Changes in the real estate market aren’t just affecting smaller capitalized real estate operators. A company called Reali which was one of the first to offer home owners the opportunity to sell their home to the company is now in process of winding down operations and will either be bought by a competitor or close permanently. Reali just raised over 100 million dollars less than a year ago and now they are claiming that changes in buyer/seller attitudes and difficulties in raising money are factors that are contributing to their demise. 100 million wasn’t enough to save them and likely twice as much wouldn’t have helped either. Of course, other companies are struggling, but in our opinion, the business model and those running the ship were too inflexible to adjust with market shifts.
Most businesses rise and fall on cash flow. In our many decades of business experience (mistakes and successes) we have learned and observed from others whom succeeded, that you need to keep the monthly burn rate manageable in relation to your incoming cash or sales. In our experience, we have also learned that every business has cycles of success for which you need a reasonable reserve. So while we feel for those who bet big and lost, it may be worth examining conditions of their fall. Did every business in that space fall? No. Why not? Well, there are a number of reasons, but we would speculate that poor management experience/decisions and inflexibility or unwillingness to adapt were chief among them.
You have to love a capitalistic market because someone with a good idea and poor execution is a new acquisition for someone better prepared to steer the ship responsibly and with better capital reserves. In truth, we aren’t capable or judging Reali or its team at this time, but this would not be the first time we have seen such enterprises fall for the reasons aforementioned. We can’t and won’t tell you something is a good deal or not or to invest in a deal or not, but we can share our experience and our opinion after decades in the real estate world. We believe that big deals usually only remain big deals when they have appropriate management following a long-proven yet simple method of flexibility and smart cash management. Something to think about? What do you think? Tell us.
FYI, we can not and do NOT offer accounting ,tax, financial, investment, nor legal advice.