Brian was one of my first international partners. He’d been based in Japan for four years working for a large software company from the U.S. We met on the 42nd floor of the Tokyo Park Hyatt, where the view was so stunning you’d think the city never ended, during a small international investment seminar where I was one of the guest speakers. The event was real estate specific and the primary content was targeted at international property purchases. I hadn’t yet presented and was taking in the other speakers, many of whom were selling sunsets, seascapes and glitzy downtown London high rises.
Between delicate bites of bluefin tuna—which arrived fresh from Tsukiji market that morning—and sips of Shizuoka iced matcha, Brian asked me what I thought about the event. He commented that the Thailand land offer looked good and asked me my opinion on whether it was a "good deal" or not. I wasn’t surprised by Brian’s direct question. But what does shock me is how arbitrarily some folks can make their investment decisions.
I replied in a lighthearted way that spending my money on sunsets and sandy beaches is what I do when I’m on holiday, not when I plan and weigh out an investment option. Sunsets sizzle, and when we imagine the lifestyle associated with them, emotion takes hold and reason leaves the room.
Now, that’s not to say there aren’t great places to invest that are also visually appealing paradises; there are. However, they require the same kind of homework that I do on my property investments, target towns and provinces.
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Where I choose to invest is closer to the North Pole than to the equator. But I’ll tell you what I told Brian and the audience in Tokyo: You have to focus on the fundamentals and ask the tough questions. What are the critical criteria that drive a location and its future growth? Don’t look to past performance for direction, look to where the market is shifting and dig deep to find out why and how long this trend will last. Long term demand, long term industry and short term challenges create opportunity.
I asked Brian, "Why not invest in a city with a great hockey team? These guys are tough Canadian boys used to the hard winters. You know what they eat for breakfast every day? Canadian back bacon covered in Maple syrup, half a dozen eggs and a loaf of whole wheat. They slap on their skates, go straight down the Rocky Mountains and head for the Aurora Borealis, where in the summer months, they can train in the 24-hour sunlight. In the winter, they retreat to their igloos and endure the -40 degree storms. Well, actually, there aren’t really any igloos, and they’re more likely to head to West Edmonton Mall—the largest mall in North America—to shop for brand name products or practice surfing indoors in the massive wave pool."
Brian looked at me like I was nuts. He liked the idea of the hockey team at first. I had a feeling he liked big Canadian breakfasts, too.
There is nothing wrong with selling the sizzle if there is some to be sold, but you need to train yourself to look for economic sizzle as opposed to emotional fizzle. What I mean is this: Don’t get caught up in a good story. Find the facts about what makes your potential investment and its area and economy perform. Look for a long term trend that allows you to hold if you need to, and calculate just how long you could afford to hold.
Brian came up after my presentation at the international investment seminar and said he could "see with clarity" why investing in an area with a foundation stronger than a row of thatched huts and a coral reef was important. He asked why I didn’t show any pictures of my property deals. I told him that I didn’t need to. The pictures of the building didn’t really matter—it was the numbers you needed to see.
Brian called on Monday. Two months later we had tied up our first of three deals.
Todd Millar is the president and owner of Glenn Simon Inc., a wealth building real estate joint venture investment company focused on the Edmonton area resale housing market. Millar invests in the Edmonton area personally and on behalf of his clients.