For today’s episode, we will be discussing three important mistakes new investors make.
This is going to be an interesting conversation as we shed some light on the common mistakes through examples.
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[00:01 – 10:26] Opening Segment
- Bad investing tips
- #tombilyeu
[10:27 – 18:24] The First Mistake New Investors Make
- Even experienced must keep these mistakes top of mind
- #1 – Opportunity
- The Operator
[18:25 – 25:00] The Second Mistake New Investors Make
- #2 – Seeking excitement
- NFTs
- Crypto
[25:01 – 31:21] The Third Mistake New Investors Make
- #3 – Prioritizing returns over risk
- Use a longer-term time frame
- Asking the questions
[31:22 – 41:50] Closing Segment + Bonus
- An important skill to adpot, journaling
- Mental mapping
- Bonus #4 mistake – Going through life not really understanding why
Book recommendation:
“ I think a lot of new or an investor makes is they focus on the problems and they stop looking for opportunities.“ – Dan Kreuger
“I think 2020 showed us, if nothing else, how important being in groups of people can be and so promoting the healthy aspect of social connection.“ – Anthony Vicino
“I do think good investing is built on the back of boring ” – Anthony Vicino
“I would say at the end of the day, we assist people in realizing other avenues that they could take in life to achieve whatever it is they want to achieve. ” – Dan Krueger
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The 3 Mistakes Almost Every Investor Makes
Anthony Vicino: [00:00:14] the Hello and welcome to multifamily investing made simple to the podcast, that’s all about taking the complexity out of real estate investing so that you can take action today. I am your host, Anthony Vecino of Invictus Capital, joined as always by Dan pointing at his nameplate
Dan Kreuger: [00:00:31] Kruger playing with the new graphics
Anthony Vicino: [00:00:33] He’s playing for. If if you’re used to listening to us because this is a podcast and that’s the primary way that people consume, the podcast is listening to it, then you are being denied the very awesome opportunity of seeing us on camera. So I want to encourage you before we go any further, I want you to pull over the car, pull over the treadmill, whatever you’re doing right now and go to YouTube and Google Multifamily investing made simple hit subscribe. And then you can get the podcast every week in video format and you get to see these two chuckleheads. Yeah, spitting mad at color.
Dan Kreuger: [00:01:05] Two hundred and fifty-six colors. I think we got going.
Anthony Vicino: [00:01:07] All the colors I’m on. My dad’s a little hue blind. Yeah, he can’t see a single guy named Hue.
Dan Kreuger: [00:01:15] Anyways, we do want a dad joke.
Anthony Vicino: [00:01:17] It’s the dad joke segment. We should do that. We should. I’m not a dad, but I think moving forward if you guys at home that are listening to this want Dan, who is a newly minted dad and
Dan Kreuger: [00:01:27] I need dad jokes.
Anthony Vicino: [00:01:29] He needs daddy jokes. So go leave a review in an in the review, leave your best dad Yokota iTunes and leave a review with your worst dad joke. I’m so excited. I want somebody to do this, please. The worst one will get read on air the worst one. Yep, so all right, well enough of what they call this. They call it color commentary is what we’ve been doing. We’ve been like filling it out and like trying to make it.
Dan Kreuger: [00:01:52] That was just
Anthony Vicino: [00:01:54] A little bit of B.S. Now it’s time to get to the meat, the potatoes get to the meal because you guys came today. And really, you want to learn about the three mistakes new investors make. We might even throw in a fourth one if you guys are on your best behavior and listen. That’s not going to those mistakes. They’re not going to tell you themselves. We’re going to have to shed some light on them ourselves for you. But before we get to that. Mr. Dan Kruger, are you ready for this week’s bad investing advice? Go.
Dan Kreuger: [00:02:24] I think I am. Typically, I sit here and I think about it for a minute because I never prepare for these things. But today I actually thought of this ahead of time. I’m not going to waste your this
Anthony Vicino: [00:02:36] Sounds like you’re waffling. It sounds like you’re buying
Dan Kreuger: [00:02:39] Time right now. No, but we’ve been doing this, Tom diluting impact through university. And if you guys have heard of this thing or Tom Bellew, extremely valuable resource, extremely smart guy, and I’m going to actually steal my bad advice from something that I learned from him. No, he was not giving bad advice. He was giving good advice. But as you know, we like to take something that’s tongue in cheek and parlay it into some actually legitimate good advice. So my bad advice for this week. Thank you, Tom. It’s right to segment this hashtag, Tom. Hashtag Tom is that as far as investing goes, you need to find a niche, right? You hear this all the time, you invest in what you understand, so you find something that you understand really well and you zero in on it and you focus on it. And that sounds really great and good. However, you also want to make sure that you don’t get so focused on your niche that you forget to zoom out and think about from a really high level what it is that you’re actually doing in your business. And he was talking about this on the call last night and what he does on these things. He talks to business owners and he sits there and he spends a good amount of time with you.
