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!

 

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!