What It Takes to Be a Big-Time Investor

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You want to be a for real, no joke investor. Like Kiyosaki, or Trump, or Gates, or who knows who. You don’t want to just be set for retirement. You want to make the most money in passive income you can so you are financially free and can do whatever you want.

What do you need in order to make that happen?

How to Invest in Real Estate While Working a Full-Time Job

Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.

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Requirements of Any Big-Time Investor

1.       Don’t Be Location-Specific. I’m sorry, but no one can tell me that the big boys all only buy investment properties locally and landlord their own properties. They just don’t do it. Where do they buy? Wherever the best deals are! Where the best deals are is always changing, and will always be changing. Some markets may be pretty consistent in always having good deals, and some markets may be pretty consistent in always having bad deals, but there is no market that will always have the best deals. Plus, an amazing deal may pop up  totally under the radar in some random area at any given time for little rhyme or reason. Maybe even in an area that typically always has bad deals. The big-time investor jumps on whatever the best deals are, no matter where those might be. No big-time investor only buys locally. They also don’t work on their own properties.

2.       Outsource All Work. Did I mention big-time investors don’t work on their own properties? No way. They only oversee the teams who do all the work. Big-time investors live off passive income. There is nothing passive about lifting a hammer during a rehab or taking repair calls from tenants. Those things are work. Work = not passive = not what big-time investors do. As Robert Kiyosaki says, “I don’t work for my money.” Meaning, he is not hands-on. His job as the big-time investor is to ensure proper teams are in place who will handle all the work associated with a property and then he just has to ‘manage the manager’ after that. And at his level, I’d imagine his job is to ‘manage the manager who manages the managers’. Then his other major task is to figure out how to creatively finance the deals so that it puts the highest returns possible back in his and his investors’ pockets.

3.       Leverage as Much as Possible. Another famous debate. Do you pay all cash for a property or do you leverage? Well, what do the big boys do? I’ll give you a hint- they don’t pay all cash for anything! They leverage as much as possible. They know that using other people’s money is the smartest way to maximize returns on any investment deal. They are also smart enough to know that investing all cash into something is insanely risky because they could potentially lose all of that money. So they look for money from other sources than their own pocketbooks.

4.       Know How to Find Money. I had an investor one time tell me that his full-time job, as a flipper, was finding money. It wasn’t flipping the houses, it was finding money. Every single deal required him to find more money. Why? Because he was slick enough not to use his own money for both risk and return reasons. At the point you consider time, effort, risk, and returns it is very obvious that you should always be using someone else’s money. Once you master how to find other people’s money, you can master real estate investing (assuming you know what to do with the money once you find it). If you can’t master finding other people’s money, or you insist on not leveraging for fear of, well not sure what the fear with leveraging even is, you will never become a big-time investor.

What kind of investor are you? One who insists on only buying locally so you can do all the work yourself and manage the headaches, all while risking every penny of your own money? Or one who knows the real definition of passive income?

Photo Credit: f_mafra

About Author

Ali Boone

Ali Boone(G+) left her corporate job as an Aeronautical Engineer to work full-time in Real Estate Investing. She began as an investor in 2011 and managed to buy 5 properties in her first 18 months using only creative financing methods. Her focus is on rental properties, specifically turnkey rental properties, and has also invested out of the country in Nicaragua.

35 Comments

  1. John Thedford on

    Another good article. Though we all aspire to bigger and better ( more money, more toys, less stress paying everyday bills ) we all progress as investors. What’s right for a seasoned investor isn’t necessarily right for a new one. With experience and a good track record OPM comes easier. With more experience we all gain more knowledge and find it easier to overcome fear that every new investor has. Outsourcing is another point. A newer investor with limited resources may find doing work themselves is their best option. As their financial picture gets brighter they may have more ability to outsource or in fact may have so many properties they have no choice but to delegate more responsibility. Last, we all have different motives. One investor, who may be young and hope to build his empire may have 30 or 40 years. Another investor (who started investing at a much later point in their life) who is 5-10 years from retirement may be satisfied to have 50K-10K in passive or active income. Thanks Ali I always enjoy what you bring to the BP nation.

  2. Ali,

    Great article with lots of good information and advice.

