Recently some of you have asked me why I spend so much time teaching real estate investing from the level of individual actions and behavior…
When, as some believe, that the economy itself is the biggest determining factor?
After all, the housing market is driven by how the overall economy is doing, isn’t it?
Well, there’s quite a bit more to it than that…
And so I want to address that perspective today so that you understand that it isn’t simply one or the other…
Both individual actions and the larger economy are involved in your success in real estate investing.
A tale of two economies
It’s really a tale of two economies…
The individual, you and me, are the on the micro level of the economy…
And the economy itself and everything that’s happening in it, are on the macro level of the economy.
The truth is that the macro economy is always going to be there, whatever happens, won’t it?
There will be times when certain parts of it are in better shape than other parts…
When some trends in the economy are favorable and others are unfavorable.
Although the macro economy is important, it is also important to remember that you and I have absolutely no control over what happens in the macro economy.
We can only control what we do, how we react or, better said, how we are proactive in relation to the macro economy.
These are two very important points that I need to be quite clear about…
So that you know the reasons why the ultimate power lies not with the macro economy, but with you!
So, let’s take a brief look at the macro economy first, for this year…
Where the macro economy will impact you
But rather than looking at every piece of data, let’s focus on those parts the will have the most impact on what we do and how we act.
The latest data show us that the two areas of the economy that will improve the most this year will be the housing and retail sectors.
This makes sense, doesn’t it? In an earlier post I talked about how consumer confidence is much higher for 2014…
And how that leads to people being willing to spend more on things like automobiles and houses…
You and I didn’t do a thing to cause this…
But it certainly is something to be aware of and act on, isn’t it?
And that brings me back to you, the individual real estate investor, who is trying to improve your life…
The truth is that it doesn’t matter what the macro economy is doing or what sectors are performing well and which others are not…
Your own micro economy is where things happen!
If you, as an individual, don’t act on that information.
Again, your own actions, your own decisions are what you control.
It’s no one else’s decision but yours to educate yourself, to be willing to go beyond your comfort zone, to learn new things and become a different, more capable person than you’ve been in the past.
When you do these things, you have prepared yourself to take advantage of opportunities as they come.
The macro economy presents us–all of us–only with opportunity. It’s like a farmer’s field…
Just because it may be fertile, that doesn’t mean that you will reap a great crop…
You have to prepare, you have to plant the seeds in the soil and do the work to get a great yield.
The farmer is the one person who is responsible for a great yield, not the farm…
So yes, the macro economy is important, and what’s going in the macro economy at any given time presents us with different opportunities…
But you also have to keep in mind that not every part of the macro economy can be booming at the same time.
It’s always a case of one part growing while another part slows down…
But what does that matter if you don’t do anything?
To use the farm metaphor once more, unless you take focused actions and tend to your field, you won’t get the gains, will you?
For the most part, it’s your own actions that will create the best opportunities.
Interest rate paralysis
And by the way, there is also a third area in the macro economy that many view as having a huge impact on real estate investors…
And that is the interest rates.
As usual, there are some experts who are predicting a rise in rates, while others are saying that there might be a decrease in interest rates.
Which will it be? You don’t know…and neither do I!
I can see arguments for both…
But don’t let your anticipation one way or the other lull you into inaction and paralysis…
Waiting for an adjustment instead of being proactive in building your portfolio is the same as not doing anything.
I do know, however, that if you can find a good a cash cow or chunk deal today, then take it!
Then, if the rates rise, good on you! You’ve gotten the property cheaper than you would have had you waited.
On the other hand, if mortgage rates happen to fall, then you can refinance down to a lower interest rate on your mortgage.
That’s the only way to realistically look at the interest rate game when you’re a property investor…
You need to avoid the paralysis trap that leaves you in a state of doing nothing for fear of changing rates.
As a real estate investor, you have to take the macro economy as it comes…
But what you do about it and how you create your own micro economy, is up to no one but you!