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A Darling Little House

July 15, 2017 by  
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Many years ago, I wrote a book called The Courage to be Rich. This week, I re-read some of that book and, in particular, a chapter entitled “How Yuks Can Create Big Bucks”. It reminded me again that making money by acquiring beat up, old, dirt bag properties and adding your own sweat equity can make a person rich today in the exact same way it did 30 and 40 years ago. In fact, right now, with many properties selling for top dollar, it makes even more sense to lower your financial risk by investing in these kinds of properties. Here is an excerpt from that section of the book.

Changing a Tacky Dump into a Swiss Chalet

I really couldn’t believe what I saw. A few years ago, while driving down a street in Salt Lake City, I glanced over at a little white house, maybe a thousand square feet at the most, and I just about drove off the road. The formerly grungy house had been completely transformed. Instead of a tacky little house complete with cluttered yard, worn grass, and garbage cans by the porch, I saw a cute, Swiss chalet cottage. The change was so stunning that I pulled over to stop and stare.

At first glance, it seemed that someone had spent a ton of dough making the property shine. Upon closer inspection, I found that the changes made on the outside of the property were quite inexpensive. The dirty sides of the house had been covered up by a fresh coat of paint, and Swiss style shutters with decorative patterns had been placed on either side of the windows. The garbage cans had been moved from the front yard to the back. For extra frosting, a white picket fence had been put along the front of the yard. One other conspicuous difference was a FOR SALE sign prominently displayed.

I was totally amazed at the change, but even more amazed at my reaction to the changes! I had, for years, been in the business of buying properties that needed fixing up and, after some work, would resell or refinance them at substantial profits.

Prior to stopping at this house, I considered myself very smart and successful at what I did. But here is the huge shocking part of this experience. My first reaction was: “What a cute little house! It’s absolutely darling. I should buy it!”

Talk about dumb–really dumb. Here I am in the business of buying dirt bag properties, fixing them up and making big money selling them and this little house almost fooled me into buying it. But now as I think about it, that experience is teaching me a big lesson.

Almost everybody would rather buy a property that looks nice and new and pretty. That’s just normal in us human beings. That’s why people are making money by fixing and fancying up beat up houses and apartments. And now in today’s market where a lot of properties are at top prices, these types of properties are the safer investment. You can greatly increase your chance of making money by doing the simple fixes that stand out and grab people’s attention!

That darling Swiss looking house certainly did it for me and needs to be duplicated. Or should I say, “Hey, here is another way showing how you can make big bucks from yuks.”

Losing Out to Fear

May 5, 2017 by  
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I am totally convinced that most people don’t end up making big money–especially when you are talking millions of dollars—not because they aren’t smart enough but because of their fears. It is a fear of failing and/or the fear of losing what little money they may have. Believe me, I totally understand those fears because that is exactly what held me back for a long time.  But that’s when my wonderful friend and mentor, Larry Rosenberg stepped in and gave me the courage to overcome my fears or at least reduce my level of fear. At the same time, he showed me exactly how to do the big deals and reduce the risks which, of course, reduced the amount of fear I had.

Don’t get me wrong there are always risks but even so, Larry convinced me that if I wanted to hit it really big, I would have to take some bigger risks. At that point, I reasoned with myself and agreed with that old saying, “Better to try and fail than never to try at all.”  I never forgot being told repeatedly when I was young, “Nothing ventured, nothing gained.”

There is no question that when you use financial leverage on a purchase that you increase the risk to yourself.  Like that old example I’ve used over and over—if you put 10% down on a $500,000 dollar property, you could lose all your money if that property dropped in value by 10% and you had to sell it. That’s $50k gone just like that.

That kind of risk is scary but on the other hand, if that property increases in value by 10% then you’ve just doubled your money or made a 100% return. Remember what huge numbers 100% returns do to your money over time–just one penny compounded at 100% a year grows to well over $10 million in just 30 years! That’s the great power of compounding. Of course, you can reduce your risks, big time, by using your brain and your brawn to fix up a property which greatly increases the chance of raising its value and greatly reduces your risk.

If you want to reduce your risk even more, you may want to do what one of my long time students did early on in his acquisition of property. I’m talking about Dell Loy Hansen who now owns properties valued in the billions. He started from scratch after he read my first book, How to Wake Up the Financial Genius Inside You. How did he reduce his risk?  He went out and found partners which allowed him to buy property with much bigger down payments, so they went into these investments with a lot more equity and hence less risk. That, of course, reduces the possible return on the amount invested but, for Mr. Hansen, it greatly increased his leverage and allowed him to buy bigger and bigger properties, hence his multibillion-dollar portfolio.

