Investing Early, Often, & For the Long Haul

by Chris Lee
 

There is no substitute for the experience of someone who has traveled the road before you.

I recently had the opportunity to meet with a mentor who has done exceptionally well as a real estate investor and found that he had more to teach me than I ever expected. He doesn’t have an MBA from Harvard or Stanford, he has not written a book on his ideas, and you could walk right by him a thousand times and never know he is independently wealthy.

His story could be taught as a case study of the principles of good investing. For now, I’m going to share five of the his principles that he generously shared. Since he’s very private, this wise mentor asked to remain anonymous. This, perhaps, makes his story even more intriguing. Outside of his family and friends, the world will likely never know his name, he’s not posting his feats on social media, he’s not in it for the fame, followers, or likes. For the sake of the flow of the lessons below, I’ll refer to him as “Frank.”
 

Principle #1:

Understood correctly, there’s often no such thing as a “bad investment”.

In the 1960’s Frank’s dad - an immigrant starting life from scratch with a young family - bought a multi-unit building in a then-slighted part of Washington DC. This first investment by the family barely broke even when they sold six years later to a developer. Young Frank was in high school at the time and spent his weekends cutting the grass, cleaning the property, and interacting with the tenants. It was this experience that opened Frank’s eyes to the nitty gritty of owning a property. As it turned out, the investment into Frank’s human capital became exponentially greater than the balance sheet could demonstrate.

Principle #2:

Don’t go into business with people who you don’t implicitly trust.

In the early 1980’s, Frank was the owner of a parking lot that another investor wanted to purchase from him. The investor tried every tactic he could think of to woo Frank: from an outright purchase to a joint venture. The trouble was, while Frank respected the business savvy of the investor, he did not trust him enough to do a deal with him. Years later, Frank would sell the lot for far more, allowing him to control his own path in reinvesting the equity into new real estate holdings.

Principle #3:

Good fundamentals allow for patience.

Over the course of the conversation, Frank mentioned residential homes as well as commercial properties that he was able to acquire and hold for the long term. In every instance, there came a time when it was tempting to sell in the short term. But because Frank had purchased properties that fit his budget, he could afford to hold them. Each asset could pay for itself in the short term through rental income - even if he had to subsidize it for a short while - allowing Frank to be patient and find the right time to sell on his own terms.

Principle #4:

Surround yourself with the right advisors.

Over the course of the conversation, it became increasingly clear that Frank had an inner circle of great advisors who he found over the years. These advisors provided counsel, found deals, warned of pitfalls, and gave peace of mind. Frank said it best: “Don’t get cheap on the people you hire to represent the business!... Their expertise is well worth the cost.”

Principle #5:

Buy what you understand... and grow your understanding.

In the early days, Frank bought only property that he could easily visit. In some cases, this was property that he would see every day as he went to his day job. He wanted to have his fingerprints on the operation - to understand it intimately. Over time, as his understanding grew, he bought property that was nowhere near where he lived and worked. Whereas for a new investor, it may be precarious to invest far from home, for an experienced one, their accumulated wisdom allows for far broader opportunities without additional risk.
 

Frank has a portfolio of properties that now include single-family and retail that produce steady income for him and the next generations of his family. His is a story of patience, an enjoyment of the journey, and a mindset toward real estate that each of us can adopt as we make decisions for our own families.