Hope isn’t a strategy, reserves are
How planning for the worst keeps your investment at its best
You don’t build reserves for when everything goes right.
You build them for when life shows up.
Most pro formas assume a clean path to profit.
But in the real world, things rarely go as planned — and that's exactly why reserves matter.
We don’t hope for smooth sailing. We prepare for storms.
The Challenge That Could’ve Crushed the Deal
In September, we closed on a 114-bed assisted living facility. Strong demand, experienced staff, great operations — it looked like a textbook acquisition.
But what we didn’t fully anticipate — and should have respected more — was the reality of the residents' lives.
Within 60 days, 20 residents passed away.
That’s nearly 20% of occupancy lost in two months.
Revenue dropped. The challenge was real.
But our distributions?
They didn’t change.
Why Reserves Matter More Than ROI Projections
We didn’t survive this setback because we got lucky.
We survived because we planned.
This deal was underwritten with healthy reserves — not just for repairs, but for unpredictable shocks. Because when you're working with vulnerable populations, volatility isn't a bug — it's a feature.
Those reserves became the bridge that protected returns.
They preserved confidence.
And they gave the asset time to stabilize.
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Where We Are Now
Today, occupancy is back up to 111 out of 114 beds.
Stability returned.
Cash flow remained consistent.
Investors stayed whole — even through the unexpected.
All because we didn’t build the deal around perfection.
We built it around preparedness.
Why This Matters
➜ Deals don’t fail because of bad months — they fail because of poor planning.
➜ Reserves aren’t an expense. They’re your insurance policy.
➜ Your credibility as an operator is measured in how you perform when things don’t go according to plan.
The Lesson: Be Ready Before It’s Necessary
Resilience isn’t built during the crisis — it’s built before.
Smart investors don’t just chase IRR.
They ask the harder question: “What happens when things go wrong?”
Want to learn more about how we build resilience into every deal?
Reply to this email — I’ll walk you through our process.
Until next time,
Jon
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