So remember, if you want to hit it big, be prepared to take some risks and if you want to cut those risks a bit, go find some good partners to share in the initial down payment. Just be sure to take good care of those partners.

 

 

Lifting our Lives in 2017

December 30, 2016 by  
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As you look at or contemplate what you will be doing in 2017 and beyond, be sure to take a very hard look at the financial category. Life is certainly much more than just money but with plenty of money your options and success with many of your other goals in life can be greatly expanded.

For example, I just discovered that before the great actor and governor of California, Arnold Schwarzenegger, was famous, he became a millionaire from … yep, you guessed it … investing in good ole real estate! So even if you’ve not yet started an investment program you can do so now with savings and investing goals for 2017. It may take some time to build your fortune and you may feel you have so little to contribute right now, but try never to forget the huge power of compounding your money. Compounding can multiply even a very small amount of money into millions of dollars. Certainly Arnold knows that from his experience and so do I.

Eight years ago, when I starting writing my weekly blog it was almost exclusively about taking a small amount of money and wisely investing it, mainly in real estate, to build a fortune for yourself or at least for you to make enough to live very comfortably and retire without ever diminishing your lifestyle. But I’ve also written about health and well-being, relationships and friends, and traveling to broaden one’s perspectives on living, along with many other subjects. But I’m thinking now that as we face another year it would be wise to refocus our attention and goal setting back to that money thing that can lift so many parts of our lives including the lives of those around us.

In the foreword of the book Tools of Titans, the author Tim Ferris quotes Schwarzenegger’s thoughts not only about real estate making Arnold a millionaire but about his many other accomplishments. “I am not a self-made man,” Schwarzenegger says. “I got a lot of help … I stood on the shoulders of giants,” which was his way of giving credit to his parents, coaches, and teachers.

We all need to realize and give so much credit to others that have helped us along the way and then step up and let others climb on our shoulders to lift them up. For me I give tons of credit for my success to my wonderful parents and to the great Bill Nickerson and what his book, How I Turned $1,000 into a Million in My Spare Time, did for me. I also need to credit the great Denver real estate guru, – who took me under his wing and showed me exactly how he turned a few thousand dollars into multi-millions over the years. You can read more about that great story on my June 24th, 2016 blog.

I’ve tried to help others through my investing advice, directions, books, lectures and conversations. I have received rewards of great appreciation and many thank-you’s which are worth so much more than money. One of my resolutions for 2017 is to be more helpful to others. To accomplish this, I need to go to work right now and write down the details and specific steps or actions that I am going to take to accomplish that very goal. What are your goals and do you have them written down yet? If not, let’s do it. There is no time to waste.

Following the Rules of Law and Honesty

August 19, 2016 by  
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As I mentioned last week, if you really want a fast rise to the top of your financial mountain, you may want to consider bringing on partners. Partners can give you so much more leverage. Sounds simple, right? Well, there is a bit more to it because there are laws that govern when you seek or solicit other people’s money, rules that were put in place to keep investors and their large investments safe.  That’s the first big key item to be aware of when bringing on partners. The second is that you will benefit tremendously from being completely honest as well as understating earnings expectations but I’ll talk more about that in a minute.

What the law says about soliciting other people’s money for your investments varies according to the type of investment. For complex and higher-risk investments, US law requires that the people that you approach must be so-called ‘accredited investors’ or ‘qualified investors’.  They need to have a minimum of a million dollars’ net worth (excluding their residence) or have at least $200,000 dollars in annual income (or $300,000 of joint income) each year in the last couple years to qualify. This law helps to insure these investors are in a position to make large investments as well as being people who should have the knowledge to wisely handling their finances.

You are not required to audit your partners to prove their financial standing but if it’s obvious that a potential investor is fudging their numbers, then you need to use common sense and back away from that investor. There are some lower requirements if you raise money by alternative finance means such as crowdfunding (collecting funds in small amounts from a large number of people) but the total amount of money that you can accept is limited.  Bottom line here is when you are looking for partners you should only approach those people that you are pretty certain qualify under the rules for your country and state. So know the laws that would govern your dealings with investors.

Now, onto the second key item for super success. This is a pretty simple concept but it’s one that far too many people miss out on.  A primary reason this next key item is so important is because it can bring in additional investors without hardly any effort on your part.  And all you have to do is be totally upfront and honest with your partners and never over estimate what the financial return to the investor is going to be.  If anything, under estimate and try to over deliver.  No one minds being surprised that they made more money than they were led to expect they would.

