Outsourced Services Series:
Startup Investment Firms
By Terry Hill
Real estate investing has been changing for decades. Since
the financial crisis, trends like density and urbanization have
driven investment types and property choices. And now
with real estate valuations on the rise and potential Qualified
Opportunity Zone incentives, more startup and smaller
investment funds are under pressure to scale up along with
the larger competitors. But, they need the right support team
to make the business work.
The ability to stay focused and disciplined on the investment
thesis—and to pick the right strategies—would not be possible
without a high degree of competency and decision support
from a fund’s administrative infrastructure. But, smaller real
estate investment firms starting, growing or changing funds
may not have the established resources—or the bandwidth to
find them—and they may want to consider outsourcing their
administrative, compliance or HR functions to avoid adding
too much infrastructure too early.
Startup investment firms have the same needs as established
firms, but little or no resources to get to the same kind of
informed decision-making. When it comes to running the
business, outsourcing a CFO provides accessibility to
a business-savvy finance/accounting professional who
can partner with the General Partner (GP) to avoid costly
mistakes later. When a fund manager knows the rest of the
business is in good hands, he or she can focus on the higher
level decisions.
Outsourcing staff—whether it be a CFO, controller, HR
coordinator or IT team—is a scalable cost the GP controls,
10 BPM Real Estate Insights
and one that can ramp up or down with their business
needs. Instead of hiring extra staff and having to maintain
responsibility for their payroll and benefits, outsourcing
allows a startup fund to learn from the best and implement
what they need later, as funding allows. It also provides the
flexibility all startups need to grow and thrive in the evolving
real estate industry.
Moreover, a practice of CFOs that focuses solely on these
types of projects, and one that is encapsulated within a CPA
firm, offers extraordinary value, integration and scale for a
client. Many startups may have to otherwise choose a less-
experienced, junior candidate to stay within budget or hire
a more skilled CFO and exceed their budget, in turn taking
what little startup cash they have away from investment
opportunities.
Real estate investment funds of all sizes, not just startups,
have a lot to gain from outsourcing. Stay tuned for more
Outsourced Services Series articles to learn more. n
The Outsourced Services Series of articles illustrate
examples of services real estate companies can leverage as
they navigate the many strategies and decisions firms have
to make. In each article, BPM professionals address trigger
points that might drive these kinds of decisions.
Terry Hill is a Managing Director in BPM’s Advisory Group.
Contact Terry at [email protected] or 415-288-6244.
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