Deadly Life Lessons

HALLOWEEN REFLECTIONS

Our readers universally tell us they learn more from well executed failures than from lucky successes. 

What are your “deadly life lessons” which haunt you as we start preparing for Halloween? 

Please share you “best of” failures for inclusion in a future editions of REALTY REALITY.

MAJORITY RULES?

COUNT YOUR VOTES.  I felt the board of our NYSE REIT was too big for the size of the company. Guess who got voted off the island to accomplish the reduction.

**Before your proposal goes up for a vote (of a commission/board/committee), make sure you have the votes to win.

DIG DEEPER.  My Republican friends told me that an indictment was coming for the incumbent State Treasurer (an elected post in Pennsylvania).  I made my move in the democrat primary…and was crushed, unable to get past the convention.  The indictment did come down…after the Democratic primary, and the incumbent democrat was defeated by the Republican in the fall. 

**Ask the next obvious question.  There is almost always more to the story.

LISTEN CAREFULLY.  In the process of launching a 1031 DST sponsor, we (thought) we did everything right. Property, tenants, MSA, MBD, third party report, and distribution sales lined up.  Two of the three partners were rocking.  The third partner, on the day we needed to pull the trigger, balked.  He was not willing to guaranty a loan for several weeks (as with a 1031 DST the property must be taken down before investors are accepted). 

**Do not assume that those with which you are working are singing from the same sheet of music.

BEST OF THE REST

RETAIN YOUR TEAM. A sponsor engaged our outside legal counsel to represent them on an offering where our broker dealer would be the distributor.  We missed an issue in our due diligence which eventually led to major lawsuit with the property was subsequently lost to foreclosure. 

**Don’t get caught in a bait and switch where a friendly, now on the other side, knows you better than yourself.

YOU CAN’T CHANGE PEOPLE. Why do couples get remarried? Why do we enter into relationships where we hope to change the other? I’ve now three times worked for a good friend.  Each time I’ve gone running for the door after two years.   Love the friend; hate the mercurial nature of his genius. 

**If you must change someone, run.  If a business partner offers to change, don’t bet the ranch (and have an easy to execute escape clause in your agreement).

LOYALTY AND COMPETENCE. As your investments grow, so will your team.  As your team grows, you will be forced to develop leaders (so you can do more of what you do best). I’ve promoted for loyalty; I’ve promoted for competence. Only with both has the leader effectively lead and held my support.  

** Hire & promote slow (but do fire quick and cleanly).

BACKUP FUNDING. To support an increase in my salary leading economic development for a chamber of commerce, my income became funded 90% by a CETA grant. The only major legislation Sen. Dan Quayle ever got passed was to eliminate the CETA program (which, in retrospect, I now agree). Guess who ended up odd man out at the chamber! 

** Real estate investment funding sources go through constant change.  Always have a backup…and ideally a backup to the back up!

LET YOUR LIGHT SHINE. More than once I have left a position and waited for the universe to come knocking at my door. Even once I finally get to knocking on doors, I find that the universe is not going to wade through my resume to figure out something with which they could do with me. What do I do? I marry money and opportunity, generally equity to real estate!  When I “keep it simple stupid”, repeat to those in need with a checkbook to match, amazing things happen. 

**Figure out what your investment real estate has which is unique in the market, say it short and sweet, and repeat it every chance you get.

STAY THE COURSE.  I left a six figure job when the owner came under an informal SEC investigation. Someone else earned that money for the following 6 years as the process dragged out to an eventually settlement. 

**Sometimes fear or rigidity stands in the way of your accomplishing what you initially envisioned for a real estate investment; be willing to separate your feeling from misinterpreting the reality of the confusing moment.

CAREFULLY PROMISE.  We promised the annual meeting of our NYSE REIT that we would own apartments in Atlanta before the next annual meeting.  The Atlanta market got very soft, but we stayed the course and purchased two properties (to honor our promise).  We ended up selling both significant losses years later. 

**Don’t let your mouth write a check realty cannot cash!  

BOTTOM LINE. We all make mistakes.  Let them be grand ones, in trying something well considered, then from sitting back and being afraid to decide or act.