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February 20, 2020

Commentary: Dollar Cost Averaging

At OA Development, we ask our investors to be mindful of dollar cost averaging. Why? Simply put – we believe it is the smartest investment strategy. We do it ourselves, and we know first-hand the benefits.

While we have gained a well-earned reputation for our real estate acumen, we are also keenly aware that nobody, not even the experts, are perfect in their assessments.

Typically, each year, we bring 1-3 investment opportunities to our investors for consideration asking them to invest equal capital in each deal. As much as we believe in every deal that we acquire, we are also as confident that we can never fully identify all of the risks and opportunities in each asset. Therefore, the best way to mitigate this risk is to invest equally in all the product(s) we offer. Some projects will out-perform the portfolio and some may struggle. Yet, on average, we expect the overall investment to yield a solid return.

One example – Park Huntersville in Charlotte, N.C. OA acquired this multi-building portfolio in 2017 and we sold it for a very healthy return.

Several of our core investors missed this opportunity. The reasons were all very human. “I have too much with OAD right now,” or “I don’t know the Charlotte market,” or simply “I don’t like the deal.” Yet, no matter how human, all of these reasons undermined the benefits of potential dollar cost averaging.

You must be in the game to fully benefit from the game. Our focus on the suburban office product has proven to be a solid investment strategy generally offering a safe, productive investment vehicle.

For those investors who have invested in nearly every deal we have brought to market since 2009, their portfolios (that they can easily monitor performance holistically via our investor portal) perform similar to a mutual fund or REIT. Currently our deals average an 8 % cash on cash return and a 14.35% internal rate of return for all investments sold. While our returns are quite solid when compared to industry standards, you can’t realize the benefit if you don’t dollar cost average.

We get to work with a diverse group of investors. Our best investors are those who come looking for a good return armed with a desire to mitigate risk appropriately.