When your investors can’t see your vision!

Question

Hello BP,

I live in a market (Boston) where the hype is high. Prices are sky rocketing, priced are too high and the tycoons are taking up every sq ft for complexes and condos. I mean everywhere.

There is major opportunities in towns/cities less than an hr away. Boston is only 48 sq mi with a 13k person per sq mi density. Boston is also #1 in congested traffic in the US.

Most of the Boston area does not have the rules (1%, 50%, 70%). Properties are too high. I do see a correction happening.

Now cities like (Worcester, Fall River, Providence etc.) have properties that pass all rules and have lower priced multi family properties that will soon go up because the Boston population density.

Also can’t forget gentrification, buyers are pushed to the cities and towns above.

Question is; Why are some investors blind to potential properties and areas instead of competing in a brutal market?

Thank you BP

Anthony Thompson · Answer

@Ernest Partin investing is like anything, as humans we can try to use analysis to make good decisions and minimize risk, but ultimately we are emotional creatures. So for many in real estate, it's a question of what's comfortable, which is often what's familiar in terms of types of properties and geographic area. It's why I find behavioral economics so fascinating.

All that said, I think there's also an element of the grass being greener on the other side. Where you look south to Providence and Rhode Island and see properties that still sometimes meet the various investing rules of thumb, here in RI we often look north and wonder why there is "brain drain" and most of the good jobs and employees leave the state for better opportunities in the greater Boston area, where there is actual economic activity and the tax burden (while not amazing) is at least not quite so bad.

And in general, when I look at demographics, apart from a few cities like Boston and New York (and even including them), I honestly don't see a lot of people moving to the Northeast, versus moving away from it, for greener pastures in terms of employment, tax burden and cost of living in other parts of the country.

So it's hard to "know what you don't know" and easy these days to live in a "filter bubble". If you have a certain comfort zone, it's extremely easy to stay in it because whatever size your bubble is, you can find an endless supply of information to fill and reinforce it without really providing much reason to move out of it.

Reading and podcasts are potential antidotes to being trapped in your own filter bubble (limited vision), but it so easy these days to just read a few things and forget them, versus actually challenging yourself and expanding your comfort zone. We're swimming in a sea of information, but it's surprisingly difficult to navigate, especially to new places.

Jerryll Noorden · Answer

1) The insane to himself is a genius while to others insane... you can also reverse that one.

2) Intelligence is defined as acknowledging how little one really knows.

When you may not understand the hows and whys of someone else is when you really have to proceed with caution. Maybe they know more and see more than one self does.

This is not meant offensively.

Every time someone disagrees with me... I shut up, step back and try REALLY hard to see and understand why. When I can find concrete numbers and absolute concrete  proof, do I proceed to counter them, and then still with tremendous caution!

Ernest Partin · Answer

@Anthony Thompson

Thank you for the reply. You couldn’t have said it any better! “Filter bubble”.