Real estate analysis: When good is good enough - by Daniel Calano

Perhaps you have heard the expression, “perfection is the enemy of good.” If not, how about, “paralysis through analysis.” Even back in Elizabethan England, they were aware of the concept when Shakespeare wrote, “Faint heart ne’er won fair maiden”. You get the point: sometimes you have to be bold, stop analyzing, and commit to action.

I love the first expression that the pursuit of perfection can keep you from doing anything at all. Recently, I have been involved in a real estate project consisting of new construction and rehab. These days, it takes many professionals to be involved to get a project through. In an area where I am working, permitting alone requires the usual lawyers, architects, structural, electrical and site engineers, security designers, green-building consultants, kitchen and bath designers, decorators and stagers. It’s painful, but the main point is it’s a lot of egos in the room when it comes to making a decision. Each independent professional wants to achieve perfection, not only to satisfy personal needs, but also to ensure that the project does not have a mistake that has far-reaching impact, attributable to them. All very understandable. 

In my case, usually every week, there were at least half of the professionals involved in a decision, often as modest as kitchen cabinet design. To give you some context, a recent decision was being considered regarding the material and size of the cabinet drawer pull, which led to how they lined up with others, how the spacing of cabinets was impacted, and how that impact would relate to cabinetry in the bar, the pantry, the mudroom, and the adjacent great room furniture. Given this much interdependence and ramification, one could understand how the drawer pulls decision became a little obsessive. 

At one point, I, who was allegedly in charge of the project, said, “You know what, I really don’t care that much about the drawer pull”. You could hear the proverbial pin drop in the room. People were stunned that someone in charge didn’t care. My point was, of course, not that I didn’t care, but that we needed to move beyond perfect democratic decision, on to a compromise so that the project wasn’t delayed.

In my consulting world, I decided a long time ago that, given a problem, I could get to 75% of the solution within short order, but the remaining 25% could take a lifetime, if I let it. I resolved at that point to accept the notion that I would never have a perfect, unassailable, bullet- proof solution to a client’s problem. As an example, I have seen retail shop projects, which looked like winners, but were not in sunny enough positions on the walkway, did not have enough window glass storefront, had the wrong indentation of the door from the sidewalk, or worse, were located on the wrong side of the street. Some of these problems are resolvable after the fact, and some seem forever burdened.

The point is that no one is good enough to determine exactly what product will work, in what place, with what design, under what circumstances, and in what economy. At some point, it’s a bet…that is, unless you’ve lived in that neighborhood for a lifetime. People on the street often know what you will never know.

So what do we do as consultants, alleged experts in our field, trying to reach the best solutions for our clients? We recognize that it is impossible to know everything, but we do the best analysis we can. We so inform our clients. We recognize that there are risks, and we make clear what the trade-offs might be. We hedge the risks, financially, as well as emotionally, noting that things may not work out, at least for a while. But, we provide alternatives for interim success or options for future change. We do everything we can to make a project “good enough”, if we can’t achieve “perfection”. 

Real estate developers, for whom I have the most respect, know that if they analyze too much, they would never do the project. Some, often the most intuitive and successful, do not want to know everything. They want to rely on their gut. They may be good enough to live at that extreme. For most, a prudent path is to work with the best professionals, reach reasonable conclusions implemented in reasonable amounts of time, hedge the risks and take the leap. 

Daniel Calano, CRE, is the managing partner and principal of Prospectus, LLC, Cambridge, Mass.