Category Archives: Business Development

The Speed of Trust in Real Estate

 

Image courtesy Franklin Covey (2007)
Image courtesy Franklin Covey (2007)

 

Real estate is a team sport. How well a team performs as a whole depends on the quality of contributions made by each individual member, as well as how each key player functions within the context of delivering results for a successful outcome; on time and under budget. The cost and speed of success depends heavily on a key ingredient that can make or break the efficiency of a team and–in turn–the success of a project. That ingredient is trust. More specifically, that ingredient is smart trust.

In a book entitled The Speed of Trust (2006), Stephen MR Covey points out that although trust is largely misunderstood, it is critically important to learn the “how” and “why” of building trust to increase good will and efficiency of the team. A compelling excerpt from Covey’s book reads as follows (Covey, 2006, p.1):

 The One Thing that Changes Everything

“There is one thing that is common to every individual, relationship,  team, family, organization,  nation, economy,  and civilization throughout the world–one thing which,  if removed, will destroy the most powerful government,  the most successful business, the most thriving economy,  the most influential leadership, the greatest friendship,  the strongest character,  the deepest love.

On the other hand,  if developed and leveraged, that one thing has the potential to create unparalleled success and prosperity in every dimension of life. Yet it’s the least understood,  most neglected,  and most underestimated possibility of our time.
   That one thing is trust.” 

When placing this idea within the context of the real estate industry, it is apparent that trust is rare; if not altogether missing.  Covey explains how trust can be established, developed, and nurtured by constantly getting better at what we do, and aligning our actions with behaviors that embody trustworthy character and competence.

Trustworthiness and credibility become self-evident. When combined with the energies of people who can see and focus on the same vision, team synergy can produce results better than the sum of all parts.

The High Cost of Low Trust

Trust has an economic impact on all areas of life and business; a trust “tax” when trust is low, and a “dividend” when trust is high (Covey, 2006, p.13). It directly affects the speed and cost of making things happen.   To illustrate the point, Mr. Covey dedcribes how the events of 911 impacted the speed and cost of the check-in and boarding process at airports worldwide, as well as the effects of the Sarbanes-Oxley Act that was passed in response to scandals such as WorldCom and Enron. (Covey, 2006, p. 13-14).

When trust is broken, it significantly raises costs and adversely impacts the speed of getting things done.  Low trust slows down the pace of accomplishing things, while increasing the cost of accomplishing those things significantly (Covey, 2006, p.13). This applies to all areas of life and business; including the real estate business.

The Process of Rebuilding Trust

Building or rebuilding trust boils down to consistently demonstrating 13 trustworthy behaviors within the context of four categories,  also called the “4 Cores of Credibility” (Covey, 2006); namely Integrity,  Intent, Capabilities, and Results (p. 43):

These 13 trustworthy behaviors (Covey, 2006, p. 136-222) include:

1. Talking straight
2. Demonstrating respect
3. Creating transparency
4. Righting wrongs
5. Showing loyalty
6. Delivering results
7. Getting better
8. Confronting reality
9. Clarifying expectations
10. Practicing accountability
11. Listening first
12. Keeping commitments
13. Extending trust (smart trust)

Relating the 13 Behaviors to Real Estate

Overall,  these 13 behaviors can be used as benchmarks to measure all kinds of situations; whether it means evaluating a contractor, a coach, or any other member of the investment team. In fact, after benchmarking against these 13 behaviors,  stark realizations may come to light. You may discover and realize that you don’t have the right people filling key roles in your organization; or on your team. When such a discovery has been made, it becomes imperative to replace untrustworthy people as soon as possible with people who strive to be trustworthy, reliable, and dependable. If not, the dynamics common to low trust cultures will adversely affect performance; increasing operating costs, decreasing the pace of progress, and ultimately devastating the outcome of the best laid plans.

In the coming weeks, I will be featuring a blog post about each of the 13 behaviors as they relate to real estate investing, as well as building a high-performance team of trusted advisors and professionals.  It is a way of educating the market in an effort to raise the bar in an industry that typically functions in a toxic low trust culture; where most are in it for themselves at the expense of others. In this respect,  educating the market is key.

As the market becomes more educated about trust and its 13 behaviors, the more power there will be to use benchmarking tools that will facilitate the process of building highly effective teams in the real estate sector. People will finally understand how to consciously nurture and build effective teams upon a foundation of high trust, mutual respect, and consideration starting with ourselves.

The Fundrise Blog — Where’s the Risk? Understanding the Phases of Real Estate

In real estate, there are essentially three phases of development:

ground up construction

value-add (rehab)

stabilized

These phases represent the natural lifecycle of a real estate deal. Each sequential phase has its own set of work and therefore risk associated with it. In other words, the more phases a project must get through, the greater the risk but also the greater the potential for growth.

via The Fundrise Blog — Where’s the Risk? Understanding the Phases of Real Estate.

