From the Finish Line to the Closing Table: How Marathon Running and Real Estate are More Similar Than You Think

This weekend is the Boston Marathon.?

You don’t have to be an avid runner to know that the Boston Marathon is one of the most famous marathons in the world.

Full disclosure I am a runner and so I might have a bit more passion than others when talking about running.?

I find running to be a great outlet to clear your mind and challenge yourself to get better with each step forward.?

Although I no longer run marathons, I have run over a handful of marathons in my life, including the Boston Marathon.?

Putting in the work to run a marathon is not fun, but the joy and emotions you feel when you cross that finish line are hard to explain.?

Now you might be asking yourself this, “This is a real estate article, what does running a marathon have to do with this?”

At first glance, running a marathon and investing in real estate might not seem to have much in common. However, upon closer inspection, there are a few valuable lessons that can be learned from running a marathon that can be applied to investing in real estate:

Patience and persistence: Running a marathon requires a lot of patience and persistence. Similarly, investing in real estate often requires a long-term approach and a willingness to ride out market cycles. For instance, for the last decade, people were able to experience great gains on their real estate in half the amount of time, but in 2023 the real estate market has hit with what runners would call “a wall.” As interest rates climb, cap rates expand, and expenses increase, the end result is harder to achieve NOW, but can still able to be obtained later. Thus, an investor will need to be patient as they weather the storm and push through the “wall” of the current environment.?

Preparation and planning: Just as marathon runners need to prepare and plan their training in advance, successful real estate investors need to research and plan their investments carefully. If you are a passive investor that means you need to do your due diligence on the investment team, the property, and the plan they have in place to achieve the results they are projecting.?

Risk management: Marathon runners need to manage their risk of injury and exhaustion, while real estate investors need to manage their risk of financial loss. In today’s real estate environment, you want to aim for fixed interest rate loans at a lower LTV/LTC and with plenty in reserves to account for higher expenses and a longer timeframe to complete your project. Both require careful planning and attention to detail.?

Focus on the finish line: Marathon runners focus on the finish line, and real estate investors should focus on their long-term goals. It's important to stay committed to the end goal and not get sidetracked by short-term distractions. For instance, many real estate investments have nice to-haves like a cash-on-cash return during the holding period. While it is nice to have cash on cash, would you as an investor be willing to sacrifice short-term cash on cash in exchange for a higher IRR on the back-end exit of a deal? Marathon runners are certainly willing to experience the pain of the 26.2 in order to feel the ultimate reward upon crossing the finish line.?

Collaboration and support: Marathon runners often rely on a support team to help them achieve their goals. Similarly, real estate investors can benefit from working with a team of professionals, like:

1. A strong local boots-on-the-ground team that knows the secrets of the market
2. A great property management team to manage the day-to-day tasks at the property
3. A good group of attorneys from tax law, to opportunity zone, to property tax abatements, to subscription docs, etc
4. A CPA that can keep the books in order and generate the K1 reports in a timely manner
5. An engineering team to help with cost segregation to lock in more favorable tax advantages
6. And most importantly a sponsorship team that has a track record of being successful in this space.??

Overall, both marathon running and investing in real estate require discipline, focus, and a willingness to push through challenges to achieve long-term success.?

Good luck to all those runners and investors out there. May you achieve the results you desire.