Investment property by it’s very nature is in need of improvement. If it were perfect, then it would be “retail”. And since investing involves a certain amount of risk, then investing in real estate is very similar to gambling. …and everyone knows gambling is bad – except for rich people. Right? So, if investing is really gambling and gambling is risky, why do rich people do it?
GAMBLING vs INVESTING
There is a significant difference between investing and gambling. While games such as poker require skill, it’s a winner take all game, so multiple players participate to fund 1 “winner“. Gambling is also time-sensitive; There is always a deadline for getting your bets in and when the game will be over. This ensures that the participants have a limited time to do any meaningful research, and that the process doesn’t drag out forever while someone tries to win their money back.
Time is what makes investing different from gambling. In fact, time is what gives the edge to rich people and disadvantages everyone else. (For distinct clarification, we’ll call everyone else “poor people“.)
For the rich, time “hedges” the risk involved. Truly rich people can afford to lose a much larger sum of money than poor people. When rich people invest in real estate, they don’t put a time limit on the investment. Instead, they just sit on it until it appreciates.
Rich people get richer because they don’t have time constraints.
For poor people, time is of the essence. Poor people have limited funds that are usually already accounted for. So when they invest, they do so with the understanding that they could lose their home or car or livelihood if they can’t get a return in 30, 60 or 90 days. Time is what makes investing a gamble for poor people. Poor people have to invest much larger percentages of their net worth (usually 100% PLUS) in order to compete with rich people. As their self-imposed deadline approaches – they panic and sell for losses.
If you want to know how to buy investment property, know that …
Rich people can afford to lose what they’ve invested, but they don’t – lose that is. Why not?
A: Because they don’t sell until they’ve won. Time is on their side.
Rich people don’t need their capital investment for bills or whatever, so they can sit on any bad or ill-timed investments until it makes financial sense to sell. Every great investor (read that to mean “rich person”) goes into every investment with a buy and hold attitude, because you only lose when you sell for a loss. Rich people will just sit on their investments until they can profit.
MENTALITY OF POOR PEOPLE
Poor people look at their investment as having an expiration. They put a deadline on it and tell themselves “if we haven’t sold this property in xx days, then we have to pull the plug and get out.” This of course is a recipe for failure, because the first interested party they meet will see and hear their desperation, and will either NOT buy because they think they’re getting scammed, or will give them a low-ball offer. The poor person will sell for a loss and then breath a sigh of relief that they didn’t lose MORE. After the deal closes, of course, they’ll beat themselves up for taking the first offer, sure that they could have broken even if they had waited.
NEVER do they think they could have profited.
How to Buy Investment Property
Investing in real estate (or anything, for that matter) is only risky if you can’t afford to lose. Rich people however, CAN afford to lose, but instead of selling too early and sacrificing their capital, they just sit on the investment until the market turns. Eventually, demand for their property WILL increase and they WILL find a buyer who will pay them what they’re asking for it.
That, in a nutshell, is why the rich get richer – and the poor get poorer.
So, how do you invest like a rich person without being rich?
Never Wait for the Top of the Market
How many times have you heard someone talk about selling at the top of the market? If you look, you’ll notice that no one can really pin-point the exact “top” of the market. Why not? Because it doesn’t exist.
We panicked, then cried. Then we thought, “Since we can’t sell it, we’ll rent it out ’til the market picks back up.” Chris Smith, Bay To Gulf Holdings
Never try to guess the top of the market. A peak doesn’t exist. In fact, get “top” and “peak” out of your vocabulary. Instead, use “leveled off”, because that’s what happens – the market levels off when buyers or sellers start tapering their activities. After all, it’s their activities that dictate the direction the market is headed. If buyers start selling, the values begin to drop. If sellers start buying, the market begins trending upward.
What happens when buying and selling both stop? Values stay constant and the economy slows down, because money isn’t changing hands. If no one is selling property, it’s because the people buying are offering too little. If nobody is buying property, it’s because those selling are asking too much.
Consumer Class vs. Upper Class
Q: Why are rich people rich?
A: Because they don’t worry about money.
If you’re going to be a successful investor, you should treat each investment like a lottery ticket and only play what you can afford to lose. Only invest what you can live without. If you’re going to buy investment property, only use money that you don’t need. In other words: Don’t use your car payment, mortgage payment and diaper money to buy a house for a quick flip, because there’s no guarantee that you’ll be able to profit in the time constraints you have. Once you start approaching the due date of your loans, you’ll panic and end up selling for a loss.
Rich people don’t have those constraints, so they hold as long as they need to and then sell when they’ve profited.
HOW TO BECOME RICH
You don’t have to be rich to invest in real estate, but you need to ACT like you’re rich. Money is the indicator of success or failure, but rich people don’t waste it.
See, poor people (those of us with a net worth less than, say, $10 million) tend to spend money we don’t have and worry about money to the point that we have short term goals of acquiring it – and spending it. Basically, we’re living paycheck to paycheck.
Rich people, on the other hand, are always looking for ways to grow their money – or just not lose what they have. That’s why most are long term investors. Short term thinking leads to panic and poor judgement. Long term investing is just buying with the intent of selling ONLY when there is an opportunity to profit.
Other things rich people do
Other Things Rich People Do...
In a interview with Dave Ramsey, best-selling author Tom Corley outlined a few of the differences between the habits of the rich and the poor.
How do you measure up?
- 70% of wealthy eat less than 300 junk food calories per day. 97% of poor people eat more than 300 junk food calories per day.
- 23% of wealthy gamble. 52% of poor people gamble.
- 80% of wealthy are focused on accomplishing some single goal. Only 12% of the poor do this.
- 76% of wealthy exercise aerobically 4 days a week. 23% of poor do this.
- 63% of wealthy listen to audio books during commute to work vs. 5% for poor people.
- 81% of wealthy maintain a to-do list vs. 19% for poor.
- 63% of wealthy parents make their children read 2 or more non-fiction books a month vs. 3% for poor.
- 70% of wealthy parents make their children volunteer 10 hours or more a month vs. 3% for poor.
- 80% of wealthy make happy birthday calls vs. 11% of poor
- 67% of wealthy write down their goals vs. 17% for poor
- 88% of wealthy read 30 minutes or more each day for education or career reasons vs 2% for poor.
- 6% of wealthy say what’s on their mind vs. 69% of poor say what’s on their mind.
- 79% of wealthy network 5 hours or more each month vs. 16% for poor.
- 67% of wealthy watch 1 hour or less of TV. every day vs. 23% for poor
- 6% of wealthy watch reality TV vs. 78% of poor watch reality TV.
- 44% of wealthy wake up 3 hours before work starts vs. 3% for poor.
- 74% of wealthy teach good daily success habits to their children vs. 1% for poor.
- 84% of wealthy believe good habits create opportunity luck vs. 4% for poor.
- 76% of wealthy believe bad habits create detrimental luck vs. 9% for poor.
- 86% of wealthy believe in life-long educational self-improvement vs. 5% for poor.
- 86% of wealthy love to read vs. 26% for poor