Haverty was trying to beat into my head some sense about what I consume.

The theme of both Haverty and Gundry is a variation of the old database mantra “garbage in, garbage out”, but in this case referring to our gut. How does this guidance apply to real estate investing?

UNLEARNING IS A CHALLENGE

We have long been told “location, location, location” is the key to success to investment real estate.  The phrase does have relevance for a “frozen moment in time” appraisal.  Moments, though, don’t freeze for long! And if you are making your decisions in a dynamic market based on garbage information, there is no chance you will succeed over the longer term.

CHALLENGE FACT AND CONSIDER CERTAIN FICTION

Science fiction, plus time, can become science fact.  A combination of technological advances have us communicating like DICK TRACY. Second level characters in STAR TREK present a “personal relationships without conflict” view of the future. Is it then reasonable to invest in real estate and expect permanence of value and use?  How may the “location, location, location” mantra be challenged in the near future?

PROXIMITY

Building housing near grocery stores was a requirement prior to 1950, as few couples both had immediate access to transportation.  With a “everyone gets a car” post war period, suburbs exploded as we could drive to work, shopping and schools.  Now 80+ years later, we are moving to access by internet to schools (online learning), to work (how often do you really need to be at the office?), and to food (many groceries are now available to be delivered to your home, even when you are not there). Location (as in proximity) means something new for the future?

PRICE

One of the ways we differentiate the quality of investment real estate is the rate at which tenants will lease space, and for how long they will commit to stay at a stated price. Big changes outside our control in neighborhood (e.g., drug dealing), capital markets (e.g., hyper-inflation) and industries (e.g. closing of steel mills) will dramatically impact the value of specific real estate. 

Maybe location of the real estate asset is less valuable than the relationship with a group of tenants. Could a new lease structure evolve allowing for a tenant to move with the owner to a more suitable location? We already have a variation on this theme with corporate housing and office space available for short term leasing. What is the next step to provide greater freedom to adjust to market realities? 

PRIDE

Some real estate (e.g., with a river view) may appeal to certain prospects in spite of poor proximity and outrageous price. The location sends a message to others- or at least to the ego of the prospect – that they have arrived.!  And if they have truly arrived, rather than just “faking until they make it”, their prospects will be beating a path to their door (and in some cases, may be willing to lease in the same location just to be near the light of the key tenant’s being!).

BOTTOM LINE. 

Just because it makes sense does not mean it will work! You as the investor will sometimes receive garbage information.  And sometimes the person doing the feeding will not even recognize that what they are telling you is false (as they heard or read it from someone they believe). 

The cool thing about this world into which you have stepped is that there exists an opportunity to earn a strong return. And for those able and willing to hear what is being said OUTSIDE of real estate, there is a chance to position yourself to move truly ahead of the curve.