My brothers and I spent several years building a contracting business, but we eventually decided it was time for a career change. We sold it to my friend’s brother, Brad, who slowly continued to build the company. After a few years with the business, Brad had built a loyal client base—a practice which paid off. One of his more important clients relied on him to maintain her twenty rental properties, and she was obviously impressed by his dedication and potential. She offered to sell him one of the properties, a cozy bungalow on a beautiful canal in an affluent Long Island, New York neighborhood for $70,000, which, even in those days, was a great bargain. To sweeten the deal, she even promised to hold the mortgage and didn’t require any cash up front.
Brad thought things weren’t so certain; he still felt unsure in the business and didn’t have a steady cash flow. Without spending much time considering the consequences, he concluded that the immediate risks seemed to outweigh the benefits. Today, that property is worth over six hundred thousand dollars; the plot of land with the tiny bungalow continues to increase in.
It is unsurprising that now, with the infallible glasses of hindsight to peer through, Brad feels that he made a terrible error in choosing to pass up an incredible investment opportunity. When he looked at the situation, all he saw were potential pitfalls that overshadowed the immense profit he could have made. It is irrelevant whether the thoughts of future failure that haunted him were born of fear or distraction. What matters is the fortune he lost because he was unable to distance himself enough—or find someone else to do it for him—to make a logical decision unhindered by a disproportionate amount of fear. Had he taken a few steps back and examined possible influential factors, like the trend of property value growth or population growth in the area, the proximity of the area to large metropolises, and any changes in property values projected by experts, it is likely that he would have made quite a different choice. Alternatively, if he felt too close to the situation—as many of us often find ourselves—he could have sought advice from an experienced real-estate investor or partnered with a creative financial adviser. Either way, a distanced opinion might have averted one of the greatest financial mistakes of Brad’s life.