Dan Kreuger: [00:03:48] Like 30 minutes breaking down the biggest problem in your business and helping you solve it. And there was somebody that came on last night and was telling a story about their business and just so happens, they were in the real estate business. They were in real estate education, I believe, actually. So they didn’t they weren’t investing in it. They weren’t buying it or selling it. But they were producing content for the purpose of education and selling that out to the world. And things were not going well. I guess, you know, things were trending down, their sales were trending down, their conversions were trending down. All the metrics, all the KPIs were kind of trending down and he was trying to figure out, you know, what’s going on? Should I be closing this business down? And Tom, you know, kind of paused him there and ask the question, or I should say, ask the question. But he posed the concept that you know, don’t get too caught up thinking about yourself being in the real estate business because you’re actually in the business of teaching people how to make money or something along those lines. And I thought that was really, really profound and it really struck me because that’s really like the simplest way to describe the business that he was in.
Dan Kreuger: [00:04:56] And so this goes for anyone who’s investing or any kind of business owner, you know, don’t get too caught up in the weeds of the specifics of your business and kind of miss the 50000-foot view because you might be missing opportunities to pivot. And what he did in this conversation he was having with this guy was, he said, you know. Don’t get so fixated on trying to teach people how to invest in real estate. Teach people how to make money. And as the world changes and as people’s interests change and the economy changes and the various asset classes out there change. You know, maybe you start producing content on how to invest in crypto or something like that, right? So you still have the same business model, but just have a slight shift to align it with the world as it changes. And I thought that was a really, really profound explanation and something that never crossed my mind. And it’s I think it’s something that could be applicable for pretty much anybody. So just, you know, zoom out, get your heads out of the weeds, and just, you know, stay open to change.
Anthony Vicino: [00:05:58] Are you ready to pivot? Yeah, I found that part of the conversation so interesting and powerful because it’s a reminder we’re big fans of the idea of staying in your lanes and making sure that you’re the master of what you do. But then also, it’s so easy to lose sight of what it is at the core to that you actually do write like and the manufacturing company we produce, rock climbing holds. And one of the things, if you looked at it, you would say, Oh, these guys, they produce rock climbing holds right. And my partner had the really deep, deep insight from the very, very beginning that what we were building wasn’t a rock climbing hold or rock climbing merchandise company. What we were building, what we were trying to do as a core mission was promote a healthy lifestyle. It just so happened that we did that through the lens and through the vehicle of rock climbing. And so everything that we did had to be through the lens of does this promote a healthy lifestyle both for our consumers, for our employees, for ourselves? And when you look at it through that lens, it’s like we can do things that you would look at and be like. So we started producing cornhole boards and you look at that and be like, Well, what does cornhole have to do with rock climbing? And we’re like, No, no, no, no. It promotes a healthy lifestyle because one and maybe cornhole doesn’t make you like physically healthier, but it does promote social health, getting a group of people together. And I think 2020 showed us, if nothing else, how important being in groups of people can be. And so promoting the healthy aspect of social connection. And so when we think about, you know, at the end of the day, what do we do here at Invictus? If we were to zoom even further out like we’re not just apartment syndicators or real estate guys, and we’re not just educators like we’re not just putting out information for the sake of information. What would you say is what are we trying to do?
Dan Kreuger: [00:07:53] I mean, that’s it’s really tough to distill, honestly. But I would say at the end of the day, we assist people in realizing other avenues that they could take in life to achieve whatever it is they want to achieve. And right now, we’re doing that through providing really fantastic investment opportunities so that people can get their time back and do whatever the heck it is they want to do. Right now, it’s, you know, real estate that we’re doing that with. That’s what we’re really passionate about at the moment. But you know, I think at the fundamental level, that’s what we’re doing is showing people that there’s another path that they can take in life where they can take more control over their lives and do what they want to do with their time and get their time back. Mm-hmm.
Anthony Vicino: [00:08:32] Yeah, the way I would put it in the same way, we actually haven’t debriefed this before the episode. We just are kind of doing a live therapy session here for you, people. So hopefully you enjoy this. But the way I look at it too is like, we help people buy back their time. At the end of the day, that’s really what investing is. Is at the core is you’re trying to put your money to work for you so that it works harder than you worked for it. And that way it can then supplement or overcompensate for your W-2. So you no longer have to go to work. And now your money is supplementing your lifestyle. You get to buy back your schedule, your time with your family, and go do the things you want to do. Maybe that’s still you go work. Yeah, cool. But at least you get to choose it on your terms. And so at the end of the day, that’s what we do. We help people buy back their time.
Dan Kreuger: [00:09:14] Yeah, and hopefully they take that time and they put it into something constructive and valuable that helps better society and improve the world around them. I guess they could just sit at home and watch Netflix all day, but I’d bet that if people want to be truly happy that I actually going to be doing something valuable for society and trying to improve the world.
