John McNellis - 45 Years in Real Estate, The Lessons Every Investor Should Know
John McNellis has spent more than four decades developing commercial real estate, completing more than 100 projects throughout Northern California. But his real estate career actually began while he was still practicing law, when he turned a $1,500 investment in a duplex into roughly $90,000 through a series of early deals.
In this episode of the Real Estate Educators Podcast, Kevin Amolsch talks with John about his transition from attorney to developer, raising money for his first major shopping center development, and what real estate investing looked like when interest rates and cap rates were dramatically higher than investors became accustomed to over the past decade. John explains why higher rates don't necessarily mean deals stop happening, it may simply take time for buyers and sellers to adjust their expectations.
They also dig into how John evaluates passive real estate investments. His first priority is the sponsor: Do they have their own money invested? What's their track record? Are their interests aligned with investors? And are they making their money from successful investments—or loading the deal with fees? Only after evaluating the "jockey" does John move on to underwriting the "horse."
Timestamps
00:00 – From journalism to law school
03:25 – Why John left litigation for real estate
07:30 – Building deals while working full-time
17:20 – Why higher interest rates don’t kill real estate deals
21:10 – Preferred returns and profit splits explained
26:05 – How to evaluate a real estate sponsor
30:45 – Why experienced investors eventually lose money
32:25 – Underwriting the jockey AND the horse
34:15 – John’s book, Making It in Real Estate
36:20 – Understanding partnership structures and capital calls
40:05 – John’s advice for long-term real estate success
About Making It in Real Estate
John is the author of Making It in Real Estate: Thriving as a Developer. The book grew out of years of columns he wrote about real estate development and focuses on straightforward lessons designed to help investors and developers avoid mistakes he made throughout his career.
John says the book has sold approximately 40,000 copies across three editions and has been used at universities including Stanford, Berkeley, UCLA, Georgetown, Cornell, Clemson, and Vanderbilt. The latest edition also includes a section devoted to some of John's biggest mistakes and ways investors can lose money in real estate.
Connect with John McNellis
John publishes essays on real estate through publications including the San Francisco Business Times and The Registry, and reposts his writing on LinkedIn.
Learn more about John McNellis and McNellis Partners: https://mcnellis.com/
Learn more about Pine Financial Group: https://pinefinancialgroup.com/
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