Real estate is an unsexy business

Real Estate is an Unsexy Business

Joe Stampone Start a Career 11 Comments

For the young people out there who read headlines in the WSJ, NY Times or other publications regarding massive property purchases, recapitalizations of shiny towers and so forth and find it very appealing/sexy, I’m going to let you in on a little secret.

I work for an owner/operator, which means we run the entire deal process including identifying investment opportunities, capitalizing the acquisition, operating the deal (overseeing 3rd party property management), managing investor relations, and executing our business plan. At a high-level, buying property is an attractive career, but what few understand is that it requires deep expertise and is filled with a lot of “dirty work”.  In short, it’s an unsexy business.

Real estate is an unsexy busines

I referenced it in my ‘a day in the life’ post and my buddy Vadim hit the nail on the head in his guest post on the reality of doing deals on the side; think insurance claims, property tax appeals, lender compliance, disgruntled tenants, legal battles, construction issues, banking issues, admin work and the list goes on.

Here’s insights into a few issues we’ve been dealing with in our portfolio over the past few weeks:

  • Theft – We own a retail asset in an emerging neighborhood that has a minor crime issue. The HVAC units on the roof of the building were recently stolen. The insurance claim and increased security has been a significant expense which has a major impact on smaller deals.
  • Mold – We own a multifamily property that has unvented attics (a construction flaw) and we recently noticed mold problem in one unit. A full property audit exposed issues in other units and while we’re remediating the problem, it’s extremely costly.
  • Dealing with Public Utilities – We’re repositioning an apartment community, and while the units are move-in ready (with leases signed), tenants can’t move in since the public utility company can’t get their act together. We’ve been working with over a dozen different employees in various divisions, who rarely communicate with each other!
  • Contractors – We used a local roof contractor on a small deal we owned in a tertiary market. While we had worked with him in the past and he does good work, his company fell apart and left the job half-complete!

While this has been a challenging few weeks, dealing with these sorts of issues is common amongst owner/operators, especially on smaller deals, and the unexpected expenses can crush investor returns. While you can’t fully avoid these issues, proper due diligence can help to identify potential issues, and owner/operators who can find creative solutions to avoid or minimize these issues, will be successful.

All that said, I love the real estate business. So you still want to get into real estate?

  • Rick_Middleton

    Great post.

    But, aren’t most professions “dirty” (doctors deal in all types of unseemly aspects for the greater good, lawyers build their livings on solving the problems of the every day person, pilots spend umpteenth hours stuck in the same chair and relative position, etc). Save for a writer or public intellectual perhaps. And even those professionals have to jump through all types of hoops and rings to get their work published and stay relevant.

  • Hi Rick, thanks for the comment. I completely agree. For some reason though, there’s a perception among young people that real estate is this sexy business. From a high-level perspective it is, but the day-to-day is spent in the trenches. Thanks for reading!

  • Hi Joe, I completely agree with your post and also with your comment. Yes, from the outsider’s perception real estate business means its the most dirtiest jobs compare to other jobs just because the work place for realtors is trenches, some plot of land.
    http://www.zrealty.com/

  • Jessica Sala

    Great post and I too agree. People think it’s a glamour filled job. I deal with primarily REO homes….It’s not LOL

  • Great post. Many people get sucked in due to the reality shows but dont realize that its hard work and alot of dedication that goes into being successful in real estate.

    Again, good post.

  • Spot on. The reality shows, get rich quick books, traditional news outlets etc. are all to blame. Thanks for the comment.

  • TeddyOne

    Joe, Keep the posts coming. The content gets better and better, If you could go deep into Case Studies of some Acquisitions and how you model and look at a deal from the trenches – I am sure the readership will really appreciate it. Best regards!

  • TeddyOne

    *Maybe like “The Deal of Month” or “Deal of the Week” Series and drill down into the numbers and metrics.

  • Teddy, great idea. I’m definitely planning on doing some deep dives into various things including deal underwriting. Stay tuned.

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    In Dubai there is special training and exam for real estate agent, after passing that exam Dubai land Department issues BRN No. to the agent. Dealing with public is the part of the real estate education which is included in RERE course. Recently my friend bought Villa in Arabian Ranches from RERA certified brokers, from there I came to know about RERE Certifications.