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Since my post on the first page, I've seen several themes appear; potential for failure, taxes, etc. Again, that's why I suggest keeping your day job and learning something about real estate investing from very reputable sources. You can start small, the tax laws are certainly the most advantageous (1031 exchanges, interest deductions, depreciation, capital gains treatment, etc) and there are other programs that make real estate investing even more appealing. For example, we bought a farm, went to the livestock auction and bought cattle, and before you knew it had a couple hundred head. In addition to some nice agriculture tax benefits we received, the cattle and hay paid for the small mortgage we carried. After a few years, a rancher from Florida bought the farm for almost twice what we had paid for it. We took the proceeds from the sale and bought timber land and are now getting favorable tax treatment for growing timber.
As I said, anyone can do it. And it's a lot less risky if you maintain a career where you don't rely on your real estate for your primary income, but rather to build wealth.
I have had my own business since 1993 in one form or another and beekeeper's 100% right. The first one flamed out in 2001 (sleazy business partner). So I dusted myself and started another one.
Tax planning is indispensable. If you're not thinking about your year end financials by November, then you're going to write a big, fat check to the IRS.
We run my business books on an accrual basis, but pay taxes on a cash basis. So, beginning in late October, we look at our YTD income statement and convert the numbers, so know exactly what our tax exposure is going to be. Trust me. It mkes all the different in the world.
Never trust a 'financial advisor' who earns less than you do, never trust a 'tax advisor' who pays taxes.
And I am continually amazed at how many people violate both of these ideas.
To me it seems simple.
If a guy can not figure out how to earn a high return on his investments, then why is anyone listening to his investment advise? But look around and see how many folks who take their advise from someone who earns less than they do. So many folks listen to guys who gamble on the stock market. Sure sometimes they win, sometimes they lose. Rather than the folk's whose investments consistently win.
Then again with taxes. Why pay homage to a guy who can not figure out taxes. Of course our system is rigged. Nobody suggested that it is not rigged. Our system of income taxation is designed for the 'wage-slave' attitude, keep that attitude and you pay income taxes. Regardless of how much you earn. It is about your attitude. Why sit down to play Monopoly if you refuse to read the rules of the game? Read the rules and develop a winning strategy.
Yes, I know that life sucks. Most businesses fail, and 'everybody' pays taxes. Boo Hoo, boo hoo.
For everyone who insists on never reading the rules of the game that is.
At the same time there are thousands who consistently do not fail, and who do not pay taxes.
Both groups exist.
One group that is gambling. Bumping along in the dark, rolling the dice. Maybe this adventure will do good, maybe not. Maybe they will 'luck' onto the right IRS form and take some write-offs, maybe not.
And the other group who learns how to play the game. Who uses investments that do not fail, and obviously stop paying those stupid taxes.
Great post. Well said. If you can recommend of few good books, I'd appreciate it.
There are alot of great books that I've gotten use out of...
In investing/finance/economics, I think Jim Rogers is a great author. He cofounded a hedge fund with George Soros in the 70's, they made gazillions. He started a commodities fund in 98, right at the bottom. He's been right on alot of other calls.
Investment Biker, Adventure Capitalist and Hot Commodities are three of his books.
Money Game was a great book about investing (recommended by Warren Buffett).
Jay Abraham and Dan Kennedy are great marketing authors. Scientific Advertising is considered a bible in advertising/marketing. A little thin, 100 page book from 80 years ago. It's not necessarily "easy reading", but the pros swear by it.
Influence by Robert Cialdini is a must read.
Good books make you reach for the answers, there are alot of gimmicks out there. For the most part, I think the masses jump on the latest new book, offering answers 1-2-3. The pros go to old books, re-reading seemingly boring passages, learning new insights each time.
Absolutely. The bad news is it's possible only for a limited number of people who assemble the right combination of determination, foresight and luck.
I work in the largest real estate office in the world. I see a lot of new agents come into the business. Many are gone the first year. But a small few get it. And those who get it do well and prosper greatly - like a duck to water. All have the same opportunity, but only a few make something of it. Why is that?
Anyone can build wealth. I agree with a lot of the other posts. Avoid consumption lifestyle, live below your means, look for ways to leverage the skills and talents you have. Learn about real estate from real people in a local real estate club, not from books and late night gurus.
