As many of you know, the inspiration for this blog title came from Bill Poorvu’s popular book, The Real Estate Game. The book was recommended to me by a family friend while I was in college. Nearly 8 years later, the book still sits on my desk, filled with highlighter and tabs. There’s a not a week that goes by where I don’t reference it. Sitting above my office desk reads a quote from the book – “Given all the potential investors in the world, why has this fabulous opportunity fallen into my lap?”
I was lucky enough to steal Professor Poorvu from his tennis game and chat about the book, the market, and real estate as a career. In addition to authoring multiple books, Professor Poorvu taught real estate at Harvard Business School for over 30 years and has been the managing partner of a number of private real estate companies and on the boards of several public REITs.
It was an honor to speak with the master of the real estate game. Much of the conversation below is a direct quote.
In an incredibly competitive marketplace, how can young people differentiate themselves? What core skills should they focus on and how can they develop the right experience and foundation?
What’s great about real estate is that there’s no one path, no one background that is key to entry. Often times the career path is dictated by the skills of the individuals: do you understand construction, design, or sales? If you look at most of the major developers, they started with a particular skill. Gerry Hines was a mechanical engineer, Trammel Crow was an accountant, and Stephen Ross was a tax attorney.
In addition to the diversity of backgrounds, every market is different and extremely fragmented. For every one national player, there are a thousand local players. A lot of people get their first job because they know people who are willing to help them. We all have to start somewhere and that’s the easiest way to do it.
What’s the most profound change you’ve witnessed in the commercial real estate business since you started working in the field?
I think the most profound change has come to finance. Developers and investors used to deal with a local savings bank or a local commercial bank and it was very much a relationship kind of business. As real estate got more securitized and the local savings banks went out of business, it became more of a Wall Street business.
There are also many more regional and national tenants. These tenants have become much more professional in the way they look at things. The legal world has also gotten much more complex and documents have gotten longer and longer.
We’ve also seen demographic and locational changes that have influenced where the opportunities are. You’ve seen what’s happened to the Midwest and the Rust Belt areas and how a lot of people have moved to the south and west. But change has been constant throughout the history of the United States with different regions prospering at different times.
What you need to do is figure out where you can add value to a particular company or piece of property. Do you have the skills to renovate that property, do you happen to see where the market is going, do you have a particular tenant who wants space? Gerry Hines’ first building was a 5,000 SF warehouse for his next door neighbor.
What are your thoughts on recent grads working for a big company versus a small company?
In today’s world, it’s where are you going to get the job. I wouldn’t be that picky, you can learn a lot in both settings. It depends on what you’re doing. In a large company, it’s all about whom you’re working for and what function you’re performing.
What are your thoughts on American-born and American-educated young professionals moving abroad to work in emerging markets?
Working in emerging markets by itself is risky. Local players have local ways of doing business. Often times there are language issues. If you go out there and expect to get rich quick, it’s not going to happen.
For example, not that long ago there were over a hundred real estate funds set up in India and now it’s down to a half a dozen to a dozen. Most of them have gone out of business. If you want to go out and live there for 15 years, you have a better chance for success. Sometimes, even in the short run, it’s a great way for a young person just to get experience in a different country and have fun.
What is your favorite building and why?
Whichever building I own which is fully rented with good leases and good cash flow.
What’s one piece of advice you’d give a young real estate professional just beginning his career?
Don’t take yourself too seriously. There’s a lot to learn. You will make mistakes. Be willing to work hard, network, try to keep learning, and don’t ever accept it when somebody says do it because that’s the way it’s always been done.
The whole purpose of writing The Real Estate Game was to get people to challenge assumptions. Using common sense is really the toughest thing to get people to learn.
Like Professor Poorvu’s book, I hope this blog encourages people to think creatively and challenge everything. And as always, continue to be a student of the game.