A Tale of Two Investors: Why some investors succeed with real estate investing (and others fall short)

I want to share with you a tale of two investors. Picture two childhood friends who went to and graduated from the same college with a degree in the same field. They possess the same natural talents and intelligence. Further still, they earn the same income and live the same lifestyle which results in the same savings rate and same amount of investment capital.

Fast forward a decade or two. One of these investors goes on to build an impressive real estate portfolio with multiple streams of income at different stages of her life. Meanwhile, the other does some sporadic investing and ends up with a couple rental properties that while they provide a good return on investment don’t change his life in a meaningful way.

Key Question: What made the difference?

If all the ingredients are the same, what was the cause of such vastly different results in the end? Why did one investor manage to succeed at a much higher level while the other fell short?

While the above is a hypothetical scenario meant to isolate the critical difference maker in success for long term real estate investors, I can tell you that in my experience I’ve seen similar scenarios often. Based on that experience, I can tell you that the critical factor that separates successful investors from those that fall short is the presence of a thoughtful strategy and the execution of a plan of action that flows from that strategy.

Why successful investors need a strategy to succeed?

You see, the process of building an impressive portfolio is too complex for it to just happen by accident. No one has ever woken up after a decade of dabbling in investing and said: “Look Honey, it turns out we built a word class portfolio and didn’t even realize it…”

It takes a certain amount of critical mass for your portfolio to generate the kind of income that change substantially change your life. It takes a lot of discipline to stay on track for 10, 15 or 20 years. It takes a lot of focus to zero in on your action plan and not get your head turned by the trendy investment strategy of the month. It takes clear milestones along the way to show you where you’re supposed to be on every stage of the journey.

Without a thoughtful strategy and an accompanying plan of action to execute, it’s impossible to reach that critical mass, acquire the discipline and the focus and establish those clear milestones that are critical to success. In the wise words of Warren Buffett: An idiot with a plan can beat a genius without one.

Bonus: The Blueprint Annual Review Process

As part of our Blueprint plan, we do an annual review with our client, I’m working on one such review for a client meeting so I thought I’d share that process with you in hopes that you find it helpful. During this annual review, we go over 3 key questions:

• How did last year go? Here we look at the targets we set last year. Did we accomplish all we set out to achieve. If yes, we celebrate the win. If no, we need to find our what happened and learn the lesson for the future.
• What do we know today that we didn’t know when we prepared the plan? In other words we look for new information that we can use to course correct, if necessary.
• What do we need to accomplish this coming year?