Tuesday, August 15, 2023, Rancho Santana, Tola, Nicaragua


Notes From My Journal

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Little but Not Brittle 

Someone once told me – and this may be 30 years ago – that the secret to making great ROIs in rental real estate is to “go small.”

By that he meant that buying three small houses at $200,000 each will bring more to the bottom line than one for $600,000.

Over the years, I’ve invested in a range of rental properties, from 1,000-square-foot condominium apartments that rent for $1,200 a month to 1,600-square-foot bungalows that rent for $2,400 to houses that rent for as much as $10,000. Looking back, I can say that he was mostly right. Apartment buildings consisting of smallish two-bedroom/ one-bath units gave me the highest per-square-foot cash flow.

But there’s another side to that strategy. Renting out smaller units can be more costly in terms of maintenance, management time, and bookkeeping. That’s simply because there are some things – like accounting, contracting, and customer service – that must be done for each unit, regardless of how much income it can provide.

And the likelihood of getting a single bad tenant in a smaller, less-expensive property is higher than it is for a large property. Even if you hire a management company to take care of the day-to-day, bad tenants = agita.

On the one hand, you have the benefit of larger net cash flow with many smaller rental units. On the other hand, you have the problem of higher maintenance and management costs.

And although I hesitate to mention it here for fear it will complicate the issue, rental revenues and maintenance and management expenses are significantly affected by the age of the property. This is obvious. Anyone that has inhabited both new and old residences understands the benefit of new.

So, generally speaking, it’s more profitable to own smaller units. But only if you can keep the maintenance and management expenses down. And the best way to do that is to buy new or relatively new properties.

If I were to begin again, I would be looking for relatively new (less than 20 years old) apartment buildings of 30 to 50 units. And I would have them run by a company that would keep them 90+% occupied by (1) providing good building management and customer service, and (2) using iron-clad rental agreements that would allow them to evict bad tenants as quickly as possible.

In other words, more revenue + less maintenance costs + tough contracts = higher per-square-foot profits. (I think of that as “little but not brittle.”)

But for several years, I’ve been thinking that there may be an even better deal out there: buying and renting out self-storage units.

They are considerably smaller than apartment buildings, so, in theory at least, they should be considerably more profitable. Management costs are less because there is so little to manage. Maintenance costs are inexpensive, too, because you are not maintaining the units per se (they are virtually indestructible), just the building itself.

Why I haven’t made a serious effort to look into this before now, I can’t say. I’m not sure I will buy anything, but I’m going to do some research and see if the opportunity for low-stress profit is as good as I imagine it could be.

This came to mind after I read an article in some business blog about the rental real estate industry. It said that, as a sector, self-storage facilities have always done well, in good times and bad. (Apparently, they made a killing during the pandemic lockdown.)

In another an article, written in 2021, The Wall Street Journal categorized them as “the best bet in real estate.”

Here are some facts:

* More than 10% of Americans lease storage space today.

* In June, they paid an average of about $166/month to do so. (Even when the value of goods in storage doesn’t match the price of storing them, customers weirdly don’t seem to mind.)

* That makes self-storage in the US a $29 billion-a-year industry. (And Extra Space Storage just struck a $12.7 billion deal to combine with Life Storage, its rival, making it the largest self-storage business in the US.)

* Google searches for “storage near me” are continually rising.

Plus, as pointed out in an article about this in The Hustle, “so long as there’s death, divorce, disaster, moving, and marriages, there’ll be people scrambling to pack things away.”

So?

So, I’m going to take the next step and track down someone that is in the self-storage business and see what he or she has to say.

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“A Cold Email Got Me My Job” 

“Everyone says networking is the route to success,” writes Olivia Reingold in The Free Press. “But I’ve always been a strong believer that any door can open if you score the right invitation. My advice? Don’t ever ask to ‘pick’ someone’s brain. The trick is to get inside their brain. Start by googling them, or rereading or relistening to their work. Why do you like it? Tell them that. Make them know they matter.”

I made essentially the same argument many years ago in my book Automatic Wealth for Grads.

Here’s the gist of some of what I said in the chapter about how to write a great job application letter:

The most important thing you need to realize about getting a job is this: The people who will be reading your letter are not really interested in you.

If they’re not interested in you, then what are they interested in?

I’ll tell you: They’re interested in themselves.

