We’re never going to walk away from our Texas roots, and we have no plans to move anytime soon–except maybe to Colorado for the summers one day when it’s 100 degrees in Austin. But what you might find interesting is that we’re actively looking for value-add apartment deals in other states.
This quote really explains why.
“Structure a concentrated portfolio, yet a diverse portfolio”.
Think about that for a moment. Sounds kind of contradictory doesn’t it? I came across that quote from Ed Wachenheim, esteemed stock picker and CEO/Chairman of Greenhaven Associates, and it stuck with me. While we don’t focus on option trading and IPOs at Wildhorn, there is a whole lot of wisdom in it that can be applied to our business in the multifamily investing arena. And, it’s a great starting point to understand why we’re looking outside the Lone Star state for deals.
If you break it down, here’s what it means to the Wildhorn team:
A Concentrated Portfolio-
To me concentration means focusing all of our effort on the types of investments that you know best and provide the highest chance of providing significant returns on. As the great Warren Buffet says, “Diversification is a protection against ignorance.” Clearly we believe in the value-add multifamily space. We view it as the best, most well protected wealth generator out there. My family has gone all in on this asset class, as we’re selling all our residential portfolio.
From day one of forming Wildhorn this has been our concentration, our operational strategy, and our guiding light. We haven’t strayed from what we know and we’re always looking to invest more into the these types of deals. In short, we’ve got the concentration piece down pat.
A Diverse Portfolio-
The great paradox of this quote is trying to stay concentrated and diversified at the same time. For us, with real estate, the diversification comes from geography. As the saying goes, real estate is all about “Location, Location, Location”.
The best way to diversify is to look in multiple places, and yet stay focused on the same product. We will continue to be all about value-add multifamily apartments. But you’re going to start seeing us hunt, win and present our investors with deals from outside the great state of Texas. We’ll absolutely continue to stay focused on our home turf where we’ve had great success and maintain great relationships, but we’re are also energized to enter new markets and provide diversification for our investors.
So we’ve made a big strategic decision to diversify geographically. Where do we focus our efforts?
Now in order to look at the multitude of different markets across the U.S. we developed a framework to help narrow down the choices.
It really is all about where do the metrics make sense and where will we have the highest chance of success? This is our recipe as we’ve been analyzing market, and there are three key factors we are paying attention to.
What do the numbers say? How are facts and ratings of this market in relation to others? Just a few of the areas we dig into include:
Strong job & population growth?Steady rent growth & room for more?A desirable place to live?Healthy forecasted employment trends?Lower cost of living.Major MSA.
Where will we have a competitive advantage? How can we get a leg up against local operators or larger operators?
Do we have established relationships with brokers, lenders, managers and other local real estate players?
Is it a two to four hour flight from Austin (luckily which is the case for most of the country). The short flights in the “smile of America” also end up being some of the strongest which is a huge plus.Is it easy to drop in for day trips?Frankly is it a place we like visiting? We’re going to be spending a lot of time there.
When you boil all of the above market factors down, we think Wildhorn is well positioned to expand. This is especially true for many markets covering metropolitan areas in southern states that are experiencing strong population growth. Think states like Georgia, Arizona and Florida. There’s still a lot of ground to cover but we’re actively prioritizing our key markets and applying laser focus to expand there. Airline miles are racking up and we’re excited about the future, in Texas and beyond.
Do you agree with having a concentrated yet diverse portfolio for your investments? What other markets do you think are prime for value-add apartment investing?