Do you know how much formal real estate training I have? Zero. If you’re a successful business owner in any other industry, you can be successful in real estate, if you’re careful and follow these simple rules.
- Buy what you know
If you buy real estate handbooks or take pricey classes, the first lesson they’ll teach you is this: Do your homework and research. As if that isn’t true in any industry.
However, if you’re successful in your industry, you already know a lot. You’ve likely scoured the area – – and maybe other regions and states – – for the best rates on the most suitable and energy-efficient offices for your needs. You’re keenly aware of what’s a good deal for the square footage you desire and which areas are the most convenient for your employees and your clients. In other words, you’re more qualified to buy a particular type of office building than many real estate professionals.
- Let go of your ego
Last month, I sold a funeral home in a low-income area for twice what I paid for it in 1996, while also raking in significant rent in that time. Meanwhile, I have friends who own pricey glass towers visible from the Interstate – – because they like to go to parties, brag about the buildings they own, and hear, “Hey, I know that place!”
Few people know the places I’ve bought and sold. Because I don’t care about cache, I don’t pay an “ego markup.” I can negotiate harder and pay less. Then I can market my properties to tenants and owners who are just as savvy about finding a good deal as I am. It turns out there are more dealmakers out there than successful businesses willing to spend extra for a fancy address.
- Recession-proof your purchases
Along those lines, I look for the best values because I seek recession-proof properties. A friend of mine just bought a beautiful office building for $252 a square foot. He’s smart and hardworking, and I expect he’ll make money on the deal. Me? I’ll never pay that much for anything.
Real estate is a notorious boom-or-bust business, and like the stock market, it’s nearly impossible to time it perfectly. What I’ve learned is this: Recessions devastate the high-end commercial markets, but it doesn’t put everyone out of business. Those businesses trying to cut back will often ditch their high-priced offices for more modest ones – – and I own many of those.
- Sell to people just like you
Buying a valuable property for the best price is only half the transaction. It won’t matter how good the deal is if you can’t turn around and rent it or sell it. Real estate agents and brokers spend a lot of their time trying to locate tenants and buyers, and it’s a percentage game. Many nibbles never actually bite.
You have an advantage, however. You’ve bought property you’ve used yourself, so you’re not only an expert in that kind of space, you can step into the shoes of your customers. You instinctually know how to market your offices. You also have a sharp marketing weapon. Hey, I’m not only a real estate owner, I’m a customer. I understand your needs.
- Don’t believe your own hype
Those who succeed in their core businesses and then dabble in real estate can do quite well. They can also overreach. It’s almost a stereotype: “I’ve conquered my industry, so that obviously means I can be a real estate genius, too!”
If you stretch beyond the spaces you know, you can still make money. What did I know about horse ranches before I bought one? Nothing. However, I knew I didn’t know. Tying this back to the beginning, I did my homework.
Bottom line: I not only profit as much as my friends with nicer properties, I sleep better at night knowing the things I can’t control won’t badly hurt me.
So, this is my most important piece of advice: Better to end your real estate career simply buying your own offices than believing you’re bulletproof and buying properties that are riskier than you think.