The Three Little Pigs and Real Estate Investing
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The Three Little Pigs is a favourite fairy tale amongst many about three pigs and their real estate woes and successes. As the familiar story goes, three pigs decide to build a home for themselves as a means of protection from the Big Bad Wolf, who lives in the woods nearby.
Now, compare fairy-tale to reality. As real estate investors, we also have many “wolves” living in the woods that we need to be aware of, plan for, and build protection against. These “wolves” could be interest rates, job loss, poor GDP, lack of immigration, government policies, rental restrictions and policy changes, strata insurance premiums, taxes, and other unforeseen “wolves,” like COVID-19.
Each pig in the classic fairy tale has a different idea for the design and materials to use, as well as varying experience. When constructing their homes, each pig applies their best ideas and practices to ensure their safety against the Big Bad Wolf. The first pig is presumably the least experienced of the three as he constructs his house with straw. The second pig seems a bit more experienced seeing as his choice of building material is sticks. But the third pig shows he is the most knowledgeable and experienced by choosing to build his house with bricks.
All three of the pigs are excited to build their dream homes and each pig is convinced they are building the absolute best house for themselves. As an investor-minded realtor, I meet newbie investors that have great enthusiasm and intentions to build a fantastic portfolio. However, with little experience or knowledge, their dreams are often crushed by poor investing decisions, much like the first and second pig from our fairy tale. But it’s not all doom and gloom—I also meet wise and experienced investors that have created generational wealth over decades of investing.
The way in which each pig constructs their home can teach us a valuable lesson on investing. The first pig builds his house from straw, which makes for a quick and easy build, allowing the pig to move into his home before the other two pigs and live the good life—or so it appears. The second pig uses sticks to build his home—a stronger building material than straw. Construction takes a bit more time, and the materials are more expensive. The third pig considers all the factors and takes great pride in constructing a home that can weather any storm. He is aware the cost will be higher, and construction will take longer than the other two pigs, but he is committed to building the best home possible.
We all know how the rest of the fairy tale goes: The Big Bad Wolf comes and blows down the houses of the pigs who built their homes out of straw and sticks. But when the Big Bad Wolf gets to the third pig’s house of bricks, he can’t blow it down.
I am sure that many of you can identify as one of these little pigs in your personal experiences; I have related to these pigs many times throughout my life. There have been times when I have been the first pig, hurrying to accomplish, build, buy, or invest without first gathering the facts. The result? Not being fully prepared and getting devoured by the “wolves.” But I have also been the third pig, planning and strategizing for the possibility of the “wolves” knocking on my door trying to get in. In those times, I have been able to withstand the “wolves.”
As investors, which pig should we emulate? Obviously the third pig—the one who planned accordingly to weather any real estate storm. Like the third pig, we need to be aware of the costs and time it takes to build a solid, secure, and impenetrable portfolio. In doing so, it can benefit one’s family and future generations.
If you are new to investing or are buying your first, second, or forever home, seek out, research, and find a wealth builder/realtor that can help you build a home out of “brick.” This wealth builder/realtor will understand the drivers and the influencers of the market. The realtor should be hyper-local on all things regarding the market: job growth, inventory numbers, sales volume, city or municipal zoning and growth initiatives, as well as local, provincial, federal policies, and/or changes that may be implemented in the future.
In the end, the happy ending goes to the third pig who studied, strived for, and built the best house possible. If you want to be like that pig and achieve your happy ending, reach out to me, Randy Dyck. Together, we can build a portfolio that cannot be blown down by the Big Bad Wolf.