Millionaire tip of the day- Meet a 20yr. old MILLIONAIRE

[STR8UP]

I want to respond in detail to your other posts backbreaker, but I am in the process of moving so it will have to wait.

Let me just say that you have valid points, but I suspect that your mother's experience has caused you to see this from a skewed perspective.

Let's put it this way-

"Knock on wood", but it would take a major, catastrophic disaster to sink my ship at this point. Even though it may seem like I throw money around recklessly and gamble without regard to risk, you need to know that this isn't the case at all. I have MANY, MANY resources to draw from when I hit setbacks. The most important ones are my knowledge and creativity which get me through pretty much anything that gets thrown at me. I didn't have these resources in the beginning, mind you, but at the same time I also didn't have so many "lines in the water" either. My "safety net" expands as I go along and although I am very highly leveraged I have the utmost confidence in my backup plan.

I really want to explain in more detail about the proper use of debt because both you and Gio aren't seeing the complete picture.

I have been doing this for a LONG time. I have seen the good, the bad, and plenty of the ugly. I know all about vacancy loss and leaky toilets and ALL of the stuff that comes along with the different facets of real estate. So I'm not exactly talking theory here. I have done it, seen it work time and time again for not just me but others as well. And what I do IS NOT dependent on real estate prices making double digit gains either. I have LOTS of equity in my properties and even if the economy tanked and real estate corrected by 20% (I highly doubt any correction will be this drastic and especially not in the market I am in) it wouldn't sink me.

I know that it doesn't matter to you at this point but I can't help but think that you are THIS close to being able to understand what I am saying and if you did it would increase the effectiveness of your investments by several times.

More to come...

 

[backbreaker]

I said my mom was a sloutch, but she isn't donald Trump either... I can tell you first hand she did a piss poor job of keeping the houses up and charing too much for rent.

 

[backbreaker]

very very interesting.... check your PM later, i"m going to pm you something, but I have to go because I have company

 

[STR8UP]

Backbreaker,

Just read your horse race post. Basically you are saying that you are actually coming out ahead betting on horses? I don't doubt you at all because although it IS gambling, that doesn't necessarily mean that you can't win consistently.

The thing that boggles my mind though, is how you can say that leveraging real estate is too risky when you turn around and make money on horses! Seriously man, if you KNOW you can turn a profit on horses, what is different about real estate? You know that despite ups and downs that property values have risen for more than a hundred years. Somone once said, "You think real estate is expensive today, just wait ten years".

See the logic here? If I tried to bet at the track I would lose my ass. That's why I don't do it. But I have a good feel for my R.E. markets which have historically performed well, so I have full faith and confidence in my decision making, just like you do with horses.

If you bet on horses for one whole year and know that your picks win lets say 60% of the time, then what would be the risk in BORROWING money to bet? I'm not saying anyone should do this, but if you know your record in real estate or horses, or blackjack, or the stock market, how can leverage be a bad thing? It's your psychological aversion that kills you.

Kind of like someone hesitating to buy $1000 worth of stock, then the next day going to the car lot and buying a $30,000 car that is going to deprecite by 50% over the next two years. Where's the logic? There is none. It's a psychological fear of loss that keeps people from HUGE opportunites.

 

[backbreaker]

To answer your question.... I guess I can see where you are coming from, and yes, even though I still have the money I have from when I sold my company, the money I make and spend all comes from Horse Racing...

What I do isn't "Gambling"... GAbming is what you do when you play a slot machine, because you have no control over if you make any money or not, it's entirely up to the Slot...

I "handicap" horse races, and because my skills are pretty good, I don't wish, I EXPECT a positive Return on my Investment...

I wouldn't call it Investing...but I wouldn't call it gambling either.


And I don't win 60% of my races.. that's virtually impossible to do... because to much crap can go wrong during the race or before the race. And even when you get good at spooting good horses, it takes just as long to learn and know jockeies tendencies and what was the hardest thing of all, learn a trainers intentions in a race, and rather his intentions can give you a profit.



In all honestly, I've made more money This MONTH then I made last year running my business... and I was living pretty well when I was runnign my company... I made enough today that I am seriously thinking about taking the rest of the year off.

Anyway, I'm geting ready to PM you

 

[longwood]

this is y i stop making threads they just get messed up by bull****. i mean damn if we could just all agree that there are millions of ways to make a million dollars and not just one we would be ok.

