500 + INVESTMENTS AND COUNTING FAQ
So what have we learned?
We believe that, like most things, investing success depends on dedication and practice. We have made more than 500 investments since starting our first fund in early 2010. The frequently asked questions (FAQ) below addresses some of the lessons we have learned, including some mistakes we hope not to repeat.
What are the 500+ investments you have made?
Please click here to see a list of the streets and cities of each of the 500+ projects. This list includes both loans we originated, properties that were purchased, renovated and resold, and also properties still held by one of our funds.
What have the results been?
We are fortunate to have had very few problem investments and even fewer losses (in fact, no investor losses to date as of April 30, 2015).
What are some themes underlying your successful investments?
The great majority of these investments are single family homes in California and to a lesser extent Indiana--an asset class and two geographic areas that we know well. By investing in what we know, we have been able to largely avoid unforced errors. Another theme has been focusing on “hitting singles” rather than swinging for home runs. By concentrating on lending rather than buying, we have given up a lot of potential profits we could have earned, but we have also reduced our exposure to market and execution risk.
Have you focused on a lower-risk, lower reward strategy?
Prior to focusing their careers on real estate investment and fund management, both Managing Directors of Arixa experienced the extreme ups and downs of technology-related start-ups. After that experience, they were ready for more consistent results and for investments that could be underwritten without a crystal ball into the future of technology. Real estate lending has its own cycles, which tend to last for several years. At Arixa, we believe we can underwrite the value of each project in such a way that we are fairly well protected even in a downward cycle, by avoiding excessive leverage. In contrast, we have both seen company values drop by 95% or more in 12 months or less.
What investment mistakes have you made and what have you learned from them?
Both our worst and best-performing investments have been land. Land is the venture capital of real estate, with big paper gains and big paper losses (though if you can afford to hold land, it usual does recover in value eventually).
Timing is very important in real estate. Two similar investments with similar business plans and locations can have very different outcomes depending on the timing.
Partnerships can be challenging. Even a very solid investment can turn into a mediocre one with the wrong partner.
Cleaning up the mess after a bad investment may take as much time as making and managing 10 or 20 good investments. The cost of mistakes is not just the money but the opportunity cost.
What else have you learned from your experience?
Good investments can come from anywhere and anyone. Always pick up the phone if someone calls and treat the other person with respect. Never judge the person but focus on the merit of the investment and then structure it to mitigate risk if the investment is good.
Timing is everything so be prepared to start new investment programs or wind down existing ones as warranted. If there is too much capital chasing a particular opportunity it might be necessary to move on to greener pastures.