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Have Money but No Time ....

Saturday, August 27

So you have money, you want to invest in real estate, but you have no time!

When I meet with individuals that have secured an investable nest egg of 50K to over 500K, the conversation always seems to turn to real estate.  I suppose this is to be expected, given my track record in the real estate business and willingness to help where I can.

Having had this conversation 50+ times now, I feel safe discussing the obstacles, the opportunities, and the options such an investor has.

First, let’s look at the obstacles:

An investor who has cash to invest can become a target, as there are a lot of people itching to get their hands on cash for various investment schemes.  Some of these might sound very appealing, especially given the current environment of low interest rates.  The following scenario crossed my path a year ago or so and is just an example:  

I was offered the opportunity to invest in oil wells through a reputable dealer with promises of returns and riches.  They had all the fancy charts, they threw out a mountain of jargon, and they topped it off with a fancy Excel sheet showing proposed returns that would knock your socks off.

I have to admit that I was impressed and they almost had me.  But then I sat back and asked myself, what do I know about oil wells, drilling, the risks of the industry, etc?  I was also suspicious of the fact that they were hunting for investors in California; there had to be a lot of money in Texas that would chase this deal if it was so profitable.  Plus, I was really put off by all the jargon.  I have a simple rule if you can’t explain something in simple terms, then I suspect you are hiding something.

I did not invest, and a year later I am very happy I didn’t invest. A peer of mine did, and they lost their shirt.  But hey, they have a tax write-off now.

Besides being a target for unsavory deals, the cash investor’s time is limited due to a full life with work, family, and other responsibilities and they just don’t have the bandwidth to research another investment area.  They understand that it takes time and hard work to get good at something, and they just don’t have the time or energy to take on a new area.  

This means that the investor is left holding cash, or worse, gambling in the stock market or chasing the latest hot fad such as gold or international stocks. These options might work out, but they will very likely leave them with less of return and more risk than should be acceptable.

The Opportunities:

As the previous section hinted, the investor with cash has a bunch of options, and it is their job to protect and grow their reserves via careful investment selection.  Given that this article adds the additional caveat of limited to no time, we will remove all the options that require lots of education, daily monitoring, and other headaches.

We will instead focus on the idea of being a passive investor.  The passive investor is by definition not involved in the daily decisions, and when done correctly, simply picks up a check from the mailbox and moves on.  

While the idea of being a passive investor is very appealing to many people, let’s set some ground rules so you don’t get burned.  You need to do some upfront homework before you invest one single penny.

You should look for several things as you review opportunities to invest:

First, you need to find an investor with a documented track record of success.  You need to understand that this investor has done this before, and that they are not one hit wonders who got lucky or simply had good timing once.

Second, you need to understand their investment program, structure, and how everyone is protected and will make money.  As the cash investor, you not only need to understand how you will make money, but you also need to know how the person you are investing with will make money to insure everyone is healthy.   Remember, it needs to be a good deal for both of you or you should run away fast.

Third, if the party you are investing with tries to shower you with fancy jargon, just thank them for their time and leave without investing a dime.  The program you invest in has to be simple to understand or you shouldn’t do it.

In the end there are many opportunities for the cash investor, but you need to look for an experienced team that has a simple program that offers secure profits for both parties. Finally, the investor should be able to describe the program without use of fancy jargon.

The Options:

In the current market, there are very few options that offer secure returns in a well-understood business.  I propose that you should look for real estate investors that are seeking capital, offer a proven track record, and are happy to share their model.

Should you find such an investor, make sure you understand how you both will make money and the investment options available.  

If you do your homework correctly you will set yourself up for mailbox money which is the ultimate goal of the Passive Investor.

Good Investing

Income Statement or Balance Sheet???

Friday, August 26

Understanding your natural slant on investing is important as it will drive you to make decisions.  So you need to ask yourself this question.

What type of investor are you?  

Option A:

Do you like to talk about the value of your portfolio?  Do you like to talk about your Net Worth?  Or maybe you like to read stories about others and dream about having the Net Worth or the Portfolio they have built?

Or

Option B:

Do you like to talk about how much Rent you are collecting or Salary you are making every month or year? Or maybe you just love to read about all the big salaries of professional athletes, actors and CEO’s???

If you like option A that means you see the world or at least the investment world through the Balance Sheet.  The Balance Sheet is where you collect all the Assets subtract the Liabilities and come up with a hopefully positive number.  Truth be told most folks with this slant simply discuss the Asset side and ignore the liabilities.

If you like option B that means you see the world or at least the investment world through the eyes of the Income Statement.  The Income Statement is where you total all the income and subtract all the expenses leaving you with hopefully a positive number.  However, most Income Statement investors I have met like to simply talk about the top line and all the income and always forget or ignore the expense side.

I bring up the topic of Balance Sheet and Income Statements because it is important to understand how you see your business and evaluate your deals. Knowing this can help create goals, shild away from bad deals and help you grow as an investor.

For the record I look at my business through a often over looked financial statement called the Cash Flow Statement.  This tells me very quickly where the money is coming from and where it is going every month. For my money the Cash Flow Statement is key but it is often over looked because it is not as sexy as the Balance Sheet or Income Statement.

