All Forum Posts by: Tom Goans

Rich vs Wealth

As I have been taught, the difference between rich and wealth is rich people work for money; wealthy people have their money work for them.

To illustrate, some professional U.S. athletes are paid millions each year to play their sport - they are rich; the owners of the teams are wealthy.

"Rich Dad Poor Dad" and "The Millionaire Next Door" are two of my favorite books. Many other books, seminars, audio recordings, my grandfather, and father have also taught me the importance of the differences between being rich and wealthy.

I recall one of the most impressionable times when my father demonstrated the difference. We were at the summit of a Colorado mountain pass admiring the beauty of the mountain scenery all around and the valleys below - the photo for my profile was taken at this location. It felt as if we were on top of the world. My father turned to me and stated he was making money as we were standing there. We reviewed how. It was no longer necessary for him to pursue income. His primary task is making deposits 6 days a week.

Although my father is wealthy, he remains very active in the real estate business. Seven days a week, he is reviewing his operation, expanding his knowledge, and considering new investment opportunities. My grandfather was the same. It would appear money was the reward and not the reason for what they did and the contributions they made to society. Perhaps this philosophy is a better path to seek.

@Jacob A.,

This is where knowing the desires and expectation of the target market is critical.

It matters not what you or your fiance think or prefer, it matters what the target market wants. One makes you money and the other does not.

For example, you may not like cooking or grilling outside. Yet, a house in the Panhandle of Texas with an outdoor grill or barbeque pit is far more desirable and salable.

The target market is the answer to your question.

Word of caution: AVOID TRENDS.

@Pete C.,

I am not sure if you are serious. If you are, there is no one correct answer.The skill level of your partner is just one major factor and consideration. Each project is unique and so is the amount of work. Each partner is unique and so is that person's expectations.

If you are serious, you may be best fitted for a limited partnership investment. Consult with an attorney and financial planner to discuss your current status, strategy, and goals. They will give you the best advice and options to achieving your goals. They will also discuss the many risks you face in the scenerio you presented.

One thing you need to consider, in some states, a person must have a real estate license to be a property manager. Know the laws of the state where you plan to do business. Your attorney will assist you with this consideration. A quick call to the state real estate commission will also be beneficial.

@Taylor Ripp,

It is not my intention to rain on your parade. However, I want to be honest with you with no sugar coating. You stated: "I feel like I already have a solid foundation..."

Nothing could be further from the truth. The real estate industry is far more complex than you realize.

I highly recommend you spend far more time educating yourself on the various segments and many options in the real estate industry, and then focus developing a higher education that addresses your goals.

Your education should include many hours of learning the huge number of laws you must know and follow, how to negotiate, how to manage property and people, and business fundamentals and laws. Your degree will be very helpful, but you need much more knowledge.

This is the opinion of a seasoned real estate investor, developer, manager, and consultant with almost 50 years of experience. I have no intention of giving you false hopes. I will assure you greater success should you seek much more education.

There are numerous people in the real estate business in Durango with more than 30 years of experience. I recommend working for one or a company. Not as a real estate agent, but as a component to the success of operation. Your economic degree may be highly valued. The lessons learned will go way beyond anything you will read about in a book. You will also get first-hand knowledge of the business and what segment interests you the most.

May you have great success.

@Joshua Lybe,

The real estate industry is far more complex than you realize. May I highly recommend you spend far more time educating yourself of the various segments, many options, and then focus of developing a higher education that address your goals.

Your education should include many hours of learning the huge number of laws you must know and follow, how to negotiate, how to manage property and people, and business fundamentals and laws.

This blog is full of misrepresentations, misconceptions, and illegal advice.

This is the opinion of a seasoned real estate investor, developer, manager, and consultant with almost 50 years of experience. I have no intention of giving you false hopes. I will assure you greater success should you seek much more education. By doing so, you will discover the answers to your post.

Where Are the Seasoned Investors

By seasoned real estate investors, I am referring to those with more than 30 successful years of experience investing, developing, managing, or creating cash flow in the real estate industry.

• Have you ever asked yourself why there are no seasoned investors considering the same real estate opportunity you are?

• Have you ever wondered if the investment opportunity you are thinking of buying is not considered one by a seasoned investor?

• Do seasoned investors analyze real estate opportunities differently?

YES.

Cap rates, the 50 percent rule, the 3 percent rule, or any of the other commonly used mythical math equations help to sell books to those who are new to the real estate business, but they are not a thorough analysis of an investment - not even close.

