CEO of Your Life

You are the CEO of your life. Take control of your own destiny. Take action. Learn about investment. Get creative - how can you solve a problem that needs solving? Start a business. Any business. Multilevel marketing is often the simplest and least expensive.

How about real estate?

Real estate investing allows you to

• Become financially independent, or at least to vastly supplement your current income (Higher Income);
• Use the power of leverage to create income even when you aren't there (Passive Income);
• Take advantage of great tax benefits
• Create a constant stream of income, regardless of the market condition (Increased wealth)
• Be your own boss (Self Employment)
• Work on your own schedule and from home
• Gain education from books, informal meetings or in exotic cruise locations (Personal Fulfillment)

Don't wait for others to give you the life you want for yourself. Get up and go get it!

Happy Investing!

Happy Holidays!

Happy Independence Day!

Independence. Freedom. These are values that all Americans support. As investors, we believe that freedom includes financial freedom - the freedom to live our life as we choose because there is enough financial security to do so.

But exactly what is financial freedom, financial independence? And how do we attain it?

If you are like me, summer is a wonderful time to catch up on more reading on topics of interest. So here is another book recommendation for you, dear Blog Readers: Lifeonanaire: Real Prosperity by Steve Cook and Shaun McCloskey.

"Life -onaire," like "millionaire," but with the emphasis on LIFE, rather than money.

Lifeonaire is the subject of some special training that the Real Estate Association of Puget Sound will offer this month to its real estate investor members in a special three-day retreat. For more information, go to www.reapsweb.com

The book itself is written in the form of a story, taking its characters on a journey of financial self-discovery. The premise is that debt enslaves the borrower, and to truly live a prosperous, abundant and financially free life, one must focus on the things in life that are most important. Too much time may be spent chasing after money, instead of after one's passions. Simplify and de-clutter your life. Focus on what you want. Do not believe everything about the American dream.

My favorite quote on money and happiness comes (not from this book, but) from Jonathan Haidt:

“Those who think money can't buy happiness just don't know where to shop … People would be happier and healthier if they took more time off and spent it with their family and friends, yet America has long been heading in the opposite direction. People would be happier if they reduced their commuting time, even if it meant living in smaller houses, yet American trends are toward even larger houses and ever longer commutes. People would be happier and healthier if they took longer vacations even if that meant earning less, yet vacation times are shrinking in the United States, and in Europe as well. People would be happier, and in the long run and wealthier, if they bought basic functional appliances, automobiles, and wristwatches, and invested the money they saved for future consumption; yet, Americans and in particular spend almost everything they have – and sometimes more – on goods for present consumption, often paying a large premium for designer names and superfluous features.” 
― Jonathan Haidt, The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom

Happy Fourth of July!

Saving for Financial Freedom

How does an investor go about creating the financial support needed to invest in real estate? 

Many gurus will tell you that it is possible to invest in real estate without using your own credit or cash. This is true, and it is possible, but you must be prepared to work very hard, find the right partner(s) or investor(s), the funds you use may be expensive, and your returns will generally be lower than investors who have more cash readily available.

If you decide to start with wholesaling, as many new investors do, be prepared to spend some money on prospecting, whether that is for a direct mail campaign, bandit signs, or gas spent driving around. This is a business activity that may also require a laptop computer, a smart phone with a camera and internet access. All of these things cost money that you will need upfront.

If you are going after hard money or a conventional mortgage, you will be required to put some money down (“skin in the game”). Even sellers willing to carry a contract will usually want to see some cash paid up front. It is possible to find borrowed funds with 0% down, but again, this limits the investor’s options for both purchase and exit strategies.

Whatever your acquisition strategy, it is good to generate and maintain enough cash reserves to sustain you during lean times. Finding the funds is only one part of your strategy for creating financial freedom. Another important part is living a lifestyle that allows you to generate a sufficient cash cushion for both emergencies and investment.

As you set goals for the New Year, it is a great time to take stock of your financial state and net worth. To create more cash reserves, are there lifestyle changes that will help you get where you need to go in the short-term?

Here are a few examples.

Primary Residence. 

Can you turn your primary residence into an asset, rather than a liability? Can you reduce your living costs for shelter to zero? Can you structure your living arrangements so that your rent, mortgage, insurance, taxes and utilities are paid by other people?

I do this by renting out short-term furnished room rentals in the house where I live – which I do not own. I own other properties, but not the house where I live. I have no mortgage to worry about, pay for no repairs, and do no yard maintenance. My rent and all my utilities are covered by the tenants to whom I rent rooms. I live for free, sometimes even make money, from my primary residence. I can come and go as I please, and there is always someone to take out the garbage, take in the mail, or meet the repairman. I have an intentional community of self-selected housemates who fill a significant part of my social network.

Not everyone wants to live this way, and as a licensed real estate professional, I have a huge advantage in understanding local laws, regulations and best practices in property management. But many other investors accomplish the same thing financially by living in a duplex, triplex, 4-plex or apartment building, where they collect more rent than the expenses it costs to live there. Plus, should they ever decide to sell, they benefit from the capital gains tax exclusion for a primary residence.

Transportation. 

 How long is your commute to work? 

Mine is approximately twenty feet from my bedroom to my home office. Location makes a big difference in saving money. The closer you live to work, the less money you will spend on gas, parking and tolls.

