Well, did you start doing it? Did you start looking for a house to buy as an investment or a place to live and profit from today’s super low interest rates? If you don’t know what I’m talking about go read my blog post from last week entitled “Money Money Money”. Maybe I should have called it “Low Rates Low Rates Low Rates”.
If you are already in a very comfortable place financially and either don’t need to or don’t want to make some easy money (I probably shouldn’t call it “easy money” it’s more like “simple money” because it does take work!), then may I suggest you talk to your kids or friends that may not be so comfortable but have the drive, desire and energy. You can be a major financial mentor for them and they will love you for doing it and you will get a ton of satisfaction knowing that you directed them and helped them.
I receive so many messages from people coast to coast and even from foreign countries, thanking me for my financial advice, for giving them the motivation to get up and get moving and for making good financial things happen in their lives. There are not many things in the world that give a person more satisfaction and contentment than knowing you’ve helped someone make major improvements in their lives.
And I’m not talking just about money. Just helping people believe in themselves and motivating them to be proactive in any and every part of their lives is what it is really about. Having a solid financial situation is certainly a good thing and can help in a myriad of ways but there is more to life than money. Bottom line … help others to reach their goals with encouragement and constant support. You will get your reward in the happiness it brings you to see them bring about what is important to them into their lives.
We all want it and we all need it—and some people will do most anything to get it. Right now there are a few things you can do to really cash in big time. I don’t mean to say that money is the most important thing in the world but if you don’t have any, or not very much, it certainly makes life pretty darn rough!
What many, if not most people, don’t fully realize is that there are some critical choices and critical timing of those choices that can make all the difference in the world. It should be obvious that the “choice” of making the most income that you can and at the same time keeping spending lower than your level of income is a very good thing. By doing that you create savings and with enough savings you can make investments that, if you do it right, can give you passive income that makes your life smoother, more pleasant and rather easy. But … what about those investment choices and, maybe even more important, that thing called “timing”.
My advice to most everyone, at least here in the USA, has to do with what you could and should be doing RIGHT NOW!! Recently I said to my adult children, “You know, if you are financially wise and want to make some huge strides in your financial situation right now is the time to act! And, acting right now will pay huge dividends in the near and distant future.” What are those actions that I encouraged them to take and they are doing even as I write this blog?
Ok, here’s the simple advice which could easily be called “Million Dollar Advice”! Go buy a house or maybe 2 houses or a duplex or even more. That’s pretty simple but it’s almost sure to make my children or you a ton of money. You may be saying “Wait a minute. Prices have already bottomed out and have moved up in the last year or so and more in the last few months. You’re right but that’s OK because the big if not the huge reason to buy now is not because the possible continuing rise in values (and it might well slow down a bit) but because of a thing called “Interest Rates” or should I say ”Super Duper Low Interest Rates!” Just take a look at where we are now and where we used to be and very likely will return.
Monthly Payment on a $400,000 Loan for 30 years
Today’s interest rates are:
Rates in past years & probable future years:
Now at first glance that may not seem like a huge difference but … over the life of the 30 year loan–the difference between the 7% loan and the 3.5% loan is almost a third of a million dollars ($958,035.60 on the 7% loan and $646,624.80 on the 3.5% loan.) The big bonus is that today’s rental rates are going up and up, so you can rent those houses or a duplex’s out for more and more. Just think … 3 properties could make you almost a million bucks over the life of the loan not counting the cash flow that is possible. And what if you had more than that? At the top of my “rental property career” I owned more than 1,000 units! How does that sound to you?
I hope I have inspired you to go out and take advantage of these super low interest rates. They won’t last more than maybe one or two years longer and maybe even shorter than that. In other words, this is not the time to hesitate. It is the time to buy!
So now that we’ve gone over the first 3 big steps to building your fortune, it’s time to get to the very important Big Step No. 4. But before I lay that out, I thought we ought to talk about the power behind what you are about to do, the power of leverage and compounding.
My first introduction to leverage and compounding was as a stockbroker in the 70′s. I wanted in the worst way to make a fortune and do it quickly. I knew that there were seemingly ordinary people making millions of dollars in a matter of a few short years. What I didn’t understand was how that was possible. My thinking was stuck in the mindset of trading my hours for dollars and with only 168 hours in a week even with a decent hourly rate of $25 it would take 20 years to hit a million and that’s with the ridiculous assumption that I would not spend a dime or pay taxes!
Then I was introduced to leverage and compounding by Larry Rosenberg, a new brokerage client of mine and soon to be mentor. At that point I was becoming quite adept at bond trading and was shocked early on when I figured out I could make 100% return in a matter of weeks. I could buy $100,000 worth of bonds with only $5,000 or my own money, borrowing the rest from the brokerage firm. That’s using leverage. So if the bond price moved up just 5% the bonds would be worth $105,000 turning my 5k to 10k! Eureka! I had just discovered a money machine! But the bad news is that I could just as easily lose all my money if the bonds dropped 5%.
