What’s the Market Giving Right Now?

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I did a little virtual roadshow recently, appearing on 3 investing shows back-to-back—Lead-Lag Live, Forward Guidance, and The Price of Truth. While I didn’t set out with this intention, these appearances ended up serving as a kind of public therapy session for me.

You see, in my world—real estate—things are as strange and frustrating as ever. And they’ve been that way for almost 2-years running now. In many ways, it’s been one of the most challenging experiences of my entire entrepreneurial journey. As an entrepreneur and investor, I never even considered the idea that “feeling stuck in place” was a card in the deck here. Isn’t it supposed to be an exciting process, full of big ups and downs, hopefully, more of the former rather than the latter? That’s what I thought anyway. 

But feeling stuck is exactly how it’s felt and it’s been rather tough. Until recently, I didn’t appreciate how much so. All the great things the kids keep bringing into my life and having Profit+ and the Nick Halaris Show going provided an aura of positivity around my day-to-day existence that’s made it possible for me to ignore the truth—that I’m frustrated and maybe even, at times, depressed.

I was looking back on some of my recent journals the other day and noticed that I’ve been complaining to myself a lot, almost every morning. 

“This market doesn’t make any damn sense.”

“Is this ever going to end?”

“I cannot wait for these construction projects to be over.”

“Why is everything taking so f@cking long!?”

“What’s it going to take for this un-transactable market regime to end?”

…

Yeah, I know, not a good sign.

With my family and business associates, I’ve mostly kept up my usual positive, optimistic attitude. I’ve complained to my wife a few times but for all of you who know her well, you can just imagine how that played out:

“Suck it up, Nick.”

“Quit complaining.”

“Get a job.”

“Make it happen.”

And things of that nature. LOL. Look, a psychologist could have a field day with these interactions but that’s a story for another day or, more likely, never!

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Anyway, as I was doing all these interviews and answering the questions about what’s happening in the market, I realized the true nature of my feelings on all this. I’m fed up with this dysfunctional, wait-and-see, extend-and-pretend market! I’m ready for some action, one way or another.

For an investor, the hardest thing to do in the world is wait. But it’s very often the best thing you can do. The price of such patience is a nasty cocktail, equal parts boredom, frustration, and anxiety. By resisting the siren’s call of action for the sake of action, by refusing to just accept more risk without any real justification, yes, you will suffer psychologically, but at least you won’t inadvertently blow yourself up. The reward for patience is a clear conscience and survival. 

I once got some phenomenal advice perfect for this moment. I was meeting with the head of one of these impressive local family real estate businesses. You know, the ones who somehow own ungodly amounts of well-located properties without any investors or partners. I wasn’t expecting much as I was talking to someone from maybe the 3^rd or 4^th generation and just assumed he was too far removed from the entrepreneurial moment, had grown up too wealthy and privileged to have the kind of grit and moxie I was looking for. This was a terribly bad and immature assumption by the way, for he turned out to be one of the most dynamic, sophisticated real estate investors I’ve ever met. 

Anyway, I learned a lot from that brief interaction—beyond, of course, the stark reminder not to make assumptions about people you don’t know. When I was quizzing him about his process and habits, he described a practice, so simple yet effective and profound. The idea is to stop every once in a while, to ask yourself a basic question:

What is the market giving me right now?

You see, a lot of times in real estate you forget that you are playing the same game as all investors. Most real estate investing tends to be an active endeavor—meaning the way you generate investment returns involves doing a lot of real work—i.e. zoning, construction, renovations, leasing, and selling. This is in stark contrast to investing in the stock market, for example, where unless you are a day trader or a shareholder activist, you aren’t doing much real work. There’s a tendency in real estate to become overly focused on the work and lose sight of the bigger game you’re playing. Even though when you invest in real estate you have to get the work part right, a significant determining factor of your success comes down to just buying right. In fact, if you buy wrong and overpay, it might not matter how good you are at the work side of your strategy. 

By asking “what is the market giving me right now?” you challenge yourself to really examine the quality of your understanding of market dynamics. Are there actual opportunities out there? Or are you just trying to force something? The ideal situation is that the market is giving you a whole bunch of opportunities—fire sales, deals priced well below replacement value, deals where the rents are substantially below comparable properties for no good reason…. But that rarely happens. The picture is usually a bit more complicated than that but it’s rarely as wacky as it is today. 

This question is a reminder to listen to what the market is telling you. Accept what is and don’t make the mistake of trying to make reality something other than what it is. You shouldn’t just reflexively move out on the risk curve. “Because we need to make more money” is not an acceptable justification for doing another deal or taking on more risk. Sometimes the answer is to pivot to a new strategy. At others, the answer is to wait.

If I’m honest with myself, the answer to this question right now is “to do nothing.” At least, that’s true for someone in my position. Sure, there are opportunities out there—e.g. for those with patient/permanent capital who want to buy offices or for well-capitalized experts in industrial real estate, data centers, and homebuilding. But for a small investment and development company that specializes in multifamily, there’s nothing to do but wait. This is a hard pill to swallow for someone like me who on paper is supposed to be in peak earning years.

What’s been running through my mind lately is this:

How long can you wait around for things to change?  You know they will but in the moment it’s hard not to think that you are just wasting your life away. It’s hard not to start looking around at what others are doing and wondering if you should’ve picked another way to make money in this life. 

Not a healthy script, right?

Here’s the thing about being an investor and entrepreneur: there are periods when nothing happens and there are periods when everything happens. To be successful, you have to learn how to thrive in both environments. Yeah, it’s incredibly exhilarating when things are moving—when you are making progress and the business is growing and evolving, when you feel like you don’t have enough time in the day to get everything done. This is what everyone thinks entrepreneurship is all about. But this is just the movie version. The truth is rather different. There are lots of lows, lulls, dead periods, and crises.

In the up times, the key is to keep your wits about you amidst all the excitement and the business so that you don’t make some terrible choice or become someone other than your true, authentic self. In the down times, the key is to focus on creating the kind of value you want to create in the world, honoring all the commitments you’ve made, doing what is necessary in the moment, and trying to position yourself in the best possible way for the next growth phase or busy period. 

PS. 

Ever heard of money dysmorphia?

Ever wonder how the Internet got started

Hi Everyone. Just some quick housekeeping. In light of the Easter Holiday and our Spring Break trip, we will be taking a little break next week. The next time you’ll hear from me is on April 9th when we release an incredibly interesting new podcast episode with legendary geopolitical analyst, Dee Smith. Until then, I wish you all the best. Thanks again for all your support.

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