The Quality Investor

[duncan_m]

If you had to give a ranking to an investor or take a long look at your own position, what qualities would you look at? What things would you judge?

I think too often we focus on how many properties someone has, its such a hollow and pointless measure. There's surely a whole range of skills, attributes, qualities etc that we need to look to in order to get the Big Picture of someones success as an investor..?

I was considering the following list, but was curious what other people would add?


Risk Management,
Budgetting
Tax Management
Asset Protection
Financial Planning
Estate Planning
Record Keeping
Research skills
Investment Track Record
Personal Life Balances
Activeness in Educating the Willing
Integrity
Knowledge (reading etc)
Flexibility in approach

Dunc.

[Sim]

Interesting concept Dunc,

However I think it wouldn't work terribly well as a score of "how good" an investor is at what they do, because there is one item you forgot to add to your list...

- The ability to leverage the skills of other experts (eg accountants, solicitors, bookkeepers etc etc).

I'm halfway through reading "The Millionaire Mind" - one of your favourites I think Dunc :D - and one of the things that comes out clearly is how the successful millionaires do not try and do everything themselves - rather spend a lot of time with trusted advisors.

So my point is that the ability of an investor to implement such strategies as risk management, tax planning, asset protection, estate planning etc - are not so important, since it is the professional advisors who should be doing all the work for you.

However, if you are more looking for a grading of the completeness of an investor's strategies, more of a "check list" to ensure that they have the necessities covered, then I think you are on the right track.

[Elwood or Bust]

Discipline is a VERY important trait in all forms of investment I believe and its important at three stages, probably most important at the buying stage:

1/ Buying: Many people, including me once upon a time, are impulsive buyers. That is, we are great researchers in seeing what we want to see. A property could be a complete lemon but in our impatience, we see everything through rose tinted glasses. I still have this problem in shares but i definitely am disciplined when it comes to property investment, there is so much more to lose.

2/ Retaining an investment: How many people are thinking of selling their properties due to the current warnings of overheated property bubble. Probably bnot many on this forum as we are hardened property investors, but out there in the real world, people that jumped in for a quick buck are getting scared. If you are a long term investor you need to be disciplined to trust your own research, as those of others are usually flawed, not specific to your investment, or biased towards their own product offering.

3/ Selling: In this scenario, too many people believe their property is worth to much. Remember the value of a property is what the market will pay for it at that time. Yes it can be a bargain, but at that time that the agents gavel hits the hand, its fair value. Many people pass their properties in because they think they can get more. Of course if you dont need to sell, then thats fine, but if you are passing in because you think you can get more in next couple of weeks thru private sale, you could miss out. If you NEED to sell, you need discipline in this area to realise what the market is paying at the moment, regardless if its under your 'realistic' price.

PS Sorry if this double posted, i got an error msg first time.

[Aceyducey]

I'd rate the important skills as:

Honesty (particularly with yourself)
Integrity
Delegation
Relationship management
Sense of humour
Willingness to get your hands dirty/do boring tasks

Everything else can be picked up as you go along :)

Cheers,

Aceyducey

[WillG]

Great question - what qualities make a good investor ...

Clear well defined Goals
Ability to measure where he is in his strategy
Risk management strategies
Ability to recognise a good deal
Ability to always have enough equity to pounce in a good deal
Has good quality, trustworthy advisors at hand (sim has a similar point)
Always in touch with current economic climate(tax changes, property law, urban trends ...)
Ability to listen & learn from fellow investors
I believe these traits/skills must also be posessed by business owners

[Lily House]

Lets not kid ourselves. Whilst we might enjoy the journey, we invest to make $$$$$$$$.

Any measure of an investor would have to factor in this.

Lily

[Bill.L]

Hi all,

1/ Following the path of least resistance.

2/ Having a disciplined approach to risk management.

3/ Educate yourself in the area of your investment.

4/ Luck, but it is surprising how much luck comes to those who follow rules 1/,2/ and 3/.

bye

[geoffw]

I like #4.

I bought a property about 12 months ago which was cashflow +ve with good growth prospects. It was advertised in the paper- I didn't even respond until about the thirs week I saw it.

I have had the response from some investors since- "I saw that ad!"

[investor]

Originally posted by Aceyducey
I'd rate the important skills as:

Honesty (particularly with yourself)
Integrity
Delegation
Relationship management
Sense of humour
Willingness to get your hands dirty/do boring tasks

Everything else can be picked up as you go along :)

Cheers,

Aceyducey

Hi everybody

Actually aceyducey I'm going to have to disagree with you here. These qualities are good to have I don't disagree with that, but they are not important to becoming a successful investor. I agree with Lily House here.

We invest, develop, trade, wrap etc etc to make $$$$$$ there is no doubt about that.

The most successful investor is one that has gotten there the quickest, that has made the most $$$$$ legally but not always ethically, and therefore the one that used his skills whatever they be to get there.

In an interview with Andrew Denton, Rene Rivkin said " I will never become a Zillionaire, because to become a Zillionaire you have to trample on peoples heads" he then goes on to call Kerry Packer " the best business man I have ever met".

Therefore I believe the measure of the most successful investor is the one who has made the most $$$$$$$$ in the least amount of time with the smallest outlay and in some cases to this you have to be abit ruthless. :rolleyes:

Regards

Investor :)

[Les]

G'day all,

It must come down to "What is the definition of success" - without that, we're at odds. If success is purely based on gaining the most $$$ in the shortest amount of time, legally but not ethically, then I don't want to be there.


