On A Scale of 1 to 10…

When you go to the doctor or a hospital with pain, they ask you to rate it on a scale of 1 to 10, with 10 being the worst. I believe it is as much a test of your attitude as it is of the pain level. My wife’s 10 is probably the equivalent of my 50 or 100. She knows pain and lives with it every day. I do not. I’m not quite at the level where a sliver in my finger ranks as a 10, but I’m sure my idea of bad pain does not compare at all to what she knows.

None of likes pain, but the level beyond which we believe it is not bearable, is a decision. It is an attitude we have about how much pain we should have to tolerate. It is a sort of negative entitlement. “I am entitled to not have pain that is like that.”

I have determined that “hard work” is a pain. It’s not a physical pain, but I think it acts like physical pain relative to our tolerance for it. My attitude determines what level I’m willing to tolerate. Am I going to be like my wife and be quite happy to work as hard as it takes to meet my goal, even if it is painful? Or am I going to take the easy route, “self-medicate” by choosing to not work any harder than I think I can get by with? Mere adequacy when it comes to hard work is the road to failure. Doing enough so I feel I’ve done what I need to do is not the same as doing enough so I get the results I want.

In that regard, hard work is nothing like pain. You cannot calibrate your pain level 10. You can calibrate your hard work level 10: Are you getting the results you want and need? If not, tune your hard work scale down. That “10”-level hard work may actually be only a 2 or 3. Step it up! Step it up until you get the results you want. Set that as 7 or 8. That leaves you room to stretch into even more success!

Based on the results you have been getting, on a scale from 1 to 10, how would you realistically rate your hard work level? What are you willing to do about it?

Real Estate Market Timing

I attended a presentation a couple evenings ago about market timing. The speaker was Robert M. Campbell. His book Timing the Real Estate Market discusses key metrics one can use to select the appropriate investing strategy for your target markets at any given time. The book is available on Amazon and Campbell’s website, realestatetiming.com. Various members of the audience spoke about how his predictions in 2005 saved their portfolio before the market tanked.

I thought I’d pass along a few random points he shared. For more information you can go to his website and/or subscribe to his newsletter.

  • Historically, real estate has appreciated 0.5% more than the rate of inflation.
  • Prices are rising in many markets. The recovery there is real, although it’s not clear how long it will last, given the state of the US and global economies.
  • When looking at any metrics for anything, always compare year over year.
  • Zillow reports that in 75% of all US cities it is cheaper to buy a house than pay rent. Rents in major cities are rising very rapidly and interest rates are at historic lows. For instance, San Francisco rents have gone up 14.7% since last year. Oakland rents rose 11.2%.
  • Government action is driving this market, but the underlying fundamentals are sick. Make the most of it while it lasts, because what comes next will probably be pretty ugly.
  • Since the government is giving the banks a pass on their REO inventory, he does not expect the banks to dump them and depress the market. They can hang on and trickle them out to keep prices up.
  • 28% of all homes in the US are under water. In San Francisco, that number is 31%, Sacramento is at 51%, and Las Vegas is at 71%. This does not include second mortgages or HELOCs. Yet only 10% are not current on their payments.
  • The average size of homes is trending downward. It will probably continue that direction in the long term.
  • To get through the next 5-10 years will be difficult. If you have a job, do it well so you can keep it. Investors should be assuring sufficient cash flow to cover living expenses.
  • Like data. Study data. Know the data for your market. Let data trends drive your strategies, not what everyone else seems to be doing.

If there is a point I would make about all of the above, it would be that real estate investing is either a hobby you dabble at and sometimes make some money. Or it is a serious business at which you work hard. Working hard includes knowing your metrics, tracking your efforts and results, knowing what works and doesn’t, revising your strategies based on market trends, studying, reading, learning, etc. So, are you ready to work hard? Your success depends on it.