experts: real estate column Wednesday, June 19, 2002

Study and action pay off in real estate

We understand a lot ... it’s not enough. Action is everything. Take MASSIVE action!

By Ozzie Jurock

This article appeared in The Vancouver Sun on June 15, 2002

The following are the common reason why people fail to invest in real estate:

  • NO GUTS. Ok, that hurts? Well, in investor seminar after seminar, I tell the audience: "There are 600 people here, most of you understand what our speakers said. Most of you agree in the principles that are expressed ... But less than 30 will actually go out and DO SOMETHING! Less than 5%!" Understanding is not learning. We understand a lot ... it’s not enough. Action is everything. Take MASSIVE action!

  • THE BELIEF: I NEED TO HAVE A LOT OF CASH. Actually, money will always find the good DEAL! Ask any seasoned investor and they will tell you that lack of cash is never an issue; lack of good deals is! If you can negotiate a good price on a property, YOU WILL FIND THE MONEY. (Probably right here on the subscriber exchange!)

  • THE BELIEF: THE GOOD DEALS ARE ALL GONE. Never. The best deal is always just ahead ... and there is a new one every ten minutes ... if you do the research in your local area, if you have a quality professional Realtor. At any given time there are thousands of properties for sale in your market. In fact ( see point one) the majority of people are just sitting on the sidelines waiting for someone to fall in their lap. Good deals are created ... not advertised. This week, this day, there are ‘underlisted’ properties for sale. Yep, Realtors and owners make mistakes.

  • THE BELIEF: THE MARKET IS NOT GOOD. There is no good or bad market out there. The only thing that matters is whether YOU personally make a good or a bad deal. In fact, the worst deals come in so-called good markets. There are good and bad deals in ALL markets. Make sure YOU get a good one.

  • THE BELIEF: I HAVE NO TIME. Not true. You just decide to spend it on something else. No one in the whole world has more time than to spend it on something else. No one in the whole world has more time than YOU! No one. Make real estate investing a hobby. Load the kids into the truck and go ‘house-looking’. They are sitting now three hours a day in front of the ‘tube’. Make it a game. This weekend look only for small ugly houses. Next weekend look for the smallest house for sale on the street. Be creative, but GET TO KNOW YOUR MARKETPLACE. Only then can you identify the ‘deal’.

  • THE BELIEF: IT DOESN’T WORK IN MY MARKET. Boy all my life I have heard that one. Selling franchises, writing articles, training salespeople, training managers, introducing new products and services. "Yeah, Ozzie, sounds good, but you know, we here are different. It won’t work in my market." I could write a book about this one. Yes you have to learn your market – the rents, the trends, the local customs, the vacancy rates, the mortgage brokers, the Realtors, etc. Then, learn the basics of no money down, of serious investing (even at the library) and adapt them for your market.

  • THE BELIEF: I DON’T KNOW WHAT TO DO. I NEED TO LEARN MORE. Ok, I buy that one. . Read some books, take some seminars ... most of all figure out, what YOU want. Cash flow? Flipping? Create an action plan in writing. You are creating a business (yep!), and you wouldn’t start one without a plan. What are you trying to make happen? (I want someone to create a clear title property for me. I want to flip for some fast cash requires different actions.) Understanding YOUR own objectives clarifies the actions you must take. Not all real estate is good FOR YOU. Don’t enter the real estate arena unarmed. It’s "ready, aim, fire." Yes, in that order.

  • THE BELIEF: I CAN’T TRUST ANYONE. Nonsense. Trust everybody. but don’t give them an opportunity to prove themselves to be less than trustworthy. That goes for sellers, tenants, suppliers and anyone else you’re likely to run into when you’re conducting your business. Sometimes tenants want more time to pay or have excuses when the rent won’t be coming in as agreed. Sure, I’ll listen to their story and I’ll trust that they’re telling me the truth, but it will have no bearing on what I decide to do with them. I have company policies in place. They’ve already been told what those policies entail and they already know my answer even before they ask. Sure, I trust they’ll pay me like they say they will, but it won’t have any bearing on the eviction I’ll be starting tomorrow.

  • THE BELIEF: BUT THIS OR THAT GURU SAID REAL ESTATE IS GOING TO CRASH. Yeah, and he or she or them have said so forever. I have on file 30 years of naysayer clippings and every once in a while they are right. Real Estate markets are cyclical and generally local in nature (except as in an outright inflationary runaway), depend on confidence and affordability. So, be negative long enough and you’ll be right once in a while. But stay out of real estate for more than 5 years and you miss the best investment you’ll ever make your own home. In most major markets, a home held for 5 years has outperformed all other investments. Every time. Homes are easy to buy, give stability and surprisingly still tax-free capital gains. However most of all, homes and real estate investment in general give you leverage LEVERAGE - better leverage than a commodity or stock margin allowance. Look at the 10% price increase in Toronto, the 18% price increase in a new condo in Edmonton and the 20% price increase in Vancouver and assume a 10% downpayment. The increase return on capital invested (for ease of demonstrating not including property taxes, other costs) are SPECTACULAR. Take the new Vancouver condo bought in April of 2001 at $231,000 and sold at today’s price of $278,000. The profit of $47,000 is astounding by itself. Tax free! Now assume a downpayment of 10% - $23,100 or 5% - $11,550 and collect your return of 100% to 200% then double it for after tax returns!

When I bought my first house on William Street for $13, 400 in 1968, my first small apartment block (8 units on the waterfront) in White Rock in 1971 for $55,000, my first condo portfolio in Mississauga with an average price for a 3 bedroom 1,300 sq. foot unit at Square 1 for $46,000 in 1983, my house on an acre in White Rock in 1989 for $289,000 etc. the marketplace abounded with ‘real estate naysayers’. In fact, every year that I have been in this industry some ‘expert’ says: “There are too many Realtors in the business, no new couple can afford to buy a house anymore, house values are about to crash and then they raise their eyebrows and muse … ‘I wish I had bought 5 years ago’. EVERY YEAR!

Understanding is not learning. Boy, that took me 25 years to figure out. All of us have experienced an 'AHA', a deep understanding. We attended a seminar, we wrote furiously, elatedly, we left on a high – full of conviction we would act. Then 3 months later, we open the trunk and there are our notes. Ah ... we understood, we believed ... we didn’t learn a thing. Even when we 'understand with emotion': "This would be so much better for me and my family, this would help in my old age, I feel it," it doesn’t get us into action. Human beings ONLY learn experientially. We have to commit ourselves to some course of action, perform the action, measure the performance. Then reassess what we did, recommit ourselves, do it again, until such time as we have some new habits.

So, understand by all means, also get that emotional buy in ... then write down a plan. "I want to make a lot of money" is not a goal. "I will work hard" is not an action plan. "I will own 5 homes in 20 years and get a $5,000 per month cash flow is a goal." "I will take these itemized, precise actions every week..." that’s an action plan.

Then work the plan ... commit ... perform ... measure.




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