Sorry, Investor - I can't go along with you on this one. If ethics are set to one side, then so am I. I want to be successful on MY terms - and if that means I won't be as rich as quickly, then so be it... In my eyes, I'll still be successful earning less, but ethically.....

Again, I guess that's personal opinion - but aren't all the posts based on that anyway?

Regards,

[Aceyducey]

Originally posted by investor
Hi everybody

Actually aceyducey I'm going to have to disagree with you here. These qualities are good to have I don't disagree with that, but they are not important to becoming a successful investor. I agree with Lily House here.

<SNIP>

Therefore I believe the measure of the most successful investor is the one who has made the most $$$$$$$$ in the least amount of time with the smallest outlay and in some cases to this you have to be abit ruthless. :rolleyes:

Regards

Investor :)

Investor,

If your definition of a successful investor is someone who is ruthless & simply out to make as much money as possible in the shortest possible time, then I'm glad we don't agree :)

I intend to enjoy my life, be fair to others (ethical) & spread success as wide as possible (helping family & friends).

Ultimately I don't invest to earn money, but to create a lifestyle for my family.

Over the last seven years I worked in the Internet sector of IT and saw lots of greedy people rushing to make as many dollars as fast as they could using ruthless, unethical and sometimes downright illegal actions. None of them are people worth knowing. None give anything back to their families, friends & society. And none of them are really happy, they measure themselves by their dollars and when the dollars disappear, so do their friends & self-worth. It was an object lesson to me as to what is really important in life.

I'm with Les on this one, life is about more than money.

But Investor, I still hope you get what you want - even if it isn't what you expected when you get there :)

Cheers,

Aceyducey

[jahn]

Les & aceyducey
Spot on. !
Without ethics, its not worth it.

duncan-m
I could be pedantic and answer your question about 'investing ' and rave on about the amount of time and effort I have put in on my family and say I have 'invested' plenty,

I am a real late starter as a property investor and am only going for number 3 IP, and not much cash flow yet, so would be lousy investor on most surveys. But hey.
1/ Still learning
2/ Still content
3/ Still happy
4/ Very satisfied
5/ NO guilt complex

OK duncan 6/ little bit jealous of the ‘young guns
jahn
:rolleyes:

[investor]

Originally posted by Aceyducey
Investor,

If your definition of a successful investor is someone who is ruthless & simply out to make as much money as possible in the shortest possible time, then I'm glad we don't agree :)

I intend to enjoy my life, be fair to others (ethical) & spread success as wide as possible (helping family & friends).

Ultimately I don't invest to earn money, but to create a lifestyle for my family.
Aceyducey

Hi Aceyducey, Les

Sorry Aceyducey and Les I agree ETHICS are important, but surely if you are investing in property, shares, business etc etc you are doing it to make money and therefore the most successful investor is the one who has made the most. What you do with the money afterwards ie. lifestyle, charity etc etc has nothing to do with how you got it in the first place.

However there are different levels of success and that depends on our goal as an investor. You may be happy with $100 or $200 a week and you may consider that when you have achieved that income stream that you are a success as an investor that is up to each individual, you may consider that you have now created the lifestyle you wanted for your family. But are you a successful investor ?

I consider Murdoch or Packer as succesful investors/business men and they didn't get there by being nice to everybody. There comes a time in investing where you have to have a mean streak inside of you otherwise you will not survive. There are times when you have to be ruthless to proceed to the next level. Now I don't mean you have to do anything illegal but unfortunately you will reach a level were there will be others out there who are going to try and trample on your head to get what they want, and they will, if you are always nice and all you have is a sense of humour.

If you are going to be a successful investor you are going to make some people unhappy, be it the builder you may take to court for not doing the job right or the tenant you are evicting for not being able to pay your rent. You cannot be nice, warm and fuzzy with everybody as you say. In investing you have to make the people you are dealing with understand that your word is final and when you say something you have to follow through and do it, it's the only way people will respect you, they may not like you but they will respect you.

You can still enjoy your life helping family and friends and create the lifestyle you want as you say but these things have nothing to do with becoming a successful investor. You can be mean, grumpy and have the worst sense of humour but you can still be a successful investor because of your ability to make money from property, shares, business etc etc.

Here we are talking about being a successful investor not about being a successful and loved member of the community who happens to own a couple of houses.

Reagrds

Investor :)

PS. I am not mean and grumpy and I have not trampled on any heads. :D

[Bill.L]

Hi all,

The concept of ethics/ruthlessness in investing is an interesting one. Consider the following,

You buy a nice looking painting at a garage sale for $10, hang it on the wall, and after a year or two someone visiting notices the painting and comments " isn't that Rembrandt's long lost ......" You take it to Sotherby's for auction and receive $10,000,000. After CGT, what do you do with the money? How much of it do you give to the person who originally sold it to you??? Does it matter to you if the original garage sale was in a Toorak mansion, or or a flat in Doveton?? Does the percentage you keep determine if you are ruthless/ethical ???

A different senario, You buy a rundown house in Williamstown for a cheap price from a "desperate vendor" in 1992 for $70,000. You spend $50,000 fixing/extending the place in 93. In 2003 you sell for $650,000. How much of your gain do you give to the original vendor who is struggling in a housing commission flat, and been that way for 11 years???
My belief is that just about all cap gains come at someone else's expense.( With shares you buy at $1 it goes to $20 you sell and it goes back to $1. You have 2 losers in this case.)

bye

[Andrew]

Good post Bill, I too have thought about this. I justify it to myself by supposing that the vendor was willing to trade future capital growth for cash at that point in time. If you have acted with integrity during the negotiations you cannot be hold yourself responsible for anothers expense at your gain.

andy

[Macca]

Bill,

The only time that I would feel uncomfortable would be if I knew that the painting was a Rembrandt when I bought it for $10.00.
If I bought it, took it home and the frame was full of woodworm and fell to bits, can I go and get my $10 back? I don't think so.

