Major League Baseball’s opening day: It’s one of my favorite days of the entire year. I start getting excited every February when pitchers and catchers report because we’re getting close to the beginning of the season. That anticipation continues through spring training until we’re finally to today. My love for baseball started young. My dad would take me to Fenway Park, and I would play countless hours of baseball on a diamond in our backyard, mentally cycling through the 1976-78 Red Sox batting order and positions, most of which I still recall to this day.
As an adult, my love for the game has never waned. In fact, my enthusiasm for it has only increased over time, even as I became an entrepreneur with other passions. When I got started in the real estate industry six years ago and founded my company, I quickly realized that there were many parallels in the keys to success for both investing in real estate and baseball. Three lessons in particular stand out as cornerstones to both smart real estate investing and the great American pastime.
Bat For Average
Kids who grew up playing baseball or softball will remember missives from coaches about the importance of base hits. While it’s true that everyone loves and wants to hit home runs, you quickly realize that swinging for the fences can result in a lot of strikeouts too. And that’s no fun. Instead, if you focus on batting for average — and you’re successful at it — all your other stats will head in the right direction as well, including the most important statistic of winning games. No team can win a game without scoring runs, and to do that, you have to get on base, knock in some runners and score yourself.
The idea of batting for average rings true in real estate as well. In a real estate portfolio, you’ll have some wins and some losses, but if you overall have a good batting average and are in the right place, you’ll score lots of runs and rack up an impressive record.
Of course in baseball, going three for 10 would actually be a really good average. But in real estate, you should think about average in terms of your overall profits. And this means that you don’t need to pour your energy into hitting a sole “home run” where you have one really successful sale. Rather, getting singles and doubles, or even just getting on base, is what you should aim for. If you focus on gaining a bit of profit from each transaction, you’ll also have various tax advantages at your disposal that will bump your success stats even higher.
Pay Attention To The Stats
I often encourage baseball fans to try keeping score for at least one game. Following the detail that closely allows you to appreciate the nuance of the game.
My company works with both investors and lenders. And during the past six years, it’s been amazing to learn how important the details are when it comes to the lending side of the business. The savviest real estate entrepreneurs are the ones who do their research, know how every block of their target neighborhoods is trending and are willing to make the tough but high-percentage improvements to a home to really raise the value. They pay close attention to the stats, and use them to their advantage.
For example, I know borrowers who meticulously watch comparable sales data for very specific neighborhoods. More often than not, these neighborhoods are close by their own homes, so they’re able to drive by, see new cars in the neighborhood and stay apprised of any new business developments in the area. Being aware of all these details, the borrowers will often purchase many homes on a street or block, knowing that the area is improving and contribute to that by flipping multiple homes instead of just one. The best investors round out their lineups with individual pieces that make up the whole, such as teaming up to develop a commercial building in the neighborhood and recruiting desirable businesses, adding more convenience and value.
It’s A Long Season
Overall, it’s a long season. Spring training starts in February, and if you’re a Red Sox fan like me, you’ve been lucky enough to keep intently watching through late October. Some people think the games and the season alike are just too long. In response, I say there’s beauty and power in the long haul.
Similarly, real estate investing isn’t something that generates a return overnight. Even a short-term investment platform provides returns over an average of six to 12 months. Most other investments take years to accumulate an attractive return.
In many cases, weathering a down streak can pay off in the end. This certainly happened during the 2008 housing crisis. Despite a troubling economy, those who had capital purchased numerous homes or lots, knowing that things would turn around eventually. Timing the market is always difficult and will never be perfect, but if you treat real estate investing as a long-term strategy with a diversified portfolio — and you have ability to take on risk and expend capital — you’ll almost always be able to ride out a slow period.
Like earning a World Series ring, it’s the aggregate returns that steadily accrue over time in real estate that really matter. Keep your eyes on the prize, and remember that all good things take time. Now, let’s play ball!