Real Estate Lessons From The Ralph Lauren Story
I have a unique topic to share with you. You might be wondering from the title, what does Ralph Lauren have to do with real estate? Is he a real estate investor? Did he write a real estate book? Not exactly…
I’ve been reading a lot of biographies lately. Greenlights by Matthew McConaughey, Can't Hurt Me by David Goggins, and most recently the story of Ralph Lauren Genuine, Authentic by Michael Gross. The reason I wrote this blog is to highlight a few parallels between Ralph Lauren's story (the story of building his fashion brand) and investing in real estate. My hope is that you find these lessons impactful and inspirational.
Before we begin, let me ask you a question…when you think about long-term investing, what comes to mind? For me, I think of building something generational. Some people use the term generational wealth. Said another way, what does money mean to you? If you had a billion dollars in your bank account tomorrow, what does it mean? What would you convert the money into? Would you travel more? Spend more time with family? Be more charitable? Buy exotic cars and houses? Everybody is different…but what would you do?
These are big questions, so we will come back to them at the end of the blog. For now, let’s explore some of the takeaways from Ralph Lauren’s story and relate them to real estate.
Leveraging Other People’s Expertise (Building a Team)
Ralph Lauren is a master at building teams. Did you know Ralph Lauren never went to design school? He didn't go to college to be a fabric or clothing designer. He doesn't even do his own sketches for design concepts. What's the lesson?
Ralph leverages a team of experts who work at their own highest and best capacity to run his company and create designs. Ralph has a gift for finding inspiration and he’s a visionary; in other words, he has the “eye” for design. I'm not underplaying his talent; I am highlighting that he's built a team and he focuses on his own highest and best potential. He outsources the majority of the other tasks to free up his time.
You and I can do the same in real estate. Take investing in an apartment syndication for example. If you are not the expert in all areas of real estate or do not wish to do all the work, you can simply partner with teams who are experts in underwriting, finding off-market deals, property management, construction and technical analysis. You might consider this investment model so you can focus on your highest and best potential. That's the lesson; real estate and business are team sports. What role do you want to play in the team? You have a choice.
Ralph Lauren went against the grain in terms of the fashion industry. In the 1960s, he took a look at what everyone else was doing and he chose to go in a different direction. This same concept can be applied to investing. Most people are investing based on their parents’ advice, mainstream marketing, billboards, and TV advertisements. These outlets mostly suggest that you follow the herd and turn your money over to Wall Street. In other words, put your money in a 401k, IRA, buy annuities, stocks, bonds and mutual funds. There's nothing inherently wrong with these investments, as many of you know, I used to work for a very large, well-known brokerage firm, to learn this type of investing and stack it up against real estate. You may find, as I did, that there are sometimes superior investment vehicles in the alternative sector.
To think “alternatively”, in terms of investing, is to think private real estate, private businesses, precious metals, oil and gas master limited partnerships and so on. Typically, investments which are not publicly traded. There are thousands of investment options outside the world of Wall Street.
Back to the story... Ralph Lauren never set out to be a “grand designer”. He didn't say to himself at an early age, I'm going to launch a mega clothing line one day. In fact, he refers to himself and his company as “anti-fashion”. Going against the grain, thinking alternatively, and finding his own way…often this can be the best approach. As poet Robert Frost might add “I took the path less traveled, and that has made all the difference”.
Start Simple, Then Build From Your Foundation. The Key is to START
Ralph Lauren started with a simple idea. He was observing men's fashion in the 1960s. At the time (generally speaking), everybody was conforming to a standard gray or black suit and black or neutral colored tie. Most everyone shopped at the big box retailers, and there wasn't much of a “designers touch” in men’s fashion.
Ralph started his business by creating a men’s necktie. In the 1960s, men's ties were typically two and a half inches wide. Skinny ties, think about the TV show Mad Men. Ralph decided to mix things up and he created a four-inch-wide necktie, nearly twice as wide as the industry standard and he added vibrant colors, patterns and designs to top it off. Bloomingdale's (a major NYC retailer) took a gamble and partnered with Ralph Lauren and lo and behold, the neckties sold. Then customers started realizing, if I have this necktie that's vibrant and colorful, I need a new dress shirt that goes with it. So, Ralph started making men's dress shirts. Then his customers had a new shirt and new tie, why…they needed a new suit to go with them, right? He expanded into the suit business. And it began...
