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Last week I went to a meeting where a team exposed their plan to build a big stadium. Here, where I live now, in Auckland, New Zealand. No offense, but I love these meetings. Observing. Learning. Laughing sometimes. They presented other successful cases. Beautiful stadiums… Detroit, Los Angeles, Hong Kong… You know, great stadiums, with fantastic real estate developments around. Successful cases. The guys presenting have experience. Years and years… They said that these projects can take 10, 12 or 22 years to be completed. But still… They say that they want it finish by 2029. You count. 2025 2026 2027 2028 and 2029… That’s the fallacy of the best case… well… almost the ideal case. Ignoring experience. Ignoring what dozens of similar asset class projects have shown you. That you should aim for 10-12 years… instead of 5. If you don’t do it, you’ll depart from the wrong premises and assumptions. You’ll buying all the tickets for lottery of disasters, frustrations, failures, and all series of cost overruns. And I see this all the time. Big and small projects. When I talked to my more trusted contractor for one of my projects in Spain, his message is clear: “This apartment, in 2 months, is ready”. Yeah… Two months… Yeah… The reality is that the shortest similar flip took me 4 months and a half… You say this to him and the answer is… “Yeah, but in that case… what happened is that the materials didn’t arrive, and then the electrician went on holidays and then we needed to change the layout of the kitchen, and…” Yeah… Look. There is no project with “something happening”. No project without excuses. The average I get for any similar full renovation like that apartment is 6 months… Of course, it could be done in an ideal world in 2 or 3 months, but data tells me a different story. That ideal worlds are just that… ideal. Another example. One of my projects, for a full building, was going to be finished in 9 months. They started well. Very well… But the invoices arriving to me were only 40 to 45k€ a month… I was expecting at least 100k€. Suddenly, we needed to stop works in a small section of the building for analysis. It took us 3 weeks. Remember, a small section of the building, they were still working in the rest of the building. After we finished, with no additional works required, the contractor told us that he needed 3 extra months… additional time… Of course, they were late before. How did I know? First, cash. Second, data. These projects take a year in average. Materials don’t arrive. A subcontractor goes bankrupt. We need to adjust design for unexpected conditions. A client requests a small change somewhere. The guy of the kitchens gets delayed. Etc. Every project has some funny stories… But, let me more precise. Any project, any, all projects have some of those stories. So, imagining yourself being able to deliver in ideal conditions, with no issues, no room for unexpected things… is a fallacy. And this fallacy can get you into trouble as an investor very, very soon… and those troubles are terrible if you are playing with cash flows and having multiple projects. In publics projects, the answer is like this: “Vicente, but if I had to tell that this project cost $1bn more and 10 years instead of 5, it won’t go forward…”. This interesting answer is for another email. So, don’t think of rainbows in the sky but data in your Excel file. What’s data telling you? I’d love to hear your thoughts about this. Answer back, I love reading you. Stories, learnings and much more like this in my mentorship. ​The Real Estate Investing Incubator - 99$/month​ PD 1: If you liked this email, don't keep it in secret and forward it to a friend. They will thank you enormously one day. PD 2: If somebody has sent you this email and you want to receive emails like this yourself, visit theantagonist.co PD 3: If you want unsubscribe, click the link below. |
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It was under control. Of course it was. April 15, 2019. Semana Santa, aka, Easter… again. The most iconic cathedral in Europe. Notre-Dame Cathedral Under renovation. Experts on site. Protocols in place. And then… Fire. Not a small one. Not, it was not a “candela”… but a catastrophic one. The roof gone. The spire collapsing in front of the world. Millions watching it live… with popcorns. Oups… This was not an abandoned building. This was not chaos. This was a controlled environment. Or at...
They opened it. And it collapsed. Just like that. March 2018. Florida. Around these “Easter” days. A brand-new pedestrian bridge at Florida International University pedestrian bridge. Award-winning design. Fast-track construction. Public praise. And six people dead. Just like that… Cracks had already appeared. Not hidden. Not subtle. Visible. I repeat… f**** visible. Engineers saw them. Discussed them. And decided there was no safety issue. Hours later… it collapsed. Let me translate this...
Something worse than pricing a mega-project with consultants? Adding a second consultant to “validate” the price. Worse? A third one doing a peer review. Don’t laugh. This happens… Every day. Governments behaving like headless chickens. Not knowing what to do… but doing something anyway. Anything. Because “we need robust numbers.” Because “we need to protect public money.” So they spend millions… just to feel safe. Good luck with that. Let me simplify it for you. When you renovate your...