For many, the Melbourne Spring Racing Carnival means beautiful weather, the thrill of the track, and a modest wager or two. For others—namely the trainers, owners and big gamblers—it’s serious business. Tens of millions of dollars are at stake—not to mention the glory and prestige of marquee events like the Melbourne Cup and the Cox Plate. It may be a pleasant afternoon for the casual spectator, but for anyone with a lot of coins in their pocket, fortunes are won and lost in the pounding of hooves.
Real estate development is—if you’ll pardon the pun—a different animal. There are no cheering crowds, no announcers calling the race, no winner’s circles or fancy trophies at the end. A TV broadcast covering a real estate project could go on for years, and it certainly wouldn’t be very exciting. Real estate is generally a very slow race, full of waiting and mundane bureaucratic details.
And yet, the rewards can be truly great—much greater, in fact, than the rewards of a lucky day at the track.
So what can people who are interested in real estate development learn from the glamorous, exciting world of high stakes racing? Are there principles, tricks, even philosophies that translate from derby to deed, from horse to hotel, from race track to land track?
First off, horse racing demonstrates that as real estate developers and investors, we’ve got to use both information and instinct. Most who attend the Melbourne Cup put less than ten dollars on the races, and get over seven of those dollars back. Others know everything there is to know about the horses, the jockeys, the trainers and owners. Only when they’ve poured over the information, and thoroughly educated themselves on all aspects of the race, do they bring the element of instinct into their strategy. They know their decisions can result in big gains or big losses, so they use everything at their disposal to make those decisions more informed. Statistically speaking, the most successful strategies are those that have been carefully thought through from the beginning.
Fortunately with real estate, a losing horse rarely leaves you empty handed. The value of a property may not appreciate as much or as fast as you had hoped, but in most cases, the race goes on. The passage of time, or the right strategic changes, can still shift things in your favour. If it doesn’t, you can always sell up and recover at least a part your investment.
Here’s another lesson from horse racing: Unusual bets pay bigger when they win. If you wager all your money on a horse that’s expected to finish last, and that horse finishes first, the payout will be greater than if you’d put it all on the favourite. In other words, you can put a million dollars into a Sydney condo and there’s a good chance your value will appreciate. You can also put a million dollars into a lesser-known city or country that looks ready to boom. Your level of uncertainty might be higher, but you certainly stand to gain a lot more if the strategy works.
The wonderful thing about these lesser-known horses is that you don’t need a million dollars to get in the game. A well-placed, modest investment in a place like Nigeria or Brasil (or even Tallangatta!) can become a solid winner over the mid to long-term. The trick is, again, to strengthen your strategy with as much quality information as possible.
Above all, it’s important to be creative, flexible, and willing to move with the winds of change. The Melbourne Cup has traditionally been the most popular and well-attended event of the Racing Carnival—until 2001, when Derby Day and Oaks Day eclipsed the Cup in attendance.
In real estate, as in horse racing, there are many tracks and races to run. It’s impossible to know exactly how the landscape will change tomorrow or next year. That’s half the fun of it, knowing anything could happen. At the same time—fortunately—we can do much better than a shot in the dark.
For further industry insight, please follow the links below.