All Forum Posts by: Thomas Greer

Great thoughts @Dave Van Horn.  Very helpful.

As many who are in real estate, I have found myself grossly over-weighted the asset class in my personal portfolio.  "Invest in what you know" is great, but it does not lead to a properly diversified portfolio given my age, goals and risk appetite.  Also, while I see myself as more than capable to track, budget and analyze performance, there are nuances that I would love a third party for.  I have been waffling and engaging a FP for some time.  I think you may have talked me into it.  Thanks.

...this post took a weird turn.

A quick takeaway that I have heard echoed elsewhere (and in your post)

* a pandemic led recession is unique and leads to uncertainty in recovery and treatment (economic responses can't fully "cure" the problem as it is public health issue)

I must say that my general optimism is higher than it was during the April/May and I remain confident in human ingenuity and ability to adapt and respond (in the general sense...on an individual level people are all over the place).

But yeah, thanks for the quick take and thoughts on where we are headed over the next 6-12.

A lot of posts and some good discussion.  I would say that you cannot escape basic finance theory and fundamentals.  

Leverage = Risk by definition.

Having equity in a deal is not bad and I cannot imagine a long-term winning strategy that has you purchasing homes with none.  Unless this part of some sort of high-risk, "tactical" return strategy in part of a larger diversified portfolio...then I guess go ahead.  But if you are looking for "zero-down" investments because you can't afford it...that is likely a recipe for disaster (in my humble opinion).  

@Russell Gronsky ...we all do. We all do. 

I think your understanding is on track. You know it gets a bad rap, but I have literally looked up more random things on Investopedia than any CFA book or Finance book. Great 5 min articles that can help you get grounded on concepts (especially if you need help with something you don’t encounter on a daily). 

All the best!

@Bill F. explains it well.

I would add that there are underlying assumptions to IRR which can be problematic from a technical standpoint (e.g. assumes returns are reinvested at the IRR). IRR is just a mathematical solution and can get nonsensical when there are lots of ins and outs (you can have cf's that do not have an IRR or have multiple solutions...multiple IRR's). But no one really cares about all that and the ease of use and pervasiveness of IRR as performance metric that became an easily comparable convention across asset classes has dominated. It answers - "What's my return?"

NPV is superior in comparing investments with different attributes and does not have some of the mathematical issues of IRR.

As far are performance reporting and investment analysis, I have always focused on IRR, Profit (and undiscounted measure of cash in less cash out) and Multiples (of equity). If there is a risk-standard or -criteria or -mandate in the the investment strategy then NPV sensitivity is great. (I'm just echoing @Greg Dickerson above)

I just try to run the performance metrics and appreciate what each measures.  Kind of like appraisal methodologies...one is not better and they all add useful info.  The goal is to find out why they differ and what info is being communicated.

@Greg Dickerson

@Chris Thomas

Fair enough.  I was wondering how long it would take until shots were fired back! :)

Everyone has to position their themselves according to their value add and comparative advantages. What is the marginal return of YOUR efforts?

Some people are good at self-management.  Some are bad.  Some are just better at other aspects of real estate.  Where are you eking out value?  How are you "positioning" yourself.  IF someone gave you 1mm (or 10k, or 100mm or whatever) how would you sell your differentiation in the market?  This is the "mental exercise" I often do to determine where I should spend my time.  I try to focus my energies on those things that I feel I do well and get the most bang for the buck.

For me that is not PM.  But for others...their value-add proposition is just that - "I can buy an asset at X and through superior management obtain better quality tenants, with less hassle and consistently bump rents while keeping costs down".

Or..or...that's all an excuse and I'm just lazy.  We all have limitations of time & energy.

 I don't know how much of it is conscious and deliberate strategy (as I didn't even read to see who is supporting the legislation) but "anchoring" in public policy and perception is certainly really.  Agreed.

I have a lone tenant not paying. They actually failed to pay March (before any of this blew up)...so I guess they were just “lucky”. Still haven’t paid (May) and under eviction moratorium. 

On a somber note, it’s frustrating For me but it must be hard for them. Difficult times to be renting and living month to month.  

I worked with some institutional RE firms in the past and I have to say that some of the smartest people I met were engineers (either in undergrad, grad) who then took on finance in academia or practice. 

I would love for my daughters to take it on as a major. 

Full disclosure - I have an urban planning background...so my viewpoint has little credibility...we are barely smarter than architects!