Do you know what's better than doing 30% returns for ten years? Doing 30% returns for thirty years.
Sam Zell had spent the previous few years building a property portfolio in the 1960s. However, he was starting to outgrow his market.
He was a recent graduate, and started working at a law firm while continuing to do deals on his side. After his experience in Toledo, Ohio, he would quit law and go all in on real estate.
After completing this deal, Sam Zell would create a playbook for his future deals. Avoid competition, raise rents. Repeat.
The following case is dominated by one theme: lack of competition. Sam Zell called this his most successful deal ever. The only reason why this was so successful is there was no competition.
Toledo was not a popular place. It faced a shrinking population. The stigma of being car-manufacturing centric, and being called "the armpit of the nation".
There were no other smart investors in Toledo. This created an opening for Sam Zell. The lack of competition led to the following:
Despite the negative sentiment, Sam Zell stuck to his numbers. There was no competition in this market. Sam was the only buyer. This was such an empty lake, they claimed to still have no competition when they sold the property thirty years later.
He raised $280K from family and friends, and financed $720K. A total purchase price of $1MM, where he was expecting an initial yield of 8-19%. Compared to the 4-6% yields that his father was content with, this was a no-brainer.
In the first year, investors earned a 20% cash on cash return. This earned Sam Zell one-hundred-thousand in finders fees and profits. More than any of the senior partners at his law firm. He quit shortly after.
All of that before he renovated the apartments and raised rents.
Over the next few years, he would expand to Orlando, Tampa, and Reno. All places which had potential due to the lack of competition. He continued this strategy of low-competition markets for decades, and died with an estimated net worth of over five billion.
This was Sam Zell's best deal. And he has seen thousands, and done hundreds. If the best deal he ever did was available due to a lack of competition, I encourage you to look to where you are fishing. Is it an empty lake?