It’s 4th of July weekend and who better to talk about than the most recognizable early American of all…George Washington. As you may remember from high school history class, Washington first proved his chops as a young colonel fighting in 1754 against the French (and their native allies) on the frontier in and around the Ohio River Valley. He’d later be active as a moderate delegate at the First Continental Congress and after the more radical colony of Massachusetts drew direct military conflict from the British at Lexington and Concord, as well as Bunker Hill, Washington was nominated and elected the General and Commander in chief of the army of the United Colonies in June of 1775.
IF VEGAS ODDS HAD EXISTED
Again, you know this already from history class: the Americans were supposed to have no shot at winning this war. The British were the most powerful fighting force the planet had ever known and Washington’s troops were nothing more than ragtag militiamen eager to get back to their farms and work. His army was chronically short of supplies, poorly equipped, and rarely paid. The colonies were hardly united at all. Only about 1/3 of colonists ever joined actively in the fight and about 1 in 4 colonists remained loyal to the King. Additionally, British naval supremacy allowed them to occupy the majority of American ports, resulting in a 95% decline in colonial trade and creating extreme hardship in financing the war. Washington’s side was untrained and undisciplined; unequipped and underfunded…so what the hell happened?
PROPERTY MANAGEMENT 101: PLAY THE LONG GAME
Mortgages take a long time to pay off. 20, 25, 30 years…whichever package you go with, it’s designed for you to be in the game for the long haul. When it comes to property management and property ownership, your number one guiding principle should be to always consider and maintain focus on long term results. The key to this is to remember that no matter how much you might make (or lose) in a given year, SOMEONE ELSE PAID YOUR MORTGAGE. Again, after picking up the tab for taxes, sewer, insurance, etc., you might only break even for the year, but the reason this works is your tenants paid for rent that you then used to pay the mortgage. Play this game for 25 years and you will literally own a $500,000 asset for the price of whatever your down payment was…if you bought at $300,000 and needed 25% down you’re looking at 75K and a net gain of $425,000…even if you didn’t turn a profit for any of those 25 years. That’s why you play the long game.
Are there strategies and ways to make more from year to year? Of course there are. And those are fine, as long as they don’t interfere with the long term vision. If you’re feeling slumlordy and thinking you’ll decrease the amount of maintenance you perform to save a couple bucks, those tenants are going to walk and it’s going to bite you. You can’t lose sight of long term goals for the sake of short term wins. At Nexus Property Management, we align all of our policies and best practices with this simple principle. You should as well.
WINS AND LOSSES
To stick to the same topic, but break it down more simply, think in terms of wins and losses. Wins could be turning a greater profit for the year. However that might play out, you’re looking for a way to maintain consistent revenue, or maybe increase revenue through raising rents, and reduce total expenses. Losses would be evictions, vacancies, major maintenance issues, etc. The typical eviction costs about $1,000 and then you’re left with a vacancy which means you’re getting a zero for a couple months. You’ll also need to spend money to improve the quality of that vacant space to maximize the rent you can get for it. Without having to do any fancy analysis, it should be clear that your losses hurt much more than your wins feel good. The key to long term success is to minimize losses.
BACK TO GENERAL WASHINGTON
In America, they really love you if you win the big one or if you’re the first at something. Washington puts a check in both of those boxes, but if you track Washington’s big military victories…well…uh…at least he won the big one in the end!
Washington first takes charge in Boston and thanks to Henry Knox and some heavy artillery, the British acknowledge the colonial dominant position and flee without a battle.
From there, Washington hightails it to New York City thinking the British will land there next, but the British are in no hurry. Instead they regroup in Halifax, Canada only to arrive on Staten Island in June, 1776 in intimidating fashion. Historian David McCullough provides great detail of that fateful June 29th day.
Washington had 8,800 men at hand, 6,923 of whom were fit for duty…the first of the British fleet had appeared on Saturday morning. In a matter of hours, forty-five ships had dropped anchor inside Sandy Hook in the Lower Bay…To a Pennsylvania rifleman closer at hand their masts looked like a forest of trimmed pine trees. “I declare that I thought all London was afloat.”
