070: How We Overcame Investing FOMO
Have you ever felt FOMO – like the fear of missing out on something? Like “Wait, why am I saying ‘yes’ to everything?” 🤔🤔
There’s nothing wrong with enthusiasm, but when enthusiasm gets overshadowed by overcompensating, welllll there might be the problem.
Recently we had someone ask us if we do everything together. I mean, we record this together, we travel together, and we have almost the same shoe size.
ALMOST! At first, I was like, should we be offended? I have my own life outside of Nan, ya know? But the truth is, we do a lot of things together because if we didn’t, we’d catch major FOMO. 😨
Yeah, while we do most things together – winding down at the end of the day with a cup of boba milk tea and my favorite baking show by myself actually gives me JOMO – the joy of missing out!
So, which are you? The truth is, we all catch FOMO from time to time. FOMO applies to everything – like when someone else snags the exclusive and super trendy OMEGA Moonwatch by Swatch to seeing your friends on Insta try out the latest dessert you’ve been dying to try.
Are we about to make the leap from baked goods to apartment syndication?
Back in the day, we would say yes to just about any investment opportunity because we were so excited and full of gusto and passion. All we had were stars in our eyes, ready to sign up for just about any deal that landed on our desk – but all of it was rooted in not the best place. 😅😅
You see, we had this irrational fear of missing out on a great investment opportunity.
Even now, right Palm?
For sure. We didn’t want anything to pass us by that we might regret. And Nan saying yes to things in fear probably isn’t the best investment strategy.
Highly not recommended. We’ve shared this before but, this feeling of FOMO got us to passively invest in deals without properly vetting them out.
We got lucky in the sense that those deals ended up working in our favor, but we couldn’t help but think with a little more intentionality in our strategy, those deals we invested in that were just good could have ended up great.
A few years ago if anyone were to ask us what our exact strategy was when selecting properties, we would have stared at them blankly. We didn’t have a plan in place, we were just hungry for more! 😌😌
Now, 4 years later into our apartment investing journey we’ve grown wiser – sans wrinkles and gray hair – and have further refined our investment criteria. Today, we’re going in-depth about what our exact criteria is when selecting properties. After all, an idea without action is nothing.
Are you ready?!
Let’s get into it!
Location Location Location
To kick things off, let’s talk location. Imagine this scenario, you’re about to meet up with friends for dinner at a restaurant you’ve never been to before in a part of town you don’t really go that frequently. You’ve heard the food and drinks are divine – but you don’t really know what it looks like or where to park when you pull up.
You don’t want your dining experience with friends to be tainted by simple logistics, do you?!
Similarly, when it comes to real estate and choosing a location to invest in – a trendy or major city isn’t enough, you need to know more about the area other than its upcoming bar scene. When it comes to apartment investing, it pays to get granular with the location. 🤓🤓
These days, it’s not enough for someone to tell you what metroplex the apartment is located in. Telling us the apartment complex is located in Houston, Texas is way too broad.
While we aim to always invest in top-tier communities, “top-tier” means more than a cool city. Some questions you should ask yourself when digging into other location factors include:
- Does the property have easy access to major highways, tolls, or public transportation?
- Are there supply constraints in that area to meet the massive demand?
- Is it close to any major retail developments?
- What major markets are there?
- How does the job economy shape up?
In EP052 of our Cashflow Multipliers Podcast, 👉 7 Challenging Risks in Apartment Investing and How to Handle Them 👈, we went over some other crucial questions to start asking when it comes to a location other than the food scene! We’ll link it for ya in the show description.
Digging Into the Demographic
Next up, let’s get to know our ABC’s– and no not the nursery rhyme– the class scale of apartments. 🧐🧐
We’ve talked about this in other episodes, like EP025 Stay Classy: The Grading Scale of Apartments.
When we invest, we’re looking out for areas with a high one-mile radius median household income aka MHI. The higher the MHI, the more affluent and affordable our apartments will be for the residents. It was a huge win for us when we were recently invested in an area where the MHI was above $124,000 and where the surrounding single-family home values were as high as 7 figures!
Doing the due diligence up at the top will help you determine how to grade these opportunities accordingly– and since The Kitti Sisters only have star pupils– we’re going for A Grade apartments across the board. Focusing on Grade A investments have the highest chance of performing even during a market slowdown.
