Practice, Practice, Practice

If you want to super charge and shorten your path to big success, you will need to apply the forth rule I talked about—leveraging your success through other people’s money.  But before you attempt to bring partners into you financial plan you had better get out there and do some small deals so you will know how they work and so if you make some mistakes it’ll be with your own small deals and not with a partner’s money. Think of this as your practice phase.

This kind of phase will allow you to better judge what it will take to make a viable deal. What sounds easy to you on paper is usually such a different thing when you get out there and do it. I can tell you all about my own experiences but until you actually start making deals yourself, what I tell you will really only be theoretical to you. It’s going through all those steps—the  tiny ones as well as the big ones—that will really drive home the lessons I am telling you about here.

And doing some deals with your own money will give you a chance to build a portfolio of investments which you can bring to potential partners. Investing in your own projects with your own money also shows that you have full faith in what you are doing, enough to risk your own funds. This will add to the confidence people will have in you and will make it easier to convince them to invest with you.

The other thing in this phase to remember is that you will make some mistakes. It doesn’t mean this kind of investing isn’t for you, it just means you’re learning. And at least you will be learning and risking just your own dime.

So set yourself up to start making deals. Put money aside to make those first couple of investments. It’s that first big step that will make everything else you have to do that much easier.

The Success That Comes with Mentoring

Last week I started telling you the story of a young man who asked me for some financial advice. His questions and what I had to tell him was too good not to share.  Supercharging your goals is something we can all benefit from.

As I mentioned last week, you must first firmly set your financial goals and then write them down with a time dead line. After that, you can super charge and speed up your attainment of those goals by following these few easy tips:

1. Go out and find a mentor–Mentors are a must!

2. Get your feet wet and get some experience on a few small financial deals.

3. Go out and make yourself the best calling card possible.

4. Use the “Partner Path” to supercharge and speed toward your goal.

Anyone who has followed my blog over the years knows that I became so financially successful by wisely using leverage to buy real estate. I started with small houses, duplexes and small apartment buildings—usually ones that needed to be fixed up—then I rented them out and or sold them. Look at these numbers and the return on investment and you can see just how a person can make a fortune in a short time by using ten to one leverage and selling property for, let’s say, 10% higher price than the price paid for it. This can give a 40 or 50% return on your money or even more … because of leverage.

So, with this as the basic game plan I advised the young man to follow the tips I just gave him.

1. Find a Mentor: A mentor should be someone that has done what you want to do and has been successful at it. I encouraged this young man to meet with his mentor frequently and to pick his or her brain as often as he could.  He was already doing that with me but with how much I travel he was going to need at least a back-up mentor.

Now, how do you find a mentor and more importantly how can you get them to agree to be the mentor? Well, my advice is to use the Onassis model or method.  The Onassis method, as I call it, follows what Aristotle Onassis, did many years ago when starting out to meet the perfect contact so he could import cigarettes from Greece to South America where he lived then.  This is the method I used to meet the billionaire founder of McDonalds, .

When Onassis was a very young man–long before he made his fortune- he wanted to meet a top guy in the cigarette business that could help launch him into his first business deal of importing cigarettes. So basically Onassis just pestered the guy–he simply stood out in front of his office every morning then by the guys gate at night–not saying anything but just looking like he needed help-finally after about 2 weeks the very influential cigarette executive stopped and said to Onassis. “Who are you and what do you want?” From that simple approach Onassis took a giant leap forward into that business, because this top exec told him to go see the main buyer and use his name as a reference.

From that simple strategy, Onassis began his road to become a billionaire.  I used a similar but easier tactic to meet with Ray Kroc,  the billionaire founder of McDonalds. I called his office almost daily asking his secretary for an appointment and after many, many phone calls she said that Ray would meet with me but for only 10 minutes. I flew to San Diego and met with Ray Kroc walking out of his office 2 hours later. Hey, what can I say?  I just asked him to tell me why and how he became such a great success in life and business and as it turned out he loved talking about himself. Who doesn’t?

There are three more items you will want to implement in order to be super successful but let’s save those for next week. In the meantime, think about who you would want as a mentor. Who is doing what you want to do in a very successful way? And what would it take to get a hold of that person and have them mentor you?

Beware of the Con

So what would you do if you had a pretty good nest egg saved up but your bank was paying you a lousy 1/2% a year and a good friend just told you about how he is getting an 18% annual return, is getting paid out monthly and was on money invested with a guy he knew and trusted? Your first reaction might be, “Wow! That’s a great return.”  But then you might ask “Tell me more about this friend and the investment, cause it sounds too good to be true.”