Not long ago, I was looking for a partner to invest in a very secure property that I had found. I was pretty sure I could deliver an 8% annual return on it but I told the investor that I thought the return would be around 7%. So, when I later on delivered an 8% return the investor was so pleased that he told other potential investors about his experience. That is how you get a lot of new investors. It is also the best way to advertise or market your products, if you have any.  The thing to remember is that people will more readily trust someone or be ready to buy from them because someone they know and trust referred them.

So if you are in a hurry to make a lot of money, consider the partner option but follow the rules and take good care of you partners.  The extra bonus to you is that as you help your partners improve their financial status and situation you will receive many thanks and appreciative comments. It is such a great feeling to know that you are helping other people as you help yourself too!

How to Double Your Financial Leverage

August 13, 2016 by  
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Leverage is a great tool you can use to grow very, very wealthy and do it fairly quickly, but there is another faster way to make the financial returns even bigger! I like to call this bigger and better way “Super Duper Leverage” because it really can magnify your return on investments and at a more rapid pace. The method involves bringing a partner or partners in on your deals.

In my early years of investing in real estate, I didn’t have any partners. All the money that was needed on a deal was mine and, of course, there would be the loan from the bank or from the seller of the property. But then I came across a super bargain on a 100 unit apartment building that I just had to have because I knew that it was going to be a huge money maker. The only problem was that I didn’t have enough money for the down payment.

However, as luck would have it, the real estate agent told me she had a friend that could put up a huge part of the down payment. To make a long story short, I put up what I had and this guy, who I’d never met before, living up in Idaho, put up the majority of the down payment.

Fast forward a few years … I sold the property giving the investor/partner hundreds of thousands of dollars’ in profit. The great part about this though, is that I also made the same profit but on my much smaller investment. The return was several times the amount I put in so I was thrilled and not only that, my new partner was happy as a clam, seeing he had put his money into a great deal with a partner that didn’t let him down.

Bottom line is that, with this partner putting up most of the money I was able to achieve a huge return on my investment–a much, much bigger return than I could ever have gotten on my own—and my partner had a big win as well! That’s what I call “Super Duper Leverage”.

If I’d been more aggressive after learning and profiting from the lesson I learned from that great deal, I probably could have kept up with my most successful student and follower, Dell Loy Hansen, who bought my book when he was in college. He eventually found a gold mine of very wealthy partners who, over time, joined him in multimillion dollar deals to the point that Dell now has over a billion dollars’ worth of property. Wow. Talk about “Super Duper Leverage”!

I want to elaborate on this subject more next week and give you some methods and ways to find and keep partners so as to be able to leverage your investments to the max. I’ll also talk about the legal aspects and the caution you need to use so as to do it the right way without legal troubles. You can certainly make a great deal of money with a partner but you also need to do it smart so you keep what you make and can go on to make even bigger and better investments with partners who trust you and keep coming back for more.

 

 

Avoiding Your Own Loss Aversion

June 3, 2016 by  
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Statistics indicate that the majority of people are security conscious. This fact has been verified in a number of studies which concluded that many people people’s fear of failure is twice as great as their desire to succeed. Some of these studies also noted that in general, there will be up to 5 times as many people choosing a stable situation than people choosing an option with recognized risk. In order to achieve FF (Financial Freedom) you cannot be afraid to fail or take a risk.

Our tendency to avoid risk is known as loss aversion. It means a person believes that if they lose something, say $50, their level of unhappiness with that loss will be significantly greater than the potential increase in happiness if they gain $50.  Its apparent in our everyday lives. People will order the same thing off the menu every time simply because they are afraid they might not like what they order if they try something new, even when there is a good chance they could find a new favorite. Similarly, people put their money in low interest bearing savings accounts rather than put any of it some kind of investment account that will most likely make them significantly more in interest, primarily because there is some chance of loss. So it sits in the banks making next to nothing.

The problem may come down to a belief that one has no control over the outcome of their circumstances, be it their food or their investments. A class of Harvard graduates was asked what they believed were the necessary ingredients to become financially successful.  Their conclusion was summed up in two words, “Greed, and Luck.” I couldn’t disagree more.

If you consider the statistics I mentioned, you might very well conclude that only one out of five people will ever have FF. But that is just a statistic and has no bearing on what YOU will achieve. You can decide to take the risk and be that much closer to FF. Next week I will talk more about risk taking and what you as an investor need to understand about yourself.

