Scared Money Don't Make Money

Some would describe me as obsessed with football and real estate. So, to lean into that, here's a real estate message to my rookie investors in the form of some football analogies.

It's the 3rd quarter, you're on the road, and your team is down 3 scores. You are new to the team, and all your older team mates have championship rings from before you made the team. You're on the bench with your helmet in your hands, listening to the deafening noise of the home team crowd lose their collective minds after another big play. Your team is disoriented, and this is a must-win to stay in the playoff hunt.

What do you do? How do you feel? 

In real estate, we're in Q3 for 2022. For many investors, the last 7 years or so have seen a rising tide supported by low interest rates and surging appreciation that has given way to countless personal dynasties. For many others who are new and wanting to get started, this is your rookie season. But things have changed. So do you give up and wait for the tide to go out? Or do you buckle up your chin strap and use this as a big opportunity to make a play that will put you in the history books? 

Let me encourage the many fatigued, scared, new investors right now. I talk to you every day in my business: This is your moment!

Let me give you 5 reasons why you can make a big play right now. 

• 1) There is more opportunity right now than we've seen in nearly a decade. In the Carolinas where I work (and I'm sure in many markets), inventory is up 50% in one month. This means more options, less competition, less risk on acquisition, and more motivated sellers. The opposing team (sellers in this case) feel they're up big, but they feel vulnerable to changing market conditions, and are more willing to give up big plays because of the score, or, in our case, big appreciation. 
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• 2) Q3-Q4 provides more opportunity than most quarters. People who sell in Q3-Q4 need to sell, they're more motivated. Much of the buying competition is on the sidelines with kids in school, and waiting out the annual slow down to see if it's seasonal, or indicative of a larger market shift. While both are true, the seasonal slow down is exaggerated every year. If you wait with the crowd, and then jump back in with everyone else, you will lose.  I've heard it over and over from investors over the years: the best deals they've ever bought were acquired in Q3 and Q4. Don't be like everyone else. Usually what the crowd is doing is wrong, and by the time you realize they're buying again, it's too late. Stop paying attention to the crowd, get in the game, make a play to shut the crowd up. 

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• 3) Stop trying to predict what is going to happen by talking about things that are not relevant to your strategy. Most people are not good at this. The experts are almost always wrong. Countless studies from MIT, Harvard, Yale and other well respected research institutions have shown over and over that public sentiment is usually a lagging indicator at best, or flat wrong when determining a personal growth strategy. Standing scared as an onlooker while your teammates make big plays and change their life is not what you want. You need to be the one in there making the play. Get in the game, and give yourself the opportunity to make a big play and ignore the crowd, often it's much easier than you think. Example: I've had multiple opportunities in the last month that showed deep double digit cap that I've presented to investors who want to get in the game. They decided to sit on the sideline because they felt like they were over-paying for the property, even though the cap rate was outrageous. They focused on the wrong metric. In every case, the property went under contract and became a huge money maker outperforming the market in every metric that actually matters. 
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• 4) Changing market conditions provide some of the most slippery conditions towards wealth than any other market condition. Momentum swings provide huge opportunity. Historically in Q4, ibuyers stop buying altogether. Why? It's too unpredictable. On a macro scale, when corporations pull back, that's a huge indicator for small businesses to surge forward and take advantage of the opportunity. It's a lot safer to take what's yours when the goliaths are asleep. Most wealthy people have gotten ahead while everyone else was waiting on everyone else. The tide of the game is changing, how will you seize the opportunity and take advantage of changing momentum?
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• 5) Scared money don't make money. One of the best things I've ever heard a real estate investor say is, "never go into a deal with fear. You're doomed if you do. With every investment, we go into it knowing your strategy and that it's right for us." This was said by one of the top investors in my market, they buy things that other investors won't touch and make a fortune off of it. If it's 4th and short, nobody wants to see a run up the middle and a pile of dust for several agonizing minutes while the officials drag the chains onto the field. You want to see a fake run to the middle and flip to the running back for a jet sweep and a deep downhill play while the defense stacks the box and leaves the open field wide open. This is your opportunity to catch the defense off guard. There are so many opportunities right now (particularly with short term rental). Another investor I work with has been waiting all year to make a purchase. They haggle every purchase price, and never come to an agreement, no matter how big the return is. They're terrified of overpaying. Since then, prices have gone up nearly 20%, and borrowing costs have tripled. Had they "overpaid" early, they would already be up big, not to mention their strategy would be working for their model. Don't be scared, if the return is there, and the strategy works, then trust the process, stop thinking, and start doing.
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If it's right for you, and you're where you're supposed to be, then trust your process and use the changing market conditions to your favor and stop listening to the noise. Opportunity is everywhere, this is the best time to change the game.