Want to build a wildly profitable, multibillion dollar real estate investing business that lasts?
Then you find a few key real estate education lessons and tips from one of America’s first home builders…
Eli Broad wasn’t the first person to ever build a home in America but he was the founder of KB Home, the first home builder to be publicly traded on the New York Stock Exchange. Formed in 1957, KB Home is still one of the country’s top builders, a Fortune 500 company and brought in almost $1.5 billion in revenues in 2011.
In a recent interview with Inc. Magazine Eli shared some of his own real estate investing education tips that enabled KB Home to become so successful.
5 real estate investing education tips for building a billion dollar business:
Eli Broad credits his success to a quote from George Bernard Shaw which dictates that all progress comes from “unreasonable” men; those unwilling to adapt and settle for the status quo. Applied to real estate Broad found a way to leverage a remodeling partner to complete homes for less than the competition (without basements) and sell them for less than others were demanding for rent.
2. Keep Overhead Low
At least in the early days, KB refused to borrow for construction and paid contractors once homes were sold, slicing overhead and building in more profits.
3. Perception & Positioning
When the firm went public it boasted a P/E ratio of around 40 times earnings and was able to position itself in the eyes of Wall Street and investors as being superior to other home builders, even though it may not have been at the time.
4. Demand Results
Eli Broad has gone onto become a significant philanthropist with foundations boasting $2.5 billion in assets. However, he differentiates these organizations from charities in that he still demands results and returns on money used. This may not be in terms of financial profits but at least in real results being achieved through education. So constantly demand your money works as hard as it possibly can whether it is being reinvested in real estate or going to support a good cause.
The home builder and its founders also recognized the need for diversity and branched out into numerous markets and added additional revenue streams through insurance and investment accounts. How can you diversify your business to keep up revenues through various cycles?