"Passively Consistent"

“Passively Consistent”

09/2017

Pick an approach that works, then stick to it. That’s what this newsletter is about. And it’s valid everywhere professionally – not just real estate.

As you know, my thing is passive income for my investors. The very nature of “passive” in this case is “hands off”. No constant decisions. No constant changes. No surprises. Just steady-eddie investment growth.

That’s what investors expect. So I have to deliver. And how I do that is the above-mentioned “stick to it”.

Personally, My company chooses Multifamily Investing. This means we focus on identifying underperforming properties that have a value-add component. It could be implementing a RUBS program, putting in professional management, investing money into units to generate more rent, improving landscaping, or any number of tactics. A heavy focus on Value-add fundamentals supports the comprehensive underwriting process.

But this also means we’re not distracted by every shiny object we come across, because that would rock the boat. To this end, let’s talk about Warren Buffet real quick.

I have long been a fan of Warren Buffett’s teachings, and have had the pleasure of meeting him on a few occasions. One of his quotes on Circle of Competence seems quite fitting to this discussion. “What an investor needs is the ability to correctly evaluate selected businesses. You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

So Warren is saying not bounce around from opportunity to opportunity. He’s saying to take a measured approach in what you know.

In Real Estate, there are a LOT of shiny objects. Fix and flip, wholesaling, note buying… it seems every real estate seminar or Investor group I attend (and I do attend a lot) has a different angle – sometimes, the same company has three different angles in three consecutive months. I mean, if they are making money, that’s great, but I can’t help thinking they are chasing cars instead of burying bones. Gotta love a good dog reference, huh?

Every month, someone will come up to me and tell me about how great it is to invest in mobile home parks, self-storage units, medical offices... etc. And I am sure you can make money at any of them if that is where you focus your time and energy. But they are not within my Circle of Competence, so I pass on them and focus on looking for the next Value-add Multifamily deal. I know the boundaries of my circle.

Having a clearly defined Circle of Competence will greatly enhance your outcomes in business and investing.

To your success!

Bill Zahller

Asheville, NC