5 Lessons That I Learned Working With Millionaire Real Estate Investors
Millionaire investors are in a world of their own.
“How are things going in your world?”
This is what he asked me when we first sat down to eat for lunch.
Coming from the battered city streets of Detroit, our backgrounds couldn’t be more different.
In my world, the streets are cluttered with blight and abandoned houses and dilapidated buildings.
Remnants of a once-thriving city now gone to waste.
There are some pleasant parts of the city, such as the now thriving downtown area, where revitalization is being ushered in by the billionaire Dan Gilbert.
However, just a short three-mile drive from the downtown area you will run into homes whose glory has faded. It is like traveling through the Twilight Zone. You almost wonder if you are still in the same city.
During lunch, we discussed various investment opportunities available in the city.
As a lifelong resident and real estate broker, I am familiar with the “sweet spots” of the city where the returns on investment are very appealing to an investor who willing to take the risk.
And he was willing.
He didn’t want to form an official business partnership. He wanted to structure the investments more like a personal loan to my company, so that he wouldn’t be liable if things didn’t go as planned.
Lesson #1 — Millionaire investors are willing to take risks with their money but not with their name and reputation.
I perceived that he was more concerned than I was about the risk of being sued and tied up into litigation.
Not saying that I want to get sued either, but as the old saying goes — you can’t get blood from a turnip.
We formed our “unofficial” partnership and experienced some success, suffered some losses, and all the liability fell upon me.
His name and reputation remained safe from harm.
He wasn’t the first millionaire investor that I worked with.
My first experience with a millionaire investor happened by chance.
He was a mortgage broker who also invested in the market and would buy fixer-uppers and rehab them. Then he would locate the buyers and help them obtain financing to buy the properties. He had a good thing going.
He had inherited his wealth from his father and got into real estate investing to help maintain and grow his fortune.
Before the real estate crash in 2007–2008, Detroit was a hot real estate market.
Over-inflated property values, shady appraisers, and the ease of getting a mortgage made it prime territory for investors who wanted to buy and flip for fast money.
I met him through an associate of mine and helped sell a few of his investment properties.
We ended up doing more business together through his mortgage company and eventually became friends and business partners in our own real estate brokerage firm.
The one thing I began to notice was that he was long on money but short on creative ideas.
Lesson #2 — Be careful when you share your valuable ideas with a millionaire investor.
Millionaires have the money to take your idea and run with it. You will share an idea that you’ve been working on and the next thing you know, they are implementing your idea without your consent.
I noticed this when I shared an idea that I was considering at the time about putting big-screen TVs in every property to help entice the buyers. I figured that one of the first things homebuyers do is buy new appliances and a big-screen TV.
At that time, big-screen TVs were still in the $1,000-$2,000 range, so it wasn’t as easily affordable as today.
Next thing I knew, he has big-screen TVs in all his houses for sale.
Idea stealing isn’t risky unless the person you share your idea with has the capital to pull it off easily.
Lesson #3 — Most millionaire investors are more concerned with long term ROI than short term returns.
I learned this lesson working with an investment group of millionaires from Hong Kong.
Their investment strategy was to buy and hold.
They planned on using their real estate investments as a store of wealth and sought the highest returns possible in the form of interest.
They were most concerned with the potential return on investment (ROI).
In dealing with them, I had to be very detail-oriented in regard to providing a breakdown of all potential expenses versus the return they would receive via rental income.
They were also betting on the hope that the property itself would eventually increase in value over time thus adding to their potential returns.
I admired them because they were risk-takers. It’s high risk to be a foreign investor in a real estate market like Detroit.
Unfortunately, they suffered losses due to unforeseen circumstances, however, they taught me the value of calculating your long term ROI before you invest in a property and not just looking for a quick buck.
Lesson #4 — Millionaire investors don’t mind taking the credit for all of your hard work.
I learned this lesson the hard way while working for a millionaire and former NFL star.
I was offered a minority stake in his investment company in exchange for “sweat equity.”
Although he was rich independently, the newly formed company didn’t have any value.
I received $50,000 in company stock in exchange for doing the majority of the work.
However, since the company didn’t have any assets or value, that meant that my stock was essentially worthless.
I would work 8 -10 hour days in efforts to promote the company and work on making deals happen. They never manifested.
We would meet with potential investors and he would gladly receive all of the credit for the work that I did while I played the background.
I didn’t necessarily mind this because of his celebrity status and the fact that I wanted to maintain my association with him.
We ended up going our separate ways after about a year of continuous efforts that didn’t translate into money.
It was an adventure that taught me that if you’re going to do the grunt work with a rockstar, be ready to play the background.
At least I received a celebrity endorsement that I still use to this day.
Lesson #5 — Millionaire investors will invest in good ideas that demonstrate value.
It’s good to have a millionaire investor as a friend.
They don’t mind investing in you or your ideas, if your ideas have value and the potential of a return on investment.
But I’ve learned that they don’t necessarily like to “loan” money to you. Too slow, too complicated. They want ownership. Ownership is the secret to making money.
Felix Dennis, the ultra-rich publishing entrepreneur and founder of Maxim, wrote about this in his brutally honest memoir How to Get Rich:
“To become rich you must be an owner. And you must try to own it all. You must strive with every fiber of your being, while recognizing the idiocy of your behavior, to own and retain control of as near to 100 percent of any company as you can.”
It’s interesting how we can be on the same planet but live in our own different worlds.
Sometimes these worlds clash. Sometimes these worlds blend together.
The one common thread is that we are all human beings and because of that, trust is at the core of doing business with anyone. Be efficient with time, be competent, and always add value. Above all, never give them a reason not to trust you. It’s difficult to regain trust once it’s been lost.
I hope these lessons are helpful to you and increase your chances of success the next time you work with a millionaire investor. Keep in mind that although you may come from different worlds and different backgrounds, you can find a lot of common ground to build a good business together.
This article was originally published by Anthony Legins on medium.