For many people, real estate is top-of-mind. Whether you’re looking for a place to raise your family, investing in rental properties, or building a financial foundation for your future, the real estate market touches us all. Like homes, entrepreneurial ventures are massive commitments that consume large portions of your mental and financial attention. When house shopping, mindset makes all the difference.
To explore this question, we turned to Ivan Estrada, one of California’s preeminent real estate experts. After graduating from the University of Southern California with a bachelor’s degree in finance and accounting, Estrada worked in finance for a time before pivoting to a career in real estate. Years on, Estrada’s pivot has proven to be wildly successful, as he has become a top-rated real estate entrepreneur. Not only has he written a book on branding, but Estrada has also appeared on television shows such as Million Dollar Listing, House Hunters, and Open House. If anybody can help us connect the dots between real estate, homeownership, and entrepreneurship, it’s Ivan Estrada.
For many, the first set of questions when discussing real estate revolves around knowing when to act. There are so many factors when buying a home that it can be challenging to know when to act. The real estate market can be unpredictable. Buying at the wrong time could mean paying more than you want for a property, or even paying more than it’s really worth. With so many complications and variables, how do you know that you’re ready to buy? Is there a specific time to buy, an optimal moment, a triggering event? Or is there ever an ideal time to buy?
According to Estrada, people who are ready to buy are usually at a point in their life where they are seeing things on a long-term basis. Buying a home often signals that people are planning to stay in one location for a long time, and as such, buyers usually have stabilizing factors like a marriage, a good job, or children. Buyers often view the home as a retirement vehicle, since real estate tends to appreciate; just think of all the boomers who bought their houses for less than the cost of a Tesla Model S and can now sell them for obscene prices. The key idea, Estrada says, is that buyers are generally at a point in their life where they’re going to be stabilized for the long term. They’re ready to put down roots.
Beyond rooting, for many buyers, culture can be a driving force behind homeownership. In traditional North American culture, homeownership often seems to be part of the expected trajectory of life. You go to school, get a steady job, get married, then get a house and have some kids. Homeownership is seen as a sign of maturity, of being a fully-fledged adult. The social pressure to prove one’s success often revolves around purchasing a home as a physical monument.
This notion that homeownership should be part of maturing into adulthood and becoming independent and successful is not limited to Americans: many immigrant families also regard homeownership as a sign of success as well as a sign of integration into the American melting pot. Estrada, whose parents immigrated from Mexico, says that his own parents often remind him that his condo is not quite living up to the ideal. “Mom says I need to buy a house,” he explains.
Buy For You, Not Your Progenitors
While homeownership is sometimes driven by traditional notions of how we should live our lives, we’re currently living through a transitional period, a time when a new world struggles to be birthed from the old. As the times change, so too do our cultural proclivities. Modern people think differently. In many ways, one could argue that the American dream is evolving away from homeownership. The massive scale of the problems facing the rising generations is driving both a pivot towards more community-minded living and a renewed emphasis on life experiences over material possessions. “Before, it was you’d show your wealth with the size of your home,” Estrada says. “You could have a huge home, five, six thousand square feet, five or six bedrooms, big backyard, pool…all the bells and whistles, right? The shift that I have seen with millennials and buyers in their twenties is they don’t really need a ton of space. And they’re also very conscious about the environment, so they ask questions like, where did this wood come from? What is this composite material? Is it recycled?”
Even for people who don’t have the money to travel, the internet, the metaverse, and other advancing technologies have made the world smaller and provided people with numerous ways to virtually enhance or expand even relatively small spaces. For many people, it’s just not as important to have a big house anymore. Many younger people prefer renting or living in a condo so they don’t have to spend their time on maintenance and upkeep. “With the younger generation, it’s not size, it’s more lifestyle,” says Estrada. Why spend the weekend mowing the lawn when you could be out for a hike instead?
Lifestyle Now, Lifestyle Tomorrow: Planning for the Future
Despite evolving preferences and a changing world, the fact remains that people need somewhere to live. And despite some (arguably justified) pessimism, most people continue to plan for a future, which often includes traditional milestones like marriage and children. How do you plan for your future needs – is your family growing? Did your parents plan for retirement or are they going to be your new roomies? How should the forward-thinking buyer analyze their budget?
Estrada says that despite the endless ways to wargame one’s actual needs, the answer always comes back to what the budget permits. In other words, it all boils down to what the house payment looks like compared to the buyer’s income. Today’s lenders use a sophisticated, algorithmic system that accounts for a buyer’s credit score, salary, investments, retirement, and other assets. The lenders’ algorithms assess your relative risk and then determine how much money they’re willing to give you.
In general, an appropriate price point ends up generating monthly payments that are about 25% of one’s income. But just because the bank says that a buyer can afford a house that costs X dollars doesn’t mean that the buyers want to maximize that loan. Some people are choosing to live smaller to free up their money to do other things. “I have clients who have two or three kids and they live in a condo and they’re totally okay with that,” says Estrada. On the other hand, there are still traditional buyers who personally value having a traditional single-family suburban home with plenty of space and a nice lawn. The trick to setting your budget is to consider what the bank approved, then ask yourself: what does it look like to pay that every month? Am I comfortable with this mortgage payment? Do I want to borrow to the limit of my abilities, or do I want to set my budget a little lower to build in some padding for that trip to Macchu Picchu?
