Real Estate Truth vs Fiction

 

Real Estate TruthReal estate truth can be difficult to find amidst all the fiction. In his fantastic book, “The Signal and the Noise“, author Nate Silver so accurately points out that in this information age, the large and growing amount of inaccurate advice (noise) can drowned out the truth (signal). At local REIA club meetings and in online forums, real estate truth is being smothered by the loud noise of bad advice. And perhaps the most dangerous part about it, is that the fiction is coming from very well intentioned people.

 

Who is Creating all that Fiction Out There?

So who is creating all of this sincere and the-best-of-intentions noise? It is usually coming from beginners as well as those who have tried but failed in real estate. They typically have the most time on their hands as well as the most inclination to talk or type about the subject. By contrast, the most experienced real estate professionals, who have the most signal to share, usually spend no time answering questions on online forums and rarely speak up at local REIA club meetings. Instead, the best and the brightest of real estate quietly listen, gleaning insight and making distinctions; sifting through all the fiction and noise in order to pull out those rare, few nuggets of real estate truth. They may be searching online forums for answers or attending meetings of their peers to network and learn, but they are rarely doing the talking or typing.

 

How to Determine Real Estate Truth from Fiction

So how does one find real estate truth amongst all the fiction? How do you separate the signal from the noise? Much like experts in the field of determining monetary counterfeit, you have to know what the real thing sounds, looks and feels like. I was fortunate enough to have a real estate mentor who taught me what the real thing sounded, looked and felt like. I found that real estate truth rarely shouted from the rooftops, but instead, it usually whispered. Most people that have made very insightful distinctions in their business aren’t quick to tell everyone unless it directly benefits them. Are you telling all of your competitors your best secrets? Exactly. (Note: Although I do try to provide fantastic information on my blog and in my videos, you won’t find my best, top secret techniques and strategies in them. I reserve those for the people I work with and share in the profits with.)

I began to pick up on when things didn’t add up based on what someone was saying or writing. A successful investor in my area many, many years ago told me to stay away from short sales. That didn’t sound right considering he was doing short sales himself. Beware of the naked man who offers the shirt off his back.

I learned how to determine when someone was guessing or making conclusions based on limited data versus when they really knew their stuff. I read where an investor complained about how direct mailing to the probate list didn’t work in his area. As I kept reading, I learned that she had only mailed 70 letters. Since direct mail has a 1-2% response rate, I knew that this person hadn’t mailed enough letters to make such a sweeping assessment. But how many readers of that forum thread would not have known? How many would have accepted that noise as signal? Unfortunately, many comments and forums thread replies contain much noise and very little signal.

 

Real Estate Truth Can Be Counter-Intuitive

Real estate truth isn’t always intuitive either, while fiction can sound very logical. In today’s market, there is a buzz around REOs and Foreclosures since Banks are supposedly desperate to dump their distressed assets as we begin to dig out of the bursting of the great real estate bubble of the mid 2000s. Banks are in the business of lending, not real estate management, so they want to get rid of the properties they foreclosed upon as quickly as possible, right? Sounds logical, doesn’t it? Meanwhile, the real estate truth on the matter is that bank owned properties are selling for top dollar right now and most Banks are patiently waiting for buyers to pay high prices for them. Hedge funds and private equity funds on Wall Street are buying up bulk packages of thousands of REOs and Foreclosures directly from the Banks as well. Foreign all-cash buyers are scooping up as many United States foreclosures as they can. To many around the world, American real estate is a bargain and what better bargain in America can you get than a foreclosure? While competition floods into foreclosures, quietly, wise real estate investors are in the realm of working directly with sellers and avoiding listed foreclosures and REOs altogether.

 

Finding Real Estate Truth

Separating real estate truth from fiction gets much, much easier the longer you stay in the business and the more successful you become. Successful real estate professionals can distinguish the signal from the noise quickly and easily. Meanwhile, the beginners, the ones most hungry for signal, are most often influenced by the noise. If you are first starting out and are struggling to recognize the signal from the noise, common sense can help and experience is wonderful too. But perhaps the best and most efficient approach is to have a resource, a person or a team of people, who can determine real estate truth from fiction for you. What do think? Do you agree? In what ways do you disagree? I would love to hear your take in this subject below:

 

Comments

  1. And then there are some of the “Gurus” who like to proclaim that “Real Estate Investing is Dead!” and those who endorse this sort of thing. Separating truth from patent fiction and outright alarmist prevarication is ALWAYS difficult. It is especially difficult when it comes from those who pose as experts in the field.
    As to those who are the quiet ones at the REAI meetings, the successful ones at those who have studied their market and have a sound understanding of that market.