Green Up Yourself and Grow Faster

May 20, 2016 by  
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I don’t know about where you live but here in Utah Spring has finally sprung!!  How wonderful it is to see everything turning green and growing.  For me, I find that Spring stimulates me to grow more green stuff. I am actually talking about growing more money but more than that, I want to grow myself in many parts of my life.

As I see more and more people out and about, running, jogging, working on their lawns and gardens or fixing their houses, it pushes me to set more goals for myself.  So my theme for this week is: Let’s get out there and make our lives blossom not only financially but in how we live our lives.

Let’s use this spring time to increase our activities and grow.  We can start by simply getting out there and making this happen.  Like driving through more neighborhoods looking for properties that need a face lift. Look for beat up properties, especially the ones that might have a for sale sign posted by owner or realtor. It might mean that a house just needs the front painted or a beat up lawn needs to be re-seeded and have a few great looking trees or flowers planted with a nice little white picket fence to surround it.

If the house is beat up and shabby plus it looks vacant, take the time to find out who the owner is because it’s quite likely that the owner is a motivated seller. I’m not saying that you should not use the internet to search for properties, because that is a very fast and efficient way to find properties, but sometimes it can be so super refreshing to get out of the office or house and drive around neighborhoods. You may find things you would not have found online as well.

Also, don’t forget to do a ton of asking around … you know, that thing called networking.  Do it in every circumstance you can think of. At parties or over lunch or at work, be sure to ask people if they know of any properties in their area that are for sale, especially houses or apartment buildings that look like they are in disrepair or have sellers that are anxious to dump the property.  You can leverage yourself, big time, by tapping into other people’s brains and connections.

And while you are at this ‘greening up your springtime’, be sure to set some personal goals for yourself, whether it be for better personal health or to be a better parent, friend or spouse.  Let’s all make this springtime thing a growing and greening of ourselves and those around us!!

Compounding People

April 22, 2016 by  
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“The most powerful principle I ever discovered was compound interest!” –Albert Einstein

I relayed that quote in my blog last week. It’s a pretty amazing that here’s this brilliant scientist and thinker saying compound interest was his most incredible discovery. The thing is, the incredible power of compounding applies to more than just money. Many smart people have figured out how to expand or compound themselves or their business. To do so, they compound people.

Many religions figured this out years ago. Realizing that if they encouraged followers to have a lot of children they could grow their religious cause very, very fast.  Do you realize that if you had 10 kids and each one of your kids had 10 kids and each of them had 10 kids and that continued on for 10 generations or about 250 years, that would produce an amazing, almost unbelievable 10 billion human beings! That’s 3 billion more people than are on the planet earth right now, and all those 10 billion came from just you and your partner. That probably would never happen but it does demonstrate that huge power of compounding.

But now here is real life and modern example of the power of people compounding. In February 2004, Mark Zuckerberg and 3 of his classmates at Harvard came up with the concept of what we all know now as Facebook, which they introduced only to Harvard students in the beginning.  Within 24 hours of launching Facebook they had over 1200 students register.  Two years later in September 2006 they opened it up to everyone 13 years and older who had valid email addresses and would you believe that by August 2008 they had over 100 million signed up?

It certainly didn’t stop there and by April 2009 their numbers totaled 200 million which doubled to 400 million less than a year later and at the end of 2014 that number hit an amazing 1.39 billion.  How did all that happen?

If you use Facebook at all you know that answer.  You contact 10 of your friends who make contact with 10 of their friends and that continues on and on again, just like having those 10 kids.  And Zuckerberg sure did cash in on that power of compounding of people.  He’s now the 4th richest person in the USA with a net worth of 44.6 billion dollars and growing.

In other words, if you can get a few people behind you who are willing to recruit a few more each who are also encouraged to bring in a few more, you could have a team or group or army to help build your dream. I would encourage all who read this, as well as myself, to strongly consider how we can expand our reach and/or our business by using the power of compounding with people.

Truly Smart Money

April 15, 2016 by  
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One of the smartest people in the entire world said this about money: “The most powerful principle I ever discovered was compound interest”.  Who said that? Can you believe it was none other than Albert Einstein?

I had forgotten that wonderful quote until the other day when I came across a booklet titled “Being Smart with your Money” written by my very dear friend and my money mentor of years ago, Paul J. Meyer.  Paul was a man who truly went from rags to riches.  As a young man, he was making a few bucks by picking fruit in California, but by using his brain and wisely using his little bit of money with leverage and compounding, he eventually amassed close to a half a billion-dollar fortune.  He was considered the pioneer of the self-improvement industry and also made tens of millions in real estate. I must give him credit for much of my own fortune.

