What Real-Estate Investors Can Learn from Donald Trump’s The Art of the Deal

Aug 27th 2016

You may or may not like Donald Trump as a person, politician, or now, as President. But that doesn’t matter for this article (and our website ). The question here is whether a real-estate investor can learn anything from him and his 1980’s era book “The Art of the Deal,” which Trump wrote with Tony Schwartzwho seems to be having some regrets .

The answer is Yes.

If you read The Art of the Deal, you will gain insights about both real-estate investing and negotiating.

The book starts off with a narrative of a week in the life of Donald Trump, with the idea that this is a typical work week. Of course, we don’t really know if this was a typical work week, but it is still an interesting chapter.

When it comes to  investing in deals—in real estate or elsewhere—experience matters. Every deal is different, both in the creativity to form it and the problems that develop. So seeing several deals through offers you a backdrop of experience.

That is, when you are structuring a deal or “putting out a fire,” you can pull elements from prior deals to either come up with a creative idea or to solve the problem.

It doesn’t matter whether the prior deals were yours or someone else’s. If you see them develop or see how they were solved, you can use that experience. So a “week in a life” approach can be especially valuable for someone that invests in real-estate or negotiates other types of deals. If that is your area, you should look for ways to gain the experience of others.

The “week in the life” chapter of The Art of the Deal illustrates the disjointed nature of having several deals in different stages, which is reality. You receive a snapshot of one particular week and how Trump analyzes different pieces of different deals, one after another.

This is a good introduction to most of the rest of the book in which each chapter represents a particular deal. These are in-depth chapters that go from beginning to end in watching Trump putting the deal together (including his commentary). This isn’t a how-to book with spreadsheets; instead, Trump (and his co-author) describe the intangibles, the personalities, the politics, and the psychology behind each of these deals. This is rare in real-estate how-to books, so for that reason it is particularly valuable.

For example, Trump goes through the deals and negotiations for the Trump Tower, the Grand Hotel (reviving 42 nd Street), an Atlantic City Casino, the New Jersey Generals in the  USFL, and the Wollman Ice Rink, among other examples.

Obviously some specifics about the world have changed since the 1980’s, but the core basics of deal-making and negotiating are there. Trump has a unique approach, which includes much bravado and press (good or bad), so this book offers insights that are difficult to obtain elsewhere.

Scott Adams describes Donald Trump as a master persuader . If you agree, you can view his deals through that lens and pick up some tips from the master. If you like Scott Adams (of Dilbert fame), you can read our review of his book “How to Fail at Almost Everything and Still Win Big” here .

There is a reason that companies spend millions of dollars on CEO’s and other top executives or pay certain professionals thousands of dollars per hour: They have experience and skills that textbooks don’t teach. That is why an autobiographical view of a top power-player’s thinking and approach to real problems and situations is an invaluable resource.

Books like this aren’t how-to checklists. Instead, you should take them in and hope that part of them stick. Maybe a situation will arise later and you will remember how Trump approached the problem. It is Trump’s experience that creates the value for the reader.

If you want to learn more about real-estate investing, you might enjoy our articles on the financial benefits of real-estate investing and investing in vacation rentals .

Donald Trump’s Elements of the Deal

There is, however, one explicit how-to section of The Art of the Deal : In Chapter 2, Trump describes the specific “Elements of the Deal,” which are his deal principles.

Here they are:

Think Big: Trump says “Most people think small because most people are afraid of success, afraid of making decisions, afraid of winning. And that gives people like me a great advantage.” (46-47). He also says that “One of the keys to thinking big is total focus.” The authors of the influential book “The One Thing” likely agree .

Protect the Downside and the Upside Will Take Care of Itself: Many great capitalists have a reputation as risk-takers. The truth is that instead they usually set up deals in which the downside is minimal and the upside is huge. If you do enough of those, you will hit eventually. For more discussion on this, you should read one of our favorite books, Antifragile by Nassim Taleb .

Trump says “People think I’m a gambler. I’ve never gambled in my wife. To me, a gambler is someone who plays slot machines. I prefer to own the slot machines. It’s a very good business being the house.” (48).

Maximize your Options: Trump says “I also protect myself by being flexible. I never get too attached to one deal or one approach. For starters, I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first.” (50).

Know Your Market: Trump says “I do my own surveys and draw my own conclusions. I’m a great believer in asking everyone for an opinion before I make a decision. … I’ve learned much more from conducting my own random surveys than I could ever have learned from the greatest of consulting firms.” (51-52).

Use Your Leverage: Trump says “The worst thing you can possibly do in a deal is seem desperate to make it. That makes the other guy smell blood, and then you’re dead. The best thing you can do is deal from strength, and leverage is the biggest strength you can have.”

Enhance Your Location: Trump says “Perhaps the most misunderstood concept in all of real estate is that the key to success is location, location, location.” (54). Trump explains that you can, for example, take a mediocre location and turn it into something considerably better. This may not work for a single family house, but if you are developing a block in a city, this is good advice. Trump says “What you should never do is pay too much, even if that means walking away from a very good site.” (56).

Get the Word Out: If you are selling condos or trying to rent apartments or commercial spaces, publicity helps. You need people to know about your product. This is where Donald Trump has been masterful—using the press for free advertising. Trump explains that “One thing I’ve learned about the press is that they’re always hungry for a good story, and the more sensational the better.” (56). He points out that when he talks with reporters he is straight; he doesn’t try to deceive them or be defensive, because “those are precisely the ways most people get themselves into trouble with the press.” (57).

Fight Back: Trump says “Much as it pays to emphasize the positive, there are times when the only choice is confrontation.” (58).

Deliver the Goods: Trump says “You can’t con people, at least not for long. You can create excitement, you can do wonderful promotion and get all kinds of press, and you can throw in a little hyperbole. But if you don’t deliver the goods, people will eventually catch on.” (60).

Contain the Costs: Trump says “I believe in spending what you have to. But I also believe in not spending more than you should.” (61).

Have Fun: Trump explains that the real excitement is playing the game.

If you are a real-estate investor or someone that puts deals together (or wants to do either), you should pick up this book. You will gain some insights, enjoy the stories, and probably be better for having read The Art of the Deal .