Your final users should be your biggest fans

Successful people throughout history have been visionaries who reimagined industries and niches within industries. From his own humble beginnings Urs Ledermann has understood this important concept. Although I learned several things from my long talk with him, perhaps none were as interesting to me as his belief that the best way to predict the future is to create it.

Humble Beginnings

I don’t come from a real estate family, and I certainly didn’t study real estate at university. I began my career as a headhunter, finding the perfect employees for large corporations seeking the best talent. I saw there was an open niche in the market at the time, and I wanted to solve this problem.

Although I enjoyed building a business in the headhunting game, I was quite aware of the volatility of the market. Companies have roles they want to be filled, and they bring you in to find the perfect employee. When you succeed, you make a nice commission, but a shrinking economy causes the entire headhunting industry to disappear. If companies aren’t seeking new employees, my entire customer base disappears.

I was in my early 20s and decided that it would be nice to have a house and find a way to balance out my income. I was seeking a source of revenue that would not be as vulnerable to shifts in the market. If my clients went through a season where demand was low for new employees, I could stay afloat with a steady income stream.

My office was actually inside a beautiful building. Having appreciated the surroundings for some time, I decided I wanted to own the building. I called my landlord, but he did not appreciate my idea. He shouted at me, saying the house was not for sale.

He was very upset, but I was very determined. I called him again a week later, and he finally decided to meet me. He invited me to a traditional private members club for gentlemen; perhaps he thought the environment would freak me out because I was so young. But I wasn’t willing to let his plan distract me.

By the end of that night, we had an agreement. I was 23 years old, and I bought that house with a handshake and a $150,000 down payment.

It was a considerable risk for me to buy a house that I did not have the equity to purchase. I needed to accrue $450,000 in the next twelve months or I would lose my deposit. Stabilizing the volatility of my headhunting business was critical, so I was willing to work extra hours and put in extra effort in order to take control of this asset, even though I was placing myself in a substantial amount of jeopardy with my handshake and deposit.

I planned to rent out the rest of the house where I had my office because the building was so large. I learned a valuable lesson with my first deal—real estate is a very slow business, you need to see it as long-term.

In the United States, people buy and sell houses within three months to make a profit, but in Switzerland, this is impossible. The real estate process moves very slowly.

Nobody sells a property within two years of purchase because taxes are brutal. Refurbishments or investments into properties are difficult for many investors in the short-term due to tax restrictions and tight permitting and construction regulations.

Headhunting is a very fast, short-term profit-oriented business; real estate was a massive change of pace for me. It’s very tempting to become attached to properties emotionally. During this time, I had to learn how to wait. I had to learn patience.

My growth in this business was meteoric because of my ability to be patient.

Reimagine the Vision

I recall seeing a commercial property, called “Kirchenweg,” designed and erected by the world-renowned architects Haefeli, Moser, and Steiger. Unfortunately, the project was too complex and too expensive at the time to obtain. It’s a listed building under protection, which is something that I normally appreciate. But Swiss industrialists owned the building, and the president of the company was hoping to get a higher price than we were comfortable offering.

Properties to me have energy; this energy in some way communicates with me. I explained this thought to him, saying that when the house was ready to be sold, Kirchenweg would come to me. He was shocked at the way I attempted to negotiate a sale. Four weeks later, his managing director called me and responded that the house was ready for me.

A building has to fit you and your lifestyle. We purchased the real estate and invested five years reconstructing and repositioning the building, within the protected parameter, to where it is today, with the assistance of a new star architect, Tilla Theus, who brought it back to life in a new light while preserving the old soul. I knew that employees would also want a fun experience while at work. Switzerland permits were very slow, and it took a much longer time than expected. But we waited and we were patient. Again, patience paid off, and we developed exactly what we were looking for. Such journeys, though grueling, become pillars in your career – and gems in your portfolio.

Seeking Beauty

Our company works vigorously to create and retain exceptional quality structures that stand out at first sight. It doesn’t feel like you’re entering just another building. They encompass a unique identity that differentiates them from the masses.

How many times have you driven into the parking garage of a building and suddenly wondered where you were because every garage is similar and mundane? This to me was a problem that needed correcting. I wanted to have exclusive and inviting garages in my properties to offer an experience as welcoming as you’d expect upon entering your living room.

The true dedication lies in making our apartments as well as our commercial and retail spaces enjoyable in the long run; for example, we commission artists to create pieces tailored to each building. More often than not I encourage artists to bring me ideas associated with the building. At the deepest level, this can make a huge difference. It allows you to create something that’s one of a kind, with an artistic brilliance to it that I would never be able to come up with on my own. We want our residents to love where they live, so there needs to be something special about their environment, whether they’re living or working there.

