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Smart Money Hedges Bets In Tough Times

February 15, 2019 by  
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We’ve had quite a few very good years, economically speaking, and we may very well have a few more to come. There are, however, some warning signs that things are starting to change but it’s a slow change. Here are few things the so-called experts are predicting that, in my opinion, are very likely to happen:

  1. European expansion will slow down.
  2. Japan’s recovery will remain weak.
  3. China’s economy will keep decelerating.
  4. The rate of inflation will stay around 3%.
  5. The Feds will raise interest rates 3 times in 2019.

The experts, however, are predicting that changes will take maybe 2 or 3 more years, and will no doubt happen slowly. Regardless, many of us investors are thinking about hedging our financials that’s right now. You might ask why wouldn’t anybody or everybody hedge their bets if they knew tough times were coming? Of course, many people would, but the average person doesn’t know that tough times are ahead.

Smart money –money that is invested by people with expert knowledge – does not always do well either, but there are indications that give the smart money people a head start on everyone else. No, they are not always right, but they are more often than not.

A very important part of the formula is to be an independent thinker. The overall economy is like a gigantic river. Sure, you can swim upstream, but it is very difficult. What smart money does is watch the general direction of the flow of that giant stream. Smart money people know that the flow doesn’t suddenly turn around and run the over way.

So even though some of the experts are saying our markets and economy is ready to turn around and go down, it most likely will not happen fast. So, these days, I am advising people to do two things to hedge their money and investment bets:

#1 – Save cash. Build up a cash reserve to be invested after the economic pull back.

#2 – Even though you are building your cash reserves, keep making low ball offers to highly motivated sellers. Granted, there are not a lot of motivated sellers right now because the economy has been in an uptrend for quite a while and many people think it will continue. Still, there are always some motivated sellers out there that need to sell for various reason and some of these people need to do it now at under market prices.

Finding those motivated sellers and making those lowball offers is still smart money, especially if you can do so while building up your cash reserve. So, you might as well keep throwing you net out there and see what you can find. That kind of smart investing and saving is the kind of thing that will get you through the tough times, whenever it is they get here.

 

 

The 100% Return Goal

January 18, 2019 by  
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As we begin a new year it’s a very good time to remember the basics, specifically the basics of financial independence through which you make and keep your own fortune.  It’s so easy to forget the basics, especially when we are all caught up in the details of our daily lives, even those details that are involved with building our wealth. For example, if you have a big problem with the plumbing at a rental property or the property taxes just got bumped up, it’s easy to focus on just that, but that can get you frustrated or make you kind of space out on your overall plan.

What you should not forget is that you have to continue to look at the big picture, looking for ways to take advantage of leverage whereby you could earn as much as 100% of your money due to compounding. I’ve certainly been there and done that. Even on the very property that is giving me fits, I many times have failed to step back and realize that my equity on that very property has already exceeded a 100% return on my money and I should be motivated and reminded to keep doing that.

There is a simple example that I used in my fist book, How to Wake Up the Financial Genius Inside You, where I showed how 1 single penny a day compounded at 100% a day turns into just over $339 million on the 35th day alone. Now I know there is no way you can compound your money at 100% per day, but it is possible to compound your money at 100% per year, especially in the first few years. The key to those huge numbers is using other people’s money (your leverage). So, maybe only 10, 20 or 30% of the price you pay is with your own money and then the rest is in a loan from the bank or the seller for the balance. It’s not only possible but many people are doing just that, every day, including myself and many people that I know and have helped.

I do know that finding beat up properties these days can be a bit more difficult, depending on where your market is, but things change and prices go up and down and you and I need to always be looking for those bargains, especially those properties that need fixing up, the ones I like to call “dirt bag properties”. Then, always remember that good ole leverage formula:
If your down payment is only 10%, and you improve the property enough to increase the value by 10% you have made a 100% return on your money. That formula is a little simplistic since it doesn’t take into account your expenses, but you can keep those pretty darn low if you do most of the work yourself. Just don’t let the goal of a 100% return on your investment scare you away because it seems too difficult. If you can get even part way there, say just a 30% return on your money per year on only $10,000, that fraction of the big goal will still add up to over $1,124,000 in just 18 years.

