This publication is designed to provide accurate and authoritative information in regard to the subject matter covered.It is sold with the understanding that the publisher is not engaged in rendering legal,accounting,or other professional service.If legal advice or other expert assis- tance is required,the services of a competent professional should be sought. Vice President and Publisher:Cynthia A.Zigmund Acquisitions Editor:Mary B.Good Senior Project Editor:Trey Thoelcke Interior Design:Lucy Jenkins Cover Design:Design Alliance Typesetting:the dotted i © 2005 by Mark B.Weiss Published by Dearborn Trade Publishing A Kaplan Professional Company All rights reserved.The text of this publication,or any part thereof,may not be reproduced in any manner whatsoever without written permission from the publisher. Printed in the United States of America 05 06 07 10 9 8 7 6 5 4 3 2 1 Library of Congress Cataloging-in-Publication Data Weiss,Mark B. Secrets of a millionaire real estate developer / Mark B.Weiss. p. cm. Includes index. ISBN 0-7931-9358-3 1. Real estate development—United States. I. Title. HD255.W393 2005 333.33′068—dc22 2004015644 Dearborn Trade books are available at special quantity discounts to use for sales promotions, employee premiums,or educational purposes.Please call our Special Sales Department to or- der or for more information at 800-621-9621 ext.4444,e-mail [email protected],or write to Dearborn Trade Publishing,30 South Wacker Drive,Suite 2500,Chicago,IL 60606-7481. Dedication I dedicate this book to the world of ideas. We all have ideas.Many of us explore our ideas.Ideas are what make hu- mankind great. Developing real estate is based on humanity’s ideas. Property development includes creativity and functionality. If most people explored, genuinely explored, and pursued their ideas, we would be a happier people. C O N T E N T S Preface ix Acknowledgments xi Part I FIRST STEPS 1. Industry Overview 1 2. Success Strategies: Self-Evaluation—Is This for You? 23 Part II ASSEMBLE YOUR TEAM 3. Legal 39 4. Financial 55 5. Accounting 65 6. Construction, Maintenance, and Repair 75 7. Influencers and Contacts 89 Part III ELEMENTS OF SUCCESS 8. Evaluating Real Estate 99 9. Arranging Financing 109 10. The Art of Negotiation 127 vii viii CONTENTS 11. How to Read and Write a Contract 141 12. Taxes 153 13. Government Relations: Working with Local, State, and Federal Governments 163 14. Insurance 171 15. Advertising and Public Relations 181 16. Secrets of the Business You Won’t Hear from Anyone Else 197 Appendixes 203 Glossary 211 Index 229 P R E F A C E I started in the real estate business as a young agent specializing in com- mercial sales.I would,on occasion,be introduced to “real estate developers.” When I met these people, I was awestruck. I was meeting the people whom I had read so much about in the real estate press. These were the entrepre- neurs who built Chicago. Real estate developers were at the top of the real estate food chain. In the early 1990s, I was invited to join the Lincoln Park Builders Club of Chicago, and, as part of the “getting to know you process,” I was invited to attend their annual November Real Estate Forum. I was almost knocked over by being shoulder to shoulder with the real estate who’s who in Chicago. Obviously, I held these people in high esteem. A magic surrounded them. I never thought that I could be a member of this elite group. Not just the Lincoln Park Builders Club, but the club of real estate developers. Over the years,I have become a well-respected member of both groups, and so can you! The real estate developer’s club is worth joining. If Donald Trump in this generation is the person most recognized as a national real es- tate developer, it’s because he has a great publicist and is a third-generation real estate developer.Those are great assets, but you don’t need them to join the club. You’ve never heard of most real estate developers. In fact, years before Trump worked in New York, someone else had a dream about Manhattan Is- land. We rarely hear his name. In fact, he was discussed in an article I read while writing this book,and at the time I was not familiar with his name.I’m almost sure if you heard his name,you would make no connection with who he is or what he did. Do you know Peter Minuit? More about him later, but developers in Chicago—such as Hal Lichterman, Dan McLean, Evan Oliff, Rich Greenburg, Rich Wenxer, Harry Langer, Ron Shipka, Mark Olshanksy, Earl Malisoff, Lou Supera, Jim Crab, Patty Craig, Pat Fitzgerald, Mike Chioros, and so, so many more—are not well known. Yet they all have had ideas that changed the face of cities and impacted the lives of many. ix