Co-written by Camren Williams, a 2015 Summer Intern at Kegler Brown Hill + Ritter and Ohio State University student-athlete (football) pursuing a career in Sports Law.
Real estate investing has always been a common trend for professional athletes because of the apparent simplicity and the tangible nature of the investments. This movement toward real estate investing has led to the financial downfall of many professional athletes (for example, Scottie Pippen lost $27 million from bad real estate investments, Mark Brunell filed for Chapter 11 bankruptcy in 2010 due to real estate investments, and the list goes on). Real estate can provide a lucrative investment opportunity, but there are two key steps all athletes should take in order to protect themselves and increase their opportunities for success.
1. Establish a Team
First and foremost, find a real estate expert. Everyone needs a mentor, especially in this field. When searching for a mentor or partner in the real estate arena, athletes should use the same level of diligence they use when they select an agent, financial advisor or accountant. Finding a mentor or partner who has an established track record of real estate success is often less risky than trusting someone who has a real estate idea and is looking to the athlete only for his or her deep pockets. Establishing a team of experts is a necessity because there are details unique to the real estate world that the average person doesn’t understand. Understanding these complexities enables you to evaluate different options before making an investment decision. Real estate investing is much more than just appearance and location; it is a complex industry that can provide financial rewards, but can just as easily lead to financial ruin.
While establishing a team, many athletes have found success when acting as a co-developer. Real estate development is the act of purchasing real estate, making improvements to the buildings on it or constructing new buildings, and then selling the real estate again. A common denominator for successful athletes acting as co-developers is that they team up with an expert in the real estate field to create a development company or enter into an agreement to co-develop a specific project. Former NBA Hall of Fame star David Robinson has the brand and resources to stir up buzz in neighborhoods across the country for his company, Admiral Capital Group, simply because of his celebrity status. A critical component to his success, however, is his team of three other real estate experts who perform the research and analysis that many people don’t see behind the scenes. Robinson understands both his expertise in marketing and his ability to provide financial resources, but he has surrounded himself with experts in the field whom he trusts. It is a complementary system whereby one party benefits from the strengths of the others.
2. Find a Niche
In addition to building a team, finding your niche within real estate is very important. Investors/developers tend to have success in areas of real estate they best understand. Particularly for professional athletes, the hotel industry has been a successful option. Former Houston Astros first baseman Glenn Davis owns two Hilton-branded hotels in Columbus, Ohio. He explained, “Everyone always asks me, ‘What do you know about the hotel business? You’re a baseball player.’” And he always responds with, “You name the hotel, and I’ve probably been in it. I’ve spent half my life in hotels.” Davis has a unique perspective because, during his nine-season career in Major League Baseball, he has stayed in hundreds of hotels. Because of this lifestyle, Davis has become an expert in understanding the hotel industry. Professional athletes have unique perspectives on many different industries due to their lifestyles, which provide a foundation of research when investing in various areas. Of course, simply staying in hotels does not make one a real estate expert, but it can add a valuable perspective when partnering with other real estate experts in the hotel industry.
Earvin “Magic” Johnson is another prime example of someone who found a niche. With his company, Canyon-Johnson Urban Funds, Johnson and his team have focused particularly on fostering opportunities within urban communities. They have developed a proficiency in investing in multi-cultural and highly populated neighborhoods. This investment has included restaurants, movie theaters and many other businesses. Because of their knowledge and experience, Johnson and his team have been successful at differentiating between opportunities and identifying the right investments for their niche.
Real estate can be a very attractive investment area for athletes for various reasons. Establishing a team of qualified experts and finding a specific niche within real estate are the two key steps every athlete should take before investing.