How to build a lasting Real Estate Family Business

Running a family business can become complicated, especially without clarity. Business decisions must be based not just on market opportunities and competitive forces, but also on the varying needs of generations of family members, including how those change over the life cycles of the business and the individual. For example, if the next generation is younger, you may want to provide internships of all but not guarantee full-time employment to everyone after their college years.  If the family business is real estate, the complexities only increase.  

Real estate ownership is spread over dozens, perhaps hundreds, of entities, making estate and tax planning critical. The uniqueness (and challenge) of a real estate family is that they are not just a family but co-owners in a property portfolio and the companies that manage and maintain that portfolio. Thoughtful management of familial and business bonds is crucial to make sure the real estate empire remains a benefit, not a burden. 

Key Takeaways  

• Beyond just preserving wealth, maintaining strong family bonds is crucial for long-term success. This means open communication, shared information, and clear expectation management. 
• Develop agreed-upon strategies for decision-making, conflict resolution, and leadership to enhance business longevity and reduce friction. 
• Start by discussing your business's direction, vision, goals, and core values. These discussions build trust and foster effective problem-solving. 
• Progress to more in-depth topics like the business's history, owner responsibilities, portfolio attributes, and family members' career aspirations to ensure alignment and future growth. 
• Proactive planning, education, and skillful stewardship are essential to pass down a thriving legacy.

Preserving Harmony in Family Businesses

Beyond preserving dynastic wealth, your core focus should be maintaining family harmony while addressing complex issues like ownership rights, distribution allocation, decision-making authority, and succession planning.

Family harmony is more likely when family members feel heard, information is shared openly, and expectations are managed effectively. Development actions that encourage constructive conflict, improve communication, and develop agreed-upon governance strategies also enhance the longevity of a family business. 

Conversations for Your Family Business  

The process begins by creating a forum to openly discuss the direction of the business. For many families, this starts with a strategic plan, including a clear vision for the future and specific goals to achieve, as well as clearly articulated and agreed-upon values that serve as the foundation for decision-making.  

Successful family enterprises often focus on identifying those principles or values that are at the core of the family and the culture of the organization. This may start by asking foundational questions such as:  

• What business are we in? 
• How does the business impact the family? 
• How do we want the business to impact the family? 
• What are the key factors that underpin our investment decisions? 
• How do we foster engagement without enabling entitlement?  
• How do these factors, and the subsequent decisions, align with the values we have identified? 
• What is important to us? 
• What actions should we take to demonstrate alignment with our values? 
• What do we want this enterprise to look like three, seven, 15 years from now? 
• What needs to be said early to avoid feeding future resentments?  
• How do we want future generations to describe this enterprise and this family? 

These foundational conversations are essential for building cohesive and constructive family relationships that help to foster more effective decision-making, encourage problem-solving, minimize distracting emotions, and build intra-family trust.  

Exploring Key Issues in Your Real Estate Family Office  

As the family builds upon their initial conversations, which are often more effective when facilitated, they can then begin to delve into deeper subjects, those requiring informed debate, supporting data collection and periodic soul-searching.  

• Questions and areas for exploration might include: 
• What is the story of the origin and growth of the business, and why it has been successful? 
• What are the responsibilities of owners to the assets, employees, vendors and community? 
• What are the attributes of the property portfolio, and what drives asset investment requirements, ownership transfers and distributions? 
• What are the requirements for the business to flourish beyond the current generation? 
• What are the career aspirations of the family members, and how do these align (or not) with the current structure? 

These conversations allow the family to listen to one another and discuss topics that are rarely covered overtly but that often tacitly guide and influence decisions and direction. Learning to listen to each other’s perspectives to understand the past, inform the future, and identify both common ground and areas of differing ideas can provide an enriched environment for governance and stewardship. 

Creating Multi-Generational Real Estate Success  

Building a real estate business is the work of a lifetime, and an extraordinary legacy to hand down to beneficiaries. Successfully managing the preservation and growth of the business from generation to generation requires careful planning, thoughtful conversation, significant education, and skillful stewardship. Our goal is to provide real estate families with strategies, roadmaps, and toolkits to identify and address the most pressing issues faced in running the business today while planning for a multi-generational future. 

Have pressing questions about your family's real estate business? Contact us today for a personalized consultation.