INVESTORS’ CORNER: A Guru’s Scars

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It happens in pretty much every economic up-cycle when it comes to real estate. As more people have a degree of success in real estate, they feel empowered to want to share their information, knowledge and training with beginning investors. As can happen in real estate, there can be long periods of time when there is an upswing in the real estate market. Some of these individuals will have been investors only during those times when the market is going up and will have little or no experience investing through one or more protracted down-cycles.

I heard a statement the other day that resonated with me. “Beware of real estate gurus who refuse to show you their scars.” I know I have made several significant mistakes as a real estate investor to the tune of hundreds of thousands of dollars. I also know, however, that fighting to recover from those mistakes has made me into a better, smarter investor.

I was speaking to a small group of 60-70 investors recently. I shared with them that I want them to know about and learn from my mistakes so they don’t make the same ones. Yes, showing a bunch of checks from closings is very nice and impressive, but in a rising market and with liquidity and common sense, most anybody can make money. Show me instead people who’ve made money and survived as investors through multiple cycles, up and down. Let me find out what mistakes they’ve made and how they’re making sure they don’t repeat those mistakes. That’s the powerful and profitable teaching I want. Where did they leave money on the table? What could they do differently in strategy, communication or deal documentation to be able to get most or all that money the next time?

In no way am I targeting or criticizing any specific person. I’m issuing a general observation that while it’s fun to talk about making money when it comes to real estate investing, I choose to learn from the individuals who will readily acknowledge their mistakes and talk about how they’ve adjusted or changed their businesses in order not to make those mistakes again. After all, there’s nothing hypothetical about having to go back and fix your own mistakes.

Attorney Jeffrey S. Watson, Esquire is council to the National Association of Real Estate Investors and an advisor to the Metrolina Real Estate Investors Association, www.metrolinareia.org, which provides education, networking, and mentoring to investors in the greater Charlotte area. You may contact Jeff at [email protected].