A lot of people get interested in real estate and think that real estate empires are built from scratch, with little cash upfront. They see real estate get hyped up on social media and want to get started with no money. But if you study real estate empires, you’ll see that they almost always have an entrepreneurship background. For example, Francis Greenburger’s family started out in the publishing and book printing business, and he was able to leverage that to get into real estate. And there are hundreds of stories like this.
People scroll through Twitter and Reddit and listen to podcasts thinking that they can get a base in real estate from their W-2 job. Some people have done it, like Chris Powers, but it’s much less common. The truth is that real estate takes a lot of cash. The best way to make a lot of cash isn’t in a W-2 job but through entrepreneurship, where your leverage can kick in and you can make real money. You can start a company first, make some solid money, and then use that money to get the ball rolling in real estate.
The skill set I picked up in managing, hiring, running a business, and delegating also helped me when I transitioned into real estate. Entrepreneurship trains you for this, and great operators have benefited from it.
Real estate is a journey of a career. At the beginning I was very risk-on, taking on 70% loans on new developments and going over budget. Acting in ways that I wouldn’t act today. But now that I have something to lose, I’ve transitioned to self-preservation mode, and I’m thinking of things differently. Our goal is to use real estate to let our wealth snowball in a tax-efficient way, we’re not trying to make a quick buck. We’ve cut leverage down from 70% to 50% or even all-cash deals as interest rates have increased, and we’ve done work to make this all sustainable long-term.
We’ve shifted to a long-term horizon and picked investors that are focused on the long term. A lot of investors want to hear about the IRR and the payback period and when we expect to sell the property, but we find LPs who want to hold for a long time. They’re not interested in IRR or flipping the property. But they see a strong deal, with no bank debt and little downside that things fall apart, and they want to get in the business.
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