Avoid Costly Mistakes: 3 Leadership Principles for Smart CRE Investment Decisions

High-stakes commercial real estate (CRE) deals don’t just require adequate capital. They demand sharp decision-making under pressure, where every choice can either compound into long-term success or spiral into costly mistakes.

Too often, investors make calls based on gut instinct, rushed timelines, or incomplete information. The results? Burned relationships, missed financial targets, and wasted years trying to recover from preventable missteps.

Consider a hotel investment sponsor who closed a deal with a family office investment partner they barely knew. The tight timeline – just 45 days – forced them to focus only on urgent due diligence while deferring deeper conversations about the property’s long-term vision. Three years later, misalignment soured the relationship. The investor and sponsor parted ways with little accomplished.

It didn’t have to end this way. A structured approach to decision-making could have flagged the warning signs early.

In this article, we’ll explore three battle-tested leadership principles that separate top-tier CRE investors from those who struggle. These frameworks – Second-Order Thinking, the OODA Loop, and the 40/70 Rule – ensure you move decisively without taking unnecessary risks.

TL;DR: Three Leadership Principles to Avoid Costly CRE Mistakes

  • Second-Order Thinking – Always ask, “And then what?” to anticipate unintended consequences.
  • The OODA Loop – Make fast but informed decisions by constantly adapting to new data.
  • The 40/70 Rule – Act once you have 40-70% of the necessary information to avoid both recklessness and analysis paralysis.

For more insights on high-stakes commercial real estate investing, subscribe to The Hard Corner, where I break down actionable strategies for CRE sponsors and investors every week.

Why Smart CRE Investors Rely on Decision-Making Frameworks

Many investors believe that experience alone leads to good decision-making. But the truth is, without a structured approach, even the most seasoned professionals can fall into reactionary thinking, emotional bias, or decision paralysis.

The best investors don’t just rely on intuition. They follow proven frameworks that help them think critically, move efficiently, and reduce costly missteps.

The challenge in CRE isn’t just identifying opportunities – it’s knowing when to act and when to walk away.

Let’s explore three decision-making principles that will help you make smarter, more confident investment choices in high-stakes situations.

Second-Order Thinking: Seeing Beyond the Immediate Impact

Most investors evaluate deals at face value. They assess cash flow, location, and financial projections, but many fail to think past the first layer of consequences.

That’s where Second-Order Thinking becomes a game-changer.

Instead of asking, “What happens if I do this?” you ask, “And then what?”

This forces you to consider the ripple effects of every decision – both positive and negative.

The Cost of Ignoring Second-Order Effects

The hotel sponsor who rushed into a deal with a family office investor fell into this trap. On paper, the investment partner seemed like a great fit – capital was available, enthusiasm was high, and the deal looked promising.

But no one asked: What happens after the deal closes?

  • What if the investor’s long-term vision doesn’t align with the sponsor’s?
  • What if they have different risk tolerances or exit strategies?
  • What if operational decisions become a point of conflict?

Three years later, these second-order consequences became reality. Without alignment, progress stalled. The deal became a deadweight instead of a growth engine.

How to Apply Second-Order Thinking in CRE

Before making a major decision, push yourself to go beyond the obvious. Ask:

  • What does this decision look like one year from now? Five years from now?
  • What unintended consequences might arise?
  • What could make this deal harder to exit later?

Great investors don’t just think about what’s happening now – they anticipate how today’s decisions will impact tomorrow’s outcomes.

The OODA Loop: Making Fast, Smart Investment Decisions

In CRE, speed matters. The best deals don’t sit on the market for long, and waiting too long to act often means losing out.

But making fast decisions doesn’t mean making reckless ones.

That’s where the OODA Loop (Observe, Orient, Decide, Act) comes in – a framework originally developed for military strategy but widely applied in business and investing.

Applying the OODA Loop to Real Estate Investing

  1. Observe – Gather real-time market intelligence and spot opportunities early.
  2. Orient – Analyze the data, compare options, and adjust based on new insights.
  3. Decide – Commit to a course of action before hesitation costs you the deal.
  4. Act – Execute confidently, knowing you can reassess and adapt if needed.

The Hotel Land Deal That Could Have Been Managed Better

A hotel investor acquired a property with the potential to carve out a prime 1.5-acre outparcel near an interstate exit, expecting to flip it for a fast-food or gas station development. The assumption? High visibility = high demand.

But after closing, the market delivered a hard truth:

  • Access challenges made the site less desirable
  • Demolition costs were higher than expected
  • Potential buyers hesitated

The investor’s mistake wasn’t in acquiring the land – it was failing to adapt to new information quickly enough.

Had they applied the OODA Loop, they would have:

  • Consulted a land broker before closing to test demand,
  • Oriented themselves based on market realities rather than assumptions, and
  • Adjusted the business plan earlier to manage investor expectations.

The deal still worked, but not as well as it could have.

The 40/70 Rule: Knowing When You Have Enough Information to Act

Many investors hesitate because they want absolute certainty before making a move. But in CRE, waiting for 100% perfect information is a recipe for missed opportunities.

The 40/70 Rule, popularized by Colin Powell, states that:

  • If you act with less than 40% of the information, you’re gambling.
  • If you wait for more than 70%, you’ve waited too long.

The Competitive Bidding Example

A CRE firm was evaluating a distressed asset that required fast action. Several buyers were interested, but one firm took too long finalizing their analysis.

By the time they moved, the asset was gone.

The winning investor acted at 65% confidence – enough clarity to mitigate major risks but fast enough to beat the competition.

The lesson: Certainty is a luxury in high-stakes deals. The best investors act when they have just enough clarity to move forward.

Make Smarter CRE Decisions – Starting Now

Every investor faces high-stakes decisions. But the difference between success and failure often comes down to how those decisions are made.

  • Second-Order Thinking ensures you consider the long-term impact of your choices.
  • The OODA Loop helps you move quickly and intelligently in a fast-moving market.
  • The 40/70 Rule teaches you when to act without waiting for perfect certainty.

If you want weekly deep dives into high-level CRE investing strategies, subscribe to The Hard Corner. Each edition delivers insights, case studies, and actionable frameworks to help you make smarter investment decisions and avoid costly mistakes.

The best investors don’t just take action. They take the right action at the right time.