Maverick Real Estate Investing - The Art of Buying and Selling Properties Like Trump, Zell, Simon and the World's Greatest Land Owners
This book identifies a great list of 12 components that Maverick Real Estate Investors use that make them Mavericks. The stories intertwined in the principles make for a great study. It is a timeless reference. Below is a summary of the 12 components, who was bio'd in the section and some bullet points on the subject.
1. Make a Good Deal
Patience is a virtue in the pursuit of getting what you want. But research, due diligence, planning and flexibility are just as important.
Donald Trump Bio
-Take your time negotiating
-Don't fall in love with the property
-Never appear to be desperate
-Realize that knowledge will give you the upper hand in deal making
-Work out the numbers before beginning negotiations
-Have your financing all lined up in advance
-Don't try to squeeze every last penny out of the deal. It could come back to haunt you later.
-Determine the seller's motivations and use that to your advantage
-Sketch out your deal from start to finish
-Plan for all eventualities
-Stay focused on your goals
-Remain flexible and open to unexpected opportunities
-Accept responsibility for making deals happen
-Be willing to take chances
-Have a thick skin
-Don't take it personally
2. Understand Cycles
Because you cannot accurately predict when the market is about to ebb or flow, it is essential to recognize the signs of change and be ready to act at all times.
Walter Shorenstein - Class A office in SF - Bio
Douglas Shorenstein(son) - bio
-Realize that real estate is cyclical
-Try to get a reading on where the market cycle is right now
-String out the development process in down cycles
-Be ready to act quickly when cycles begin to change
-When entering a down cycle, clean up your balance sheet
-Invest Contracyclically(against the cycles)
-Buy when capital is out of the market
-Have financing ready for unexpected buying opportunities
-When you first bid fails, and you're not the initial bidder, look for opportunities to step in to take advantage of the situation
3. Use Other Peoples Money
Loans can be risky, especially on investment properties. As a result, one of the best ways to reduce the risk of carrying debt is to bring on additional partners.
John Kukral - Blackstone RE Advisors NY - Bio
-Know that there are a limitless number of fund raising options available to real estate investors
-Reduce leverage and risk by using a partnership structure
-Avoid expensive debt
-Have multiple exit strategies in place
-Align interests by making sure everyone contributes capital
-Look for opportunities in troubled properties
-Creatively solve complex problems
-When necessary, join forces with someone who has expertise in an area that you do not
-Seek to get extra equity without putting up additional capital by taking on a role in managing the property
-Create value for sellers by addressing their financial needs(i.e. tax liabilities)
-Focus on high-quality assets that others will want to be involved with
-Identify the factors that might reduce a property's value on the front end
-Raise money before you need it so you can act right away on opportunities that others don't have the cash to take advantage of
4. Establish Cash Flow Targets
With Existing properties, savvy investors look for properties providing solid current cash flows. With New projects, developers plan carefully to make sure they will achieve their cash flow targets as soon as possible.
Dick Dusseldorp - Lend Lease Corp founder Australia Worldwide investors - Bio
Stuart Hornery - Lend Lease CEO - grows Lend Lease into billion dollar global company - Bio
-Understand the concept of cash flow and how it impacts the bottom line
-Cash flow should be a key factor in determining whether you buy or sell a property
-Juicy cash flows can help to pump up returns for both yield and appreciation
-Industrywide declines in cash flow are usually a signal that more serious market problems are ahead
-Don't become over dependent on cash flow. Other factors can be just as important
-Concentrate on numbers other than expected cash flow when evaluating a new development
-Often, bringing in better management will help to create better numbers
5. Be in Alignment
The best and easiest way to stay in alignment is to specialize in one specific asset class.
Hamid Moghadam - Cofounder of AMB Property Corp - Industrial property specialists - Bio
-Aling investments with your operating strategy
-Stay focused and involved in the process
-have a goal in mind and know what it will realistically take to achieve it
-Become a specialist in one real estate type
-Look for geographic diversity in your real estate holdings
-PRivate capital is usually the optimal source of investment funding
-View government regulations as merely a hinderance not and obstical
-Understand that a good reputation goes a long way
-When possible, build in areas that are strategically and finacially beneficial to your customers
-Exercise patience in the pursuit of a great location
-Seek repeat business from your top customers
6. Find a Nearly Perfect Location
A good location won't necessarily save a bad investment, nor will a bad location prevent you from making money.
Gerald Hines - Hines - Class A Office high rises - Bio
Jeffrey Hines - Pres Hines - Bio
-A good location today might not stay that way forever
-A good location alone is no substitute for bad management
-Even the best location has to work out financially and structurally. Location alone will not save a poorly negotiated deal
-Despite what you may have heard, location is really just one factor to consider
-An equally important factor is timing
-It is possible to create a good location if the fundamentals are in your favor
-If you are diligent, opportunities in good locations will come to you
-High-quality structures and stable financing can help to create a good location
-Sometimes the best locations are overseas
-Be sure to check local zoning requirements to confirm that your property is welcome at the site
-Remember, a good location for an office isn't necessarily the best location for a warehouse or a residential development. Good locations must be relevant to your project.
7. Benefit from Someone Else's Disasters
Distressed real estate is the basic foodstuff of opportunistic investors. But distress comes in various forms, from physical deterioration to financial disaster. As a result, it still takes a good eye to spot gold nuggets in the hard dirt.
Samuel Zell - Chairman of 2 largest REITs in thier asset classes - Bio
-Sometimes the best opportunities are found in the same spot you discovered them before
-Not all distressed property can be saved
-Know the land's true value and understand the concept of replacement cost
-The biggest opportunities come during the darkest times
-Figure out the competitive advantage you have over other new developments before buying
-The real diamonds in the rough usually look outwardly hopeless
-It is better to buy from a seller in finacial distress than one with a deteriorating building.