Anthony Vicino: [00:09:33] Yeah, I think most people, when they think about retirement or they think about not having to work, it’s not. I think maybe some people have never given a lot of consideration. They think maybe the beach and the margaritas and the Mai Tais, that sounds awesome for like a week, for like a week. And then surely you will. You’ll get to the point where you realize like, oh, I need to have an impact, I need to have a life of meaning. And unfortunately, most people don’t get to that point in their life to even ask those questions of like, what’s it mean to live a life of purpose and meaning because they’re so fixated on solving the money problem first. Money doesn’t solve all your problems. It solves all your money problems. When once you solve those, then you get to solve the other two-thirds of the problems, which are the bigger problems, which are the questions of purpose and meaning. And so we can help you buy back your time. We can’t help you guys solve the other two.
Dan Kreuger: [00:10:20] Yeah, you got to figure that piece out on your own. But generally speaking, if you do whatever makes you happy, that’s probably a good start.
Anthony Vicino: [00:10:27] Yeah, I think that’s a good metric if at any point you’re not happy with your life and where it’s at any moment if you wake up and you’re looking forward to the weekend because that means you don’t have to go to work. Things are not going well. You need to do an about-face. You need to look hard at your life because life is too short to spend it on things you hate. This is very true. Yeah. Words of wisdom. All right nowhere, if you really, really want to avoid a life that you hate, then you’re going to want to pay close attention. As we now dive into three mistakes new investors make. And these mistakes, they’re so prevalent. I don’t want to just call out new investors because these are things that even experienced investors just like ourselves. We have to combat these every single day with intentionality. The only way like you don’t just solve them once and they go away. So number one is opportunity. And what do I mean by opportunity? I want to pose a thought for you, which is it’s not what you look at. It’s what you see. All right, so, Dan, what do I mean by that? Well. Um, I like how I say cryptic things, and then have you explain it for me?
Dan Kreuger: [00:11:42] No, I love it. I think about Knossos kind of waiting for you. Oh, there you go. Yeah. Though he tried to push him? He didn’t need my close-up, basically for this. No, it’s not about what you look at. It’s about what you see. And it’s all about what this is saying is it’s all about perspective, right? You’ve probably heard something similar to this before where some people see struggles, where some people see problems, other people see opportunities. And a good example of this is 2020 and the whole COVID thing. I know we’re all sick of talking about that, but it’s a great example where a lot of people in that year looked at everything that was happening and said, OK, I can’t go out and buy any properties right now. If you’re an investor, if you are a business owner and you’re shuttered for a period of time, a lot of people just throw up their hands and said, I can’t do anything this. You know, my business has been taken away and I can’t survive on this.
Dan Kreuger: [00:12:35] Other people looked at situations like that and said, OK, what can I do with the resources that I do have? What can I do at the time that I have? What can I do with anything that I have? And they look for opportunities and other people look for problems? I think, and it’s really it’s kind of a mindset thing. And so there’s a big mistake that I think a lot of new or an investor makes is they focus on the problems and they stop looking for opportunities. And if you aren’t actively looking for opportunities, you’ll miss them. And if they actually made a reference a minute ago, that or maybe that was an honor, actually. You mentioned that several times, actually, before recording that the universe had put a real estate in front of you in your early 20s and you weren’t ready for it and you didn’t realize at the time and then think you back in retrospect, Hey, these things, were there their opportunities? But I just wasn’t. I wasn’t open to it yet and see it.
Anthony Vicino: [00:13:28] Yeah, an opportunity very rarely looks like an opportunity at the moment where you’re at, because if it looked so obviously like opportunity, then literally everybody else would see it too. And then it would no longer be an opportunity because everybody would already be jumping into it, right? And so that’s the thing you have to realize when it comes to investing is that quite often the things that represent the most opportunity, whether a great investment. They very rarely are not going to look like that. So let’s make this practical and think when you go into a property, where we’re not big fans of going and buying the beautiful, really nice, gorgeous house or apartment complex that just is a jewel. To own it would be like a trophy piece that you could put on the mantel and you’re like, Yes, I’m proud to own that thing. The buildings that you’re going to be proud to own generally are not going to generate great returns. And so when we think about an opportunity like if you’re looking for capital preservation, that could be the opportunity where we’re at in our lifecycle and the types of deals that we’re looking for. We’re not going to be able to generate the returns for ourselves or our investors that were we’re looking for. And so what we look for are things that you walk in and the paint’s peeling and there are issues in the kitchen and the tenant base isn’t super great and you walk in there and you’re like, I see problems and problems represent opportunity. And if we can go and fix those problems, will that brings value to the marketplace. If there’s nothing to fix or improve, it’s very hard to bring value to the marketplace.
