Chapter Seven: Overcoming Obstacles
Kim and I are not real estate agents. We are strictly investors.
After identifying a unit in a resort community, we called an agent who
sold it to him that afternoon. The price was a mere $42,000 for a
two-bedroom townhome. Similar units were going for $65,000. He
had found a bargain. Excited, he bought it and returned to Boston.
Two weeks later, the agent called to say that our friend had backed
out. I called immediately to find out why. All he said was that he
talked to his neighbor, and his neighbor told him it was a bad deal. He
was paying too much. I asked Richard if his neighbor was an investor.
Richard said he was not. When I asked why he listened to him,
Richard got defensive and simply said he wanted to keep looking.
The real estate market in Phoenix turned, and a few years later,
that little unit was renting for $1,000 a month—$2,500 in the peak
winter months. The unit was worth $95,000. All Richard had to put
down was $5,000 and he would have had a start at getting out of the
Rat Race. Today, he still has done nothing.
Richard’s backing out did not surprise me. It’s called buyer’s
remorse, and it affects all of us. The little chicken won, and a chance
at freedom was lost.
In another example, I hold a small portion of my assets in
tax-lien certificates instead of CDs. I earn 16 percent per year on my
money, which certainly beats the interest rates banks offer on CDs.
The certificates are secured by real estate and enforced by state law,
which is also better than most banks. The formula they’re bought on
makes them safe. They just lack liquidity. So I look at them as 2- to
7-year CDs. Almost every time I tell someone that I hold my money
this way, especially if they have money in CDs, they will tell me it’s
risky. They tell me why I should not do it. When I ask them where
they get their information, they say from a friend or an investment
magazine. They’ve never done it, and they’re telling someone who’s
doing it why they shouldn’t. The lowest yield I look for is 16 percent,
but people who are filled with doubt are willing to accept a far lower
return. Doubt is expensive.