Living Large Despite Failing

Back in 2015, Mitt Romney, the 2012 GOP candidate for President, made some powerful comments to graduating students at Utah Valley University. He advised the students he spoke in front of “to experience a fulfilling, purposeful life.” He called that living “a large life”. What great advice. We all need to go out and live large, not just when we’re young, but throughout our entire lives.

However, people often hesitate to live large. Why? Because most of the time, they fear their potential failure.

“Failures don’t have to define who you are,” Romney said in that same speech. “Through all my occupations, I have experienced successes and failures. I am asked what it felt like to lose to President Obama. Well, not as good as winning. Failures aren’t fun, but they are inevitable.”

The thing about failures is that they come hand in hand with success. It seems to me, from my experience, that the number of failures I’ve had is in direct proportion to how large I’ve tried to live. So, yes, I’ve had a ton of failures, but some of those have led to some huge successes. And the reason for those successes was that I learned so much from my failures.

I remember one huge loss that I learned a valuable lesson from that then led me to some very, very large successes. I had decided to lend a large amount of money using a restaurant as collateral. Big mistake on my part! Why? Because I don’t know much about that kind of business, so if it failed, I certainly wouldn’t know how to run it. And guess what? It did fail, and I lost almost all of what I had loaned.

What did I learn? Well, first I found out that restaurants have a very high rate of failure and, second, I learned that I shouldn’t stray from what I know best. Not that I shouldn’t ever loan money, but if I do, I should loan it on assets that I understand as well as being on improved real estate which, ideally, would also be income producing.

With those guidelines in mind, I forged ahead and made many millions of dollars’ worth of loans that were backed up by more familiar types of real estate. Those ventures were largely very successful. Later, I discovered that I could do even better by owning the right kind of income-producing properties. I also, very successfully, ventured into the development of condos and warehouses, where the profits were even bigger. Those did come with increased risks, but they were risks I was willing to take because I knew enough to be comfortable with those types of properties. Much, if not most, of the success I had in those ventures came from lessons learned from my failures and my efforts to live large.

Now, living large for you may not be about investing in real estate. It will mean different things to different people, but keep in mind that the term refers to more than making money. As Romney says, it’s about “expanding your world and engaging in your world, constantly learning, nourishing friendships, overcoming reversals and servicing others.” In other words, there are plenty of opportunities for you to live large in a way that is meaningful to you and boosts your life and the life of those around you.

So, what are you doing, or will do, to live large and take your life to the next level?

Control Your Wealth

Last week I ended my blog by talking about the huge importance of saving a minimum of 10% of your income as the first step to achieving total financial freedom and making that savings plan an absolute habit so you do it automatically every time.

But now what to do with that money? Where do you invest it for the best possible return with a reasonable low risk?

One rule that I’ve kept for life in investing is to never turn over total control of my money to someone else. As a stockbroker many years ago, I played in the market and usually lost money or just broke even. Part of the reason was that not only did I have no say or control over the company I bought into but I also had absolutely no control over the stock market and the direction it went.

But then I met a guy who became my wonderful and brilliant coach, Larry Rosenberg. He convinced me that improved rental real estate was the safest and most consistent way to build a fortune. Why? Because if you buy right and buy a property that needs improvement, you can reap huge returns and much of what happens with your investment is in your control.

First of all, you have the power of leverage you can apply when you have the right assets. In other words, if you fix up a property and raise its value by, say, 15% then that 15% improvement in value can turn your investment into a fat 60% on your money! That huge return is based on your choices. In this case, you would put a 20% down payment on it and keep fix up costs at about 5%. These are your decisions to make and therefore you have some control over how well you make out on the investment.

Even today, after 40 years of experience, I still say the best investment that allows you the most control, especially in today’s market with these very low interest rates, is real estate. I started with a small house on the wrong side of town and after I fixed if it didn’t sell right away I usually could rent it out so I had a tenant whose rent I was able to set so that it was paying off the mortgage, usually with a little left over for me. Then I moved on to larger and larger properties which I was able to work pretty much the same way and I still use this strategy today.

The other thing I do to keep control besides investing in the right property and making smart decisions to keep money flowing in, is to be careful with how I set up any partnerships. When I do deals and have a partner or two they always have their name on the deed showing the percentage interest they have in the property with everything spelled out clearly. If all investors insisted on doing it this way, it certainly would cut down dramatically on all the scams and Ponzi schemes. But it also means all the partners know what to expect and there are no out of control surprises later on.

So if you are smart and want to make those big bucks you’ll get out there, take and keep control of your investments, and keep focused on the great power of compounding and leveraging. Next week we’ll go into those subjects a bit more to keep you focused on your goal!

 

Using a little Jaw Jaw

I am in the process of updating 4 of the 8 books I’ve written, which has been a fascinating and mind opening task.  First of all, it’s quite a stunning experience to read your own words that were written many years ago and then to come across something that you find to be very profound. I found myself saying “Wow, this is a pretty good money making method and is quite inspiring stuff. Did I write this?” then I’m thinking,   “I can’t believe I wrote this. Where did this come from?” However, I must admit some of what I wrote also brings on thoughts like “Ugh! This is kind of simple minded and even stupid. I’ve got to change this!”

While updating and re-writing some of my book The Courage to be Rich, I was struck particularly hard by what I wrote about the huge power of negotiating and the incredible financial rewards that come just from smart and calculated discussions.  Yes, just by using your head and your words you can make huge financial returns on your money! Winston Churchill said “Jaw Jaw is better than war war” and I will add that, Jaw Jaw alone can make you 100% in returns on an investment too!

With good negotiations you can take a mere 5% discount combined with another 5% in earnings and come up with a 100% return on your money. Sound impossible? Not at all. I have done it myself a few times and others I know have done it. It’s in the numbers.

For example let’s say you found a very attractive piece of real estate and the seller was very motivated to sell it. With good negotiating skills you could convince him to sell the property for just 5% lower than its fair market value and maybe even a little beyond that and then you buy it with just 10% down. Now, using another round of skilled negotiations, you convince a buyer to pay 5% more than the property’s fair market value by making the property sound better than it may appear to be. Of course, fixing it nicely helps too. Then, guess what? You’ve just scored a 100% return on your money; you invested 10% then saved 5% on the buy and made 5% on the sale of it for a 10% profit, or 100% of what you put down on it!

If you get tripped up at the point where I say you are only investing 10% on the property, that’s not hard to do either. Further negotiations can convince the seller to carry the mortgage or you can use a bank for the mortgage and a signature loan so in total you have 90% financing.

Go ahead and run your own numbers on any size property with those percentages and you’ll always come out with that huge fat return of 100% on your money by just using your brain and your words to convince people of what great deal you make them. These are just some of the gems you can find in my books which are available online on places like Amazon and on my website.