I also want our residents to be proud of where they live. Although this may seem like hyperbole to many, I believe that if you live in a nice building in pleasing surroundings, it encourages you to behave accordingly in your daily interactions. I am willing to reduce my short-term profits in exchange for long-term rewards. When you get people in a pleasant environment like that, they’re proud to be there and tend to stay, which results in lower turnover. Additionally, our units are treated with greater respect and attention, which in turn decreases overall reoccurring repair and capital improvement expenditures.

Doing things differently than other developers, and extending our services beyond standard industry practice, has allowed me the opportunity to reach my true aspirations. Our buildings offer a concierge service to cater to all our client’s needs. Having this regular and intimate interaction fosters with them fosters a healthy relationship and provides an extraordinary experience. Every time I’m working on a building or property, I ask myself this very simple question: “Would I let my daughters live here? Would they be happy living here? Would I live here?”

Not All Roses

Refinancing negotiations can make already intricate real estate projects more complicated. I believe that you simply can’t trust bankers. They’re not partners, and they have a complete inability to think long-term. Because they’re short sighted, always looking for the quickest buck, you have to be very careful with bankers.

Real estate goes through cycles, as economies expand and recede. During a recession, people often have the following thought: “The economy is shrinking. I have to lower my prices because something has happened to the system.”

But you must be able to think differently and say to yourself, “What are the options if I can’t sell this property? Maybe I can rent it out instead of selling it.” Maybe you can buy the adjacent properties and create something new. When a crisis arises, it comes unexpected, so you need a plan and an exit strategy in place for any unforeseen uncertainty.

I have a very clear focus: I only invest in urban areas. Most importantly I mostly invest in what the real estate industry considers “irreplaceable” locations, the timeless properties that will appreciate in value and preserve their quality over the long run. This has a positive effect on the overall appraisal of the portfolio. In these types of urban environments, you can’t do a lot of demolition and new construction development. There are so many barriers to cross that the typical property owner has a difficult time successfully entering the market. The risks are too high. It’s much smarter to renovate or plan minor alterations to an existing structure that does not require total demolition. What you want are the irreplaceable locations.

Miami overbuilds residential buildings because developers might believe that everybody wants to live there, but it’s all based on speculation. They target overseas markets – Russian, Brazilian, and others—because they successfully convince them that Miami is a secure place to invest. But these buildings are empty most of the year.

I know a luxury building in Miami that is top of the line, and only four families live in the entire complex. It’s a ghost building. That is not my philosophy. I don’t think of buildings as profit centers. I think of them as wonderful places for people. A building has energy and life. Without people living in a building, it’s nothing. This philosophy that sees the residents as an integral part of any building has been critical to my success in real estate. When I’m analyzing a real estate property, there are certain things that I look for.

For instance, I lived in Boston for three and a half years when my children were young. At the time I couldn’t speak English, so I decided to hire a university professor to develop my base in the language and further my IT skills. My time there taught me a little bit about the area.

So after selling my recruitment business, I thought, “I’m rich now. I never have to work again.” I began to remember how much I enjoyed my time in Boston and how vibrant the city is.

There are so many young people and universities; pharma and health play a huge role, the financial sector is rapidly growing, as are lots of other important businesses. What’s beautiful about this old city is that you don’t have to worry about new construction because everything in the city is built, which I absolutely love. There’s a little new construction planned for in the harbor area, but there’s no competition for what the city already offers.

My initial idea was to open up some new revenue streams outside of Europe, and I thought it would be nice to have some exposure in the United States. Doing business in a new region is all about meeting the right people, and I was lucky enough to meet the right ones to fit my needs.

In Europe, business relationships are more relaxed. I coach people, and people coach me. It’s not just business; it’s also a friendship. It’s easier to trust each other in Europe than it is in the United States. Unfortunately, my experience with Americans has often been about the dollar. Everything is cash. Nobody takes anybody’s word, and everybody’s impatient and paranoid. Remember: I closed my very first deal by paying $150,000 on a handshake. I never once had to wonder if my landlord would honor that deal, and I never once had to worry whether we signed a contract.

In the United States, you can’t do business with a handshake anymore. In Europe, once we sign a deal, it takes some time to complete the acquisition transaction. We can wait thirty or sixty days because we trust that a foundation has been established. It has to be fun to go to the office. We don’t want the stress of calling someone every day and asking, “Where’s that money?”

Because we do our due diligence and know who we’re dealing with, we know that the funds will reach us in a timely fashion, so we’re not worried that we’re going to give away a property and never receive the money. That’s never a fear.

Starting Over

If I were starting off in real estate today, I would be more invested in the big cities in the United States. New York City is going to be there forever. It has long-term appreciation. Assuming you bought a piece of land at market price, property in Manhattan will always go up in value in the long-term.

