I just finished Donald Trump’s The Art of the Deal. I’ve been looking for good business/finance/real estate books for the past couple months (and would love to hear about more) and while I didn’t know much about Donald Trump before reading the book, I knew he had done a lot of large developments and I thought it would be an interesting read. I was correct.
The book starts out with a week in the life of Trump, kind of fun to read, but nothing life changing. The second chapter was the most interesting to me. After this he walks through his life of deals starting in Queens with his father going to Ohio for his first big deal, coming to Manhattan for his big deals in the city, and finally to Atlantic City for his Casino deals. After reading about the Casino deals the book gets bogged down in some deals that I didn’t find interesting; his investment in the United States Football League and his work on the Wollman Rink. These last couple chapters are the only ones where I thought Trump became a little self righteous. Before this the book was a breeze to read through and I was amazed at how humble he was and I really learned a lot from the book.
As I said the second chapter spoke the most to me. This is where Trump lays out the elements of the deal.
1. Go big – this is a little easier for Trump because he has more money then most. But it is amazing to learn about his courage to put his money into these deals, his skill at getting his money out, and his proficiency at turning poorly run unprofitable properties into money makers.
A good example of this is when he and his father bought a housing development in Cincinnati, Ohio. He found this deal in the listings of FHA foreclosures and got his father to invest with him into this 1,200 unit building with about 2/3 of the apartments vacant. The were able to get a financing for the property which gave them their money back plus renovation costs. After renovating the place they were able to increase occupancy, income, and reduce costs so that the property was performing well quickly.
2. Protect downside and upside will take care of itself – this is the advice that everyone gives, but is important. Constantly look out for how the deal could go bad. Also, never get so attached to a deal so that you can’t walk away from it. “If you can live with the worst-the good will always take care of itself.”
3. Maxmize your options – be flexible. Go in to a deal thinking about a number of options. You have your first, best case scenarios. If something happens so that you can’t do your first idea, move to the second and so on.
4. Know your market – I think presently all the blogs, magazines, podcasts, and newspapers help with this a lot, and something I enjoy studying. Trump reminds us that the oldest ways are still probably the best – taking your own surveys by asking neighbors in the area, and following your instincts.
5. Use your leverage – sometimes difficult, but obviously, do not seem desperate.
6. Enhance your location – doesn’t apply to everyone, but since Trump usually does a large development he can create a development that has the retail, residential, or commercial or the mix that he believes that area needs. For smaller developers, you want to create a space that you’re proud of. Trump talks a lot about keeping his places clean and how much this resonates. I think this is a great point.
7. Get the word out – Trump is great at self promotion/site promotion. He knows any promotion is only going to help his developments and his brand.
8. Fight back – fight for what you believe in. He gives the example of a time he didn’t take a tax break, and he didn’t give up and fought for it. I’d like to take this a different direction and say that most things don’t come easy so if you’re not confident enough in a property or an idea, or anything to fight long and hard for it, don’t do it.
9. Deliver the goods – it’s funny that this is so far down the list. Trump reminds us that you can have the best property, do the best promotion and it all be worthless if you’re not building a property that has value and is what your customers want.
10. Contain the costs – another obvious point, but something I learn more everyday how important it is. Be attentive to every cost. If you’re not, they project is going to be out of control before you know it.
11. Have fun – this is a great one to end on. If you don’t enjoy what you’re doing, you’re not going to be good at it. This is especially true, now. I feel that if you’re not constantly investing in yourself and your specialty, someone who enjoys it more and knows it better is going to pass you by.
The most important thing I took from Trump’s books, was that he was so confident in his abilities, that he wasn’t afraid to be the first one to invest time or money in a deal. I say time or money, because he gives a number of great examples of when he got a contract signed on a deal, but didn’t put any money down until he had an approval, or financing or any number of things. Second most important thing that I took out of the book was that he also was the first to try to get his money out of the deal. I realize that he wrote the book so he can put whatever spin on it he wanted, but in almost every deal detailed in his book, Trump gave up some profit or incurred some extra expense to get a partner, be it a bank or an investor to get as much of his money out of the deal as possible and wait to get his profit.