Dan Kreuger: [00:15:06] Yeah, and that’s what it’s all about. I mean, you don’t make a ton of money from just the general appreciation of these assets, right? You make some money from that because there’s inflation and you know, there’s only so much supply out there and the demand is increasing. And you know, as your debt gets paid down, you know, this stuff kind of works over time. But if you want to actually make really good money, you’ve actually got to add value. You’ve got to improve something that needs improving. You can’t just buy something and let it sit there and expect to get rich off of it. You’ve actually got to do something to make it better and add value in some way, shape, or form. And that’s how money’s made. You know, any successful business has done that. They’ve solved a problem of some sort of society, and they’ve gotten rewarded for that. Amazon vastly improved the consumer experience for shopping. Tesla improved the automotive market. Facebook improves the connectivity of people. So all of these businesses came in and they found something that needed fixing and then they fixed it and they turned it to billionaires, right? No one came along and just, did, you know, bought a business and just kept it the way it was and got ridiculously rich off of it. Like, you’ve got to come in and improve something. That’s what you get paid for.
Anthony Vicino: [00:16:24] Yeah. Thinking about Tom, Billy, he mentioned something the other day, I think is really deeply profound. And it’s a concept that I’ve talked about a lot myself, which is that there are really only two directions in life. There’s either forward, there’s progress or there’s declining and. There’s going backward. There is no static state, the universe abhors a vacuum, and I think it’s like the second law of thermodynamics, which says that the universe is in a constant state of decline into entropy. If you don’t apply any more energy into the system, it just will continue to decay. And so the only thing that can add stability that can add order is by infusing more energy into the system. And that’s really what when you think about yourself and your personal growth or your investments is if you just come in there and you buy the thing and you don’t do anything with it, it’s going to continue declining into entropy. And maybe, maybe it can ride the wave of organic appreciation in that marketplace. But for us, that’s not enough. Like, we need to have control and we need to have the ability to go in there and deploy energy or, you know, value or effort to drive value. And at the end of the day, the people that are able to do that recognize the opportunities where they can go and add energy and not just superfluous amounts of energy because there’s a lot of places that you could pour energy, that’s just a really bad idea. And so not all energy deployment is created equal.
Dan Kreuger: [00:17:43] Yeah, yeah. And just to kind of clarify for people who are kind of talking in the bill your language now. But for those of you
Anthony Vicino: [00:17:49] Who is like, Wait, I thought, you guys love Alex, I’m Rosie. Who’s this town bill, you guys?
Dan Kreuger: [00:17:53] Oh, he’s the hot new thing, right?
Anthony Vicino: [00:17:54] And we love
Dan Kreuger: [00:17:55] Love. But he’s talking about adding energy into something. What he’s what he means is capital or people manpower, right? That’s the energy he’s speaking about. So Anthony started talking about thermodynamics, and so people hear the energy and they’re probably thinking, What’s that mean wind? Like solar? Like, what are you talking about? No, in this regard, it’s its capital and manpower labor, right? Sending in crews of construction workers to fix up units and getting the capital to pay for those guys. And that’s the energy in this, just to provide some clarity for everybody.
Anthony Vicino: [00:18:25] No, that’s a good clear clarifier because I think and you know this about me is that I live in a world of metaphor and analogy. Very often I forget what we’re even talking about. So that’s fair. Speaking of what we’re talking about, let’s go to mistake number two that new investors make. This one is a big one. And again, today is a Tom Biblio episode because this is kind of what got me thinking about this. Alex is going to get jealous. Don’t worry. Don’t worry, Alex. I have an Alex Alex story I want to share because it was actually pretty funny. But here’s the thing with seeking excitement. And Tom reminded me of this last night as he was talking to that, that fellow about his real estate business and maybe pivoting to something else and following the trend of NFTs and crypto and all these other things. He pointed out that new young investors, you know, zinnias and young millennials people in there like the 20s, don’t think about real estate in the same way that their parents did. They don’t want to own it. And we know like we don’t want to live in it and own it like a primary residence. And we know that we’ve seen that data trend. And that’s one of the things that gets us really excited about multifamily assets, in particular, is that there’s an ever-growing demand from millennials and boomers that don’t want to own these buildings anymore. And so they’re renting and they’re moving into apartments. So that creates a lot of potential residence for us. So we really love that. But what Tom pointed out was that these young people, don’t want to invest in real estate because it’s old and not sexy, and it’s tired and it’s scary, and they want to do new things like NFTs and crypto.
Dan Kreuger: [00:19:59] It’s going to
Anthony Vicino: [00:20:00] Go to the Moon. They want to go to the Moon. And honestly, you know, NFTs might be like a huge shift in wealth. Who knows? But what I do know is that real estate isn’t going anywhere and somebody’s got to own it, and everybody has to have some relationship with real estate in some way, shape, or form. You can’t just opt-out of the system. And so that’s one of the things that I really love about it. And I’m not saying Tom is wrong on this point, because maybe he’s right. Who knows? But I do believe that solid investing, not speculating and trying to shoot for the massive wealth swings. I do think good investing is built on the back of boring
Dan Kreuger: [00:20:42] 100 percent hundred percent. I can double down on these eight different ways because I’ve got so much experience in different types of not even investing. I mean, I just I’ve been a trader for almost 15 years now, at least. Benedict Arnold, so trader. It’s a.
