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The secret to successful investing as an owner-user

A friend recently told me the best way to buy real estate is to have purchased it many years ago!

In addition to this sage advice, I was reading a recent letter from Warren Buffet to his investors regarding his history of purchasing stocks and real estate stocks with the same simplistic method of underwriting. Simple and profound, however, what elements of real estate does one consider when purchasing on behalf of their company?

I am always learning a thing or two from our advisors, one of which recently told me to "turn off all the noise" when evaluating an asset for purchase. It is a skill to look past the short-term up's and down's, gains and losses, to the intrinsic value of the asset. When we advise a client in purchasing a building, for use or long-term hold, we look at asset's value from the perspective of its usability and profitability over time as well as the current market value.

For an owner-user there may be unique features of a particular asset only of value to that purchaser, rather than the market in general. Understanding our client's intended use and business model is key to finding hidden value in real estate that may otherwise be overlooked by the investor community. There also may be a way of unlocking the asset's value as a result of an owner-user's occupancy of the building. We have helped clients with sale-leasebacks, meaning we help them strategically buy a building as owner-user, create a long-term lease for their business, and sell the building as a profitable asset. This allows long term financing with the benefit of today's continued historically low interest rates. We recently utilized this strategy to unlock over $60 million dollars in cash for a client from the sale-leaseback of two buildings.

Again, I have to agree with Warren Buffet, when approaching real estate decisions it is best to look at the long term approach. We don't get caught up in the "earnings per quarter" mentality and lose focus on long term strategies. Part of our job as real estate advisors is to understand the objectives of our client's and their business strategy. We look at owner-user purchases with the intention of creating a stable platform for their business growth, which not only provides stability but can sometimes, lead to significant short term gains.

About McKinney: McKinney Advisory Group is a uniquely client-focused firm that looks at the bigger picture when helping clients make real estate decisions. We are more than a real estate company; we care about the community. We operate at the highest levels of fiduciary responsibility and focus on the finance of a company before making real estate suggestions. Ultimately we are an "achieve your vision" company.

McKinney Advisory Group prides ourselves on finding customized solutions and building relationships for long-term success. For more information or questions please contact Damian McKinney at dmckinney@mckinneyadvisory.com or 858.519.3240. Please visit www.mckinneyadvisory.com for more information.

Written by Damian McKinney, founder and CEO of McKinney Advisory Group, a national tenant representation firm.

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