At Pear Tree Property, we’re gearing up for our mid-November investment round. That means I’ve got to put on my salesman persona (which I’m woefully bad at). One query I’m oft asked is “how do you determine what to buy?” My typical answer talks about about focusing on cash flowing properties in rural areas. While this is true, I want take today and discuss our overall strategy: what I call cynical investing.
The power of positive thinking…is there any?
I’m nearing the end of a, thus far, phenomenal book titled “The Antidote: Happiness for people who can’t stand positive thinking” by Oliver Burkeman. Not only do I adore the dry, sarcastic, cynical tone but, the man makes some great points.
It tackles a very fundamental problem: how can you be happy?
Many self help writers and lecturers argue that to be happy, you should think positively. Banish those pesky negative thoughts and your days will be filled with sunshine. Sounds like common sense, right? The real question is: Does it work?
Nope. It actually makes matters worse.
When you suppress that negative voice in your head, you detach yourself from reality. No matter how much you wish for it, your life won’t always be filled with roses. Focusing on the best possible outcome sets your expectations too high. Unless you’re very very lucky, your dreams won’t come true and you’ll feel unfilled and frustrated.
Picturing yourself in a Ferrari won’t give you a Ferrari; however, it will make you sad you don’t have a Ferrari.
Wishing you were with Jennifer Lawrence/or James Franco (are those the new “it” people, I don’t keep up with these things) makes you disappointed you’re not.
Envisioning living in that mansion makes your house feel cramped.
If thinking positively worked, why are there so many different self help books telling us to do the same thing? Wouldn’t a handful do?
Happiness through cynicism
What if we embrace the negative thoughts instead? Expect the worst to happen and bank on catastrophic events destroying everything you’ve worked towards.
You’ll soon find your mind is very good at exaggerating for the worse.
Try and remember what you were worrying about one year ago; the things that kept you up at night and raised your blood pressure. How did they shake out? Was it as bad as you thought it would be? Probably not.
When you anticipate the worse, reality is almost always better.
Your life will won’t be filled with disappointment, it’ll be filled with pleasant surprises.
Get familiar with your negative thoughts. Explore the worst outcomes and brace yourself where applicable.
What does this have to do with real estate?
If you want to a slew of evidence and to further explore Mr. Burkeman’s point of view, check out his book. For the purposes of this article, suffice to know that I generally agree with him and I’m going to spend the rest of the time chatting about what this has to do with real estate investing.
How can we use this principle?
Simple, replace “happiness” with “financial independence.”
I call it cynical investing.
When you’re participating in cynical investing, don’t focus on what might improve your situation. Focus on what might make your life a living hell.
Sure, if you buy an apartment building and the market goes up 50% next year, you’re going to make some money.
You also might win a $100 million PowerBall jackpot, but you’re not going to factor that into your cash flow are you?
What if the market goes down by 50%?
What if the mafia makes you an offer you can’t refuse? (Is that still a thing?)
What if the largest employer in your town shutters their doors?
What if a meth lab is discovered on your premises?
If these things happen, how will you fair? Will you be overextended? Will you go bankrupt? Will you be able to weather the storm?
The goal is financial independence
Most likely if you’re reading these words, you’re seeking financial independence. What does that mean?
If you can’t survive the largest employer in your town imploding, then you’re dependent on that employer. By definition, that’s not independent.
Plan for the worst. If you build your Empire expecting catastrophic events, then every uneventful year gives you extra capital you can use to help you reach your goals faster.
Take that money and invest it (again while expecting things to go bad).
Wrap It Up: Cynical investing to reach your goals
In your walk through life, if you expect the worst in every situation, your days will be filled with pleasant surprises.
In your walk down the path towards financial freedom, if you invest planning on the worst outcome, you’re days will be filled with bonus money! That bonus money can be used to reach independence sooner.
Persistence is the key. Never forget the Old Man and the Mountain.
At Pear Tree Property, we’ve used this model from the beginning. It’s this thinking that led us to avoid debt, grow sustainably, and closely monitor every step of our progression.
We’re not going to grow for the sake of growth. If we can’t invest the way we want to, we’ll stop buying.
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