Larry Rosenberg introduced me to a safer, more consistent and more controllable asset: improved real estate. With this you could make a 100% return in 6 months to a year and do it with consistency and very little risk. But what Larry made me see that got me super motivated was what a 100% return per year will do to even a very small amount of money. $1,000 dollars at 100% compounded return will grow to the incredible sum of more than a third of a billion dollars in just 35 years! Although a consistent 100% may be hard to sustain, I did it for a while and reached my first million net worth in 47 months with only a couple thousand dollars to start.
This may all just sound like numbers now but in the next few weeks I will go into more detail with specific examples of improved real estate deals you can make so you can put these powerful concepts to work.
Last week I gave you the first step you need to take towards making your fortune. I hope you’ve started that first step or at least put in place a savings plan you can get started with in the New Year!
Now onto your next step …
Step 2. Go out and make offers on dozens of potential bargain properties.
Remember last week how I told you that timing is so very important? Well, this is what I mean–right now we are at a 50 year low when it comes to mortgage interest rates and as everyone knows home prices have dropped by 30% to 50%. At the same time rental vacancies have dropped which has pushed rental rates up. All that adds up to perfect timing and great opportunities.
This step is key to taking advantage of that “Partners Capital” concept that I hope you are seriously considering as part of your first step. The key to getting good partners to join you is to have a property “tied up” before you pitch the deal to them. Why? Because it’s so much easier to ask someone “Would you join me and take on a 50% (or 75%) interest in this property I found?” if you are giving specifics on the property as well. If you can start a pitch by saying “I’ve found a great 4 unit apartment building” or “I’ve have a beautiful little rental house under contract” as well as being able to tell them you can buy the property for 30% under it’s real value or that it’s all rented up and will show a fat positive cash flow from day one, it will be hard for them not to consider joining in your little venture.
Now back to making offers. How do you find those great deals?
Finding the great deals is largely a numbers games. What I mean by that is if you make dozens and dozens of low ball offers you will eventually have some of them accepted. What I have done in most cases is to make those offers before I even take time to visit the property. This gives you the opportunity to write up the offer but make it “subject to” or conditional on your full inspection of the property and on the condition of the approval of your partner, even when you don’t have a partner yet. By using the “subject to” clause you are not obligating yourself and by using the internet and several brokers or agents it’s possible to make hundreds of offers without a huge expenditure of your time.
So get going on Step 2. Remember, you won’t be obligated to buy a property just because you’re making an offer but you do have to get out there and start looking and eventually there will be a property that you’ll want to jump on. It’s easier than you might think.
Make it your New Year’s resolution … take those first steps. Make this your year of success!
Wealthy entrepreneurs seem to be a breed apart. But what makes them so different from the average Joe? A big part of it is their mindset, a way of thinking that just automatically aims big. They are ready, willing and able to make or move on large scale opportunities. Thinking big isn’t even an effort—it’s just habit.
I talk about mindset on page 107 of my book “How To Ignite Your Passion For Living”. This section explains how your mindset acts as a blueprint; how it directs what you do with your life. The people in this world who have amassed great wealth and success have a blueprint that is all about thinking big. If you want wealth or great success, you too have to work off a blueprint designed for thinking big.
Bill Gates is a well known example of super success. He’s also one of those people who has always had a ‘think big’ mindset. He was already embarking on his own business ventures at the age of 17. While an undergraduate at Harvard he managed to convince one of the first microcomputer manufactures to meet with him so he could sell them on something he hadn’t even tried yet. These crazy, untried, big ideas paid off and he eventually took a leave of absence from Harvard because of them. His big leap also started him down the path to starting what would end up being the largest software company in the world, Microsoft. It is also what made him a billionaire at the age of 31.
If Bill Gates had played it safe, it’s likely that very few of us would even know his name. Where will thinking big like this take you? If you want the big rewards, get your subconscious, as well as you intentions, working off the same big plans blueprint. Make thinking big a habit. Think big, think wealthy, think successful. If this truly becomes your mindset, it will lead to this also being your reality.
In the past few posts, I’ve been outlining the best ways to leverage yourself with networking. In addition to getting out there regularly and having a loaded business gun so you are ready to make the most of a new connection, you also need to have the proper, open-minded attitude. In other words, you need to toss preconceptions about what type of people you want to connect with or what kind of opportunities you’re hoping to find. Some of the best connections and opportunities arise where you least expect them.
For instance, a long, long time ago a candle maker and a soap maker found themselves married to sisters. As brothers-in-law, they saw each other frequently but never talked to each other about their businesses because they created two different things. It took their astute father-in-law knocking them over the head to realize that what they did was actually very similar—they both produced tallow and fat based products sold to the home retail market. They decided to go ahead and try combining their efforts by selling both products types at each sales call and putting their individual strengths where it would do the company the most good. Within a couple decades they were one of the largest companies in Cincinnati. The simple candle and soap makers became some of the richest men in the region, something they were not likely to accomplish on their own.
