Stories of True Self Made Real Estate Moguls

JSmithRE2010's picture
Rank: King Kong | banana points 1,009

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?

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Comments (29)

Mar 14, 2018

Back in the day my great-grandpa used to own his own apartment and a commercial property (then a bar) in Little Italy. He was very far from rich at the time and had come over when he was a young adult. If he would have passed down both properties through the generations my parents would be sitting on millions with them. I'm assuming there are other stories like this, of people who happened to own property in NYC during it's explosion of value and development and reinvested their profits.

I agree with you that RE takes more capital and takes way longer to build up capital through though. It's such an illiquid market with such high transaction fees that you can't just day-trade property like you do equities.

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Mar 14, 2018

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.

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Mar 14, 2018

Let me tell you a little story about Donald J. Trump

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Mar 14, 2018

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?

Best Response
Mar 14, 2018

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.

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Mar 14, 2018
Thought Leader Entrepreneur:

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.

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Mar 16, 2018

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

Mar 16, 2018

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.

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Mar 14, 2018

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.

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Mar 14, 2018

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

Mar 19, 2018

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.

Mar 14, 2018

How was the biography? I've been thinking about picking that one up for a while now.

Mar 19, 2018
alyoop928:

Just finished a biography on him

Which one? There are a couple, I believe

Mar 15, 2018

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.

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Mar 15, 2018

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.

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Mar 15, 2018

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.

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Mar 19, 2018
decrebepro:

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.

Mar 15, 2018

What exactly is a merchant builder? Small Equity in a development that you are doing?

Mar 16, 2018

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).

Mar 14, 2018

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