"Boring Is Sexy" - Lessons from My Mentor

[Joel Sherlock]

The term “Boring is sexy” was one my mentor had used so many times, I always understood the overarching meaning. Safe and secure, slow and steady. My focus has always been on growth markets, good job growth for the area, steady population increases and low unemployment. Our buy and hold portfolio looks for caps in the 6-8 range.

I often hear stories of investors making 10+ in boom markets, (for example: Canada’s Fort McMurray or North Dakota in the USA) and found myself looking at deals in those markets. Tempted to stray from my mentor’s advice chasing the big returns. In the past 8 years I have watched some of my friend and business associates learn the lesson first hand in these markets but each time I am still tempted to jump in.

Its only over the past 3-4 months as some of the oil boom towns (Fort McMurray in particular) are seeing huge vacancies and property values decrease and unemployment jumps. Hearing the tales of price reduction after price reduction and monthly shortfalls certainly tell a different tale then the boom days of not too long ago.

I am reminded now of the long term focus and the meaning of these lessons. “Boring is Sexy” The security and feeling accompanied by consistent growth. The lack of stress when a tenant gives notice and we are in markets that have extremely low vacancy rates (less that 1% in a few markets we are in now) Having 19 applications for a property in the first hour its advertised. All great feelings… good returns and low risk. Boring but Sexy.

As I write this half of me hopes it will be of value to someone, while the other half wants it to be a reminder to me next time someone brings me a Hot Deal in a market that does not fit our proven structure.

Make it a great day! 

Joel

Thanks for taking the time to read my rant.

[Martin Scherer]

Yes Joel I agree, I keep a subdivision map of a project I was developing years ago to keep me from jumping into seeming "bargains".  We had financing both from a local source and the seller at good terms for the time but as you mention things change and quickly.  We down zoned the property to make what we thought was a slam dunk approval.  

The city kept talking that we needed more affordable housing and we bought it to that idea.  We designed our project around what the city said they wanted but instead of embracing it they dragged their feet for nearly 3 years before approving the project and allowing construction to start. Meanwhile we had to carry the financing and development costs which more than ate up any profit.   I fortunately sold the project after 18 months and before construction started so instead of losing my shirt I made $500 for 18 months of work.  Boring really is sexy.