Stories of True Self Made Real Estate Moguls
I find a lot of the rags to riches real estate stories hard to believe. How can you go from having absolutely nothing to being worth $500 million? I get how this happens when you own equity in a business and it grows at extraordinary rates, but real estate has somewhat of a capped equity multiple
Once you have significant capital to invest (maybe $5 mil) the story becomes more feasible. But I feel like the only way to get there is to start very young (early 30s) and have some sort of inheritance worth several hundred thousand or in the millions. Am I wrong? Am I underestimating the size of development fees when you have little skin in the game?
I have a friend's dad who went from selling magazine as an 8-year old to bootstrapping his way to a net worth that, if I had to guess, is north of $250M. Another example of a bootstrapping "mogul" is Jerry Buss, former UCLA Chemistry Professor and Owner of the Lakers before his passing.
A ton of current successful "moguls" were positioned at the right place and the right time during the S&L Crisis. If you read about most of today's wealthiest real estate investors, that time period was a huge catalyst to their net worth and career.
Let me tell you a little story about Donald J. Trump
What’s the biggest barrier to entry for a young entrepreneur? Liquidity to meet lender loan requirements? Assuming one could line up capital but doesn’t have the net worth as 99% of 30 year olds do not, what major boxes would need to be checked?
As a young entrepreneur, influencer, thought leader and CEO of my own small business, I find the biggest barrier to entering lucrative market spaces is within one's own mind. Once you learn to master your mental state, erase self-doubt and reach your own thrive state, it is just a matter of connecting with lucrative value-add cleints. If you can forge synergistic connections in a high-impact, disruptive way, in which you take a deep-dive into core competencies wherein you incentivize outside the box, bleeding edge business solutions to move the needle; then you can begin to ideate and unpack your underlying bandwith to reach both the low-hanging fruit and the prosperous propositions of real estate and other industries.
Thoughts on combining AI, and ICOs and real estate with a click funnel?
Really looking for some thought leadership on this vast untapped market
thx
Holy shit, that is the most jargon-riddled post of nothing I think I have ever read. Your consultanese is strong. Kudos.
It's been a long week, I couldn't tell if serious at first read. Sad part is I've worked with people who talk like this, and even worse seen clients eat it up.
Gerry Hines started as an Engineer working on air conditioning units in large buildings. His neighbor needed an industrial building so he offered to build it for him. His business grew from there. The key is that this was 60 years ago, it's probably impossible to replicate today.
Good point about how it was 60 years ago. I wonder if the money today is in emerging markets where there is more risk / potential growth
Just finished a biography on him, he is true self-made, although he did marry rich for his first wife. Also he was very aggressive at a time when 100% loans were available with minimal guarantees. I do think that makes things easier than today's environment.
How was the biography? I've been thinking about picking that one up for a while now.
Which one? There are a couple, I believe
I think I plugged this on another thread, but check out Sam Zell's autobiography "Am I Being too Subtle" (+1 for the audio book which Sam narrates himself, very entertaining). He tells his story much better than I could on here, but he started out managing, then building small deals while in college in Ann Arbor before building up the Equity companies and pioneering the REIT industry. We can argue that getting started was easier back then (which it likely was) but he's a good example of a self-made RE mogul.
I think you will find very few centi-millionaires/billionaires in RE that made it all, or most on one deal. Like you said, capped equity multiple and relatively tame growth rates are going to make this difficult. I think that a common trait you will find in many self-made RE fortunes is that they found a duplicate-able process and used power of compounding. Whether that is some sort of programmatic development where you are able to roll profit into owning more of each successive deals, or investing where you are able to continually attract capital by delivering consistent returns.
Maybe I am being optimistic, but I like to think that it is still possible today. It is easy to look at guys who have accumulated fortunes in RE and say that you couldn't follow that same path today, but I think that's true of any industry. No more billionaires are going to be minted by inventing the iPod. I would bet that when I am Zell's age (God-willing I make it there) and look back at where the RE industry was in the my 20s, it's going to look just - if not more - different to me than the same comparison would to him today.
It's definitely still possible.
However, it's important remember that selection bias plays a MASSIVE role in the way in which we look at "real estate moguls". Most of these guys like Zell or Hines have been through multiple cycles, whether that's the Great Recession or the S&L crisis in the 80's or anything previous to that. There are many many many times more investors/developers/etc who lost everything in those crises, and we never think about it because, well, they're broke. For every hundred of us in our 20s or 30s right now, 90+ aren't going to be going strong in 30 or 40 years. For the few who manage to stay afloat in bad times and grow during the good, they'll be worth hundreds of millions at that point too, because compounding and price growth and appreciation will all work in your favor.
For all these big guys in any industry, it's just a matter of staying in the game and understanding that you don't make huge fortunes on one or two deals, and it's better to sacrifice some upside in the short term in order to be able to hold on to your assets in the long term when shit inevitably hits the fan.
Tax efficiency & major buying events (S&L, GFC) are key. Notice that none of these guys are merchant builders or fee developers - they all got where they are by slowing accumulating a balance sheet and letting the cash flow ride.
As a merchant builder, this speaks volumes.
What exactly is a merchant builder? Small Equity in a development that you are doing?
I know a guy that started as a dyslexic plumber and ended up owning a few hundred million worth of class A office with almost no partners and half of the buildings debt free. Oh yeah, and he developed almost all of those assets. I doubt this can be replicated without 1980's lending practices (99% LTC).
https://www.bloomberg.com/news/articles/2018-03-16/li-ka-shing-retires-…
Interesting article. This is a good example of what I was talking about. The guy started a plastics company and invested the small fortune from that into real estate at the perfect time. Yeah he’s still self made, but I was trying to highlight how difficult it is to get to a $100mm net worth without starting with a smaller amount of wealth from elsewhere
HAHAHAHA. He is most definitely not self made.
I was asking my mom about li ka shing since she grew up in China. He was seeded via his father-in-law who became wealthy from selling gold.
So despite what the media lets you believe, the rags-to-riches is not true.
Behold, the boogeyman of European commercial real estate, the terror of Hudson Bay´s and the slaughterer of Karstadt, behold and weep: https://en.wikipedia.org/wiki/Ren%C3%A9_Benko
Back in the days when I was a broker, there was a business owner who purchased her 20,000SF industrial warehouse in Brooklyn to run her operations. She purchased it for around 8M (with 30% percent down I believe) and 10 years later, the area got rezoned to residential. She sold the warehouse for $47M. Sometimes luck plays a part.
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