My big point here is that we must keep the big picture in mind and remember that those potential returns are there. If you do, it becomes easier to not be deterred or discouraged by those plumbing issues, property tax increases, or other relatively minor problems.  Keep your eye and your dreams focused on the big prize, because it is all together very possible to achieve that big goal.

Invest in a Basic Need

October 26, 2018 by  
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Just yesterday, I was on a conference call discussing options for doing a 1031 exchange as a big property that I’m a part owner of was recently sold for many, many millions of dollars. We did make a huge profit on this property and it had a great cash flow during the time we owned it, just like most of the income properties I’ve invested in, but it was time to sell. So, we were looking at our options to buy into other properties which would allow us to avoid paying a huge capital gains tax. We discussed several properties that looked quite promising when one of the partners—a guy much smarter than me—talked about the possible softening of the real estate market due to rising interest rates. Whereas he and others agreed that we are probably due for a pull-back of property values, the new acquisitions looked so promising that a pull-back in prices in the area would not likely have much effect on our possible purchase but it was still a risk.

I was faced with a similar dilemma many years ago and just recently happened to come across something I wrote back then when everyone was worried about a down turn in the economy and a pull-back of real estate prices. My headline was “A Basic Need”. In this piece I wrote, “Why is real estate such a good investment? Why do experts predict that the real estate market may slow down but will probably never fail?”

My answer to those questions is the reason why real estate is such a super great investment – real estate is an answer to a basic need. People always need a place to live, a place to work, a place to shop, a place to stay when on a vacation, and even a place to farm. Improved real estate is especially in demand and it is in demand most of the time. These include apartment units, single family houses, duplexes, etc. And, of course, one of the huge benefits of this kind of real estate is that even if the market softens and price come down, you still have someone else increasing your net worth since their rent payments are paying down your mortgage. Is that a great deal or what?

Even when the market softens a bit, eventually, these properties regain their value as the supply of units shrink and rents begin to climb again. I’ve seen this happen many, many times but investing in small rental houses, duplexes and apartment buildings, through all kinds of market conditions, was how I made my first million. I would keep buying as the market softened and prices and rents began to drop, but I was pretty darn sure the drop would eventually be over and, sure enough, the slump would end and put more millions in my pocket.

Bottom line here is yes, the economy will probably pull back a bit in the next year or so, but this can open up many opportunities for you and can bring you big profits in the long run. So, keep an eye out for good income properties and make offers to buy, whether the economy softens or it keeps on growing.

 

Money Can Buy You Novelty

August 17, 2018 by  
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If you Google “Ignite My Life Now”, you will see “Investing in Real Estate” as part of the headline, so some people might wonder if this blog is about investing in real estate or igniting your life. I certainly believe that investing in real estate and making lots of money does not necessarily  ignite a person’s life, even if real estate investing yields millions and millions of dollars for that person. I clearly remember thinking, when I was young and didn’t have much money, that once I made a million dollars, my world would be perfect and I would be totally satisfied, content, and happy. I imagined that my life would be totally ignited.

However, when I arrived at my first million-dollar net worth goal, I was surprised and disappointed that I didn’t feel much better, so I figured I had to make another million or two, then I would be totally set in the departments of contentment, happiness and fulfillment. I was certain that my world would be pretty much ignited and perfect then. But surprise, surprise … when I arrived at my new goal my life still didn’t seem to be ignited.

I looked deeper and deeper to try to discover what the real key to fulfillment, contentment, and happiness in a person’s life was and whether money could play a part. As it turns out, there is a lot that goes into having a content, fulfilled, and happy life and, yes, money can be a part of that.

We all know that love and loving relationships with other people – a spouse, friends, children and others – lifts the happiness factor as does setting goals and reaching them. It also has been proven that unique and novel experiences can revitalize a person’s mind by boosting a brain chemical called dopamine, which makes you feel so very happy. But, what about money? What part can it play in lifting our contentment and happiness factors?

What I have found is that money by itself does not make a person much happier than when they did not have it. It can, however, buy more possibilities in a person’s world. You see, our brains want novelty and money can give you more time and resources to carefully and creatively design and go after these novel experiences. This is one of the best uses of your money.

I’ll never forget all the totally unique and novel experiences I had when my wife and I went around the world in 28 days, visiting dozens of new and different countries with so many totally different life styles, houses, huge castles, small villages and fascinating people of different cultures, religions and habits. On a smaller scale but also quite stimulating for the mind, is being in places like I am now.

