- Joined
- Aug 22, 2007
- Messages
- 2,005
Are You Being Mindful in Your Investing Decisions?
Being mindful about real estate (and really all investment choices) can be difficult. I've had many conversations with media and investors recently who are caught in "Average price" or "Average vacancy rates" or "Average rents." I can understand it - as they are pushed so hard on the public and easily accessed. However...
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...what we have discovered is that when you use 'Average' <any number - price, rents, vacancy rates etc> you will have below average accuracy on your analysis and below average investing results. It takes effort not to get caught in avearges. People panic when the S & P/TSX index drops - even if they don't own stocks in the index... in fact many stocks increase during times when the small # of index stocks drop. Even within the index all it takes is a couple to have large drops to make the whole market look like it is collapsing.
Same occurs in the real estate market. You have a bunch of new-build product sold one month the average will go up... if that new product isn't sold the following month (i.e. condo tower is sold out) then average can often swing downward.
One neighbourhood can have a resurgence - prices and demand up, while others next door have flat or shrinking demand. Imagine how that would reflect in the whole city average... zero as they would counter each other. So an unsophisticated investor would think the market was flat, while a geographic specialist would have profited by a raise in values in her neighbourhood. Averages produce below average results.
Bottom line is you will see people making important decisions without the important data in their hands - and that is sad. But it is also an opportunity to 'not' be average - to be above average. Taking the extra effort to understand what really drives your target neighbourhood, finding out what real 'value' means (hint - it is not cheap price - it is value), finding out that many many many people who comment on the real estate markets (whether professionally or as friends) have really no idea on the difference between averages & reality. Please be mindful of what you are analyzing, to whom you listen, what 'Business Metrics' you use to make your decisions.
In real estate investing and business there is no 'magic pill' that makes you wealthy overnight - it takes work, knowledge, contacts and tools that help you analyze. The secret is that there are no real secrets - just a very predictable simplicity. Know your numbers, know your goal - don't get too excited when you win big, too upset when you make a mistake (you will) or too afraid of the future. Doing NOTHING is the biggest risk, because if you don't set your own agenda, your own goals and your own future - someone (or the market) will do it for you... and you probably won't like it.
Be Mindful in All You Do...
Being mindful about real estate (and really all investment choices) can be difficult. I've had many conversations with media and investors recently who are caught in "Average price" or "Average vacancy rates" or "Average rents." I can understand it - as they are pushed so hard on the public and easily accessed. However...
`
...what we have discovered is that when you use 'Average' <any number - price, rents, vacancy rates etc> you will have below average accuracy on your analysis and below average investing results. It takes effort not to get caught in avearges. People panic when the S & P/TSX index drops - even if they don't own stocks in the index... in fact many stocks increase during times when the small # of index stocks drop. Even within the index all it takes is a couple to have large drops to make the whole market look like it is collapsing.
Same occurs in the real estate market. You have a bunch of new-build product sold one month the average will go up... if that new product isn't sold the following month (i.e. condo tower is sold out) then average can often swing downward.
One neighbourhood can have a resurgence - prices and demand up, while others next door have flat or shrinking demand. Imagine how that would reflect in the whole city average... zero as they would counter each other. So an unsophisticated investor would think the market was flat, while a geographic specialist would have profited by a raise in values in her neighbourhood. Averages produce below average results.
Bottom line is you will see people making important decisions without the important data in their hands - and that is sad. But it is also an opportunity to 'not' be average - to be above average. Taking the extra effort to understand what really drives your target neighbourhood, finding out what real 'value' means (hint - it is not cheap price - it is value), finding out that many many many people who comment on the real estate markets (whether professionally or as friends) have really no idea on the difference between averages & reality. Please be mindful of what you are analyzing, to whom you listen, what 'Business Metrics' you use to make your decisions.
In real estate investing and business there is no 'magic pill' that makes you wealthy overnight - it takes work, knowledge, contacts and tools that help you analyze. The secret is that there are no real secrets - just a very predictable simplicity. Know your numbers, know your goal - don't get too excited when you win big, too upset when you make a mistake (you will) or too afraid of the future. Doing NOTHING is the biggest risk, because if you don't set your own agenda, your own goals and your own future - someone (or the market) will do it for you... and you probably won't like it.
Be Mindful in All You Do...