    I have another question, do you or your readers think Kiyosaki, Trump, or Gates buy a property for say $10,000,000 and sell it for $15,000,000 and just roll over and pay tax on
    the $5,000,000 in profits?

    Hardly, they do a 1031 Exchange but most incredibly most Investors and Realtors® know zip, nada, zilch about this incredible tax avoidance tool.

    If you properly conduct 1031 Exchange strategies you will never, ever have to pay 1 cent on your profits if you simply do one thing; die. Your heirs inherit your property on a step-upped basis ergo you beat Uncle Sam and the IRS.

    • Ali Boone

      Lol, nice Tom. I love your verbiage in explaining that one. I don’t personally have a lot of tax advice or know-how as I’ve never sold a property I’ve bought (thanks, cash flow). But yet, the seasoned guys are incredibly strategic in knowing how to properly sell a property. As Kiyosaki always says, taxes are one of the biggest factors that has to be considered when it comes to making money. The less you pay in taxes, the more money you make. So learning the tax side of things is pertinent to becoming one of the big boys, absolutely.

  3. Great article and something I have been talking about aspiring to for a long time. If people aren’t at this level and want to go big, they do need to think on that level. Some people think I’m crazy when I say things like that but you have to think BIG and learn to form your ways after those who are successful rather than falling in old patterns and staying small. Thanks, great post Ali.

    • Ali Boone

      Thanks Amie. I agree, understand what it takes to be big later and that can help you steer your journey there. There will be tons of little things you have to learn on the way that the big boys don’t have to worry as much about at their levels, but always have that end-goal in mind.

  4. Great refresher. We constatly get side-tracked with doing most of the leg work, marketing, finding deals, financing, overseeing repairs, we micro manage our business so much we buy ourselves a new investment job. Flexability, leverage, automation, and OPM are key…

  5. Good article Ali. I needed that kick in the rear to get me moving to a different market. I’ve got ten homes now in Atlanta, but I’ve been kicking around investing in Texas for a year now. This was what I needed. Austin and San Antonio are calling me.

    • Ali Boone

      Hey Nick. Thanks for your comment. Can’t say I agree with it, nor will I ever base my opinion about someone on what someone else says about them, but I do respect everyone’s opinions. I’ve read 9 of his books (just had to count them on my shelf) and played the game a little and I think there is a ton of substance there, as long as someone actually understands what he is saying. Not everyone does, and that’s fine.

      Following Kiyosaki’s advice has let me get out of my 9-5 corporate job, it taught me how to buy 5 properties in 2 years using none of my own money, they’ve taught me how to budget my money in amazing ways, and he has given me the advice I needed on how to create my lifestyle design just the way I want it.

      He’s not for everyone, but he’s done incredibly well for himself and incredibly well for me, so I have no problem using his name in context.

  6. Bill gates does not work the best for a leverage to the gills advocate. As microsoft relatively recently issued bonds, meaning took on debt for the first time in a long long time all the while still sitting on a pile of cash and they are doing quite well with that strategy as well.

    • Chris Clothier

      Hey there Ali Boone! Another great article and a really timely topic. You and I have had discussions in the past about your point #3 and I think one thing needs to be pointed out about this example in particular. When you say:

      3. Leverage as Much as Possible. Another famous debate. Do you pay all cash for a property or do you leverage? Well, what do the big boys do? I’ll give you a hint- they don’t pay all cash for anything! They leverage as much as possible. They know that using other people’s money is the smartest way to maximize returns on any investment deal. They are also smart enough to know that investing all cash into something is insanely risky because they could potentially lose all of that money. So they look for money from other sources than their own pocketbooks.

      I want to point out two things. When an individual uses leverage, they are still risking all of their money…in that particular deal. There is a curve graph that has developed over time showing the risk of default by borrowers and the insane drop in risk to a lender when someone puts more than 30% into a deal. I hate using leverage as a long-term buy strategy. I like it for acquisition, but am no longer a fan on a 30 year mortgage. I prefer to pay off things earlier with the NOI. But, if investors are going to use leverage, I would remind them that the higher your down payment, the lower your risk is of default. It may be a cliche, but having skin in the game is very important.

      My second point is this. You mentioned some people in your article who have had financial troubles. We hear about their troubles in the news. It always has to do with losing something that they leveraged, yet they are still right at it making deals and in the game. It is because THEY are not the ones borrowing the money. THEY are big enough and smart enough and have the resources to leverage without the personal risk…usually.

