Gordon Gekko Rules of Real Estate

I am a film fan. No apologies. But I watch movies for entertainment. Remember the old saying: “If you want to send a message, call Western Union?” Attributed to famous producer Sam Goldwyn and dated, of course, since when was the last time you sent a telegram?

However, movies often in ironically comic ways attempt to be serious. And how are real estate investments and its advocates portrayed in movies? Generally, not fondly. Or perhaps on a par with greedy developers. To cite just one example:

The plowing under of an Indian graveyard by greedy developers led to not one but three Poltergeist movies.

No better example exists, however, of filmdom’s portrayal of greedy develolpers than Michael Douglas playing Gordon Gekko in “Wall Street.” That was about the stock market but it’s also about investments in real estate.

We more moral and honest folks can learn from Gekko.

One of his mantras was not to gamble. He quoted Sun-tzu, who in the famous Art of War said “all battles are won before the fighting begins.” Preparation, please.

In real estate parlance, this might be interpreted as knowing all you can before signing to buy that property. It also can be interpreted to mean that when doing renovations, make sure you have the right numbers for fixing the place up. Hire an expert if you can. Figure on something of a higher number than you expect  –  5 to 10 percent more to give yourself some leeway.

Also realize you are not buying for today. You are an investor and looking at tomorrow’s prices. Again, hire an expert to double check your results.

Never, ever take the first deal that comes along, even if at first glance it looks so good that if you pass it up, you will be sorry. It’s not unusual for big-time developers to make offers on only a small fraction of even potentially good deals. Copy big-time developer suspicions. Be skeptical because really good deals are not easy to find and they are often not as obvious as you might think.

County foreclose auctions are popular with many smaller investors. But these require quick price decisions.

Bank owned properties are generally more practical for your type of investor (meaning smaller and without a lot of cash behind you) because there’s more time to evaluate the deal and negotiate a price that you have concluded makes sense. But don’t forget that there are catches: added costs and the bank often can and does refuse your offer.

But whatever avenues you choose for buying, be sure to take into account Gekko’s saying that information is easily the most valuable commodity of all for investments of just about all types.

Gekko also famously said that “greed is good.” Sorry, Mr. Gekko, but at times that may have been true but he also ended up in prison. The moral: be careful with greed: it does not do anyone much good in prison.

Related Posts