Don't confuse brains and a bull market ...

So basically we should tell children that the story of the hare and the tortoise is invalid because of sheer dumb luck. Or is it a story that shows persistence can pay off...once.

 

This is more a reduction of risk through due diligence rather than any form of luck.

Bad luck is a result of poor due diligence. Whereas 'good luck' is more about achieving the desired outcome through the elimination of poor options and making better decisions for the remaining options.

 

I agree with you its not 'luck' per se, our hard work has created the situation. I guess others on the outside view it as luck as I have heard many times, so I just explain it to some as educated luck. But no, its not luck at all. Its hard work paying off.

 

I hadn't been aware of that but I am aware of something which effectively covers the same concept

The four stages of learning or competency with the first being unconscious incompetence which cover s what you raise https://en.m.wikipedia.org/wiki/Four_stages_of_competence .

My main hobby is songwriting and I've involved in a few songwriting groups over the years . Lucky the standard has improved significantly in the last years as a result of world class educators visiting Australia ( pat Pattison being our most frequent visitor ) , but my wife used to refer to them as sheltered work shops . One of my scariest moments occurred around 20 years ago and I gave someone a lift and he insisted on playing me his new album ( Elizabeth , no one you know .....) . Before he pressed play he said " I think this is as good as Hotel California " . The moment of true panic arose when I dropped him off and pressed eject , and the cassette would not come out ....

I refer to the phase of uncounsious incompetence as " they're **** and they don't know it " .

Cliff

 

Maybe Bradbury knew he couldn't win the race if he tried to compete on their terms , and the only way he could win was how he did win .

Maybe he was just really stoked just to be there and that was enough

Cliff

 

Agreed. I'm a bit annoyed at these enquiries when Australia doesn't perform as expected. The Olympics have an ROI? Really?

 

Hi Seech,

Agreed Luck can be a factor, but not the only factor

No Risk No Reward

What's that saying " Luck is what happens when action meets opportunity"?

 

@radson what a fantastic article!

 

If you are lucky each year for several years is it still luck playing a major role or skill? Does greater skill lead to more luck/opportunities?

Luck is random but you can increase your opportunities to be lucky

Buying your first investment property just before a boom and seeing its value race upwards - Luck or Skill?

Buying your first investment property just before a boom and seeing its value race upwards, and then capitalising on that increase in value - Luck or Skill?

 

Love it. This is why I mostly love working with KPI's. Problem arises of course when the supervisor has no idea what you do.

And this quote from the other artice:
'He's saying be humble about what has led to their success. ...Stay hungry, stay foolish - by foolish, I mean: stay humble.

Yeah, well said. There's your 'insight'.

 

Add a couple of blonde streaks to the rug and would give a sophisticated edge, but looking pretty hot as is

 

I think it's definately both.

 

Yes, absolutely, play in more than 1 market, jump in as many as you can that are rising anywhere in Oz, overseas.

Give you recent example -

We have had 3 rising markets in Oz since 2012 - Syd, Melb, Perth, what if you managed to invest in all these markets, you certainly got lucky.

During this time we have had booms in US and NZ, so if we are paying attention to what is happening we got lucky again, forget the property rant about it doubling every 10 years

 

Interesting thread!

We played a business simulation in uni. We were given twelve weeks of information like sales up 8%, Government cuts tax by 4%, Warehouse costs rise, etc. We had our widgets, warehouse costs, production costs and so on.

We had to build a model and work out our moves for the entire twelve weeks ahead of time. Our instructions would be acted on once a week.

Off we go and my team wins. Our model was better and we figured out a loss for six weeks running would eventually become the highest profit at the end.

So the lecturer runs the simulation with all the class actions in it and shows winners/break-even/losers. Then he runs it again but alters a variable (interest rates now 8%). We still win but not by much.

Because this is a computer science class he doesn't just run one simulation - he runs thousands, altering one variable, two variables, three at time. What happens if interest rates rise, customer income drops AND the Government cuts spending? The market falls!

It was amazing and we learned many interesting things that I think apply to the property market.

One was that in a rising market it's hard to lose money. Take 100 strategies (buy and hold, buy-wait-unlock capital-buy again, buy-renovate-unlock capital-buy again, etc) and in a rising market 90% of them will make money from break even to millions. Your wins are bigger and your bad moves are forgiven easily. Even buying the worst house in Sydney back in the 90s has made a profit by now.

But change some of those cards that have been played and what you thought was your hard work/cleverness/research comes crashing down. Banks play interest rate rise! Government plays cut grants! Banks play tougher credit restrictions!

The point here is that all these external events can be beneficial or detrimental and you didn't do anything for them to happen. Government cutting CGT was a benefit that a property investor got because that's the card that was played. Negative gearing. Home grants. SMSFs being allowed to invest.

If you played the property game from the start of the boom to now, you could have made money in many scenarios because of the rising market. Pick Sydney early on and you're rich. Pick regional and you've made a profit but not as much.

But start playing in 2000 and your final result in 2015 can't be as high as someone who was playing since 1990. Start in 2010 and the game is different again. Buy an off-the-plan in Perth in 2014 and the chances for a positive outcome are almost reversed - possibly 90% chance of loss.