Better yet, find alternative ways of commuting that save the cost and hassle of driving (or owning!) a car. I ride my electric bicycle whenever and wherever I can, saving the use of my car for long-distance trips, heavy loads or bad weather. I save thousands of dollars in transportation costs this way. At the same time, I get healthy exercise, save the planet by not polluting, and enjoy the scenery.

Food Costs.  

How often do you eat out? Chances are you can save more money, eat better and stay healthier by preparing more meals at home. 

I often host business meetings at my home office, where I can offer guests snacks, tea or coffee which is less expensive and less time-consuming than going out to a coffee shop. This is not appropriate for all meetings, but it works well for most.

It doesn't hurt to examine your diet as well, and see where you can cut out sweets, alcohol or other toxins that hurt both your health and your pocketbook.

The bottom line: Look for lifestyle changes this year that allow you to put away more cash for the things that are important to you in getting your financial house in order.

Job Hunting.
You need more income coming in?
There are plenty of low-cost opportunities to start your own business, whether that is in real estate or in another line of work. Don’t wait for someone else to provide for you – consider where you can make a difference now and fill a need.

Keep searching for work in your chosen field, but don’t neglect the opportunities to benefit from multiple streams of income. Network marketing and franchises are great starter businesses for the new entrepreneur in that they are generally low-cost to buy in, and offer training and systems for success. Owning a business provides numerous tax benefits, as well as income. Keep your options (and your mind!) open to possibilities.

Happy Investing!

Financial Literacy

One great benefit of a long vacation is the opportunity to catch up on reading. Here are a few more great quotes on investment and financial security from Garrett B. Gunderson's Killing Sacred Cows:

"True investors don't invest in anything that they don't know how to make productive...."

"One of the most important and effective ways to mitigate risk and identify a good investment is to understand the value proposition of any investment opportunity...."

"...If a person cannot tell you quickly and clearly how, exactly, she is creating value with her idea, she may be hiding something...."

"If we allow ourselves to fall prey to the concept that in the long-term our returns will average out, we're allowing untold and unanalyzed opportunity costs to affect the course of our lives. The bottom line about averages is that they are completely useless in making investment decisions...."

"The most important way to overcome the myth of risk is to learn how to reduce your risk to near zero in any investment opportunity. This is accomplished through education, understanding your abilities and how to produce value with them, and aligning with principle instead of being driven by technique and strategy alone."

"What collateral exists in typical stock market 'investing?' How many so-called investors can control the interest rate, payment, down payment, and time period that affect their investments?....How can this even remotely be classified as investing?"

The author loves the idea that real estate investment is secured by collateral, that bank lending is secured by collateral, and that these are all forms of protection for the investor and the lender. One of the reasons I personally believe in income-producing real estate as a path toward financial independence.

Feel free to leave your comments on investing here.

Happy Investing!

Financial Myths

I am really enjoying reading Killing Sacred Cows: Overcoming the Financial Myths that are Destroying your Prosperity by Garrett B. Gunderson. There are way too many good quotes to provide all of them in just one blog, but the following should give a pretty good idea of the themes of this book. The basic premise is that most of our beliefs regarding the path to financial security are just dead wrong.

Here are a few excerpts:

"Rather than believing in the myth of throwing money into investment accounts and hoping that it will realize a return after a long waiting period, we can utilize our assets to immediately provide as much value for as many people as possible. Utilization means we stop waiting for financial freedom to come to us and instead become proactive in creating it ourselves, right now."

The author states that the interests of financial institutions that manage our wealth may be very different from our own interests. We need to be aware that what drives financial institutions are the following:

1. "Financial institutions want our money.
2. They want it on a regular, systematic basis (preferably through automatic withdrawal).
3. Once they have our money, they want to hold on to it for as long as possible....
4. If they have to give it back, they want to give back as little as possible."

"Banks operate under completely opposite rules than do most individuals, and they rely on that fact to stay profitable. While individuals are  accumulating and hoarding, banks are utilizing the money we give them in far more productive and profitable ways. While individuals are hoping for a 10 percent annual return, banks are mitigating their risk to near zero and guaranteeing themselves healthy double- and sometimes even triple-digit returns....."

In other words, banks use other people's money to invest in more profitable activities that individuals are taught to be too "risky" or "complicated" for their own personal finance. "Meanwhile, our production is decimated...based on a [faulty] construct of scarcity and is a recipe for fear-based hoarding."

"Where did the belief arise that the purpose of our existence is to scrimp and save for thirty years, then spend the next twenty in scarcity, afraid that we're going to lose all that we accumulated or jost outlive our resources? Why do we buy into this kind of thinking? Why do we think that this is financial freedom?"

The author proposes instead that it is "far more productive to base our investment and planning for the future on our Soul Purpose and human life value than our minimum requirements or our tolerance for risk." In other words, creating value to others and knowing how to create value are the recipes for true prosperity and happiness.

"The accumulation theory fundamentally requires an abdication of responsibility. It requires people to stop thinking, to accept social norms and cliches unquestioningly, and to quietly consent to their lot in life while allowing external circumstances to dictate their success, all in the name of financial security. Yet the way to provide for security is to cultivate the ability to produce value in the world under any set of circumstances. The way for you to get what you want is to give others what they want; to make yourself valuable to others...."

More great quotes from this provocative and informative book in a future blog. In the mean time,

Happy Investing!