Before making a passive investment in real estate, one of the most important items for an investor to assess is the sponsor’s ability to execute the strategy for each property and efficiently manage every aspect of their business.
The best passive investments in real estate include an experienced sponsor who finds appropriate properties to acquire, underwrites them properly, performs due diligence correctly, and raises capital from like-minded investors to acquire them.
Once properties are acquired, the sponsor is responsible for repositioning them to optimize each property’s performance and value. As a prospective investor, it is critical to know the sponsor has taken measures to ensure success at every level.
At the property level, this includes making physical improvements, lowering expenses, increasing income, and managing the day-to-day issues at each property.
At the business level, this includes proper bookkeeping and accounting, regular reporting and distributions to investors, staying up to date on legal and regulatory changes, and all the tasks related to marketing, administration, and human resources.
On a macro level, this includes long-range market analysis, solving for any bottlenecks that may be forthcoming in the future, and building processes to allow the business to scale.
Investors are more likely to contribute capital when they are comfortable with the sponsor’s ability to execute on every level. Their investment relies on the sponsor’s thoughtful consideration to architecting their business in a way that promotes success.
The Origin of 52TEN
Having observed shortcomings that prevent real estate sponsors from being profitable, growing to scale, and executing efficiently, our founders spent almost a year architecting the mobile home park strategy and the business that surrounds it. From the beginning, we chose to build 52TEN and our mobile home park investment fund portfolio on EOS®, a business architecture designed by Gino Wickman.
The EOS Business Architecture
In his book Traction®, Wickman outlines how to “Get a Grip on Your Business” through a holistic system that helps owners run better businesses, maintain better control, and gain more traction. Ultimately, the system ensures owners run their businesses instead of their businesses running them.
With Traction as a guide, we developed the long-term vision for 52TEN and broke it down into short-term goals that we tackle one quarter at a time. Along the way, we give thoughtful, proactive consideration to each business decision, with our core values and long-term vision in mind.
At 52TEN, we take EOS to the next level and install the same architecture at the mobile home parks we acquire. This way, our properties each have their own unique long-range vision, broken down into shorter-range goals that are also tackled one quarter at a time.
How We Apply EOS at 52TEN
EOS outlines a set of comprehensive processes and tools that help our team solve challenges, stay in control of the business, and operate efficiently. The system focuses on six core components: Vision, People, Data, Issues, Process, and Traction.
Most business owners have a vision for their company, but it isn’t always clear to the whole team, leading to confusion and conflict. If everyone is going in different directions without a clear understanding of what they’re working toward or who they should be reporting to, a vision is unlikely to become a reality.
A company’s vision should clearly articulate who you are, where you’re going, and how you plan to get there. At 52TEN, we intend to acquire 52 properties over ten years. We are so focused on our vision that we named our company after it.
A company’s vision should also identify its core values and Core Focus™. A company’s core values are the timeless principles that guide its founders and staff as they hire people and make decisions. Properly followed, these values impact every aspect of business, from the long-range vision down to the day-to-day operations.
The core values we established for 52TEN align with our Midwestern values, conservative approach to investing, and mobile home park investment fund strategy. These values were established in 2016 and are still guiding us today:
We believe that each employee, contractor, vendor, professional, and even software solution should be world-class.
We believe in delivering the best experience for everyone involved in our business. This includes the residents at each property and the employees, contractors, and vendors. For our investor partners, that means structured communication, transparency, timeliness, and accessibility. No matter who we work with, we strive to pleasantly surprise them with the best experience they’ve ever had.
IT WILL HAPPEN
We believe that everyone on the 52TEN team needs to be aligned with our goals and share the unshakeable belief that “it will happen.”
We believe great investments begin with a smart decision and continue with a series of smart decisions. These include conservative underwriting to accommodate surprises, the courage to pivot when necessary, and thoughtful consideration for short and long-term goals that impact each investment’s performance.
Establishing a core focus ensures you don’t get distracted by what others are doing or end up chasing the “shiny object.” It helps drown out the noise around you that doesn’t align with the company’s vision.
At 52TEN, our core focus is mobile home park investments, which provide recession-resistant cash flow for our network of private investors. That’s all we do.
The right people are those whose skill set and personality are a perfect fit for the role and who share your company’s core values. This will ensure their success and increase the likelihood they will thrive in your culture.
Our team hires and fires around 52TEN’s core values. This approach has helped us build an amazing team that is pulling in the same direction, with each person accountable for hitting their numbers.
Without accurate data, businesses tend to operate on opinion and impulse. However, with the correct data and a scorecard to track weekly updates, you can have your thumb on the pulse of your business and see real-time patterns, which lead to smart decisions.
At 52TEN, we set clear expectations so each team member knows what is expected of them on a daily, weekly, and monthly basis. These expectations are measurable and quantified by a number that allows everyone to keep score.
When everyone delivers on their number, the long-range plan comes to life in a predictable way. And when something is off track, it is easy to notice and quickly remedy before it becomes a problem.
Issues are the obstacles that get in the way of accomplishing the company’s goals and vision. Unfortunately, most entrepreneurs are so overwhelmed with firefighting that they don’t have time to uncover the root problems.
Our team identifies the most critical issues during our weekly meetings, discusses them, and solves them permanently. This allows us to be proactive and prevent fires rather than reactively fighting them.
Every company should have core processes that are linked together via a system. This unique way of doing things can be consistently applied and refined, giving you the option to duplicate, scale, maintain, or sell the business.
At 52TEN, we have established processes known as “The 52TEN Way” for each business component. These processes allow us to scale the business and acquire the next property in a very predictable manner.
Humans have a short attention span and tend to lose focus beyond 90 days. To retain focus and momentum, it’s critical to pause each quarter to remind yourself of the company vision and the one-year plan. Breaking down the year into short, 90-day bursts that are manageable, yet achievable, keeps the business moving forward toward long-term success.
Our teams establish new, smaller goals each quarter that are aligned with the overall vision and larger annual goals. During the quarter, each team member participates in a weekly meeting, where we review the goals, report on the numbers we are accountable for, and discuss issues that have gotten in the way. The result is “traction” toward measurable results for the business, the portfolio of properties, and our investor returns.
A Key Factor to 52TEN’s Success
When we look back at the success we and our investors have experienced, it’s clear a key contributing factor has been the EOS business architecture. Without it, we certainly would have dedicated far more resources to putting out fires instead of what we really do here at 52TEN: deliver the best experience.
As applied to running a real estate investment fund, this proactive method allows for the planning, execution, and control of every component of the business, down to the smallest detail at each property.
With EOS as the framework, our team continues to outperform projections in our first fund as we build a portfolio for our second fund, all while delivering the best experience our investors have ever had.
This content is the perspective of the author and is not intended to be relied upon as a forecast, recommendation or investment advice, and is not an offer or solicitation to buy any securities or to adopt any investment strategy. The information and opinions contained in this content are derived from experience, historic data, and other sources deemed to be reliable, are as of the date of this content, and may change as subsequent conditions vary.