If I paid $60,000 for house, spent $100,000 reno, and then discovered the soil was contaminated or a coal mine is starting next door, will the vendor refund my $60k plus my $100k??
very unlikely I think.

We must act in accordance with our personal values, on the knowledge we have at that time. We do not have the right to tell other people what they should do with their life or property.

Every person of sane mind is responsible for their own actions, if they want to sell then we are actually complying with their wishes if we buy aren't we?

[XBenX]

Macca - im not sure if I read your post the way it was meant to read - so ignore my post if I misunderstood

But I would never feel bad about buying something valuable for a nominal price - if the vendor doesnt know the true value and accept the price you pay them... bad luck....thats the way a market works...failure of the free market system no1 - imperfect information leads to price distortion...its just a fact of life

[Aceyducey]

Originally posted by investor
Hi Aceyducey, Les

Sorry Aceyducey and Les I agree ETHICS are important, but surely if you are investing in property, shares, business etc etc you are doing it to make money and therefore the most successful investor is the one who has made the most. What you do with the money afterwards ie. lifestyle, charity etc etc has nothing to do with how you got it in the first place.

<SNIP>



Investor,

This sounds like standard Ends justifies the Mean stuff. Sorry Investor - it doesn't. You'll learn with more life experience.

Also the definition of MOST = BEST is totally fallacious.

MOST = MOST, nothing more :)


<SNIP>

There comes a time in investing where you have to have a mean streak inside of you otherwise you will not survive. There are times when you have to be ruthless to proceed to the next level. Now I don't mean you have to do anything illegal but unfortunately you will reach a level were there will be others out there who are going to try and trample on your head to get what they want, and they will, if you are always nice and all you have is a sense of humour.

<SNIP>


Investor,

You're drawing a very long bow here.

Assertive doesn't equal ruthless. You can look out for your own interests without being ruthless.

I don't know what your background & experience encompass, but after spending around seven years dealing with Boards, Venture Capitalists, CEOs and the like, founding & operating companies, I can assure you that the ruthless approach only works in the short-term & causes much more damage than good. The assertive approach, coupled with a good win-win philosophy works for the long-term.

I'm investing for the long-term, not the short term. In fact I do it full-time, so I must be doing something right.


<SNIP>

You cannot be nice, warm and fuzzy with everybody as you say. In investing you have to make the people you are dealing with understand that your word is final and when you say something you have to follow through and do it, it's the only way people will respect you, they may not like you but they will respect you.

<SNIP>


Again - don't confuse assertive with ruthless.


<SNIP>

You can still enjoy your life helping family and friends and create the lifestyle you want as you say but these things have nothing to do with becoming a successful investor. You can be mean, grumpy and have the worst sense of humour but you can still be a successful investor because of your ability to make money from property, shares, business etc etc.

Here we are talking about being a successful investor not about being a successful and loved member of the community who happens to own a couple of houses.

<SNIP>


So it all gets down to a definition debate - I regard successful investing as including being happy with myself and considerate of others, you don't.

Counting the dollars is fine, but they don't make a good bed to lie on.

(BTW: I'm enjoying the debate).

Cheers,

Aceyducey

[Jamie]

Originally posted by Aceyducey
Investor,

Ultimately I don't invest to earn money, but to create a lifestyle for my family.

Cheers,

Aceyducey

Hi Acey,

Without wading onto either side in this debate (I see the validity of both perspectives), arent you utilising a distinction you were loathe to allow investor to make himself?

My point is, you can't create the lifestyle you allude to without making money in the first place.

If you werent investing for money, how could you fund this lifestyle? Isnt the lifestyle afforded by successful investment a fundamental by-product of earning that money in the first place?

Just a thought,

Jamie :p

Im trying to avoid replying to the "end justifies the means" comment... my favourite book is Machiavelli's "The Prince" :D :D

[Aceyducey]

Jamie,

I've never said I'm not investing to make money :)

I'm saying that making the MOST money doesn't necessarily qualify you as the BEST investor or justify being ruthless just to earn a buck more than the 2nd wealthiest investor.

You need to have balance in your life & part of that is being able to sleep at night knowing that there is no-one out there who has been ruined by your decisions.

Here's a thought:
Most investors don't invest in cash.

Why is this if cash is the aim of investment?

It's because there are many things more valuable than cash - thus investing isn't simply about money, it's about what you do with it.

Cheers,

Aceyducey

[Jamie]

Originally posted by Aceyducey
Jamie,

I've never said I'm not investing to make money :)

Aceyducey

Sorry, but didnt you say in your previous post:

Ultimately I don't invest to earn money

Not sure, but that seems quite a paradox to me :p



Here's a thought:
Most investors don't invest in cash.

Why is this if cash is the aim of investment?

It's because there are many things more valuable than cash - thus investing isn't simply about money, it's about what you do with it.



True... but dont those who invest in property and/or shares have to liquify their holdings to indulge their "lifestyles"? Arent you now muddying the waters by comparing "cash" and "money"?

Equity in any investment vehicle cant fund your lifestyle... doesnt it all have to be converted to "cash" at some stage?

Jamie :p

[Bill.L]

Hi all,

We can JUSTIFY the final results all we like with whom knew what at the time of original purchase of an asset. However it changes nought the final result of the profit(cap gain) made. Someone is a winner and it is at the expense of some other party, either whom you purchased the asset from, or whom you sold the asset to, or both.

