real estate operating processes is the focus of this guide for passive real estate investors. First, it highlights the main idea behind the topic. It also outlines the risks and questions worth reviewing. As a result, you can approach the discussion with a clearer framework.
What to know about real estate operating processes
I recently had the opportunity to join some of our team members on-site at our first car wash acquisition, the Hurricane Express purchase of two sites in Fayetteville and Lumberton, NC. I love being on-site at acquisitions, and it is my aim to join the team at every single asset we acquire.
This time was especially valuable as, unlike with our self-storage and multifamily assets, we are not handing off management to a third party. We’re doing it ourselves. It was incredibly enlightening to step on-site at these two locations and see our value-add plan begin to take shape.
One of the key questions we’ve received as we’ve stepped into this asset class is, “Do you have experience operating car washes?”
No. But more importantly, we have strong experience profitably operating far more complex businesses. Beyond that, we have an incredible team in place, and a comprehensive plan to add tremendous value to these businesses.
I’ve thought a lot about what it takes to run a successful business, and beyond the viability and nature of the underlying business itself, it comes down to two essentials. Good people & good processes.
What this means for investors
In business, good people take ownership and responsibility. They have common sense. They’re humble and they’re customer-focused.
Good processes are clearly defined, iterative, and consistent.
Cameron Broom, our director of car wash operations, alongside our managing partners, had already developed a comprehensive takeover plan, so we literally hit the ground running. Prior to the acquisition, several areas of improvement had already been identified, and as we spent time on-site with the staff, these were reinforced and clarified. A lot of questions we’re asked:
How many memberships are you selling per day?
What’s the average car count?
Tell us about your marketing efforts?
What’s your sales pitch?
How are employees incentivized?
How are you rewarding and thanking your monthly members?
When was the last time you bid out chemical costs?
Good people implement good processes. They hire other good people. They reproduce! They create culture.
On one of our recent webinars, you heard Dan say our goal is to be the Chick-fil-A of car washes. If you’ve ever been to Chick-fil-A, you know exactly what that means. There is an incredibly consistent customer experience no matter which Chick-fil-A you visit. Now, if you’re a Chick-fil-A devotee, this may be sacrilegious, but their food isn’t dramatically different from the competition. It’s the experience. It’s hearing “my pleasure.” It’s the way the person who takes your order and hands you your food smiles at you. And that culture is incredibly valuable. The average Chick-fil-A franchise is more profitable than the average Subway, Taco Bell, and McDonald’s… combined.
Questions to ask before acting
After being on-site for two full days, I can say with complete confidence that we’re in a very solid business, and we have great people in place who will reproduce through great processes. As we all know, especially in our current world, a wonderful customer experience is rare. But when you have one, it sticks with you.
Key takeaways for real estate operating processes
- Start with the goal and timeline that fit your wider financial plan.
- Next, review the assumptions, risks, fees, and possible outcomes.
- Finally, compare the opportunity with other ways to use your capital.
Put real estate operating processes in context
Core ideas for real estate operating processes
Every investment decision depends on the investor, the deal, and the market. Therefore, use the ideas above as a starting point for deeper due diligence. Review source documents, ask direct questions, and seek qualified advice when needed. For more guidance, explore our passive real estate investing education.
A clear review of real estate operating processes
real estate operating processes deserves a clear and practical review. These short checks can support a more informed decision.
- Start with a clear goal.
- Next, define the time horizon.
- Review each key assumption.
- Compare the likely outcomes.
- Test a less favorable case.
- Ask who controls each decision.
- Confirm the fees and incentives.
- Study the market and the deal.
- Check the supporting documents.
- Look for clear communication.
- Compare other choices.
- Keep the full plan in view.
- Write down the main risks.
- Review the source of returns.
- Check the exit assumptions.
- Understand the tax questions.
- Consider the need for liquidity.
- Match the choice to your goals.
- Ask direct follow-up questions.
- Confirm the reporting process.
- Review the operating plan.
- Check the team’s experience.
- Compare the best and worst cases.
- Keep expectations realistic.
- Use qualified advice when needed.
- Document the final decision.
- Review the decision over time.
- Watch for changing conditions.
- Stay focused on the long term.
- Finally, act with a clear reason.
A practical review of Good People and Good Processes
First, define the goal for this decision. Next, write down the result you expect. Then, identify the facts that support that result. Finally, note any facts that could change your view.
For example, compare the likely return with the main risks. In addition, check the timeline and the amount of control you will have. However, do not rely on one attractive number. Instead, review the assumptions behind every estimate.
Before you act, ask who will manage the work. Also, confirm how that team will report progress. If conditions change, decide how the plan can adapt. As a result, you can judge the opportunity with more confidence.
Moreover, compare this choice with realistic alternatives. For instance, consider liquidity, taxes, fees, and timing. Likewise, review the downside as closely as the upside. Therefore, your final decision can reflect both your goals and your limits.
In short, use a clear process. First, gather the facts. Next, test the plan. Then, ask direct questions. Finally, choose only when the answers support your strategy.