Ventura Ca Real Estate - Exit Realty By The Sea

The Town is the Investment. The House is the Instrument

by Greg Rand on October 19, 2012

This is a concept that is central to our philosophy of real estate investing. The single family home is the base instrument of investment in an asset class known as the USA.

I am being literal here. As the nation goes, so goes the single family home, and vice versa. If the USA is the asset class, then it can also be viewed as a marketplace. People like to say, “There is no national market”, to which I agree, but there is a national marketplace. Every town is different with different fundamentals, different drivers of population growth which translate to different attributes of demand. Things like migration patterns, demographic trends, job growth, cost of living and quality of life are the harbingers of demand well into the future. If people want to live there, they will want to live indoors. Most often in a single family home.

Every market also has different attributes of supply; the mix, the age, the type, the price points. This marketplace is fragmented to the highest degree, which is good. It means human intelligence is critical to success, which means each individual can become a top-tier expert on their markets of choice, and not be outdone by geniuses with expensive databases and teams of analysts. This is not like any other market. The best research and the most accurate intuition win in this game, and since every market is totally unique, all research is also unique.

For example, if Pittsburgh, PA is the investment, then the single family home near the median price is the base unit of investment in Pittsburgh. You don’t care which share of stock you get, or which brick of gold. Of course, you do care about which house you buy, but first internalize the concept that one median priced single family asset is interchangeable with another of similar condition and location. They are both one unit of Pittsburgh.

This philosophy will keep you entrenched in the pursuit of sound fundamentals, and make you less susceptible to the temptation to chase discounts. Most investors do chase discounts. I think it’s the influence of the snake oil real estate education industry. Get rich quick schemes in real estate have been around since the founding of the country. They all have something in common. They don’t work. They can make you a quick score, but they won’t make you rich. Everyone says they know this, but many still fall accidentally into the strategy that underpins all get rich quick schemes – chasing discounts. And in their pursuit of a perceived discount, they ignore the fundamentals.

I am using Pittsburgh as an example because it has defied the housing boom and the housing bust. The chart for Pittsburgh is a steady climb of about 3% annual appreciation. They missed the big party of the last decade, and were spared the hangover that followed. There are markets like this all over the country that only get the attention of local investors because they don’t offer discounts. They offer cash flow, stability and steady appreciation. Accumulating “shares” of cities like Pittsburgh is how you get wealthy in this asset class. Stable is the new sexy.

Pittsburgh Median Sale Price

Ventura CA Real Estate – Exit Realty By The Sea

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