My other mentor was Larry Rosenberg from Denver, Colorado. Both Paul and Larry basically gave me the same advice when it came to making millions with Einstein’s powerful discovery figuring into the equation as well, big time!  I was taught that, to begin with, a person who wants great wealth needs to pay himself first.  That is, no matter how much or how little money you make, set 5%, 10% or more aside and then (and this is critically important!) never, never, never spend it!  This money is not for buying nice things, it is for investing!

When you’ve built up enough from those savings, go out and invest it wisely.  Most of the time that wise investment is going to be in good ol’ real estate.  The big-time, huge key to this investment, however, is to keep at it, reinvesting the money you make on the first deal in another deal and then another deal after that and so on and so on. That is what compounding is all about.

Paul says this about what a $1,000 investment can grow into: “If that $1,000 were in an investment that brought 10% interest per year, in 73 years, I would have over a million dollars from my original $1,000 investment!  If you put another $1,000 dollars into the pot each year, it would take only 47 years to hit the million-dollar mark.” Keep in mind, that’s compounding at only 10%. As my previous blogs have demonstrated, you can do much better than that. I, and many others, have compounded money at 25%, 50%, and even 100% which turns $1,000 into many multi-millions.

Paul Meyer also gives this excellent advice in his “Being Smart with your Money” booklet: “Only when you develop confidence in a principle will you exert the effort required to change your behavior and put this principle into practice.” That means, you won’t be able to put these ideas to work for you until you take the time to look carefully at them and come to understand just how well you can do with this plan. That understanding should motivate you into acting on these principles. Paul has these great bits of super money advice to get you going as well:  “Set goals, live within your means, get on a budget and stay there, pay yourself first, put your money to work …” and, I would add, use lots of leverage and reinvest for that wonderful compounding effect.

Although Paul’s booklet is no longer in print, I do have a number of copies that I would be so happy to share. Simply write me here with your mailing address and I will send it to you. Paul’s wise words are too good to keep to myself! (Free offer for booklet is limited and will be given to those that respond first while supplies last)

SUPER MONEY MIRACLE

March 25, 2016 by  
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Ever wonder why many smart, hard working people end up making only $40,000, $50,000 or $60,000 a year while others who don’t seem to be any smarter or work any harder, make millions and even billions?  Years ago when I was advertising my first book, How to Wake Up the Financial Genius Inside You, I used as a tag line, “Millionaires are not 100 times smarter than you, they just know the wealth formula.” So, if you are making $50,000 dollars a year, that very rich person, who is no smarter and is not working any harder than you, could be making $5 million.

On last week’s blog, I just touched on the basics of this formula. So if you read it, you may remember that I told you if you go out and buy a property that needs fixing up with a 20% down payment, putting another 5% into the fix up, you could improve the value of that property by 15%. That 15% would equal a 60% return on your actual invested dollars. But just how does that happen?

The million-dollar miracle part of that simple example, which I and others have done may times over, is a matter of leverage. You see, you leveraged your 25% (your 20% down plus that 5% to fix the place up) which allowed you to borrow 75% of the money so you could acquire the property. But your return is on the total value of the house. In other words the 15% increase in value of the property would equal a 60% return on your down plus fix up cost. Then by doing basically the same thing again on another property, you would be doing what is known as ‘compounding your return’.

Now here is the shocking and exciting part of this thing called compounding. Are you sitting down? If you keep getting a leveraged return of 60% on your investments, you can start with just $4,000 and build that into $48 million dollars in just 20 years! Now that’s what I believe is a super money miracle.

It really is that simple. Mind you, I didn’t say easy, I said “simple”. You really have to work your buns off to first find the deals and then fix them up to a point that increases their value. I’ve made a 60% return on many, many properties. I have also received thousands of letters, emails and phone calls from people who have told me that by following what I have been doing for years, they have seen, not just 60% returns, but even 100%, 200% and more.

However, you will no doubt find, as I did, that it usually is easier to get those fat returns on smaller properties.  As you move into larger and larger properties it does become more difficult but it is not impossible to get high returns on your dollar there either. I had one $2 million deal that made me more than a 100% return and even a new $27 million deal that returned more that 60% on my invested dollar.

I hope that this kind of huge potential will motivate you to keep working on deals, even the small ones you’ll have in the beginning. Remember those baby steps are necessary and very important. They show you what you can do. Those huge numbers I spoke of don’t happen overnight and that can be discouraging. Just focus on your success and build on it as you go and just like compounded money, your compounded efforts will also build into huge returns for you!

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