Think of getting a job as a direct-marketing challenge. The direct marketer knows that, to make a sale, everything he writes must be focused on the prospect’s problems and how much better his life will be after he’s bought the product.

When seeking a job, the prospect is the person you want to work for and you are the product.

So, the number one job of any sales pitch to that prospect (a letter, phone call, or personal meeting) is NOT to sell yourself as smart and well educated, but as someone smart and knowledgeable enough to solve his problems.

And to do that, you have to do a good deal of research. To begin with, you should research the industry to understand its problems and challenges. Then research the company itself and find out everything you possibly can about it. Is it growing, in limbo, or losing revenue? What are the main factors affecting that? And then, finally, dig up what you can about the person you are going to be working for. What kind of boss is he?

If your first effort is a letter, make it as specific and personalized as you possibly can. Don’t make it sound like you’ve been snooping around, but make it clear that you (1) understand how the business works, (2) have some idea of what the primary challenges are in terms of profit growth, and (3) are interested in helping this particular person accomplish more with less stress because you will be there to take responsibility for whatever he needs.

   Click here to read Olivia’s article.

And if you’d like a copy of Automatic Wealth for Grads – for yourself or as a gift to a young person just starting out – you can order it directly from us. List price is $22.95. But for readers of this blog, the price is $15 (which includes free shipping).

To order your copy:

* Send a check for $15.

* Make the check payable to Cap & Bells Press, LLC. (No cash, please.)

* Include your name and mailing address and mail it to:

Cap & Bells Press

Attn: GKoo

290 SE 2nd Ave.

Delray Beach, FL 33444

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The COVID Response: Meet Dr. Fauci’s Replacement

Was She as Wrong About the Facts as He Was? 

Dr. Anthony Fauci, arguably the most likeable non-elected government official in recent memory, resigned last year from his role as director of NIAID (National Institute of Allergy and Infectious Diseases) amid mounting criticism of his handling of the COVID pandemic.

While looking for a replacement, the NIH appointed Dr. Lawrence A. Tabak as acting director. And last week, he announced Fauci’s permanent replacement – Dr. Jeanne Marrazzo, head of the Division of Infectious Diseases at the University of Alabama in Birmingham.

In introducing Dr. Marrazzo, Dr. Tabak said, “Dr. Marrazzo brings a wealth of leadership experience from leading international clinical trials and translational research, managing a complex organizational budget that includes research funding and mentoring trainees in all stages of professional development.”

To be sure, Dr. Marrazzo has impressive academic credentials. (A bachelor’s degree in biology from Harvard, an MD from Thomas Jefferson University in Philadelphia, and a Master of Public Health in Epidemiology from the University of Washington.) Academic credentials are meaningful for people that aspire to be academics, but when it comes to a job that matters as much as this one does, what’s more important is specific experience, past performance, and personal characteristics like honesty and integrity.

In the case of Dr. Marrazzo, I have concerns about what she has said and done in the recent past. In researching her, I discovered that she was a big proponent of mask-wearing. In fact, as late as May 2021, she was quoted as saying that she wears a mask indoors. Click here.

She also promoted the government vaccination misinformation. In July of 2021, she was blaming the spread of COVID on the unvaccinated, saying, “So much transmission in our community because a majority of people are not vaccinated. The opportunity for little kids to get infected is much higher than where the vaccination rate is much higher.”

Based on what I’ve read so far, it’s clear to me that Dr. Marazzo has been promoting the company narrative since day one. This, by the way, is not completely surprising. Her role as head of NIAID, like Fauci’s, is not to tell the truth but to say what the organization thinks the public should be told. Her role is not that of a doctor or a scientist, but of a public relations spokesperson.

I’m hoping I’m wrong. I’m hoping she will stand up for the truth. I’m withholding judgement for the moment. We’ll see soon enough.

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Fun and/or Interesting

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Five Quick Bits You Might Enjoy 

  1. What’s Your EQ? I scored a 9 out of 10 on this self-test. I wasn’t being honest as much as figuring out what the right answer was. Click here.
  2. The McDonald’s Vegan Burger Taste Test. Click here.
  3. All your favorite alcohols ranked by sugar content. Click here.
  4. Does my outfit offend you? This is a bit that PragerU does now and then. What I like best is how trained these college kids are in political correctness. Click here.
  5. They say that twins have a connection that is unique. Click here and here for two little clips – one of twin chimpanzees and one of twin girls. Tell me if this isn’t inspiring!
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