Editor’s Note: Hal Cranmer has had a wild past. Born in India, he’s lived all over the world and started his working life as an Air Force Special Operations and Commercial airline pilot. After 9/11 brought him down from the clouds, he entered the corporate world and rose to the level of running a $36M machining plant. Yet from 2006 on, he caught the passion for real estate investing. He flipped a bunch of houses in Minneapolis and still owns several multifamily rentals there. Lately, he is into assisted living, and owns 5 assisted living homes in the Phoenix area. He loves to follow real estate trends, both locally and nationally.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Cranmer provides us with his own unique, lively and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out our other super-helpful Market News Updates. For now, enjoy...
From Hal Cranmer...
I’m sure most Mogul members don’t check the sports pages to find insights on real estate. And then there’s the jock reputation – as not so much the smartest guy (or gal) in the room.
Alex Rodriguez is looking to change the jock reputation. The All-Star Major Leaguer started with the purchase of one rental duplex in South Florida in 2003. He worked on a ‘lather, rinse, repeat’ process, and cranked up his business to owning approximately 13,000 rental units today.
Sure, when you sign a $275M, 10-year deal with the New York Yankees (full disclosure – I’ve been a Yankees fan since the 1970s), you have some capital to deploy. But there are many pro Athletes that end up in Bankruptcy court as well.
In addition to housing, A-Rod also owns investments in media and fitness companies. Clearly, he is doing something right, rather than just throwing his money around.
Here are some of the things he did to create so much wealth, along with some of his insights for the markets in 2018. I thought it would be good to see how his lessons and insights could apply to those investors without professional sport’s contracts.
Find a Mentor
A-Rod went straight to the top. He convinced Warren Buffett to be his financial mentor.
Although it might be difficult for us to find a mentor like the ‘Oracle of Omaha,’ it doesn’t mean we can’t find a great mentor.
Buffett is not known as a tremendous real estate investor. But someone who understands business well can definitely be a great mentor.
He’s Fine with Fixer Uppers
One of Warren Buffett’s philosophies is: ‘Know the difference between price and value.’
Or, as A-Rod says:
“We’d rather put in the hard work and assemble the expertise needed to effectively renovate and reposition properties than go straight into a bidding war for the most attractive luxury offerings on the market.”
In other words, find properties that have more value than their price would suggest. People will walk away from an otherwise gorgeous property that has a bad paint job. Or a property that smells of cat urine.
Both problems can be solved easily and relatively inexpensively. Both problems can make a big difference on the sales price. Learn to look for diamonds in the rough.
Look for Underserved Markets
Looking for value compared to price has led A-Rod to look at underserved markets with lots of middle-class workers, especially in the current market.
In a real estate recession, these rental properties will stay full, even if you have to lower your rent a bit to keep them full…
These underserved markets could very well be in the Southern and Southwestern states. More and more people are looking to escape the cold weather and high taxes in a lot of Northern states. The warmer, business-friendly climates may not be able to easily handle the migration. Prices are moving up down South.
Keep an Eye on Rate Hikes
Higher interest rates mean higher monthly payments. In order to keep monthly payments affordable, real estate prices may drop. As rates rise, A-Rod suggests keeping some of your capital ‘dry’ and ready for a recession. The higher rates may bring out the great deals.
Staying on the side lines (or should I say, staying in the dugout) if you don’t see any good deals is a great strategy. Work with your investors, banks and other financing sources to make sure you have capital to deploy when the good deals come.
Invest in What You Know
This is another lesson that A-Rod shares with Warren Buffett...
A-Rod’s family was not wealthy growing up, and he lived in several apartment buildings. He always thought he would be doing much better as the owner of an apartment building than the tenant. Since he spent a lot of time in apartments, he felt comfortable investing in multi-family units.
As a pro athlete, he spent a ton of time in gyms and dealing with the media. That’s why his company also invests in fitness centers and media companies.
A-Rod didn’t jump into commercial real estate or fixing & flipping so much. He wasn’t familiar with them. It makes sense to figure out what you know, and concentrate on becoming an expert in it.
I spent a lot of time helping my parents take care of my grandparents. I noticed that I was very patient with older people and enjoyed all the history they had bottled up inside them...
That’s what led me to invest in my assisted living homes.
One Last Lesson
At first blush A-Rod doesn’t seem like a person you would seek out for investment advice. If anything, you might want to talk to him about borrowing some of his money, not asking him how to make money.
Yet he has become a serious real estate player.
Don’t always count on first impressions. Learn more about people who come into your network. Ask lots of questions. Even if you know a lot about something.
Check out this video of A-Rod asking a lot of questions about hitting a baseball, even though he was arguably one of the best ever.
Just like the value of a home may not be obvious, the same can be said about people. Look beyond the obvious. You might be pleasantly (or unpleasantly) surprised.
Talk to Me
Have you gotten good REI advice or insight from someone not in this industry? Or someone surprising? Share below.
Hal Cranmer
Hal Cranmer has had a wild past. Born in India, he’s lived all over the world and started his working life as an Air Force Special Operations and Commercial airline pilot. After 9/11 brought him down from the clouds, he entered the corporate world and rose to the level of running a $36M machining plant. Yet from 2006 on, he caught the passion for real estate investing. He flipped a bunch of houses in Minneapolis and still owns several multifamily rentals there. Lately, he is into assisted living, and owns 5 assisted living homes in the Phoenix area. He loves to follow real estate trends, both locally and nationally.