Enjoy a business fable, based on truth. This post aims to explain the most common reason why most millionaires who hope to buy San Diego County apartments fail to capture their desired investments.
Sam Special understands “buy low and sell high.” Sam’s problem is that he assumes he is among the few who recognize that truth. He worked long and hard for his money and has sacrificed for his success. He may not recognize that almost all millionaires are also first-generation. They worked hard for their success, too.
Sam thinks he’s special
Sam’s mother told him he was special. He may be the richest person at his high school class reunions. Merchants of all kinds give him special treatment and deals. Sam assumes other people should give him a slightly better deal because he is special.
Sam doesn’t realize he is competing with peers, maybe half of whom are wealthier, more liquid, or more experienced. He doesn’t understand that successful investors don’t succeed because their mom told them they were special. They embrace the grind and put in the time to study the market. But Sam has abundant confidence in his wisdom and discernment. Unfortunately, there are some important things he does not know and he is not open to learning what he does not know.
Many high-income people, in their business life, come to expect just a little more. Our society has many paths to the perception of entitlement. There’s “you deserve a break today” and “have it your way” and “you’re worth it.” Sam’s airline, banker, broker, car dealer, hotel chain, suppliers, and others on the opposite of his business transactions, at least create the illusion that he receives special consideration.
Those vendors hope for a generation of more transactions. Repeat business matters to them. What Sam doesn’t realize is that the millionaire on the other side of his escrow will probably never see or do business with Sam again. That millionaire has no reason to give Sam a break or treat him special.
Sam expects people to want to serve him. He treats his advisors like hired help. He hasn’t yet figured out that many brokers often won’t call him because dealing with Sam requires lots of explaining and uncomfortable situations.
Sam wishes he could close twice as many escrows. He has no clue why he closes so few.
Not special, but more effective
A different investor with approximately the same net worth does things differently. Bob Bountiful knows that there are few terrific deals but there are scores of unseen competitors. He values building wealth more than getting special consideration or even being treated fairly. He ignores insults.
Bob often greases the skids to increase the odds of being in the minority who can buy as much as they want. The professional investor buys lunch for his attorney, banker, broker, suppliers, and other people who might help him.
When he finds the deal that meets his criteria, Bob doesn’t haggle over trivia amounting to less than ½ of 1% of the total value. Highly active investors understand that paying market price for a first-rate opportunity is better than gaining a bushel of confetti and a warm feeling while buying a third-rate property.
Bob Bountiful compliments people. He appreciates, forgives, and honors others. When a broker calls, Bob responds quickly and therefore sees more opportunities. Bob keeps his word and absorbs tiny risks, unlike competitors who expect the other side to offer a money-back guarantee. Bob sees more opportunities and closes about twice as many as Sam.
If you want to buy San Diego rental property, which investor merits imitating?
Terry Moore, CCIM, is the author of Building Legacy Wealth: How to Build Wealth and Live a Life Worth Imitating. Read his “Welcome to My Blog.”