One thing I’ve learned from working full-time for the past year is that it’s very easy to get blinded by your interests. As an active real estate firm, we want to do lots of deals and create strong risk adjusted returns for our investors. However, we shouldn’t just do what we’re doing without wrestling with anything. We need to be be questioning every assumption.
Hands down, due diligence is the single most important aspect of creating strong risk adjusted returns. All risks, benefits, and value drivers of a transaction must be thoroughly understood before capital is committed. As investors/sponsors we should never be reluctant to walk away from a deal, no matter how deeply we’re into it, if either we identify unacceptable risks or lack sufficient information to identify the key risks.
No matter what business you’re in you should be wrestling with everything.
What are you wrestling with?