This was something our lecturer was trying to teach us. You can make a plan, use information, research and execute your strategies but don't underestimate the environment you're operating in. Move this game to sub-Saharan Africa and it doesn't exist. Move it to Ireland and 2008 onwards things are looking very bad. Move it to the US and Banks play Lying! It's super effective!

It's easy to mythologise our lives too. It feels like hard work so it must be. But you only know the choice you made, not the other. Buy property one and make $200K. Buy property two and you might have made the same but you can't be sure entirely.

In a rising market with all the cards going your way, simply playing the game can be enormously profitable.

In a falling market then it takes all your skill to prevent yourself going backwards and in many cases the best you can do is limit losses.

The Aussie market has been rising for so long and all the cards (easy credit, negative gearing, CGT, first home grants, massive mining boom, real estate industry, real estate television, property-as-entertainment) have been very favourable if you were an investor. If you had to come up with a scenario in which housing prices inflated rapidly you couldn't ask for a better set.

But now a lot of new cards are on the table. APRA plays credit restriction. Banks interest rise. Agent claims market will stabilise (Agent plays ********! It convinces 40% of investors!). Phillip Soos plays Massive Statistical Analysis. It convinces 50% of investors!

Lots of people have made a lot of money from property but I keep thinking back to that simulation. When it's rising, it's easy to do well. When it's falling, it's hard to hold your cash!

 

Hi MGF

all of those things you talk about are true , but the one think that you don't specifically mention is whether you play the game or stand on the side lines .

For me , that is an additional factor that I believe enables you to shift the balance in your favour significantly .


Cliff

 

That hits the nail on the head,if one started before 1990 it gives you the flexibility in dealing with all the economic slowdowns that happen along the way,as long as governments ensure the "rule of law" property rights are protected ,contracts are enforced,and corruption in real estate sales is punished,glad I live in a free market country and not be born in Russia..
Now all you have to do is put those ideas to the test..

 

I remember as if it was yesterday. Sitting at home, reading the paper & spotting a small advertisement declaring something like "pay off your H/L early". After just surviving 17.5% interest rates, I wanted nothing more than to pay off our mortgage. The last thing on my mind was getting another one!

We got a 'consultant' to come out & give us a presentation. All these new products had come onto the market & they would help us buy an IP and with the help of a LOC and a CC pay down our mortgage early. It would only cost X per month for them to implement it and monitor it for us.

Without going into the details of what we actually did, I wonder just how much of this was luck.

Yes, I was lucky to see that advertisement, but so did many other people. How many of them acted on it?

Was it luck that I looked at the presentation & decided that we could do it all without their help, and save more money? Or was that just me thinking outside the box at the time, and trying to conserve as much money as possible?

Was it luck that we even got the loan, as we were on extremely low wages, & the bank knocked us back initially, but gave in once I found another lender willing to give us the funds?

Then finally, was it luck that we got the property we did? We couldn't afford much and there were a total of 2 properties that we thought we could afford. One, the agent called a 'dog of a property', and the other going to auction. We put in a pre-auction offer, which was rejected, but walked away with it at auction for $500 more than our offer. We were contemplating not turning up, because we were sure that it would go for a lot more.

Personally, I don't think that luck played a big part in all of that. Many other people had access to the same information that I did, but did not act. Getting the loan I attribute to me just not accepting no for an answer. And property choice, we didn't have a lot to choose from. The 'dog', which would have come up nice with a coat of paint, or the house we bought. The one we did buy was newer & had better bones, but there was the risk of it going to auction & us getting blown out of the water.

I think that, for the most part, luck is the ability to recognise an opportunity and then to take action. Or maybe it is a calculated risk, rather than luck.

So....I saw what was presented & it was a 'light bulb' moment, the same as Seech seeing what was happening in 2770, and MTR investing in the USA.

Of course, this is different to just plain dumb luck, where you might win the Lotto or similar

 

Saying something is 'luck' in hindsight is easy, but at the time of purchase you would of had to make sacrifices, go against negative sentiment, make the effort to do your DD and everything else. Go through all the emotions of buying etc. I don't see that as luck. Fast forward and perhaps the market performs much better than you anticipated. Some call that luck. I don't. I call it putting yourself time and time again in good situations to make use of the favourable winds when it blows. When it does blow your way, you are capitalising on it not because of luck, but because YOU PUT YOURSELF in that set up, imo.

 

The 1 and most important thing that game cant take into account is 'Emotional fluctuations'.

Its extremely easy to say you would do this, that or the other in boom times or whenever. But when you ACTUALLY have to do it with hundreds of thousands of dollars on the line, everything completely changes.

 

I guess the main point I'm trying to make is that the same strategy with excellent research, thought etc can succeed or fail based on external events outside of personal control. We love to attribute success to ourselves and not failure. Which makes it hard on people - they blame themselves for events outside their control.

Take the buy, wait for capital to rise, access capital and buy again strategy. Drop that in Sydney 2006 and you'll do well. Even mistakes will be softened by a rising market.

Move that identical strategy with excellent research and due diligence to Ireland 2006 and for a year you're doing very well. The next four after that sees a 50% drop in prices.

Identical strategy, very similar conditions, one outcome success, the other failure.

Games do take into account emotions. Consumer sentiment for example.