As an investor (for cap gain) you have to come to terms with this and accept that some other people will lose out at your expense. If you can't come to terms with this, then you will be held back in your investments physchologically, probably subconsciously.(My god they're big words)

If you invest where do you expect your gains will come from?? Whom gives you the physical dollars??? If you really think the market has peaked and it is time to get out , aren't you just selling to the bigger fool??

Enough deep and meaningful,

bye

[investor]

Originally posted by XBenX
But I would never feel bad about buying something valuable for a nominal price - if the vendor doesnt know the true value and accept the price you pay them... bad luck....thats the way a market works...failure of the free market system no1 - imperfect information leads to price distortion...its just a fact of life

You ruthless b*****d :p

Hi again

I have to agree with Bill.L, Jamie and of course XBenX here.

Aceyducey let's consider that painting as an example.

XBenX found the painting being sold for $10. He correctly identified it as being a Rembrandt and he knows that it's worth $10,000,000. Now what does he do ?

If he follows your rules :

I'd rate the important skills as:
Honesty (particularly with yourself)
Integrity
Delegation
Relationship management
Sense of humour


1. Honesty : Well he is going to fail that one miserably, because if he doesn't tell the seller what he knows he is not being honest.

2. Integrity: Well he is going to fail that one too, because it would not be ethical to buy it.

3. He will pass delegation and relationship management because he will pay the $10 with a smile.

4. He will certainly have a sense of humour as he walks away with the painting.

Now according to your rules XBenX should not buy the painting. However he does.

So if it was you, you would have not bought the painting and you would have left or you would have told the seller it's true value.

XBenX however bought the painting and sold it for $10,000,000.

Who therefore is the better investor ?

I would say XBenX is because he has $10,000,000 and you have $0

This is just an extreme example of how your rules can fail in investing. Everytime a property investor finds a bargain and buys it, where the vendors have underestimated the value of the property they are selling, they are breaking your first 2 rules. Everytime an investor sells a property without totally disclosing all it's negative aspects (and I've never seen that done in an add) they are again breaking your first 2 rules.


The only time that I would feel uncomfortable would be if I knew that the painting was a Rembrandt when I bought it for $10.00.

Macca, so you would feel uncomfortable but you would still buy it for $10. :p
Your uncomfortable feeling comes from the fact that it would be dishonest and unethical to buy it but it would be a good investment to do so.

What if you found a property being sold by an old couple for 200K when you know the market value of it is 500K. Would you turn down the deal ?

Regards

Investor :)

PS. I too am enjoying the debate :)

[ShaunW]

Hi people,
Very interesting discussion. However it seems to be fueled by two certain mindsets - that of 'not enough' and competition.
By this I mean if I make a profit it is at the expense of someone else (ie there is X money available, and if I want more, he has to have less), and my deal-making/negotiating abilities are used to beat the person I'm dealing with.
Having studied management I've seen first hand that greater deals and bigger profits are made in a cooperative atmosphere where there is the idea of abundant wealth (the old win-win and I'll scratch your back if you scratch mine).
Having said that, here is the disclaimer - this is to me entirely theory when applied to the investing world, as I don't even have a ppor. :eek:
Once I get back to Oz I'll be delving into Lease Options as my prefered wealth creation strategy. I see this as both cooperative (I'm providing a home to someone who wants it, and who is willing to pay my premium for the right to own in the future) and abundant (I create my profit before I actually sell - I decide how much capital gain I will make- thus I create my own profit, and no-one is taken advantage of, as my buyer agrees to that).
And the way I will source my properties will also be cooperative - my tenant/buyers choosing their home to a set value, finding tired landlords, helping pre-foreclosure 'sufferers', etc (thats the theory anyway.) :D
I hope this reads the way I'm thinking, and that it provides an interesting branch for discussion.
Cheers
ShaunW

[Tibor]

Hi,

Very interesring and enjoyable thread. While I am learning a lot reading different (and for the individual morally justifiable views)
let me put up a hyphotetical (or real) situation.

I am in trouble. Lost my job, no money left, I have to sell a property (irrelevant whether it is my 'HOME' or an 'investment' property), otherwise the bank will (financial insitutions have a bit less moral and much more ruthlessness in the name of the 'SHAREHOLDERS INTEREST').

The market has also turned a bit south and I need a quick sale.

Who will offer me the 'real' (it is my perception only as I am loosing on it bit time) value for my property?

My best bet (very safely) NO ONE.

Why?

My perception is unreal. The 'real' value of my property will be
the price a willing buyer is going to pay to a willing (or unwilling in my case) seller in a point in time.

Obviously from the willing buyers point of view it could be a real bargain, for me a real loss.

We even call the the smart money, investor, whetever, it does not alter the underlying fact. We may even 'justify' it by telling that if the willing buyer would not have bought at that price the bank would have sold for even less (and hopefully covered theri own exposure), so I was 'helped'. Was I really helped?

The point (opinion) I am trying to make is that this is not wrong or right. I call it REALITY IN LIFE.

Now, to make it even more interesting.

I might even get lucky and a very charitable person will help me out by lending me the money at no or very low interest to help me get back to my feet. This is fantastic for me.

The only question (and I will not ask) how this person got there to be able to be so charitable with his/her/it fellow man?

The person my inherited a fortune, won on the lotto or casino big time, saved during their entire life, whatever. Most likely the person made some money (reasonable amount to afford to be charitable) by buying other people's properties as a willing buyer (smart money) at VERY LOW PRICES, under their owner's 'REAL' value or foreclosures, etc. Would it bother me???? Obviously not, as my family will be helped to have roof over their head.

