Why we need a longer term approach towards real estate

downloadEverything gets tied up in such short term thinking.  Every investment horizon is typically set on a 3 to 5 year window to get in and get out.

Vast amounts of wealth have been created by this very model of buy at a discount, fix up cheaply, and sell for a huge profit within just a few years.  We ourselves have done this several times.  And in the cases this happens, something feels off.  It almost feels like we are cheating.  And maybe we are.

To make a quick buck, there are only a handful of ways to really make that happen in real estate.  Lower expenses and increase revenues.  Pretty simple right?

Revenues get increased by pushing rents and adding on fees.  And over the last few years, rents have been skyrocketing.  And incomes stay stagnant.  So these short term gains are being realized by squeezing more money from many of these consumers who already teetering on over-burdensome housing costs.

And while construction dollars are way up in real estate, the way it is being spent is such a short term horizon.  On-site staff’s are typically cut and stripped down to a bear minimum – taking what was once a quality job to a lower level entry position.  And service gets sacrificed.  Jobs are contracted out to save on oversight and overhead.   But who cares – the market is so fragmented and reputations aren’t quite as sticky.

What if, instead, we all committed to taking the long view.  Looking at and ensuring stability over a 10 year horizon rather than a 3 year window.  What if we truly committed to service and performance over the long term?  Or create and sustain jobs within these communities for years on end rather than create instability every few years by uprooting the entire staff.

Apartment communities have the ability to touch and change lives.  And we are using this tool all wrong.  Everything is so profit driven.  What if we focused on the value we create in our residents lives?

Stability in any family is key.  And the current apartment model continues to be wrought with instability.  What type of society could we create if we were forced to take the long view in real estate?

 

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