Here's another thought I would like to add to this discussion. When there are monumental shifts in the economic climate, THAT'S when the foundation for the next economic boom is laid.
Remember the stagflation of the 70s? That really paved the way for Wal-Mart to come along with its complete overhaul of traditional retail distribution channels. In fact, in about every industry today, you'll find successful businesses that, during the 80s, totally changed the face of business and contributed to a huge, 27-year economic boom in the process.
Remember the early 90s? We had a brief recession. Lots of people got laid off, especially from bloated entities such as IBM and AT&T. The same whiny gloom and doom crowd (The kind that seem to populate message boards such as this) were bleating out the exact same themes we see today.
So guess what happens? The internet boom and the rise of the totally decentralized business culture. In the 90s, people finally started seeing the long-promised productivity gains of personal computing, fueling the greatest entrepreneurial binge in American history. At the same time, franchising became truly big business in this country.
Today? You can sit around and watch the news and get depressed, or you can start gaming the current situation and figure out where things are going. Gas prices will be high for a long time, based primarily on the relative weakness of the dollar (The rise of gasoline prices in the EU haven't been nearly as severe, btw). However, the weakness of the dollar also constitutes a huge opportunity here for manufacturing exports, tourism, and foreign investment. Even as we speak, foreign manufacturers are looking for opportunities to site plants here in the United States to take advantage of the relatively weak currency. So what can you do to take advantage of matters?
In short, there's always opportunities. You just have to be forward-looking to identify them.
My wife and I have gone from nearly broke to almost a million in assets in 8 years. The key is actually having discipline. So here's my advice.
1) First, it's impossible to build wealth without a budget. Until you really look at what you're spending, then you'll always spend every dime you make.
2) Second, you have to work and work hard. My wife and I have worked extremely hard in the past eight years.
3) Live beneath your means. I mean 20-30% under your means. At this point, we live on my salary and bank my wife's. At first, it was tough to do, but as our salaries improved it got much easier.
4) Pay off debt first and foremost. If you have credit card debts, refinance your house to pay off your cards. THEN PUT THEM IN THE DRAWER EXCEPT FOR ONE CARD FOR EMERGENCIES. Honest to God. If you can't pay with case, check, or debit card, don't buy it. If you must charge something, then pay for it with next month's budget. Make it a frame of mind and, after awhile, you'll be amazed at how you don't even think about it.
5) Once you have a budget, put money into savings or investments first. Never wait until the end of the month, because there's never enough left over. It's just that way.
6) Really look at what you buy and how much it costs you. Be a smart comparison shopper. For example, we realized that buying stuff at Sam's shaved 20-30% off our monthly grocery budget. For our gasoline purchases, we got a BP card, which saves 5% on every gallon we buy there and gives us rebate checks after enough purchases. Buy 15 gallons of gas today at $3.50, and you've saved $2.62. Multiply that by four trips to the gas station apiece for two drivers, and you've saved about $22 a month. That's $264 a year.
Play the same game for your other purchases. Have cable and telephone? We put our telephone onto our cable. It made zero difference in our telephone service from a practical standpoint, but the package deal saved us about $100 amonth. That's $1,200 a year.
See how it work? Don't just think of your savings on things as one-time expenditures. Project your savings over the course of the year, and let the math convince you.
7) Here's a great trick. When you buy something for any price, double the price in your head and ask if it's really still worth it to you. After all, taxes take roughly 50% of everything you make, so it really costs you twice as much to buy it than you really think. It's amazing how quickly you really don't need that discretionary purchase.
9) Drive the cars until the wheels fall off, which means take good care of them. Cars are probably the single most wasteful expenditure people have. Anybody who buys a new car every five-six years either has money to burn or is an idiot.
8) Once you start accumulating money from your household savings, THEN you can start investing. With that, use your head and be patient. It's a long-term effort on your part, not a short term endeavor.
Good post. I found you really can make a million in 8-10 years but it requires very great sacrifice. Most people are not willing to do that.
I think there's still a ton of opportunities to create weath in being your own boss.
The big difference is that, there's a ton more competition out now so you have to be sharper than ever.
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