Had a question for all the pure real estate people out there.
I come from a pure finance background and have only been in real estate for a short period.
For those of you that have been in CRE for a number of years and now "get it", how did you expedite your learning process?
I find that I can absolutely tear it up on the finance side (understanding leverage, DSCRs, IRRs, Cash on Cash etc.). I'm quite good on the legal side too of PSAs and understanding why we need certain clauses in the PSA.
But how does one go about really picking the markets and locations they like?
Everyone says you can't beat experience in Real Estate which I agree - some of the guys just have a "sense" for Real Estate (i.e. this market is missing X product, Building A is way better than Building B because of X, Y and Z).
People around me say you have to touch, feel and smell real estate and it's not just numbers. Is there anything you can do to help develop a "sense" for Real Estate or is it something people inherently have?
That’s a great comment. I am in the same boat. I have noticed a few things that help me with getting that intangible skill (note - I am in development):
1) site visits - helps me actually see what is going on and gives colour to the numbers I am working with
2) time - I’ve been doing for 5 years now and I’ve seen projects that do well and ones that have failed. One critical aspect I learned is you really need to understand civil.
3) working with other teams - we have a small team therefore I talk to the construction folks, trades, marketing, banks, etc. Helps me get a more balanced perspective on the market, project and general sentiment.
4) out of anyone hands - in looking back at the last 5 years, it does kinda of feel as though most of the critical outcomes in the project were due to luck in timing. For instance, when you locked in your constructions costs, when you completed the project and your exit price in the current economic conditions, etc. In the markets we operate in, a lot of the deals are priced very sharply and therefore it’s tough to even buy the land well.
Hope that helps but I might be out to lunch here.