Ignore Real Estate Predictions
I’m going to share with you something that is one of my secrets that is definitely against the grain. It’s probably a bit controversial and so, I’m sure we’ll get some comments down below, some people reasoning with me, but I would delay it that you are better off in many cases by rejecting much of the real estate news that’s coming at you.
The Information Age
We’re in the information age. There is so many things coming at you all the time, so much information that it can get you all confounded. What I have discovered is that there’s a lot more noisy knowledge. Noisy, necessitating it’s not productive. It’s not going to help you. Then there is signal. Signal means that those pieces of wisdom that are absolutely essential. Tell me talk about what would be some of the noise that you’re going to read about in the news. I’m going to say,” Noisy news .” Noisy news going to get events like foreclosure paces. It’s going to be, you’ll hear phrases like” make starts .”
They’ll merely talk about overall sales, both of new and existing. You’ll read these events in articles. You’ll read events where it talks about interest rates. I know, some people are going,” Phil. Interest paces, those are really important .” Okay so this is what I characterized, in most cases, as noisy news.
First of all, who’s creating these news articles? Writers.
What are they composing them for? So parties will speak them.
They’re not real estate investors. They’re not in the field doing the business. They’re writers, and they make these articles so parties will speak them, but it doesn’t mean it’s going to help you and your business. Now, some people say to me,” Phil. I want to keep up to date what’s going on .”
Real Estate on a Neighborhood Level
Well okay, this is the next part of this. If the foreclosure paces are high, the make starts are low, the sales are low and the interest rates are high, how does that change the behavior you’re going to invest? That’s a big question, right? Because I would position that regardless of where the market is, my approaching is still almost identical. I only buy rental properties that cash flow improbably well. Otherwise, I merely throw the transactions. If a bargain is a good deal, I don’t care if the interest rates are high or low-spirited. I don’t care if the sales are good or bad, because all of this material, here is a big one, this is macro. This is what’s going on on a national level.
You “know what i m thinking”? Real possession happens on a neighborhood stage. Real possession happens in such micro localities that even if the city “ve lost” cost in properties, it doesn’t mean the entire … the neighborhood you’re doing a deal in is misplacing cost. Warren Buffet does a great chore of communicating these principles when he talks about the idea, like you buy a farm and you buy it based on what it’s going to produce , not based on what the cost is going to do each and every month. Following all of this is largely a squander of most people’s time, because it really doesn’t change a wise real estate investor’s approach.
Now, if you are buying volume properties, 2,000, 5,000, 500 homes at a time and you’re a hedge fund proprietor, okay, you have been able indifference everything I’m going to talk about because you do have to watch all these things, but for all of us individual investors, this material really doesn’t make a big influence. But I’ll tell you what it does do and it perplexes new people, it perplexes subsisting parties.” Uh-oh, the make starts are up now .”” Oh my gosh, the sales are up. Okay, the real estate sell is booming again. I can’t find transactions again .” These are the kinds of parties freak out about and nothing of these matters to me, because we were seeing great money when the market was booming in the mid 2000′ s. When the market collapsed, we made a ton of money, when the market is on its way.
People Will Always Necessity a Lieu to Live
We’re always being very productive because the real estate business is especially which is something we do at residential, is very consistent. It’s going to be consistent because people always involve a situate to live. We only select those transactions that stand on their own two feet. I’m not to be concerned about what’s going to happen next, which is, here is the next slouse. You can’t prophesy the future. I know I’m abounding your bubble because you were probably one of the few that predicted that the market was going to collapse in 2007, and so you pride yourself on predicting the future. I got news for you, you can’t do it.
You Cannot Predict the Future
Predicting the future is a huge waste of time. Real possession investors should not be investing in transactions, I represent, some of the longer term basis, based on what’s going to happen in the future because you never know. Tell me give you a simple instance. In 2010, 2011 as the best interest are truly, really low-spirited, everyone said the rates were going to go up. In 2010, they were going to go up, they didn’t come near in’ 11. They didn’t come near in’ 12. They became up a bit somewhat in 2013. We don’t know what’s going too happen. This is fascinating, in 2007, they did a huge analyse when the market begun to collapse, when they’re asking all of these brilliant economists,” Hey, are we about to have the most difficult catastrophic submerge in their own economies that we have since the depression ?”
