It has been said that the best time to plant a tree was 20+ years ago, and the second-best time to plant a tree is right now. That statement reveals the wisdom of doing things for future, long-term benefit rather than for immediate gratification. I have been a consistent buy-and-hold investor for nearly 30 years, and I’m a firm believer in the slow quarter instead of the quick nickel. That’s why this statement about planting trees appeals to me. I believe in doing things that have long-term value and long-term consequences. Having a long-term perspective is an essential element of being a true investor.
Not to take anything away from the talented individuals who specialize in wholesaling real estate, but their “business” (not “investing”) activities are generated toward earning immediate, taxable, earned income. The investor perspective is to generate long-term, appreciating wealth while receiving some cash flow in the present.
Let’s apply this analogy of planting a tree to your investing, or any other business you operate, by asking this question: Are you doing it now for the immediate income, or are you doing it for both income and future growth and potential?
I’m asking this question because I’m starting to hear some anecdotal reports from different market areas about how the housing market has shifted in such a way that many who were running successful wholesaling operations, even as recently as 8-9 months ago, are now out of business. If such individuals had kept one out of every five houses that they bought and quickly resold, they might be in a much better situation right now.
Another trend I’ve noticed is that a growing number of people who are buying properties, rehabbing them, and putting them out for sale are constantly running into cash-flow crunches because their rehab costs have continued to escalate, and they didn’t plan and prepare for those costs. This is causing a problem for their projects and businesses. This may be another symptom of the lack of long-term perspective when doing these deals.
Please do not interpret what I’m saying as advocating only for long-term growth and appreciation. There are times in a person’s business and portfolio when harvesting profits or making immediate, ordinary, earned income is necessary to cover the cost of other operational expenses or to accumulate enough down payment to make another property be able to cash flow properly. The purpose of this article is to get you thinking long term with a horizon beyond five, possibly ten or more years, so that investments you make now will be reaping rewards 5-10 years from now and beyond. This will be a foundational element to changing your life going forward.