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Habits in Saving and Investing for the Future

January 6, 2017 by  
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For the average person, the key to wealth is summed up in that simple little thing called ‘savings’. Saving can also be the key to peace of mind such as in that old phrase “Saving for a rainy day,” which means setting money aside in case of an emergency. Saving up money is just a very smart thing to do and the new year is a great time to really get serious about that and your financial life.

Your financial future begins and depends on the idea of savings. Even those with small incomes that are living hand to mouth, thinking “we are just barely breaking even,” will need to save. Yes, it can be tough to save a little money from each pay check but with good planning, some self-discipline, and giving up on things that you thought you couldn’t live without, setting a little money aside is very possible. Yes, you may have to come up with a very tight budget and forego eating out at your favorite cafe and not buy that shirt or dress that you want so badly, but the rewards are so very worth it. In the long run, a little savings can amass a very large net worth and even a fortune, plus a good deal of peace of mind.

But saving money is just part of the big picture. As you are building up your financial nest egg it’s a good idea to keep your eyes open for real estate deals that look to have great potential, even when know your savings is not near enough yet for a down payment. And yes, I am talking about and recommending those fixer uppers and dirt bag houses or apartments that need work but whose value can be greatly increased. Keeping your eye out for those bargains is a great habit to get into. You can even make offers when you don’t have the down payment.

But why, you may ask, would you do that when you don’t have the down payment? Well, first of all, it’s a great way to work on your offer writing and negotiating skills and, second, if you really do find and tie up a great bargain there is always the real possibility that you can go find a partner to put up most or, sometimes, all the money with you still owning a percentage of that bargain.

When I first started my saving and investing plan, I very quickly saw the advantage of making offers with that good old “subject to” clause which allowed me to back out if I couldn’t get the down payment or finance it. This gave me a lot of practice and, yes, I even landed a couple great bargains and brought in a partner.

So, if you don’t have much money but want to get started, begin by saving as much as you can and get in the habit of looking for those bargains. Also, you might want to pass this kind of information and strategy onto your kids, grand kids, or friends that you know are struggling financially. This kind of thing may be just what they need to get focused and find their way to financial freedom.

It’s also smart to take the time to really study and fully understand the incredible power of financial leverage and then what compounding your money can do, even when you start with just small amounts of your money. When I saw what leverage and compound could do, it turned me on and motivated me to a super high level and pushed me to save even more money and cut back on most everything.  Anyone can do the same thing.

So, as we start this new year, consider saving more and looking into bargain real estate as one of your great new year’s resolutions!

Sweet Sweat Equity

May 2, 2015 by  
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When I first learned, from my mentor and friend Larry Rosenberg, how I could actually make a 50%, 60%, 70% and even 100% return on my money, I was blown away because I knew exactly what those kind of returns could do to a small amount of money over time. And believe me back then, a small amount of money was all I had.

I remember vividly the first dirt bag property I bought.  It was a little house that was ugly on the outside and a mess on the inside. But this little ugly and messy house didn’t really need anything more than a major clean up, new carpet and a fresh coat of paint inside and out. The problem was I used almost all of my cash for the down payment.  So, I knew I couldn’t afford what contractors wanted to charge for the work and the materials that were needed to turn this dirt bag property into a beautiful cottage.

So what did that leave me? Sure, I probably could have borrowed enough to cover the contractor’s bids from relatives, friends or a bank but that would cut into my overall profits on the deal. So what did I do?  I just rolled up my sleeves and went to work.  Yes, it was some dirty, hard work but wow did it ever pay off!

I’m not a professional painter and I really didn’t have experience laying carpet but I quickly figured it out.  I can’t say that it was fun but when the project was done and I looked at that dolled up house it gave me quite a bit of satisfaction and a huge a sense of accomplishment.  But I also must say that my satisfaction soared to new heights when I sold the doll house for a big fat return on my investment and that, my friends, is what your own sweat efforts, or ‘sweat equity’, is all about. Wow. Can it ever pay some very handsome returns! And don’t ever forget how those returns of 50, 60 and even 100% can turn a small amount of money into millions over time.

I will admit that a bit later in my investing career, as things were speeding up, I finally got to the point when I figured that my time spent doing all that physical work was robbing me of time that could be much better spent with much larger rewards.  What I mean is that I realized at that point I could make more money by spending more time finding good deals and getting others to do the physical work, than doing the work myself. I could put in more time to make more offers, negotiate more deals and do the paper work needed to figure out what deals to buy and how to finance them. I traded sweat effort for brain effort.

This mental part really is also sweat equity. It’s actually the brain sweat that will give you the biggest returns on your money.  Both physical and mental sweat equity are critical and necessary and you can do both. You need to get to the right point in your growth so you can delegate the physical jobs to speed up your efforts and really grow those returns!

 

 

 

 

 

Shotgun Investing

August 1, 2014 by  
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Last week I talked about how you can receive a huge rate of return on your invested dollar—100% return– by increasing the value of the ‘right kind of asset ‘by only 10%! But the real trick is that you must know how to increase its value by 10 or more percent to start with.

In my opinion and from my experience the best type of asset that lends itself to  ‘forced improved value ‘ is good ol ‘ real estate and specifically properties that need a  ‘face lift ‘. These are beat up houses, duplexes, apartment buildings etc., or what I have often refer to as ‘dirt bag properties ‘.  The key is doing a ‘face lift ‘not ‘bone surgery ‘ so you would need to find properties that are run down mainly on a cosmetic level.  You really don‘t want a property that needs to be fully rewired, plumbing pulled or the foundation replaced.  I look for properties that haven‘t been painted for 25 years or the front lawn is dead and the fence is falling apart. Maybe it just needs new carpet and window coverings to turn it around. Those kinds of properties can make you a fortune and do so in a few short years.

I do want to add that when I was introduced to leverage I was a stock broker and I began trying to use leverage with stocks and bonds but I found out very quickly that the real problem was I really couldn’t ‘fix up’ a stock and I didn’t have any control over the company whose stock I was buying or the stock market itself.  I did however, have some control over a little beat up house that I would buy, even though that is where the real work began.

Once you have found the dirt bag property, the next big chunk of work is actually doing the fix up to greatly improve its value and give you those big fat returns on your invested dollar.  So how do you find those fixer uppers and exactly what kind of work does it take?

There are several ways this can be done.  You could drive through the right neighborhoods that are a bit run down and in your price range, but that is the hard way to do it and it takes a ton of time.  Since time is one of those things that none of us seems to have enough of I recommend what I call the ‘shotgun’ method.  The concept of a shotgun is that when a hunter shoots at a bird the shotgun blasts hundreds of BBs that spread out as they speed toward the target. Most of those BBs miss the mark but it only takes one or two BBs to bring down the target.  Likewise, my  ‘shotgun method ‘ of finding the right properties is very efficient and a real time saver and it only takes one or two hits to score your target.

All you do is use the internet to observe all the for sale properties that even roughly fit your  ‘specs ‘ and then make low ball offers –around 20% to 25% lower than the asking price.  And you do this without even driving by the property.  The real key here is to be sure you have a “subject to” clause in your offer, which basically says that this offer is good only upon certain conditions.  Those conditions can be subject to acceptable financing or even something simple like “subject to my spouse or partners approval”.  So now when you shoot your shotgun at many dozens of properties each week or each month, you only get in your car and drive by and or do an inspection after you get a  ‘counter offer ‘  or sometimes, an actual acceptance on you super low ball price! It does happen once in a while!

Using the shotgun method works if you make enough offers and then after you have scored a property, then the physical work begins. It‘s not easy but it‘s simple.  More on how to fix up those properties next week!