Now their company, Proctor and Gamble, is known around the world and boasts sales near the $40 billion mark. And to think that initially they didn’t believe they had anything to offer the other! Opportunities are plentiful. You just have to get past the standard assumptions, think creatively, and consider ideas from many angles.
So, the next time you’re introduced to someone or an idea comes your way that gives you that “not my thing” feeling, stop and give it a couple minutes and see if you can’t come up with a way you could benefit each other. You never know what you might come up with. Keeping an open mind gives you so many more chances to multiply your finances, as well as business partnerships and friendships. You’ll be surprised at how often positive things develop if you just give them a little consideration.
Chance meetings have the most amazing potential for you and your goals but to take advantage of these, as yet, unrevealed prospects you need to get out there and give chance meetings the opportunity to happen. I once made a million dollar profit on an apartment building after receiving a call from a guy I had met briefly only once before. He couldn’t come up with the full down payment for the building and just happened to remember our conversation and so called me to see if I would like to take over the purchasing contract for him. Our meeting was completely unanticipated but turned into a million dollar profit!
What did I do to make this happen? I just put myself out there, willing and actively trying to connect with new people. It’s all about how you present yourself and the words and ideas you put out there that will stick in people’s memory after you’ve parted ways. Be confident, be attentive and let people know what you do. Let them see your passion.
In other words, just leverage yourself, making yourself available to meet new people wherever you are. Use your personality to make an impression and keep a keen ear open whether it’s at a party, a business function, or just standing in line at the grocery store. You never know what it will lead to or how it might help you achieve your goals that much quicker.
I talk a lot about creating wealth on this blog because, honestly, making better money is a major goal for many people. However, not everyone wants to be wealthy, not monetarily at least. Some people have a different currency they want to invest and see grow.
Take, for instance, Daddy Bruce Randolph, a philanthropist and restaurant owner who, at the age of 60, after many years of hard times and failed businesses, scraped together enough money to open a BBQ joint in Denver. A year after he opened, not that much better off financially, he started serving free Thanksgiving dinners to the down and out in his community, a tradition that would last almost 40 years. He would also give away what he could to help the less fortunate on Christmas, Easter, and even his own birthday. Every year his generous events would get bigger and harder to finance but he’d still keep doing it. It gained him admirers all over the country, many of whom jumped in to keep the charitable events going as they grew well beyond his means. Because of his generosity, he had to live modestly but still, he was happy.
When asked why he gave so generously, Daddy Bruce said, “You can’t beat love. Nothin’ beats love. If you give one thing, you get three things back.” He was, in the truest sense of the phrase, a very successful investor. He invested in what he believed in most and gained the love and appreciation of thousands of grateful Denver citizens as well as the admiration of people from all across the country. Not that he was after the admiration, I’m sure, but if he was getting three times what he gave, he was certainly one of the richest men of his time, living a full, passionate life through bettering the lives of others.
I understand that kind of passion. I may have amassed significant personal wealth but the real joy in it has not been what I can buy but how I can use what I have to help make positive changes in other people’s lives. It’s why I wrote my book “How to Ignite Your Passion for Living”. It doesn’t matter whether your dreams involve increasing your monetary wealth or enriching the lives of others, the key is to live well and let your passion lead you.
How often do investors think about what is involved in their investments besides money? If you’re handing your money over to a stock broker, the time it takes to invest is small but you also take on significant risk. In real estate investing, there’s both money and time involved in getting it into shape to sell or rent. In a small business investment, the common approach is to put in as little money as possible but all your free time. So considering everything, what investment makes the most sense?
The answer lies primarily in the risk level of the investment and how much your time is worth. For instance, investing through a broker takes little time but the pay back is either very uncertain or very small. Small businesses often take years to turn a profit and your time investment, which may seem cheap or free initially, can be very expensive if you consider how much you could have made working more hours or a second job. Just think, if you could have gotten $25/hour working a second job, then that 20 hours a week you spent over 6 months getting the business up and running cost you $12,500 in lost income! How long will it take you to recover that investment through your business?
In real estate, you invest both a significant amount of time and, sometimes, money (see last week’s post and page 184 in my book “How to Ignite Your Passion for Living” on how to get others to fund your investments) but the outcome is far less risky. The added bonus is that real estate will not continue to suck your time the way a small business often does, and the returns will inevitably be greater and more secure than stocks. This is why I really encourage you to look at real estate if financial freedom is a primary goal of yours.
I’m not saying you shouldn’t open that storefront you’ve been dreaming about or support your favorite budding green business with a capital investment—there are many factors beyond time and money to consider when deciding what investment is right for you—but just don’t pour your all your time and money into something that is not going to help you reach your financial goals in the near future. Keep an eye on the big picture. Because after you make your first million in real estate, you can pay someone to do all the hard work to get that business off the ground or invest in whatever you like. That’s the beauty of financial freedom.