If you are reading this, you are likely at a stage of your life where you own a home and possibly a lake house, cottage, condo, beach property or ranch. You might also have an investment property or two. In your adult life, you have probably bought and sold multiple properties; you know the ropes. You do not need to be sold on the value of real estate. It is likely each of your moves have been profitable ones, as price appreciation for real estate has consistently outperformed most other asset classes.
Most of us would admit that knowing the ropes and being informed is not the same as being an expert. As doctors and medical professionals, you are all too familiar with patients who have “done their own research,” second guessing your years of training and experience. It is a very human failing, and one that we are all guilty of in our own way. Google and the Internet have made it even easier to convince ourselves that we can do anything, from restoring an old house to diagnosing our own ailments.
Because we all experience home purchases first-hand, it is easy to think we know more than we do and can find a great property ourselves, relying on word-of-mouth referrals. We hav all seen the “I know a guy who knows a guy” approach to real estate investing, and that is far too casual an approach for you and your family when it comes to investing for real yield.
We also often see groups of physicians and other professionals banding into their own real estate investment clubs. At best these can be good and often enjoyable ways to pool efforts. Unfortunately, they can often be overly risky as they are rarely led by knowledgeable wealth-builders or real estate professionals, but rather individuals who can and do often follow emotional whims and biased tastes. At worst, this informal approach can lead to the blind leading the blind. There have been no small number of disaster stories related to uninformed “clubs”.
Doctors simply do not have the time to manage a real estate development in the most effective way. To maximize your hard-earned real estate investment dollars, expertise makes all the difference. Organizations such as Ballard Built use a sophisticated, risk-aware, data-driven approach. Ballard’s professionals, working from a foundation of detailed demographic and financial analysis, focus on America’s fastest developing markets such as Austin, Miami, Denver and a small number of other dynamic communities.
As with any financial portfolio, a balance of different kinds of assets is essential to maximizing yield and mitigating risk. Buying an investment property yourself is akin to investing your financial assets in a single company instead of a mix of equities, mutual funds, exchange traded funds, commodities, fixed income funds, and so forth. Real estate investing should be seen as a natural complement to market investing, and it should both be approached in a similar manner as well as ideally somewhat mimic the best qualities of market investments.
The best real estate investments comprise a balance, built on expert breadth and depth. The breadth comes from investments in all types of productive real estate. Real estate investing is famously about location, location, location. In the right location, even raw land can harbor the potential to appreciate faster than many developed properties in underperforming markets.
The required depth comes from having the knowledge and expertise to select the best performing locations vital to peak returns. This is nowhere more evident than when contemplating new developments on existing land. By using a land residual technique, an appraisal method of estimating the value of land combining the net operating income (NOI) and value of the planned improvements, it is possible to estimate the highest potential value of a given development.
All three Ballard core markets have seen unprecedented real estate price appreciation, so much so that the actual returns on recently completed developments have greatly outpaced the initially estimated return on investment (ROI). New developments usually attract a premium, and both business demand and a massive migratory in-flow of people into metro Austin, Miami and Denver has driven fast growth.
New construction will not itself meet the market demands in these vibrant metros. Savvy real estate investing accommodates this reality by diversifying into equally robust existing properties as well as new urban multi-family developments that are maximizing the best of city and suburban high-value locations. Commercial real estate values, especially related to warehousing, logistics and industrial uses, are also skyrocketing across our core markets.
To sum it up, flying solo and even partnering with friends through well-intentioned amateur “clubs” can be risky. By definition, it lacks the required level of expertise to maximize your real estate returns. Irrespective of the type of real estate investment, success depends entirely on working with the right partners who have a strong foundation of knowledge, experience, a passion for data and a commitment to strengthening the communities in which they operate.