When analysts wanna illustrate a point with a little extra gravitas, they’ll often invoke the concept of the vaunted ‘Fundamentals’. Given analysis with them vs without them, we’d all opt to have them well blended into the equation, right? Of course.
Here’s the problem though, especially as it relates to the garbage in/garbage out principle in the form of an axiom.
BawldGuy Axiom: Using most of the required tools to complete a job well ain’t gonna work — and the proof will show up in the results.
Ever been workin’ out in the gym and seen one of those guys who didn’t get the memo about workin’ the body as a whole? They generally look like Ahnold from the waist up and Olive Oil from the waist down. I’ll bet you’ve seen this before. They’re applying the fundamentals of body building through resistance training — but doing it selectively. FAIL.
This goes double when you invest. Selectively adhering to what you know is fundamentally correct won’t cut it. Curious though, how when a fundamental is contrary to what we wish to believe, or worse, what we really wanna do, we can figure a way around it.
Bad idea.
Leg work in the gym is pretty much universally loathed. In fact, I don’t trust folks who love leg work, as it just isn’t natural. 
Then there are the comical results described above — the Ahnold/Olive Oil look IMHO will never catch on.
Getting the right property, or the right price, cap rate, region, etc. can’t be approached piecemeal. Also, especially these days when we tend to feel far too comfortable with online research, a false sense of ‘having the data we need’ is the biggest risk. I run into it almost daily.
“We’ve done some real research, even down to the neighborhood level, and we’re convinced the rents should really be such and such.” Long time readers know the value I ascribe to ‘boots on the ground’ (BOG) research. I’ve had folks tell me rents are too high, when in point of fact, those rents are a year old, and now slightly lower than the three down the street, just raised upon lease renewal.
Local boots on the ground knowledge is like gold — it’s value is never zero. When combined with decades of accumulated knowledge and expertise? A lot more than zero.
Online research? Helpful at best, horribly misleading at worst. If not gathered with the intent of BOG follow-up it has dubious value at best. Those who buy or pass on regions, properties, neighborhoods based upon research done in their living rooms are more likely than not future recipients of the law of unintended consequences.
This is why we always, no exceptions, do our own boots on the ground work. When we say a property should rent for $XX, we have the data to back it up. When we come to an opinion of value, we’ve seen the properties and the comps in person — not to mention appraisals from paranoid lenders who believe nothing. We know both personally and empirically how we came to our opinion.
The Father of all investment fundamentals?
They’re called fundamentals for a reason — without them in place, things don’t work as planned. You either miss out on a stellar opportunity, or mistakenly brand an investment as an opportunity. Either way, eschewing the use of all the tools in your toolbox is a mistake which almost never fails to deliver. consequences. The dirty little secret? Most investors simply don’t pack a fully stocked toolbox.
My ‘band’ has at its disposal many instruments available for use with specific real estate music. When ya need cowbell, ya need cowbell. There’s no callin’ out ‘Gimme more cowbell!’ when there isn’t one. Hence, the name of my new band.
Fundamentals Toobox — Backed up by Boots on the Ground.
Wanna talk? You can contact me at 619 889-7100. Have a good one.
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