As I write this blog I am sitting in a marvelous,  multi-story “cabin” in beautiful Big Sky, Montana, totally enjoying this very unique and novel place with most of my kids and grandkids. Ok, yes, I’m working, writing this blog as the some of the kids are running about, visiting Yellowstone, looking to go tubing, or taking the chairlift to the top of the mountain. But none of this would be happening if I hadn’t invested in the good ole real estate stuff and make some good money at it.

The big bonus to making money on my investments was that I really did enjoy the work and I got a ton of contentment along the way as I worked through each deal. I even broke a sweat back in the days when I did much of the hard labor to repair and fix houses and apartment buildings in order to increase their value. I’m not saying that I’ve always been perfectly happy and content, but I am saying that money has opened a much wider world for novel and unique experiences that have greatly enhanced and lifted my world.

See into Your Own Financial Future

June 29, 2018 by  
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First of all, is it really possible to see your financial future, or even into the future, in any part of your life? I do strongly think the answer is a big fat YES! “Future looking” certainly has seemed to work for me. When I was young, I visualized myself making tons of money. I wanted to make my first million by age 30 and it all worked out, even bigger and better than I visualized.  Here’s how I went about it.

First, I began visualizing the end–my final goal and objective. With a very clear precise vision there is hardly a person, organization, or circumstance that can stop you from achieving what you have clearly set in your mind’s vision.

The real trick to making this work is in your ability to clearly visualize that future outcome. This takes deep insight and discernment. Unfortunately, most of us are not encouraged to use our imagination adequately. Consequently, the art of visualizing with imagination is not as developed as it should be or could be. With effort, however, we can start the subconscious motors and keep them running for our own huge financial benefit. Also, that thing that I wrote about in my last two blogs called “brain blinks” will likely kick in more often and lead you to great things.

Many so-called sophisticated people scoff at the value of this little exercise. But if used in the proper context and with intelligent control, the result can be powerful and very rewarding. My experience is that when a person uses their imagination to visualize the final results in sufficient detail, they can actually see into their future and, so, with a step by step plan, those final results can be reached.

So, here is what you need to do. Focusing on your ultimate objective, lock it into your memory, then work backward from that future goal to your present circumstance. In other words, you mentally think through each step necessary to achieve that particular objective.

Additionally, it is imperative to write down each step and all the plans that are necessary for you to accomplish your goal. Put this down on paper, in your phone, or in a computer as a permanent document, and be sure to put down a time line for each step. Then work hard to stay on task and on time. However, if your miss some of your time deadlines, don’t beat yourself up – forgive yourself. Nobody is perfect. Just move on and move forward with your plans.

Spending time to look very hard into your future can pay huge financial dividends but remember, this brain exercise is certainly not limited to money. It can just as easily and effectively be used with sports, public speaking, acting, performing, writing etc. Just about any part of your life can be greatly enhanced by using that wonderful, powerful, and almost magical thing we call the human brain. Let’s all remember that and cement it deep into our heads and go do it.

P.S. You might want to share this with a few younger people inasmuch as they have so much life in front of them and this financial advice could make them many, many millions of dollars since they have so much time!

Blink Moments

June 22, 2018 by  
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To continue last week’s subject on what we can do in the blink of an eye, I’d like to tell you a story about what the great Getty Museum learned from the “blink” that unconsciously happens in our brains.

An art dealer approached the J. Paul Getty Museum in California years ago to sell a rare 7 foot, a statue that was claimed to be thousands of years old. They were asking for $10 million. It was certainly worth that much money, if indeed it was a genuine piece. Getty took the statue on loan and began a thorough investigation. After 14 months of study by experts, Getty was satisfied so they agreed to buy it.

But then, before they closed the deal, two people had their own “blink” moment, feeling something was very wrong. As Malcolm Gladwell writes in his book, Blink, an Italian art historian, who served on the Getty board of trustees, “found himself staring at the sculpture’s fingernails. In a way, he couldn’t immediately articulate why they seemed wrong to him.”

