What I’m thinking about: Dispositions! Nothing keeps me up at night more than concern about dispo. Typically, spring is the hottest time of year for RE sales, but both micro and macro data is not indicative of that.
With last week’s newsletter in mind, we’re even more aggressive with our portfolio offload strategy. Outside of two very large assets, I’m now price-cutting every 7 days on the rest of our parcels, basically in fire sale mode.
Returning basis is the goal, anything beyond that is gravy. (Credit to Brian Wied for suggesting updating marketing materials to account for land being potentially protective in an inflationary environment. We updated our listing descriptions accordingly.)
I don’t think any sold comps can be trusted at the moment, and would put off any significant acquisition (think $35-40k+ purchase price) until end of May if possible. The first sold comps accounting for trade war distress won’t start appearing in the records until about mid-May. Keep this in mind.
Never forget that land is a luxury purchase for almost all buyers, and very sensitive to consumer sentiment. This economy is dramatically different from the early COVID months, where stimulus checks were handed out, interest rates were cut, people were fleeing cities and remote work was a growing trend. All of those factors are not in play this time around.
Think a trade deal of any kind with any country is around the corner? I sure hope so, but note that the fastest ever modern trade deal negotiated with the U.S., was with Singapore, and that took about 18 months.
All about downside protection. With this strategy, we risk leaving money on the table by price-cutting too quickly and reducing profits, or even eating losses. On the flip side, if we act too slow and the economy continues to worsen, we’re left holding the bag with assets that aren’t moving or cash flowing, and limited liquidity to take advantage of distressed assets. Take your pick.
Personally, I’ve lost millions of dollars by not paying careful enough attention to clear macro/micro indicators in the past. That pain has serviced me. Never making that mistake again.
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Check out the replay to our Virtual UnConference session from yesterday, with Dave Denniston and Justin Sliva. Excellent engagement and absolutely killer strategies/tactics discussed in the Hot Seats to navigate this evolving economy
(11 slots left to join us at the live UnConference August 7-9 in MN). Use code ‘duff’ for $200 off your ticket.
UnConference has been foundational to Serious Land Capital’s success and becoming a go-to leader in this industry. Wouldn’t be in the position we are today without it!
P.S. Want to hear more details on my latest thoughts/tactics on dispositions? I discussed it on Episode 102 of my Get Serious podcast.
