As we’re wrapping up 2018, we thought it would be a good time to stop and reflect on our busy and productive year.  I sat down with Hughes Private Capital co-founder Steve Sixberry to chat about what we learned and experienced, and what we’re looking forward to in 2019.  Enjoy!

— Greg

How has Hughes Capital changed in 2018?

Meeting new people at our events this year was a highlight for both of us!

Steve: Historically, we’ve always tried to help people become homeowners.  We thought that was the best model – we’d own the property for some time and then sell it to the people renting the home.  In early 2017, I even remember telling you, “There is no way we are getting into the rental business!”  But here we are, with hundreds of rentals in our fund’s portfolio.  Because it’s all about setting up the right model.

Greg: Right, it’s because we found out that the homeownership model wasn’t very scalable.  When you are buying and selling assets, it works, but you have to keep doing it over and over.  It’s a lot of work.  That’s when we started thinking about moving to a buy and hold model.  Not only is our current buy and hold fund scalable, it also has longevity to it.  Now we acquire homes to keep in our fund for many years, and this fund has a lifetime of 20, 30, or 40 years instead of just 5 or 10 years.

Steve: Rentals also turn over but that’s completely different; you’re not selling the asset, just finding another renter.

Greg: From that standpoint, you still own the asset that’s producing income.

Steve: It’s a completely different model.  Much better, really, in hindsight.

What is a lesson, personal or professional, you learned this year?

Greg: I would say that – and this isn’t just this past year, but overall in the last few years – we found it really difficult to rely on any vendors.  Having any third party do work for us is a big challenge, and the companies out there that do a good job are truly few and far between.  So that’s why we’re doing our own property management, opening our own brokerages, and hiring people who are 100% employed by us.  Eventually every one of our markets will be that way.

Steve: That’s exactly what I was thinking.  It’s kind of what everyone knows: if you want it done right, you have to do it yourself.  Yet, to run a business, you can’t do everything, right?  So you need professionals to do the pieces that they specialize in.  But it’s hard finding good people to do that.  We’ve got one vendor in our mobile home park – he’s a partner, really – who is just incredible.  There are good vendors out there, but you have to really hunt to find them and a little luck helps too.

Greg: We’ll reach more economies of scale by keeping the processes in-house, and we’ll be able to go very deep in the markets that are most favorable.

What are some of your goals for 2019?

Greg: We’re focused on growing our buy and hold fund.  We also want to offer the 1031 Exchange solution to more people.  On a personal level, I should probably get better at golf.

Steve: Or pick up the pickleball racket again.

Greg: There are only so many hours in the day.  Any personal goals?

Steve: I have no personal goals.  All business, no fun, right?  I’m kidding.  I would like to do more fishing.

What was one of your favorite experiences this year?

Steve: I think buying the mobile home park in South Carolina was just as fun as can be.

Greg: Yeah, that was pretty fun!

Steve: Definitely.  We’ve gone there twice now, and Columbia is such a vibrant city.  We really scored on this mobile home park.  It’s a diamond in the rough.  Interestingly, we’ve always liked mobile home parks.  Even six, seven years ago we were talking about mobile home parks.  We just didn’t know how to get into them.  What about you?

Greg: Well, this is probably going to sound funny but I would say that I really enjoyed all of our presentations and events.  We just had a lot of interest and success with our fund this year.  In the past, we would struggle getting 10 to 15 people to show up to our events.  Now, in just one presentation, we get 30 to 40 people, and when we do that presentation three times in a row, we’re getting 100 to 120 people.  It’s just a lot more fun.

Steve: It’s interesting that’s your answer because I hadn’t thought about that, but I agree.  The amount of effort that we put into letting people know what we do is tremendous, especially since we know there are lots of options out there for people to invest in.  So, it’s really rewarding when we see our fund solving a problem for people and generating lots of interest.

What should savvy investors keep in mind for 2019?

Greg: Buy low, sell high, and find something with really good returns and no risk.  Wouldn’t that be nice?  Everything Steve and I have learned has affected how we build our funds.  First, we look for the greatest amount of safety to limit our risk as much as possible.  Then we see how we can get a consistent return.  Of course we want the biggest return possible, but that comes secondary to mitigating the risk.  I used to invest in the stock market, but with what I know today, I can’t bring myself to do that.  That is partially because I know I have so much more control over our investments, and that our fund has less risk and volatility.  I know that sounds like a commercial, but if you remember, John Bogle would always say, “Invest in what you know.”  Or was that Peter Lynch?  Either way, it is good advice.

Steve: We look at volatility as something that is going to erode your portfolio and put you at risk.  And we look at the assets we hold now and even if everything goes horribly wrong, at least they are worth something.  I do want to say that everybody needs to diversify.  I love what you’ve included in your presentations about how you’re not diversified if you’re in 10 different pieces of the stock market, because that all goes together.  It’s hard work to really diversify yourself and usually requires owning assets that are difficult to manage and deal with.  That’s essentially what we do; we do all that hard work.

Greg: I tell everyone to diversify because we all know that is the smart thing to do.  However, I end up putting almost all my money into our business and our funds.  We all experience the same dilemma when we’re deciding where to invest our money.  It’s not easy to get comfortable with new investments, and we understand that.  In 2019 we really look forward to helping so many more investors find what we believe to be an excellent investment opportunity.