“Take what you want but pay for it.” ~ Spanish proverb

It would be wonderful if we didn’t have to pay the cost, if we could just take what we want. But the universe doesn’t work that way. That’s true for monetary costs and it’s also true for the trade-offs that come with every decision we make. 

Want an extra helping of pie and ice cream? You can have it, but you may have to pay the cost in extra exercise. Or you can skip the exercise and pay the cost in the pounds on your frame. You decide. 

Decide comes from a Latin word, “decidere,” which means “to cut off.” Deciding to do one thing means cutting off another. Economists even have a name for that “loss of potential gain from other alternatives.” They’re “opportunity costs.”

You have to pay no matter what, and that’s hard. Every quarter, at least one of my clients faces this important dilemma. I understand trade-offs.

My calling is to help you make the most important financial choice of your next decade. You pick the goal and the time frame. You’re the pilot so you tell me where you want to go. My job is to be the navigator and tell you how to get there. 

We serve our clients; we don’t control them. Not all brokers use this model, but it’s worked well for my team and our clients for decades. Let me tell you a story to illustrate how this can work. I’ve changed the names and some details to preserve my client’s anonymity. 

The client I’ll call “Mike” is already successful by most people’s standard. He has a wonderful family life. He’s deeply in love with a classy woman. She gave birth to twins near his 50th birthday. Their household income and wealth are in the world’s top 1%. Mike owns a successful business and he’s fit enough to be a frequent podium contender in his sport. 

We met over lunch at an ocean front restaurant to discuss Mike’s goals. When he told me what they were, I asked what time frame he was thinking of. Things that are easy to achieve over the long term are sometimes almost impossible over a shorter time frame. 

When Mike told me how soon he wanted to achieve the goal, I thought, but didn’t say, “Are you crazy?” Instead, I outlined what it would take. 

To attain his phenomenal goal, he would have to triple his income or sell some of his trophy assets. While his current renovation and upgrading program is amazing, it is not enough for his new goals. If he wanted to keep his trophies and not diminish family time the he would need to budget at least another decade. Confidently, Mike assured he that he would get it done.

Six months later, not much had happened. Mike and I had made some efforts to advance his goal, but we had not taken it to the next level. There is no desperation in San Diego’s apartment sales market. Death, divorce, and other life circumstances do force some transactions. You must wait for the right opportunity and then act quickly

After 400+ closed escrows and a generation of success I learn of more opportunities than the average broker. Sometimes I learn something that gives us a head start. Well, a little birdie told me about a situation that could work for Mike. 

It was fixer, with the right things wrong with it. The apartments were in his favorite submarket and the unit mix and amenities were in the top 20% of the submarket. My judgement was that this opportunity was a once-in-a-decade opportunity for Mike.

Within two days my team had been fortunate and diligent enough to have opinions from two of the county’s wisest experts concerning this asset. Getting smart people to check out a property in two weeks is easy; two days was the fastest research in my 25 years.

Mike’s unique strengths would be huge advantages in this particular opportunity. The property had more deferred maintenance than most buyers would want. On the other hand, the rents were far below the market. It was a great opportunity but seizing it would require some trade-offs.

Mike would have to sell a smaller trophy property or dip into financial resources he had not used in 20 years if he wanted to buy the property. There were other capable potential buyers. Mike could prevail if he fully engaged. He would have to decide.

The other buyers limited how cheaply he could buy the asset. He expected the cost to repair would exceed the experts’ numbers. He hoped so similar opportunities more sooner than a decade from now. He had trouble believing that other buyers would take on this challenged asset.

On decision day, Mike could seize the opportunity, but he would have to sell a trophy. He would have to release the easy cash flow from the smaller building. He can’t buy the bigger asset at a price that cushions him against his worst fear, paying too much. 

On the other hand, he could keep his trophy, not over-pay, and know for certain what someone paid for the bigger building. He could simply sit on his hands. When the escrow closes it will be public knowledge how much someone else paid. Within a few years he’d know whether he missed a great opportunity or if the other buyer was the greater fool.

What would you do?

There are at least two right answers. You’ll regret something. You can regret acting or you can regret not acting. You can’t escape regret. Not to decide is to decide. You may regret not having decided. I think I have a unique perspective on that. 

When our firm recently celebrated our 38th year, more than 100 clients, peers, and industry professionals rejoiced and reminisced with us. Over the course of that month I surveyed more than 30 clients. 

  • A few of them bought a property when price seemed high and saw values slip. (I have been there and done that.) None of them regretted “paying too much.” 
  • In fact, none of the 30 owners reported that they regretted any of their purchases. 
  • Most of the clients told me they regretted not buying. 
  • One of my wisest friends, a former President of a local real estate group, regretted not buying more during all the years in the arena. 

I’m not the sage on the stage. I’m the guide at your side. You are the driver; I’m the navigator. I can outline the route to your goal for you, but you must decide to make the trip. Only you know what’s most important for you.

In the last six months, I have coached more than six clients through challenges similar to Mike’s.  The people, zip codes, dollars and building imperfections were unique each time, but each situation involved a decision and trade-offs.

~ Each client decides what is best for them. The pain of deciding what to cut off will make the client smarter for their next decision.

~~

Terry Moore, CCIM has helped real estate investors make wise choices for more than a decade. Each year he advises more than 100 owners. About 30 pay him for brokerage services. He is part owner of ACI, the county’s most active apartment brokerage. Call him at 619-889-1031, email him at tmoore1031@gmail.com or visit SanDiegoApartmentBroker.com.