Investing, particularly in this industry, is all about delayed gratification. The concept is pretty simple. We all have wants and needs. Sometimes we need to fulfill those now and sometimes it's better if we wait to fulfill those needs. Psych majors will remember the Stanford Marshmallow study in the 1960s. They studied a group of children and offered them 1 Marshmallow right then or they could wait 20 minutes and have 2 marshmallows. About 25% of the children chose to wait for the 2nd treat. The researcher in charge decided to track the children that chose to wait and the kids who waited for the 2nd treat did better in almost every aspect of their life. They performed better academically and had better overall health. They were also better able to deal with stressful circumstances and were more socially adept.
Even recent studies on patience show that those who are willing to wait for a better return are usually richer. In 2017, The National Bureau of Economic Research surveyed older Americans (70+) and asked them if they would take $100 right now or wait a year for more money and how much money it would take for them to wait a year for it. In other words, they were testing their ROI or return-on-investment. The answer was called a "discount rate" so someone who reported that that $10 more would make them wait, reported a 10% discount rate. Higher discount rates meant less patience. Lower discount rates correlated with higher net worth and higher discount rates corresponded to dramatic reductions in personal net worth. Patient counterparts were richer by an average of $130,000. This patience test has a stronger correlation to overall wealth than marriage, religion or other factors. Less patient respondents also had less healthy lifestyles. They tended to smoke, drink more, and skip medical appointments, even after adjustments for demographic factors. Another interesting factor was education. Those with just a year of additional education had higher patience. Education is a form of delayed gratification. What does this mean for our industry?
Let's face it, it takes quite a bit of delayed gratification to get involved in this industry. People have to save enough money to get a down payment on a house (at the minimum) and build their credit. This can require years of smart decisions and living below your means in order to make that first move. Once someone is ready to buy a 2nd house for investment or for personal use, that also requires more savings and investment which means more delayed gratification. This industry is dependent on investing now for a future pay off either in consistent income or the ability to sell assets for a secure financial future. This often means years of unglamorous things like not taking expensive trips, fixing toilets, and managing rental property on a day to day basis. But the pay off can be tremendous at the other end when it's time to sell off assets or simply enjoy the income from years of hard work. If you are willing to endure some delayed gratification it will make you healthier and wealthier.
Many RHAWA members started into this industry as a way to save for retirement. Some people worked for themselves and had to be responsible for their own future or simply were looking for something that would generate a better return than other forms of investment. Rental housing is unique because you get to work with great people while also owning some great assets and having a chance to be closer to the investment. People will always need places to live and quality housing is a valuable service. And now we know from these studies, that good things really do some to those that wait, including rental housing providers!