Getting started in real estate investing according to the experts

MEET OUR PANEL OF EXPERTS

Bruce KirschFounder & CEO Real Estate Financial Modeling (REFM)/Valuate®
Cynthia SheltonCCIM, CRE, Sr. Managing Director Investments & Capital Markets Landqwest Commercial
David SchnitzerCCIM, LEED AP, Partner ASCEND Commercial Real Estate

REALTORS® are natural entrepreneurs who constantly look to grow their businesses and increase efficiencies. As I travel the country, the most common questions I receive are “How do I break into investing in real estate?” and “Where do I go to get training to take the next step?” So I wanted to talk to the people at the forefront of investment.

Nathan: Bruce, you just co-authored the fifth edition of Real Estate Finance and Investments: Risks and Opportunities with Dr. Peter Linneman at the Wharton School of Business. Due to the frustration with traditional textbooks focusing too much on theoretical detail and literature without the practical “real world” application. How would you advise Realtors® who have real world experience in the real estate space but need to learn more about working specifically on investment deals?

Bruce: As we say in the preface of the book, there’s no singular, simplistic, or formulaic answer to any real estate finance problem. Rather, investment analysis is fundamentally driven by judgment and experience, with an eye to the numbers, to help evaluate the inherent risks and opportunities. Knowing how to build a financial model and calculating the internal rate of return in a spreadsheet is not the same as making good decisions that end up manifesting in a profitable real estate investment. Judgment comes one mistake at a time, and building your judgment is a never-ending journey.

Nathan: Cynthia, what do you consider to be the foundational tools or imperative education for anyone wanting to work with real estate investors?

Cynthia: First, an agent needs to choose what product type they want to specialize in and then become an expert in their market. Once you have that identified, I find the most help through the CCIM education. I wasn’t planning to get my designation at first, but I later realized how important having the CCIM designation was going to be to give me credibility, knowledge and access to the excel spreadsheets I use daily. The next thing you need is the ability to research with tools such as RPR Commercial. to RPR Commercial allows me to find so much of what I need in one location and that is wonderful. Lastly, you need to have others around you who bring different knowledge to your team for support when that random situation arises.

Nathan: David, you’re a CCIM so naturally you’d agree education from CCIM or self study programs utilizing the Real Estate Finance and Investments: Risks and Opportunities textbook are crucial for getting started and staying up to date, but as you gain experience what role does a gut feeling play when looking at an investment?

David: The “feel” for real estate is always needed in any transaction. But if the numbers don’t work, then the numbers don’t work. A solid understanding of a client’s need is critical to determine what direction to take. I always fall back on my CCIM training and will combine that with my “feel” for what will work best based on the needs of each client. With this approach I am able to sit with a client and look at the numbers with them to help determine if the scenario makes sense. Investment analysis products such as Valuate®, which is available through RPR, are great tools to sit down with your client, run the numbers and compare multiple opportunities to validate the gut feeling.

Nathan: Cynthia, how about an example where you wrestled with a gut decision?

Cynthia: I can’t say who the tenant was but a few years ago I listed a property that was a large box single tenant retail with 3 years remaining on the lease. That company had some issues and had media talks of considering bankruptcy and closing lots of locations. During my marketing time frame, they hadn’t closed any locations. My gut told me this will not sell but I was wrong, and the buyers thought it would be a good redevelopment play if the tenant went under and vacated the property as their rent was really low. I thought the selling price would never be achieved and it was. Not only did they pay close to asking price that was acceptable to the sellers but 3 years later the tenant was in and out of bankruptcy and extended the lease at this location for 5 more years, they are still operating today. It’s a good thing I don’t always listen to my gut.

Nathan: Bruce, what’s new and exciting in the investment landscape possibly due to a sector shift, new technology, or a change from traditional valuation process?

Bruce: Transparency in the investment process is improving, which increases the liquidity of real estate in general. This is an exciting trend as the more liquid an asset is, the more valuable it can be. I believe that the reasons for this are widespread but can be boiled down to a combination of greater literacy on real estate investing, new technology platforms like Valuate® making investment analysis more approachable and how crowdfunding platforms are forced to present transactions in a digestible manner for non traditional investors.

Nathan: This one is for the group. If you could have one “superpower” to help in pursuing a successful career in real estate investments, what would it be and why?

David: The power of persuasion cannot be beat. Especially if I could combine deal-making persuasion with having the ear of the world’s top real estate investors.

Bruce: The power to schmooze endlessly. One of the keys to success in business is being known and liked by pretty much everyone. The relationship in the deal is still key.

Cynthia: The power of limitless access to data for today’s market as well as knowledge on what data will look like deep into the future. In many cases, client’s records are sparse with information, so this would allow me to analyze a property’s real and future value with greater ease.

Now that you’ve heard from the experts, take the next steps for learning more about investment analysis by exploring these three resources:

Bruce Kirsch’s Foundational Topics For Real Estate Investors

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