Speaking of strong schools – it’s worth mentioning that parents tend to want to place their children in the best schools. So here’s hack for ya, websites like niche.com and greatschools.org are free resources to verify schools by ranking. 😘😘
Nan, niche.com is a pretty good resource when it comes to median household income, though they are not as granular at least they give you the MHI by zip code.
Yes, I was going to say that. So the next time you’re scouting your next Class A/ Class B investment, start with the schools and let those locations determine if the properties there are worth your while to invest in.
We wish we would have started there four years ago!
There are a lot of talks right now in regards to not enough apartments coming online to meet the demand for housing– as an apartment investor this is our moment. According to a recently published Co-Star report, there are 4.3 million apartments shortages in the US and there’s no foreseeable way to cut into this shortage anytime soon.
Yes, but Not all markets are created equal, and their growth and overall performance will not be linear. What we didn’t know in our FOMO days was that it’s very important to see what areas have the highest rental growth and the highest demands. 🙌
With a twist– you also want to ensure there are no or few apartment units coming online (aka being built) in the submarket.
Here are two other questions to consider when it comes to the submarket.
- How many units exist and are available to lease right now, currently, in the area, you’re looking to invest in? Base that number around the next question.
- What is the current construction pipeline? This metric will give you a good idea about what to expect for the up-and-coming complexes that could affect your property in the next 3-5
It’s All About Character
You’ve heard of curb appeal, right? Our next tip for ya we wish we knew a few years ago has the same vibe – but we’re rebranding it to apartment attraction.
What do we mean by this? 🤔 Reflect on the type of apartment units that are the most desirable in the marketplace. A general good place to start for what can be considered “desirable” or “attractive” is properties near strong schools with units of 2 to 3 bedrooms because they attract families.
Another perk to not dismiss is attached garages, this convenience can not be understated!
We all know that feeling of walking up two flights of stairs to an apartment only to realize– we left the phone in the car! Hauling back and forth is no fun, especially on a regular basis. The results are in and attached garages are hot when it comes to someone deciding which apartment they will lease and convenience has a way of winning people over.
Aside from garages, another apartment attraction factor we consider is the vintage status. Unlike wine or Dior – apartments don’t age well with time. Simply put, the newer the property, the better. ❤️️ ❤️️
Newer properties, for most renters, are automatically considered safer and more technologically sound. Modern designs for today’s living and energy efficiency are things to not be overlooked when making that decision about the type of apartment you’re investing in.
Always Add Value
Just like yourself, you and your apartment have value. And anyone who recognizes the value in themselves is always looking to bring that same energy to others. The same can be said for your newer assets, we wish someone would have told us to always value-add on what we already have! 😉😉
Nan, can you share what you mean to value-add to the assets you have?
Start by inspecting what other opportunities there are to upgrade and/or increase rent. Can you install any new technology packages? Redo the floors? Include a wifi bundle?
These small tweaks with some thoughtful planning and research will make your assets more desirable within the market – and will not break the piggie bank in the process. Palm, It’s amazing what a fresh coat of paint and simple and modern backsplash can do for a space, right?
From FOMO to YOLO
As we wrap up this episode we want to leave with one simple reminder, you only live once. ✨✨
Our point being, you don’t have time to slip up on these investments that have the potential to grant you financial freedom and overall security. Taking this seriously now will result in a more effective and powerful plan that can only benefit you.
So don’t lose sight of the questions we ask ourselves when deciding on where and when to invest.
- Is there a strong sub-market?
- What’s the demographic of the residents that will be living in my apartment?
- How strong are the surrounding schools?
- What is the demand in this sub-market?
- Are there opportunities to add value?
These are some of the things that we teach our passive investors in the Kitti Freedom Club. We teach them that when they invest in any apartment opportunity, they have to make sure they don’t get caught up in the psychological trap of feeling like they have to invest in whatever property someone else has because they’re afraid of catching FOMO. 😇😇
For the sake of your financial future, ask yourself, is this a just a good deal, or a great one?
That’s it for today, as always thank you for tuning, Cashflow Multipliers! 👋
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