Every magnificent building begins with a vision and blueprint. It would obviously be a chaotic disaster to simply grab whatever materials were within arms reach and start hammering, sawing, nailing and painting.
Yet, many investors take very little time to really think about how to design a portfolio which supports their vision for their lives. After all, the portfolio is supposed to serve you…and not the other way around.
On the broadcast couch to peer into the how and why of getting in touch with your inner investor:
- Your psychiatrist of speech and host, Robert Helms
- His psychotic co-host, Russell Gray
- The calm and sage Godfather of Real Estate, Bob Helms
Real estate investors are unique animals. Typically deal junkies, they gravitate towards the closest opportunity and dive right into the deal analysis and negotiation. And who can blame them? It’s fun!
However, most of the time the closest opportunities are wherever you happen to live. That’s fine if you happen to live a in a great market with the right mix of drivers, demographics, and supply and demand dynamics most likely to produce the financial performance you’re after.
And this isn’t to say you can’t make money with real estate in almost any market…because you can.
But being an investor is about a whole lot more than simply making money. It’s really about building a portfolio that pays you to live how you want to live. And this is an important distinction.
We’ve known investors who’ve built big portfolios that hemorrhage cash flow and are worth millions. But they get up HATING every day of their lives because they are obligated to people and responsibilities that are driving them crazy.
Of course, they can sell the whole portfolio, take the tax haircut and park all their cash in the bank at next to zero interest. But this obviously has its own set of problems.
So we think the better solution is to (quoting from Stephen Covey’s classic book Seven Habits of Highly Successful People) begin with the end in mind.
We call this “vision”…what does the finished product (or in this case, portfolio) look like when it’s perfect. THAT’s what you’re working to build.
Of course, that’s hard work and requires much introspection and thought. It’s nowhere near as fun as wheeling and dealing for properties. And that’s why so few investors take the time to do it.
So what are some practical tips for getting clarity of vision?
First, think about what’s important to you. That’s your Mission…and it has two parts, internal and external.
Your internal mission is what you want the portfolio to do for you. It’s a common mistake to think it’s just money. The idea being that if you just have enough money you can buy whatever lifestyle you want.
That’s not necessarily true because the money machine requires operation and maintenance. And if you build it wrong, it will require you to engage in activities you don’t really enjoy.
So think of your internal mission as how you spend your time, who you interact with, where you are or are required to travel, where you live, whom you support (dependents, charities, government), and what topics and trends you need to stay on top of.
There’s no free lunch. You’ll need to exert effort and energy in building and managing your wealth. That’s the bad news.
The good news is that if you build it right, it’s not work. It’s a hobby you enjoy.
Now, your external mission is simply what you want the portfolio to do for the world. This is what you trade to get what you want the world to do for you.
Maybe you want to provide low cost housing or fix up dilapidated neighborhoods.
Or maybe you want to create magnificent luxury hotels that provide a 5 star experience to the uber-rich and pull money into your local economy.
Perhaps your mission is to have assisted living facilities that help elderly people stay in a real home near their family instead of being shuttled off to an institution.
You get the idea. There are LOTS of ways to make money. But what’s your MISSION?
You can see that when you’re clear on your mission, there are many things you might have a chance to do, but shouldn’t because they are actually distractions which knock you off course.
Values also play an important role.
For example, you could go into the business of making hard money loans to desperate borrowers with the hope of being able to foreclose and seize the property for pennies on the dollar. Many opportunistic investors obtain wealth by taking advantage of someone else’s misfortune.
We’re not judging, but that’s very different than making hard money loans to help under-qualified borrowers hold onto their property and get back on their financial feet. Obviously, if your values are win-win, if this borrower gets in trouble you’re first response would be to work something out if possible…not pounce to grab the asset.
And maybe you just could never bring yourself to foreclose on or evict a family. If that’s true, then you probably don’t want to make residential property loans or own residential rental properties. Maybe self-storage, or retail / commercial would be better. You may find it less distasteful to evict boxes or a failing business.
So thinking about who you are, what you’re REALLY trying to accomplish for your self and the world, and what you’re willing (and not willing) to do, will provide the clarity you need to recognize the appropriate strategies and tactics to build a business and portfolio which fits you best.
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