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Some thoughts re my investment/business strategy:
I like operating in what I like to call the Wild West
Areas where information isn't readily available to everyone; where the game hasn't been solved; where mistakes are being made and where there's lots of uncertainty.
I like operating in what I like to call the Wild West
Areas where information isn't readily available to everyone; where the game hasn't been solved; where mistakes are being made and where there's lots of uncertainty.
Between 2005-2014, I played poker online pretty much professionally. I started playing a game (Pot Limit Omaha) in '05 that most players didn't know how to play. There was very little software/instructional info online and the game was relatively new. It was the Wild West.
People were giving away money, making huge exploitative mistakes in certain spots, and I was cleaning up. Almost everyone, in my eye, was playing the game wrong. Why? The game wasn't solved yet. So any advantage I had could be used strategically when big mistakes were made.
But at some point, the game got solved. Too many people started taking the game seriously. Many of the best players started making instructional videos on how to optimally play the game. The Wild West was dead, and to be the best, you had to take the game incredibly seriously.
Not that I couldn't make money anymore. But the "free money" was gone. To make money now, I really had to work obsessively to study the game and my opponents. And it has only gotten tougher and tougher since then.
IMO, the same phenomenon occurred in sub-institutional RE in the early 2010s. Many brokers and investors had no idea how to UW buildings. So ppl with some sort of informational advantage (e.g., a clear idea of pro forma rents & cxn costs, understanding of risk+reward) cleaned up
But today, in multifamily, at least in LA, the Wild West is dead. Sure, there are the occasional mispriced deals here and there, and the best of the best can still make great risk-adjusted returns, but they have to be surgical.
All neighborhoods today are priced to perfection. There were a few up until probably mid-2019, where I felt there was still mispricing, but today I can't help but feel like the jig is up.
Everyone knows the rents, everyone has an idea about construction costs, everyone (seemingly) has infinite money. Will there be real opportunities in the future in this space? Can the Wild West return? I don't know.
Takeaway:
If you're operating in a Wild West, shut up, stop sharing information and bragging, and buy everything you can. It won't last forever
If you find yourself in situations of widespread uncertainty, embrace it. If you play your cards right, uncertainty is your friend
If you're operating in a Wild West, shut up, stop sharing information and bragging, and buy everything you can. It won't last forever
If you find yourself in situations of widespread uncertainty, embrace it. If you play your cards right, uncertainty is your friend
