As we wrap up winter quarter at UCLA, I thought I’d leave my departing students with some takeaways to remember years after their passage through my ”Intro to Real Estate Finance and Investments” course. There may be some lessons in here for all of us, so I thought I’d share:
My Dearest Students,
After a marathon grading session, I think this is the first class in the history of mankind where final exams and projects for 103 students were turned around, and final grades issued, within 24 hours. HUGE thanks to Natalie and Greg for their amazing efforts in helping to make this happen, and for being such great TAs this quarter (electronic round of applause). I hope you feel like the outcome matched up with your performance. But more than anything, I hope you feel like you received a great real estate education, were challenged, and had fun in the process. If you love me and hate me at the same time, I’ve done my job.
Stepping back, remember the lessons of this class apply to all fields of business outside of simply real estate, and that you’ll get tripped up much less infrequently if you grow your ventures/portfolios/companies slowly and wisely. Even if you forgot everything in this class 5 minutes after the final exam, always remember the following takeaways:
1. Et tu Debtus?: Leverage is your best friend but can turn on you if you abuse it. Real estate success is all about staying power, the ability to weather the cycles and come out on the other end without losing your shirt. After all, because I levered up conservatively, I’m still in business while many of colleagues are at FedEx/Kinko’s updating their resumes.
2. Deal Sourcing: You make money when you buy real estate, not when you sell it. Buy wisely, and you’ll have less exposure to market volatility. And don’t be afraid to walk away from a marginal deal. There is enough room for emotion in other aspects of life; don’t carry it into business decisions. You will never lose money on that deal you didn’t do.
3. Market Inefficiency: Real estate is a heavily fragmented market, so use your local knowledge and initiative to find untapped opportunities. If you don’t have local knowledge, pick a community that interests you and go get it. If you don’t have initiative, marry rich.
4. Portfolio Management: Try not to put all your eggs in one basket, but if you do, make sure you do so knowing the risks, and walk slowly. Remember that it’s harder to keep money than to make money, so once you get a nice nest egg, make sure you are vigilant towards preserving capital and reputation. If you’re a high-flyer and just want to grow at all costs, admit that to yourself and then learn to have a tough stomach so you can weather the ups and downs.
5. Time and Risk: Remember that finance is all about adjusting for time and risk. Coincidentally, so is life. Time is our most precious resource, something we can never take back. And the risks you take, the rewards you seek, will carve much of your path in business as well as just about everything else in life. Take risks when necessary, but know the stakes. Or, as my dad likes to say, “There are old pilots and there are bold pilots, but there are no old, bold pilots.”
6. Common Sense: Above all, use the numbers as a tool, but go with your gut and intuition when it comes to decision-making. Perhaps the most underused tool in life is intuition. Give yourself that power, listen to it, it’ll set you apart.
Okay, so that’s it for now. I truly had a wonderful time teaching and getting to know all of you over the past ten weeks. I am having a tough time getting over the fact that it’s time to move onto another quarter, but I wanted to make sure to ask you all to stay in touch with me and let me know what you’re up to as you graduate and embark upon your successful and rewarding careers. Kick butt out there. Or as Rodney Dangerfield said in Back to School: “Look out for number one, but don’t step in number two.”