What if he gives you an answer like this? “I’ve known this guy for several years and he’s a good guy that I have great confidence in and trust.  I invested some of my cash with him a year ago and since then he hasn’t ever missed a monthly interest payment. I just recently put all the rest of my savings into his deal a couple months ago and I even helped my poor mother out and talked her into putting most of her savings with him. She was getting screwed by the bank’s low interest rate and she desperately needed more income to supplement her social security check just to scrape by.

So, the bottom line of what you would be hearing from this friend is that he’s put virtually all his cash and savings into this “safe investment” and the return is guaranteed because he has so much trust in the deal. For all you know he may even have put a second mortgage on his house at a low interest rate so he could make the difference in the spread. I don’t know what you’d do but I know I would hold onto my wallet and run like hell.

Sadly, this kind of scenario happens almost every day. It has been particularly bad during our recent recession and now in our very slow economic recovery. I personally know 4 people that have lost almost every penny to their name because they bought into situations very similar to the one described above and these people are really quite smart and educated. You wouldn’t think they would be susceptible.

There is a very old saying that goes back to the 16th century: “Tis the part of wise men to keep himself today for tomorrow and not venture all his eggs in one basket.”  The other saying that we’ve all heard that we need to drum into our heads is “If it seems too good to be true it probably is.” One of my policies that has driven my investment life is “If I do choose to put all of my eggs or a substantial part of my eggs in one basket I must have total control over that basket and I must watch that basket very, very closely”.

One last thought.  In the example above and with the four people I know, they all had “confidence and trust” in their friend.  Guess where the origin of the term “con man” comes from?  You see these “con men” always take time to build up your confidence and trust in them before they strike.

This is not to say that there are not very good investments out there but always check them out thoroughly and make sure your investment is backed by solid, verifiable assets. Remember, don’t put all your financial eggs in one basket unless you control those eggs and watch that basket very closely!

***

Money, Money, Money–How To Get It, Keep It, and Grow It

You know it’s all well and good to talk about living in the now (which we did last week), relaxing, taking mountain or beach walks, and playing tennis and other games to keep your mind and body in good shape, but without a good financial situation or with little or big money worries, life can feel quite miserable.

Lately, a number of people have asked me what I’m doing about investing and income now that I’m nearing the big 70 year old mark. Well, here is my answer:

First, things are a lot different now than when I was young, as many of you know, I made a ton of money back then, though the simple process of buying so called “dirt bag properties”, fixing them up and renting them out or selling them. Yes, it was a lot of work but it had huge payoffs.  Then I bought bigger and bigger properties including duplexes and larger apartment buildings and, again, made a lot of money fixing them up then renting them out or selling them.

But those days are over. Now it’s all about “passive income” and it needs to be safe and steady.  I mean face it, I just don’t have the same drive or need or energy to do all the work that is necessary in finding, fixing and flipping properties.  If you are near my age and situation, you will want to know where to get a good, safe and steady passive income in today’s markets with savings accounts paying but a fraction of one percent and even 10 year US government bonds paying only about 3.6%.

I will tell you how I am getting a safe, steady passive return of around 7% to 8.5% with little management or worries—I’ve been buying retail stores that have good, solid, long-term leases with national companies–and often public companies–as tenants. Companies like Family Dollar and Dollar General or Office Depot.  You see these companies usually do not choose to own their stores as they would rather lease their space and put all their efforts into running the business because their business is what they know best.  These leases are usually done on what is called a “triple net” basis, which means that most of the increases of costs, like taxes and insurance and many of the repairs are reimbursed by the retail tenant, which makes the 7% plus return on investment pretty steady and safe.

If you can you might think about doing the same thing.  If you don’t have enough money for the down payment, you might consider bringing in your family or friends as partners. One note about partners though–thoroughly check out the security laws in your state to make sure you are in compliance or ask a lawyer. You don’t want a great investment opportunity to turn into a legal and financial nightmare. And the same basic rule goes for any investment. Be informed, don’t make assumptions, and ask a lot of questions before you dive in!

 

In Search of the Right Income Property

Don’t let the title mislead you—there is no such thing as the perfect property, just as there no such thing as the perfect spouse, car, child or job.  But there are certainly “good” properties and even some “great” properties as well as “good” financing and “great” financing.  By the same token there are some real bad properties around, waiting to snare you. I want to steer you in the right direction towards the right property for what you are after and keep you from ever giving the bad ones a home in your portfolio.

