Running a private equity group isn’t easy and a company like this brings with it a great amount of challenges. To understand this better, and to identify what those challenges are, we spoke to some of the high profile management team at TitleCard Capital, a private equity real estate firm. The men and women who work here take in large sums of cash from their investors and they then use that pool of money to invest in a diverse portfolio of real estate. As properties are bought and sold they send returns back to their investors and everyone makes money. It sounds simple but it most certainly isn’t, and here are the greatest challenges which the management team face.
One of the most challenging things which all of the management team discussed was the pressure which they are under each day. The reason for this is of course the fact that the money which you are playing with in the business is that of private investors who have homes, families and responsibilities. The team all spoke about how they have the knowledge to run a business like this very easily, but that added pressure can be difficult to get past.
A group such as this can only function if it has a constant stream of investment coming in, and this too presents its own challenges. There must be a large push on the investment manager and their team to get out there and find investors, and sell the benefits of what this company, or a company like it, can achieve. We live in a world where individuals have so many options in terms of where to invest their money and this is why it can be difficult to convince people that you are the right place for them to invest their capital.
In order to diversify in the best way possible the real estate private equity firm will look to purchase properties across the centre nation, often even across the globe. What this means is that there are more markets to understand and more work to be done in doing so. If a small town in Arkansas sees a boom in property prices because of a new railway being built, this doesn’t mean that a Michigan property will see a boost too, in fact they may be witnessing a slump after investment was removed. The level of work which goes into understanding real estate markets in a multitude of locations can be very taxing work indeed, especially given the pressure which these companies are under to bring in strong returns.
Managing relationships is essential to keep bringing in capital from investors and whilst this isn’t difficult in contrast to the other challenges which the company faces, it can be tough when you are needed in the business but you must spend time with investors, a necessary step but one which will take you away from your job for a while.