The Door Fallacy

A Moses Kagan inspired post:

We often get asked how many doors we operate.

An understandable question to get an idea of how much real estate somebody owns/operates.

However, door counts can be misleading.

Let me explain:

We’d much prefer to own 50 doors in a Class A area where we can receive the top-end of market rents and ultimately attract high quality tenants.

On the other side, we could operate 150 doors with a median rent of $800, in sub-prime areas.

5-plex in a desirable location with $12,000 in gross rents > 15-plex on the outskirts of the city with $12,000 in gross rents.

Given the choice of the two, we’d prefer properties located on good dirt vs. seeking out density.

Taking it a step further, we’re dealing with less tenants/leases/complaints given the smaller headcount but still receiving comparable gross incomes.

Prime locations with access to amenities typically appreciate at a higher rate than others and have more consistent demand.

With that said, we prefer to sacrifice scale for quality (location, renter base, general trajectory).