Lessons - 80’s Real Estate Market vs Today’s | Bob Knakal - RK Real Estate

When I look at the real estate market, now it seems like there's a lot of real tours out there that are just getting started. Was it as competitive back then in the 80s as it is now? Is it always been that competitive just to understand what the dynamics were for like you getting that job and you making your mark and how successful you were? Yeah, I think the world has changed pretty dramatically. If I take you back to the 80s, commercial real estate wasn't really a mainstream job category. A lot of the folks who were active in commercial real estate back then, it was the second, third, fourth career for them. They had done all the things, got into real estate somehow. Today, a lot of colleges have real estate majors, kids getting interested in real estate, a lot younger age. Real estate has become a much more mainstream asset class in terms of institutional investment. I think it's changed very dramatically. Interestingly, folks have said to me, gee, now with all the new technology you have the deal process is so much quicker, there must be so much more business going on today than occurred back in the 80s and 90s. The interesting thing in New York is that each successive decade, there have actually been fewer properties sold. But what technology has done is it has allowed an individual to do significantly more than they could have done in the past. There are years in which I've sold over 100 buildings. There's no way I could possibly do in the 80s or 90s with the technology the way it was. I think what's happened is it actually has allowed fewer people to do more business because you have more horsepower with the strength that technology gives you. It's probably a smaller industry today than it was previously. It's interesting. I think people are getting into it a lot younger today. It was very unusual for me being a college kid to get into real estate as a first job at a school. Back then, today, it's very, very commonplace. We have hundreds of thousands of folks applied for some internships on very, very competitive. I know it's like that at every shop. It's really it's great to see that people are getting into real estate at such a young age. When you progress in your real estate career, in New York specifically, what pushes you down the route of doing commercial? That's a behemoth that you're taking on. I'm assuming that it's hyper-competitive. The best of the best take it on is where you've built your career. What was the passion in commercial real estate? That sounds a little funny. Passion for commercial real estate. It's something that passion for making money, passion for solving a certain problem. How do you get a passion for commercial real estate? It was always fun to that first summer driving around looking at the buildings. Don't forget, the security in commercial buildings is very, very different in the 80s. You basically could walk into any building anywhere. The way leasing brokers used to canvas big office towers, you just got in, took the elevator to the top floor, got out and walked into every office and said, let me talk to the guy who makes real estate decisions here. That's how lack security was back then. I was driving around looking at these buildings. One building would be an office building. The next one is a retail property. The next one is an industrial building. He is looking at all these commercial properties and it was so cool to walk inside them, see what was going on right now. Experience it. Experience the money that just goes into some of these organizations and these buildings. It must be wild. It was just something that I really liked right off the bat. I always was very statistically and numbers oriented. It all stems from being a baseball card collector as a kid. I was probably one of the few kids that spent more time looking at the backs of the cards than the front of the cards. Always like to look at stats and kept track of my own stats. I was a baseball player, a picture as a kid and always kept track of those. When it came to real estate, that first job was very statistically oriented, figuring out the sides of the building, the square footage, writing down a lot of data and it just really resonated with me right off the bat. I never considered getting into residential real estate. There are some fundamentals that are similar but it's a vastly different business in residential than in commercial. I am very curious about your entrepreneurial route that you took and you built your own brokerage and then obviously you sold it. I want to go down that road and unpack some of the learnings that you obviously figured out as you were building. But I would love to understand just what for people that are listening that are not in real estate or not in commercial real estate, what does a commercial real estate transaction look like? What does it look like from finding the land selling the land, buying the land all the way through to when they start to build? Can you just walk us through a typical transaction and what that looks like so they understand the scope of work that you would do? Sure and I'll start with just kind of an example to give folks a sense of what the business is and I always try to simplify it in a way that you really can very transparently understand what it is. So let's say I was going to leave New York and I'm going to go to Iceland and I'm going to sell rocks for a living. What I would do is I make up a list of everybody that owns rocks. I then study the rock market, understand what different types of rocks sell for, how many there are of each type. Look at sales trends and really become an expert on the value of rocks. And then I'd make up a list of everybody that wants the buy rocks and I would try to develop relationships with the people who own the rocks and when they want to sell the rocks, I'd ask them to hire me exclusively to be their agent to sell them. And then once I got hired, I'd call all the people that want to buy rocks and that's the brokerage business in a nutshell. So basically I have a list of folks that I'm trying to develop relationships with that own real estate in New York. I'm trying to explain to them that I've done it before I have the capability, I have expertise in the subject matter and that if they hire me to sell their building, I'm likely to get them a higher price than if they hire somebody else. So I get hired to sell it and then we send the information out to the thousands of people that have expressed interest in buying properties here, get folks interested, answer questions for them, give them information about the building, who with the tenants, how much are they paying, how long are the leases, what are the expenses, what kind of return will this investment provide and then you go through the process of getting people to make offers on the building and then you deal with the top two, three, four people at the top of the back and ultimately sell to the one that's willing to pay the highest price. So it's a fairly simple business. It's just really hard because it takes a lot of discipline and doing a lot of very basic fundamental blocking and tackling every day. A lot of relationships have built in I'm assuming. Yeah, with that, the key is to be top of mind with somebody because if you think about the New York market and use Manhattan as a microcosm south of 96 street, which is the prime part of Manhattan, there are 27,649 buildings. The average turnover of that stock of buildings has been about 2.6% of the total stock in anyone year. So building sell only once every 40 years on average. So the idea is to be there when that owner decides, hey, I need to sell whatever the reason might be death, divorce, taxes, partnership disputes. There may be a compelling strategic reason why somebody wants to sell, but you want them the second after they think, hey, I need to sell. You want the next thing for them to think of is, hey, let me call Bob and the way you do that is by constantly developing and nurturing a relationship with that owner, sending the market information, calling them, speaking to them all the time, answering questions that they have always staying in front of them so that you remain on top of mind for them when they decide they need to transact.