The movies make it seem easy.

In the movie The Matrix, the hero, Ono, has a choice. If he takes the red pill, he can become a person of positive impact. He takes the pill.

To save the world as he knows it, he must quickly learn martial arts and another language. He sits in a chair and someone slams what looks like a deck of cards into the back of his head- WHAM! YOUCH! He gains encyclopedic knowledge and world-class competence instantly and easily. There’s no pain or frustration. There’s no trying and failing, then failing again. Instead, he’s knowledgeable instantly.

That’s delightful fiction. There is no red pill that makes you instantly effective without pain.

In my craft excellent results are only earned by people who correctly diagnose problems and then conduct effective, difficult conversations about unpleasant truth. Yesterday I had important conversations with frustrated and or flailing adults.

They are all busy. None is honest with himself or realistic. Each engaged in magical thinking. Therefore, none is productive. Each one is doing what we all do sometimes, ignoring what we know, or should know, by now.

There is no “eat ice cream; lose weight; do no exercise; gain muscle diet.”

Most of us understand the unpleasant truths behind that saying.

* Ice cream tastes better than spinach but doesn’t help you lose weight.
* Pushing your muscles to exhaustion is tiring and can be painful.
* A lower percentage of body fat is more likely to lead to a long and healthy life than obesity.

There are unpleasant truths in apartment investing, too. Here are three.

* In San Diego County in the last 25 years there have been 10,000+ apartment listings in the multiple listing service, MLS. 40% succeeded; that means 60% failed.
* The average California real estate licensee does not earn minimum wage.
* There are 1000+ millionaires who claim to want to buy one of the 250 San Diego County apartment properties that will close this year. Most investors won’t write even three offers.

People who practice my craft should be aware of those truths. We should diagnose problems based on facts, not wishful thinking.

Sam Senior

Yesterday I had a heart-to-heart talk with Sam Senior. Sam speaks seven languages. He has closed a $10+ million escrow, which less than 10% of local agents achieve. People like his affable manner. Our friendship and respect enable us to enjoy friendly conversation, to talk like brothers. My friendly concern was that he was polluting his brand by promoting nonsense. Why push a listing with less than 20% chance of closing?

Sam has been busy preparing an attractive package, entering it in MLS and internet sites. He is talking with owners and agents about the listing. He may hope that showing a poorly analyzed, over-priced listing will bring him realistic sellers who will list at sensible prices.

Al Apprentice

Al works in a high-volume brokerage. Al and his firm accepted an extremely low probability listing which I declined. He is busy sending fliers, emails, postcards and making calls. He will gamble months of his precious time and a chunk of the company’s limited money on that listing.

He’s trying to find a rich fool who will make a down payment twice as large as a similar property, to obtain lower cash flow, and pay at least 15% above the probable third-party appraisal.  He must find a government regulated lender, who will select an incompetent third-party appraiser who ignores obvious data and then overvalues the asset.  Al can spend months calling owners with his long-shot proposition.

Frisky Fred

Frisky Fred and I interacted on his listing in a “nightly news” zip code. He is delighted to be talking with people about the not yet obtained potential upside. He spins a yarn about how this high- cost option and a lot of work might produce an almost average outcome.

Our initial analysis was that his listing price exceeds the likely appraisal by 20%. Most successful listings start within 7% of the sales price. I asked Fred about his confidence level that third party experts would value the building near the seller’s acceptable price. Fred hadn’t done that analysis. He expected that his client, with below market rents, would immediately accept reality when the bank appraisal came in below her hoped-for value. Fred had not discussed that possibility with his client. He is busy with low probability activity but has not addressed the obvious and inevitable obstacles.

My bet is that none of the listings will sell, regardless of how many emails, or calls are made. Each one is ridiculously priced. None of these men have a realistic plan to solve the obvious problems.

Each man knows the difference between fantasy and reality. Yet their actions imply that activity alone will produce profit. It is as if one could expect to go to Disneyland, enjoy the rides, and be rewarded with a wad of $100 bills. Being busy is easy. Only being realistic and productive can be profitable.

Stupidity knocks on everyone’s door. Many people I care about would solve many of their problems by resolutely saying “no” to stupidity.

Friend, you and I strive to be people who generate positive, beneficial, long term impact. Sometimes we encounter people we care about, who are frustrated and flailing about. What ways might you suggest they seek for some improvements, even if it means self- change?


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.

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