The Nordstrom Experience – Real Estate Investor Edition

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Betcha you’ve had this same experience, or close to it. Many years ago I was given marching orders by the woman in charge (I know, redundant.) to buy new shoes for some semi-kinda-sorta dressy type events comin’ up. I saw nothing wrong with the shoes in the closet at the time, but was over 40 so knew the futility of debate. Off to Nordstrom’s I went, per further suggestion, making a mental note that goin’ alone was a victory of sorts.

Guys know what happens next.

Upon arriving at the store I quickly, OK, eventually, locate men’s shoes. I look at several styles that don’t cause me to lose my lunch. Meanwhile the experienced, very dapper salesman arrives right on cue, asking if I’d found anything yet. Pointing to four different shoes, I say ‘9’, ‘D’ if ya have ’em. He took off while I found a place to sit.

He’s back in a few minutes with half a dozen boxes or so. He brought the four I picked, and a couple more of the same style, different maker. Cool, good thinkin’. Tried ’em all on, walked around a bit, was satisfied they wouldn’t make my feet bleed. Bought a pair of black, brown, and two-tone brown on black. He boxed ’em back up, met me at the register, and before ya know it I was headed back to the car — mission accomplished.

Got what I went there for, and the whole vignette took less than a half hour from the time I turned into the mall till I was headin’ back to the freeway onramp. Neither of us would remember the other’s name by the time I was backing out from my parking spot to head home. He’d answered the few questions I had with solid info. I said what I wanted, he produced it, we both came away from the transaction smiling.

Though an appropriate experience when buying dress shoes, it’s also virtually analogous with most newbie real estate investors’ first few times out buying income property with their real estate agent.

Don’t think so?

Here’s the script I’ve heard first hand from dozens of clients over the years — their own experiences.

They study up, one way or another about income property. They join this or that club. They talk with their Uncle Kenny who owned a rental house once, back in the 1960s. They attend a seminar or 10. With all that preparation plus the money they’ve saved, they declare themselves ready. They call Rick, the agent who sold them their home several years ago. The guy flat knows what he’s doin’, having been in the business over a decade. In fact, he’s sold many duplexes in his time, which makes our investor even more comfortable.

Rick dutifully asks exactly what Dennis, our investor, iss lookin’ for. Dennis tells him — a duplex located in one of a couple local zip codes. It must be in this particular price range, with this specific price/rent ratio. He then explains what he means by the whole ratio thing. The next day, Rick calls Dennis with a few potential properties, all of which sport the location, and other factors Dennis ‘ordered’. An appointment is set to see them.

You know the rest.

Dennis likes the second one which he winds up buyin’. It may or may not be a good, bad, or spectacular deal. It may not even be what he should’ve bought at all. It might’ve been too much or too little. Neither one of ’em will ever know, of course, cuz that sequence of events wasn’t much different than mine with at Nordy’s.

I’ve witnessed this scenario in real life/real time more than a few times when I worked for a big box brokerage. It’s painful to watch at times. But all that begs the real question, doesn’t it?

Does anyone really believe they can create a magnificently abundant retirement  using the same approach they do buyin’ shoes?

Really?

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.

9 Comments

  1. Jeff,

    Here I go playin devils advocate again. I think its not an entirely bad thing to jump in. Learn all you can on that first property, tweak your plan and execute relentlessly. To many people fail to make that all important first step. Even the most astute investors I know admit they should not have bought that first property, but are very glad they got into the game. They began to know what they didn’t know.

    I think your point of the post is that folks should have some direction before they put that car into drive, but most people cannot see past the hood when they first start out. The first property does amazing things to open their eyes to the reality of real estate.

    Jason

  2. love the article and the writing style.

    on the flip side, what would you recommend for people to do? sit and wait and analyze deals until they are blue in the face or better yet until the prices go up?

    or get a dump and since they have no renovation experience they get in huge foundation issues and lose their shirt, credit and marriage? but they get to claim the price was low. that’s no victory at all.

