Return OF Investment
Warren Buffet famously said, “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1”
In other words, THE RETURN OF YOUR INVESTMENT is more important than the return on your investment.
Buffet’s first two rules are Attune Investments first two rules.
At a bare minimum, we want the capital our investors have entrusted in this business to never return to us at a loss.
Of course, we cannot control the future or guarantee income or preservation of capital, but, to repeat a truth about Commercial Multifamily as an asset class, unlike stocks which can become worthless, or bonds which can go down in value, or gold or other assets whose price can go down, even significantly down, Commercial Multifamily assets have a long, steady track record of not only holding their value, but increasing in value.
There are threats to our properties – fire, vandalism, natural disasters and the like. We can mitigate these risks with insurance and solid adherence to our business systems.
We focus on what are called Class B and Class C properties. They were built 20 to 40 years ago, (1970 to 1990), have good “bones” (foundations, structure, roof, HVAC, functionality, etc), serve primarily working class, blue-collar families, and don’t have all the fancy amenities that the Class A properties offer.
Rents are much more affordable in the Class B and Class C properties. The cost per unit is much lower as well. Occupancy rates are more stable.
It is not cost-effective to build any more Class C properties, so the supply remains low and the demand high. Thus, they have been able, by and large, to retain their value, even through major market turbulence, such as the recession of 2008-2009.
Multifamily provides an ongoing and remarkably secure investment return. Unlike many other asset classes, the odds are stacked in the favor of multifamily for retaining value over both the short and long-term horizons. And the data from recent decades confirms this stability.
Now that we have taken care of the first two rules, which put the return of capital more important than the return on capital, we can work on the later. Read about Growth of Capital in another article.