Next to look at it was Evelyn Harrison who was one of the world’s foremost experts on Greek sculpture. In the very first moment when the cloth was taken off the sculpture, what did Harrison see? Gladwell writes, “She didn’t know, but she had a hunch, an instinctive sense that something was amiss. Several others that saw the kouros felt an ‘intuitive repulsion’, and they were absolutely right. In the first two seconds of looking at the work –in a single glance or blink of the eye–they were able to understand more about the essence of the statue than the team at the Getty was to understand after fourteen months.” The statue was proved to be a fake and those people who paid attention to the blink of their “adaptive unconscious” were proved to be totally correct.

We all need to give more credibility and pay attention to those “blinks of our brains” because it can lead us to great success and do it much faster than we can understand. Gladwell writes, “I think we are innately suspicious of this kind of rapid cognition. We live in a world that assumes that the quality of a decision is directly related to the time and effort that went into making it … We really only trust conscious decision making. But there are moments, particularly in times of stress, when haste does not make waste, when our snap judgments and first impression can offer a much better means of making sense of the worth. The first task of Blink is to convince you of a simple fact: decisions made very quickly can be every bit as good as decisions made cautiously and deliberately.”

This is not to say that we shouldn’t do our due diligence or research on an investment or in other parts of our lives, but if your gut reaction is telling you something different, you should pay a lot of attention to that “blink” in your brain.

In the Blink of an Eye

June 15, 2018 by  
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I’m sure that we’ve all had moments in our life when suddenly our brains provide an answer to a question we’ve been struggling with. Maybe it was as simple as a name of a person that we couldn’t remember or a great creative or business investment idea that popped into our head when we were thinking about something totally different. It can happen in the blink of an eye.

How about when you meet someone new and in that blink of an eye you know and feel in that instant that this new person is not a good person.  I will never forget being told by a friend that a guy he’s known for years had a great investment opportunity that I needed to get into. Then, wow, when I met the guy I knew, within a blink of an eye, that he couldn’t be trusted. Sure enough, my friend and several others lost hundreds of thousands of dollars as this guy, that my brain told me couldn’t be trusted, took off with their money.  The only good part of all of that was that the guy was caught later in a foreign country and is now sitting in a California prison and will be for many years to come.

In a great little book titled Blink, Malcolm Gladwell makes a very convincing case that our subconscious brains are so very good at giving us instant, and often times, very accurate feedback to all kinds of life, business and personal situations. Gladwell says, “The part of the brain that leaps to conclusions like this is called the ‘adaptive unconscious’, and the study of this kind of decision making is one of the most important new fields in psychology.  The adaptive unconscious is not to be confused with the unconscious described by Sigmund Freud.”

Next week I want to talk more about the great power of listening to the instant feedback that our adaptive unconscious gives us. I’ll give you some of the details concerning a 10-million-dollar deal that long, hard expert research said was a good and genuine opportunity but that the adaptive unconscious of several people indicated it was a phony deal, and they were right. In the meantime, don’t forget to “trust your gut” because most of the time your gut gets it right in the “blink of an eye”.

Save Time to Make Millions

June 1, 2018 by  
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It is so easy to squander your time in a way that you hardly notice.  Most time is wasted in minutes, not hours. The average person squanders enough time in ten years to have earned a college degree. Some people may have lost enough time to have earned 2 or 3 degrees or could have made a few extra thousands of dollars, or even a million dollars.  So maybe next time you find yourself watching TV, turn it off and, using strategies that will save time and expand your opportunities, do some easy chair investing.

Just pick up the newspaper or go on line and take a look at some properties that are for sale. There is no need to drive all over town looking for those “For Sale” signs. That’s a huge waste of time. Instead, stake a claim to a little piece of time one day a week to search for just one good deal. You may be very surprised at how many properties are available. When you do see a property or two that look even somewhat promising, then start doing some delegating. And the fast, easy way to delegate now is too start writing offers and then call a few real estate agents to deliver your offers.  Most agents will be more than happy to do all this beginning legwork.

Of course, never forget those critical words that every offer to purchase needs to have – “This offer is subject to the buyer’s inspection and acceptance of the property,” or words to that effect. This, of course, means that you can walk away from the deal for any reason without any liability to you. You also won’t want to waste any time driving to the property and doing your inspection until the seller has agreed to your price and terms.

These strategies, along with delegating what you can to an agent, will save you a lot of time and will greatly expanded your opportunities. Years ago, when I was buying small properties, I would make dozens of offers each week using these strategies. It worked miracles for me and it can work for anyone. Then once I completed a purchase, I would begin the process of improving the property.

