When Plan A Stopped Working...

[Drago Stanimirovic]

One thing I've noticed over the years is that people sometimes confuse confidence with certainty. They're not the same thing.

I remember talking to an investor before closing on a deal. The plan looked straightforward: buy the property, renovate it, refinance in six months.

Everything depended on that refinance.

So I asked him a simple question: "What if you can't?" He smiled: "Why wouldn't I?"

Why...? Maybe rates move. Maybe the appraisal comes in lower than expected. Maybe the property takes longer to stabilize. Maybe lending guidelines change.

Some of those things were likely. Every one of them was possible.

For a few minutes, we stopped talking about Plan A and started talking about Plan B. If refinancing didn't make sense, would selling still be profitable? If selling wasn't attractive, could the property carry itself for another year? How much could the market change before the deal stopped making sense?

It wasn't the most exciting part of the conversation. But it was probably the most important.

Months later, the refinance didn't happen. Not because anyone had made a mistake. The market had simply changed.

Nobody panicked. Nobody made emotional decisions. The backup plan we'd talked through before closing became the new plan.

Confirmed, in my book: planning for the unexpected isn't a lack of confidence. It's confidence that's been tested.

The best investors I've met aren't the ones who believe nothing will go wrong. They're the ones who've already decided what they'll do if it does.

One question I ask myself more often these days is: "How much can I afford to lose... and still call this a good decision?"

Because every investment carries risk. The goal isn't to eliminate it. The goal is to survive it.

(Has Plan B ever become your winning strategy?)