 

[CHOCOLATE(COLA)]

Originally posted by longwood
this is y i stop making threads they just get messed up by bull****. i mean damn if we could just all agree that there are millions of ways to make a million dollars and not just one we would be ok.

Ive learned a lot by reading through, more threads about money never hurt no one, as long as the broke people dont try to give advice

 

[backbreaker]

speaking of broke people trying to give you adivice.... for the longest, my dad , who for all intents and purposes is your average 43 year old Male, tried to give me financial advice.

For the longest, he told me that I needed to work a "regular" job (i.e security blanket) and do my "thing" on the side...


Him and I stopped talking for about a year when I pointed out three things to him...


1) NO disrepect, but he has been working a regular job for (Airport) and doing his thing (janotorial service) on the side now for at least 15 years... and he is still working both jobs.. Granted, his janortiral service is doing decent, but you get my point.


2) By working a regular job and doing what you want to do on the side, you are subciously telling yourself that you don't believe in yourself enough to go at it full throttle.

3) The more time I can put towards what I wnat to do, the quicker I can get where I want to be.

 

[STR8UP]

Originally posted by backbreaker
3) The more time I can put towards what I wnat to do, the quicker I can get where I want to be.

That's a good way to look at things.

Tonight I was talking to a guy I know who has done VERY well for himself financially. He has been going at it for about 20 years (twice as long as I have) and has reached the point where he can drop $750,000 on a business venture just to help him to pick up women half his age.

He was talking about converting a restaurant he owns into a nightclub and was asking me to come and work for him. I didn't ask him how much he was willing to pay me, I just told him, "Sorry, you can't afford me". I've had this mentality for awhile now, but it felt good to tell someone flat out that I am not willing to trade hours for money.

What's the point here? The point is that I could sidetrack myself into dozens of different things and make a good chunk of change, have security and pay my bills, but I am not willing to sacrifice my current path for a quick buck. My time needs to be focused on doing MY OWN thing. If I start taking away from my current projects it will take me exponentially longer to get to where I want to go.

 

[Bonhomme]

He got started a couple of years ago with $100k he received from a settlement

It doesn't take all that much brilliance to turn $100K into a million.

Starting from 0 -- or even being in debt -- and making a million in less than a decade, now that would be impressive.

It doesn't necessarily take money to make money, but it helps a helluva, helluva, helluva lot.

 

[STR8UP]

Originally posted by Bonhomme
It doesn't take all that much brilliance to turn $100K into a million.

Starting from 0 -- or even being in debt -- and making a million in less than a decade, now that would be impressive.

It doesn't necessarily take money to make money, but it helps a helluva, helluva, helluva lot.

I couldn't disagree with you more.

You aren't factoring time into the equation. Sure, ANYONE can do it. But to do it in only a few years is amazing.

Lets put this time thing into perspective. Starting out with $100k how long would it take to turn it into a million at 10% interest? If my calculations are correct it would take over 20 years. So what kind of rate of return would you need to achieve to make it happen in two years? Looks like you would have to be earning over a 200% return. Anyone getting a 200% return is outearning the average investor by leaps and bounds. I would bet that less than 1 or 2% of the population could pull this off.

As a side note, most people his age who get their hands on $100k wouldn't even be able to hold onto it to save their life. $50k on an H2, $4k on rims, another $6k on a stereo, $10k on a new wardrobe, handouts to mooching friends and relatives......$5k.....you get the picture.

I agree that it's MUCH harder to start with nothing. The good thing about starting from scratch is that it certainly builds character. I know I am a better and stronger person having to build it from the ground up.

 

[A-Unit]

Re:

What I guess guys don't get on the "100k" thing either is, you can BORROW 100k for R/E tomorrow, depending on what it is.

So it doesn't have to be your $, it CAN be the banks. If you have a good credit report, ok income (say above $35k, etc) 100k can be borrowed to buy a home or rental property. It isn't that CUT and DRY, but getting 100k is not as hard as it seems. Banks loan money for education (both fed. and private), only on the good faith and credit of the borrow and co-signer (I know, I'm one of them). So if they loan upwards of 50k on Un-secured debt, wouldn't they based on Secured debt AND your ability to pay?

In the "wealthy barber", he speaks of purchasing R/E using the following strategy.