The other point (opinion) here would be to be able to be charitable big time (here flies the moral high) is to have enough dough to afford big time charity, which needs somehow to be made.

During the process in spite of our best intentions we WILL
make some decisions which from the other person's point of view will not be fair or a win.

For example it could be that a rent raise to market rate will push a family out of their accomodation to a much worse situation. We usually do not know it, and not even sure we would want to know. Will it stop us to raise the rent? Maybe temporarely (if we know the situation), but not indefinitely.


Tibor

[Aceyducey]

All I can say for the Rembrandt example is that if the painting was on sale for $10 the seller clearly has no idea of what they have.

If I knew at the time of purchase that the picture was a Rembrandt I'd tell the person, gently make it clear that they need help getting a true price for the painting & offer to act as their sales agent for 20% of the sales price. I would bear all selling costs.

If, instead, I found out subsequent to purchase that the painting was a Rembrandt I would sell it (don't want the expense of security to protect a painting) and send a cheque for 20% of the price to the person who sold it to me :)

In either case I have made an absurd return on a $10 investment - plenty to keep me happy & the next time that person was thinking of selling a painting they would come & talk to me.

20% of multiple deals is better than 100% of one (and people ALWAYS find out when you screw them).

Some of you might find it better to maximise a single deal than to make many deals, but I ask you: how many deals does it take to become a Packer?

You have to treat fairly with people if you want to go on doing business....bad deals get talked about, good deals get referrals.


Investing is a business like any other.

If I am prepared to hold onto and/or develop an asset to increase it's value I have no compuncture about paying what the asset (a property) is currently worth, investing my own capital & then realising a profit.

After all, the person selling me the property chose not to do this work, either because they had to liquidate their asset (to move the capital elsewhere) or were unwilling to invest further capital in the asset (had their capital committed elsewhere - ie on buying food :) ).

And I get to sleep at night, enjoy my work AND build up a network of potential repeat business.

I contend that any good investment, to qualify as good, must fulfil hurdles of both profitability & ethicality. Only in this way can you build a business.

Anyone heard the saying: What comes around goes around? - It's really true :)

Great post Shawn! While you probably won't get the maximum return on every deal, you'll get a lot of deals & every financier-type knows that deal flow is most important - can't make profits when there are no deals.

Cheers,

Aceyducey

[Bill.L]

Hi all,

Shaun+Acey, While I admire your noble intentions, I come back to the point of justification to oneself. Even if you agree on terms with another party as to what is purchased and when, and both are willing participants, your profit is their lack of gain. If you negotiate a better deal in a purchase, it is still at the other parties expense.

Using Kerry Packer as an example. He sold channel 9 to Alan Bond for one billion dollars. Both parties thought they had a good deal. Bond goes belly up because of stockmarket crash, Packer repurchases 9 from administrators for $200,000,000.
In both transactions Packer was doing Bond shareholders a favour but times and circumstances had changed. It didn't matter, one party was a winner at the others expense. If you had been Packer on that occassion, would you agree to purchase back 9 for the original billion dollars, even though it's value now was only $200,000,000???

Interesting discussion

bye

[Aceyducey]

I would have bought it back at the $200M figure. That's what it was worth. Not my fault all that value was lost since I sold it.

Don't confuse being ethical within yourself with being responsible for other people.

People make bad decisions all the time. It's not my place to fix their lives. I just don't deliberately structure deals in such a way as to hurt other people.

If someone came to you with a bad business deal which would give you a huge upfront profit but would end in the destruction of their business, would you take it?

I wouldn't - I'd work with them to develop a deal that keeps them in business & happy and delivers me lower initial profits but greater profits over time - Win-win = long-term success.

Just because you buy a property, screwing the vendor, doesn't mean you may not deal with that vendor again in the future (perhaps in another capacity)..and you've burnt a bridge that could cost you much more in the long-term.

Cheers,

Aceyducey

[investor]

Originally posted by Aceyducey

If I knew at the time of purchase that the picture was a Rembrandt I'd tell the person, gently make it clear that they need help getting a true price for the painting & offer to act as their sales agent for 20% of the sales price. I would bear all selling costs.

If, instead, I found out subsequent to purchase that the painting was a Rembrandt I would sell it (don't want the expense of security to protect a painting) and send a cheque for 20% of the price to the person who sold it to me :)


Hi Aceyducey

Firstly there is no guarantee that the owner of the painting will accept your fee of 20% for you to sell them the painting after you have told them what it's worth. They may even not want you to sell it at all. Are you willing to take that chance ?

Secondly I'm am very curious as to why you are willing to accept a 20% commission only, and let the owner keep 80%, if you tell them about the painting before hand but you are willing to keep 80% and only give them 20% of the profits when you sell the painting after you bought it and found out it was a Rembrandt ?

Is there are reason why you chose to keep 80% and not 20% if you bought the painting and then found out it was a rembrandt ? ;)

I just found that interesting :p

Regards

Investor :)

[Aceyducey]

To answer your points Investor,

Originally posted by investor
Firstly there is no guarantee that the owner of the painting will accept your fee of 20% for you to sell them the painting after you have told them what it's worth. They may even not want you to sell it at all. Are you willing to take that chance?