A properly conducted investment analysis will include:

1.Time Value of Money

2.Risk

3.Risk and Workload vs. Acceptable Reward

4.Target Market Considerations

Do you think Warren Buffett uses a Cap Rate to make the final decision to purchase an investment? In interviews, it is common for Mr. Buffett to refer to the company people and management and to the customer base.

I am not a supporter or follower of Donald Trump. I will use him as an example because he is very visible and well known. Have you ever heard him mention in an interview a cap rate for one of his projects, the 50 percent rule, the 3 percent rule, or any of the other commonly used mythical math equations?

I am reminded of a time when a mentor 20 years my senior and I attended two residential foreclosure sales on the county courthouse steps. I had already conducted enough research to determine a maximum price each property was worth to us. No rules were used, other than our acceptable risk and workload vs. return. We did not buy any properties. All the successful bidders were willing to accept almost no mathematical return on the money at risk. Some were ecstatic with the hopes of making only several thousands of dollars.

Our property analysis considered the risk and time-value-of-money as parts of the equation, factors many investors omit.

The true analysis of an investment opportunity of any type MUST include the risk component to be an accurate analysis. If only the amount of the possible profit is assumed or considered, there is a lack of fully understanding the purchase as an investment.

• Just because there may be profit or a positive cash flow does not make it a good or wise investment - at least not to seasoned investors.

If you are wondering why seasoned investors are not bidding on or buying the opportunity you are considering, it may be because the purchase is not considered an investment opportunity after performing a more thorough analysis.

By including the risk factor into your analysis, the investment analysis becomes more reliable. The accepted investments may be less challenging and more rewarding.

• This is how you build wealth just like the seasoned investor.

I am not selling books or paid access to a blog or paid access to articles. In fact, I receive no financial benefit from this or any blog postings. I am only offering the investment concept and opinions of a seasoned investor with almost 50 years in the real estate business.

Your comments are welcomed.

@Seth Williams,

Education.

In my opinion, the lack of thorough knowledge or willingness to seek thorough knowledge is what plagues most people in the real estate business.

Too many in the business are Legends in Their Own Mind.

Too many think after a few years of experience and after reading a book or two they are now experts and able to give advice to others.

@Alex Smotherman,

I highly recommend books written and the audio tapes of Jimmy Napier. www.jimmynapier.com

The great thing about Jimmy is he shares experiences and lessons learned from many decades of investing and developing real estate. His experience includes manufactured homes, investing in debt (notes), developing land, residential rentals, and much more. Jimmy makes learning fun.

70 Cash Flow Ideas by Jimmy Napier is an excellent and very economical investment. Many great ideas are shared, which should get your brain to churning to come up with even more or ways to tackle some opportunities you have already come across.

Power of Negotiating by Jimmy Napier is another terrific investment. Everyone must learn how to negotiate properly to make the process easier and more successful. Negotiation is used in every segment of your life, not just business.

These are audio CDs. You will look forward to taking long trips because it is difficult to stop listening to the stories.

I do not make a penny with these recommendations. I receive no benefits. I am only offering suggestions for what I consider to be excellent sources for learning and wisdom shared by someone who was actively making money in the real estate business long before many of the authors of other books, tapes, or articles were born.

The real estate business has ups and downs. I consider it very important to learn how to survive the bad times as well as enjoy the good times.

@James D.,

Welcome to the real estate industry. May you have great success.

The real estate business is very complex with many laws that must be known and followed - federal, state, county, and city.

• One law you should be aware of is legal documents may only be legally provided by licensed lawyers or are state approved forms.

Seeking advice from an attorney in the area where the property is located can be a wise and very economical decision considering the alternative. An attorney will assure you are abiding by the federal and state laws. Every state has unique laws. The attorney will also provide the best advice and options for your specific needs with a consideration for your future. The lawyer will take the time to discover your present needs, strategy, and goals. The result will be legally drawn up agreements for your use.

• Please do not consider using any legal documents given to you by any one other than a licensed professional.
• Protect yourself. Please do not consider any legal advice except from a lawyer you hire. Every person is unique, every situation is unique. There is no one correct resolution.

Good luck.

@Ron Kelley,

I am a seasoned note investor - real and personal.

I do not mean any disrespect, but only want to protect you from yourself.

Please do not buy a single note until you have more knowledge on the subject. There is a whole lot more to learn than you can read on a blog or in a book or two. Beyond learning about notes and their construction, you also need to thoroughly learn the finance laws - from federal to state - there are many. Understand the laws and the reason behind the laws.

If possible, become associated with a seasoned note buyer/seller. Not as good, but also valuable, become associated with a mortgage brokerage company.

By doing all of these ideas, you will then know the answer to your question.