What I Wish I'd Known: Wisdom for my younger self
Including how to (roughly) value any investment property in 20 seconds.
I recently reflected on lessons learned over my now 20+ year career in mortgage finance and real estate investing. And given the breadth of where my journey has led me, it's no surprise that a top 10 exercise quickly turned into 50.
All but a few of my working years have been spent in the residential sector, but I’ve dabbled in just about everything else. I’ve funded home loans, doled out credit lines to mortgage originators, watched banks implode, invested in distressed debt and property, flipped houses, walked the tightrope of investing in cannabis warehouses, and bought apartment buildings across the Western states.
I've sent 8-figure wires from a Manhattan trading desk and I've laid sod in cloudy Daly City. I’ve counted Apollo Investments as a client and once watched a single mother cry as she handed me the keys to her home, having lost it in foreclosure. We once found a 40-foot hand-dug well six inches below the bathroom floor in a 4-unit apartment building.
Billionaires, venture capitalists and school teachers have entrusted my partners and me with their money to invest. I even built an online marketplace for discounted teacher housing during the pandemic, as my native San Francisco slipped into the Bay.
For a naturally humble person it is uncomfortable to tout these experiences, to believe that I have sufficient wisdom to share with the broader real estate investing world - much of which has more and better experience than I have.
Truth be told, I've struggled to bring to myself to write this piece: Writing about yourself is so much harder than writing about the news.
But that is a profoundly wrong-headed.
So I decided to print my list, share my lessons not merely for the few who have sought me out, but for the many who may be too shy, or who didn't luck into the right connections to learn the ropes the easy way.
I have grown most in this business by standing on the shoulders of others. (spoiler alert, here comes one of the lessons).
Either by chance or by subconscious design, I have always sought out my gray-haired predecessors for wisdom. Even if I often had ulterior motives (usually fundraising), I learned a tremendous amount from those who came before me and were generous enough with their time and knowledge to share them with me. People like Graham Henley, Norman Scott, John Shay, Tony Clemendor, Jerry Finch, Pat McDowell, John Salera, Tom Buckley, Tom Keelin, Jess Love, John Leibgott, Rich Winter, Tom Guba, Tim Brown, Louis Cornejo, Tom Murphy, Patrick Richard and too many others to name, who patiently answered my questions, enduring my clandestine investigations into their masters' secrets.
Along the way, I’ve also came up with a few of my own.
Like how how much to pay for an office building by only knowing the rent. Or what single number, printed on every Offering Memorandum, will tell you about how much to pay for a rent controlled San Francisco apartment building. Or any apartment building for that matter.
This is not a “How To” guide on real estate investing, there are too many of those already. Instead, this is more of a "How To Not" guide. Or said differently, How To learn from my mistakes.
These are not get rich quick tricks, each one is the start a long and detailed process that needs to be nailed for a deal to go right. Real estate also ain't easy.
I thought about how to organize these nuggets of wisdom, and numbering seemed too arbitrary. So I categorized them in the following buckets, which loosely follow the life of a real estate deal.
MARKET ANALYSIS
INVESTMENT STRATEGY
DEAL SCREENING
UNDERWRITING
BROKERS
DEALMAKING
FUNDRAISING
CAPITAL MARKETS
ASSET MANAGEMENT
EXIT
TROUBLESHOOTING
For each item on this ever-growing list, which I will trickle out over weeks and months, I will discuss the lesson itself, define any geeky terms that may be required for a full understanding, and then tell a story which either taught me the lesson or where I used the it.
I hope you learn, enjoy the stories, and away we go.