Yes I am willing to take the chance. I'm confident that I could convince them that I could do a better job of getting maximum price than they could & I've already demonstrated that I'm highly trustworthy :)


Secondly I'm am very curious as to why you are willing to accept a 20% commission only, and let the owner keep 80%, if you tell them about the painting before hand but you are willing to keep 80% and only give them 20% of the profits when you sell the painting after you bought it and found out it was a Rembrandt ?


If I knew the value of the painting then it would have been unethical of me to buy it for $10 when the owner patently had no idea of what they had. In this case I am acting only as an agent for the vendor & therefore the fee is lower.

If I had no idea of the value of the painting either (quite likely, I'm not into paintings) and bought it in good faith for $10, I do not feel it is then unethical to make the 80% profit. However, I feel that it IS unethical to take 100%. After I give that 20% to the person I bought it from I would then talk to them about what other paintings they had (or their friends may have) - again I've built some trust by being honest & laid the groundwork for more profit besides feeling happy that I have not ripped anyone off.

Being ethical works very nicely with enlightened self interest I have found :)

Cheers,

Aceyducey

[investor]

Originally posted by Aceyducey
If I had no idea of the value of the painting either (quite likely, I'm not into paintings) and bought it in good faith for $10, I do not feel it is then unethical to make the 80% profit. However, I feel that it IS unethical to take 100%. After I give that 20% to the person I bought it from I would then talk to them about what other paintings they had (or their friends may have) - again I've built some trust by being honest & laid the groundwork for more profit besides feeling happy that I have not ripped anyone off.

Being ethical works very nicely with enlightened self interest I have found :)


Hi Aceyducey

One can argue that it is unethical for you to sell the painting once you discovered it's true worth, and that it's unethical of you, if you don't return it immediately to it's owner and explain to him the grave mistake he just made.
One can argue that's it's unethical of you to make an $8Mil profit out of $10 at the expense of someone not as knowledgeable as yourself.

So another investor may consider you as being unethical for not returning the painting. :rolleyes:

Would you agree then that the level of ethics differs between investors ?
and what you may consider ethical another investor may not ?

I would have bought it back at the $200M figure. That's what it was worth.

Well then why don't you pay 10Mil (or close to it) for the painting as well ?
That's what the painting is worth.

Regards

Investor :)

[dtraeger2k]

Hi all,

It seems to me that Ace claims that investing is not just about money, its about one's self perception too. IF this is true, then I disagree. Investing IS about the money, if it wasnt we wouldn't be doing it - we'd be at our PAYE jobs.

To me, if someone is ignorant enough to have something (IP, rembrandt, etc etc) selling 400k under market value than that is their problem. Sure, they might call me a ******* if they find out I sold it the day after for 400k more than i bought it for, but I'm the one who is rewarded with a holiday/car/time with family/etc for being on my toes and spotting the deal, first.

-Just a thought

Dave

[Aceyducey]

Investor,

I note that you've shifted from providing your views to nitpicking mine - I'll take that as meaning that you now agree with my viewpoint and have realised you didn't have a leg to stand on.

Specifically addressing your point on shadings:


Originally posted by investor
Would you agree then that the level of ethics differs between investors ?
and what you may consider ethical another investor may not ?


Of course ethics varies by the person. Look around you, you'll find that everyone has slightly different beliefs on what is right & wrong. That's one of the reasons society is compelled to develop laws which precisely set out the boundaries (another is control).

It's always possible to find someone who believes they are more ethical than you - that's not the measure I apply.

I apply, as I had said in a variety of ways in previous posts, the level of ethicalness that makes me feel comfortable in myself that others are not being hurt by my actions.

I suggest you read some books by ethicists like Peter Singer - may open your eyes to the different schools of ethics & how well-thought out & structured they are :)


Dave,

Life is about perception - half full/half empty, etc. Investing is about choice. Choice is driven by perception (you only see the choices that you choose/have been conditioned to see).

Don't confuse the outcome (money) with the choice of activity (investing).

You can earn a lot of money working in a PAYE job (millions/year) - so why invest? Because you are making a choice to work for a particular lifestyle.

I'm glad that you aren't worried about being called a ******* - but what if the person selling the undervalued IP was a member of your family or a friend - would you still feel it was ethical to take the profit?

Now, is it then OK to take the profit if the someone was a person who might become family (the long-term boyfriend of your daughter or sister for example)? How about an acquaintance that you work with regularly?

Where's your ethical line?

Cheers,

Aceducey

[Bill.L]

Hi all,

C'mon guys, lets not throw insults around as it's not ethical:D , in what is just an intelectual discussion.

My understanding of my investing is that I do it to make money. I realise that the money comes from someone else. At the same time I try to be as "ethical" as the situation allows. Of course this will mean different things to different people.

In my original thinking on the Rembrandt from the garage sale, the concept was that I just thought it was a pretty picture and hung it on my wall for a couple of years before a friend in the know told me it was a Rembrandt. In this situation the 100% ethical approach would be to take it back to the original owner, (even if you had to search for them as they changed address). The 100% *******(ruthless) approach would be to sell it to your trust for $10 then sell it at sotherbys(by hopefully saving some CGT) ignoring your friend who told you about it's value, and laughing all the way to the bank about the schmuck who didn't know what he sold.

As this was a gift from the luck gods, and not an intentional investment, I would probably give the original owner 50% of the profit after CGT. I would also buy a very decent present for my friend who bought the facts of the painting to my attention.

When I am purchasing a property for investment, and purchase something that goes up 50% p/a because of a change in zoning, asthetics etc, I don't feel that I owe the previous owner anything. He had as much information as me and circumstances changed. My guess was better than his.

However despite all of my ramblings above, it doesn't change the FACT that I gained at someone elses expense in both cases.

bye

[JoannaK]

I've been biting my tounge on this one, but i really have to comment now.

