Are Real Estate Investors Sometimes Lookin’ Through The Wrong End Of The Telescope?

Posted @ 12:13 am - Filed under Real Estate Investing, Purposeful Planning, Retirement, Buying Income Property, Investment Lessons, Communication, RE Investment Practice

As a teenager I’d lost a sale because the buyer thought the seller was making too much money. Seems he’d researched what the seller had originally paid for the home, and was aghast at the price from which the seller wouldn’t budge. A price, mind you, for which I had abundant evidence was very reasonable.

At the dinner table that night, Dad smiled as I complained long and loudly of the unfairness of losing out on a $222 commission. (Don’t snicker, that was a lot of money back then. A round of golf, including cart, was under $10, $1 got me three tacos, a burrito, and a large Coke at Taco Bell, and $5 brought me change after filling my tank.) After he tired of hearing me whine about my tragic loss, which was about 42 seconds, he dispensed the following advice.

How many times have investors lost great deals because they were concerned somebody else might be making a buck? What is it about some folks? It’s like they can’t force themselves to finalize a potentially very profitable transaction if it means the seller hitting his own jackpot. Their behavior would be comical if it wasn’t almost tragic in so many cases. They will actually walk away from an incredible transaction because closing the deal would mean the seller was able to do exactly what they’re hoping to do themselves.

Looking through the wrong end of the telescope makes it impossible to analyze the big picture. By concentrating on what the other guy is getting, it can sometimes mean you’re missing the real reason you should be closing the deal — or not. Keep your eye on your big prize.

My favorite example of this principle in action happened back in the mid-80’s. A client was interested in a couple duplexes located in a blue collar area. I’d brought them to his attention because they were on one lot, but could be split at a relatively low cost, which would increase the value of each duplex significantly. The split had been started more than a decade earlier, but for some reason had never been completed. It was a real find.

The seller had acquired the units in the early 70’s, and was going to realize a pretty nice sized profit. The buyer was, to use his words, ‘nearly insulted’ at the profit this guy was going to enjoy. So he calculated what he deemed reasonable, and made his offer accordingly. Of course, he didn’t get far with this ludicrous approach, and lost the opportunity. I then called another client who had just entered into a tax deferred exchange. This property would fit nicely with their Plan. They agreed, and along with a couple other properties, closed on this one too.

Three years later, in ‘89, they sold those duplexes for just short of double what they paid.

Back then I put out a small newsletter to clients only, and used this property as an example of how creating separate parcels from one original lot can be very profitable. The wife of the ‘insulted’ client called me, asking why I hadn’t called them about those units when they were available. When she heard Hubby had indeed had first shot, and turned them down for the reason he did, she was livid — and not with me either.

Focus on your agenda, and what your Plan is trying to accomplish. Pay attention to the other side, but only to the extent you can give them what they want without defeating your Purpose. You do this by looking through the right end of the telescope, and keeping sight of the big picture — and your big prize.

Looking through the wrong end of the telescope can easily result in losing out on exactly what you wanted in the first place. Sometimes you just need your telescope aimed the right way. Give me a buzz, or contact me via email, and we’ll polish yer lenses for ya. Let’s get things going your way. Have a good one.

This entry was posted on Tuesday, September 2nd, 2008 at 12:13 am and is filed under Real Estate Investing, Purposeful Planning, Retirement, Buying Income Property, Investment Lessons, Communication, RE Investment Practice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.