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Circle of Competence Issue #42

Quote of the week: "If you don't know where you're going, you'll end up some place else." - Yogi Berra

FOOD FOR THOUGHT

Investor discussion - John Ackiss & Opportunity Zone Development

This week, Neil and I had the opportunity to speak with John Ackiss about his career in real estate and the most valuable lessons he's learned thus far. John is an experienced real estate investor and developer from North Carolina and is currently developing a $18M multifamily project in Asheville, NC in an Opportunity Zone. The project is open to new investors, so please reach out if you have someone in mind who may be interested! Disclaimer - neither Neil nor I have any investments with John, nor do we plan on initiating one at this time. Each potential investor should do their own research and consult their own counsel.

Lessons learned

1. Pick your partners well. Your business partners might become long term partners when things get tough. Tough times bring out the true character in people. Make sure you’re partnered with good ones. Be careful accepting equity partners as well. Draft good operating agreements and always stay transparent. While this sounds banal, in raising private capital, you can only be active as long as your partners are willing to invest in you. Ideally, you should pick partners that are patient, capable of withstanding cycles, and are aligned with your vision for the investment. Break ups are often painful and sometimes can cause forced selling.

2. Know where you are in the cycle. Over and over again, we heard John say that overleveraging is what gets many real estate investors in trouble Just because you can leverage up on a property doesn't mean that is the best move going forward. This remains true for operating businesses as well (see Retail Private Equity deep dive series below!).

3. Don't accept capital, debt or equity, and invest it, just because you can. Just as before - just because capital is there for deployment, whether in the form of debt or equity, doesn't mean that it is the right decision at the time. Just because you can, doesn't mean you should. Chasing returns and fees is often a recipe for disaster.

4. Be slow to hire, but quick to fire. Run as lean as possible for as long as you can. Cycles happen, and it is hard to part ways when business slows down. Only bring on people you really like that are flexible and have potential to grow. There’s a saying that is easy to hire average people but very hard