How Do You Make Luck Happen?
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ast month my article focused on looking at the big picture. Now, on a more personal level, it is time to apply the possibilities revealed and the insights gained. There are no right or wrong answers. The reality is that not one of us knows exactly what will happen in the future. Even the most renowned economists can’t agree. All you can do is read, review the facts, weigh the different opinions and, then, apply the conclusions that you reach to your own circumstances and properties. So how does this work? Take for example the question: Can I survive and thrive in rising inflation and interest rates? Much depends upon your own situation. We are already seeing the rise in interest rates slow down residential sales. Maybe that does not matter to you. But what happens as costs continue to double or triple? Do you then see yourself in a position of having to sell one of your properties? From a broader perspective, how do you feel about the entire economy and outlook over the next two, three or five years? Last month I mentioned a new book, Fake Money, Real Danger: Protect Yourself and Grow Wealth While You Still Can. Whether you agree with the co-authors, Robert Wiedemer, David Wiedemer, Ph.D., and Cindy Spitzer, they certainly offer some thought-provoking ideas and suggestions. Based upon how you see increases in inflation and interest rates impacting your own investments, now is probably
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Apartment News
a good time to ask yourself: Do I need more security? Where am I most at risk? What would happen if you faced a loss in cash flow or if the value of your equities dropped by 50%? What if both happened at the within three months of each other? This is probably also not a bad time to ask: Are my properties delivering the maximum rental value?” You may feel very comfortable, at the moment, but what if circumstances change? And, remember, we now have statewide rent control, so there are limitations on raising rents with your existing residents even if your operating costs go up and/ or you need more cash flow to offset other losses. Think, too, about those deferred maintenance items. What will happen if you have to undertake costly repairs or replacements? Will you need to get a loan? Do you have other resources and how secure are those values? Then, there is the question as to how will tax laws or other regulatory changes impact my bottom line? We have already seen evidence of ever-tightening rent control restrictions. What about 1031 exchanges and/or required readjustment to the tax basis when putting your property into trust for your heirs? Which brings up another question: Is my portfolio set up for a smooth transition and a way to build my legacy? Perhaps circumstances are such that hands-on ownership is not going to work for your heirs? Maybe selling or exchanging into some type of partner-
www.aaoc.com
July 2022
BY WILLIAM R. GORMAN REAL ESTATE BROKER/OWNER/ INVESTOR
ship or Delaware Statutory Trust (DST) would be a better option. But do you do this now or wait a couple of years? You need to do some projections and run the numbers. All these questions may seem overwhelming. However, if you tackle each concern and possibility, one-by-one, you begin to form a more complete picture of where you are situated and what you need to do. This brings to mind one of my alltime favorite movies, Dirty Harry, with Clint Eastwood playing a tough copy with a cocky edge. As he was confronting a bank robber, he tauntingly issued his famous line: “You’ve got to ask yourself just one question — ‘Do I feel lucky?’” Dirty Harry had the power of being on the right side of the law behind him, and although, at times, he took a risk, he always knew that he made his own luck! Savvy investors, who are willing to ask those tough questions, do the research, evaluate the options, and make changes as needed, make their own luck. Just like Clint Eastwood in his role as Dirty Harry, they take action knowing what they want to accomplish and then understanding and weighing the risks. What’s luck? It is what you make happen.
