experts: real estate column Tuesday, May 25, 2004


Forget 'Location, Location, Location' - timing is everything...

By Ozzie Jurock

This article appeared in The Vancouver Sun on May 15, 2004

In my 1999 book Forget About Location, Location, Location, I argue that we are too enamoured with that time-old phrase.

Yet, as with practically everything else in life, timing is everything. In real estate investing, the degree to which your timing is accurate is the degree to which you will achieve optimal or minimal results. It is very often the difference between success and failure.

So you say, "Good! I will learn what I have to learn about timing and then I will know how. Where do I start? What are the rules?"

This brings us to our first problem. There is no particular place to start and there are no rules.

There used to be rules. It used to be easy. If you could learn to recite, "Location, Location, Location" from memory you were automatically a real estate expert.

You simply had to find out where the most desirable part of town was, or where the most desirable suburban or rural area was, depending on your interest, push a pin into the map at that spot and then go and buy something as close as possible to where the pin was.

Timing wasn't important because the dynamics never changed. But now, Location means little and Timing is extremely important.

When you look at any market you are looking at a snapshot in time. That's the way it is at that moment. In a month or a year, it might be very different.

One of the problems we have is in our education. All of our teachers prepare us, regardless of what the subject is, for a world that is not going to exist by the time we get to it. They take a snapshot in time of the world as it is in the present and they prepare us for that. When we go to use that information we find we're in a different world.

If you are in an inflationary real estate cycle, the rules are relatively simple. You buy a piece of property utilizing leverage, you wait a certain amount of time for the property to appreciate, then you might sell for a profit and buy something larger or you can borrow on your increased equity and buy something in addition. What could be easier?

However, if you're in a flat-line segment of an inflation cycle you have to buy below fair market value to establish your profit at the beginning. You have to give greater importance to cash flow considerations.

But what happens if you buy in an inflationary cycle and then it turns flat-line? You have to shift your focus every time the market changes. Because, like riding a rodeo bull, every time the bull does something different you have to change your position accordingly or you're going to be thrown very forcibly to the ground, stomped on, and gored unmercifully. Another example of sport imitating life - except life is more cruel.

So we agree that there are no rules because the marketplace is continually changing, therefore what we have to do is learn to read the changes, interpret what the changes mean, and adapt to them.

What are the determining factors? Here we come to some good news. The component parts, the determining factors, are not complex or difficult to deal with. You look at migration, affordability, inventory availability, inflation, and environment of growth.

You can gather your facts from wherever they are available but after you've done that you have to form an opinion. This isn't like religion where you decide on a moral philosophy and then go out and carve it in stone. This is an ever-changing continuum, a soup that is boiling and bubbling and nothing is ever where it was the last time you looked. The difference between 'too soon' and 'too late' is timing! If you watch the trends as they change you'll be able to time your actions for optimum results.

So, you must watch for changes. How does the average person learn to read them?

How is someone supposed to know when the changes are coming?

The changes are heralded by a change in the numbers in the statistics. Trends continue until they change and you can read the beginning of those changes in the statistics. However, often by the time you see a report on the changes, those changes have already occurred.

What you have to do is go upstream from the news reports directly to the source of the numbers - to those various real estate boards, Canada Mortgage and Housing bureaus, and agencies - and get the news while it's still new. If you're Internet literate you can go right to the web pages involved and be right in on the beginning.

One of the short cuts is to take the contrarian view. The contrarian view is the supposition that the public is always wrong.

It flies in the face of logic, but it's true. The public is always wrong.

Take the situation with pre-builder land. Pre-builder land is the piece after the next piece to be built on. Let's take a piece of land that has been worth practically nothing stretching back to the dawn of history and nobody wants it. All of the sudden there is a demand for the use of the land and prices start to go up.

When they've gone up enough, everybody wants to jump on the bandwagon. They say, "Hey, now is the time to buy!" But they're wrong. This isn't the time to buy. This is the time to sell. The time to buy was back when the prices first started to go up.

So, what does that mean for today's real estate markets? Can the experts really help us? Well, remember even the experts are only guessing. Futurists are never right except by accident. Historians are never wrong. If you had tomorrow's newspaper you could make millions; if you have yesterday's newspaper you can wrap fish in it.

Except, contained in yesterday's newspaper are changes that have already started and if you get to them soon enough, interpret them correctly and then act on them, you can do yourself some serious good.

It's not necessary for you to have the entire wisdom of the world at your fingertips. But get good quality information, know who you are - a shark, a flipper or an investor - pick your market segment, pick your professionals and then don't get emotional about it. You will always make the most money on the day you buy ... even today.

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