What can real estate investors learn from Bank of America’s head honcho?
As CEO of one of the largest financial firms in the world there is certainly some important lessons that leaders of real estate investing companies can learn from Brian Moynihan. Of course, given his reputation and beatings in the press perhaps the best real estate investing education tips he has to offer are on what not to do as a business owner…
1. Neglecting to Prospect for New Customers
Since Moynihan’s take over the bank’s focus seems to have been diverted from attracting new customers. Becoming distracted with all the emergencies and stopping the leaks has meant making it difficult for those that want to do business with the bank to do so. Without new customers you have to wring every penny out of existing ones, and that isn’t always good for business.
2. Failure to Test
A great example of the above was the nationwide rollout of fees for debit cards, without testing as advisors had recommended and the competition was doing. This meant losing a ton of customers, protests and masses of bad press.
3. Snubbing the Public
People are always watching and they will quickly pick up on the times when they are being snubbed and put down, just as when BofA’s chief executive suggested not everyone should own a home and alluded to the fact the government should stop trying to help them do so.
4. Failing to Get Practical Knowledge
One of Brian’s biggest mess ups which cost him a ton of credibility was claiming refunds to Fannie Mae and Freddie Mac were over, just before they soared 90%. Giving the benefit of the doubt this shows that while he might have had the book knowledge to land his position he didn’t have the experience. For real estate investing education is important, but a practical, proven system that really works is far more important.
5. Be Slower to Accept Investors
Everyone wants more capital today, but that doesn’t mean it should be accepted at any expense. BofA lapped up Warren Buffett’s offer of a $5 billion investment but it also means paying him $300 million in interest a year and giving up a sizable stake in the company.
6. Watch Your Profit Margins
While leverage can be a real estate investor’s best friend not all debt is good. BofA’s debt costs are now around 3% higher than its competitors’ meaning smaller profit margins and a tougher time competing in the years ahead.
7. Recognize Every ‘Deal’ is Not a Deal
Bank of America’s acquisition of Countrywide has almost sunk the bank. The funny thing is that all the company had to do was ask a real estate investor on the street and they would have heard how many bad loans were being made by the company every day. Savvy real estate investing pros know that every foreclosure is not a gold mine and that no matter how appealing it looks due diligence must be done.