workers who will need housing, and the property we have identified is "the only game in town" in regards to proximity. The fact that the numbers pencil out extremely well, even when being hyper-conservative, and that the current owner is inclined to make a deal through negotiations has made this a situation that would be hard to pass up. All the costs to get going on this property would require less than half of our available cash, but could represent a significant COC return (20%+ using conservative numbers). The kicker is the fact that this is a 14-unit property with a separate building that has 16 storage units. My father is a retired appraiser who used to be the chief appraiser for a bank and he oversaw the commercial division and my partner's father invests in real estate and has had/managed properties since my partner was a child.

Despite some of the areas of exposure we believe this is a calculated risk and seems to show a greater potential than what lies in our "home" market (northern CA).  I'm not looking for anyone to "talk us off the ledge", but just sharing our story so we can document parts of the journey and network with other BP members.  We have a lot to learn, some of which will come in the form of hard lessons, but we have built a successful business using several of the same principles and we believe we can find success in this endeavor.

I can't wait to circle back to this thread to confirm that the offer was accepted and then we can iron out the details and start working on implementing the processes and policies, as that is where we thrive!

Again, just wanted to share and join the community here on BP!  Feel free to ask any questions etc.