Good Investing


Do you Chase or Do you Decide to Invest

Thursday, August 25

As I have stated in other posts I travel way too much for my day job which is no fun.  That said it does give me the opportunity to talk with individuals across the country.  I like to do this because it gives me the opportunity to insure I am not just swamped in the silicon valley view of the world.

Lately I have heard lots of folks talk about buying Gold.  I find this to be yet another example of the masses chasing the latest hot asset/investment.  When will we learn?   I just don’t get it.

If you are lucky enough to have a pile of cash for investments why would you want to invest in an asset that has been appreciating for years and has recently gone parabolic.  Gold could go higher but are you Deciding to buy or are you Chasing the investment or return.

Another question, are you trying to catch the last leg of the increase or are deciding this is the best investment?

You have heard others say it before but real money and security is made by investing in assets that are down and out instead of the latest hot trend.  Especially if the asset can spin of a dividend, interest payment or rent.

If you don’t have the time to do all the homework required to be successful in investing in down and out assets you need to find an Investor with a track record of success in the down and out asset.

Don’t Chase Investments but Decide to invest in down and out assets

Good Investing

Steve Jobs and REI???

Wednesday, August 24

So by now I am sure you have heard that Steve Jobs is stepping down from day to day activities as CEO at Apple.  First let me wish Mr. Jobs a long and healthy life and many more birthdays.  (For the Record I think Steve Jobs is a GENIOUS and the Best Product Guy of My Lifetime!!!)

Now with that out of the way what do you think Steve Jobs and Real Estate Investing have to do with each other?

What do you think??

Give up?

Well from where I sit the news about Steve Job’s is just another reason I won’t invest in stocks.  The financial pundits would probably call this “Execution Risk” while I simply call it “Out of my Control”. 

I can’t control the events in my own life everyday let alone the life of executives in Fortune 500 companies.  Owning a share of stock gives you the upside and the downside but again you CONTROL nothing.  Seems like gambling to me???

With Real Estate Investing you can control the “Execution Risk” yourself and thus you own the outcome instead of having some random event drive down or up the stock price.

The more Real Estate Investing you do the better you get at Executing and driving up the return and reducing Risk. 

If you don’t have the time to do your homework on a market or you are swamped with other activities find an Investor that has a track record of success and talk to them.

Good Investing


Does Fear or Greed drive the people around you???

Friday, August 19

So next time you are at a family gather, out with friends or in a casual work conversation take a minute and get a sense for the vibe of the group.

Is the group talking about everything with a negative slant?  For example housing is down, stock market, foreclosures are up, etc.

Or

Is the group talking about everything on sale?  For example just today HP is down 20% in the stock market.  Heaven knows I am not a stock guy and I don’t play one either but does anyone really think HP as a whole is worth 20% less today than yesterday? Again note I am not a stock guy this was just the most glaring issue of the day.

I want you to do this little exercise because it is the simplest form of understanding the mood around you.  No matter how positive or negative you are if the group around you is on the opposite side they will eventually drag you over.

For the more advanced players think about it this way.  If everyone is negative it is a good sign that a bottom is close …  

We can make lots of money in this real estate market you just need to know where to look …

Good Investing

I feel Bad for Baby Boomers!!!!!

Thursday, August 18

As an investor I feel very lucky to buying lots of long term rentals at ridiculously cheap prices.  The old adage of “The harder I work - the luckier I get” is so true. 

We continue to build a decent pipeline of deals, we produce safe and secure rentals and life is great.  In addition our network of private investors is growing as our track record and reputation grows.  I love creating win-win situations for Investors.

Then I sit back and think about the baby boomers who are on the door step of retirement.  The list of headaches I see is long and none of them are their fault but they will feel the greatest pain.  Lets just review a few of the headwinds.

Stock market is tanking and people are losing faith which means 401K, IRA’s, etc will be worth less and potentially a lot less. Which is not a good thing.

Savings rates are a joke especially when you add on the realities of inflation both short and long term.  They are actually losing money every month!!!

The value of the dollar is not going up as we print more money.

Gold is spiking but this parabolic move is certain to produce a nice downside surprise at some point.  Truth be told I road the wave with lots of Silver from an average of $8 and sold at $38 (and bought a couple of houses with proceeds).  Remember Gold takes the stairs up and the elevator down so it will be nasty when it comes.

This leaves real estate but what can a baby boomer do that has a full time job, a very full after work life and likely does not live in a great market to invest?  Who needs the risk for a measly 5% return.  I wouldn't buy real estate with only a 5% return - too many risks and surprises!!!

Real Estate takes work, lots of perseverance and the ability to make quick decisions.  It is a very tough business to pick up with limited cycles.  

I suspect for most baby boomers they would benefit from finding an experienced investor with a documented model, lots of examples of success and a willingness to share.  

If you want to talk just let us know.

Good Investing


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Michael Zuber


Real Estate Investor
Fresno, California


Website: http://www.wealthbuildingpro.com

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