How Opportunity Costs Impacts the Real Estate Investor
Posted @ 3:48 pm - Filed under 1031 Exchanges, 401(k)'s & IRA's, BawldGuy Axiom, Purposeful Planning, Retirement, San Diego Property Owners
When any particular resourse we have is finite in nature, trading it for something on our menu means, by definition, there’s something for which we didn’t trade. Though we chose ‘A’ over ‘B’, part of the cost of choosing ‘A’ was passin’ on ‘B’. Much of the time we learn what that exact cost was by way of hindsight. Best case scenario is that cost being, more or less, about what we thought in the first place.
This concept is called opportunity cost — the economic consequences of choosing one thing over another. Sometimes the cost isn’t just economic. For example, did you attend college? Did you have a wide choice? Years later, are you happy with the one you chose? Opportunity cost.
In real estate, investors are constantly having to gauge the opportunity cost of choosing this property over that one. This region over stayin’ local. Buying or not. Selling, exhcanging, refinancing or — doing nothing. Those decisions all have a cost — often defined by what wasn’t done.
As a real estate investor, deciding to abandon the local market doesn’t only bring opportunity costs financially. There’s a subjective cost too. We can’t drive by it, ‘just cuz’. We’re in charge, not only cuz we own it, but due to our physical proximity. Ah, perceived control — or its relinguishment. What’s the price for staying in a demonstrably inferior local market? Opportunity cost.
Own a 401k/IRA etc.? Still reelin’ from your losses? Do you have the option of converting to a self directed plan? Whether you exercise that option or not, there’s an opportunity cost. Stayin’ the Wall Steet course — or diversifying into some well located, cash flowing imcome property. Whether you do or don’t, you’ll be billed — and nobody escapes paying their opportunity costs.
Nobody.
BawldGuy Axiom: About the time the farmer got the old mare to work without eating? She died. Opportunity cost.
What opportunity cost are you now paying cuz you’re not being Purposefulabout your retirement? Know what the most expensive cost is? The time for which you may be billed when retirement hasta be pushed back. That’s a bill ya don’t wanna incur.
And again, that bill WILL be paid. Tick tock.
Find out what your current opportunity cost is now, by calling me at 619 889-7100. Besides, I need a fix. Have a good one.
This entry was posted on Tuesday, December 15th, 2009 at 3:48 pm and is filed under 1031 Exchanges, 401(k)'s & IRA's, BawldGuy Axiom, Purposeful Planning, Retirement, San Diego Property Owners. 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.
