I'm delighted that Codie Sanchez will be joining us for Smart Money Live in April. Her newsletter is brimming with sometimes unconventional but excellent ideas on how to generate a return.
Here's 4 unconventional investing opportunities she's covered recently in her newsletter from becoming an Airbnb entrepreneur to more left field equity investments.
In this blog post she talks about the entrepreneurs including farmers letting out land to hipster campers and the incredible return on investment that they are generating.
There's a host of sites in the US which cater for those looking to rent out their space for camping such as hipcamp and in addition regular rental sites such as Airbnb and VRBO have a camping section.
Entrepreneurs are buying land in areas such as Joshua tree for 10k and in her case study example
'Kate charges $50 a night, bringing in $1500 a month on a site with her only costs being airbnb charges and land tax. It's a business thats ''low cost, low risk and doesn’t have much wear and tear''.
While I know there is probably more to it than simply putting a piece of agricultural land up for rent, you can find land for sale across Ireland for under €20k on daft right now.
Codie explores more on unconventional acquisitions here.
Staying with the property industry. Sanchez talks about the proliferation of tiny homes cropping up throughout the States and their potential to generate a return. Covid has no doubt contributed to the growth of people leaving big cities and decamping to rural retreats, which coupled with the expense of big cities has meant that “9 out of 10 dollars earned by US Airbnb hosts came from outside top 10 biggest US cities. The company’s rural bookings surged last summer with rural hosts earning over $200 million in June 2020 alone.''
''They’re eco-friendly, efficient, affordable, mobile, and as of late, very in demand''
She also profiles this rather hyper but pretty entertaining professional airbnb host and tiny homes entrepreneur Robuilt who has created reams of useful content on this subject.
You can read more of her insights here where she breaks down location, financing, pricing and automation.
''In the context of start-ups sweat equity has come to mean payment for services by shares which does not drain immediate cash in the way salary does'' Kim Whitaker of Gannon Solicitors.
Codie talks through an example here of how one of her unconventional acquisitions clients was able to swap his marketing skills for an equity stake in a company instead of investing his own money.
Codie cites 3 reasons why an owner might give you sweat equity and these include
1. Cut costs
''If you can go into a business and help them negotiate down their prices, suppliers, optimize their team, and automate parts of the business you can typically structure an equity and revenue share to correspond to those decreases in costs you are saving the company.''
2. Grow revenue
If you can grow revenue and bring in money the owner would not otherwise have been able to do then they are incentivised, ''you are a profit centre to them not a cost centre.''
3. Do work the owner doesn’t want to
Entrepreneurs can always use help. ''People will often trade you equity and revenue share for you to labor on a project they can’t get to or something not within their skill set.''
Sorry I had to. Here she talks about the opportunity in the cannabis industry. As a partner at a cannabis growth equity fund she obviously has a certain skin in the game so she is definitely not neutral in this space but it's certainly a compelling and in-demand industry.
Recent legalisation means that ''109 million people now live in states where cannabis is legal to some degree''. The Motley fools says ''Global marijuana markets are growing like a weed. Worldwide spending on cannabis is on pace to top $29 billion in 2020, according to Statista. The total is projected to increase to $63.5 billion by 2024, for a compound annual growth rate (CAGR) of 21%.''
Codie advises if investing in this nascent space to not bet the house on one charismatic CEO with a dream but to diversify. One classic diversification technique is of course to buy a cannabis ETF and there are a couple of these available such as the ETFMG Alternative Harvest ETF.
Cash is king:
Who has enough cash on hand to weather the storms to come? As referenced in the Motley fool 'In particular, financing remains a major worry for both Canadian and U.S. pot stocks.' They reference research by Ello Capital citing ''the average U.S. pot stock has just 14 months of available cash before running out of money. Meanwhile, the seven Canadian pot stocks it examined had only 6.5 months of cash liquidity, on average, before running out.''
Sanchez says ''Cannabis is not tech. It’s not infinitely scalable, you need lots of money to operate these companies who have big cultivations, storefronts, manufacturing, distribution and logistics.''
Companies she has invested in:
Entourage Effect Capital Codie's company has invested in a selection of companies in the space from cultivation and ancillary services to science and technology. She lists them in full here.
While I am absolutely in no way suggesting as a recommendation purchasing cannabis stocks, indeed the Motley Fool says ''Marijuana stocks are both risky and highly volatile; putting too much of your investment portfolio into any marijuana stock or ETF isn't wise,'' it is a new and interesting opportunity and if you wish to review or purchase there are a number of companies in this space available to purchase on sites like De Giro such as Sundial.
Codie will be among the speakers at Smart Money Live taking place on April 28th and 29th virtually. You can register your interest here and be the first to receive a super early bird discount code when tickets go on sale.