    • Phil Pustejovsky says:

      Yes, that particular product launch orchestrated by a certain Guru that oh-so-many other Gurus participated in, a few months back, used the classic marketing tactic of fear, doom and gloom, and negative headlines to increase email open rates, click through rates, and ultimately, sales. It’s interesting that you pointed out the problem not only being with the person who originated those messages, but also with the others who joined in on the emailing deluge that ensued. As you know, I, of course, did not participate in that noise and you didn’t get any such emails from me. I do my very best not to add any more noise to this already noisy world of real estate investing education.
      And yes, a successful investor should study their market and have a sound understanding, but there is far more to it than that. They know how to find the best deals, structure those deals so that they incur the least amount of risk and the most rewards, they know how to focus on their closest routes to money first, etc, etc, etc. Frankly, there are a whole lot of people in a local area that truly understand their area, such as real estate agents. That knowledge doesn’t always translate into money though. Very few acquire all the skills needed to be a truly successful real estate investor.

      • I agree with you about the idea that knowing a market doesn’t necessarily mean maximum success in a market, especially when you’re focusing on micro-transactions as opposed to huge sweeping mass transactions.
        After several years of painful learning on my own I became a master of profiting in a computer game with tens of thousands of dedicated players and a bustling auction house economy with thousands of different items being bought and sold. Every item or set of items is its own market, and I buy/sell almost all of them. There are many people who take the markets very seriously and specialize in the markets. I would see people who literally transferred game servers just to follow a supposedly profitable market condition for their crafting profession. I’m the exact opposite. I don’t follow or adjust to market conditions. While other sellers are constantly checking the market and adjusting their prices I slowly build up long term optimal buy/sell price points and while they are all spending 20 times more time and mental energy to do their routine auction posts, I simply automate it and batch post huge amounts of inventory in almost all the markets while I read things or watch YouTube videos such as yours 😉
        Obviously this business is incredibly different from real estate, and less complicated, but the principle of excessive market focus still holds true. Some people are just so entranced by the market itself, but the reality is that every transaction is its own phenomenon with its own factors. It’s true that there are patterns and overlaps, but using “the market” as some sort of blanket set of rules governing what you can and can’t do is trying to use a macroeconomic approach to a micro-transaction. For instance a certain trinket might be worth $5 on e-bay because that’s what it always sells for on e-bay, but if you bought it for $5 on e-bay and then vendor it at some festival you might sell it for $35. Some other vendor might sell it for $100 and another may sell it for $10. Real estate may not be as subjective in value, but I’m only talking about the principle of micro transactions versus macro market conditions. A good example would be a bottle of water. On a hot beach someone may have no problem spending $10 for an ice cold bottle of water. Someone dying of thirst would spend any amount of cash they had for the water. Some sellers and buyers are on a hot beach and they want a solution to their thirst, and they’re willing to part with their chips for it. So there’s a bit of room for subjective value there too.

  2. I think that you are absolutely right. It is so much information coming into my inbox and I don’t know what system or who is actually right. I also get a lot of emails detailing new systems that this or that person developed ” after years of failing” that are actually renamed systems that have been around for years. A perfect example is the “subject to” deals that I have seen labeled under many different names but it is the same product with a different label but touted as a new never before released product. As a person wanting to get into real estate it is very difficult to sort out the real programs that I can use to begin and the hype.

  3. investin904@gmail.com says:

    Wil you be having any upcoming seminars?

    • Phil Pustejovsky says:

      I usually do one or two per year. I may do one this summer in Vegas. They are a ton of work for me and my team so we do them rarely. I’ll keep everyone informed if I schedule one.

      • Joseline Avendano says:

        I am a newbie REI here in Vegas. Pls. let me know,too, about your seminar once you have scheduled it.

        It is true that we given the present market situation, REI’s are competing in a very small market, I would say Left-over markets which became off-radar to the big money players after their bulk buying spree in 10 big cities. But I believe that the RE market is not totally doomed – it just presented some real challenges which I think would bring out the creativity in us-like focusing on niches that were “snobbed” by most during the boom: Code Violations, ugly/old houses for rehab or selling to rehabbers, abandoned properties, absentee owners.

