Guest Blog Post by Darrin Garman, CCIM

Boring real estate.  Nothing sexy about a 24 unit property located in Cedar Rapids, Iowa or a 25 unit property located in Belle Plaine, IA… (or in Orillia or Barrie, Ontario)

However, do not mistake boring for NOT being profitable.

I like to call this Warren Buffet investing…

In other words, in my OPINION, if Warren Buffet were out buying real estate he would be buying similar boring real estate properties.  Commercial investment properties.

Think about it.  Buffet owns companies like Dairy Queen, Mid American Energy (a utility) and jewelry chains.  Did I say internet start up or dot com hit?  No.  Just boring, profitable companies.

But, if you invested something like a dollar 20 years ago it would be worth 2 Billion today or something like that.  I exaggerate a lot but in a way I do not.

Why?  Success can be boring.  Profit can be boring.  The same with “heartland” or “breadbasket” real estate, boring and profitable. And more often overlooked.

Terry asks:

What have you done to investigate boring real estate opportunities in small to mid-sized communities? Seek out people who will speak to you about these boring properties they have owned for years and years. Ask them what they have accomplished in terms of cash-flow and appreciation. You will no doubt learn a lot and profit from modeling their successes.

Today I would like to tackle a common question asked by many investors looking to purchase their first real estate investment property.

Many first timers ask, “Should I invest in an office building, a shopping plaza, a residential apartment building, a self storage facility…?” or whatever else is on the commercial real estate market.

Before you can even think of deciding on such brick and mortar opportunities, first time investors should be asking themselves, “Do I want to be an ACTIVE hands-on manager/investor – or – a PASSIVE let the pros do the job for me investor?” and, “Do I have the skills, time and state of mind to do one or the other?”

Now, there is no wrong answer to this question, but before you start making any decisions about which properties to buy and all the multitude of other factors involved – your first choice is deciding on the type of investor you want to be as it will drive all other decisions going forward. First timers inevitably miss this foremost distinction and thus, at the first sign of stress related to their investment property, they start to have problems, big ones that could have been avoided.

I am reminded of this example from a mentor of mine where a guy bought, and is self managing, a 20 unit property. A year later he is now having a serious problem spending time with his family, the kids, and even his now former stress reducing hobbies.  Yes, he can now bring in a property manager but not only is there a long ramp up period to turning the property over, such as getting the right managers, bookkeeper, etc., there is all
the stress he has faced over the year and the personal consequences that may have developed at home and at work. He never really thought through the ACTIVE vs. PASSIVE investor test, weighing the pros and cons of each.

Conversely you could make the same kind of decision to become a PASSIVE investor, thinking you will turn everything over to the pros only to find yourself in a stressful situation by second guessing or interfering with their work. It happens!

Again, there is no wrong answer here. You can be one or the either, or a combination of both in some cases. Do what you can to know WHO YOU ARE, what you really want out of your real estate investments and what role you want to play in them. Figure this out before you look at properties and certainly before you invest your valuable time, your sanity and your money – or you may lose them all.

All the best in all your real estate investment and life altering decisions!