Why on earth would you give the original owner of the Rembrant anything? He offered to sell it for $10. If he didn't know the real value, it's his problem. you haven't deliberately shafted anyone here, you are seizing an opportunity. Big difference.

What if you stumbled across a property that was listed $100,000 below market value??? Would you say to the owner or the silly agent..."ummm,,,,,you've under-listed this property...i'll pay $100,000 more, because that's the true market value and I want my conscience to be intact."?

My guess is NO. You'd snap up that property so fast it wouldn't be funny. And on top of that, you'd be laughing and bragging at what a catch you just bought.

Again, you're not shafting anyone here, you are seizing an opportunity. Opportunity knocks, you open the door.

You're in it to make money plain and simple....if someone else is going to be stupid - that's their problem, not yours.

[Aceyducey]

Originally posted by JoannaK
What if you stumbled across a property that was listed $100,000 below market value??? Would you say to the owner or the silly agent..."ummm,,,,,you've under-listed this property...i'll pay $100,000 more, because that's the true market value and I want my conscience to be intact."?

My guess is NO. You'd snap up that property so fast it wouldn't be funny. And on top of that, you'd be laughing and bragging at what a catch you just bought.

JoannaK,

What if that 'stupid' person was your mum? :)

Is it then ethical to apply different rules because you happen to be genetically related?

If so, keep in mind we're all genetically related - it's just the degree. What degree of separation is sufficient to make you happy to snap up this deal?

Or what if you have the prospect of doing millions of dollars of business with that person in future? How would they feel about working with you in future if they found out that you were not honest with them here? What would it cost you?

What degree of self interest is sufficient to make you choose to tell them what a fair price is?

That's what defines the ethics debate.

Cheers,

Aceyducey

[XBenX]

Ive read the debate... personally I think its a mute point... but Ive read it with interest regarding other ppls ideas....

The quote that disturbed me was :

"You'll learn with more life experience."

An example - I often get older family friends telling me about the economy and insurance... I listen to their POV and rebutt...their stock reply is... (you guessed it) "You'll learn with more life experience." its the biggest cop out in the world....essentially it is - your wrong, im right - I dont need to justify myself to you.. im older and more experienced obviously Im right (nevermind the fact the young "inexperienced" person has undergrad postgrad and industry training....)

Please ppl - age and experience is great.... but its not everything... the amount of problems Ive encounted because im young and obviously inexperienced is astounding.

The arrogance on this forum is unbelievable....it seems everything is a big dick contest... we seem to forget we are ALL small fish !!!

<end rant> ahhh thats better

[JoannaK]

if it was my mum then she's stupid, just because she's related doesn't mean the rules are changed.

If it was me, then I'd be stupid!

If I listed a property on the market, it would be MY responsiblity to ensure that it is listed at an appropriate market price.

If i agree to list $100,000 under market (knowingly or otherwise) - then it is MY stupidity....I wouldn't list it $100,000 under market unless I was happy to get that price anyway. So, if I knowingly or otherwise sold a property that turned out to be $100,000 undermarket, that is the price i was happy to receive....so why would that influence any other potential business opportunity with that person?

It is their responsiblity to protect themselves - we are not anyone's saviours here!

[Aceyducey]

Originally posted by JoannaK
if it was my mum then she's stupid, just because she's related doesn't mean the rules are changed.

Joanna,

I guess that your mum doesn't read the forum ;)


XbenX,

Glad you feel better after that rant, I find them very therapeutic too :) My 'life experience' comment has nothing to do with age & was slightly tongue in cheek anyway :)

And remember this is the internet - no-one knows if you have a dick - so there's not much point in comparing them ;)

Cheers,

Aceyducey

[Bill.L]

Hi

Looks like we are all in agreement here:confused: Its just the definition of investor that needs to be looked at.

If you think that the best investor= the one who makes the most money, Then Packer,Murdoch and ruthlessness win out.

If you think that the best investor= the one who makes everyone else win and not make the most money themselves, then the salvos and Tim Costello(not Peter) win out.

I'm just in the middle trying to make my bit.

bye

[investor]

Originally posted by Aceyducey
Investor,

I note that you've shifted from providing your views to nitpicking mine -

Hi Aceyducey

No don't feel that way, I'm just trying to understand why you place so much importance to ethics when it comes to measuring the success of an investor. But by answering my question you have proven my point, and it is in fact you who has come to agree with me. :p

That is :


Of course ethics varies by the person.

It's always possible to find someone who believes they are more ethical than you - that's not the measure I apply.


So in fact you have agreed with me that ethics should not be applied when measuring the success of an investor purely because it is such a large variable and will therefore vary according to the investor. You can forever debate on what is ethical and what isn't so it should be excluded from the criteria to identify the most successful investor. Don't confuse ethics with legality however.

Let's cosider two Investors which started off with the same outlay and have invested for the same amount of time and both have acted legaly.

Investor #1 has ended up with 1mil in equity, cash,shares etc
Investor #2 has 10mil after the same period of time.

Who is the most successful investor ?
I would say investor #2.

Investor #1 cannot possibly turn around and say "Yeah he made 10 times more than me because he acted unethically" he would not have a leg to stand on, because as you have clearly stated, ethics varies by the person. So investor #2 is the most successful investor.

I am glad that you have come to agree with me that the levels of ethics involved in an investment decision vary according to the investor and therefore play no importance on how successful that investor may be.