-Figure out the seller's basic requirements and weaknesses early on in the negotiations
-Be visionary and consider the property's future potential, which often isn't obvious on the surface
-Banks with distressed loans in foreclosure can be a good source of cheap property
-Sometimes it pays to partner up, especially if one of your partners is good at sniffing out great deals
-Have money ready so you can strike when an opportunity is pitched your way
8. Make Safe Gambles
The Mavericks know how to mitigate the inherent risks. They do this by using a number of tactics, including conservative financing.
Samuel LeFrak - LeFrak City in Queens NY Apartments- Bio
Richard LeFrak - President LeFrak - Bio
-Know that real estate investing is a risky proposition
-Take steps to minimize the downside and improve your odds
-Forward-think your project. In other words, consider what the area and property might look like in the future, not just now
-Avoid prejudicing the research. Remain neutral, even when your heart is set on a particular piece of real estate
-Use a secure capital structure as your best defense against future unforseen difficulties
-Be conservative when it comes to financing
-No money down is not the best strategy
-Big gambles can result in big payoffs
-Look for the potential in unloved property that no one else can sell. Just don't overpay for it
-Create economies of scale and pass the savings on to your tenants. You'll make more money and this will give you a competitive advantage
-Do not sell immediately just to finance the next deal
-A large scale project creates its own value
9. Hire Savvy Managers
Bad managment can quickly doom an otherwise good investment. If you decide to become a property or asset manager, take these tasks very seriously.
Frank Lowy - Westfield Trust Retail Shopping Bio
Peter and Steven Lowy Westfield Trust Bios
-If you are merely a passive investor, hire an active third-party managers to look over your property
-As a small real estate entrepreneur, you can do your own property management as long as you take the job seriously
-Your first priority should always be to take care of your tenants
-Remember, management consists of two parts: managing the property and managing the asset
-Standardize management procedures and adopt a reporting system
-High retention is a sign of management success
-Be flexable, adaptable, and attuned to local market changes
-Adopt a time management program
-Learn from the good and bad lessons of the past
-Maintain a comfortable environment for managers and building occupants
-As your company grows, be prepared to change your corporate management structure
- Integrate all parts of your company together for maximum efficiency
-Don't be afraid to do things differently
-Use strategies that have been successfully applied elsewhere
-Even if times get tough, stay the course
-Try to spot the next problem before it happens
10. Get Good Legal and Tax Counsel
A competent advisory team will help you hold onto your most prized investments, even if things do decidedly wrong.
Eli Broad - Kaufman & Broad national home builder - Bio
Bruce Karatz - CEO KB Homes - Bio
-Always seek professional help for matters of law and accounting
-Let your lawyers deal with zoning and permit requirements
-Have every contract reviewed by an attorney
-Read the fine print closely
-If your real estate business grows sufficiently, consider hiring in-house legal and tax counsel
-Taxes are as important to REI as appreciation potential
-Use best practices, even if they are developed elsewhere
-Sometimes it is better to grow through acquisition
-Rely on formal research - not just instincts- when making major investment decisions
-Harness the power of technology and use it to its ful potential
-Avoid full build-out until the orders come in
11. Overcome Negative Responses
A negative reaction is just a starting place. After all, everyone has a point of weakness and drop dead price.
Melvin and David Simon - Simon Property Group Retail malls - bios
-Don't be afraid to use all of the negotiating tools at your disposal to get what you want
-Resort to hostile measures if you have no other option
-Air your squabble in public if necessary to sway public opinion and bring more sympathy to your side
-Bring in a partner if it will help to get the deal done
-Try to head off any expected hostility before it starts
-Be Patient. Hostile deals take time
-Be ready to bring out the big guns, namely your attorneys and accountants
-Turn a hostile takeover into a friendly one if you possibly can
-Even hostile deals must make strategic sense. Otherwise, they can damage your business and your reputation
- Unwelcome actions are risky and difficult to execute successfully
-If necessary, break new ground
12. Sell to Your Advantage
Somewhere down the line, properties must be sold. You must make sure the sale is done under the right conditions to book a profit. This is a feat that even the best investors don't always get right.
Paul and Philip Reichmann - Olympia and York Development - Class A office - bios
-Not selling is sometimes the biggest mistake you can make
-You should consider selling when times and conditions are good, even if you don't have to for financial reasons
-Be on the lookout for signs the market has reached a peak. This is your signal to get out
-If you own more than one property, and conditions are ripe for selling, trim those assets that are least important to your bottom line first and ensure that the sale is in line with your overall business strategy
-Don't immediately decline an offer to buy your property, even if you currently have no plans to sell. If may be an offer than is too good to refuse. Alternatively, you might be able to return to that same party once you are ready to sell.
-If you cannot get your asking price for the property, be ready to compromise
-Selling involves a bunch of small tasks - such as advertising and listing the property - that are best handled by a broker. Still, its up to you to keep and eye on the broker and make sure th sale takes place on your terms
-Unloading property with a financial encumrance is tough, but not impossible, if you are willing to work around it.
-Remember, there are always second acts in real estate. If you fail to sell at the right moment the first time around, chances are you will get another opportunity to do so down the line
Will you read this book again? Yes, likely. As your portfolio grows this book will be a good reminder of how greatness can align with your goals.
Would you suggest this book be added to a personal library or leave it at the public library? Personal, this is a good motivational book. The success stories are great. The advice is top notch.
Reviewed By Mike W. - Twin Cities, MN
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