Growing a businesses and harvesting cashflow!

Maricela Soberanes Wednesday November 23rd, 2022

How is syndication related to the harvesting process? We would like to compare these two processes since they both require preparation/planning and undergo similar growth stages.

The Multifamily acquisition process is a type of business venture. Each step of the process has a direct effect on the other. Each phase of the process has its challenges. This is why we do ongoing business training along with Apartment syndication mentorship. The method of growing such a business can be compared to the harvesting process. Mastering both strategies is needed to be the best custodian of our investors’ capital.

Along the way, we prioritize educating our investors to help them understand that when they invest in Multifamily, they are investing in a business. A business that happens to provide housing as a service.

To keep the business profitable, the housing business needs extensive support from vendors and third-party companies that we (the general partners, AKA sponsors) coordinate. The end consumer is the residents, and our investors are our partners. As you can see, each party involved plays a critical component in the business.

The nature of this business is to prepare and plan for the step ahead. The cycle of the business moves fast and allows little time for mistakes. Most mistakes have immediate and future consequences if not identified and corrected promptly.

Apartment syndication needs to follow processes to be fruitful and produce outstanding services for the residents and profits for the investors.

How is syndication related to the harvesting process? We would like to compare these two processes since they both require preparation/planning and undergo similar growth stages.

 

Germination in building a syndication (business)

Germination is more to the preparation and initial implementation of the business plan within about thirty days of acquisition. You do not see much happening, but the groundwork is being placed for more growth, then suddenly changes occur. First, you will need real experience building syndication, same if you wanted to harvest land. You will need other resources, capital, a business plan, a good market, vendors, and other team members to leverage resources. Experience is a fundamental component of the early stages of the process. Experience allows the team members to implement strategies as they prepare for the steps ahead and optimize the resources without neglecting the issues at hand.

 

Seedling in building a business or business growth

After taking over a new property, there is a stabilization period. During this time, the sponsoring team initiated the business implementation process. The sponsors manage the day-to-day operations to accelerate the growth of the business, just the same as fertilizing the root of the harvest.

This phase might not produce revenue for the partners as this is the time to build reserves and preserve resources because they are essential for accelerating business growth. In fact, this is the phase where most of the capital expenditures take place. It is like planting the seeds, injecting resources back into the soil.

 

Harvesting in building a business or business mature

This stage will bring comfort and security, unlike the startup phase, which carried more risk. During this phase, the sponsor implemented the business plan and strengthened the team and vendors’ relations. They likely had improved the services provided to the end consumers. The company now has a good cash flow and can quickly solve any problems in the company.

However, the harvest phase is not the time to get complacent and comfortable. The challenge here is to look forward and plan for the exit strategy implementation even on well performing assets. Like fertilizing the land during flowering, this phase is also crucial because mistakes happening in this stage of a business have a much more significant impact on the final result. This is because there is very little time for drastic change in the asset performance to be absorbed. It is ideal that revenue has been optimized and expenses optimized by this time.

On syndications, as we prepare to harvest the profits of the business, we are also preparing to exit the business. Preparing for exiting a syndication requires optimizing the business performance and planning to make the asset appealable to the next buyer. The better the asset performance is shown on the books, the better the value of the business. This results in being able to sell for a higher price which results in better returns for investors.

As you can see, every step is crucial and has an impact overall. Experience to have business visibility is of high importance. Hence the lender requirement for a solid team to manage and oversee the asset. When it comes to harvest, it is what we target, just in time to start the cycle over again with a new asset (crop). Repeating the cycle over and over with positive results is the way to generational wealth. Remember, saving the seeds and consuming them all keeps you working to only buy more seeds to eat today. You must think about the future and start the harvesting process early!

 

Until next season, Happy harvesting!

Leave a Reply

Your email address will not be published.

Related Blogs

IS THIS STILL A GOOD TIME TO BUY REAL ESTATE?

/ /
Comment0

Invest cautiously, but invest! “My retirement funds are down a large percentage because of the stock market. I don’t want to take another risk investing in Real Estate with the increasing interest rates.”    We heard this quite a few times these past months.  We are often asked, Chris & Maricela, what are you doing about […]

Read More →