Donald Trump: A Poor Real Estate Examplar

May 29, 2016

Donald Trump got his start (with his dad’s help) in real estate. Everyone knows that.

And Trump lent his name and endorsement to Trump University. Most everyone knows that.

But unless you’re involved in real estate investing, you may not be aware of Trumps other ventures into real estate and his organization’s symbiotic relationship with real estate investor clubs and associations.

There are hundreds of real estate clubs (often called REIAs–real estate investor associations) around the country. Some are affiliated with national organizations; others are independent. Some have only a few dozen members; others have hundreds. But these aren’t just “clubs” in the traditional sense. Their members spend a lot of money. One REIA in the mid-Atlantic has members who spend about $45 million annually . . . just at The Home Depot. Imagine what they spend elsewhere. Then multiply that by . . . well, who knows? Point is: Real estate investor associations are a real force in real estate investing.

Trump and Ragland

Sherman Ragland, head of DCREIA, and Donald Trump.

It was these groups that Trump and his companions worked their ways into over the past 10-15 years. It was one reason why Trump University initially was so successful; Trump was already revered. He had created an image and became a role model for investors. But . . .

Most REIA leaders preach that investors are there to help, to find solutions, for people who are in financial trouble. Yes, those solutions can produce big profits for the investors. But the investors are offering solutions that the traditional real estate establishment (brokers, real estate agents, etc.) can’t. They help people buy homes with lease options. They help restore neighborhoods by buying run-down homes and rehabbing them. They help people sell homes quickly, even when the homes are in terrible condition or when the sale has to be completed in weeks, not months. The message investors hear, and most accept, is: You can get rich by helping people solve their problems.

The problem with Trump is that he’s not concerned about helping solve other people’s problems. In fact, Trump despises people with problems.

In 2006, nearly two years before the housing collapse, Trump said:

I sort of hope that happens because then people like me would go in and buy. If there is a bubble burst, as they call it, you know you can make a lot of money. If you’re in a good cash position—which I’m in a good cash position today—then people like me would go in and buy like crazy.

That was real estate. The problem is: Trump doesn’t have any sympathy or empathy for anyone in a tough situation.

Remember the John McCain statement:

He’s not a war hero. He was a war hero because he was captured. I like people who weren’t captured.

I’m writing blog this on Memorial Day weekend, and I wonder if Trump (who never served in the military) feels the same way about members of the armed services who died serving their country. Are they heroes only because they died? But does Trump only like people who didn’t die? Does he consider those who died, to use his term, “losers”? (Oh, heck. I don’t have to wonder. Of course he does.)

Then there’s this:

Ariana Huffington is unattractive, both inside and out. I fully understand why her former husband left her for a man. He made a good decision.

That’s consistent with “Kick ’em When They’re Down Donald.”

From the National Review on Trump and eminent domain:

“Most of the time, they just want money,” he said. “It’s very rarely they say, ‘I love my house, I love my house, it’s the greatest thing ever.’ Because these people could buy a house now, that’s five times bigger, in a better location.” Trump has firsthand experience with eminent domain fights. In 1993, he tried to purchase the home of Atlantic City resident Vera Coking to expand his hotel and casino. When she refused to sell, New Jersey attempted to condemn the property and have her evicted. . . .

Trump later said he offered Coking $4 million; her grandson said Trump’s top offer was $1.9 million. Whatever the sum, Coking refused. In July 2014, with Coking now in a San Francisco retirement home, her family sold the property for $530,000. Trump called that amount “peanuts.” “She saved me a fortune!” Trump said with amusement. “I didn’t build a hotel in Atlantic City, which is dying, okay? I should send her a letter [of thanks.] I mean, honestly!”

There are dozens of other examples. But the point is: Trump is not, nor has he ever been, a shining example for real estate investors to follow. In fact, The Donald typifies everything a real estate investor should not be.

And with that lack of empathy, you don’t have to wonder what Trump would be like as President.

How Will Donald Trump Finance His Campaign?

May 12, 2016
Trump Tower for Sale

Will The Donald put Trump Tower up for sale?

I recently read–and responded to–a blog posting that questioned how Donald Trump would finance his campaign. (That blog, by Carole
Ellis in Real Estate Investing Today, is here.) That blog asked whether “a HUGE real estate sell-off could be coming in New York City? Let’s just say the money’s gotta come from somewhere, and the GOP isn’t coughing up yet…” Alternatively, might he borrow against some of his assets? The problem, Ellis suggests, is that Trump has made a big deal about not accepting outside contributions, about not “being bought.” Can he reverse that stand now?

