Where have you been? Retail investors vs. macroeconomic investors

It may seem as if this blog has fallen off the planet. There’s a good reason. At the end of May, I signed a contract to write the technical book Learning Spring Boot. Suffice it to say, that effort has consume all my spare time in the evening. Since my work couldn’t stop, the thing that suffered was this blog. If you ever run into a chance to tap your cognitive surplus, I suggest you go for it!

Technical writing aside, I was drawn into a discussion on Bigger Pockets. In the article, Jeff Brown shows how so many investors are focused on formulae, tricks, tactics, but never on the end results.

People have horrendous savings. They aren’t loading up their 401K plans, their personal savings accounts, or anything else, on average. In fact, whenever I hear this brought up, it reminds me of a finance show on TV years ago where Ben Stein was commented how “Americans aren’t saving enough money.” I didn’t think much at the time, but the comment, by itself, is incredibly insightful. The first step towards successfully building retirement wealth is recognizing when you AREN’T.

Jeff Brown has written a couple recent posts pointing out how even IF you can rack up $1MM in your 401K plan, you’re not DOING ENOUGH. Given that almost everyone has less than $100,000, the issue should drive anyone CRAZY with panic.

In the comments, someone nonetheless brought up “retail investors,” a term minted to refer to people that buy turn key rental property. Instead of buying good deals, i.e. making money when you buy, “retail investors” typically buy what they can find and, on average, crash and burn when Murphy visits, nixing their cash flow.

I wouldn’t stand for this short sighted characterization and remarked that the path to retirement wealth isn’t confined to fix-it-up rentals. I created the expression “macroeconomic investor” since I have invested in Texas-based rental properties. Texas has shown tremendous job growth. In fact, 2006-2011 demonstrated a stronger job growth that all other states COMBINED.

When a flood of people are headed to a particular thanks to a booming economy, there is a natural consequence. They all need a place to sleep. I went on to comment:

So…I can either invest a lot of time and effort locally, or I can take my investment capital to Texas and invest there. One option requires that I invest a lot item, even potentially ending my successful career as a software engineer to get the maximum cash flow. The other option says I can invest where I’ll get higher yield, better tenant options, and newer, fresher properties, if I’m willing to sacrifice a certain overhead for others to manage it.

People love to show off their rentals. Even better, they pride themselves on finding something local and able to drive by it and show it off! Sorry, but that is amateur. Critical thing is to look at total results, and see if your fix-it-up property can generate a better yield rate than buying new properties remotely and incurring the overhead of property managers.

I have had Murphy strike twice and knock me down to 75% occupancy. Thanks to having a pro team support me, I have been cash flow positive, despite pouring an extra $1000/month into one of the mortgages to pay it off faster.

I can’t guarantee I’ll blog as frequently as I did before my current writing endeavor. But I just couldn’t keep this to myself. (Seeing some  of my past readers comment how they enjoyed my writing was inspirational as well!)

2 thoughts on “Where have you been? Retail investors vs. macroeconomic investors”

  1. Great to have you back, Greg! I’ve always felt a kinship between us since we’re both leveraging low interest loans to finance our VNR holdings and we’re both invested in Texas rental properties. I’ve never been concerned with getting my real estate below fair value. I buy at fair value with a positive rental cashflow from the start. I’m not overly concerned about capital appreciation, though I agree that TX has some good potential there. But most of my properties are just solid income producers, workhorses, with tenants not only paying down my mortgages for me, but paying me a monthly surplus in the form of usable cash flow. No great secret there. Just a solid long term plan for perpetual income.

    1. Thanks Tyler!

      I’ve also seen this commenter post other articles using the term “retail investor” so I knew precisely what he meant. It’s a criticism that doesn’t always apply. The key is doing your due diligence. That’s why I have people like Jeff Brown, Betty Epperson, Lenny Elias, and Dave Shafer. These people are my experts and with them I have a powerful plan in motion.

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