As we know, Ralph Lauren today has expanded into women's clothing, home décor, perfumes and colognes, activewear, watches and the list goes on. It has become a mega-company, BUT it has taken decades to get there. The lesson is to take action; start with a single step forward.
How to begin investing in real estate? Some prefer to start with buying shares of a publicly-traded REIT (Real Estate Investment Trust) for as little as ten dollars per share. I use that number for example purposes of course, each REIT will be priced differently. Some may be ten dollars a share, twenty dollars per share, one hundred dollars per share; it depends on the company. The point is, it doesn’t take millions of dollars to get started. In fact, this is what my nephews are doing to start their passive income journey, and their starting in their teenage years, which is incredible… if they keep it going.
You could invest in single-family homes. This might require twenty-five to fifty thousand dollars in the form of a down payment. You could house hack (rent spare bedrooms), flip it, turn it into a vacation rental, or purchase a buy-and-hold rental. You could also invest in real estate syndications as I do. You may have to come up with fifty to one hundred thousand dollars to invest in a private placement offering; however, the passive benefits may be worth it. The bottom line is that everybody is different. Everybody has a different risk tolerance. Do what makes sense to you, start with what you're comfortable with, evaluate your risk tolerance, and leverage licensed advisors if need help making a decision or strategizing.
The takeaway is that building a business or investing in real estate is not an overnight success. It can take decades to get where you want to be. The key is to start your foundation, then build from your foundation.
Setbacks are Part of Life – Be a Realist
This next lesson is not as pleasant, but it is necessary to discuss. Setbacks are part of life. There was a point in the 1970s when Ralph Lauren almost lost the business, he nearly went bankrupt. It came at a point of rapid expansion. You would think from the outside looking in, that the company was doing great, but the inventory, overhead, and payroll began to exceed the cash flow of the business.
Hopefully, if you and I are investing in cash-flowing real estate, we're not taking on such risk. At least not that of a venture capitalist running a startup company. There will always be hurdles and setbacks with investing, in business, and in life. There's always a recession around the corner and not every deal you invest in is going to be a home run. In fact, you might lose money in some deals. That is why diversification is so important. Just be a realist. In other words, you and I can’t bank on consistent 10-15 percent returns for the next 50 years; it doesn’t work that way. Since we know there will be setbacks, let’s plan for them. As Warren Buffett's business partner Charlie Munger says, “prepare for the worst, hope for the best”. He refers to himself as a “cheerful pessimist”. Excellent billionaire advice.
Design Your Own Path and Live it
The final lesson that I want to share with you is to design your own path and live it. This is one of the most inspirational takeaways from Ralph Lauren’s story. What did he actually do? Ralph Lauren created a lifestyle image for his brand, similar to that of a Hollywood film. He designed an imaginary lifestyle of romance, freedom, abundance, optimism, and a vision of the American Dream, and he sold that vision to his customers. The most inspiring part came after decades of creating this fantasy lifestyle. Ralph began living that lifestyle in real life.
If you have ever seen Ralph Lauren, he wears his own brand, he lives in the houses you see in the photoshoots, and drives the collector cars you see in the ads…genuine and authentic. That is the beauty of it all and also why I'm so passionate about teaching you and others about the benefits of investing for passive income. The purpose is not about money, it is about designing the life that you want to live.
At the beginning of this blog, we explored what money means to you. What would you do if you had time freedom? In other words, if you freed up your time by generating more passive income each month compared to your monthly expenses. I encourage you to get started on your passive income journey if you haven't already. Get started with designing your life. A life on your terms.
Thank you for tuning in and reading this blog. I don’t blog much anymore, but when I do, it comes from inspiration, passion, and the desire to help you achieve your goals. I hope you found these takeaways and lessons inspirational, impactful and valuable. Until next time…
To Your Success