The Journey To Retirement — Are You Stuck On The Path Of Least Resistance?
Posted @ 11:22 pm - Filed under 1031 Exchanges, Investment Lessons, Retirement
I’ve often treated the process of investing for your retirement as a journey. You pick your destination, map our your trip, choose the mode of transportation, and head out. It’s been my favorite metaphor.
Sometimes we can get too comfortable. We can gain momentum, which can carry us too far — passing better turns, choice, opportunities. We tend to stay with what’s easy, don’t we? Sure we do. It’s always the temptation, isn’t it? The scenery is gorgeous, and all we have to do is float down the proverbial river.
An investor could spend $10,000 upgrading his units to create an extra $300 a month in income. OR they could trade into more property(s). They might pay $25,000 in total costs to get it done, receive the same cash flow, or much less — but earn an additional $100-200,000 in appreciation over the next five years, than if they’d kept the original property.
One choice is emotionally comfortable, the other makes better business sense — by far. One is the familiar path — the other a new one — leading to a brand new destination. Kinda scary.
Though I’ve observed this behavior in folks, including myself, for years, I’ve never really understood it from an objective viewpoint. It’s not like the difference between the two paths is marginal. It’s huge. Yet time and time again, investors will look me right in the eye, and tell me why staying put made sense five years ago. Huh?
The last time this happened, something told me to keep smiling, but do the math right then and there, in real time. So I did.
Since his facts very closely matched a few of my clients, I pulled a folder out, and asked him if it was OK to do a comparison. He was eager. I noticed this, and asked him why.
He was sure I was setting a trap — unknowingly — for myself. Seriously.
I won’t bore you with the details. But the difference in him deciding to stay put back in the spring of ‘02 cost him — in real greenbacks — in excess of $1Million.
And he knew it. He was crestfallen. I didn’t know what to say.
I remained quiet.
Because he’d seen the empirical evidence, through closing statements (with names whited out), he saw in real terms, what would’ve happened for him if he hadn’t taken the path of least resistance. Now he’s deliberating on whether it makes sense to move his equity out of San Diego to much better growth regions sporting far lower prices.
He’s not really thinking about it. He’s trying to figure out a rational reason to avoid it. Why?
I’ve tired of trying to figure that one out.
His journey to retirement, sadly, is really a poorly disguised bunch of laps around the block.
Investing in real estate for your retirement is indeed a journey. Not all of the trip is fun. Sometimes 
we have to be a little uncomfortable.
Six hour plane flights aren’t fun — they’re downright uncomfortable and way boring. But looking out the window a few minutes before landing and seeing the islands below?
BawldGuy Point: The destination must be the focus of your efforts. The journey? Think of the fun parts as a bonus. Taking the path of least resistance leads to destinations that were never on your map.
This entry was posted on Friday, September 7th, 2007 at 11:22 pm and is filed under 1031 Exchanges, Investment Lessons, Retirement. 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.
