So they fear that the risk comes from their lack of knowledge. There is no need to feel naive or claim ignorance. The bottom line is that unless you do this every day for a living, you will always feel ‘out of the loop’. The funny thing is that most people know what a stock is, but have no idea what makes stock prices go up or down. However, because societyrule‘is buying mutual funds because a fund manager must understand stocks better than you do: people go out and buy mutual funds. So even if the funds/stocks go down, the fund manager gets paid and people invest more because they are saving for retirement. I also buy mutual funds, but this year (2008) they have lost money and I can’t do anything about it. In the worst real estate/mortgage crisis of our time, I am making money investing in real estate. I will keep my funds, but managing risk is about diversification.
Robert Kiyosaki (author of Rich Dad Poor Dad and co-author of Why We Want You To Be Rich with Donald Trump) said it this way, and he’s absolutely right: “the more control you have over something, the less risky it is.” is. The less control you have over something, the more risk there is!” In my real estate investments, I control pretty much every factor: When I buy mutual funds, I can’t tell the fund manager which stocks to buy and which to sell.
Suffice to say that when you don’t eat, sleep and breathe in a certain industry, there’s no shame in partnering with an expert. He relies on an accountant for tax advice, a doctor for medical advice, and a lawyer for legal advice. You probably don’t know as much about their industry as they do because you don’t study or practice it every day. M&M Properties acts as the real estate doctor. we get paid for to study the properties, the markets, the techniques and the solutions (educate ourselves), and then we implement the solution (prescribe and administer the treatment), for example. property rehabilitation and contract negotiations, to name just a few, to make the property profitable.
Passive income is a buzzword these days, and I believe in it, for all the right reasons. People continually talk about MLM (multi-level marketing). I recently suggested to someone (he was trying to sell me an MLM program where I get paid every time someone clicks on certain websites and web ads) that if you have to recruit each person into the program one by one, you could die of old age trying to build your network of people under you (those who pay you in MLM structures). The person went on to explain how the numbers work and they might actually add up to massive numbers later on. He told me “it’s the best way I know” “I really believe in it as the way of the future”.
Many people make money in many different ways in this world (including multi-level marketing). It’s about what you believe and what you focus on.
I’ll tell you this a lot:
1. Everyone needs a home – AND – the markets I’m buying/selling property in actually enjoy significantly HIGHER demand than supply, so there’s no risk of vacancy or low rent.
2. The price of a stock can fall overnight, and a company could go bankrupt; a real estate market may go down, but the house will never be worth zero.
3. The market is probably near the bottom – it has already bottomed out in the area I am buying/selling and is actually appreciating already.
Where the risk is eliminated:
1. Little or no risk of vacancy: bearing the cost of the property out of your own pocket.
2. There is no risk that the property will depreciate further
3. There is no risk of the property falling apart because you just rehabbed it with all new materials, so the cost of repairs is minimal.
4. There is no risk of costing you more money because the rental income far exceeds the cost of ownership.
But consider this for a moment. In very general and simplistic terms, if I buy a property with a little money down (of my own money) and after all expenses including electricity, gas, repairs, vacancy and mortgage, the profit each month (Cash Flow ) is $1,000.00, then I get my ENTIRE investment back in a matter of months, and then my income (Cash Flow/Monthly Income) increases by about $800 – $1,000 per month from there forever…until I sell the property. PLUS… property values continue to rise.
If you don’t have the cash to deposit right now, I know of investors who are using their line of credit for a down payment. For the record, I do not condone or advise abusing credit to buy something that depreciates in value, otherwise you go into debt and have credit problems. But as Robert Kiyoaski teaches, what I mean is ‘good’ debt, e.g. that what you buy with borrowed money (debt) increases in value AND covers the cost of carrying the debt. Which my friends, is how and why THE RICH GET RICHER: they leverage money!
They also buy low and sell high. We’ve all heard it, but now when the market is down, everyone is afraid. I don’t blame them, but I handed over 3 properties last week to “RICH” people, because they (the rich) want to buy low and sell high.
Think of it this way: Let’s say you get your mail and you have your bill from Verizon.
QUESTION: How many people do you have to spend time recruiting in an MLM or Pay-Per-Click program, and how many hours of work do you need to raise the money (through these said methods) just to pay that cell phone bill? Now compare that to having an extra $800 – $1000 per month without doing any work, beyond the initial deal setup. That’s the other way the rich get richer: they don’t trade time for money, they buy investments that provide ‘passive’ income and appreciate in value, 24 hours a day, no matter where you are or what you’re doing with your money. weather. .
To me, it’s about the amount of time you put in vs. the amount of reward you get. Last week I traded 3 properties and only spent a little time on my computer doing the transactions. I never used a penny of my own money.
To reduce risk, you must gain more control. To further reduce risk, you must have options. In real estate investing, you can reduce risk by buying properties below fair market value, or buy properties whose rent exceeds maintenance costs, or you can buy properties that are in a rapidly appreciating market. All of these scenarios reduce risk. When you purchase properties that meet all three criteria, you have reduced almost all of your risk. By having multiple advantages to ownership, you also get options regarding exit strategies. In other words, it reduces the risk of getting stuck with a losing proposition (property). If you have more than one option to get off the property, that also reduces your risk!
