Climb Capital is hosting a Pensacola REI meetup
Our goal is to create value
Branding of an investment firm like ours requires a delicate balance between finding an asset class niche we love and being adaptable in an ever changing market. It might be obvious that our goal is to create value, but how we go about doing so isn’t as obvious. We can’t just say we are multifamily investors because we buy more than just multifamily, so in this blog we want to explain the nuance process of how we approach this problem.
For the past ~8 years we have been focused on buying C-class value-add multifamily apartments and restoring them. We did really well buying them cheap, rehabbing them, and selling them for big profits. If we could do this forever we would be happy and our investors would be very happy, but the world is ever changing and those who do not change with it are doomed to fail. Not only do we refuse to fail, we don’t want to even come close and strive to be ahead of the investing curve and at the forefront of the next opportunity. Value-add multifamily is still an appealing asset class but cap rates are compressed, margins are thinning, deals are scarce, larger institutional investors are scooping up deals at prices we won’t compete with, and most of the mom-and-pop deals we liked have already been bought and flipped over the last decade.
We have three choices:
We can buy fewer deals and fade into obscurity.
We can be stubborn and keep buying the same types of deals as they become more difficult to buy and return smaller profits.
We can adapt, learn new things, and capitalize on new opportunities that have high profit margins and a long runway of growth ahead.
The correct answer is obviously #3, but it would be a lie to say this doesn’t come with hurdles.
It’s easier for a company to operate and brand itself inside a specific niche. Since our inception, we have mostly been value add apartment operators. That’s how people know us and that’s what people may expect from us, but that’s not how we see ourselves and that’s certainly not all we can do. Over the course of 2022 and going forward, we are pivoting toward mostly buying RV parks. Climb Capital is convinced that this is the next big untapped asset class and it has a lot of overlap with what we already do. However, we want to explain to current and new investors that this is a wise pivot and that they should trust us, they should continue to invest with us, and that it isn’t us bouncing around on shiny object syndrome. We explain in great detail why we like RV parks here.
General Motors has been making gasoline powered cars for 100 years and now they are working to convert to an electric car company. This is not an easy pivot for them. It’s going to take time and resources and trust and eventually they will do it, but it’s a slow moving process. Climb Capital is a young and growing company who’s still nimble and we are able to more easily capitalize on new opportunities than a bigger company can, but the idea is the same.
To summarize, we do like to find niches we can focus on when they become apparent, but we don’t want to brand ourselves to such a specific niche that we can’t move when the market changes. We want to be known as adaptable and strategic operators who can create value in a constantly changing market but we also know how to commit hard to big opportunities. We stuck with apartments for 8 years and we plan to stick with RV’s until the market becomes over saturated and unprofitable, which is a long way away. It might be easier for companies to brand themselves in a tighter niche, but it won’t be as profitable, and ultimately we care far more about our investors than easy marketing.
This isn’t so much a problem for us, but it can be a problem for other firms. Consider that Climb Capital is a veteran run organization. This means we all have experience in situations that are high stakes, high risk, and ever changing. In fact, in relation to military life, adaptability in the investing world is quite a bit easier.
Which is exactly why we feel confident in asking our investors to trust us through periods of adaptability. It does require us to ask for your patience, and to make some thorough and transparent content like this to explain our reasoning, but this is a small sacrifice to make for a much larger and long term good.
Climb Capital is a fairly new company and we have decades of profitable investing ahead. The world will change much in that time and we intend to change our investing strategy with it. That said, there are some things that you can be sure won’t ever change about us. We will always adhere to our core values, and no matter what the market looks like – there will always be ways for us to create value.