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  • Managers as Investors

    I've floated the idea to some of my managers and others at different round tables and seminars. I figured I would post here and see what kind of responses I got.

    If you had the means of investing $50,000 for 8% of a storage project and being one of 10 partners, would you do it? Would you do it if the facility was out of state?

    The thought behind this is that more often then not the ceiling for managers to get in has always been the price, most investors will put in at least $200,000, something that is often unattainable for a manager. If the price was reasonable, $50,000, it might make the ability to own more realistic for those wanting to get into ownership.

    What are your thoughts? Is that something people here would entertain?

    Chasing Perfection to catch Excellence

  • #2
    I would see a drawback of two things. If it was out of town I couldn't be there like I would want to and being involved with that many partners. I may be off base but as many as 10 partners scares me.
    "Never let the inmates run the asylum!"

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    • #3
      Thanks for the feedback PAC. So is it the 10 partners or the % of ownership that scares? Being a manager and silent partner would be of no interest even if the books were wide open and could pull reports daily if wanted?

      I've gotten feed back on both sides of the Aisle outside of here so this should be interesting....
      Chasing Perfection to catch Excellence

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      • #4
        Even if I had a bigger piece of the pie with let's say 20% while others are at 5%, the amount of partners scare me. Too many chances for infighting with decisions and problems, IMO. As just a partner, with of course a certain amount of money involved, an outside investor with a bigger % will want to maybe say something should be done a certain way, while a manager knows what works and cannot be heard because of a lower %. IMO, the manager/owner, even at a lower %, should have more input if the facility is being ran right and is making money and has happy tenants.
        "Never let the inmates run the asylum!"

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        • #5
          Am I hearing you right then that a being a silent partner wouldn't interest you to get your foot in the door, even if the partnership only had 6 investors?

          Typically there would be a "managing partner" with all others,5-9 being silent. Silent partners then would still have access to reports and books just not any decision making when it comes to the day to day. In other words the infighting wouldn't happen because one partner makes that decision, with the others just sitting back waiting for a check in the mail.

          That being said you still need to have the partners bring enough to the table to buy something reasonable. IE more partners less equity less partners more equity.

          The whole idea is to get managers from the desk into ownership while still making it afford for them to do so.
          Last edited by Advantage IT; 23rd August 2016, 01:05 PM.
          Chasing Perfection to catch Excellence

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          • #6
            Even as an owner, no matter the %, I could not be silent. I am very hands on. If I see a problem, I fix it. I am not the right person for a facility that wants an investor to sit back and just collect a check. I am not insinuating I want to be an investor but I am just giving my opinion. Maybe at a later date when I am older but even then I know I would want to give my $.02 worth. I have never been the type to let someone else run things. My foot in the door comes attached to a brain and a mouth. Would I like to be an owner, absolutely. But as partnerships go it would be myself and at the most 2 more people but better if just one. I have a very close friend that Has a relative in the real estate business and for years he wanted to buy a facility with me as partner and let me run it. I was all over that because I know his character. He has now decided to buy and flip houses. He has a strong business sense and great mechanical abilities and loves to get his hands dirty. It may never happen but I know what I could bring to a facility if asked to partner with the right person(s). Alas, it may never happen. I am lucky that I love what I am doing here.
            "Never let the inmates run the asylum!"

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            • #7
              Interesting. I'm 31 and my first opportunity to buy in was as a silent partner. It was a local deal so I felt comfortable doing so. In 2 years I have now recouped what I put in and am saving the bi-monthly checks for my own facility. It's an extremely small stake,5%, but the value I bought at has increased more then 4x over.

              What I have heard previously is some of what you said. If I'm going to be a partner I want a say but when you start talking dollars and cents of what that entails it becomes too rich for a typical manager ( we bought at $1.2M, you can do the math at 5%)

              My goal is do try and do the same thing with other managers when I'm ready to go it alone. I think the next real estate market down turn in 18-24 months is going to be a good opportunity to do so. Buy something cheap, possibly new but bank owned, and go in there with several other managers as partners and turn things around.

              It's finding out whether other managers that are interested in that same path I was afforded.


              Chasing Perfection to catch Excellence

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              • #8
                Advantage, I agree with your thoughts of what to expect and what is coming and now that I know your age range I see how it all works for you. At my age, it is not a possibility for me. I would have to win a lottery to be able to do something like that. If I won the lottery I wouldn't need an investment opportunity anyways. I have weaknesses when I have the extra money. Things that shoot and I still want that perfect drone. At my age I would not want to take a chance on an unknown facility. If I could buy in to this facility I would do anything I could to do so.
                "Never let the inmates run the asylum!"

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                • #9
                  It's going to be interesting. I've used my opportunity to launch to what I really want to do which is to eventually own my own portfolio. I've been completely open with my managing partner with my intentions and he was the one to actually approach me about buying in. I laid out a "timeline" as to what and when and so far I am on track. My projected down turn in real estate/economy will coincide with step 2 which in to become a managing partner, while still keeping my "day job." Finally turning into owning outright be the time I'm 40. While still having partnerships at other stores.
                  Chasing Perfection to catch Excellence

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                  • #10
                    Looking at this from a very top level view, I don't see why there shouldn't be a problem that a manager has some of his own money invested into the company that he works at. It's job security for one because they obviously wouldn't be able to fire the manager who owns shares of his own company and I'm sure the partners need to be able to have some insight of what's happening on the ground and who better to provide such information other than the manager? He'd probably have to delegate some of his more menial tasks out, but I think that such a situation could really work!

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                    • #11
                      I wish I had $50,000.
                      Don't put off until tomorrow, what you can do today.

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                      • #12
                        At that point you might just consider investing in a self storage REIT and have less drama when you want to buy and sell shares.

                        Steve

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                        • #13
                          Steve, that's true but there is something to be said at having your hands on something physical. The other aspect of this is that you have minds that are in the industry or have been at the ground level to bounce things off of.
                          Chasing Perfection to catch Excellence

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                          • #14
                            Originally posted by lady5563 View Post
                            I wish I had $50,000.
                            See, this is my issue.
                            An apple a day keeps ANYONE away if you throw it hard enough.

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