Anthony Vicino: [00:21:01] That’s a wordplay. He lost just in Europe.
Dan Kreuger: [00:21:06] But yeah, I mean, basically it’s the same thing whether you’re investing in real estate or you’re investing in equity markets or your day trading or whatever you’re doing, it should be boring. It should be a systematic process. Or all you do is you’ve got a set of rules and every day, probably not even every day, maybe once a month or once a year, you go down your little list and you say, OK, I’m looking for these four things. Do I see them? Nope. And I sit and I wait. And then the next day, I’ve got the four things I’m looking for. I see you. Nope. And I sit and I wait. And so these will be your investing parameters. Sorry, if you’re looking for a deal that you want to invest in, it’s the risk profile that the time duration, the operator that aligns with you, and the market that you want to be in. And those are the types of things you’re looking for. And if it’s a trading that you’re doing, it could be, you know, a various combination of different indicators and data, whether it’s volume profile or, you know, if you’re using Fibonacci levels or whatever it is, you’ve got your thing, you’ve got your rules and you know, you’ve got a statistical edge. If you follow these rules and it’s when you don’t follow those rules and you go in there looking to entertain yourself. If you’re looking for excitement, you lose all your money no matter what. If it’s real estate, if it’s crypto, if it’s stocked, if it’s futures, if it’s a forex, if you go into this stuff looking for entertainment, you will lose your money because you’re effectively just gambling at that point.
Anthony Vicino: [00:22:29] I don’t know if Warren Buffett actually said this, or if I’m just attributing it to him right now. I think he said at one point that the majority of what they do is just sit on their hands. That’s and that’s the hardest thing to do
Dan Kreuger: [00:22:44] Is
Anthony Vicino: [00:22:45] Munger. It might have been Munger. Ok, well, they’re pretty much the same person to me. But the idea is solid where when it comes to investing your natural inclination, we have a bias towards action. We want to be involved, we want to be doing things and taking action and changing things. But with investing quite often, the thing to do is nothing. And that I know that’s super hard to put into action consistently, but it’s true. And it’s interesting to me that Tom had this perspective on young investors. But when it comes to building businesses, he takes a different approach. And he says successful entrepreneurs are the ones who can persist through the daily boredom. And really, that’s what investing is to like. The people who really succeed at it are the ones who can persist through the daily boredom.
Dan Kreuger: [00:23:35] Yeah, I mean, there are not that many amazing asymmetric opportunities that are going to be presented to you. You’re not going to have those things come across your desk every day, every week, or even every year. And so really, as you said, the most important thing you know what a lot of the best guys do is they sit and they wait because, you know, this one is for sure. Warren Buffett, the first rule of investing, is you don’t lose money in the second rule of investing is you don’t lose money, and the way you don’t lose money is you don’t do stupid deals or take bad trades. You wait for the ones that are so incredibly obvious and you’ve got such a good risk-return ratio that even if you are wrong, if you just wait for the next one, statistically, if you know if you’re betting one to make 10, you can be wrong nine times. It’s still come out ahead. So, you know, the point is that you sit there and you wait and even, you know, Jim Rogers, he’s another one of those guys that that people follow a lot in the investing space. He’s older, he’s walking around in a seersucker suit and a bow tie all the time. So you probably know who I’m talking about if you see a picture of him. He said his style of investing is he just sits there and waits until there’s a pile of money in the corner, and then he goes and picks it up, and he’s effectively saying the same thing. He sits around and waits until there’s something that’s just so asymmetric in that the downside is so limited, and the upside is so insane that it’s just easy. And that’s the kind of stuff you wait for. They don’t come along that often, but when they do, that’s where you get active. So for those people that are looking for something to do every day, that’s probably the wrong approach.
Anthony Vicino: [00:25:01] Yeah, get a job, go build a business, do those things, go be active, and do something every day on those fronts. But recognize that investing the more you meddle and the more that you try to force it, the worse the result is ultimately going to be. And you just alluded to number three on our list of mistakes that new investors make. And honestly, we should qualify this. The mistake that all investors make is they prioritize returns over risk. And so let’s break that down. Let’s talk about what does it mean to prioritize returns over risk and why that is a guaranteed recipe for disaster on a long enough time frame?
Dan Kreuger: [00:25:41] Yeah, I think what a lot of people have is a strategy when they’re looking for potential deals like, let’s just imagine you could go and look for deals on Amazon, right? And you type in real estate syndication deals like invest in an Amazon, you get all these results. You’re a lot of people are probably going to sort by returns. So show me the. Irs returns
Anthony Vicino: [00:26:01] First. It’s like the price sorting feature price low to high.