Purchase with Purpose
Extraneous factors often influence buying decisions in unpredictable ways. As the pandemic surged, buyers began seeking larger homes again. With many jobs relocated to the home and many children being schooled remotely, buyers needed larger homes that offered enough space for people to participate in their various digital activities without driving each other crazy. But, as the pandemic wanes and people adjust to the new normal, the ephemeral preferences of the market are shifting again. How can one optimize their purchasing decision in an ever-changing landscape?
The answer, says Estrada, is to purchase with a purpose. Unless you’re specifically buying a home with the intention of making a profit, there are other factors to consider. Think about your needs. What is driving your purchase? What’s your vision for your house? If you’re traveling frequently or not planning to have a brood of children, do you really need a big house? Many of us have small families or found families or live nontraditional lifestyles. If your purpose for buying a house is simply to have a place to stay, you may have many more options at your disposal than people whose purpose is more family-oriented. Your home, in many ways, represents the lifestyle you choose to live – where we live is part of our identity.
“It goes back to emotion,” Estrada explains. “You’re investing into a property but also you’re investing into the memories, the Christmases and birthdays, all of the memories you’re gonna be building with your family in this home.” Your unique vision for your future, and how your domicile plays into it, are of paramount importance in homebuying.
Presently, Estrada is in the process of buying a traditional family home. His experience crosses the boundaries between young professionals living adventuresome lives and traditional families looking to establish roots. While he’s a single young professional with a dog, he has a vision for the future that includes having a home where he and his family will build memories together. He envisions having his family over for holiday parties, having his nieces and nephews over to hang out by the pool, and hosting summer cookouts. While Estrada’s condo worked well in his formative years, his vision has evolved, and with it, his needs. The core question to ask yourself is, does your prospective home work for your vision of how you’re going to live your life?
Vision vs. Reality: Coping With The Mismatch
Having a clear vision for your future is wonderful. Reality, however, sometimes has a different vision than we do. Today’s housing market is arguably very distorted. For many reasons, buyers are facing serious challenges with finding inventory in their price range. The dream of homeownership feels decisively out of reach for many people.
“When my parents bought their house, it was about a hundred twenty, a hundred fifty thousand dollars. It was a reachable goal,” Estrada says. “[Now] there are houses here in Beverly Hills in the flats that are now worth ten to fifteen million dollars. 5 beds, 4 baths, 4000 square feet. A lot of the people who live there who bought their homes thirty years ago and are doctors, dentists, attorneys. Now, if you want to live in the flats, you can’t be a doctor or a dentist, you have to be a multimillionaire. And so I think with the younger generation…there’s college debt, things are a lot more expensive than they used to be, where obtaining a home has become more of a faraway dream…where people have accepted that they’re not going to be able to afford a home.” Indeed, the market is such that even people who make relatively good money can’t afford homes in their local markets, so they put the money elsewhere. Even for those blessed with good jobs, it’s challenging to scrape together a 20% down payment, so people spend the money on other things instead.
Between the burden of debt and the soaring heights of the market, many modern buyers have had to face the fact that their dream is dead on arrival. The American Dream has been altered by the circumstances. The unique combination of factors that has led us to this moment has left many people with no real choice. Children who are coming of age in the next few years may never be able to buy a home of their own. How will this affect their dreams and their self-image? Will people begin buying suboptimal homes due to FOMO? Will buyers pursue other options? Will a future entrepreneur take cheap land in middle America and make it into an affordable, community-oriented, ecologically-focused community? Or will people continue gravitating to the lifestyles we’ve become accustomed to over the last few decades?
Estrada’s answer is that, like anything else, it’s going to depend on individual buyers. Everybody has different levels of drive and ambition and unique personal preferences. When homes are unattainable, people often seek other status symbols or means of demonstrating their accomplishments. Unfortunately, this often manifests in the form of depreciating assets like cars, clothes, or fancy watches. While buyers might not become despondent about the inaccessibility of homeownership per se, he thinks that they may regret not having access to an appreciating asset like real estate.
Others, Estrada says, probably won’t care. When facing the core tension of spending money on assets vs. experiences, more and more people are choosing to pursue the path of experiences. They’re learning that true happiness comes from an internal source of joy, not an external pile of materials. To be sure, plenty of people still crave the traditional American lifestyle and dream of owning a big house and hitting traditional milestones, but there’s a growing sense that homeownership just isn’t as essential as it used to be. In the end, it all comes back to intention and emotion.
In life, it’s important that we learn to grasp the difference between a deep-seated emotional desire and a fleeting passion. This is especially important in real estate. While many modern analytical minds might scoff at the notion of making a massive investment decision based on emotion, there’s real value to paying attention to your emotional needs and thinking in terms of your intention. The momentary urge to buy a vacation home when you’re watching a show like “Caribbean Life” is not the same as the deeply rooted emotional urge to buy a home in which to make memories. So how do you know when to listen to your emotions and when to turn to reason? How do you know when it’s right to buy a house and when you’re acting on impulse?
