Charlie Munger often said the easiest way to succeed is to avoid stupidity rather than chase brilliance. In investing, that means sticking to a few core principles and avoiding big mistakes.

Nowhere is this truer than in real estate.

Real estate is a relationship business where success is based on taking smart risks, maintaining long-term optimism, and, most importantly, staying in the game.

Amateur tennis is a perfect analogy. At the amateur level, most points aren’t won, they’re lost through unforced errors. The players who succeed aren’t the flashiest or most talented, they’re the ones who keep the ball in play and let their opponents make the mistakes.

Real estate investing works the same way. Long-term success comes not from brilliance, but from consistently avoiding errors.

However, as the industry has become more institutionalized, with more data and technology at our fingertips, there’s been a trend toward adding complexity to seek alpha.

This shift has led to the development of complex investment theses, niche asset classes, shorter-term hold strategies, over financialization, operational intensity, and technology embedded in all facets of the business, etc.

We’ve managed to take a business that is inherently simple and should be relatively low risk and make it unnecessarily complex and risky.

As a multifamily owner-operator, I constantly have to remind myself to keep things simple.

Here are a few of my core principles for multifamily investing:

• Every good deal starts with a motivated seller
• Your investment thesis should be comprised of the 2-3 levers which drive all the value – everything else is noise
• Deals can be underwritten on the back of a napkin
• Buy deals that have a clear, supportable path to NOI growth
• Don’t buy the value created, create value
• Buy below replacement cost
• It all comes down to supply/demand
• Don’t over-lever the deal and use fixed-rate debt whenever possible
• Maintain hold period flexibility
• Match the capital with the intended business plan
• The stabilized yield should be at least 150 bps spread to market cap rates
• Buy in good to great locations in markets with job, population, and wage growth
• Avoid big mistakes – survive and let time & compounding do its thing
• Understand capital flows and how multifamily investing compares to alternative investment options
• Be an expert in your space
• Buy deals with a strong product-market fit
• Don’t let the tax benefits wag the dog
• Know why people live there – it may just be price and that’s ok
• People want to do business with people they like. Relationships first – deals later

All of these investing rules are simple, but the reality is that being a multifamily owner-operator is hard.

With so much information available, it’s easy to overanalyze and build complex investment theses.

With heavy competition for capital, it’s tempting to over-engineer differentiation.

With endless performance data, it’s natural to want more reporting.

With new software, it’s enticing to keep layering onto your tech stack.

With AI, it’s easy to expect everyone to be faster and cheaper.

Running a multifamily investment platform is hard, but it doesn’t have to be complicated. The key is to break the business into its component parts, strip away unnecessary complexity, and focus on making small, consistent improvements over time.

There’s a story in James Clear’s Atomic Habits that captures this idea perfectly.

“After World War II, Japanese manufacturing was struggling. Their products were seen as low-quality compared to American goods. But instead of trying to make big, dramatic changes, Japanese companies — most famously Toyota — adopted a philosophy of continuous, incremental improvement, known as Kaizen.

Workers at every level were encouraged to identify tiny inefficiencies and suggest ways to improve them — even small things like rearranging a tool station to save a few seconds. Over time, these 1% improvements compounded, transforming Japan’s manufacturing reputation. Within a few decades, Japanese electronics and automobiles (like Sony, Toyota, and Honda) became synonymous with excellence and reliability, surpassing many American competitors.”

As a multifamily owner-operator, we only need to do a few things:

• Find good deals, finance them appropriately, and execute them well  
• Provide quality/transparent reporting and be a fiduciary to your investors
• Build a team, culture, and infrastructure designed to scale

That’s it. If we do each of these things well, we’ll build a highly successful and profitable company.

One of my favorite things to do is collect quotes which I reference often (organized in Sublime).

Here are a few that resonate with me and serve as daily inspiration for keeping things simple in investing and business.

“A novice is easily spotted because they do too much. Too many ingredients. Too many movements. Too much explanation. A master uses the fewest motions required to fulfill their intention.” – James Clear

“The highest level of mastery is simplicity. Most information is irrelevant and most effort is wasted, but only the expert knows what to ignore.” – James Clear

“Get rid of irrelevant details so that the essential things and the relationships between them stand out. As the saying goes, Any damn fool can make it complex. It takes a genius to make it simple.” – Ray Dalio

“Most complexity is unnecessary, but we manage it instead of removing it because deletion requires courage that addition doesn’t.” – James Clear

“We avoid doing simple things that work because they don’t make us look smart.” – James Clear

“Smart people feel stupid doing simple things, so we invent complicated alternatives that accomplish less but feel more intellectually satisfying.

Meanwhile, the people who dominate their fields are doing embarrassingly basic things, but they do them better than everyone else.” – James Clear