First, decide exactly what it is you want out of your investment. Why are you buying a piece of income property?  Be specific.  Are you after a lucrative cash flow? Or do you want a profitable overall return? Is it for the cash flow in addition to the tax savings and what you might get after you do some “fix up” work?

In addition, a novice investor must understand the alternative types of real estate investments available to him or her.  Of course, there are the residential types of investments including houses, duplexes, apartment, rehabs and others but there is a myriad of other income-producing properties which fall in the category of “beyond residential”.  A few examples would include gas stations, small strip malls, mini storage, motels, and retail shops.

This second category is too often overlooked by beginning and even experienced investors.  If you’re looking only at the residential properties in your area, you’re missing the entire menu.  There are commercial properties that fall into the lower ranges but because commercial is often thought of as being for the big time investor, the smaller guys don’t look there. But think about it … why would there not be smaller commercial investments just as there are smaller residential investments? It doesn’t matter what kind of property is it, just that it’ll get you the best return for your investment dollar.

Also consider that property that might have been residential or commercial when you bought it can be converted to take advantage of better income producing options for the area. Vacant gas stations have been leased to counties as libraries; motels have been converted to office buildings or housing for the elderly; mini-warehouses have been built out of other commercial spaces behind sub divisions or trailer parks where storage space is scare and small warehouses have been converted into loft type apartments or duplexes.  There are many potential gold mines in commercial or “beyond residential” property.

I’m certainly not saying that commercial or “beyond residential” property makes a better investment than residential. I’m merely trying to point out that when you go looking for the perfect income producing real estate, don’t limit yourself to the residential category alone. Look at the full menu.

And lastly, don’t forget now is a particularly great time to be buying income real estate because prices are near historical lows relative to income and interest rates, even though they have moved up a bit in the last month, are still at very low! So doesn’t hesitate. Get out there, look at all the options and put your money to work!

 

Your Own Financial Genius

Years ago after writing my first book How to Wake Up the Financial Genius Inside You people started calling me a “financial genius”. My typical response was “Thanks, but I am no genius or a financial genius! I am just an ordinary guy who got through high school with a “C” grade average.” I would then explain that the millions of dollars I made were due to following a simple formula that my multi-million dollar mentor, Larry Rosenberg, shared with me–the same formula that I have shared with you in my book.

Fast forward many, many years and many more millions of dollars. I was recently shocked when, just for fun, I Googled the words “financial genius” and saw my name come up just above Warren Buffett and Albert Einstein (since I first looked at this Google page, I moved from top of the list into second slot and Warren Buffett was replaced by Alan Greenspan.) My name was there as part of Amazon’s website and shows my original 1976 edition of How to Wake Up the Financial Genius Inside You, available for $12 dollars and the revised edition called The Next Step In Waking up the Financial Genius inside You, available for $24.50.

Seeing my name and book listed so predominately on the Google search has motivated me to offer all of my blog readers a REAL DEAL! The timing of this is particularly, serendipitously and financially very, very important. Why? Because right now with today’s much reduced prices combined with the incredibly low interest rates, you would have a tough time finding a better period in modern history to apply my simple but highly effective “million dollar strategy” ,which really is the strategy that wakes up anyone’s financial genius.

Right now is the best opportunity for buying properties you can fix up and flip or just rent with huge rates of return. Go ahead and Google “financial genius” right now and see for yourself the comments on the old book like the one Jason from Colorado sent saying “The numbers are from 1976, so add a zero to most of them and it translates well into modern day.” Or from Dallas, Texas W.E. Wyatt’s comment “Change the numbers and this book could have been written this year. The principals remain the same.” And folks, that’s comments about the 1976 book!

Let me tell you about the revised book The Next Step in Waking up the Financial Genius inside You. It’s bigger and better and if you or someone you know wants help with making a fortune, I will help you out right now.  Email me at moh@reincome.com or call the office at 801-307-2787 and ask for Malinda and I will send you the new edition for only $9.95 with no shipping or handling charges—if you want both the old edition and the new—add 5 bucks.  You need to get started right away since interest rates are beginning to slowly climb as are prices of properties!

 

Mentor for Success

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.

MONEY MONEY MONEY

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:
3.5%	4.0%	7.0%
Monthly payment
$1796.18	$1909.16	$2661.21

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!

The Power of Leverage and Compounding

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.

Step Two to Making Your Fortune: Making Property Offers

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!

 

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