Dan Kreuger: [00:26:05] Show me the top returns first, and that’s probably what I want to do. And that sounds right. I mean, that sounds like it should be good. However, high returns don’t necessarily mean that you’re going to make a lot of money. They typically imply that there’s a significant degree of risk because there’s this much upside, there’s probably a significant amount of downside. And if there’s not, I mean, maybe, you know, it’s extremely asymmetric that that is possible. But like I said before, those types of opportunities don’t come around every day. They’re very rare. So you should not be looking at deals or opportunities just for the highest potential return. You’ve got to be looking primarily at the downside, finding the smallest downside, and then starting to look at what the potential upside would be that I think, in my opinion, is the better order of operations.
Anthony Vicino: [00:26:52] Absolutely. Again, because this is the Tom Blue episode, his number one rule of business is to avoid mortality events. So avoid the things that are going to end in catastrophic ruin, either putting you in jail or putting you dead. Now, when it comes to business, avoid the things that are going to put you out of business, and Naval Ravikant talks about this, too. He says. You know, in modern society, the risks and the returns, like the risks are fairly low in the grand scheme of the universe these days, as the chances of going out in the wilderness and getting hit by a lion are very, very low. And so we can afford to take more risks in our life for the opportunity that asymmetric returns. But the thing is, you got to be in the game to be able to realize those returns. So you have to avoid mortality events and things that are going to risk disproportionately for marginal gains in returns because, at the end of the day, that’s really what people are doing. If you really think about it, the difference between a conservatively underwritten 16 percent IRR apartment syndication versus a 22 two percent syndication. The risk profiles might be incredibly different, but at the end of the day, it’s only a seven percent difference. It’s not going to change your quality of life that seven percent return, but the 60 percent higher risk profile of the one over the other. That can change everything.
Dan Kreuger: [00:28:13] Mm-hmm. Yeah. And that’s the one that doesn’t have a metric and
Anthony Vicino: [00:28:17] You don’t see that one on the pro forma.
Dan Kreuger: [00:28:18] Yeah, there’s no risk metric that gives you some sort of cape or some sort of number to peg to the risk. You’ve got to try to kind of uncover that yourself by looking at effectively the assumptions that the operators made when they were underwriting this deal. You know, are you assuming things are going to be getting better and better and better every year? Are you going to assume that you can do something in this market that’s never been done with respect to how high the rents are going to go? You know, if you look at these assumptions first and ask yourself, is this really realistic? Like, what’s the probability that this actually plays out? Like, That’s the best way to try to quantify the risk, in my opinion, is just to look at the assumptions and ask yourself if that makes sense.
Anthony Vicino: [00:28:58] I want to share a story that happened today. So I was in the recording studio recording the audiobook for passive investing made simple, which if you haven’t, this is our book plug moment of the episode where we talk about the new book number one Amazon bestseller. You can go pick it up at the passive investing books. You can get it for free. The free physical book there just pays for shipping. But I was in the audio studio recording this section today, and I bet I could turn to the page and find it. But I’m not going to try because that will make me look silly on camera if I can’t do it. But I read this line and it was a question that I wrote, obviously. So it’s me speaking to myself, which is always weird to read your own stuff. But in there I said the most important question to continually ask yourself is, is this really realistic? And you literally said those words. And like, truly, when you ask yourself, Is this really realistic? There’s something about that question that pulls you out of whatever euphoria you might have been in to really sit there and like, Look, OK. Am I just selling myself a bill of goods here? Like, am I? Am I smoking my own supply? And quite often when you take that objective step back and question your assumption of, like, is this really realistic? A lot of times, if you have to ask that question, the answer is no.
Dan Kreuger: [00:30:17] Hey, you know, what’s fascinating just about like human psychology is that if you don’t ask yourself that question, you can go on just kind of behaving in a way that implies that all of these assumptions that you’re looking at and this deal or whatever it is that you’re looking at is completely probable. But if you just sit there and ask yourself the question, all of a sudden your brain starts to answer it and you realize that subconsciously you knew that this wasn’t realistic, right? But until you actually go through the exercise of asking yourself, in my opinion, it’s even better to write this stuff down, like write down the questions you need to be asking yourself and then write the answers. You’d be amazed what comes out of your head when you get a pen and paper, or you can type it too. But in my opinion, get a pen and paper. Maybe a remarkable
Anthony Vicino: [00:30:59] Hashtag. Remarkable. We’ll put an affiliate link, yeah.
Dan Kreuger: [00:31:03] Yeah, but yeah, it’s amazing what happens is like, there’s so much stuff going on in your head almost like you’ve got it’s like your phone and there’s like applications running in the background, like or like antivirus software. You don’t see it on your computer, but it’s back. They’re doing things. And sometimes you ask yourself these probing questions, you find out a whole lot about what’s going on back there.
