California Real Estate Investors: You’re Not Invincible — Super Investor Syndrome

For those not in California, try to imagine the following. You’ve been investing in real estate since early adulthood, and have done exceptionally well. Regardless of the cyclical downturns, it’s like your touch literally shames Midas. Your mere presence in a real estate investment turns it to guaranteed future platinum. Face it, you’re a stud.

That is until the end of ’05 when your model was turned inside out, upside down, and smashed into a thousand pieces. There’s even a problem with that historical flashback. See, California investors, through no fault of their own, have contracted Super Investor Syndrome. I’m living proof it’s curable, but it’s a potentially devastating experience. The first symptom is the appearance of a large red S on your chest whenever you enter the real estate investment arena. Though yer unaware of this, yer the only one who actually sees it.

It’s insidious the way it slowly, sometimes over decades, infects its victims. No matter what they’ve done the last four decades, they’ve done spectacularly well. Their net worths have skyrocketed through good times and bad. Nothing ever had the power to derail their investment prowess — or so they thought. After the first several years they slowly but surely began to believe how smart they were. Again, I’m speaking from experience here. Sometimes my red S actually glowed in the dark.

The difference is I learned my lesson in the early ’80′s. Even though what we all thought was lost in that terrible time came roaring back, the professors of Old School University, RE Investment Division, set me straight. If they hadn’t, I wouldn’t have learned my lesson back then.

They told me I wasn’t bullet proof, and that I was investing and advising clients as if I was immune to a losing proposition. They were right of course, as I lost my butt later that year in a ‘can’t miss’ land deal in which I’d invested. Talk about a cavalier attitude. That experience lent me a sense of immense fallibility, and more importantly cured me forever of Super Investor Syndrome. From that day on my sense of genuine humility was worn like a baseball player wears a lucky T-shirt during a winning streak.

San Diego specifically, and California in general has infected the largest concentration of SIS victims.

The cure is easier than one might think.

Simply ask yourself a few questions, and be brutally honest with your answers.

How many times should you have traded up but didn’t?

How many boatloads of cash have those non-moves cost you — at least so far?

Would you buy your California income property for what it’s worth today?

It’s a lock 95% of those reading this answered ‘no #$%^&%* way’, if only under their breath.

Now — step back and decide yer gonna break SIS’s hold on you, and Get Outa Dodge.

The first step is to realize it’s an accident of geography that’s been the reason for all your incredible gains. Please don’t take that the wrong way. I’m not saying you didn’t know what you were doing. The assumption here is you absolutely do. I did too. It’s just that we don’t have the magic touch that turns wrong decisions into ginormous winners. Geography did that — not you and I. The next step is to realize that even though you’ve been blessed by the Golden State’s largesse all these many years, you’ve also missed out on far too many opportunities to turbo charge your capital growth rate — with the result being a smaller net worth than was easily at your beck and call. The last step is to realize the geographical party is over, and your zip code has lost its magic for the foreseeable future.

The reason most of us never realized we even had SIS is due to human nature. Who doesn’t wanna believe they’re not totally responsible for their run of seemingly unending capital gains? I know I certainly did. There’s a huge difference between taking advantage of a locally blessed real estate market, and believing it’s really my brilliance. Facing the cold hard truth was a bitter pill, and frankly a little humiliating.

It was also a blessing in disguise when those kind men took me to the woodshed, as I’ve since learned to disregard past performance while analyzing proposed investments — which was what I was trained to do in the first place. It’s what allowed me to clearly see it was the beginning of the end back almost five years ago. It was then I began getting any clients who’d listen, out of their San Diego properties. Those who chose to stay, are now revisiting that same decision. Those honest with themselves are getting’ ready to catch the next train out. They’re cured.

There’s no use cryin’ over spilt milk — just don’t keep spillin’ the same glass.

Now all that’s left is to realize your equity is virtually dead in the water. Once you understand that reality, the rest is cake.

Contact me and we’ll make fun of each other’s former delusions of grandeur. Speaking for myself, I’m forever grateful to those who that day chose to make me the target of their impromptu intervention. They cured me for life. Since that day I’ve never again assumed an investment would appreciate more than 5% yearly. That alone has helped me avoid countless personal mistakes, not to mention potentially misleading advice. It forced me to become the skeptical analyst I’ve become.

In fact I’ll let you in on a secret. That intervention was the catalyst which led to the birth of Purposeful Planning. I owe so much to those three old goats who took it upon themselves to take the brash kid down a few pegs.

SIS is insidious. I was cured over 25 years ago.

You too can rid yourself of that pesky red S on your chest.

We’ll never know how many millions have been lost due to this largely unknown syndrome. It’s been my agenda to stop the suffering one investor at a time.

Related posts:

1. What Gettin’ Outa Dodge Means To A Real Live San Diego Real Estate Investor
2. Why Shouldn’t The Real Estate Investor Go With The Interest Only Loan? ‘Cuz
3. Tax Shelter — Real Estate Investors Should Beware the Professional Investor Trap
4. Are You A Dealer? Are You A Real Estate Investor? There’s A Huge Difference
5. As A Real Estate Investor Ya Gotta Pick — Capital Growth or Cash Flow