When I founded a financial services company 24 years ago, I was focused on my core business — hiring the right people, navigating arcane regulations and recruiting clients.
As my business grew, so did my rent.
I asked myself why I was paying someone else when I could just buy it myself.
Thatβs how I got into real estate.
In fact, itβs how many entrepreneurs get into real estate.
It starts with their own balance sheet and gradually grows into a lucrative side practice — sometimes more financially rewarding than the initial business they launched.
Moving forward, I decided to buy my own offices.
Throughout the years, I have bought and sold more than 50 properties, from commercial office buildings to single family houses.
If youβre a successful business owner in any other industry, you can be successful in real estate, if youβre careful and follow these simple rules.
1. Buy what you know.
If you buy real estate handbooks or take pricey classes, the first lesson theyβll teach you is this: Do your homework and research. As if that isnβt true in any industry.
However, if youβre successful in your industry, you already know a lot.
Youβve 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.
Youβre keenly aware of whatβs 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, youβre more qualified to buy a particular type of office building than many real estate professionals.
2. 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, βHey, I know that place!β
Few people know the places Iβve bought and sold. Because I donβt care about cache, I donβt pay an βego markup.β 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.
3. 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. Heβs smart and hardworking, and I expect heβll make money on the deal. Me? Iβll never pay that much for anything.
Real estate is a notorious boom-or-bust business, and like the stock market, itβs nearly impossible to time it perfectly. What Iβve learned is this: Recessions devastate the high-end commercial markets, but it doesnβt 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.
Bottom line: I not only profit as much as my friends with nicer properties, I sleep better at night knowing the things I canβt control wonβt badly hurt me.
4. Sell to people just like you.
Buying a valuable property for the best price is only half the transaction. It wonβt matter how good the deal is if you canβt 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 itβs a percentage game. Many nibbles never actually bite.
You have an advantage, however. Youβve bought property youβve used yourself, so youβre 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, Iβm not only a real estate owner, Iβm a customer. I understand your needs.
5. Donβt 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. Itβs almost a stereotype: βIβve conquered my industry, so that obviously means I can be a real estate genius, too!β
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 didnβt know. Tying this back to the beginning, I did my homework.
So, this is my most important piece of advice: Better to end your real estate career simply buying your own offices than believing youβre bulletproof and buying properties that are riskier than you think.