A few years later, the real estate market rebounded and everyone else was getting in. The stock market was booming, and everyone was getting in. The U.S. economy was getting back on its feet. I began selling and was now traveling to Peru, Norway, Malaysia, and the Philippines.
The investment landscape had changed. We were no longerbuying real estate. Now I just watch the values climb inside the asset column and will probably begin selling. I suspect that some of those six little house deals will sell and the $40,000 note will be converted to cash. I need to call my accountant to be prepared for cash and seek ways to shelter it.
The point I would like to make is that investments come and go. The market goes up and comes down. Economies improve and crash. The world is always handing you opportunities of a lifetime, every day of your life, but all too often we fail to see them. But they are there. And the more the world changes and the more technology changes, the more opportunities there will be to allow you and your family to be financially secure for generations to come.
So why bother developing your financial intelligence? Again, only you can answer that. I know why I continue to learn and develop. I do it because I know there are changes coming. I’d rather welcome change than cling to the past. I know there will be market booms and market crashes. I want to continually develop my financial intelligence because, at each market change, some people will be on their knees begging for their jobs. Others, meanwhile, will take the lemons that life hands them—and we are all handed lemons occasionally—and turn them into millions.
That’s financial intelligence.
I am often asked about the lemons I have turned into millions. I hesitate to use many more examples of personal investments because I am afraid it comes across as bragging or tooting my own horn. That is not my intention. I use the examples only as numerical and chronological illustrations of actual and simple cases. I use the examples because I want you to know that it is easy. And the more familiar you become with the four pillars of financial intelligence, the easier it becomes.
Personally, I use two main vehicles to achieve financial growth: real estate and small-cap stocks. I use real estate as my foundation. Day in and day out, my properties provide cash flow and occasional spurts of growth in value.
The small-cap stocks are used for fast growth.
I do not recommend anything that I do. The examples are just that—examples. If the opportunity is too complex and I do not understand the investment, I don’t do it. Simple math and common sense are all you need to do well financially.
1. To inspire people to learn more.
2. To let people know it is easy if the foundation is strong.
3. To show that anyone can achieve great wealth.
4. To show that there are millions of ways to achieve your goals.
5. To show that it’s not rocket science.
In 1989, I used to jog through a lovely neighborhood in Portland, Oregon. It was a suburb that had little gingerbread houses. They were small and cute. I almost expected to see Little Red Riding Hood skipping down the sidewalk on her way to Granny’s.
There were “For Sale” signs everywhere. The timber market was terrible, the stock market had just crashed, and the economy was depressed. On one street, I noticed a forsale sign that was up longer than most. It looked old.
Jogging past it one day, I ran into the owner, who looked troubled.
“What are you asking for your house?” I asked.
The owner turned and smiled weakly. “Make me an offer,” he said. “It’s been for sale for over a year. Nobody even comes by anymore to look at it.”
“I’ll look,” I said, and I bought the house a half hour later for $20,000 less than his asking price.
It was a cute little two-bedroom home, with gingerbread trim on all the windows. It was light blue with gray accents and had been built in 1930. Inside there was a beautiful rock fireplace, as well as two tiny bedrooms. It was a perfect rental house.
I gave the owner $5,000 down for a $45,000 house that was really worth $65,000, except that no one wanted to buy it. The owner moved out in a week, happy to be free, and my first tenant moved in, a local college professor. After the mortgage, expenses, and management fees were paid, I put a little less than $40 in my pocket at the end of each month.
Hardly exciting.
A year later, the depressed Oregon real estate market had begun to pick up. California investors, flush with money from their still booming real estate market, were moving north and buying up Oregon and Washington. I sold that little house for $95,000 to a young couple from California who thought it was a bargain. My capital gains of approximately $40,000 were placed into a 1031 tax deferred exchange, and I went shopping for a place to put my money. In about a month, I found a 12-unit apartment house right next to the Intel plant in Beaverton, Oregon. The owners lived in Germany, had no idea what the place was worth, and again, just wanted to get out of it. I offered $275,000 for a $450,000 building. They agreed to $300,000. I bought it and held it for two years. Utilizing the same 1031-exchange process, we sold the building for $495,000 and bought a 30-unit apartment building in Phoenix, Arizona. We had moved to Phoenix by then to get out of the rain and needed to sell anyway. Like the former Oregon market, the real estate market in Phoenix was depressed. The price of the 30-unit apartment building in Phoenix was $875,000, with $225,000 down. The cash flow from the 30 units was a little over $5,000 a month.
No comments:
Post a Comment