Estrada’s own journey to homeownership began to take shape during a meditation session, as he reflected on his mother’s desire to pass the family torch on to him. His vision sharpened; a house was more than drywall and concrete, it was a place to strengthen his family’s bonds and grow cherished memories. He progressed from a loose idea that “entertaining would be cool” to a more solid vision of seeing “Mom cooking in the kitchen and Dad chilling in the living room.” As his vision for a home solidified, his perspective shifted. He went from playing with the idea of homeownership to impulsively thinking about houses to embracing the idea of homeownership on a primal level, a feeling he described as “I need to do whatever it takes to get this fucking house.” Once you need the house, you’re ready to begin the journey.
Embrace the Journey
Once your emotion is strong enough to power you through the tasks required on the quest to homeownership, you will be ready to make the move. Buying a home is a journey, not a destination. There is a lot of work involved in purchasing a home, from getting your financial ducks in a row to finding an agent and looking at properties. You may need to take time to improve your personal finances or save money. You may need to spend months on end looking for homes and engaging in negotiations. All of these things are going to involve personal sacrifice and a variety of tradeoffs.
And while it will certainly be frustrating at times, buying a house is like anything else in life: you should expect results proportionate to your efforts. If you’re an instant-gratification kind of person, buying a house might be extremely unrewarding for you. It’s easy to go buy an Audi or a Breitling watch, but it takes solid, sustained effort to successfully obtain a house. If you’re not ready to commit to the journey, to commit to the effort, you’re probably not ready to own a home.
Sometimes, that effort scares potential homeowners. Today’s world generates a lot of fear, insecurity, and worry. People are emotionally tapped out. “Sometimes, people feel like what’s the point? What if it doesn’t work out?,” says Estrada. And, let’s be real, there’s a lot going on today. We live in anxious times. Growing numbers of people are beginning to sense that there might not be a future, which makes putting work into the future seem like a waste of time. You may as well live for the moment, they say, because tomorrow the water runs out or the wildfires come. Ironically, many people with modern existential angst relentlessly engage with social media, which distorts the lens through which we view reality and robs them of the present and the future. Much like entrepreneurship, homeownership is not for the faint of heart. Only those who really want it are going to get it. The trick to success is to embrace the journey, to accept that you’re going to have to work hard, that you’re going to face challenges, and that failure is an option.
Proactive, Resilient, Successful
Indeed, while everybody dreams of being successful, not everybody achieves it. We fall victim to negative self-talk, pessimism, and doubt. We become stuck on the hedonic treadmill, get trapped into doing things that don’t matter. There are plenty of reasons to say that homeownership is unattainable, plenty of reasons to be skeptical of the market or doubt the feasibility of your dream. And while its okay to be skeptical, analytical, and even doubtful, nobody ever achieved their dreams by giving up on them. While you will certainly encounter failure on your journey – rejected bids, lost properties, miserly lenders, and so on – it is critical to develop a strong sense of resiliency.
Estrada’s resilience was instilled into him in childhood. “When I would fail, my dad would always ask me, what did you learn?” Reframing failure as a learning experience, replacing the word “failure” with the word “lesson” in your vocabulary, is an excellent cognitive tool to strengthen your resiliency.
Another method of enhancing your resiliency is to take your lessons and use them to apply goals on your next attempt. The idea is that one should fail forward, taking lessons from each painful failure and using them to develop a more robust strategy of dealing with any given situation. In other words, the lesson to learn here is that “If you’re not failing, you’re not trying,” says Estrada. His current level of success did not come to him overnight; he didn’t decide to get into real estate and immediately become a tycoon. His journey has been fraught with challenges, but he embraces the idea of making persistent efforts that build on each other. “Let’s say you fail and the opportunity presents itself again to really be courageous and be able to complete that goal or finish that job or whatever it is you didn’t do last time. What that does to your morale is that it allows you get that positive hit of serotonin or dopamine, like, holy shit! I did it! What other things was I afraid of in the past that I can conquer?”
Finding Your Forever Home
Despite all of the challenges we’ve discussed, finding your forever home is not impossible. Estrada likes to differentiate between a physical house, the pile of materials organized into rooms, and the psychological home, the place where we belong and make memories. For many people, the two are the same: your physical house is where you plan to build your sense of home.
The trick to success in finding your forever home is to figure out what it is that you’re actually looking for, and then deciding if buying a big traditional house is really for you. Homeownership, Estrada says, may not be right for everyone. As people seek more authentic ways of living, cope with a changing world, and engage with unpleasant financial realities, their preferences for dwellings shift. A four-bedroom house in a sprawling suburb might well be your dream – or, you may like the convenience and ease of living in a condo or an apartment. You might even find yourself living in a yurt, a van, or an RV. Whatever your vision is, embrace it. In homebuying, as in entrepreneurship, passion, vision, and resilience are the keys to success.