Perspective on Real Estate

September 11, 2002

September 18, 2002

September 25, 2002


Winning requires adherence to objective rules

"There are three kinds of lies," Navy Commander Holloway Frost said, "lies, damnable lies and statistics." And Henry Clay's wisdom: "Statistics are no substitute for judgment."

Yet the media will quote all the statistics, without judgment, but with your inference that they reflect facts, which they seldom do. If you bother with statistics you will be confused these days, for there is a discontinuity to them. First of all, they are revised with almost the same volatility as the stock market; most quoted interpreters are cloaked in the ignorance of blind faith or yesterday's expertise in their comfort zones. The other reality is that marketplaces are affected with the velocity of accelerating change.

My years of experience and growing pains have left me with this counsel: Making a "killing" is a form of mental suicide. Forget it, and if it happens, thank God and go on your way, with no self-flattery. You are just lucky.

Land is the one resource that underlies everything, figuratively and literally. It is where we build the places in which we live, shop, work and play. You will not have to determine whether or not real estate will boom, but when. Timing is the essence of experimentation and investment.

There are growing opportunities in the changing whirl of land use and redevelopment. New fortunes will be created, and many smaller fortunes will be made. You just have to pay attention to how and its timing. All is risk, but capitalism is that exquisite, unique opportunity which freedom allows.

As your community grows older, opportunity for reuse of land and buildings adds to the marketplace. Southern California's incredible natural growth and the vast immigration that continues to pour into it assures these opportunities.

Your motivations are important to establish your own culture of investment: Do you look for appreciation (receiving more than it cost you within which time frame); quick flipping of the deal (you tie it up and depend on heavy demand for it that will pay you a fast profit); cash flow (investors must insist that it pays you positive cash-flow so that you can pay off debt and expenses); venturing it with a builder so that it comes to life with a professional who has experience in that marketplace; tax shelter so that benefits assist your tax position and/or your estate (always with the counsel of an experienced real estate accountant or attorney); or estate or net-worth builders (to be the master of your accumulated domain).

A quick review of Goodkin Rules: (Very few friends tell you about their losses).

  • Remember that real estate deals are good only when there is demand in that area. Viable real estate needs the presence and movement of people, growth in jobs and population, need for the kind of product you will market and need for newness and modernity.

  • Use professional advisers who examine all the risks involved. This is vital in the era of green environment, toxicity and litigation. Make sure your advisers understand leverage -- when you can control much more than actual cash investment usually allows, usually when a marketplace is filling with vacancies, a lender has repossessed something and wants its mortgage serviced, or when a non-real estate corporation is trying to get out of the real estate it owns.

  • Know your motivations and match the deal to them. A home is the best way to experience the perpetual learning curve, but each other use (retail, industrial, commercial, etc.) is a different story which you must comprehend before trying to conquer it. In my years of advising students (including law) at universities, I never met one who didn't fall in love with the exciting possibility of investing in real estate and making money at it. The smart ones study it and do not become infatuated with it. They are students of the game, as you must be. There are always lessons to be devoured.

    Goodkin is president of Ackman-Ziff-Goodkin, an international real estate adviser and strategist, and has been a housing analyst since 1956. He can be reached at sandy.goodkin@sddt.com.


  • September 11, 2002

    September 18, 2002

    September 25, 2002