Anthony Vicino: [00:31:22] This is backed by strong science. And so I want to drive this home because I’ve talked about this a lot in the past where I think the most important skill everybody needs to pick up right now is writing like journaling and understanding that writing taps into your subconscious brain in a way that nothing else does. And what’s really fascinating is when you think about the conscious mind, our ability to attend to any given moment consciously to something we can only hold. I’m going to butcher this, but it’s like one hundred and fifty kilobytes of data at any given moment in our activity. It’s not very much, but when you compare that to our subconscious mind and how much faster it’s able to process and how much more it’s able to process, it’s not even quantifiably the same. Now here’s the problem. Tapping into your subconscious mind, we don’t really have a good way of doing that. Sort of, I don’t know, go into a dream state, maybe meditating, except for what the research shows are writing. Now here’s the trick. Here’s how you can do this Sitdown and give yourself some quiet time just to write out the question and as thorough detail as you can. What’s the issue? What’s the problem that you’re trying to solve? Write it down in as much detail as you can and then go and take a break.
Anthony Vicino: [00:32:36] Go and take a hot shower. There’s a lot of science actually shows that a hot shower is really good or go do some light physical exercise doesn’t not? I’m talking like heavy weight lifting and getting really out of breath. Go do light physical exercise. What you’re trying to do is go into a place where your subconscious mind can relax and start to noodle on the problem. We don’t want to do anything that’s too intense because then our subconscious mind doesn’t have the room to flex. And then what we’re going to and you can even go take a little micro nap. That’s a really powerful thing, too. Then what you’re going to do is you’re going to come back and it could be an hour later, could be four hours later. It could be the next morning and you’re going to start writing and you’re just going to stream a consciousness, say, this is what I’ve been thinking about blah blah blah blah blah. And something happens within about a minute to two minutes. You unlock something and things will start pouring out onto the page that you had no conscious idea that you had been thinking about. And it’s going to provide you some really cool solutions to things. And it’s all coming from inside of you. That’s the coolest thing.
Dan Kreuger: [00:33:36] Yeah, it’s fascinating. I’ve been doing so much research on this lately for myself, and it’s just been profound to see the impact that this type of process has had on me. And it’s just the process of journaling like Anthony said. And then in addition to that, doing something called mental mapping where you start to kind of map out and this is more so with like your emotional wellbeing and like why you behave certain ways and do certain things. It’s, you know, when emotions get involved, especially with investing or anything with money, things go south really fast. So you’ve got to be really good at controlling your emotions whenever you’re dealing with money, especially if you get into the shorter-term stuff. You’ve got to have a really good handle on your brain, which is not something that most people have. And so the process of mental mapping out different emotional states and different sequences that your brain goes through is so powerful, you know, you basically just sit there and do the same thing. You write down exactly how you’re feeling about a certain thing and why you’re thinking that way. And then what’s flawed about the logic? And then what really is the thing that you should be doing? And then you go through that process a number of times and you start to really uncover, you know, why you behave a certain way in where it came from and what in your past caused this connection to this thing that causes you to behave a certain way, and it’s just a really powerful process of really just unpacking your own brain. And if you could do that, this is completely off-topic now.
Anthony Vicino: [00:34:58] No, it actually isn’t like as I’m looking at these three mistakes that new inexperienced investors make. Thinking about this, like it’s one is the perception of seeing an opportunity, which is a mental model. The other is seeking excitement, which is an emotional model. Returns versus risk, which is a judgment and emotional model. These are. It all starts exactly here, like in our ability to make quality decisions and think through problems from First Order principles.
Dan Kreuger: [00:35:24] Yeah. And really the key is to try to just remove the emotions from the equation so that you can stick to your rules and your parameters, right? And that’s the tough part. That’s the tough part is people let the emotions start to get in there and influence things, and people don’t make good decisions when they’re emotional.
Anthony Vicino: [00:35:41] Oh, this is the best quote. This is the Tom Bill quote of the day, which is emotions make us feel that dots connect that do not. So repeat that emotions make us feel dots connect that do not. It is when you get your head around that and you realize the truth behind that statement and. How profound it is, then you’re going to be on a mission to try and eliminate emotions from your decision-making process. Now I’m not saying be a machine and eliminate emotions from your life. I’m not saying that. But when it comes to understanding ourselves, it’s very hard to do that from an emotional place. When it comes to making objective decisions like an investment or a business decision, it’s hard to do that when emotions are clouding the conversation.
