by Donna Robinson, TREA Director

Today we live in what is known as the information age. And indeed, it is easier than ever to access information on virtually any subject. There are more seminars, more books, more lectures, more videos. Whatever the topic is, there is information out there that you can access. And there is no question that more people are more knowledgable than ever before.

But have you ever thought about the fact that having knowledge does not automatically mean that you have the wisdom to use that knowledge proper  

Consider the knowledge of the atomic bomb.

The scientists had the information and knowledge necessary to create it, and make it work, but in the process they created the potential for mankind to destroy itself.   

It is one thing to have knowledge, it is another thing entirely to use that knowledge to achieve the best possible results. Knowledge may be power, but wisdom is the power to use knowledge wisely to insure that the result desired is the result actually achieved.

Real estate investing is not quite as big an issue as the atomic bomb, but the same dilemma applies in both cases.

Can you use the knowledge you possess about real estate to establish financial independence for yourself and your family? Or will you use your knowledge of real estate to put yourself into foreclosure and possibly bankruptcy?

Today's high foreclosure rates, mortgage company business failures, mortgage securities losses, and much of the recent stock market losses can all be traced back to the same root cause - knowledge without wisdom.

There are millions of home buyers out there who made poor buying and financing decisions. There are tens of thousands of mortgage originators out of work today because of bad lending decisions, there are banks and investors all over the world losing billions of dollars because of bad investing decisions.

All of these groups posessed knowledge concerning what they were doing. But most of this housing market melt-down would not have ocurred if their knowledge had been tempered by wisdom.

Wisdom goes beyond the basic knowledge that occupies our minds, and asks "Does this decision really make good sense?" "If I do this particular thing, what will be the real outcome?"

Our decisions cannot be viewed strictly through the lens of our head knowledge. Decisions, especially big ones, like buying houses or investing money into a real estate development are decisions that must be made not just by knowledge of the situation, but through the filter of wisdom.

Wisdom includes several key items that stand uniquely alone in their ability to help us make better personal and business decisions.

If we take the time to be "wise" we will consider our decisions in light of certain specific things that make up what we refer to as "wisdom".

First is "Truth". The ability to see the truth for what it really is. The truth is the truth, regardless of what you believe is true.

Most buyers would never have signed for sub-prime mortgages unless they believed that they would be able to make those payments. But their beliefs did not line up with the real truth. Their decision was emotional and was a rationalization, not a gut-level assessment of the true financial situation that would result from their decision.

The real truth was that most buyers simply would not be able to make those payments after they escalated to their full principal and interest amount two years after the mortgage was signed. The buyer had knowledge that the mortgage payment would go up, but heck, that was two years away. Many simply did not consider the "truth" about their personal financial situation.

It was easy to believe that the higher payments would not be a problem when the time came. But alas, the belief did not line up with what the actual truth was. Now the truth is, millions of buyers can't make those payments. And for them, it will be equally true to state that their finances and credit will be ruined for a long, long time.

The first step in making right investing decisions with the benefit of knowledge AND wisdom is to apply the "truth" test to the decision before you commit to anything.

We can only be effective and profitable investors if we view our investing decisions through the clear lens of truth, and not just let our emotions rule our actions.

We must be willing to set aside our emotions and examine our decisions carefully. Once a commitment is made, especially where a real estate investment is involved, there is usually no going back.

Take the time to examine your business and personal decisions to see what the "truth" really is, and whether this decision is truly likely to provide the results you want to achieve. Only then can you make wise decisions that will allow you to grow and prosper for a lifetime. ***

This is an example of the kind of professional advice and information available to members of The Real Estate Arena. TREA offers quality professional level education on real estate investing, with the emphasis on professional methods and business strategies. This information is provided by experienced real estate professionals who understand todays market and work full time in the real estate industry. TREA was created for real estate investors and the professionals who serve them.
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