Forcing Wall Street To Grow
Some are anxiously wringing their hands wondering about their financial futures – wondering what Wall Street has in store for them next.
Others are holding their heads in their hands – reeling from the economic fallout from the Wall Street roller coaster.
For those who cashed out at the bottom of the latest ride, the stock market has taken investors on due to Covid-19, economic recovery can be years away.
Many people who have a fear of flying explain their fear of a lack of control. Behind the wheel of a car, at least they have some control. With somebody else is behind the controls of an airplane, they feel powerless. That’s why they’re anxious and nervous when they fly.
Unfortunately, what many investors are finding out or rediscovering is the uncontrollable juggernaut Wall Street is. Once it goes into a tailspin, there’s nothing anybody can do about it. All you can do is pray and hope the plane recovers, but until then, you’re powerless.
The problem with Wall Street is that most stock market investors are not long-term investors. They’re not in it for the long haul. They’re more speculators than investors – looking to time their investments to beat the market.
They think that if they buy before everyone else does that they’ll be able to get in at a lower price before the price gets driven up. That way, they’ll make a hefty profit when they sell at the peak before everyone starts unloading and driving the price down. They have to get the timing right.
The reality is, mainstream inventors rarely beat the market.
Heck, more than 90% of financial advisors and professional managers don’t hit the market. The odds are stacked against the individual investor.
The rise and fall of stock prices often have very little to do with anything to do with the actual business itself or with management decisions.
They’re more commonly affected by the whims of the crowd and herd behavior than anything fundamental. Compared to the underlying business, social media, and the 24-7 news cycle, all have more to do with stock pricing.
As much as an investor tries or concentrates, they can never control the stock price or force it to grow. No matter how much investors think they can control the direction of the stock market, most know it’s futile.
Wall Street can not be controlled.
What do the people who have a fear of flying do? They avoid flying. The lack of control drives them crazy.
Some savvy investors avoid the lack of control with Wall Street. They have found that there are, in fact, some investments that can be controlled where direct actions can have a direct impact on the price of the asset.
Some expert investors can force growth on an asset’s value. And there is no other asset class like commercial real estate (“CRE”) where this is more true.
CRE naturally appreciates over time due to natural market growth.
The experts aren’t satisfied with just market appreciation. They want to accelerate growth and have a handful of tricks in their playbook for forcing growth. Unlike with Wall Street investments, they are in full control of their CRE investments.
One of the favorite plays by CRE experts for forcing appreciation is to start with improving NOI, which in turn improves cap rates and long-term value. The experts have a variety of ways of increasing net operating income (NOI) through increasing revenue, decreasing expenses, or both.
Here are some typical strategies:
- Adjust rents to match market rates
- Add amenities and capital improvements
- Improve screening to acquire higher quality tenants
- Make cosmetic improvements to enhance curb appeal
- Improve marketing
- Improve management and property management for more efficient and cost-effective operations
By increasing the NOI, the value of the property is “forced” to increase as cap rates rise accordingly.
The experts have learned that the true key to long-term wealth is to be proactive in forcing the appreciation of your investment property or rely on someone else to force that appreciation.
With tangible assets like CRE, investors are in control. They can force growth. You can not force Wall Street to grow. With the stock market, Wall Street is in control.
Who do you trust more?
By leveraging information advantages to exploit value-add opportunities and by leveraging management experience, expertise, and operational efficiencies to improve NOI, the experts can grow wealth exponentially by forcing appreciation on value-add opportunities.
CRE allows them to exert control over their financial destinies. And whether you invest directly or indirectly, an investment strategy involving forced appreciation maximizes your chances of achieving true wealth and financial independence.
Michael Foley, president and CEO of Humabilt Capital, oversees the entitlement process, funding, and operations for Humabuilt Capital. Mr. Foley has been a full-time real estate investor since 1995 during which time he has developed hundreds of single-family homes, townhomes, condominiums, and apartments. Mr. Foley started his investment ventures in Long Beach, California, and has expanded to Apex and Durham North Carolina. Mr. Foley is a graduate of the University of California at San Diego.