Applying Lessons from National Retailers to Investment Decisions: Insights and Tips for All

In 2005, I decided to launch an investor services business. After reviewing all of the popular investing literature and consulting self-proclaimed experts offering opinions without offering processes for investing, my view was that opinions offered no value as an engineer.

After conducting my initial research in residential investing, I expanded to commercial investments where I found effective processes. For instance, retail store location selection and stocking methodologies provided excellent guides for systematic residential investing.

Here, I’ll demonstrate how I use methods from national retailers to select properties with proven income-generating properties.

National retailers have spent decades refining processes to select store locations and inventory. Retailers make decisions based on financial goals: location of stores, layout of stores, decorations etc.

Retailers do not make decisions based solely on opinions they read online or in books; rather, they take an in-depth view of their customer demographic and implement measures necessary to maximize returns.

McDonald’s in Hawaii offered spam, Portuguese sausage, hot haupia (coconut pudding), and taro pies to attract locals; once inside they could order from the full range of standard items available; this practice served as a kind of “attractor.” I will discuss further below.

Operating a rental property business involves providing housing services to tenants as customers; to maximize profit and secure maximum occupancy rates for each unit rented out, it’s critical that you understand both their needs and capabilities of rentability.

If your goal is to generate reliable income from real estate investments, securing reliable tenants is paramount. A great tenant stays for many years while always paying rent on time and taking great care in maintaining the property. Of course, this may take multiple occupants over time – reliable tenants should not be taken for granted as the rule.

Many people assume all tenants share similar behaviors. This assumption is untrue as there are multiple segments within the renter population, each segment having unique housing requirements and behaviors.

As depicted, Las Vegas features three primary tenant segments that exhibit distinctive behavioral characteristics.