People who know these things say that women often do better in the stock market than men. Not especially because they’re smarter than men or better at judging stocks, but because they’re more likely to buy and hold.

According to the research, men trade more often which reduces their capital each time because of transaction fees and taxes on any profits. I believe that. Men get bored quicker, we want some action, we want to DO SOMETHING, even if it’s more risky. Maybe even BECAUSE it’s more risky.

Imagine that!

The same is probably true in real estate, although nobody’s likely to research it and they don’t need to – they can just ask me. Men want The Big Kill, which also means taking The Big Risk. In the stock market, I’m told that’s known as the Risk/Reward Ratio: The bigger the risk, the greater the potential reward.

I haven’t heard it lately, but there’s an old saying that the way to make big money is to buy liquor by the barrel and sell it by the drink or buy land by the acre and sell it by the lot. On the frontier, the owner of a few barrels of whisky could put a board across a couple of them and be in business. The adult beverage business has gotten a lot more complicated, riskier and expensive since then.

The same is true of real estate development, except more so. No longer can a developer push a few skinny dirt roads into 20 acres and turn it into 40 or 50 lots and even if it took 10 years to sell out, the cost of carrying the unsold lots was minimal. Especially since the entire acreage was probably paid for out of the first dozen lots sold. Zoning wasn’t even important, since it either didn’t exist or was minimal.

Best I remember, nothing outside of local municipalities was subject to zoning, leaving all of unincorporated Lowndes County at the mercy of whoever wanted to do what.

Today’s residential subdivisions must meet strict city/county development standards and doing that sure ain’t cheap. Roads usually require a 60-foot right-of-way and they must be paved, often with curb and gutter installed. That’s serious money, but what’s buried in the ground is often more expensive. Water and sewer lines, power lines, storm water drainage and a few other things I forget.

Just getting to the starting point of all of that means surveys, engineering, site clearing, often soil and environmental surveys, city or county inspections, zoning, green space, drainage retention ponds, subdivision and development regulations, entrance/exit requirements, buying permits --- all of this going on while the developer listens to the ticking of the lender’s interest clock tick-ticking away 24 hours a day.

Commercial and retail development faces the same hurdles. Between the time a residential, commercial or retail development starts on paper and the first sale is made can take long enough for the economy to take a slow dive into the dumpster, leaving developers with empty stores and unsold lots growing some expensive weeds. Then leaving the lender with the same thing and if the developer also the backing of individual investors, leaving them with nothing but a very expensive tax deduction.

Oh, but when it works, it can work really well indeed. I admire those guys with the nerve to take those kinds of risks and make it work and don’t begrudge them a nickel of profit. They will have earned it, especially since they’ve probably had their entire net worth and then some on the line. That’s why I’ve said that developers keep on getting richer and richer, until they go broke since many of them keep on thinking they can hit a home run every time, can keep on rolling the dice and never lose.

That can lead to an exciting life, but then jumping off a cliff or spitting on Superman’s cape can be just as exciting. There’s a Chinese saying that goes: “May you live in interesting times”, although it’s more than a saying, it’s meant as a curse.

What’s “interesting” also is the number of high-income professionals making some of these investments. “Interesting” tips over to flat out “amazing” when some of them try developing on their own. Without any effort, I can think of a couple of medical professionals who’ll probably have to work a few years past their preferred retirement date as a result of dabbling in real estate. There’s just something that leads otherwise intelligent people who are highly educated in one field to believe that their complicated knowledge in one area will transfer over into real estate, when all they should be bringing to the deal is a check.

They’ll get some nice tax deductions, though. Bad investments can do that. They would have done better adopting me, I haven’t had a lot of experience throwing money around, but I could learn to be a very expensive adoptee and just a GREAT tax deduction. I’ve offered, but nobody’s signed the papers yet, although I’m still hopeful.

It’s best not to find that out the hard way that real estate investing is more complicated than it looks. I’ve seen figures presented to investors for cash flow, expense and profit estimates that could only have come from a dream or a serious blow to the noggin, but it’s gonna take a real estate pro to recognize that.

How do you recognize a pro? Start with somebody with his or her own investment track record which probably cuts out as much as seventy or eighty percent of local Realtors. Check references, of course, but anybody claiming to be a pro will know the price differences for differently zoned land, office and commercial rents per square foot, approximate building costs per square foot for different construction methods, the meaning and correct use of cap rate, cash-on-cash, internal rate of return, depreciation schedules, after-tax return and other methods to determine investment yield and also be able to discount multiple future cash flows to reach the current value of those cash flows today.

Those are just the highlights and since dozens of books are written about real estate investing and analysis each year, you theoretically learn how to apply them from that. You’ve gotta add a good bit of experience to the mix, though. Those books often don’t agree with each other.

Mike Hill has been in the real estate business in Valdosta since 1976 and hopes he made all his beginner’s investment mistakes long ago.