  3. Hey Jason — So, next time you tear your ACL, you’ll do some research and take care of it? Is your retirement at least as important as an intact ACL? The short sale/foreclosure pipelines are chock full of DIYs. DIY works for some things in life. It works for real estate investing — till it doesn’t. And when it appears as if it’s working, you find out others with either expert advice, or massive experience are doing embarrassingly better.

    To keep the analogy going, you can limp into retirement, or hit the retirement pavement running, and never look back. DIY has crippled more stellar retirements than everything else combined, in my experience.

    Again, thanks for teeing it up and being a superb Devil’s Advocate, Jason.

  4. Hey Homer — Thanks. You said:

    “on the flip side, what would you recommend for people to do? sit and wait and analyze deals until they are blue in the face or better yet until the prices go up?

    or get a dump and since they have no renovation experience they get in huge foundation issues and lose their shirt, credit and marriage? but they get to claim the price was low. that’s no victory at all.”

    I reject the implied premise, that they even have a clue, most of the time, about what real analysis is. If it’s flipping, an amateur’s mistake can set them back a decade financially. If it’s long term with the goal of retirement, the easily avoided, yet very common mistakes can literally lead to working in their 70’s, sayin’ “Hi, welcome to WallMart!”

    “. . . that’s no victory at all.” You obviously get it, Homer. Find a slam dunk expert and benefit from their help and advice. I’ll finish by asking the same rhetorical question I asked Jason earlier.

    How important is your retirement to you?

    • Hey Jeff,

      I am wondering-what should Dennis have done? If he purchased a good deal and the rents work out why shouldn’t he purchase this property. How else would you get started in RE investing?

  5. Hey Paul — Let’s line up 1,000 ‘Dennis’s’ and project how they do. My experience is that learning something this involved isn’t like learning to ride a bike. All is well when they succeed, but sadly, the huge majority either fail miserably, or succeed at a level far below what could’ve been their reality had they had an expert at their side.

    How much money can they afford to lose?

  6. Jeff,

    Now that we’ve talked about having proper guidance, how do you recommend a new investor find proper advice? (insert post request here) As far as he knows, Uncle Dennis would know best. Heck when your a rookie, any sophomore player looks like a pro.

    Jason

  7. That’s a good question, Jason. When we need to accomplish things in life for which we acknowledge our own inadequate knowledge, experience, and expertise, we look for help. But, we only look for help if we attach importance to results. And we only search for expert help when we insist on excellent results.

    Gettin’ investment advice from a guy who had one duplex in his life, isn’t gonna get the job done. Obviously I’d be a candidate to advise a newbie or inexperienced investor. So would the guy at the investment club who’s been investing successfully, long term, for 20 years. They’re out there, Jason. Again, how important is the investor’s ultimate quality of retirement to them?

    Long ago, when I was in need of a surgeon, I found the right guy. How? I asked a few doctors in town, who didn’t know each other, who they’d use themselves. All but one said the same guy. Two of ’em had actually had the same surgery, and used that guy.

    Guess who I used? It was incredibly important to me to get it right, so I used the guy that several doctors chose, and two used. By the way, one of the two who used him was a surgeon himself.

    That was good enough for me. 🙂

  8. It is very interesting for me at least. I study and strive to get as much information as possible. The problem in today’s day and age is there are so many guys claiming to have the knowledge and/or experience after reading a book or two or purchasing one property. The mentality of many is to claim to be an expert after such a time but the world facilitates it because there is so many that want to and do skip the hard work it takes to truly become an expert.

    I have made the error of learning the basics to something new and jumping in head first and was lucky enough to come out the other end, just with a few scars. I now have become very aware of this and make sure to make sure I realize when I think I know what I’m talking about and then wait because thinking I know something doesn’t always play out in reality. Knowledge is not just experience and or book smarts it is a combination of both and it must be fostered and developed in order for it to produce the fruit desired.

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