I have a simple rule. The businesses make the cash, and real estate is where I park it.
People sometimes ask why an operator in tire recycling cares so much about real estate. Here's how I think about it. This isn't investment advice. It's how one operator decides where his money goes, and you should talk to your own licensed advisors before you do anything.
Operating businesses are great at making cash, not storing it
A good business throws off cash, but it's hard work. Machines break, markets move, people quit, and every year you're reinvesting just to stay in place. That's the job, and I love it. But I don't want every dollar I've earned sitting inside the same kind of risk that earned it.
So the question becomes: once the business has done its job, where does that cash go to hold its value and grow without needing me on the floor every day?
Why real estate
Real estate is something an operator understands. It's physical. You can walk it. You can see the roof, the dock doors and the parking lot. And a lot of what makes a property work is operations: tenants, maintenance, leases and cash flow.
Commercial property also connects directly to the world I already know. Businesses like mine need yards, buildings and space for trucks. I understand what a tenant like that actually needs, which helps me judge whether a property makes sense.
The same rule applies as with buying a plant: the deal on paper is never the deal on the floor. Walk the property. Understand the tenant. Know what breaks.
A little Bitcoin too
I also love Bitcoin and hold some. It's the opposite of a plant. There's nothing to maintain, no employees and no equipment. I think about it as a long-term hold, not a trade, and I don't put money in that I'd need next month. This isn't advice, it's just what I do.
Why the combination works for me
Each piece does a different job. The businesses produce cash through hard work. Real estate turns some of that cash into tangible assets that can produce income. I own single-family homes and apartment buildings, and I've sold commercial office buildings, so I've seen both sides of it.
They also balance each other. When the plant is having a tough stretch, I'm glad not everything depends on it. When markets are noisy, I'm glad to own things I can walk and touch.
The operator's rules I follow
- Pay the business first. The operating business that makes the cash needs maintenance, reserves and reinvestment before anything goes out the door.
- Keep reserves. Cash on hand is what lets you survive a bad month without selling something at the wrong time.
- Understand what you own. If I can't explain why I own something in a sentence, I probably shouldn't.
- Think in years, not weeks. Real estate rewards patience.
- Use experts. Tax, legal and lending questions go to people who handle them every day.
The bigger point
Blue-collar businesses can build real wealth. The cash they make doesn't have to stay trapped in the next machine rebuild. With a plan, it can become property, savings and an investment that outlasts any single business.
That's the path I'm on. If you're running or buying a hands-on business and want to talk through how an operator thinks about it, I'm glad to share what I've learned.
By Steve Porter. Operator perspective, not legal, tax or investment advice.