3 Ways of being a good investor

Emergency Fund- Having an efficient amount saved for any unplanned expenses. Setting aside 3-6 months of cash on top the money you plan on investing can give you the comfort you will need until the investment goes full cycle. Its a piece of mind that will help you sleep, if $%it hits the fan.  Having an emergency fund will help keep your stress under control. The roof loves to leak and the car loves to break down when you least expect it. Its usually called “Murphy’s Law”, anything that can go wrong will go wrong.

Sow on good soil- Parable of the sower in the Bible teaches you to sow on good soil, not on rocks, weeds, thorns or shallow grounds. On rocks, the seed cannot grow roots to grow big and healthy. In weeds and thorns, they will get choked and on shallow ground, the sun will scorch the roots and kill the plant. Finding a healthy and fertile grown to sow your seeds will allow for a fruitful crop to produce 10 folds what was sown. Investing with a good steward of money will help you guarantee you money will be sown on good soil. Do your due diligence and vetting when partnering up on an investment.

Be a student- Study, study and study. Learn about the asset class you want to invest in. Ask questions, they say dumbest question is the one not asked. Listen, listen and listen. We were given 2 ears and month, lets put that to use.  

Partnerships

Choosing someone to partner up with in real estate is really important and there needs to be some due diligence. Its isn’t a short term deal. You will be in it for the long haul of 5-10+ years. You can gain insight on future potential partnership by talking to their property managers, contractors, accountants, and etc. 

Having a partner that compliments you can really help out in the long run. One that focus’s on investor relations and the other that concentrates on the operating side. Knowing what your strong points are, might be helpful for you when networking. 

Good example of a partnership was from the expedition of Lewis and Clark. “INTO THE UNKNOWN” written by Jack Uldrich sheds light onto their complementary skills. Lewis couldn’t make the journey without Clark. They both held the title captain. Clark was more tactical and good at handling the day to day affairs of the men. Lewis was more of the visionary and strategic thinker. There were others that went before Lewis and Clark that were successful, but Lewis and Clark learned from their mistakes. 

In conclusion, Thomas Jefferson didn’t want there to be two captains on their expedition. It would go against the military ranking (expedition was funded by the military), Lewis knew he couldn’t complete the most famous expedition in Americas history without an equal partner. The crew never knew Clark wasn’t a caption in the Governments eyes, but Lewis treated him like it and never called him anything other than captain.

Passive vs Active Investing

What is the difference between and Passive and Active Investing? Sounds kind of confusing, right? Passive investors need Active investors and Active investors need Passive investors. It is definitely a marriage in layman’s terms. An Active investor cannot bring his creation to being without help from Passive investors. And Passive investors can’t get a return without the Active investors. 

Active investing is more of a hands-on approach. Active investors have visualization and put their vision into action. Active investing involves buying, managing and selling assets. There is a bigger chance of reward, but your taking on more of the risk. In real estate they are usually called, a sponsor, principle, operating partner or general partner(GP).

Passive investing is the less hands-on approach. You are not active in the day to day buying, managing and selling of assets. There is lesser risk, headaches and obstacles to overcome, but you’re taking on less reward. In real estate, they are usually called limited partners(LP).  A limited partner is an investor who contributes capital to a business partnership in exchange for a proportionate share of the venture’s.

In conclusion, what type of investor are you? What are your goals? What are your passions? If there is one thing for certain, there is no “I’’ in real estate. Your network is your network!

What is a Self-Directed IRA

Did you know that you can you use your IRA to invest in real estate? If you do not like your path to retirement and would like to invest in real estate and want more control. You can do this by transferring over your IRA to a Self-Directed IRA(new custodian). You would need to talk to your tax advisor/CPA, there are many rules the IRS has setup. One example is that you are not allow to use it for yourself or your company. Even if you buy a real estate, you are not allow to rehab it, must be a contractor. Must be used in a Passive way. Make sure you follow the IRS’s rules of no self dealing. Cannot use it purchasing art work or antiques. Your financial advisor may talk you out of this because they will lose money from you. Because this is an IRA, you cannot use the the cash flow from your real estate. If you like to self perform and be an active investor, this vehicle may not be for you.