Maximizing Profits and Reducing Risks
Any smart investment strategy needs to adapt to the market and grow with your investment business. As you scale, you may find yourself needing to hire help to manage your investments. And as you get more comfortable with investing, the opportunities for investing in new and bigger projects will become available to you. But to grow effectively, you need a strategy in place for expanding while mitigating risk.
Recently, I had a conversation with my friend Gary Jonas. Gary is the president and principle of HOW Property Group, a multi-faceted organization that works in many aspects of property development and real estate. Gary started in real estate after reading the book Rich Dad, Poor Dad, and over the years he has been able to expand his business from one-off investments in single-family homes to six different revenue streams.
Gary believes in buying and holding properties to generate long-term rental revenues, and as his business expanded he realized that the returns for multi-unit properties far exceeded that of single-family residences. Moving into commercial real estate was a cornerstone of Gary’s success and it enabled him to grow his business in a way that single-family homes wouldn’t have allowed for.
In our episode of the Real Estate Investing for Professional Men and Women podcast, I speak with Gary about his investment strategies, some case study investments he has made that turned out to be major wins, the importance of mitigating risk as much as possible, and the impossibility of attempting to “time the market”.
More Doors Equal More Profits
At a certain point in Gary Wilson’s investment career, he realized that the potential profits from multi-unit properties far exceeded that of single-family residences. As with any investor, Gary was initially nervous about breaking into a new niche, but he discovered that it was actually easier and less complicated to invest in commercial properties (defined as 4+ door properties) than to stick with smaller one, two or three-unit properties.
By moving into a more profitable market, Gary was able to expand his investments and fuel the growth of his businesses. What started as a small mortgage company has now grown to a six-business organization with multiple sources of cash flow. This explosive growth wouldn’t have been possible if Gary had not recognized that his investments needed to scale up and taken the opportunity to do so.
Dealing With Downturns and Mitigating Risk
One of the important points Gary raised during our conversation was that he was able to survive and even profit during the 2008 real estate crisis. As Gary said, when the market was down he chose to sell his assets and buy still bigger assets. Since the market will inevitably fluctuate and recover over time, Gary was able to buy larger real estate assets during the down period and then profit heavily when the pendulum inevitably swung back in the other direction.
This strategy is safer and more effective than attempting to “time the market”. Timing the market is next to impossible, so a far more effective risk mitigation strategy is to plan for a downturn rather than trying to pull out of the market before it hits. As Gary has shown, taking a long view of real estate rather than being reactionary to the market can truly pay off in the end.
Want to hear more? Listen to this podcast here.