Unfortunately, at the end of the day, the only measure I can think of that can guage the success of an investor is how much $$$$ he ends up with provided that other variables such as time and initial outlay are constant and equal.
There are however factors which attributed to their success such as their ability to see a bargain and act on it, their ability to position funds to maximize returns etc etc which we can talk about.

But the only measure I see is the $$$ at the end of the day. :)


Regards

Investor :)

PS. I agree with JoannaK :)

[Aceyducey]

Nice counter twist Investor, not true that we agree but nice twist nonetheless :)

I'm going to close out my contribution to this thread by saying that I hope it raises a lot of thoughts in peoples' minds about ethics in investing & the choices they make.

To me investing is simply one approach to happiness through wealth. Personally I like it as an approach because I can control the process, it gives me great satisfaction to create 'stuff' and provide shelter to others and I am not required to destroy or maim people professionally or emotionally to move ahead.

I could equally become wealthy in the business world, but found over ten years that the lack of ethics, ruthlessness & egos in the corporate world did not leave me feeling happy with myself in the actions I had to take to build and defend businesses.

Everyone has to choose their own path, applying ethics is a tool to ensure your path is an enjoyable one to walk.

You target wealth as the purpose of investing, possibly because you do not see other paths to get to this goal. I see lifestyle as the purpose of investing, because I can see many other paths to wealth but through investing I gain the greatest joy.

Cheers,

Aceyducey

[geoffw]

Originally posted by Aceyducey
I see lifestyle as the purpose of investing, because I can see many other paths to wealth but through investing I gain the greatest joy. Acey,

The "joy" is the only point I want to pick up on in this debate.

Although it was not my intention, the "joy" I've had is not so much in the satisfaction of a good investment, or the satisfaction of a good return- or even both.

It's been the satisfaction of taking an ordinary little house, painting it, putting in floors, curtains or whatever- and seeing a quite special place replace that very unsatisfactory place.

Obviously, I would not have done it just because I liked the looks. The extra rent or capital value has provided a satisfaction in its own right.

Acey, I've seen what you and Jas have done to one place- I'm sure that you've had that same feeling of satisfaction.

And I've read the same feeling by people who post their before and/or after pictures.

It's great to get that satisfaction. For me, it's especially good because I'm a desk person. And, I swore 13 years ago, that I would never do reno work myself again.

I've done it now. I don't want to do it full time (but I know I have that fallback if there's problems with my job). And I'd love to do it again. Within limits.

The profit (in whatever form) is important.

But the satisfaction of seeing your own handiwork looking good- and even the feedback of a satisfied tenant- is also a good bonus.

I'm really enjoying this.

[bundy1964]

Originally posted by JoannaK
If I listed a property on the market, it would be MY responsiblity to ensure that it is listed at an appropriate market price.

I heard an interesting one tonight.....

My friend does a plumbing job for a couple and they offer him a block of land for $X. Contracts are signed and deposit is paid. Couple get an offer for $X higher, after much legal talk original offer stands. Couple said it was worth a try to get mates offer withdrawn then invite him in for coffee. Mate is now subdividing 60+ house blocks :eek:

bundy

[investor]

Originally posted by Aceyducey
Nice counter twist Investor, not true that we agree but nice twist nonetheless :)



I thought you would like that. :p

Nice closing post Aceyducey I like it. :)

Good luck in your journey in the world of property.


Regards

Investor :)

[yadreamin]

I have been digging around in the dark and dusty again and this is a good thread if you have a bit of time for a read. It really does make one THINK.
cheers yadreamin

[JoannaK]

yes, this is a very interesting thread indeed...

[jahn]

Hi all
And one of the most interesting things is, that this is so many years on, and time has not changed the relevance of the coments/thoughts
Since then, property and investments have surged, levelled dropped, etc,
And it was also good to finish on a good note :o :D
jahn

[sue78]

I can understand Acey's views but at the same tiem I can understand Investor's too.

Investor - actually, being an investor you shouldn't give a damn about how people measure your success. At the end of the day, we all made money and we don't need to compare how much each person made because we are all winners.

The difference is how you feel about yourself with the way you have made your money ethically or not so ethically. If you feel good then good for you. If there's something nagging at you then you probably made an error of judgement along the way.

Acey- personally, if it was blatantly obvious that a house was being sold for way below market value, I probably wouldn't feel right about the deal. Call me stupid but I would advise the owner and then if he still wanted to get rid of it then fine with me. I may have lost a good deal but then I don't feel upset about it so doesn't matter. Infact, it probably makes me feel better about myself.

I have made a decision to not increase our rent this year. In the last 2 years it has increased by more than 15% and one tenant has expressed to me that it's starting to get a bit tough for her. The last increase, I actually felt guilty and in hindsight, I should have stopped our agent. When you take into consideraion loss of rent if she moves,out, losing 1 week finders fee and the new tenants may not be good then it's not worth it to be too greedy for the sake of an extra $5 per week.

Maybe people here are not religious but I am. The way I see it is that I don't need to increase rent to gain an extra $5 p.w per house. Maybe God will bless us in other ways i.e Capital Growth, promotion or doesn't even have to do with money.

[Les]

G'day all,

Yes, I agree this thread has a lot of interesting thoughts attached. As such, it may be worth some "kudos" .....

I'm a bit surprised it doesn't have any stars. But, to display these, three or more people must think it worthy. Since this is a thread, the way to give it kudos is to use the "Rate thread" drop-down at the top of the page. If enough people agree, it will get its stars.

Edited later:- I endeavoured to give it my vote for stars, but nope, I'd already done this and it wouldn't let me do it again. Fair enough.... Over to you now,

Regards,