 

JOBS Act – Excerpt from SEC Final Ruling for Capital Raising

JOBS Act

 

SECURITIES AND EXCHANGE COMMISSION

 

17 CFR Parts 230, 239 and 242

 

Release No. 33-9415; No. 34-69959; No. IA-3624; File No. S7-07-12

 

RIN 3235-AL34

 

Eliminating the Prohibition Against General Solicitation and General Advertising in

Rule 506 and Rule 144A Offerings

“We are adopting amendments to Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933 to implement Section 201(a) of the Jumpstart Our Business Startups Act. The amendment to Rule 506 permits an issuer to engage in general solicitation or general advertising in offering and selling securities pursuant to Rule 506, provided that all purchasers of the securities are accredited investors and the issuer takes reasonable steps to verify that such purchasers are accredited investors”

More info via SEC, Final Ruling

 

SEC moves toward allowing crowdfunding stock offerings

Originally posted by: Matt Krantz, USA TODAY 3:18 p.m. EDT October 23, 2013

Up until now, crowdfunding has just been a way for consumers to give money to inventors concocting newfangled things ranging from Big Wheel bikes for grown-up and smartphones. But soon, it could become a way to actually invest in those companies.The Securities and Exchange Commission voted unanimously to propose rules that, for the first time, would allow investors to buy stock in companies over the Internet using a crowdfunding exchange. These rules could reinvent the way that companies raise money by allowing them to bypass the traditional costs of going public, which usually involved hiring costly investment bankers and accountants.

via SEC moves toward allowing crowdfunding stock offerings.

Creating Curb Appeal | Multi-Housing News Online

An interesting article regarding the process of designing an attractive curb appeal for multfamily properties.

 

By David Strosberg, President of Morningside USA

Designing a six-story apartment building that fills an entire block of an existing—and fairly small—suburban downtown is an undertaking that demands the utmost in thoughtful consideration and planning. Play it too safe and the bland design will be lost; be too cutting edge and the development will be uncomfortably out of place. So how does a developer strike just the right balance and create a building with curb appeal that is vibrant yet timeless? That is exactly the question we at Morningside Group had to answer when designing Wheaton 121 in Wheaton, Ill.

via Creating Curb Appeal | Multi-Housing News Online.

Building Your Real Estate Investing Team

Not having the right people on your team can become a drag on progress. It’s like trying to run a marathon with bricks in your pants. When this starts to happen, it is a sign that all is not well. Communication is the key; it can make all the difference.

“You wont find a mega-successful real estate investor without a carefully selected team helping them to make deals happen.  Learn who your key team members should be, what they bring to the team, and how to select the best.Every article linked from this list contains valuable information about the team members who will be instrumental in your success by helping you to leverage your time and knowledge and do not only more real estate investment deals, but more complicated deals as well.”

via Building Your Real Estate Investing Team.

Water in New Orleans: pushing a new approach to old problem | NOLA.com

A host of dignitaries, architects and public officials gathered Friday at the Port of New Orleans to unveil the Greater New Orleans Urban Water Plan, an effort to change the hearts and minds of a region that often sees water more as a threat than an asset.

Supporters of this new attitude described it as a way to stall the steady sinking of dry land and to manage flooding by keeping water inside — rather than outside — the levees that surround the Crescent City, East Jefferson and Plaquemines and St. Bernard parishes. But despite its aspirations, there remains the looming matter of the massive bill attached to it.

via Water in New Orleans: pushing a new approach to old problem | NOLA.com.

Most homebuilders are ‘not investable’ right now: Pros

“Uncertainty is no good for these stocks, and until we get some certainty around the taper and around mortgage rates, I think they’re just going to trade up and down and probably end up in the same place,” she said. “They’re tradable but not necessarily investable.”

For homebuilders, “the impact of rising interest rates will lead to slack demand, and that’s going to translate into slow earnings growth,” said Bob Wetenhall, managing director at RBC Capital Markets.

via Most homebuilders are ‘not investable’ right now: Pros.

SEC Lifts Mortgage Pool Advertising Ban : Juniper Capital

On July 10, 2013, federal regulators adopted a rule lifting a ban on mortgage pool advertising. The ruling, allows hedge funds to advertise to the general public to offer their securities, once the issuer takes reasonable steps to verify that investors are accredited. The ban on mortgage pool general advertising has been in effect since 1933, during the Great Depression.

The ruling is welcome news for fund managers, because it increases their ability to attract capital. Experts agree that now is an opportune time to set up a mortgage pool. The lifting of the ban should take effect by mid-September 2013, allowing many private funds and companies to raise private capital under Rule 506 to advertise and solicit accredited investors in their Reg D offering.

via SEC Lifts Mortgage Pool Advertising Ban : Juniper Capital.