Say we buy an apartment building...now, it might not CF NOW, but eventually it will...just as your Mutual Funds investments might not grow now, but over time, with more shares, they will. So let's set aside the MUST HAVE MONEY NOW SYNDROME.

Buying a home...say you find a property for $200k (cigarette butt approach of Ben Graham, and Warren Buffet), that's it's value now. In most cases you're required to have a down payment AND a mortgage. So...the mortage can be used to buy the property, and a credit card and be used for the down payment, depending on the value.

Some might say "well that's risky, the values are going down, etc"...2 things...

1. The payments you'd make on borrowing 5-20k are likely what you'd dump into a mutual fund anyways, but you're leveraging more, so the real risk is cut at what your C.C. is. The mortgage is paid for by the rents, whether you live there or you don't, and are renting it out. In enough time, the rents pay the mortgage down, so you CF to your credit card or that you roll it into another property.

2. Don't buy overvalued property. Do homework on it. Buy so it can't go lower. I've read in Rich dad and even in Buffett (2 different investors), that the value must be made today. That profit is made NOW. The value is NOW.

Because of technical trading, day trading, the stock markets, and flipping, people want fast bucks. The markets waffle day by day NOT because a company changes, but because of program trading, because of daytrading, etc. Traders move the markets day to day, not real value. Most stocks are moved interim because of emotion and news.

Ever watch Mad Money? Don't think he moves markets with his words, one way or the other? He's nuts, and that's a perfect example of "hype." The profit on a deal is built in. It's unwise to dump money in "hoping" for profit, hoping a stock goes up, hoping it moves. The market will also beat stock down, because of emotion, too badly. It will overreact to news and facts.

Alot of .coms burnt up because there was nothing to them. All smoke and mirrors. There's nothing of VALUE there. A stock certificate is nothing but a mini business itself. It has it's own set of measurements like EPS, P/S, cash flow, P/E etc and some are mere measurements of fact and some are just emotion and perception. However, buying 1 certificate is a mini business.

The only reason stocks go up or down is perception of value. People want the ride. It used to be that stocks were bought for dividends and cash flow, otherwise, why own them? Nothing would make them more valuable other than perception? Right? I mean...if you weren't getting cash for owning it, or rights to do something with it, then why buy it? It'd be mere perception of going up or down.

When Buffet bought/buys companies, he's looking inside them for value. He'll look for unused assets (that's how he started) or cash sitting idle. He doesn't see if the market is going to accept or reject a new drug. That's speculative. He's always been an old world investor, because he stayed away from tech.

On the flipside, guys who make the bigger dollars (Livermore, etc) did it based on trends and trend trading. They played off moving averages and sales #'s. I still see alot of hype in a stock like Google, too. They've just IPOED with the year, and while there's alot of promise they can do something great things on the net, the only driving it north or south is perception of WHAT they can do or might do. There's no tangible benefit being extracted from owning it.

"Money isn't made or lost it's simply transferred from 1 perception to another." Gordon Gecko. Wall Street. 1987.

And that's when ends up happening with stocks with no inherent value. Quote all the sales you want, but you can't spend those. So if people never perceived that stocks value just came on the underlying business, it has none.

I bring this up b/c speculation is just that. Every war is lost or won before it's ever fought ~ Sun Tzu.

There's inherent value in being small now. Big players can only play in big ponds. Mutual funds can only buy a certain market cap company b/c they're not allowed to own more than 5% of a company (which they almost never do anyways), which means small guys get into stock and won't get kicked around as easily.

Not to mention in R/E, big players can drive down margins, since they can buy high volume, but the small player can be swift of foot, and move quickly. While you don't have a deep well yet, but you can make bigger bucks.

So you can't get Foreclosures? So. Nothing new to me. I have a buddy who does auctions. Used car dealers make out in most cases because they can borrow and borrow and borrow, and they can give their word they'd buy 50+ used or foreclosed cars. Who wouldn't take that? it alleviates the headache of cherry-picking by sales person. That's complex. Shere numbers. Doesn't mean it won't work, just means we must exploit the holes in other areas.

------------------------

Something learned from paying down debt and doing debt consulting with people is much like the analogy of a fire...you don't disperse your water. You aim at one spot and move around progressively putting out more. Same with debt. You pay down whatever you can first, then roll the money you're done paying on Credit Line 1, and use that on Credit Line 2 (so it's 1+2). It grows exponentially. Just like a wall of sand @ the beach. Remember when we built those?

