I read a story over the weekend about a young man named Billy Jinks. He’s 19 years old and owns a limo company that grossed $1.4 million in sales last year. I’m not going to go into detail about the article (you can read about it at http://www.azcentral.com/arizonarepublic/business/articles/2009/05/09/20090509biz-mr-limo0509.html), but I would like to use his story to illustrate my point in this post.
Billy started learning about the limo business when he was 5 years old. By the time he was 14 he was attending industry conventions. Why? Because Billy wanted to know everything there was to know about the limo business. At a very young age Billy became an expert in his field. There are others out there like Billy. Mozart and Tiger Woods are both considered child prodigies. But, their real secret was that they worked very hard to become experts in their area of study (see David Brook’s article, Genius: The Modern View at http://www.nytimes.com/2009/05/01/opinion/01brooks.html?_r=2).
My real estate business failed in part because I was not an expert in my business. Sure, I had some flashes of brilliance from time to time. One of my favorite stories is about a vacant home I found in south Scottsdale that was in foreclosure. With some serious detective work I found the owner living in Hebron, Indiana. The house was scheduled to be sold at a trustee’s sale two days after I finally got in touch with her. She had a huge judgment on the property too. Through careful negotiation I got the judgment released for a small payment.
But, the clock was still ticking on the sale. I had to be sure I could get the transactional documentation back from her in time. Rather than counting on FedEx or the US Mail I jumped a plane to Chicago, rented a car and drove 3 hours southeast to Hebron. We met at a Holiday Inn Express (insert a joke from the commercial here) at 11p that evening, she gave me the signed documents and I gave her a check. I called one of my wholesale buyers from the airport in Chicago the next morning and I had a contract on it by the time my plane landed in Phoenix that afternoon. Everybody made out well on that deal.
In June, 2006 my brief reign as a real estate expert ended because of rising inventory levels, the sub-prime meltdown, investor paranoia, El Nino, global warming, acid rain and black cats. Prices had hit their peak and I was still buying like crazy. I figured as long as I was picking properties up for 70 cents on the dollar I was safe from a market correction. But, if I had been following inventory levels and absorption rates (the amount of homes on the market divided by pending sales), I would have discovered that the music had stopped. In Maricopa County, Arizona we went from 8000 homes on the market in mid 05’ to 60,000 homes by the summer of 08’.
Here’s how I plan to become an expert again in my market:
- By constantly tracking the inventory levels and absorption rates in the city, zip code and neighborhood I want to invest in.
- Monitoring the price per square foot trends in the city, zip code and neighborhood I want to invest in.
- Reading everything I can about the city, zip code, and neighborhood I want to invest in.
- Networking with everyone who knows about the city, zip code, and neighborhood I want to invest in.
Eric Hoffer said, “In times of change learners inherit the earth; while the learned find themselves beautifully equipped to deal with a world that no longer exists.” That is wise advice. He must have stayed at a Holiday Inn Express.