Last week I watched my home basketball team, the Denver Nuggets, play in the NBA finals - and take home the championship for the first time EVER! Watching the games, I realized there's a lot from basketball that can apply to real estate investing.
So how is a basketball team anything like real estate investing you ask? Well, listen up, and get ready for me to take this analogy to a whole new level…
In most of the real estate investments that my company Regency Investment Group puts together, we are buying apartment buildings with a group of investors for the common goal of making money on our investment. We seek to make money while we own the property (cash flow) and later down the road when we sell the property in the form of capital gains.
You’ve probably heard that investing is a team sport, but who is on that team and what are their roles? In sports, we’re all familiar with what a team does – it works together to try to win the game!
In a basketball game, every basket is kind of like the cash flow you get from owning an investment; then, the big win when the final buzzer goes off and your team wins is kind of like the final, profitable sale of an investment property. Lots of small wins (like cashflow and baskets!) along the way ultimately helps you win the game in the end.
So who are all the players on this basketball - I mean – investment team?
First off you have the point guard. This role is most similar to the syndicator or lead investor of a project. Like a point guard, the lead investor knows the playbook for the investment and calls the plays during the ownership of the asset.
Next, you have the guards. These are the core players who we absolutely need on our team and who usually help us win the game a little further back from the net. Meaning, they don’t see all the details of how the investment works, but they are crucial to the business plan. These are team members like general contractors, groundskeepers, CPAs, suppliers and other vendors. Similar to basketball, without them our chance of winning the game will fall apart.
Now for the post position! These are usually the tallest, biggest players on a basketball team, and they do best when they’re playing right next to the hoop. In investing, the post position team member is our property management company. They are the absolute closest team member to the property and know when things are going well or going poorly. The Post property manager is in the best position to make corrections when things go off course. Just the way the post is often the one to rebound missed baskets, the property management team is there to see when problems arise, rebound from the mistake, and then correct the mistake with an easy layup to score.
Okay, okay, I know it's a sports analogy, but I think the similarities between investing and a basketball team are pretty cool! - And hopefully this helps you remember who the key team members are when you’re considering investing in real estate and what their roles and responsibilities are.
And, there are still a few people missing from this basketball game..
Like all good team sports, you always need someone there to make sure everyone’s playing by the rules. In real estate investing, your attorneys act as the referee for your investment. Just like the ref in a basketball game makes sure the players follow the rules, attorneys make sure you stay in compliance with all the regulations of investing. Your transactional attorney will make sure that you have good contracts in place while your securities attorney helps you follow all the rules of capital raising. Having good referees (attorneys) is absolutely critical to winning the game of real estate.
Now, who else is missing?? The CROWD!! Without raving fans and a crowd to buy tickets to a basketball game, there would be no professional teams. In the same way, without investors real estate investments don’t happen! Even though the crowd at a basketball game doesn’t actively participate in playing basketball, they are critically important to the business. Investors typically aren’t involved in the day-to-day business plan of owning real estate, but they are the driving force behind why deals get done. So if you’ve invested with us at Regency in the past, thank you!
I hope this fun basketball analogy has helped paint a clear picture of the team you need in place to successfully WIN at the game of real estate investing. I’d love to hear your comments or thoughts, and you can easily reach me directly by emailing sarah@regencyinvestmentgroup.com. Thanks for reading!
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