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In any industry, there are skills/habits that can lead to ever increasing levels of success. The real estate industry is no different and it’s a matter of how soon that you can find those habits which will accelerate your path to success. In this post, we will dive into some of the skills that our team has engrained into the way we do business at JP Acquisitions. These skills came about through a combination of trial and error, learning from mentors, and continuous education.
Note – The definitions of the technical terms in any of our posts can be found in the glossary section of our website.
Don’t Do Deals You Have to Talk Yourself Into
Simply put, if you have to convince yourself to do a deal, then it’s not worth doing. If you’ve been in real estate long enough, when something feels off and your intuition is telling you so, just back away from the deal. If you’re constantly thinking about the deal and going back and forth, it’s a no.
About a year ago their was a deal that on paper seemed to have everything that we were looking for. The rents were low, the location was good, and their was clear upside. However, we noticed that the deal had been on market for a long time and deals that have clear upside are never on market for that long. That was what tipped us off. We chose to gloss over that fact and started negotiating the purchase, but we continued to feel that something was wrong. As we got close to negotiating the purchase price, we contacted our loan officer and he informed us that a client of his had been under negotiation for that same deal and chose to back out after receiving some bad news. I acknowledge that while this example is cherry picked, we’ve spoken to other sponsors who have affirmed this habit/skill. At the end of the day, you’re better off not doing a deal at all then losing your piece of mind and stressing over something that doesn’t feel right.
Guard Your Reputation With Everything
Believe it or not, the real estate world is a lot smaller than you may believe. This is especially true in the world of commercial real estate. If you treat a broker, lender, or any other professional with disrespect, word will travel fast. While treating others with respect seems so obvious, you’d be surprised as to how entitled and unreasonable people can be. At JP Acquisitions, we make it a habit to make the lives of the people we work with as simple as possible. By doing so, we ensure that people want to continue doing business with us. More so, life is already so complicated, why make things harder than they have to be?
I know of a sponsor who had worked in commercial real estate for a long time and eventually branched off to start their own syndication company. Through the resources and connections they built up prior to starting the company, they were able to scale fairly fast. However, one of the partners got greedy and chose to forget everything he learned about analyzing deals, managing investors and employees, and having a strong work ethic. At the moment, their portfolio is struggling and their investors are being lied to. Not to mention, their is a lack of communication only amplifies the issues. While I don’t have a crystal ball and can say for sure that they will fail, the signs are pointing exactly to that.
Be Careful With Financial Modeling
A financial model will say whatever you want it to say. As the saying goes in finance, “garbage in, garbage out.” That said, it’s best to spend time at a property and really get a feel for not only the building, but the surrounding area as well. More so, get a feel for the comps in the area, learn to spot trends, and foreshadow everything that could go wrong before pursuing a deal. These are some of the conservative habits and ways of thinking that will sharpen your underwriting model to more accurately paint a picture of how a property might operate. If you’re curious as to how we underwrite deals a JP Acquisitions, I encourage you to check out these posts:
- Three Tips for Underwriting Multifamily Deals
- Two Different Approaches to Underwriting Exit Cap Rates
Conclusion
While there are many skills in real estate that will result in you making more money, these are three big ones that all real estate investors should keep in mind. To recap, don’t do deals that your gut tells you not to do. Trust what you’ve learned and if necessary, get an opinion from someone with relevant experience. Secondly, your reputation is extremally important in real estate and making yourself difficult to work with is a sure way of setting yourself up for failure. Finally, make sure that you know exactly what you are inputting into your financial model. Supplement the assumptions in the model with getting an in-person feel for the property and the surrounding area. I trust these three skills will steer you in the right direction and ultimately make more money.
If you have any questions regarding the terms and concepts in this post or previous ones, please reach out to either me (tedi.nati@jpacq.com) or someone on our team so we can help explain further. If you’re interested in investing with us at JP Acquisitions, you can contact us via our contact form, by emailing a member of our team, messaging us on LinkedIn, or signing up for our investor portal to set up a meeting.
As always, I hope you enjoyed reading this post as much as I have writing it. Best of luck!