To break it you don't try to spread your focus over it, you hit one spot. When the pressure is released, the flow OUT helps widdle the walls away for you. Then you focus somewhere else once that is flowing.



A-Unit

 

[DumpaLumpagus]

What are some of the payments involved in RE besides the deed? Insurance, taxes, unexpected disasters?

 

[STR8UP]

Originally posted by DumpaLumpagus
What are some of the payments involved in RE besides the deed? Insurance, taxes, unexpected disasters?

Depending upon the terms of your loan you might have to pay principal, interest, and PMI (mortgage insurance) on your mortgage.

Of course as you mentioned taxes and insurance.

Vacancy loss (time the unit isn't rented or otherwise producing income) isn't something you have to actually pay, but you need to account for it.

You will have to pay for repairs. Generally repair costs will be higher on older properties. If you are renting to lower income tenants count on your repair costs being higher. When I owned lower income rentals I had to deal with everything from flea infestations to bleach intentionally poured on the carpet!

Don't let this stuff scare you too much though. If you do your homework you can anticipate repair costs and plan accordingly. I have personally found that repairs aren't nearly as expensive as I thought they would have been before I saw it firsthand.

What I have mentioned is specific to investing in rentals. Rehabbing and other investing strategies will be a little different.

 

[STR8UP]

Re: Re:

Originally posted by A-Unit
What I guess guys don't get on the "100k" thing either is, you can BORROW 100k for R/E tomorrow, depending on what it is.

So it doesn't have to be your $, it CAN be the banks. If you have a good credit report, ok income (say above $35k, etc) 100k can be borrowed to buy a home or rental property. It isn't that CUT and DRY, but getting 100k is not as hard as it seems. Banks loan money for education (both fed. and private), only on the good faith and credit of the borrow and co-signer (I know, I'm one of them). So if they loan upwards of 50k on Un-secured debt, wouldn't they based on Secured debt AND your ability to pay?

Yea, when you say to yourself, "I need to SAVE a downpayment for a piece of property" you are closing off possiblilities. People think that a bigger downpayment somehow gives them "security". This makes no sense whatsoever when you realize that the bank can take that property away from you just as easily if you owe $1,000 as if you owe $1,000,000. If you don't make the payments, the bank takes the title, simple as that. So where is YOUR security in this? There is none. It's psychological. If you want security stick that money you WOULD have spent on a downpayment in a savings account in case you need to cover payments for awhile. THAT'S security. I don't look for security. I look for a high return on my investment. I calculate my risks vs. potential reward and GO FOR IT.

In the "wealthy barber", he speaks of purchasing R/E using the following strategy.

Say we buy an apartment building...now, it might not CF NOW, but eventually it will...just as your Mutual Funds investments might not grow now, but over time, with more shares, they will. So let's set aside the MUST HAVE MONEY NOW SYNDROME.

Never read that book...guess I need to add it to my collection.

This is one issue I have with the RichDad philosophy. Kiyosaki says to ALWAYS invest for cash flow, not appreciation. Jeez, if I would have followed his advice to a T I would have missed out on making a TON of money in the past year.

I agree, for MOST people it isn't wise to speculate. The thing is, most of my current properties have a small negative cash flow, but all of them were worth tens of thousands more than I paid for them the day after I bought them. I have my ear to the ground and am able to take advantage of things that the general public never even sees.

So...the mortage can be used to buy the property, and a credit card and be used for the down payment, depending on the value.

Some might say "well that's risky, the values are going down, etc"...2 things...

1. The payments you'd make on borrowing 5-20k are likely what you'd dump into a mutual fund anyways, but you're leveraging more, so the real risk is cut at what your C.C. is. The mortgage is paid for by the rents, whether you live there or you don't, and are renting it out. In enough time, the rents pay the mortgage down, so you CF to your credit card or that you roll it into another property.

EXACTLY!

The funny thing is that lots of people do exactly what I am talking about with using borrowed funds for the down payment, they just don't REALIZE they are doing it.

It cracks me up when someone is so hesitant to heavily leverage an ASSET but have no problem whatsoever buying a brand new car on as much credit as the bank will give them. It's six of one and half dozen of another. If you look at it for what it really is you can see how ridiculous the mentality is.

Alot of .coms burnt up because there was nothing to them. All smoke and mirrors. There's nothing of VALUE there.

