"The Man, The Mission, The Passion" Husband, Father, Attorney, CPA, Steward Leader, Entrepreneur, MBA, Author, Builder, HBS OPM 25 Class, Mentor, Teacher

Don’t Believe Everything You Think

confirmation bias

Our own minds can lead us astray; we humans are subject to numerous logical fallacies, the most common of which is “confirmation bias” in which we tend to seek out or only believe sources that agree with our pre-existing belief system or subject conflicting evidence to much more rigorous standards of proof. We also are inclined to see patterns where none exist, blindly engage in group think, prefer stories to statistics, and be totally unaware of how our cultural backgrounds radically tilt our world view. The more you travel the globe, the more you realize how many different ways there are to perceive reality.

Our proclivity to live in denial about the extent of our mind’s frames, the way we interpret what happens to us, the stories we choose to tell ourselves about the events that happen to us all leave us less able to deal effectively with a rapidly changing world. A healthy skepticism, a willingness to step outside ourselves, a passion of developing our self -awareness: all these are powerful tools that will serve us well to acquire and hone.

Closing Quotes:

“If a problem can’t be solved within the frame it was conceived, the solution lies in reframing the problem.” – Brian McGreevy

“It is difficult to see the picture when you are inside the frame.” – Unk.

“He who frames the question wins the debate.” – Randall Terry

“How little do they see what really is, who frame their hasty judgment upon that which seems.” – Daniel Webster

“Get into the habit of imagining an alternate scenario. By posing such ‘imagine if’ questions we can distance ourselves from the frames, cues, anchors and rhetoric that might be affecting us.” Noreena Hertz

As always, I share what I most want/need to learn. – Nathan S. Collier

Real Estate Investing: Nuts and Bolts of Capital Expenditures


Happy New Year Mr. Collier,

Here is a question I’ve been pondering, would you mind answering it?

Thank you so much for your time!

What amount is wise to have in reserve per unit when acquiring an apartment community?

Depends on if there are any deferred maintenance or capital needs. Lender required Replacement Reserves typically run $250 per year per apartment (LOW!!) for brand new product to as high as $400 or $500 for older. The Collier Companies’ Financial Plan has 2 forms of Capital Expenditure: First, Internal Capital (carpet and appliances including a/c) that the Community is preauthorized to spend during the year and generally runs $200 to $300 per apartment (if carpet replacement costs $1,000 and only lasts 5 years, that alone is $200/yr/apt).

There is a lack of uniformity in the industry about whether Net Operating Income (NOI: Revenue less Expenses) is calculated before or after Capital Expenditures. That is because in theory capital expenditures are either to replace items with LONG lives (parking lots, roofs, appliances, carpets) or to improve or upgrade the property and thus should not be treated as an expense at least not fully in the current year. However, once a community is more than 5 to 10 years old, these so called long term capital costs start showing up annually! My parents’ carpets lasted 30+ years; to my amazement when I became an apartment owner I found myself replacing carpets on a 5-year cycle! Appliances may average a 12-year life but that means that some fail at 8 years and others last 16 years. Since we believe that we must spend this Internal Capital annually to simply stay in business, our focus is not on NOI per se but on a number we call NOIAIC or Net Operating Income After Internal Capital. Obviously our numbers would be much better if we chose ignore those expenses. When evaluating any NOI number be carefully to see what if any capital expenditures it takes into account.

Secondly we have External Capital. External Capital covers exterior painting (every 10 years? $500/per apartment? That alone is $50/year to set aside!), roofs (every 20 years? Cost depends on roof type and # of stories but $1000 per apartment or $50/year is not unheard of), model re-freshening (marketing will want to do every 5 years), clubhouse renovation (we’ve spent anywhere from $250K to a cool million, they look like a million and they cost it too!), landscaping restoration (I used to think landscaping was timeless…no such luck!); we also have enhanced turns (replace flat panel doors with six panels, add baseboards, panel light switches, globe or lever door knobs, really modernize an older apartment but easily cost $2K per) plus we do true upgrades that run $8K to $12K per unit: granite counter tops, new cabinets and bases, faux wood floors, new light and plumbing fixtures.

We generally spend another $300 to $500 per apartment per year on External Capital but unlike Internal Capital, there is a fair amount of discretion on the timing of External Capital i.e. roofs can be patched one more year, exterior painting postponed a bit, and upgrades are an investment choice.

As always, I share what I most want/need to learn. – Nathan S. Collier

Happy Just Because

happy sunshine

Novel Idea: You don’t NEED a REASON to be happy, you can choose to be “Happy Just Because”… you WANT to be happy. Yeah, I know, crazy idea. And in our Heart of Hearts, we all know its true… BUT we don’t do it that often, do we?

