Life is all about making decisions. And if you can’t make good decisions quickly you’re going to miss out on a sea of opportunities as well as make those around you frustrated and lose confidence in your abilities. So how do you make fast and effective decisions? In this Mobile Home Park Mastery podcast we’re going to review some methodologies to help you make good choices in a reasonable time frame.
Episode 257: The Dangers of Indecisiveness Transcript
General George Patton once said that a perfectly good plan today is infinitely better than an excellent plan tomorrow. Why would Patton say that? What was he thinking? Patton knew the importance of making decisions. This is Frank Rolfe for the Mobile Home Park Mastery Podcast. We're talking about the dangers of indecisiveness. Now all of us live in a world of urgency, whether we like it or not. You never really can just mellow out. You can't ever really kick back and say, well, I have not a worry in the world. I'm not going to make any decisions, because even doing that is making a decision. You decided to get off the normal path and go to the lake, go to the beach, whatever the case may be. You're racking up cost in doing so, you're missing out on opportunities.
So the big issue on decision making, number one, is if you don't do it, if you can't make decisions, you're never going to get anywhere. There's the old saying, "Think like a man of action and act like a man of thought." Never in that did it say you can think without action. So we all have to make decisions. Now, when you make decisions, many people hate doing it because they're worried they're going to make a bad one. They think, "Oh, man, if I commit to this, what if I'm wrong? I'll be shamed, I'll be publicly humiliated. My family will hate me. My friends will laugh at me." That's one of the dangers of making decisions, it's true. You put yourself out there for complete scrutiny. That's just a fact of how it works.
But if you don't make decisions, here's what happens: Life passes you by, you miss out on all kinds of things. And all of your friends and neighbors, everyone around you, your family, they lose confidence in you. Being a decision maker is a very, very important attribute of people who succeed in life. There's an old saying that successful people do what unsuccessful people don't. Well, I would throw out that perhaps unsuccessful people don't... One of their big items is they don't make decisions. So if we all agree that making decisions is vital, you have to do it, you have to be good at it, you have to move quickly. Then how do we get off of this problem of making decisions? Well, the first way is you've got to know what you're doing. Many people can't make decisions because they don't have confidence in themselves. Now, if you sent me into surgery at a big hospital, if you said, "Hey, Frank, the doctor didn't come in. He said to do your best." And he gave me a scalpel and a mask. What would happen? Well, I'd be terrified. I would have no idea what to do. I don't know how to do surgery. I'd be afraid I'd kill the patient. I'd be sued by somebody, so I just wouldn't want to do it. And that happens to a lot of people with mobile home parks. They feel like they don't understand it. They don't know. They've read a few things online, but they have no idea what the real makers and breakers and the pitfalls are to actually making that final decision to move forward.
So the first thing you have to do if you want to make the decision to buy a park or not buy a park, is you've got to learn what you're doing, how it works. Learn about infrastructure and density and the economics and the location and all those key drivers that make deals do well or fail. But you'll never be able to make decisions unless you know it, because at the end of the day, you are never going to have the guts or the fortitude to write that check or sign that agreement because you're not confident in yourself.
Now, another good way to make decisions is to use the axiom that Sam Zell uses. Zell is the largest owner of mobile home parks in the United States, which means in the world. And he is so obsessed with risk and reward, he wrote a whole book about it called 'Am I Being Too Subtle?' And you could buy that on Amazon or at your local bookstore. It's got a bright fluorescent yellow cover. And in the book, he talks all about his way he approaches deals. He only buys deals with low risk and high reward or high risk and high reward, but never high risk and low reward. And that allows him to jettison quite a few deals. So if the deal has low risk, high reward, he always buys it. If it has high risk, high reward, he debates it. He says to himself, is it an equal measure? If I take all that risk, is the reward worth it? And what can I do to mitigate that risk? And what can I do to go ahead and make that reward even higher?
If you write that metric out and you look at almost any mobile home park deal, you're going to see where it fits into that scheme. So if you're looking at a deal that's got a failing packaging plant that might cost you $1,000,000 to fix and all you're going to get for your trouble and in your risk is a regular kind of return, then you should never do that deal. If you're looking at a deal, however, that is in good physical condition, has a great location. It's 80% occupied and it's got a very reasonable cap rate to it, and you can push the rents a whole lot higher, and there's really no risk to it at all. Well, you're definitely going to do that deal. Or going back to the first example, a deal that's got a packaging plant that's failing, but the things at an enormously high cap rate, hugely profitable if you can pull it off. And then you start saying, well, maybe I can mitigate that risk of that packaging plant by getting a really good inspection or setting money aside to fix it or maybe connect you to the city sewer system. Then you might do that deal. But using the risk versus reward method has been very, very successful for Sam Zell. And he talks about it in that book over and over and over.
