My business partner grew up in a family that was in the demolition business. Her father owned a company that destroyed buildings for a living, and many of her brothers also went into the family line of work. As a kid, she and her brothers would routinely go to demolition sites to salvage materials and clean up.
When you grow up with this kind of experience, looking at the end cycle of a building gives you a unique understanding of the age and strength of certain construction. As investors, we often forget that our perspective is constantly seasoning how we view our real estate investments. Today we are talking about how to look at other perspectives to become a stronger investor.
Unlocking Success: The Power of Experience in Multifamily Investing
Multifamily real estate investment offers a unique avenue for wealth creation and financial stability. Beyond the theoretical knowledge gained from books and seminars, there lies a wealth of invaluable lessons that only experience can impart.
Case Study: Water in the Basement
Recently we had an apartment building with water in the basement. There was a sump pump that ran regularly, but the water continued to come in with a constant trickle even though it was not raining or wet outside.
Even the owner was puzzled by this, but a tour with a prospective investor turned up a new perspective. “Oh, in my main market area, there is an underground river, and most of the properties have some water in the basement because of the high water table. As long as it is minimal, and dealt with properly, these buildings have stood for 100 years.” Well, ok then.
Having the understanding from past experience allows this investor to turn his attention to important parts of the deal, and will likely secure a great deal others passed over because of his perspective.
Understanding Unique Market Dynamics
Just like the investor who knew water tables are higher in some areas than others, knowing what to expect at the local level is the best way to truly know the local market. If you aren’t as familiar, make sure you ask someone who is. Be humble enough to ask for advice.
As a broker, I hear a lot of information passed down from investors, and always appreciate when someone asks for our local market knowledge with the intent to really listen! Property managers, other investors, municipalities, and social media can all be great resources for gathering local market intel.
Mitigating Risks and Maximizing Returns
Sometimes the best question to ask is ‘What am I missing?’ And those around you will tell you. Tenants can also be a great source of real information on a building’s good points and bad points.
Experience is really teaching investors how to optimize their investment strategies to maximize returns while minimizing risk exposure. Whether through value-add renovations, strategic financing, or portfolio diversification, seasoned investors leverage their experience to identify opportunities for growth and capital appreciation.
The Evolution of an Investor
As you grow as an investor, make sure you capitalize on your unique experience — just like my colleague in the demo business. Knowing whether that cracked foundation is the end of a property or just an easy fix can give you a perspective that provides the opportunity for greater returns.
Look for the items you can relate to. If you grew up in a trailer park, buy mobile home parks. If you grew up on a farm, you can relate well to land and development.
To make your experience count, keep a curious mind and stay thirsty for knowledge!