Dan Kreuger: [00:36:26] Yeah. And really, it’s not even necessarily about removing emotions, necessarily. It’s more so just about being aware of them and being able to still maintain your composure and execute efficiently when those emotions are there. And so that’s where that mental mapping process really comes into play because you start to realize these signposts that start to pop up as these things are happening because most people have these sort of behavioral patterns that have developed throughout their entire life tied to their emotional mental state, right? And so something happens and people tend to go through kind of like a cycle. And there are these very early warning signs that emotions are brewing, and a lot of these things can sit there and accumulate in your subconscious for a long time before they actually percolate to the surface. And we’ve all seen this with loved ones and family members. When we get into a fight, it’s usually been brewing for a long time. And if you could start to spot that stuff ahead of time, you can kind of be like a pilot in a plane and take it off autopilot, grab the controls and be like, OK, things are getting. If you hear, I got to be really intentional about how I approach this and you could still manage it, there’s emotion there. It doesn’t go away necessarily, but you’re aware of it and you’re able to grab the wheel and control yourself and kind of see yourself through the turbulence to go with the airplane example. A lot of it, and you’re good. But most people just don’t even realize all that’s going on in the background. And by the time they realize it, it’s too late and things are exploding.
Anthony Vicino: [00:37:46] And so maybe that is the bonus fourth mistake that investors and humans make, which is we go through life not really understanding why we’re doing what we’re doing, the underlying root causes of that. And so going back to that age-old quote, the unexamined life is not worth living. I think there’s a lot of truth in that concept. The more you dive into these ideas of like your self-awareness and understanding your emotions and your thought processes and how you became the person that you are. I find the deeper I go into that, the more engaged I become in life in general. And so that’s just a quick aside for everybody out. There has nothing to do with investing or real estate in particular, but hopefully, it brings you a little bit of value. So we have spent a lot of time kind of philosophizing a little bit more than usual on this podcast, but it’s been good. I hope I liked it. I think it’s fun. I hope it brought somebody some value out there and it resonates with somebody who’s maybe struggling with a lot of things that we’re sharing right now. But it’s time to go. It’s time to go home, time to get out of your car and go inside, cook dinner for the family. It’s time to, I don’t know, go leave the gym. You’ve been at the gym too long. I assume that all our listeners are either at the gym or driving to or from work, right? I think that’s a fair assumption. Yeah, but before we go, we do. Oh, you, as always, just a little book recommendation so that you can give your mind a little mind candy. Okay. Yeah. What’s our book? Another? Not that. Not that I
Dan Kreuger: [00:39:21] Do have some estimated simple in my hand. Just going to throw it up. Here it is. Amazon bestseller. I can get it on. Amazon actually can go to fast investing books and get them for free.
Anthony Vicino: [00:39:29] Right? Go to the passive investing book.
Dan Kreuger: [00:39:31] Is that there’s that? That’s a good one. And actually, the book recommendation I’m going to make today is not even a book that I’ve read yet.
Anthony Vicino: [00:39:38] Oh God,
Dan Kreuger: [00:39:39] Yeah. Interesting. But I’m really excited to read it because I just got it. And it’s I think it’s going to kind of double as a coffee table book for me, actually, it’s Charlie’s Almanac.
Anthony Vicino: [00:39:47] No way. Oh, you’re going to love it. It’s a
Dan Kreuger: [00:39:50] Little. So I’m recommending that I’m so confident I’m going to like it because everyone else that I know and respect likes it. And it’s, if nothing else, it’ll look great on the car.
Anthony Vicino: [00:39:58] It’s such a good coffee table book. It’s so well done. You’re going to love that. That’s an expensive book. That’s maybe when most expensive books I’ve bought in the last few years,
Dan Kreuger: [00:40:05] It was like
Anthony Vicino: [00:40:06] 80 bucks. Yeah, it’s pricey, but it’s
Dan Kreuger: [00:40:07] What it is the size of, like a dictionary. I mean, it’s like this big, big.
Anthony Vicino: [00:40:11] It’s and it’s more art than it is. There’s a lot of art in there. There’s a lot of drawings, a lot of concepts. But this so people if you’re listening to this at home and you have no idea what we’re talking about, Charlie Munger, the legendary partner of Warren Buffett. Or maybe let’s put that another way Warren Buffett is the partner of legendary Charlie Munger. There you go. Charlie Munger is always, Yeah, he is. He is a great thinker. I love him. This book is fantastic. I have read it. I can. I can attest to it. Go pick this book up. It’s worth the 80 bucks or whatever it is. Go drop it on Amazon and pick it up while you’re over there. Go pick up passive investing made simple and while you’re over there, also leave a review for passive investing made simple. That would really mean the world. Not to me, but to Dan. I’m just kidding. Would mean I know I need,
Dan Kreuger: [00:40:53] I mean, really insecure and I need. I need those likes. I need those reviews.
Anthony Vicino: [00:40:58] You need those good reviews if it’s a bad review. Take it somewhere else, I don’t want it, but that’s going to do it for us, guys. We really, really, really appreciate you taking a little bit of time out of your day to explore the three mistakes that new investors make here on multifamily investing made simple, the podcast that is all about helping you make more money. So without anything else? That’s it. That’s all we got. We’ll see you next week.
