The “mindless” business model

The business savvy required to own and/or operate multifamily residential properties is, we admit, not complicated. This is because, over any reasonably long period of time (say 6 months or more), the cash flow for a given property is actually highly predictable. Income (rents) is generally predictable (it certainly won’t surprise to the upside!), and barring the advent of unexpected major repairs, so are costs. But here’s the thing: over an even longer period (say 5+ years), even major unexpected repairs and dips in income (due to vacancies or delinquent tenants) should be very easily weathered, so long as reasonable assumptions are made. 

But the risks and uncertainties, we’d argue, are nothing compared to many business models. For example, there isn’t really any product to develop; there are no true research or innovation costs to bear; marketing costs nowadays are minimal; and market/pricing research is essentially done for you (subject to change over time, of course).

So what’s the point of all this? Well first of all, without offending anyone, we’d like to assert that this is a hard business in which to fail. Secondly, we’d suggest that owners/operators don’t have to be the most educated, or even the most experienced at this model, to make it work (honesty and integrity, on the other hand, are vital, and are the subject of another nearby blog post). Lastly, we find it rather surprising that more people don’t do this, especially given the unique tax and other advantages (also the topic of a separate blog post).

We can certainly think of reasons why more people don’t do this (eg, it still generally takes large up-front investments, and nobody loves the idea of being a landlord), but to us, it just doesn’t add up. What are your thoughts? Want to discuss how and why to get going? Reach out to discuss with us!  info@coldstream.partners