Is now the time to cash out? Part 2: How the wealthy think about investing vs. how the masses think about investing

Andrew la Fleur: Is now the time to cash out if you own a Toronto condo? Here is part two of my two part podcast on this question, and in this episode, I’m going to look at how the masses think versus how the wealthy think. Stay tuned.

Speaker 2: Welcome to the True Condos podcast, with Andrew la Fleur. The place to get the truth on the Toronto condo market and condo investing in Toronto.

Andrew la Fleur: So, that is sort of some of the advice that I gave to this gentleman who’s thinking about this, selling this asset. I want to now just finish up with sort of, this made me think about, again, it’s something we talk about a lot in the podcast, is different mentalities. Different ways of thinking. If you want to be a successful real estate investor, follow those who come before you. Follow those who have made great wealth and great fortunes in real estate. Study how they think. Study how they act. Understand how they approach life, and business, and investing, and you’re going to do well.

If you’re following the masses, if you’re following the 95% of the population that have never made a dime in real estate, well, you can guess that your results are going to be similar to theirs. If you’re following the 5% of the population that are, had been very successful at making money in real estate, then your path is probably going to mirror what theirs is, so let’s look at this idea of how the masses think and how the wealthy think.

So, and again, this is not anything to say about how this gentleman is thinking. I’ve never met this guy. I have no idea how he’s thinking. I’m sure he’s obviously made great decisions with the two properties that he’s got. So, it’s nothing against, or to say anything, any judgment about where his mind is at. I have no idea. But, this just made me think of, in a general sense, of when we are thinking about investing in real estate.

Let’s take a look at how the masses think versus how the wealthy think. So, when it comes to the masses, they’re thinking, “Well, I bought a property, I got lucky, and now it’s time to cash out.” How the wealthy contrast it, how the wealthy think about it is, “I bought a property. It’s been good so far, but the longer that I hold this property, the luckier that I will get. The longer I hold the property, the luckier I will get.” Basically, understanding that over 10, 15, 20 years, when you have money invested in real estate, you’re just going to do better and better, the longer that you hold it.

The shorter term that you hold property is the more likely that you may have some hits, you may have some misses, but you’re not going to be accumulating wealth. The way to accumulate wealth is, and the way to increase your chances of being “Lucky” with the market is just to stay in the market longer. The earlier you get into the market, the better. The longer that you’re there, the better you’re going to do.

Next point, how the masses think. The biggest thing is the masses tend to try to time the market. Their thinking is, trying to buy at a low and sell at a high, this kind of mentality. Whereas, the wealthy understand that it’s impossible to time the market, and they’re not concentrating on timing the market. They’re concentrating on, again, being in the market for as long as possible. And, not only that, they’re concentrated on buying quality assets and holding them, so buy a quality and hold. Buy a quality and hold. Very simple formula. Not looking to just buy anything I can afford when I think it’s low and sell anything that gives me a gain when I think it’s high. That is not how the wealthy think.

Again, more. Like how do the wealthy understand that selling is a very expensive position. Anytime you’re selling an asset, there’s a lot of transaction costs there, versus holding that asset and continuing to grow the equity, and using that equity as leverage to invest in other areas, as well. The wealthy, again, when the wealthy sell something, they’re only going to sell something if they have something better to invest into. So, that’s again, a mistake I’ve seen so many people make over the past year, especially, is they sold assets without having the plan. Like what to do with that money.

They’ve just sold it for the sake of selling. They sold it because they think they’ve timed the market. They think they’ve outsmarted the market, and now is the time to sell, and in some cases, you can do that. You can time the market and you can look like a rock star, but only if you do something else with that money. If your money is [inaudible 00:05:06], your money is just sitting in your mattress, rotting because of inflation, it’s actually decreasing every day. You’ve got nothing. You should only sell an asset if you have some other asset to put that money into that’s going to perform better. So, if the market right now is performing, is increasing at 30% a year, downtown condos, do you have some other investment that’s going to be going up at 30% a year? Probably not. So, again, why would you sell from that perspective?

The masses think the worst is yet to come. Just that sort of more pessimistic perspective on life and on investing. The wealthy tend to think the best is yet to come. The masses are thinking what if the market crashes? The wealthy are thinking what if the market actually doubles again? Especially in times like this, when everyone is screaming at you, that the market is going to crash. That it’s 1989 all over again. And, it could very well be, I mean, we could be on the verge of some major catastrophe that I and no one else has been able to predict, but if I’m a betting man, I would say that’s most likely not going to happen, due to the fundamental strengths of the market, and the supply and demand equation in the market.

But, again, the wealthy are thinking, when everyone else is zigging, they’re zagging. Like when someone saying, “What if the market is about to crash?” The wealthy are thinking, “What if the market is going to double again? What if it’s going to triple again?” The underlying understanding is that it will. It is a 100% guaranteed reality that the market will double, triple, quadruple from where it is today. It’s just a matter of time. And so, again, it goes back to the longer that you’re in the market, the luckier that you get, the better that you look, the smarter that you look. Another great example, look at M City Development, there in Mississauga. That is selling right now and has done very, very well. No surprise there.

But, the point of the story is just to, the Rogers family bought that piece of land there in the 1950’s or something. 1960 or something, for like some ridiculous, laughable number. I don’t know. $60,000 or a $100,000 for this massive piece of land, which is now going to be built out into 10 condo buildings. I’m guessing, 5,000, 6,000 condo units are going to be built on this piece of land that cost like a $100,000. But, again, that was 40, 50 years ago. That is the kind of perspective, and you think about wealth, you think about the Rogers family, the billions of dollars of wealth that they, personally, have and have created for many, many people.

That is a great example of how, of this, of what I’m talking about. The longer that you’re in the market. The luckier that you get. They’ve had that property for 40, 50 years, whatever it is, 60 years maybe. I don’t even know. It’s a very long time, decades, and now, the return on that initial investment is just going to be absolutely off the charts, immeasurable. Imagine they had have sold that off in the ’70s, or in the ’80s, or even in the ’90s, when everyone was telling them, “This land is worthless. This land will never be, do anything.” If they had have listened to those people, they never would have had this opportunity now to, again, build 6,000 condos, and you can imagine the numbers they’re going to get on that.

Okay. That is the end of this podcast. That’s what I wanted to get across to you today. Hopefully, you found that useful, and hopefully, that will help you, as you are building your real estate portfolio, and just training your mind, and training yourself how to think about the market and investing, and how to truly build wealth as a real estate investor in the condo market. Thank you very much for listening. I hope you enjoyed this. And, if you did, go ahead and share it with somebody that you know who could use it. And, until next time, I’ll talk to you soon.

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