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Long Term Real Estate Investment Success Doesn’t Come From A Recipe

by Jeff Brown on October 23, 2012 · 9 comments

  
financial treadmill

When you read something here or elsewhere that you’ve not known of before, in what way do you process it? Do you review how the new info might’ve helped you years ago? Or maybe it would’ve easily helped you avoid a mistake you made years ago — one that put you on a financial treadmill to nowhere ’til ya caught up. Thing is, the information age is a lethal double-edged sword. View it as a good news/bad news joke.

The good news is that you have all that info and those bazillion data points at your fingertips. The bad news? See the good news.

As the title to this post proclaims, success doesn’t come from set recipes. We’re not baking cookies from a prepackaged batch of cookie dough, when all that’s required is to slappin’ the dough down onto the bakin’ pan, and turnin’ the oven on, per printed instructions. Investing requires different ingredients for different investors, even though their most important goal — retirement — may be the same as millions of others. What passes for real analysis, not to mention strategy(s) is often nothin’ more than over simplified formulas applied to broadly described circumstances, which are then recognized by thousands of people who think the various strategies/recipes/formulas apply to them. Again, we’re not bakin’ cookies here. We’re investing to create the most important thing there is as we grow older — after health ‘n family — retirement income.

What happens is that a particular strategy is put forth as superior. Any strategy, when assessed in a vacuum, can deliver damaging results when applied in the rough ‘n tumble of real life. Even if any particular strategy delivers positive results, so what? Could they have been better if using a competing approach? Are there distasteful long term consequences for which you’re currently unaware? How would you know?

And there’s the rub.

The decisions you as an investor made yesterday, make today, and will make five years from now — on what strategy(s) to employ — will literally make the difference in the quality and quantity of your income at retirement. But again, the real fly in the ointment is the reality that what worked in San Diego in 2000, would be a wish for a financial coma today. What proves wildly effective for Fred, would be foolish for Abby, even though on the surface they appear to be two peas in a financial pod. In fact, what made sense five years ago, might be the last thing to do now. There are too many crucially important factors involved in the decision making process as it relates to investment strategy to approach it as merely the catalyst to a simple recipe.

It’s almost never about the ‘best’ strategy.

Earlier this month my ‘CEO’ and his wife were in town for my benefit. The Boss and I took ‘em out to dinner to say thanks. The chef at this place is well known not only for how fantastic her meals taste, but also for the many awards she’s won for excellence. From the appetizer to the main course, who knows how many cooking ‘strategies’ she brought into play, many in a wonderfully synergistic fashion. I won’t bore you with all the details — OK maybe a quick summary. :) Duck nachos isn’t on the menu as it once was, but if you ask for them, they’ll make it. Awesome. Then there was the porterhouse pork steak with a sinfully good reduction sauce. How many different strategies must it have taken to produce those nachos alone? Was the steak prepared using the same strategy(s) utilized in making the sauce?

The TakeAway

Regardless of what you’ve read and heard, a single strategy ain’t gonna produce the retirement you want. Even those makin’ use of more than one strategy will generally fall short. What produces magnificently abundant retirements is Strategic Synergism — the blending of multiple strategies, often completely unrelated to each other, in ways that ultimately enhance your final results. When an investor realizes the hugely superior results obtained when combining multiple strategies synergistically, a whole new menu of possibilities opens up. Everyone agrees that cash flow at retirement is the goal. It’s how you get there, and how much after tax cash flow your specific Plan generates.

Sadly, the vast majority of Americans are creating what I’ve come to call a ‘FastFood’ retirement. Fast food is fun every now and then, but we all know what happens long term if you live on it. Strategic Synergism works in the kitchen, and it works when investing for retirement.

Photo: Sasha Wolff

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{ 9 comments… read them below or add one }

Dale Osborn October 23, 2012 at 1:06 pm

You can start with a basic recipe that works initially, but as the market, technology, & the economy change, you have to be able to adapt to these changes. If you do not make the changes, you will find yourself left behind and lacking for the amount of retirement cash flow you need. Adaptability to change is what will make or break you in the long run.

Dale

Reply

Jeff Brown October 23, 2012 at 1:15 pm

Though your comment is on the money, Dale, it’s not what I was talkin’ about. It’s the strategies, and how they work together that make a huge difference in results. Adjustment is always in the arsenal of a wise investor, but those using any particular strategy simple won’t be able to compete with those combining multiple strategies in a purposefully synergistic manner.

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Dale Osborn October 23, 2012 at 2:28 pm

The point was not focused on the money – you have to adapt or change to meet changes around you. Perhaps you start with SFRs and are good with those for awhile – soon you realize there is more money in apartments so you move into apartments. Things are fine for awhile then there is a new breed of tenant that tears up all your property so you are tired of apartments. You then have to change or adapt a different strategy to keep making forward progress. I think we are saying the same thing in 2 different ways. Cash Flow is important but what worked yesterday may not work today. Also what is working today may not work for you tomorrow.

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kyle hipp October 23, 2012 at 7:36 pm

Great article as usual Jeff!! It is amazing how dynamic investing really is. I first started my real estate investing career at 21, 6 years ago and thought it was brillant. I would be able to retire by 55 no problem by working my day job and getting a 30 year note on duplexes. I had lots of free time at work so I had everything all figured out on paper each year down through age 100. Luckily my plan involved learning more every single day because that simplistic plan left a lot to be desired as I learned more. Segments of that plan survived, others required a step back to realign and the overall vision shortened timeframe to achieve freedom and expanded exponetially on possibilities. I still plan and extrapolate but now am eager to put new ideas into play.

My path is unlike anyone else I have ever met and is possible by my set of circumstances but those change any time and it great to know my aquired set of skills allow me to make adjustments. I am still amazed by reading daily on this site and incorporating this or that strategy into my current path. Keep up the great articles!!!

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Jeff Brown October 23, 2012 at 9:20 pm

Thanks so much, Kyle. I love hearing success stories, especially from 20-somethings.

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Philip Wade October 25, 2012 at 5:06 am

you have to be able to adapt to these changes. My path is unlike anyone else I have ever met and is possible by my set of circumstances but those change any time and it great to know my aquired set of skills allow me to make adjustments.

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Karen Rittenhouse October 25, 2012 at 7:47 am

Multiple streams of income! No matter how you invest, one of the major keys to success is diversification.

We started investing full-time in 2005. No two years of our business have been the same due to:
our knowledge
the real estate industry
client needs
the economy

If you’re stuck on only one strategy (or recipe), remember Blockbuster!

Thanks for your post.

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Ziv Magen October 29, 2012 at 10:03 pm

More details, please, Jeff, and examples if you will? ;)

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Jeff Brown October 29, 2012 at 10:42 pm

Workin’ on it, Ziv. Decided to put together a case study made up of several clients. Gonna take a bit of time. Thanks

Reply

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