Oftentimes, the only difference between tremendous success and mediocrity is the ability to keep an open mind in relation to new information. Think about it, if you do the same thing as everyone else, you are going to get the same results. Supply and demand: the more people do something, the less valuable it is.
“Insanity: doing the same thing over and over again and expecting different results”
The same concept applies to your property. When people are trying to sell their home, they are not aware of all the options available to them. This is natural. People have been conditioned by friends and family since a very young age that in order to sell their home, they have to go through a broker and sell for a traditional lump sum amount for as close to asking price as possible. Working with a traditional realtor further entrenches this line of thinking. The realtor makes promises that he will sell the property for the highest price he can get and market it as widely as possible. Everything looks good on paper.
The problem is that often, a traditional way of selling is simply not the right fit. A key component of making the right decision on anything is to keep the end goal in mind: how does the sale of your property impact your life? Where is the money from the sale of your property going to go? Is it going to be parked in a CD earning 1.0% interest every year? Is it going to be used to fund your kids’ college tuition? Perhaps instead it’ll be allocated to fund a trip around the world. The main takeaway is that everybody’s situation is different. Why should they be forced to fit a Real Estate model that most benefits one particular group (brokers). That would be like trying to force yourself to fit into one kind of clothes instead of buying clothes that fit.
We will be the first ones to tell you that if you plan on putting all the cash from the sale into a savings account, you are doing yourself a tremendous disservice. There are so many ways to structure your deal that will turn it into an income generating investment. To borrow some material from Rich Dad Poor Dad, the difference between the rich and everyone else is that the rich invest their money in income producing assets (like Real Estate).
Why are interest rates so low?
The reason not everyone is on board with this is because:
- Since every deal is structured differently, it takes more time and energy to understand what is going on compared to a traditional sale, even though the rewards may far outstrip the effort
- When people hear about nontraditional ways of doing business, their gut reaction is to think “scam”. It’s an unfortunate reality of life that there are certain types of people in the world who would take advantage of others to get ahead. The only thing we can say is that you must ensure that all transactions, traditional or not, go through a reputable Real Estate attorney in order to protect yourself. Do not try to save money here, it’s simply not worth it.
That’s really it. Most of the time, it’s pure laziness that prevents people from doing the optimal deal for their situation. Nobody likes homework, and it’s simply not natural to factor things like the tax implications of the sale into their decision making process. To give you an idea on what you are potentially missing out on, consider the following:
- Instead of taking the cash from the sale and investing in a savings account, consider carrying a note and receiving a steady monthly stream of investment returns at higher returns than the stock market
- Mitigate the financial impact of capital gains tax by spreading it out over time
If this did not change your mind at all and you still think that a traditional sale is always the right way to go, it’s not a problem. We understand that everyone’s reference points are different and that there’s absolutely nothing wrong with conforming to the majority. We simply hope that we were able to open your mind to the possibility of new ways of thinking about Real Estate.
And that’s the important thing going forward as your read our series and we go more in depth on each of the topics. Maintain an open mind as you read. What we provide is a free education, and allow you to make your own judgment as to whether or not the information is valuable to you.
Join us next week for a detailed look at Lease Options and why they may be the ideal fit for tired and/or out of state landlords.
Written by Brandon Lor