Here's how you can recognize when it's time to pivot after a failure in commercial real estate.

Assessing your losses is crucial because it provides a clear understanding of what went wrong and how to move forward. Here are three steps I'd suggest: Conduct a Thorough Financial Review: Examine the financial impact beyond immediate losses to understand the broader effects on your portfolio and business strategy. Analyze Market Conditions and Property Performance: Look into how market conditions and property performance contributed to the failure. This helps identify external and internal factors. Evaluate Management Decisions: Reflect honestly on your own decisions and management practices to recognize any missteps. This self-awareness is key to developing a better strategy.

Understanding market trends is essential because they can indicate whether it's time to pivot your strategy. Here are three things I'd recommend: Monitor Economic Indicators: Stay informed about economic indicators that influence commercial real estate, such as interest rates and employment rates. Track Demographic Changes: Pay attention to demographic shifts that could impact demand for different types of commercial properties. Identify Emerging Industries: Look for emerging industries and trends that could present new opportunities. Aligning with these can help pivot your strategy effectively.

Having an exit strategy is paramount because it helps you minimize losses and reallocate resources. Here are three points I'd suggest: Know When to Cut Your Losses: Recognize when a property is underperforming and be prepared to sell, even at a loss, to prevent further financial damage. Consider Repurposing Properties: If selling isn't viable, think about repurposing the property to better suit current market needs. This can turn a failing investment into a profitable one. Free Up Resources: Ensure your exit strategy frees up resources that can be redirected into more promising ventures, optimizing your portfolio's overall performance.

When I first got into real estate, having an exit strategy (and ideally multiple exit strategies) was one of the first concepts I learned. The more exit strategies you have, the lower relative risk you have. When faced with an impending loss, it's time to start 'exercising' those existing strategies. Options include: 1. Repurposing the asset (e.g. office to multi-family) 2. Refinancing (today's market makes that very hard) 3. Selling (again not easy today but always an option) 4. Improving the asset to make it more marketable to drive up rents. Look at the deal from all angles and then make your best educated decision.

Failure can be viewed as a very negative thing. However, it's really only a failure if you don't learn from it. I've made my fair share of mistakes in real estate but have learned from them and adjusted my strategy from there. You may get resistance to your new strategy, but that ok, stick with it and hopefully it will payoff. If it doesn't, learn, adjust and move on again.

We all learn more from losses than wins, it's just reality. The pain of a loss is usually greater than the high of a gain. If you're in real estate long enough, you're going to lose money on a deal. One of the hardest lessons I leaned early on was thinking I could rehab an asset that needed torn down. I pursued the rehab strategy, and you an guess what happened...... I've done some great deals and learned what works as well, but you the learn the most when you take an L. It's just the reality of life. Don't risk more than you afford to lose, learn from it, and move on!

New opportunities can arise from setbacks. Begin by thoroughly analyzing what went wrong to understand the root causes of the failure. This reflection can reveal new market trends, unmet client needs, or inefficiencies in current practices. Stay attuned to feedback from clients, partners, and employees, as their insights can highlight potential areas for growth. Embrace a mindset that views failure as a learning experience, not a dead end. When you spot a new opportunity, be willing to adjust your strategies and leverage your resources to explore this new path. This proactive and flexible approach will enable you to turn failures into stepping stones for future success.