Some lessons from Skyscraper Dreams

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Finally finished Skyscraper Dreams over the weekend.

Lessons learned:

  1. It’s best to start a real estate business when it’s possible to leg into 20% caps (this is now impossible);
  2. Ideally, you would build your 20% caps in a city destined to become the world’s financial capital, so that you would also benefit from massive land value appreciation across your entire portfolio (again, good luck!);

Lessons a bit more applicable to today:

  1. Leverage kills. Massive real estate empire crumbled in the 1930s and 1970s due to their owners being over-leveraged at the very worst moments;
  2. Conversely, having cash at the right times can make all the difference. The investors who were in a position to buy / invest in the late 1930s and late 1970s made gigantic fortunes.
  3. Office buildings are inherently riskier than residential (because businesses fold in downturns), but also have much more upside if you hit the timing right (rents can double or even triple over the course of, say, a seven year lease)
  4. Real estate is inherently political, because real property is immovable (and therefore vulnerable to taxation) and because land value is so sensitive to zoning;
  5. Philanthropy is the right thing to do, and also good business. One of the big families had the policy that you would choose a cause within six months of coming to work in the business or else one would be chosen for you; and, finally…
  6. Don’t sell.

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