Updated: Apr 23, 2020
Fear is the most powerful factor in determining a course of action for all of us as human beings. Fear comes with good reason, our minds are biologically programmed to keep us healthy and alive. If the goal is to live a long life, a deterrent compelling us or rather not compelling us towards additional action is effective. Maintaining the status quo, or the way things are, is the end result of this biologically programmed fear. And because emotion drives thinking, and thinking drives behavior, fear as a powerful emotion drives most of our behavior.
I wanted to write a different sort of post that touches on a concept I see all around me. I see it both on my job as a firefighter, and also my passion in real estate. I see fear drive so much of the behavior around me, that I feel a discussion on fear is central to investing in real estate.
Part of my personal role as a commercial multifamily real estate investor is raising capital. During this phase of capital raising, I speak to and meet with many prospective investors. All of these investors fall somewhere on the spectrum of fear.
Those more familiar with investing in real estate I find have very different questions than those who are not.
Those who are not familiar with commercial family have concerns and questions more directly correlated with fear. This is part of the human psyche, and it is nothing to hide from or shun. Rather it should be wholly embraced and talked about. So I wanted to come up with an analogy that accurately describes this fear in the context of the fire service. So here it goes…
Firefighting is a potentially dangerous job. Everyday, situations present themselves that carry a high degree of the unknown. This unknown carries elements of risk that need to be mitigated and monitored if we in the fire service are to do our jobs effectively and safely.
If you approach the average person on the street and inform them of what we do, they are grateful.
That generosity, warmth and humility is something we in the fire service wholeheartedly cherish, value and actively protect.
Alongside that is an admiration for our willingness to put ourselves in these situations.. That admiration can come across in many forms, but when you proposition the average person to become a firefighter themselves, that’s when an interesting truth presents itself. One of the most common emotions I see is some form of fear. It would be confusion, immediate resistance, or a categorical no. So what is the difference between these average people and a firefighter?
It truly is...Education, Training and Experience. Firefighters were once ‘the average person’ too. Tell an average person on the street that right now, right this second, they need to climb a ladder wearing a hundred pounds of gear, carry a chainsaw up to a roof of a burning building and cut a hole. They would look at you like you are completely crazy. Never in a million years would they take that on because the risk is just too great.
On the contrary, ask a firefighter to do that, and an immediate risk assessment takes place followed by a systematic approach to cutting that hole. A firefighter knows that a secondary means of egress should things go wrong is required to cut the hole. A firefighter knows that once the roof line is reached, everything from the smoke conditions, rigidity of the roof, HVAC units and vent pipes are evaluated for the feasibility and effectiveness of a ventilation hole. This all occurs before a single step is made onto the roof. If the call is made to get on the roof, the first firefighter off of the ladder sounds the roof and checks it for structural integrity. If the ‘coast is clear’ and the roof is sound, the remaining firefighters make their way onto the roof.
An initial indicator hole is cut to assess both the direction of roof construction and the smoke conditions. The captain will make a call on where the hole is to be cut, and the ventilation crew will start making its way to that location. But along the way, additional small holes are made every 10ft or so to provide a means by which the crew can continually look back and immediately assess the smoke/fire conditions underneath. If conditions change, the call might be made to abandon the operation for safety. The path a firefighter makes across the roof is very specific, we never travel 'cross country' or directly to the proposed hole location. We travel along beams and purlins, the heavy construction members upon which plywood and roofing material is laid. We continually sound the roof using rubbish hooks or axes along the way to our destination. Once we reach the location where a hole is to be cut, it is coordinated team effort of multiple chainsaws cutting simultaneously in a predetermined pattern.
The hole is made, the structure is ventilated, and the interior attack crews now hopefully have improved visibility to help them get water on the fire. The ventilation crew exits the roof in a controlled manner and requests another assignment.
This entire process has come from not only years of experience from veteran firefighters, but literally centuries of firefighting knowledge passed through the traditions of the fire department.
Education, training and experience is what separates a firefighter from getting onto a burning roof from a non-firefighter getting onto the same roof. Cutting a ventilation hole on a commercial structure is one of the most dangerous activities a firefighter can partake in. Make no mistake about it, it can be hazardous, and fear plays a role. But it is mitigated risk and therefore a mitigated fear.
The difference between a novice real estate investor and a savvy one is education, training and experience. Despite the medium for how this dynamic plays out, there is no difference between a firefighter cutting a hole in a roof and a savvy real estate investor turning a property. And in the exact same way, there is virtually no difference between a layperson turned firefighter, and a non-investor turned new investor. Perhaps it takes a certain type of person to want to become a firefighter in the first place, but it also takes a certain type of person to want to actively take control of their financial future by investing in real estate.
When I approach new investors, I hear many similar objections at first. The more we discuss them, the more comfortable they get and that initial fear subsides. The more they choose to spend time learning about what we do, the higher the likelihood they will invest. Eventually these new investors come back for more investments on different properties.
Our investor retention is extremely high, in fact it is so important to us that we try and time all of our investments to take advantage of 1031 exchanges which have certain time requirements.
Returning investors now comprise a significant portion of the capital on our latest projects.
Fear is perhaps the most powerful motivator in human behavior. Education, Training and Experience is what propels us to move from a place of fear towards a place of understanding and comfort. Firefighting is a hazardous job with very real risks, through education training and experience, that risk is mitigated which allows us to perform tasks for the benefit of our communities. Investing in commercial multifamily follows a similar learning curve. Investors in our deals find themselves returning to current and ongoing deals bringing additional capital and enthusiasm for our latest projects.
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fyre CAPITAL is a commercial multifamily investment firm. We purchase and/or partner in 150-600 unit, value-add apartment communities in fast-growing Tier 1 & 2 U.S. markets. Together with our strategic partners, fyre CAPITAL represents over 500 Million Dollars of successful real estate acquisitions. Our developers, sponsors and capital partners have amassed a network of over 1,500 unique investors. We provide new opportunities to invest in projects targeting a 14%-21% Internal Rate of Return . If you would like to join us on our next project, your first step is to Submit an Interest Card. We look forward to partnering with you.