Almost everyone said, “No.” And we were in the middle of the put and they didn’t even know. We’re shitty at predicting the future. We’re terrible at predicting the future. I pause it to you here that you attempting to predict the future is a complete waste of hour. Noisy news , is not simply does it disorient you , is not simply is on a macro stage on almost all cases, so it’s pretty much pointless regardless, but likewise, to try to use that data to make decisions is kind of a poor approaching because you can’t prophesy the future anyways. I represent, when the market is as bad as it is, what’s supposed to happen is the interest rates are supposed to be up, but they’re not. They’ve been down.
I mean, we don’t because everything is different all the time. We don’t know what the future fetches. With having said all that, where is the signal? Where is the signal? This is the good stuff. Where is this? It’s in doing transactions. It’s getting out there, getting properties under contract, getting properties shut the hell is wise transactions and getting material done. When you’re in the game, that’s when good events happen. By the time real news smacks the newspaper, if you are out there doing the transactions, you would have already known about it.
I’ll give you a good example. Various years ago, the market is defrosting down and everybody is panicking and the sky is descend, and they devoted … The government did a tax creditfor anybody that bought home, like a first time home buyer excise credit. When they released that, especially as it started to expire, right before it expired, there was a huge boost in sales. If you had some transactions out there, you drew it. You made some money. We did. We made some good money from that. Another instance is when the market really hit rock bottom, which exist in about 2012, a lot of hedge fund came in and bought a cluster of property. Then in some markets, they’re still buying them right now, but that’s really trailing off. I represent, it was like an in and out.
What happened was, if “youve had” properties on the market, you had transactions you were working, you got paid. It was nice. But hey, once it made the news, that Blackstone group was to purchase a whole cluster of properties. Just as rapidly as it made the news, slam, it was already exited and you missed your opening. The signal is out doing transactions. Now, in your neighbourhood, neighbourhood sell, there may be some statistics that could be very helpful. Perhaps your neighbourhood board of realtors releases some data. Some of that can be helpful. That is also possible signal very, when you get really, really localized. If you’re in a big city like Los Angeles and they give you Los Angeles-wide statistics, that’s still not as helpful. I represent, you got to sharpen it down,[ inaudible 00:09: 01] kind of level.
What I’m trying to get across is the idea that a lot of parties expend a lot of time wasted on focusing on news, as opposed to focusing on doing transactions, because when you’re doing transactions, great things happen. That’s where the news comes into play because you’re there before the essay is coming back. You know what’s happening before anything else is materialize because you’re out there. What drives me seeds is when someone just takes a cursory glance at their sell. They read a couple clauses and they disappear,” Well, around here, Phil, things are a lot different than where you live .” I disappear,” Really? How many transactions have you been doing this last-place month ?”” I’ve never done real estate before, Phil .”” Oh, so you’re giving me some advice on your neighbourhood sphere and you’ve never done a bargain there .”
The Real World
That’s the difference. The signal comes from being in the real world. You’re not going to shortcut it reading some news. You got to get out there and do transactions. I got a little intense on this one. You could tell a material drives me seeds when people do this, when they shape these assumptions based on some macro news, I’d tell you … Now, am I saying that you entirely shut off the news? No. I represent what I do is, I’m always tracking what’s going on out there, but I only read the articles that I can tell has some signal on it. Most of them aren’t anything like,” Sales plummet in November .”” The National Real Estate Association said that real estate crisis are really leveled up .”
They shape these grandiose claims and it’s like,” Okay, so it’s November. Yeah, of course real estate slows down in November. That’s Thanksgiving. People don’t buy as much, as well as December .” Then June, parties buy all- It’s a lot more bustling in June because everybody’s out of institution and they’re all buying houses to get change for the following financial year. The key here, in my opinion, shut off the noisy news, don’t try to predict the future and going to be okay and do this business in a way whereby the bargain stand on their own two feet. It doesn’t matter what happens tomorrow. You’re still going to get paid.
All right, cool. Well, I’m Phil Pustejovsky of Freedom Mentor.com. I really realize you watching this video. If you completely disagree with me and you think I’m just … I’m out on the left field and the best thing to do is to merely focus on the news every day so “youve never” miss a little bit. You can also check out my volume, How to be a Real Estate Investor . Check out my other blogs, and thanks so much for reading.