      So there is HUGE diference between an everyday investor and one of the ultra-wealthy people you mentioned. They are not on the same playing field as us when it come to structuring leverage.

      That being said, I loved the article and as I’ve said, I loe the passion and enthusiasm. I think you are a rockstar investor and want you to keep turning out advice!

      Chris

      • Ali Boone

        No, you are the rockstar Chris! Only rockstars are as pumped about International Pancake Day as others of us may be. Haha.

        Good perspective on leveraging. (p.s. when are we going to do our debate blog?!) I don’t totally agree with it, mostly because defaulting doesn’t scare me. Losing money scares me, and the more of my own money I have in a deal, the more I can lose. But yet, a lot of the big boys have had financial troubles, no doubt. But I think it’s unavoidable at that level to not have something flop. We always talk about investors in that all investors will fail at some point, but lucky for us little guys our failures don’t get slapped all over the headlines of newspapers. We also don’t fail as big as they do (newspaper-worthy failures) because we don’t have as big of successes as they do either. And then too, filing bankruptcy and things like that are often a strategic money-money. More slick tricks.

        Keep your articles coming as well!

  7. Hi Ali,

    Nice article. The only thing I wonder about is the phase before you become “big time”… I would think there’s value in learning the ropes close to home before branching out.

    • Joshua Dorkin

      Karen – I agree with you 100%. Even if you’re using a trusted company to manage your properties, you need to understand the fundamentals. Blindly buying property and trusting someone to take care of it without knowing how to evaluate opportunities or how to manage your manager is a recipe for trouble. You might get lucky and have a good experience, but you may find yourself in trouble without the knowledge of how to get yourself out.

    • Ali Boone

      I absolutely agree Karen. And I think learning the ropes yourself is the only (I would underline that word if I could) way to get to being a big level. All those guys had to learn things down in the weeds in order to get that far. There’s no way to get big if you don’t understand the internal workings. I think there is a point where learning the low-level details does become too distracting, but there are definitely principles that need to be understood, and the only way to get that understanding is to experience them.

  8. Ali, another great article! Although some folks will agree to disagree, when I think of all the big time investors I know they all have those 4 requirements as part of their lives. Their time is so valuable, they have to manage it better, so that means leveraging their time, money & resources and it shows in their success. Thanks for reminding us what we all can aspire to.

  9. Ali – This is another great article.

    I think after you have been doing business for a while, you will begin to see where you fit into the “big picture”. Is your niche being a small investor, a big business in your local market, or do you want a really big business like you described working in multiple markets? It will be an individual choice for each person. This choice will ultimately determine the course of your business.

    But like you said, everyone needs to use leverage to grow their business. We all need figure out whether we need employees or possibly a VA or two for outsourcing some of that work. Figuring out how to work “on our business rather than in oour business” needs to be done sooner rather than later. Most of us remain “solopreneurs” far too long.

    Sharon

  10. A few years back I invested in a development in Panama. I put my trust in a developer and found that I spent significant time managing the developer. After purchasing far, far, away I vowed never to do this again. From 2009 – 2012 I purchased several properties all within 15 miles of my primary residence. I personally manage all my properties but at some point in time in the future I plan to hand this off to a trusted property manager. The experience I have gained working on all facets of this is invaluable and I wouldn’t have chosen a different route. So to answer you last question I guess I’m the one who only buys locally and I’m the one who manages all the headaches!

    • Ali Boone

      Haha. No worries there Paul! I always tell people, handing off their investments isn’t for everyone, nor is not managing everything yourself. I can say it’s not personally for me (not even close), but that doesn’t mean it’s not for everyone. But to become a big boy, yes, you will eventually have to pass off the baton because there won’t be enough hours in the day to handle everything.

      What city do you live/invest in?

  11. Paula Pant

    I’m definitely in the phase in which I do too much work myself, and put a lot of my own money in the game (though I also borrow a lot). And you know what? I prefer it this way — at least at the moment.

    Why? First, because I’m a novice, and I need to learn the ropes. Handling day-to-day operations is like a “college education” in real estate investing. One day I’ll graduate, and when that happens, I’ll be outsourcing a lot. But I’m not ready to wear my cap-and-gown yet. 🙂

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