Hello Measured Investors,

Welcome to The Measured Memo – a concise note that shares our perspective on private investing and income-producing assets. We aim to make this the most value-packed investing email of your quarter…let’s go!

Market

In our daily conversations with investors, the one topic that comes up more often than any other is interest rates. Will the Fed continue cutting rates next year? Or is inflation coming back? Does Trumpʼs win change the economic landscape?

These are fun topics and might serve as good conversation starters, but Iʼd argue they are inconsequential when it comes to investing your personal capital over the next 5 to 10 years. Thatʼs because, regardless of where rates go over the next 12 months, a major shift has already occurred in the capital markets.

To explain, letʼs do a one paragraph history lesson. The chart below shows the Fed Funds rate for the past 50 years. The orange line is the average rate over the past 50 years (6.18%) and the purple line (2.97%) is the average over the past 25 years. Then, the two areas circled in red show extended periods where the effective Fed Funds rate was zero (0%).

‍

‍

Clearly, those two “free money” periods were not normal. In fact–they were, by definition, unsustainable. The 0% risk-free rates were afforded by government policy in response to an economic crisis, not market dynamics.

The reality is that a properly functioning capital market likely settles on a risk-free rate somewhere between the two lines marked on the chart…let’s call it between 3% and 6%. And that, my friends, is why the phrase “higher for longer” is the one to understand. I make no attempt here to predict where interest rates are going, but I’ll join the veteran investors out there who have observed what I’m showing in this chart. Specifically, that all trends revert to their mean and the days of using 0% interest rates to financially engineer gains are likely over.

And what happens when the opportunity to “financially engineer” an investment is reduced or eliminated? Well, then you’re left with the fundamental qualities of a given asset and it’s ability to produce income or increase in value over time.

Strategy

In a “higher for longerˮ world, the days of relying on cheap debt, quick flips, and financial gymnastics to squeeze out returns are behind us. For investors, this isnʼt bad news—itʼs an opportunity to get back to what works: buying quality assets at great prices, improving their performance, and holding for the long term.

Our strategy is simple but effective: we focus on cost basis and yield on cost as the ultimate measures of success. Why? Because these metrics strip away the noise. They donʼt rely on optimistic assumptions about future cap rate compression or the manipulation of returns with short-term debt structures. Instead, they tell us what truly matters:

1. Did we buy the asset at the right price?

2. Can we produce strong, reliable income relative to our investment?

A low cost basis is the investorʼs best defense. It creates margin for error, reduces risk, and allows for strong returns even when market conditions are uncertain. Yield on cost—what the asset earns relative to its total purchase and improvement costs—is the clearest signal of an investmentʼs real performance. It canʼt be faked or smoothed over with clever financial structuring.

Of course, this shift is music to our ears. The idea of over-leveraging an asset to juice returns never made much sense to us–but others running that play in the market did cause prices of our favorite asset class to rise to unsustainable levels. We are now seeing some assets sell at a 30%+ discount from the peak...right to the level where asset fundamentals make sense again.

Portfolio

We are prepared to execute on the opportunity presented above. In fact, with the market correction already underway, weʼre seeing asset fundamentals drive price discovery once again. This is a moment weʼve been waiting for—an environment that rewards disciplined operators who know how to identify and manage great assets. We currently have 3 assets with a total of 170 doors under contract and a rich pipeline of potential deals.

Our approach remains focused on the target markets (Jacksonville, Waco, Des Moines) where we have developed a local expert advantage. By combining deep market knowledge with our commitment to low cost basis, we believe we are well positioned to capitalize on this cycle. Simply put, we plan to buy a lot of great deals in the coming years—assets with inherent value that will perform well without reliance on cheap debt or speculative projections.

Regarding the current portfolio, composed of 9 assets and 897 units, our results continue to track close to expectations. While challenges in the broader market have no doubt impacted performance and short-term returns, every asset we own shares two key characteristics: 1) the cost basis remains below todayʼs corrected price and 2) the asset produces sufficient income to service itʼs debt, allowing us to continue our hold to realize future potential.

Itʼs in moments like these, when others hesitate, that disciplined investors win. We are committed to staying active, opportunistic, and focused on creating lasting value for our investors.

The next cycle is here, and weʼre ready.

References

• JAX2 & Cypress Court – a great example of the opportunity in todayʼs market. The owner of this property demanded a proven buyer who could close in cash. This created a unique opportunity for LPs to return capital and retire risk early on a high-yielding asset.
• The Cause of Bubbles: Investment vs Financial Engineering – this piece was written 17 years ago by one of todayʼs most successful entrepreneurs...and it perfectly describes the situation we face today in the capital markets.
• Principles for Navigating Big Debt Crisis – some of you will not be happy that this link contains 480 pages of dense financial education. But for the few that dig into it, this paper will likely change everything you thought you knew about money

Thanks for reading and hope you received insight and value. At Measured Capital, we are committed to always putting ourselves in the place of highest potential – which for us, means connecting with like-minded investors. I hope the time you spend reading this brought you to a place of higher potential.

Please forward this note to any trusted friend you feel could benefit as well. We welcome your feedback and are grateful for your trust.

‍

Best,

Dan & Greg