What Netflix’s Failure Can Teach Real Estate Investors
Netflix’s growth miserably failed to live up to expectations for Q2 2018. It’s failure and other similar scenarios provide important warnings and valuable insights to business owners and real estate investors everywhere.
The Netflix Flop
Netflix was one of the most praised stocks for quite a while. That was until Q2 results came in, and the firm disclosed its earnings failed to meet expectations and subscriber growth came in at over a million less than analysts’ and its own forecasts predicted. The company’s stock price immediately dropped by 12% as investors lost confidence.
Why Big Companies are Failing Faster
A variety of big companies and even some of the nation’s biggest banks have been performing poorly for investors recently. Many of these failures can all be traced back to some of the same actions.
Netflix didn’t make customers happy with its last rate hike. A move that Redbox had made after becoming famous for its $1 movie rentals. If you still remember Redbox or Blockbuster. Netflix also seems to be coming up short on content. Prices are going up, customers are getting less for their money.
Wells Fargo was another big name that failed miserably in Q2 2018. It also happens to be one of the companies who are most notorious for cutting back on service while increasing costs to the consumer. A habit Bank of America has begun and credits its earnings too. Yet, after continually reducing the value and customer service to its clients, while charging more, it has certainly caught up with Wells Fargo. An institution which may infamously go down for its widespread fraud of its own customers and the millions of fake accounts it opened in their names.
Investors in startup Instapage are likely to be one of the next to suffer after the company hiked the rates on long-term customers by double or triple this year.
Note these trends are the opposite of what Amazon has been doing with its acquisition of Whole Foods.
A Recipe for a More Prosperous Portfolio
Want to grow your portfolio with rich assets that bring in consistent cash flow and abundant returns? Give more value, give better service, and be consistent with price increases.
You can raise the rent evenly every year and train renters for it. You can make very minimal investments in added amenities and still wow tenants. Simply hiring a better customer service team who at least acts like they care and is friendly can make a world of difference in who you attract and your renter retention rates. Any of these investments can pale in comparison to the cost of just losing a single tenant.
Yet, if you try to take away services, and make big hikes in rents after having failed to prepare tenants, you can bet there will be some repercussions and negativity among online reviews. That can cost you dearly year after year.
Make sure you know what your asset manager’s strategy is before you invest, and have a plan for mitigating these potential issues if you are bold enough to self-manage your own real estate investments.
ABOUT THE AUTHOR
Bill Zahller is the Managing Partner of Park Capital Partners, LLC and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Partners, LLC in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalPartnersLLC.com for more information.