Everything about PropCo / OpCo deals under 10m

How does this investment work?

​This type of investment has two main components:

The Development side by the Parent/Property Company(PropCo)

The Business Operations side by the Subsidiary/Operating Company(OpCo)

The Development side is done by both taking a well located vacant building, and getting it into fine working order or by doing a full ground up development. In each case the Market approach is the same: Creating value where before there was none, by getting a non-performing asset into shape and ready to be used.
This Business Operations side is provided by the OpCo that takes care of the day-to-day operations: assisting the senior citizens and insuring the monthly cash-flow.

In this arrangement, the OpCo leases or rents out the income producing asset from the PropCo, usually at a 5-6% of the Property Value. Sometimes the operating company will spin the property company off as a real estate investment trust (REIT) for tax advantages.

There are all sorts of OpCos: Hotels, Restaurants, Residential Assisted Living Facilities. The general idea is to have an operation where you can maximize cash-flow, and when it gets stabilized in the 100% you sell it as an exit strategy to an Investment Fund.

How does this investment work?

This is a well-known structure called Propco/OpCo, and this type of investment has two main components:

The Development side by the Parent/Property Company(PropCo)

The Business Operations side by the Subsidiary/Operating Company(OpCo)

The Development side is done by both taking a well located vacant building, and getting it into fine working order or by doing a full ground up development. In each case the Market approach is the same: Creating value where before there was none, by getting a non-performing asset into shape and ready to be used.
This Business Operations side is provided by the OpCo that takes care of the day-to-day operations: assisting the senior citizens and insuring the monthly cash-flow.

In this arrangement, the OpCo leases or rents out the income producing asset from the PropCo, usually at a 5-6% of the Property Value. Sometimes the operating company will spin the property company off as a real estate investment trust (REIT) for tax advantages.

Dealing with Uncertainty

I am deeply grateful for all the meaningful encounters in my path. In this conversation with Howard Marks, It took me a while to get this concept to sink in after the podcast, but the reality of things is that, you can’t control the world, because there are just too many connections out of your reach. What you can do is control what you do, but that is all.
If you are an entrepreneur, i am sure you have come to the point that you question your sanity on how can everything have gone so wrong, when you made your very best effort taking take your time to make a rational decision, since you want the best impact for your time, capital, energy and effort in order to be successful in your endeavors. The reality is that stuff happens. I guess it is like Ted Turner said: “If you do anything you are going to get in trouble. If you don’t, you won’t get in trouble but you won’t get anywhere either.”
This was the best interview of 2017, hope you enjoy it.

Joe Fairless – The Best Real Estate Advice Ever I – Book Review

Joe Fairless – The  Best Real Estate Advice Ever – Book Review

In a straight to the point manner, Joe shares some of the insights of his guests in his famous podcast.

Learn about some of the strategies that they used in order to get ahead.

I particularly like the one from an Australian investor that found a way to get to the US, by Real Estate.

You can get this wonderful book here

Be great, nothing else pays.

DM

How to Study well

How Richard Feynman and a Tomato could have anything in common

Well, simple.

Feynman was a great learner. He found out that the best way to learn something is to simplify it to the point you could explain it well to a child. Just like Peter Lynch when he buys a stock. See the similarities?

The tomato thing? Well, comes from the Pomodoro technique of study. To break it down simply: Study without interruption for 25m and stop for 5m. Keep doing the process until you actually have to stop. Your brain needs rest, so you plan the rest ahead.

So:

1/You learn by simplifying and teaching it to someone

2/You study well by planning 25m sessions with 5m interruption each.

Be well, nothing else pays.

DM

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