Here, again, I wanted to expand my time by delegating to others.  If you are like me, and do not relish the idea of fixing up a house or apartment building, you can easily find help by putting an ad online or in the newspaper, or ask around for a young, energetic person or a retired handyman.  There are always good workers out there looking to pick up a little extra income. By using their efforts and hard work, you have expanded your world, increased your available time, and greatly improved your odds of making millions through wise strategies and delegation!

The Time of Your Life

May 25, 2018 by  
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As a real estate investor, it’s pretty darn important to actively manage your time, just like you should manage any assets you have, to get the greatest and biggest return possible. Time is possibly the most important assets all of us have since it does have limits and is not, for us, endless. Plus, if you don’t watch and manage your time carefully it can be taken away from you without you even noticing.

To benefit the most from the time you do have, you can really stretch your time by organizing it.  If you want to squeeze every dollar, pleasure, fulfillment and sense of accomplishment out of the minutes you do have, you must organize your time to the best of your ability and or have others organize things for you.

We’ve all heard that people can’t be in two places at once or do two things at the same time, but that’s not correct.  You really can be in two places and or do two things at the same time. How is that possible?  It’s called “delegation” and, wow, does it ever work.

You can greatly multiply yourself and what you can accomplish by delegating to other people.  Here’s a few “do’s and don’ts” that have helped me buy, manage and sell millions of dollars’ worth of real estate.

  1. DO delegate specific tasks to others whose time costs the business less than your time.
  2. DO provide accurate instructions plus a target completion time or date when delegating.
  3. DO the hard tasks yourself that would cost more to delegate than for you to do.
  4. DO discipline yourself not to do tasks that you’ve already delegated or should delegate.
  5. DON’T let the task be given back to you uncompleted without an acceptable reason.
  6. DON’T let a delegated task be postponed. Periodically follow up each task you’ve delegated based on reminder notes you’ve made.
  7. DON’T over supervise. Look for acceptable progress and results.
  8. DO take time and the effort to carefully pick the best people for that tasks you need done.  Plus, carefully think through the best rewards that will push and motivate the person to deliver the results you want.

Keep these points in mind and you are sure to find that you will have more time for the things you want to do as well as increasing your ability to complete more in your investments, business, and life in general.

Make Your Birthdays Count

April 14, 2018 by  
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Wow!   I just turned 888!  Okay, that’s in months not years but one can only imagine how different the world would be if you really could live 800 plus years.  Just think of all we could accomplish!

Why do we make a big deal out of a birthday?  For the most part I think it’s a good thing since it usually pushes us to not only review the past year or years but also it can motivate us to think about how short life really is. It makes us question what we’ve accomplished and what we have fallen short on. That thought should push us to live life big! It should push fear out of your mind so that you just go do what you really what to do.

As I plod along, working on writing my auto-biography and making a time line of my life, two big things have struck me. First, life is really, really short. Second, I’m totally blown away by how much I have done over the past years. It’s absolutely amazing to me how much a single human being can do in their lifetime, even though on a day to day basis it doesn’t seem like all that much.

When I look back at my life, I’m truly amazed that I’ve written 9 books, especially when I stop and think that those books were written a single word at a time. But then, I think of my good friend Richard Paul Evans, who has written more than 2 dozen books!  Where does he get the time? But again, it’s all done with baby steps.

We can all do so much with our life. Just always remember that the big things, even monumental accomplishments, are done one step at a time.  So, go after your huge goals and ambitions with at least a few minutes here and a few minutes later. Whether it’s writing books, making millions of dollars or running a marathon, it’s all step by tiny step.

Yes, I’m 888 months old or 27,010 days old, plus I spend probably 222 months just sleeping but when I look back I’m amazed that I’ve gotten so much stuff done.  Looking back, it seems like there is no way that little ol’ me could have earned tens of millions of dollars in income and investments as well as having written all those books all the while raising a bunch of kids and grandkids.

The big lesson in life, I think, is realizing that there are big things we can do if we put our minds to it. We do need to fully realize and understand two simple things—that life is short, so we need to push ourselves to use that short amount of time wisely, and that it can, and will, all add up to some very big accomplishments for your life. You just put one foot in front of the other, one step at a time.

 

 

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