I’m also interested in looking at opportunities in Asia, especially China and India. I live in Europe – it’s where I’m from, and it’s a great continent. It will always attract tourists, but I like the residential sector. I like co-living areas. I think that’s so fascinating, and it’s where my heart and my passions lie.

Passion is the most important thing in real estate. We like to dream a lot, and we’re constantly coming up with new experiences for living. You must be a little bit crazy when you’re comparing yourself to the average person so that you can dream up and build amazing buildings that people desire to live in and see themselves living in for a very long time. You need to be a visionary and fix a problem for people. Sometimes people don’t know what they want, and you have to show it to them. Create a new experience for your users; make sure they have fun.

Real estate is a long-term business. Buying, fixing, and selling properties can take years. You will likely ride an entire real estate cycle in your career. Be prepared for the ups and the downs and avoid speculation.

Focus on developing strategies that are recession-proof and that will allow you to survive a downturn in the market, a change in the demographics, or unexpected geopolitical events. Write down your goals and your dreams. Review them every night before going to sleep. This will ensure that you achieve them.

You need to have very clear goals. The biggest mistake real estate players make is getting emotionally attached to their investments. That’s dangerous. In this business, you have to push your emotions aside. There’s no space for emotion when you’re managing other investors’ money because you have to be a fiduciary, and you have to serve your shareholders. You must be fiscally disciplined to succeed and grow in real estate.

When you’re using other people’s money, you have to treat it with more respect than you’d even treat your own. Don’t allow your emotion to cause you to spend someone else’s money on the wrong deal. The other mistake is not having local knowledge. I used to be on the board of a company owned by a Russian oligarch and a Swiss real estate firm. They were buying houses all over Germany, Holland, Switzerland, and some other countries with no idea about the local markets. This left them vulnerable, and they took a massive hit.

Like everything else, even at the highest levels, there are good and bad players. Someone small can outmaneuver a massive international company with billions of dollars when they understand their local market in a deep and meaningful way.

Learning by Doing

Unfortunately, I don’t think you can learn everything about real estate investing by simply attaining a degree at a university. A lot of it comes from going out there and doing it. As much as this book is filled with the knowledge and experiences of successful real estate investors from around the world, their wisdom will never become yours unless you take that knowledge and experiment as you execute your deals.

I’m a big believer in learning out in the world, the way that I did. I believe that questioning everything is part of this process. When you invest your own money, that learning curve is going to be steep. But when you work for other people, and you lose their money, you’re not going to learn as much because it’s not your money. It doesn’t mean as much to you.

My grandfather was a farmer, and he told me when I was a child that I had to be an owner, not an employee. When you work for a company, you have many external risks. But when you’re the owner, you only have yourself to blame.

I was fortunate to have great teachers at school. I learned a great deal about real estate from friends and real estate entrepreneurs, but I’m still learning. You have to maintain your curiosity. Sometimes, I call other great investors and developers and meet with them just to listen to them and learn. I want to hear their philosophies and how they see the world.

I love to read newspapers every single morning because it keeps me informed about the world, and what I see in these articles allows me to communicate with other people. I also love reading biographies. Reading the stories of the greatest figures in human history allows you to discern their similarities and figure out what made them so great.

I own private estates around the world in Europe and in the United States, but when I’m home, I’m always up early and start the day with a light 20-minute exercise and stretching routine. Sometimes, I like to go to the beach and relax as a way to step out of my business. That’s when I often come up with my best ideas. I am dedicated to taking long walks to think, and I play golf to keep myself moving, which also allows for me to be in the flow of the moment. Something that I really do and not just preach is live in the moment. I fully embrace situations and experiences, whether in the workplace or in private. I truly live by the philosophy of being mindful and aware. Also being in the moment with those you interact with is a very important trait I foster. I take the time and I am in the moment with that individual.

No matter what you do, have fun and enjoy the journey. Enjoy every single day. It doesn’t matter if you have 100 or 200 buildings when you’re lying in that casket. When my time comes I sure hope that I can say, “That was fun! I enjoyed my time on earth.”

I encourage you to live a happy life. If you don’t like your life, go and change it; start something new that you love. If you hate real estate, you hate the thought of negotiating, or you hate everything about this business other than the fact that you make a lot of money, don’t do it. There are loads of other things you can do to make money that you will actually enjoy. You could take the principles of this book and apply them to other industries and still find great value from these lessons.

You have the ability to make your own destiny. I encourage you to try and be a good person. Don’t be greedy and don’t step on others on the way to the top.

I hope that some of my stories have encouraged you. I believe that real estate can be a beautiful thing; you can really build and design beautiful homes and places for people to live, even if you’re doing it one family home at a time.