The semi-formal company Christmas party is next week, and your better half — come on, you know you married above your station like the rest of us — tells you to get new black dress shoes. She sets the bar, and sends you on your way, suggesting Nordstrom’s shoe department will probably lessen the pain while shortening shopping time. Works for ya, right? So, off you go.
As you follow this experience, compare it to the first time you went to a real estate agent to buy a long term investment property, say 1-4 units.
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Shopping for Your Real Estate Investment at “The Mall”
You arrive at the mall, enter Nordstrom’s, then stumble around lookin’ for men’s shoes. Not wantin’ to mess around you tell the sales guy your marchin’ orders. He shows you where to sit, and before long returns with half a dozen boxes. Included are several styles meeting the parameters made by a few different manufacturers. You try ’em on, walk around a bit, and pick the pair that’s most comfortable. You grab some polish, pay the cashier and head back to the car. From the time you initially parked ’til the wheels are rollin’ back home was less than a half hour. In another hour you won’t remember the shoe guy’s name and he wouldn’t be able to pick you out of a two man lineup.
Sadly, that describes how most investors acquire properties designed to deliver their retirement income.
I’ve heard this story so many times I can lip sync it. “So, tell me the story of how you acquired your properties, Stan.” “Well, Jeff, . . .” — and the sad tale of woe begins. They had such a good experience buyin’ their home, they decided to use the same agent. After all, didn’t he say he’d sold a few duplexes over the years? Don’t get me wrong, cuz Larry, their agent, was and still is a highly qualified and experienced professional — in the home market. He’s honest as the day is long. But flip a coin to figure out who knows more about investing, Stan or Larry.
And there’s the rub.
Are Your Just Buying Real Estate Off The Rack?
This is when I begin to tell Stan what his initial conversation was with Larry. He told him he wanted to buy a 2-4 unit property in a few specific areas. Larry called him back in less than an hour with five listings in the designated neighborhoods. They looked at ’em, Stan liked a triplex a lot, and they were off to the races. Stan thinks I’m a seer now.
BawldGuy Takeaway: If you know as much or more than your real estate agent about retiring well through real estate investing? The chances of your BigPicture Retirement Plan turnin’ out well are pretty lame. In fact, it’s very analogous to how you bought your new shoes. Heck, even if you screwed up the whole shoe buyin’ scenario, your wife woulda had ya take ’em back — no harm, no foul. The analogy doesn’t quite extend that far. Go figure.
Truth is, Stan might’ve ended up in spectacular position. ‘Course, it woulda been nothin’ more or less than the luck of the draw. My experience with this scenario is that the vast majority of the time, the results achieved are something less than spectacular, especially over the long haul. The other huge problem is that Stan would never realize — even in retirement — how much better he coulda done. Make that mistake over and over for 10-35 years, and the difference can be staggering, an understatement if ever there was one.
What Could Have Been
In fact, in many cases I’ve been challenged by the client to ‘retrofit’ their Plan, in order to demonstrate what I would’ve advised, along with the inevitable results. Having done it several times, I’ve learned to ask the client if they really, really need to see it. You know, of course, their answer is always the same, duh. Since I’m able to use my knowledge of past markets, not to mention actual Plans/Execution of my own clients, the numbers are pretty much dead on reliable. The clients know this — especially when they see the numbers and begin wildly crunchin’ on their calculators.
The results of your retirement Plan can’t be retrofitted — just so ya know.
I realize I’m relentlessly poundin’ the Captain Obvious drum set. Still, as you’ve read this you may’ve of realized I was either describing your own experience, or of someone you know or have heard about. If it’s so dang obvious, why oh why does it continue to happen? For Heaven’s sake it appears to me sometimes it’s the norm, not the exception. Real estate investors — specifically Boomers — simply cannot afford to make this mistake. The factor in this script that’s so insidious is stealth. Unless the results obtained by pickin’ from the aforementioned list provided by Larry were inarguably and almost immediately terrible, most investors would never realize what coulda been — what shoulda been.
Magnificently abundant retirements aren’t found at the mall in the upscale shoe store. They’re custom designed and generated on Purpose, with a Plan. So many have already begun retirement with vastly inferior ‘off the rack’ income. It wasn’t necessary and was so easily avoided. As Captain Obvious begins to smile again, I’ll say it in a different way.
Your retirement ain’t a pair of new shoes.
Photo: Joel Bedford