As you all know, I am a huge fan of Howard Marks, in fact he is on my Mt. Rushmore of Investors. His new memo is here. He recently wrote a piece on his thoughts regarding selling which really got my juices flowing, and I began asking myself these questions:
If the value of real estate is long term cash flow, appreciation, and tax advantages, is it ever a good time to sell?
As an investor how do you straddle the fence between accomplishing #1, and having a healthy cash balance so that banks will continue to lend to you? Banks like track record (read sold deals at a profit), but they put more emphasis on liquid assets (read cash).
Is selling now simply a function of “taking profits” only to have to re-invest that money back into higher priced assets? Just like when you see you home has appreciated in value, you think, wow it may be nice to sell. Then you realize everything in your town has increased in value so not much gain will be realized.
In thinking through all of these questions, I have landed on “there is no right answer”. (Thanks Richard A., I have been listening!) I am starting to think of our portfolio as a garden. There is a season to plant, a season to nurture with water and sun light, then for some assets a season to harvest.
Just like tree farmers never clear cuts his entire forest to maximize profits in one year, I think it wise to evaluate your portfolio as the years progress and ask:
Is now the time to harvest based on what Mr. Market will pay?
Based on today’s interest rates?
Most importantly, is there a better option on the horizon?
Lagniappe: We are making a big push this year to level up our marketing and branding for both individual stores and the over all brand. Expect some exciting changes in the 3rd quarter of 2022.
I could not be more optimistic about 2022 as we dial in our operations, grow our team, and add larger assets to the portfolio.
It was short and sweet today. If you enjoyed this today, please forward it to another curious friend. I love your replies to The Real Deal. I read every single one, and I try to respond as often as I can.
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