The hardest thing about entrepreneurship, real estate, or anything else worth doing:

You have to be able to look at incomplete information...

Or a complicated problem without a clear-cut solution...

And make a good decision on which way to proceed.

A thread 👇👇👇

If you're new to real estate twitter this is a must-read.

A thread on how most real estate folks structure deals with outside investors.

Most GPs utilize the "preferred equity" structure when they raise money from outside investors. They "syndicate" deals.

Here's the basics:

The person (or team of people) putting the deal together is the "sponsor". Also called general parter. Referred to on twitter as the GP.

They find the property, do all the work, hire the management company and take fees. They often co-sign debt and always secure the financing.

The investor is generally passive, doing no work and putting in cash. This is the "limited partner". Referred to on twitter as the LP.

They don't co-sign debt. They simply read reports and ask the sponsors questions and cash checks every month (if the deal is going well).

There are two equity classes.

"Preferred equity" belongs to the LPs. Cash talks, so this is a higher class of shares. They are first in the "capital stack" behind the debt (bank loan).

"Common equity" belongs to the sponsor. They are generally last in the capital stack.

Sponsors generally co-invest. That means they hold both equity classes. A 10% co-invest is standard.

That means the GP has skin in the game. His 10% co-invest makes him both an LP and a GP.

I’ve gotten a lot of bad advice in my career and I see even more of it here on Twitter.

Time for a stiff drink and some truth you probably dont want to hear.

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College isn’t worthless for everyone.

All of the successful folks who tell you college is worthless went to college.

What does that tell you?

It’s not about the learning, though.

It’s about growing and learning how to sell yourself and your ideas.

Miami isn’t the next tech hub.

It’s surrounded by a swamp.

Construction costs are insane because of hurricane codes. Vacant land doesn’t exist.

Property insurance has risen on average 20% per year for 5 years.

Plus it’s hot AF. Ever been there in July?

Starting a business isn’t right for everyone.

95% of folks are better off getting a job.

It’s hard AF. Decisions are critical and plentiful. Risk is for real. Stress can be crippling. Delegation can be impossible for poor communicators.

Most folks don’t have what it takes.

Technology isn’t as far along as the media makes you think it is.

We’re 5+ years away from autonomous vehicles.

Alexa still can’t play the song I want 25% of the time let alone make decisions and “learn”.

Robots fall on their faces when they aren’t on perfectly flat ground.

Think slow, work fast.

A thread on entrepreneurship and what folks don't understand about opportunity.

It comes in waves.

Long periods of time are spent blocking and tackling and going through the motions.

Short periods of time can change your life.

Don't get me wrong, successful folks are consistent. They show up. They stay focused for years.

But...

Ask them to point to a time period where they made most of their money and they'll direct you to a time span between 6 months and 2 years.

When the opportunity arose and they seized it.

They built something that continues to create value. They built an asset that continues to create cash.

They seized an opportunity and did work over a short period of time and they harvest the fruit for years or generations.

Too many folks set the bar way too high with entrepreneurship. The next million dollar company. The next sexy startup.

Forget all that.

Why isn’t the goal to build something that pays you good $ every year and requires only a few hours of your time per week to make it happen?

When you start a business your goal shouldn't be to get an article in TechCrunch or raise VC $.

It should be to make $1,000 as quickly as possible with as little risk as possible.

Trade your time for money to test an idea.

Speaking of ideas.....

Business ideas are OVERRATED.

The only thing a brand new, world-changing idea will get you is an interesting Twitter bio and very shitty odds of success.

We only hear about the unicorns like Jobs and Musk.

The successful entrepreneurs in your town all have something in common...

They did common things uncommonly well.

They did something that someone else was already doing and they just did it a little bit better.

Young entrepreneurs hear the same advice over and over again...

Change the world. Do something you're passionate about. Thing BIGGER.

That advice is BULLSHIT.

Shoot for the stars and the odds you'll end up with a JOB.