Applying Engineering Principles to Apartment Deals

What kind of person do you think of when you hear engineer? I haven’t really paid much attention to what others think or say about engineers, but from what I read on the stereotype, I guess that’s part of being an engineer.

I searched for engineer stereotypes and found some interesting comments. One was from a guy at a dinner party with a group of CPAs and after a few glasses of wine, the conversation drifted to what they thought of other professions. “Doctors think they know everything…”, “Yeah, engineers think they know everything too!“, “Well, they do.”, “Yeah, I guess they do.”

I think this is funny, but don’t agree with the stereotype. I don’t think I know everything and neither do most of the engineers I’ve worked with. Most of us are more focused on what we don’t know (in fear of making a mistake) than bragging about what we do.

Another site had this: “You thought that the math people were nerds? No, engineers are the most hardcore of all the nerds. These nerds are so nerdy they build things with their nerd skills and that’s pretty cool. Engineers are probably the coolest type of nerd because they like to make things happen. Engineers like the physical, the tangible and they’re all very hardcore about their work too.”

Another added “Engineers are valuable to businesses because they don’t balk at difficult assignments and will dig in to find a solution.”

While there are always derogatory stereotypes, the ones above reflect some positive characteristics. Engineers do like the physical/tangible and do focus on details. This is how we are trained in school, but my experience predates my formal engineering education. I remember when I was 10 years old, I asked my mother if I could disassemble an antique light fixture (I was bored – we didn’t have electronics back then to keep me occupied). She reluctantly agreed and I proceeded to completely disassemble the fixture down to it’s smallest screw. With the parts all spread out on a table, she had no confidence that she would ever see it look like it had before.

The principles my father taught me as I watched him disassemble car engines and put them back together is simply ‘put it back together in the reverse order that you took it apart’. While this does require focus on details, it’s not that hard once you put your mind to it. To my mother’s relief, the lamp was returned to it’s original condition with no evidence it had ever been taken apart.

I found that this instinctive behavior has served me well throughout my career. Engineers approach everything systematically and with meticulous scrutiny. Every detail is important since problems (and the devil, as they say) are nearly always in the smallest of detail. Apartment deals have many moving parts, many details. An engineered solution means that the details have been reviewed and it works.

However, just reviewing details of a deal doesn’t mean that nothing can go wrong. The review of details in the due diligence process helps to populate a risk matrix that covers all aspects of a deal. Each potential risk event is evaluated for it’s probability of occurrence and the consequence if it becomes reality. Once the known possible risks have been identified, they can be evaluated based on risk tolerance to help make the final decision to invest. After the investment decision is made, the matrix is used to help manage risk and ensure the best possible outcome.

What opportunities have you found hidden in real estate deals?

I’d love to hear your thoughts on this topic. Please add a comment below.