I think he can. I know he can. Here’s my response:

I’d be willing to bet that Trump WILL take outside funds. He’s certainly, ummm, “adjusted” his positions on other issues even within this campaign on everything from abortion and the minimum wage to banning Muslims from entering the United States. And none of that seems to have hurt his popularity at all.

Admittedly, one of his core appeals (others include: “He’s not a typical politician” and “He tells it straight.”) is that he isn’t “bought” by anyone. True . . . but look at Bernie Sanders and his successful fundraising at an average of $27 per contribution. It appears that in this election cycle, it’s possible to raise huge amounts of money in small chunks from actual supporters. No one would accuse Sanders of being “bought” because he accepts campaign contributions. Trump might well do something similar and he’d get away with it.

Besides, Trump established early in the campaign that he’s the one who buys off politicians with campaign contributions. That early branding should inoculate him from possible charges that he’s being bought with contributions.

I’m confident he wouldn’t sell any of his properties. They’re too much part of his image and his ego. He’s emotionally attached to them. (Imagine a Trump golf course or building being sold to, gulp, Chinese investors.) Nope, that won’t happen. And while I don’t consider him to be the great businessman he’s cracked up to be, I doubt he’d over-leverage any of his prize jewel properties, either. Maybe he learned something–not financially but brand-wise–from his Atlantic City experiences.

No. He’ll figure out a way to take money from outsiders and make it appear to be a virtue, not a vice.

Why Donald Trump Is No Investor

September 10, 2010

Donald Trump’s no investor. He may well be a smart businessman. He’s a great self-promoter. You may or may not like him as a reality TV host. He’s got a lot going for him. Granted: Lots of skill. Lots of knowledge. Lots of talent. Great name recognition. Lots of money.

But Donald Trump’s no investor.

I heard him interviewed on MSNBC’s Morning Joe today. He debated and defended his offer to buy the plot of land near Ground Zero on which a proposed mosque would be built.

If you haven’t heard the latest developments: The investor who now owns the land bought it less than a year ago for $4.8 million. Donald Trump made an offer to purchase the land for the original purchase price plus 25%–which works out to $6 million, though Trump said it was closer to $6.2 million.  Trump said he was making the offer “as a resident of New York and a citizen of the United States, not because I think the location is a spectacular one (because it is not), but because it will end a very serious, inflammatory and highly divisive situation that is destined, in my opinion, only to get worse.”  The investor made a counter-offer, saying that he wanted $25 million for it.

Trump said on Morning Joe that he wouldn’t pay $25 million because: (1) he wasn’t going to be bludgeoned into paying such a high amount, especially in the name of religion, and (2) because he didn’t want the current owner to be able to say afterwards that Trump was stupid for paying so much.

  • There was discussion on whether Trump was making the offer just to gain publicity. He denied it.
  • There was discussion about whether moving the mosque another 5 or so blocks would defuse the situation. Trump thought it would–that it would make a psychological difference.
  • Trump was asked whether he’d (like the current owner/investor hope to) had ever made 5 times the amount of his investment on a deal. Trump said he had.
  • Trump was asked whether he’d be willing to pay $25 million, with $6 million going to the investor and the rest to charity. He said he would.

Those are all interesting and valid points of discussion.

But Trump’s no investor.

At no point was Trump asked–or did he give his own estimate of–what the land was actually worth. How much is it worth? An investor would put that question at the top of his list. If, hypothetically, the land is worth $40 million, then Trump the investor should have no problem paying $25 million. He’d pick up an instant $15 million in equity. On the other hand, if it’s worth only $20 million, then it’s overpriced at $25 million. Just say so.

I’ve known plenty of investors who’ve put a property under contract for just a few dollars–$10 or $100 in many cases–then sold that contract for $5,000-$25,000. The person who’s bought the contract–often a rehabber–doesn’t complain about the profit the initial investor is making. The person who buys the contract is concerned with whether it’s a profitable deal for him.

I’ve known other investors who’ve bought properties for $175,000 and sold them to other investors for $250,000. Is the second investor “stupid”–to use Trump’s language? No way, if the property is really worth $450,000.

The entire mosque situation is complex and highly inflammatory. There are many competing arguments about how it might be resolved. And there are perfectly valid reasons why Trump might not want to pay $25 million for the land. But to reject a higher counter-offer not on the basis of value but on the basis of emotion (he doesn’t want the other investor to call him “stupid” or to be “bludgeoned into the deal”) suggests that–for all his many strengths–Trump is no investor.