Sherman Ragland, founder of DCREIA, dean of the Realinvestors Academy, and longtime commercial real estate broker and investor, has some very simple rules for success in real estate. He disclosed those rules during his overflowing training session at the Think Realty National Conference & Expo in Baltimore, Maryland, on June 24, 2017. “One deal can change your life, but you’ve got to own it,” he told the eager audience of investors, noting that one of the reasons he prefers larger-scale, commercial deals to residential real estate in many cases is that the effects of those commercial deals are so immediately life-altering. However, he added, there are a few rules that you have to follow to succeed in commercial real estate, and they do not involve thinking of yourself and your bottom line first.
Simple Rules are Best
“Rule number one is simple: do not lose investors’ money,” he said firmly. “No matter how bad things get, you have to make sure that you take care of your investors. You have to make sure that you have enough money to weather the storms, because you never know when the storm will happen.” To put the fears of new investors who might have felt that this type of rule would literally rule them out of commercial real estate, Ragland told the story of one of his first commercial deals. He explained that he had purchased an apartment building that had gone through “a really rough patch” that had him worrying about the eventual outcome of the deal. Once that rough patch was past, “it started putting $10,000 a month in my bank account,” he said. However, that $10,000 wasn’t really Ragland’s yet. “For several years, that money went to pay back my investors!” he explained, noting that until the investors who had stuck with him through the rough patch were repaid in full, the building’s income could not go toward things that he might have wanted to use it for, such as paying private-school tuition for his son or saving for college.
Sherman Ragland Tells a Personal Story
Ragland took the opportunity to recount a very personal angle of that deal as well. He recalled going to dinner with his father, to whom he had been describing the ongoing difficulties he was having with the property. “When I showed him the picture [of the completed building], he went crazy over it. He kept saying ‘Oh, I’m so proud of you. This is wonderful,’” Ragland remembered. He added that the three of them (Ragland, his father, and his son) went to see the building together that evening and that for them, “it really was a transition point in our relationship.” That point led to Ragland’s other rule for real estate investors.
“You can be in this business for the short or the long run, but your track record will be what is important,” Ragland said. He explained that many investors never pull the trigger on their deals because they feel like they are not getting good enough terms from their investors. This, he insisted, is a mistake. “If you’re in it for the long run, does it matter where you get your money or how much it costs as long as you’re making a profit?” he asked. “You have basically no experience, no clue, and you’re asking someone to foot the whole bill. That’s basically what you are asking on your first rehab. Get the money, do the deal, and make a profit. Now you have experience. You’re not a newbie. By the time you’ve done three, you’re on your way to being an expert!”