Are you a Driver or Passenger? A primer for effective real estate investment management

April 5, 2010

In the last several years, investment real estate in Michigan and the Midwest in general has suffered, which is not breaking news to anyone. But when I sit back and think about why, I feel it’s beyond the simple excuse of a “bad economy.” Rather, investment is suffering because of a lack of what I call “great operators.”

In economic downturns, great operators can produce significantly better investment returns then those of mediocre competitors.  Great operators are “drivers” of value while mediocre ones are “passengers;” they choose to sit idle and allow market conditions to be the determining factor for success or failure.

Ten years ago, it was easier to produce favorable investment returns as the strong market pulled everyone along including the “passenger” operator.   In today’s environment, the “passenger” attitude—where one accomplishes marginal results at best—won’t cut it, at least not for long. Those who are “drivers” continue to learn, improve and employ best practices, those practices built on a strategy of constantly maximizing investment value.

The current economic climate has emphasized the need for the great operator.  The key in an economic battle is to recognize great operators and provide them the platform to perform.

I’m reminded of Warren Buffett, the great investor and businessman, who stood by several tenets when entrusting companies with his money – invest in businesses you understand, never invest in the average company, and target the great operators, those who are on top. Because when the average drops, the great operator will fall slightly, but still be ahead of the curve.

Now how do you find a great operator? We’ll continue to discuss that in later posts. Meanwhile, thanks for reading, be sure to drop by again soon.