Real Estate Investors Trapped in Alice’s Wonderland…

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It seems that with each passing day the real estate market, or at least those “experts” who make their living telling us what direction things are heading get curiouser and curiouser.

Everyone of us is looking for some sign that stability will start to creep into our markets… a sign that provides predictablity… a sign that can be relied upon to guide our businesses.  Yet finding those signs can be a real challenge.

In my article last week,  I discussed the new normal and characterized it by constant change. 

One of the recommendations I made in this article was that to be successful in navigating the new normal, you needed to pay attention and stay informed regarding what is happening in the real estate market.  I didn’t realize how challenging that task could be.

As a real estate investor, particularly an investor who focuses on rehabbing, it is damn hard to find reliable information regarding where the market is heading.

And this is where Alice’s Wonderland comes in…

I did a quick check of the BP bulletins and very quickly found two articles written within days of each other that said exactly the opposite regarding where the market is heading and why.

The first article in the Wall Street Journal is titled Housing Market Stumbles  And then of course builds it case for all of the reasons we would imagine… high unemployment, tax credit pulling buyers in early, etc.

The second article posted on RISMedia  titled Market Holds Its Own: Life after the Tax Credit tells us that some markets are seeing appreciation, days on market are down, inventory levels are shrinking, etc.

What and who do you believe?

Everyone and no one!

Human nature guides us to believe the best will happen and of course if you believe everything in the RISMedia article you might be convinced that things are going to be OK.  On the other hand, a prudent investor might take that information, coupled with everything else they see in their market, and arrive at a very different and ultimately more profitable conclusion.

So… what to do?

First, keep in mind that the second most important job you have as an investor, behind figuring out how to convert equity to cash, is to be able to sift through the data and see what is possible in your market or markets that support your goals and objectives.

Second, don’t believe everything you read.  Verify everything based upon what you and others are experiencing in your market.

Third, be honest with yourself.  Don’t convince yourself that things are going to improve unless you can back it up with real data.  Data like growing employment, housing trends over several months reflecting market improvements, etc.

Fourth, be willing to adapt your business based on the information you collect and study.

And lastly… always be aware of the following…

The only constant is CHANGE… and those real estate investors who can adapt to our changing market or any market are the ones who will reap the profits.

Make sure you are that investor!

Photo: Eddie S.

About Author

Peter is an active and successful real estate investor in the Baltimore Maryland region for the past 8 years and is one of the founders of The Club Mastermind a real estate investing coaching program focused on local coaches helping investors to perfect their game.

5 Comments

  1. Jeff Brown

    The new normal, more than anything else I’ve seen in my career, makes it more critical than ever to know someone who can answer those questions most folks will never know to ask. Rare indeed is an investment ‘surprise’ a positive experience.

  2. Jeff… you make a couple of great points.

    Your are correct about investment suprises ending up positively. I can’t think of one curcumstance where the opposite is true.

    Your first thought regarding people “not knowing” what to ask has been one of your recurring themes that can only be born of lifes’ experiences… and that theme is… “You don’t know, what you don’t know”.

    I see an artcile in there somewhere.

    Do you want to do the honors… or should I?

    Pete

  3. Pete, another element is that the real estate market is so large that it can be moving in different directions at the same time. Different areas of the country recover at different paces, and low end can perform differently from the high end. It’s a bit like a human body. You foot doctor might say you are in perfect health while your heart doctor is very worried.

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