Nathanael Greene (pride of Rhode Island) reported to Washington that the total fleet of 120 ships had 10,000 troops and Washington’s staff noted that an additional 15,000 to 20,000 could be expected “hourly”. …gulp
No need to sweat the details any further…the story of Washington in New York is one of constant retreat. His forces are obviously overwhelmed and Washington isn’t trying to win…he’s just trying not to lose. As long as his army has a pulse and is on its feet, America has a chance. Washington is playing the long game and minimizing losses is the only way to get there. It wasn’t pretty, but it was necessary. To return to our analogy, a frozen pipe burst in the basement and the roof is leaking heavily, but you’re still making the mortgage payments…what other choice do you have?
End scene.
TRENTON, PRINCETON, AND THE END AT YORKTOWN
After retreating from New York, public support and army morale was as low as could be. According to David Hackett Fischer, in his 2004 work Washington’s Crossing, Washington knew that despite his escape from the British, his army and his long term vision were in trouble.
“The honor of making a brave defense does not seem to be sufficient stimulus, when the success is very doubtful”
With the long game in mind, Washington needed a morale booster, a win, or he would lose much needed support and the campaign would be over. He found it in the moment Fischer highlights, the successful crossing of the Delaware River on Christmas night, 1776. The surprising capture of 1,000 Hessian troops and the following success at Princeton gave Washington the juice he needed to keep to his long term plan.
The longer he could keep the game going, the more likely he was to pull off the upset (see America in Vietnam, see America in Afghanistan). As the story goes, there would be several more trying times, including the brutal winter of 1777-78 at Valley Forge, but Washington was narrowly able to keep Congressional support as well as that of his soldiers. By avoiding the big loss and avoiding capture that could result from chasing a quick win, he and his leadership were able to convince the French that the war could be won. In October, 1781, General Cornwallis, surrounded by American and French forces, surrendered at Yorktown and Washington finally had his big victory.
WASHINGTON THE PROPERTY MANAGER
To world historians, this was the beginning of a free American continent and a new liberal world order. To real estate analogists, it was the final, triumphant payment on a 25 year loan. Either way, the story checks out: George Washington never compromised his values and vision in pursuit of short returns. Although it wasn’t sexy, he played defense in a dedicated effort to minimize losses. It is not lost on this amateur historian that while I’m really pulling hard at this comparison, Washington’s true love, apart from his country, was his residence at Mount Vernon.
And if you’re not yet convinced that Washington was the essential long term thinker, consider the following:
Washington commonly uttered the phrase, “I walk on untrodden ground” days before his first inauguration. He knew his decisions would set the precedent far into the future for an executive position that existed nowhere else on the planet. Every choice he made had to be analyzed in reference to the present and the future. Appointing a cabinet of advisers helped broaden the power away from just one central executive, a tradition that’s not codified anywhere but has been replicated by all presidents since. When visiting state leaders, he insisted upon meeting on his own terms, at a location of his own choice, avoiding any perception that the federal government was secondary to that of the states (see John Hancock, October 1789). The authority of the national government over the states would be a major theme for presidents Andrew Jackson and Abraham Lincoln, and Washington’s precedent helped those heralded leaders forge a path during the most severe challenges to our democratic system. And notably, after two terms in office, he set in motion the unprecedented peaceful transfer of power by stepping down and relinquishing executive authority…Hamilton’s King George III brilliantly captures just how radical this idea was in a world defined by monarchy up until that point:
Finally, Washington made it commonplace and acceptable for presidents to take retreats to escape the pressures of the workplace (see Time Affluence
). While today we might think of Camp David, Mar-a-Lago, Martha’s Vineyard, Crawford Ranch, or Kennebunkport as recent destinations for presidents and their families, it was the aforementioned Mount Vernon that was the place of desire for our first Commander in chief. It was common for Washington to spend as many as “six hours a day on horseback inspecting his sprawling plantation.” Yes, even as he considered how his actions would affect the legacy and success of this noble democratic experiment, George Washington was actively managing his property whenever he could find the time.
Notes:
Fischer, David Hackett. Washington’s Crossing. Oxford University Press, 2004
McCullough, David. 1776. Simon & Schuster, 2005.
Newman, John J., and John M. Schmalbach. United States History: Preparing for the Advanced Placement Examination. Amsco School Publications, 2002.
Philbrick, Nathaniel. Travels With George: In Search of Washington and his Legacy. Penguin Random House, 2021
https://founders.archives.gov/documents/Washington/05-04-02-0160
https://www.history.com/topics/us-presidents/george-washington
https://www.law.cornell.edu/constitution/amendmentxxii
Photo credit:
https://fineartamerica.com/featured/general-george-washington-crossing-everett.html