Cautionary Words in Uncertain Times

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 with monthly dividends through investments with a good friend? 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, because it sounds too good to be true.”

This friend might say, “I’ve known this guy for several years and he’s a good guy that I have great confidence in. I invested some of my cash with him a year ago and he hasn’t ever missed a monthly interest payment. I just recently put all the rest of my savings into his deal and even had my mother put most of her savings with him.”

So, 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. But 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 on to my wallet and run like hell.

Sadly, this kind of scenario happens almost every day. It can be particularly bad during a slow economic recovery. After the hard years of the pandemic, people are ready to find something good that can help them recover and build their savings against the next difficult time. I personally have known a number of people that have lost almost every penny to their name because they bought into situations very similar to the one described above. These were not ignorant people. They were really quite smart and educated so you wouldn’t think they would be susceptible, but such good sounding deals can be very tempting.

There is an 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 the policies that has driven my investment life is, “If I do choose to put all or most of my eggs in one basket, I must have total control over that basket and I must watch that basket very, very closely.”

I have talked about this before, but with the way things are now, I thought it was time to put out another reminder. Even if you are introduced to someone that a family member or friend says they have total confidence and trust in, just remember where the term “con man” comes from—it comes from the description of people who 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 just be careful and always check them out very thoroughly. Be sure your investment is backed by solid, verifiable assets and don’t put all your financial eggs in one basket. Not unless you are the one in control of those eggs and can watch that basket very closely!

Don’t Kill Your Dreams

Over the last few decades, the amount of information we are exposed to daily has increased dramatically. But for all that abundance, we don’t necessarily get a clear picture of what is going on in the world. Most of the news we hear is highly negative, overly dramatic, and designed to inspire fear. So, it doesn’t surprise me that many people are afraid to take risks and go after their big dreams.

However, right now is exactly the time you need to jump in with both feet. Yes, even in the middle of all this economic uncertainty and our unprecedented times. You just need to believe in yourself. If you have that, all else will follow.

I started investing in real estate in 1972, in the middle of the worse recession in the US since the great depression. Fortunately, I didn’t know that and, even if I did, it probably wouldn’t have made a difference because I really believed that I could succeed.

Sure enough, not only did I not lose my shirt, I became a millionaire. That recession didn’t stop me and these crazy times shouldn’t stop you. Not believing in yourself and taking immediate action is the only thing that is guaranteed to kill your dreams.

Remember, all you need to worry about is your life, what you need, what you want, and know that if you keep working at it, you will get what you’re after. If your dreams are that important to you, you will want them bad enough to do whatever it takes. And no fear filled news story should get in your way.

So, turn off the TV, stop reading those dramatic posts, and unsubscribe from all those pessimistic newsletters. Instead, read up on all the great success stories you can find on-line, in responsible and inspiring periodicals, and in books like my classic, How to Ignite Your Passion for Living. The most amazing stories of success are most often accomplished by ordinary people who simply have an extraordinarily strong belief in themselves and what they want. And there is no reason why you can’t be one of them.

Invest in a Basic Need

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.