        We know there is a cycle to everything. The Real Estate cycle is nearing its “recovery phase” in maybe 3 more years, then it will reach its boom again, and hopefully, with the lessons learned in the past, the bust will not be too steep. But with the loud noise that there is the financial community of an imminent catastrophic collapse of the economy, I would say, let us just hope for the best and leave everything to the Mighty One up there.

        • Since mediocrity and failure tends to be the norm I suspect that there will always be plenty of opportunities for those who really learn the business enough, since when there’s more competition, that also means there will be more failed businesspeople who are desperate to have an exit (that’s where the knowledgeable deal maker comes in).. As a newbie myself I’m preparing for going through a very rough process of getting started on the long road to expertise so I can clean up real estate messes and get paid for it.

  4. Here’s the very best and quickest way to make money in Real Estate…..most “Guru’s” repackage and sell the regurgitated hyperbole of packages of long lost past e.g. 1960’s -1980’s. Way back then! Why not regurgitate that information in a brighter, newer package? Remember, everybody is still looking for the “Shiny New Object”. P.S the shiny new object has ALWAYS been in your grasp. How hard did you make a fist?

    • Phil Pustejovsky says:

      While I agree with some of what you shared, it is also true that our world is far different than it was in the 1960s-1980s. Some “gurus” do come up with brilliant new ideas due to the fact that our real estate landscape is somewhat different from the past. Although many of the fundamentals are similar, the exacting details can be quite different. And I have discovered that I can learn from all types of people, from the pundits all the way to the novices. I’m always learning from everyone.
      Further, the “Dumbo” philosophy, as I refer to it, that you already have everything inside of you that you need, while true on one level, is also inaccurate on other levels. Yes, it is true that most people have the potential to be successful in real estate. But without detailed, specific knowledge on what to do and how to do it, some are unable to actually make deals happen. I have discovered that some people, perhaps you Tom, can overcome incredible obstacles and get things done, even in fields where you have relatively little experience. But just because you pulled it off based on simply what you already had within your grasp, doesn’t mean everyone can. Some people need support to help them along the way. The book “The Signal and the Noise” does a great job of explaining this concept that life is better viewed in probabilities rather than predictions being 100% accurate because there is just so much that we don’t know.

  5. HapsaiGeorge says:

    Thanks a lot
    i’m blessed
    God bless you in your business

  6. Phil,
    I just wanted to thank you. For all the time that you put into helping people like me. Teaching us and help us alone our way in pursuing our dream.
    May you and yours be blessed.

  7. jeffrey doto says:

    Very refreshing, given that we live in a world that pushes `Noise` constantly.

  8. It has been a blessing reading your material. I look forward to investing in your companies.

  9. Mark Jordan says:

    Phil, I look forward to a meaningful and prosperous future with you and r/e and I am reassured by your approach to r/e that it will continue to be the best vehicle for achieving wealth and improving the lives of those around us. Thank you, Mark

  10. Matt Duzan says:

    Hey Phil,
    Super great points as in tbe midst of getting my license in Tx I see / hear these examples a lot. You’re right the humble stay humble and make the best investments in time.
    Thanks and God bless brother.
    Matt

  11. Robert Claxton says:

    Phil, I really enjoyed your class and I decided to ask a question of you. My sister is planning on buying a house and fixing it up and re selling it. She plans on spending $145,000 to buy the house and she plans to put about $50,000.00 into fixing it up. She is trying to figure out how much she could get for it fixed up ? I’m new to this but, I do have my Broker’s Real Estate License. Just not that well schooled in the investment end of things. I don’t expect you to give me an exact answer but, if you could help me in the right direction or give me some kind of a formula to follow, it would be appreciated. I have been in real estate for over 35 yrs but, just have not looked into flipping houses. Any kind of a response would be appreciated. Thanks again, Chip

  12. genine jamison says:

    I am still getting thru the book you sent and learning so much from it. Getting my plan together and this is a whole new education for me.

  13. Upon watching this particular video I asked myself a rather gawking question and I wondered if you ask yourself the same question: when I multiply the hours in my day by training other people to the task at hand how do I point out the truth as blunt as possible to carry on that information?

  14. i would like to buy the book written ” HOW TO BECOME AS REAL ESTATE INVESTOR by phil”

  15. Hi Phil, thanks for all the value you have share about real estate !! I really do appreciate it.

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