Apples And Oranges – The Hidden Zero Yield Trick

As we engage potential investors it consistently amazes me how many people fail to account for the virtually zero percent yield that their cash collects for them when it sits idly in their bank account.  People will hold out for a killer deal that only comes along once every 2 years so that they can brag about that particular deal instead of keeping the money at work in investments that will make them MORE money.  It seems that the need to impress people trumps the completely rational need to make more money.

There are projects in my neck of the woods that will consistently yield 40% unlevered returns and north of 60% on an annualized basis.  If you compare having money at work in these projects consistently to those that you have to wait for even 6 months to find and spend an inordinate amount of time managing the rational thing to do is to pick the former projects.  The latter projects may scratch out a few percent more annually, but if cash sits idly for half of the year waiting for them you are making a lot less money than you would be keeping it at work in simply good projects.