Posted about 4 years ago

Five Ways Flying and Real Estate Investing Are Remarkably Similar

Five Ways Flying and Real Estate Investing Are Remarkably Similar


There are two activities I hold near and dear. You could call them passions, really. One is, obviously, Real Estate Investing. One look at my website or LinkedIn profile will tell you it's a big part of my life.


The second activity is one that surprises people - Flying. I come from a family of pilots, and I have been flying since high school. Currently, I have accumulated over 12,000 hours and 7 Jet type ratings.


On the surface, these two activities seem like night and day. But it surprises me at how similar they really are, once you peek beneath the surface. Here are five ways flying and real estate investing are very similar.

1. The Checklist.

In Flying, we are very checklist driven, because you don't want to miss anything when you are eight miles up. We have checklists for Power On, Cockpit Preparation, Before/After Start, Before/After Takeoff, and many others.

These lists ensure you will accomplish all of the required tasks, and also put you in the right frame of mind.

Commercial Real Estate Investing is similar. We need to have a checklist for picking the markets we are going to invest in. For example, we need to know:

   - Employment/Unemployment Change - are people working?

   -Population Growth- is the population growing or is it stagnant?

   -Population Age - the younger the better.

   -Job Diversity, Top 10 Employers, etc. - We don't want a city to be too dependent on any       one employer or industry.

   -Supply and Demand of Rental Vacancy Rates.

   -Other Factors - (e.g., new plants being built. New docks. New interstate exit...)

2. Preflight.

In Flying, we do a preflight of the aircraft before every flight. We make sure everything is as it is supposed to be: Logbook reviewed, documents and manuals, circuit breakers, systems test, lights, hydraulics, tires, brakes, controls, and more. Plus we make sure the aircraft is free of frost, ice, and damage.

In Real Estate Investing, we do the same when we find a deal we want to put an offer on. Before making the offer, we need to make sure everything is as it is supposed to be. We need to underwrite the property using actual numbers, not the pro forma that the broker provides. We need the rent roll, trailing 12 month financials, be sure of the type of financing in place, offer memorandum, and more.

Plus, if you are following a conservative approach (which is wise), now's the time to ask more questions: What's the area like? Is it a class C property in a class B neighborhood or the other way around? What is the Market Cap? And similar.

3. Flight Plan.

In Flying we always have a flight plan. We not only know exactly where we are going, but we also know the factors affecting our trip: total time, fuel burn, winds aloft, turbulence forecast, flight level, and total distance. And we plan for emergencies, knowing alternate airports along our route.

In Real Estate Investing our flight plan is our business plan. It answers the larger question of how do we plan on running the property once we have acquired it, and what is our forced-appreciation value-add strategy? If we update the units, can we achieve a rental increase of $75 a month? Can we implement a RUBS program? What is the upside to adding washer and dryers to each unit, or perhaps adding a play area, a dog park, and/or an onsite package receiving area?

4. En-route.

In Flying, the en-route phase is usually the longest, because we are at cruise altitude, making progress toward our destination. But this is not the time to take it easy, because things will not always go according to plan. We may be vectored off course for traffic, or we may have to account for unexpected weather or perhaps change altitudes for turbulence or more favorable winds.

In Real Estate Investing, this phase is the day to day running of our investment properties. We are making sure that our business plan is being implemented, and are in regular contact with both our property managers and our investors. We send monthly updates to our investors on how our properties are performing, and quarterly Profit and Loss statements to compare with our pro forma projections to see how we are doing.

Good, clear communication is essential in both Flying and Syndication.

5. Post flight

After our flight is over, we do what we call a "post flight". We make sure the aircraft is in good condition, any maintenance issue is addressed, and the plane is as ready as possible for the next crew. We will also do a debriefing of the overall flight to identify possible actions that might work better for us in the future. There is a saying in aviation: You develop good judgement from experience, and you get experience from bad judgement. We always need to learn from our mistakes, or from the lessons of others.

In Real Estate Investing, the post flight/debrief will be after we have finished repositioning our asset and are into the disposition phase. We will then look for what went right, and what we could do better going forward. Upon the sale of the asset and distribution of the profits to investors, it's always our hope to be able to offer investors a way to 1031 their profits into the next project if they would like to defer their taxes.

So yes, a successful flight and a profitable commercial real estate investment are very similar. Smooth takeoffs and smoother landings are always the goal, and are far more likely when you follow these five points.

About the author

Bill Zahller - Asheville, NC

I am currently flying the Global 6000 in a long range mission capacity. This keeps it interesting - one week its Beijing or Sydney; the next Rio or Rome.



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