Yeah, I know: “deadlines and commitments”* plus “new job’s a hassle and the kids have the flu”.** Well, there are always reasons not to be happy and reasons to be happy. Me, I’m choosing to be happy and walk on over to the Sunny Side of the Street; hope you will join me!***

Closing Quotes:

“Resolve to keep happy, and your joy and you shall form an invincible host against difficulties.”– Helen Keller

“Sometimes your joy is the source of your smile, 
but sometimes your smile can be the source of your joy.”– Thich Nhat Hanh

“Would you rather be right or happy?”– A Course in Miracles

* Against The Wind: Bob Seger

It seems like yesterday
But it was long ago
Janey was lovely she was the queen of my nights
There in the darkness with the radio playing low
And the secrets that we shared
The mountains that we moved
Caught like a wildfire out of control
‘Til there was nothing left to burn and nothing left to prove
And I remember what she said to me
How she swore that it never would end
I remember how she held me oh so tight
Wish I didn’t know now what I didn’t know then

Against the wind
We were runnin’ against the wind
We were young and strong, we were runnin’
Against the wind

The years rolled slowly past
And I found myself alone
Surrounded by strangers I thought were my friends
I found myself further and further from my home
And I guess I lost my way
There were oh so many roads
I was living to run and running to live
Never worried about paying or even how much I owed
Moving eight miles a minute for months at a time
Breaking all of the rules that would bend
I began to find myself searching
Searching for shelter again and again

Against the wind
A little something against the wind
I found myself seeking shelter against the wind

Well those drifter’s days are past me now
I’ve got so much more to think about
Deadlines and commitments
What to leave in, what to leave out

Against the wind
I’m still runnin’ against the wind
I’m older now but still runnin’ against the wind
Well I’m older now and still runnin’
Against the wind
Against the wind
Against the wind

** Cat’s In The Cradle: HARRY CHAPIN

My child arrived just the other day
He came to the world in the usual way
But there were planes to catch and bills to pay
He learned to walk while I was away
And he was talkin’ ‘fore I knew it, and as he grew
He’d say “I’m gonna be like you, Dad
You know I’m gonna be like you”

And the cat’s in the cradle and the silver spoon
Little boy blue and the man on the moon
When you comin’ home, Dad
I don’t know when, but we’ll get together then
You know we’ll have a good time then

My son turned ten just the other day
He said, “Thanks for the ball, Dad, come on let’s play
Can you teach me to throw”, I said “Not today
I got a lot to do”, he said, “That’s ok”
And he walked away but his smile never dimmed
And said, “I’m gonna be like him, yeah
You know I’m gonna be like him”

And the cat’s in the cradle and the silver spoon
Little boy blue and the man on the moon
When you comin’ home, Dad
I don’t know when, but we’ll get together then
You know we’ll have a good time then

Well, he came from college just the other day
So much like a man I just had to say
“Son, I’m proud of you, can you sit for a while”
He shook his head and said with a smile
“What I’d really like, Dad, is to borrow the car keys
See you later, can I have them please”

And the cat’s in the cradle and the silver spoon
Little boy blue and the man on the moon
When you comin’ home son
I don’t know when, but we’ll get together then, Dad
You know we’ll have a good time then

I’ve long since retired, my son’s moved away
I called him up just the other day
I said, “I’d like to see you if you don’t mind”
He said, “I’d love to, Dad, if I can find the time
You see my new job’s a hassle and the kids have the flu
But it’s sure nice talking to you, Dad
It’s been sure nice talking to you”

And as I hung up the phone it occurred to me
He’d grown up just like me
My boy was just like me

And the cat’s in the cradle and the silver spoon
Little boy blue and the man in the moon
When you comin’ home son
I don’t know when, but we’ll get together then, Dad
We’re gonna have a good time then

*** On The Sunny Side Of The Street

Grab your coat and get your hat, leave your worry at the doorstep
Just direct your feet to the sunny side of the street
Can’t you hear that pitter pat and that happy tune is your step
Life can be so sweet on the sunny side of the street

I used to walk in the shade with those blues on parade
But I’m not afraid ’cause this rover, crossed over

If I never had a cent I’ll be as rich as Rockfeller
Gold dust at my feet on the sunny side of the street

With those blues on parade
Because this rover, it crossed over

If I never had a cent I’ll be as loaded as old Rockfeller
With that gold dust ‘roudn my feet
On the sunny side of the street
On the side, at that side of the street that is sunny

As always, I share what I most want/need to learn. – Nathan S. Collier