Next. Use a best case, worst case, realistic case methodology on any deal that you do. So how does that work? Well, it's easy. So if you're looking at a mobile home park that's for sale, your best case scenario would be you fill every lot at the full market rent, you push typically water and sewer back on the residents, you cut every cost imaginable. That's your best case. However, the worst case may be what you have right now: A park that's 70% occupied, where the park pays the water and sewer, you've got some collections problems, aesthetic problems. So what does that yield? That's your worst case scenario. Although some people like to even take it one step further, there's... In fact, banks out there that like to stress-test deals and take that revenue down another 10% just to see how bad a worst case you could handle. And then, finally, the realistic case, which is somewhere in between those. So if the park's at 70% occupancy and you wanna get it to 100, you might say, "Well, what if I only got it up to 80%?" And if the rents are at 250 and the market's at 450, you might say, "But what if I only get the rents up to, let's say, 350 and split the difference?" And then see how those numbers work. And when you get done doing those three tranches, if the best case is invigorating, thrilling, exciting. Okay, that's good.
And if your realistic case still would make you happy, that's good. But can you survive the worst case? And if the answer is yes, I can survive the worst case, then that deal might well work for you, because the worst thing that could happen to you is a deal that can still cover the mortgage and you can still keep working on it, trying to get it full, raising the rent, fixing it up. But if you start getting involved in deals where the worst case scenario you can't survive, you can't handle it, the negative cash flow will wipe you out, then those are deals you should not buy. And when you have a handle on best case, worst case and realistic case, it's much, much easier to make decisions because now you feel like you really have a handle on exactly what the right decision would be. And you know worst case you'll be fine, best case life is fantastic, and even realistic case you're still a happy person. Finally, you've got to accept accountability for your decisions.
This is a big problem in America today. People do not like accountability. Everyone likes to blame everybody else for things that they did. It stems all the way back, to me, to the 2007-2008 Great Recession, because America looked around after it had crashed and burned with mortgages, and they decided to put the finger of blame on someone, and the Obama Administration chose the mortgage industry. That's not who it should have been. It was the people who actually signed those mortgages. They knew what they were getting into. They knew they couldn't afford the $400,000 home, but gosh, darn it, they wanted to live there, then it was zero down [0:09:13.3] ____. And okay, maybe they lied a little bit on how much they were making, but nevertheless they thought it would all work out because they were gonna get that promotion or get a second job, but they never did. But that's who actually caused the Great Recession of 2007-2008, the American public buying homes that they couldn't afford. They'll pin it on the mortgage company, but that's what you see all the time today, everyone who doesn't get ahead, anyone who they feel... Everyone feels wronged about everything, and they always blame somebody else for all of their failures, and you can't do that.
Good decision makers don't approach it in that manner. Look at Eisenhower, the President during World War II. He had to make an enormous decision during the war when to invade France. It was called D-Day, and he agonized over D-Day because he knew if they did D-Day and they failed, it could well mean the Germans would win the war. It would cause the mass annihilation of a huge amount of his force, a huge amount of equipment, and it might seal the fate of the Western world. And basically, everything would ultimately be either under Nazi control or at war seemingly 'til the end of time.
And he already wrote a speech for when D-Day failed. Of course, D-Day did incredibly well, but he was ready for it not to. You can look it up on Google. He already had pre-written the speech. It's in the presidential archives. Basically, he was gonna tell everyone, you know what, D-Day was my decision alone. I made the most educated decision I could. I failed you. I blew it. I'm sorry. Here's where we go from there. Because he accepted accountability of his decisions, and if you wanna be a good decision maker, you have to accept the accountability. That's the only way you'll be at peace with what you do. You can't make decisions thinking that somehow you're gonna pin it on somebody else if it fails. If that's your attitude, then you're not gonna be able to make good decisions 'cause you're not gonna go through the basic steps you need to make good decisions, because you can make a haphazard decision and then just blame it on somebody else later. It's always interesting that people who make haphazard decisions, they always revel in the success if it works and then they always wanna pin the blame on someone else when it doesn't work. That's not the mark of a good decision maker.
So if you wanna make good decisions, acknowledge all the different ways, the different methodologies to do so. Know specifically what you're doing, ponder your risk and reward, do your best case, worst case, realistic case scenario, understand the sense of time urgency, and then move forward with the best decision that you can. But acknowledge to yourself, I'm not perfect. I'm making this decision based on all available data. I've put in all of my homework. I hope it's correct, but I can't guarantee it. But if it's not, I accept responsibility for making that decision. That's what decision makers do. The bottom line to it all is, we're all under a sense of urgency, we all have to make good decisions. Good decision making is an art that has kind of fallen away from interest today, you rarely see it in the media, rarely see much discussion of it in the school system. But sadly, it's one of the most important basics of buying a mobile home park. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. I hope you enjoyed this. Talk to you again soon.