While I agree that the real estate market IN GENERAL is due for a correction, to compare the real estate market as a whole to the dot com's is RIDICULOUS. Anyone who understands how businesses are valued knows that a lot of these companies stocks go through the roof because of the public's stupidity, a false sense of supply and demand.

Residential real estate in general might stagnate or even drop a bit in CERTAIN AREAS but to compare the market in general to the stock market is naive and is usually only spoken by someone without a significant net worth.

"Money isn't made or lost it's simply transferred from 1 perception to another." Gordon Gecko. Wall Street. 1987.

Yup. And same with things like the hurricanes. New Orleans residents might have LOST but there will be a lot of people out there who GAIN from the tragedy. Not that anyone should take advantage of another person, but that's how it is. Person A. needs a new house so he pays person B. to build it. Wealth is transferred. Happens every day.

People here in FL are STILL making a bundle off of repairing hurricane damage from over a year ago. Money doesn't evaporate it simply changes hands.

 

[Page]

Re: Re: Re:

Originally posted by STR8UP
Anyone who understands how businesses are valued knows that a lot of these companies stocks go through the roof because of the public's stupidity, a false sense of supply and demand.

I remember the dot-com fiasco well. I think it had a lot of potential, it just happened ahead of its time.

The Real estate market is not going to crash like the dot coms did b/c the RE market is backed up with tangible assets that have definite value.

The Dot-com boom was fueled by speculation, promises of innovations, business models that never managed to make a profit, and the general desire of people to own a piece of what might be "the next big thing." People bought stock in all sorts of fly-by-night companies with a poorly tested business model, b/c for awhile companies could float losses and deliver services b/c they hit it big on their IPO and were able to get an insanely huge chunk of start-up capital.

However, at the end of the day, they had a negative cashflow and no way to pay for it, so their stock ended up tanking.

It also didn't help that a lot of the dot-coms went over the top when it came to living in style: You had companies that had elaborate offices and execs taking ridiculously expensive vacations. These unnecessary liabilities just added red ink to the balance sheet.

Also, at the time, most people were still on dial-up, and broadband was still expensive. People also couldn't adjust to doing everything online all at once, people have to gradually transition into it as they form new habits.

I feel that there will be a second dot-com market, but this time it will be more successful long-term. it's a good idea, it just happened prematurely in the 1990s before the world was ready for it.

 

[thebsharp]

STR8UP - you might wanna free some space in your inbox.

 

[sapphire]

STR8up, I just recently purchased my 8th property.

I'd like to chat with you personally to get your insights re: the R/E market and investments. Do you have an e-mail address?

 

[SELF-MASTERY]

How do you guys feel about RE wholesalers? There are several individuals that wholesale real estate to other investors.

It does take money, to make money, but I am really starting to understand str8's point about leverage. Almost anyone can qualify for an investment loan with a hard money lender; their requirements aren't that high (600 fico, 6k liquid). I'm graduating this spring and I'm not even going to look for a job. I plan on keeping my cushy low paying job, and investing in real estate.

I see college students borrowing money to buy cars and rims. Why not use this same money to invest in real estate or a business? Where else can you find a 5% loan that isn't contingent on your fico score?

 

[backbreaker]

Originally posted by SELF-MASTERY
How do you guys feel about RE wholesalers? There are several individuals that wholesale real estate to other investors.

It does take money, to make money, but I am really starting to understand str8's point about leverage. Almost anyone can qualify for an investment loan with a hard money lender; their requirements aren't that high (600 fico, 6k liquid). I'm graduating this spring and I'm not even going to look for a job. I plan on keeping my cushy low paying job, and investing in real estate.

I see college students borrowing money to buy cars and rims. Why not use this same money to invest in real estate or a business? Where else can you find a 5% loan that isn't contingent on your fico score?

my best friend, who was lucky and smart enough to get some good scholorships, luckly enough to where his mom worked at his school and he got a 40% discount on ttutation and to top it all off, was on athletic scholorship already, got a ton of leftoever money after scholorships...

what did he do with it? Painted his car Candy Blue, got some 22' rims with spinners and put 3, count em 3, flip down 15 inch TV's in his car...

And to make matters worse, didn't get an alarm, andhis tv's were stolen.

I told him that you have to invest and stop thinking short term, that with the money he had left over, he should have done something smart with it.