Purpose vs. Popularity
Kim Kardashian West reportedly has 150,000,000 followers on Instagram. That is roughly seven times Australia’s population. Astonishing! She is part of a new group of celebrities known as ‘influencers’ – people who can impact others, and who can make or break businesses, simply via their actions and recommendations.
The idea of people ‘following’ her must, logically, make Kim a leader. I wonder… does she, or anyone else, know where they’re being led? Does anyone care?
Right from an early school age we want to be popular, or at least ‘in’ with the popular group. It’s part of our desire to belong; part of peer group pressure to conform and not be different.
Yet popularity is fickle. It’s here today, gone tomorrow. It’s desirable, but it lacks substance.
Investments can be popular too. Flavour of the month. A trend or fad. One such fad that comes to mind is Student Accommodation. A decade ago it was the ‘investment du jour’. It’s now looking shaky as more and more campuses invest in ‘on site accommodation’ to unlock new streams of income as margins are squeezed on tuition. Another example is retail shops, once the darling of commercial real estate back when people went out to shop, but these are now very much ‘out of favour’ – struggling to keep tenancies in the face of the online revolution.
Investors who lack skill or knowledge often target ‘popular’ investments, or areas, believing what’s popular will be a backstop to their investment’s success. However, popularity usually comes with a purchase price premium, and the risk is that if (indeed, when?) the trend changes (such as a tenant moving out, the fad ends, etc.) then the investor will have to offer a discount to exit.
Instead of popularity, investors would be much smarter to focus on purpose – a compelling reason for acting to achieve a desired outcome. For instance, I prefer to target investments currently ‘out of favour’, with a view of letting time and/or strategy ‘fix’ them.
For example, I have just bought an investment property located near a major private hospital where the current tenant – a gym – will do for now, but where my vision for the property is to re-purpose it to become attractive for ancillary medical purposes that will attract a higher rent and sell on a lower yield (thus increasing the capital value). Can you see how I am buying what’s ‘unpopular’ but executing a purposeful strategy to make a profit?
Indeed, buying unpopular properties (or problems, as I call them), and knowing how to cost effectively ‘fix’ them is a literal licence to print money: so long as you can find problems and fix them, you’ll make money.
In summary, beware ‘Kim’ properties – deals that might look good and attract attention, but that lack substance. Instead, invest with purpose, targeting properties where you can add value by applying strategy, or are out of favour today, but will be in fashion tomorrow.