Market Inefficiencies

Today we’re going to talk about market inefficiencies. What does that mean? Well, I’ll give you an example.

Back when I was single, 20+ years ago, there was a huge market inefficiency out there: Women love men who can dance, and most men didn’t know how to dance.

I decided to take some dancing lessons, and because of that I was able to win my pride and joy: my wife!



The point is, there's all kinds of market inefficiencies out there – you just have to look for them.

The best way to find them is to be observant, and realize that there's always breakdowns in what people call “efficiencies.”

Breakdowns happen in markets that try to be efficient. One prime example of this is Wall Street.

The stock market tries to be a very efficient market, but how can you, the little guy, win in a place like that? You can’t.

Essentially, when you invest in the stock market, you buy the market.

There are people who claim that they can find ways to arbitrage the market, but it’s incredibly difficult because it's very efficient and very manipulated.

Look at the real estate market, which is the marketplace that I love: There are so many inefficiencies.

It's great for those of us who want to be small investors and play below the radar, below the traditional marketplace.

The traditional marketplace includes realtors, brokers, conventional financing; those arenas that people and institutions try to scale.

For us, the efficiencies are in many cases with the local markets. Real estate is a very localized market – you can't call it a national market.

You go into a local market and there's information that’s only available to those who are willing to dig down and find it, either themselves or through their network.

The national markets can't provide that kind of information. Even MLS (Multiple Listing Service) does not provide all the information you need to make great deals.

What else can you do? You can add value to properties.

You can add value through the management that you bring to property that's under-managed (i.e. bad landlords, bad managers.)

For properties that are vacant and have not been marketed well, you can increase the value by marketing.

Then there’s physical appearance: More and more, updating and removing obsolescence from properties increases value.

And finally, what about the big one?

The big inefficiency is in financing. The financial marketplace is very turbulent.  

Credit markets today are relatively wide open for certain segments of the marketplace, but not all.

When you add creative financing and the ability to run private capital to the marketplace in real estate, there are significant advantages.

So there's numerous ways that you can use market inefficiencies to your advantage, but you have to connect with people.

Connect with people who have a pulse in the market, then observe what the inefficiencies are and leverage them.

Leverage them like crazy.

That's what I do in the marketplace. If you're not doing that, you're missing some huge opportunities.

The fastest way to leverage inefficiencies is to be around people who already know how to leverage. Don't try to do it all yourself.

Don't try to reinvent the wheel. Just connect with those people, because everybody brings something to the table.

Everybody brings a different component of putting the frameworks together, of putting the puzzle pieces together to optimize these inefficiencies.

And you want to be a part of that group, that mastermind, that brain trust that does that.

If you're not connecting with one, do it today. It's the most important step you can take.

If you're ready to get in the game, join us for our upcoming “Investment Smackdown” webinar!


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