I talk with serious investors just about daily. Some have never invested in real estate before, some have. Most of ’em have one thing in common, though — they wanna get it right. Nothin’ like the last decade or so to generate sober thinkin’. Who knew? 🙂 The conversations I’ve been having recently have underlined the value of knowledge, expertise, and experience.
The lessons to be learned from the last few decades are often . . . not the lessons that shoulda been learned. Again, this is where the Firestones hit the pavement. The troika of Knowledge, Expertise, and Experience (KEE), are the engine driving lessons well learned.
We must learn the correct lessons — or we’ll find ourselves in the same hot water, just a different pot.
A minor example — with major consequences.
Many have decided, when financing or refinancing their homes or their investment properties, to opt for short amortization periods. Most have selected 15 year fully amortized loans. In this economy, choosing that ammo period could seriously exacerbate future downturns your family’s job income.
Sure, the shorter payoff period also brings with it a lower interest rate. But the payments are significantly higher. And set in stone. For a $200,000 loan, the difference in payments at the current available rates would be around $480 monthly. Doesn’t it make sense for most people to pay the slightly higher rate, but significantly lower monthly payment? Think about it.
If current financial reality allows you to double up on loan payments, good for you. You can still pay your loan off as quickly as you’d prefer. ‘Course, Murphy doesn’t ask permission when he decides it’s your turn in the barrel. When temporary bad times descend upon your family, having the option to ‘revert’ to the normal, 30 year payment can literally make the difference. Think that’s important for your home loan?
Imagine the impact the wrong loan might have on your income property. I’ve seen it before and the havoc it generated wasn’t pretty. The lesson to be learned from previous bad times, at least when it comes to loan terms, is to keep more, not less options on your menu.
Learning the wrong lesson is often more disastrous than the original learning process.
The takeaway is that going through rough times usually leaves us the silver lining of valuable lessons learned. However, without the minimum knowledge, expertise, and experience at your command, they may not be ‘lessons’ at all. Instead, they may be the seed for your next disaster — this time self-inflicted.
The lesson we have or will learn?
Without ‘KEE’ we often never know what we’ve really learned, if anything — and worse? We may use that new ‘knowledge’ down the road, to wreak havoc on ourselves. Knowing exactly what we’ve learned isn’t as easily accomplished as we’d like to think. Words mean things.
Knowledge — Expertise — Experience.