Investing in Real Estate the Return On Luck (ROL)

Investing in Real Estate the Return On Luck (ROL)

Many of us have used or have heard the term ”Return On Investment” or  ROI.  Investopedia.com’s definition of ROI is; ‘A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments’. ROI measures the amount of return on an investment relative to the cost of the investment. This calculation or measurement is used every day in business meetings and board rooms around the world. But what about the term “Return on Luck” or ROL. Is this a common term used in business meetings and board rooms around the world? Can luck be a calculation or measurement used in business or investing?

Do you believe in luck? Some would say that luck plays a key role in everything! So if one believes in good luck, then one must also believe in bad luck. Or, maybe you believe that successful people have more good luck than unsuccessful people? Jim Collins, author of “Great by Choice” writes about companies that are 10Xers, referring to companies that are 10 times better than their competitors. For example,  super successful companies like Microsoft, Southwest Airlines, and Apple.  Collins researched these 10X company’s “Return On Luck” or ROL and found that they actually had less good luck than their competitors. And even more significantly, the 10X companies had more bad luck than their competitors. According to Collins, the idea of successful people or companies having more good luck than bad luck just is not true . In fact, it appears that bad luck is actually good luck according to the research. Collins also found that significant forms of luck- good and bad- do not come as WHAT, but instead come as WHO i.e; people. High achievers thrive in times of conflict and it is these difficulties that they face that are the catalysts that push them to greatness. Collins came to the understanding that the by-product of luck is recommitment, discipline, heightened creativity, and heightened paranoia to be great.

As a real estate investor what is your ROL? Collins test for “Return On Luck” on a luck event is;

• Some significant aspect of the event occurs largely or entirely independent of the actions of the key people in the enterprise or venture.
• The event has potentially significant consequences, good or bad.
• Some element of unpredictability.

If you have done any amount of investing then you have more than likely experienced luck. What luck events have you experienced, good or bad?  Timing of the market, partnerships, tenants, zoning changes, gentrification, mortgage rates, appraisals, trades, realtors, insurance claims, buyers, sellers, special assessments, employment numbers, policy changes, and government announcements are some luck events that a real estate investor faces. Have your investment luck events become the catalyst for you to re-commit to solid investment fundamentals? Did you become more disciplined? Did it heightened your creativity and/or heighten your paranoia to improve your investment portfolio? In the end, the result of any luck event is a reflection of who you are. Are you going to make the next luck event a 10Xer outcome?

The trend of low inventory and increased sales volume year over year continues with the “Sell Through Rate” staying strong throughout the Greater Vancouver and Fraser Valley. The current sellers’ market is creating a great deal of difficulty for many buyers. The buyers are being forced to compete against multiple other buyers, resulting in non-subject and offers written and accepted well above list price. This is not an environment that is conducive to buying investment properties at the right price. Emotional negotiating does not translate into a positive ROL. Smart real estate investors look for low STR stats and positive cash flow opportunities. This month the best opportunities are in Chilliwack for single family with a STR rate of 18%. Abbotsford or Surrey North for townhomes at 18% and 16%. While Maple Ridge has a low 8% rate for condos.

If you would like to receive a copy of the statistical market report contact us here. Looking to tour cash flowing properties?  Click here to sign up for our next Investment Bus Tour!

By Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com

STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales  ​