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In Stocks, Insider Trading is illegal. In Real Estate, Insider Trading is essential.
In any market, there are insiders and there are outsiders. When corporate executives on Wall Street buy or sell stocks in their own companies with “insider knowledge”, they go to jail. When a real estate investor gets first chance to purchase a property privately without public knowledge, he gets rich.
Markets like Wall Street are set up like Casinos and TV stations like BNN are funded by Stockbrokers to create excitement and encourage trading. The brokers get paid when trades happen, so they want their audience on BNN to get emotional and make trades. BNN will run stories that pump the emotions of the audience just to make money, the information is not provided to make actual sound decisions.
When emotions go up, intelligence goes down and the house always wins… and you are not the house.
In my opinion, the Stock market is not designed for you to win. It’s a game played by insiders and institutional investors who control their own information. For the average retail investor, there is very little control in stocks, unless you are an insider.
I prefer to control my investments, control the management and control the outcome of my returns. I also prefer to make purchases as an insider with access to the necessary information to make profitable decisions.
Information is king in the market and he who controls the information, controls the market.
In Real Estate you can become an insider by:
1) Having a large network of other investors
2) Having a large network of lawyers
3) Posting private advertisements for deals
4) Offering referral programs
5) Having a large network of Realtors
6) Public speaking in front of groups of investors
7) Creating content, blogs and videos for consumption
8) Having a network of property managers
9) Having a network of private lenders
10) Becoming the biggest, most visible person in the market
The truth is, becoming an insider is quite simple in Real Estate. The best deals always come to those who are 1) The most visible 2) Most connected and 3) The ones who control the information in the market.
When a real estate deal hits the local market with a Realtor, the deal has already been cherry picked by at least 8 sets of eyes. The fewer sets of eyeballs that see the deal before hitting the market, the higher the chances are to profit.
In high school it’s easier to date the girl who is the bookworm than it is to date the prom queen. The prom queen has so many more sets of eyeballs on her so her value is way over-inflated and there is a line up of guys dying to get a chance with her. Avoid the prom queen at all costs and go for the bookworm. With some lipstick and high-heels she can easily be the prom queen, but with a much lower cost.
This analogy applies directly to Real Estate. By the time a house hits the retail market, multiple Realtors have looked at it, at least one broker, a few secretaries, assistants, everyone in the immediate circle from the seller, all of the realtor’s best clients, all of the broker’s best clients, contractors and then other buyers who get to it first.
By the time the property gets to you, everyone has explored any easy chances for profit and you and you are usually too late to the party. Plus, you now have to pay the price that the seller wanted plus the commissions of 2 realtors and 2 brokers. Negotiating becomes muddled because the realtors always have their own interests above their clients and sometimes the brokers can complicate negotiations as well.
When all of these “professionals” get involved, prices begin to rise and favorable terms disappear. All options for good terms or no money down deals go out the window because the Realtors will kill any chances of a “creative deal”. They want to get paid their commissions immediately and do not care about the price or terms of the deal: They just want the transaction to happen regardless of outcome.
However, when you become an insider, or partner with an insider, you get first access to deals before anyone else gets a chance to look.
The best deals I have done have come from:
1) Other investors who could not close on private deals
2) Private ads I have placed
3) My networks and relationships
Being active in the market, participating in local investor groups, having an online presence, private advertising and public speaking have created an insider position for myself in my market. Being visible and sending a clear message that I am “always looking for deals” has attracted excellent opportunities that are well under market value, under appraised value, 100% vendor financed, or no money down. The average person believes that these deals do not exist or are not possible in their local market. The truth is, these deals are available everywhere, but you need to become an insider or partner with an insider to take advantage of them.
The best deals are made and are not advertised on the market because they never ever make it to market. This rule applies to any market: the best girls to date are not advertised on e-harmony, match.com or at the local bar. To find real value in life and in the market, we must become the insider, become well connected, become visible and control the information around us.
The best deals are reserved for insiders, everyone else can pay full price.
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