... "A Fool and His Money!"

Many in "my generation", probably remember the famous line from the 1980's Movie "Wall Street" by Oliver Stone, when Michael Douglas leans over to Charlie Sheen (Bud Fox) and says:

"... A Fool and His Money - It's a Wonder They Ever Got Together In the First Place!"

Got to think about that one.



I think the Number One Reason folks never get started investing in real estate is because they do not want to look, or for that matter "be" foolish.

#1 - They are completely afraid to ask for help. Maybe it has something to do with our society, and our education system, but we seem to want beat the snot out of any one who appears "weak", if they dare raise their hand and say, "... excuse me, but I don't quite think I understand, can you please explain that to me again." I guess only "girly-men" (and what ever is the appropriate metaphor for a woman) ask for help, when they are dazed and confused about something.

Much more MACHO to just plunge ahead (in your ignorance) and do the deal - regardless of one's understanding of what they are doing. And those who realize how dumb this is, fall in to the second group:

#2 - For fear of looking dumb by asking for help, you simply choose to do nothing. Taking comfort that "doing nothing" is the "safe choice". Unfortunately, doing nothing is actually worse than being Macho. Cause the Machismo Man (or Woman, if I can say it that way), if they are teachable - will jump off the cliff without a parachute, and then if they survive realize the importance of packing a chute next time they jump. Or as John Maxwell says in one of his best selling books on leadership and life, they will "Learn to Fail Forward", and as result will be better off if they do not quit.

However, the person who chooses to do nothing, is worse off for two reasons: a. They have begun to build a prison for themselves. A prison of fear. Every once in a while you have to get out the sword and slay the dragon. It is a fact of life and a cornerstone of every religion - While no one wants to go around fighting their way through life, every once in a while even the most passive amongst us is faced with a fight. Sometimes the fight is physical, but as we grow older the majority of our battles are fought within the six inches between our ears. If we choose to avoid every battle we face, we automatically begin to build a wall around ourselves. A wall that will ultimately imprison us in fear, where we will be afraid to make any decisions that will result in something "New" happening in our lives. And where would we be if we never had anything "new" come into our lives...?

For some people, the thought of living out our "golden years" on a rocking chair on the front porch of our Smokey Mountain Cabin with a shot gun in our laps to shoot "buck salt" at any "trespassers" who come on our land, is a very exciting idea. I personally would rather be traveling via private jet to all the great beaches of the world with my family and friends, but for those who want the grey beard down to the toes, and a husband to give them epson salt foot baths, the Smokey Mountain Woman thing is o.k. < - here come the emails, "incoming!" But seriously, practicing the habit of fear by "hiding in a cave" every time you are faced with a difficult decision is a bad idea. And for many people, anything having to do with money and investing is a "difficult" decision.

But the reality is that if you do not learn to invest, you have also sentenced yourself to a life of "9-5". And in an ever changing world, where the average job is "offshored" or "right sized" every 5-7 years, what you have really done is subjected yourself to an ever declining quality of life, once you pass a certain age, like around 47-53. During the last round of layoffs, did you take note as to who got the axe first, and when the organization started to hire again, who got picked up, and who didn't...? Don't tell me age discrimination is not real!

And b) Even if you are able to avoid getting caught without a chair when the music stops, the reality is that there is always something going on in the economy called "inflation". Inflation is the "thief in the middle of the night" - it steals from us all without regard to age, race, or religious back ground. Real Estate is the only investment that is universally regarded as a "hedge" to beating inflation. Why...? Because you can raise the rents to counter the effects of inflation.

But back to why Inflation is a THIEF! Simply stated, if you made the same amount last year that you made this year, you were already 3% poorer, because inflation picked your pocket. If you do not believe me, then you must not drive a car, or your spouse pays for the gas. If on average, you spent an extra $50.00 at the pump each week, in 2005 vs. 2004, you spent only an extra $2,500 for gas. Said another way, if you make $45,000/year, you had to work an extra two weeks last year just to pay the extra amount that gas cost you in 2005.

"So, what...?"

If you do not have an investment plan that beats inflation, then every year you think you are standing still, you are really going backwards.

"No problem. My job will take care of me!"

No, not really. Even if you get an annual raise that keeps pace with inflation, which most people do not. The average person will be laid off 3-5 times over the course of a 30 year career, and will not receive any form of a pension. Meaning, unless you want to keep on working until you drop dead at your desk, YOU have to put aside money for your retirement. And the money you have to put aside has to account for The THIEF - INFLATION. And not only does it have to account for Inflation, it also has to account for the fact that during the periods of time that you are "in transition" you will receive little to no income, and the last two times you are laid off, when you do go back to work it will probably be for less money than you were use to making, because once they off shore your job, the only jobs you will have any chance at getting will require you to be re-trained and although it is illegal, most employers will still not want to hire folks past 50 that they have to train, when they can hire someone under 30 to do the same thing, and pay them a lot less - Welcome to reality.

So the next time you are thinking, "should I really make the effort to learn how to do this real estate thing", or "gosh, I really feel dumb asking a question like this", think of the old grey guy in the corner cubicle who use to be a Senior Vice President, and say to yourself, "but for the grace of God.... "

And I hope you come to the conclusion that you should "give this real estate thing one more shot..."

"...If there is no struggle, there can be no progress" - Frederick Douglas

Five Things #2 - Your Very First Deal...

Do you remember your first kiss...???

I don't - guess I'm weird.

But I do remember my first deal... ahhh.

Truth is, your first real estate deal is not only your toughest, it is your most important.

You can not get out there and do 100 deals this year, until you get past #1

Truthfully, I do not know why anyone would want to do 100 houses in a year, any more than anyone would want to be married to more than one woman at a time, but then I got something special ;)

o.k., back to the real estate discussion.

Your first deal will absolutely be the most challenging, BECAUSE, it is your first deal. And the bottom line is that they do not teach you how to be a real estate investor at The Wharton School, and based on my discussions with a number of friends, they do not teach it to you at Stanford, Harvard, Columbia or any other IVY, nor at Johns Hopkins, Maryland, George Mason Towson or Loyola.

You learn this business by doing it.

So If I knew then what I know now, I would definitely put together my very first investment deal while I was still working as an employee for someone else, if for no other reason - you got nothing to loose if it falls apart.

Seriously.

If you do not need the money to survive, you can put together a terrible deal for your first deal, and NO ONE CARES!

You won't have to "splane it" to your in-laws, your boss or your kids, any more than you had to "Splane" any number of hobbies/interests you got "hot to trot" over and ultimately gave up on. It would have been just another fad.

What does it cost to really get into golf...? $2,000, $5,000 Let's see: clubs, lessons, golf trip with the guys, GREENS FEES, oh and how about those tickets to Augusta and airplane fair, hotels, etc, etc, etc.

Ski trip to Vail...?

Sky diving, horse back riding...?

You can pull together a real estate deal for less than $5,000 of your "hard earned" dollars, totally mess it up, and still come out better than a 100 other hobbies/interests out there that do not have the power to make you financially F-R-E-E.

Why didn't I know this back then....?

Maybe it was all the hype, maybe the self-imposed fear - who knows.

But when you really break it down, the cost of getting into the real estate game is about the same as any "good" hobby, but at 43 its too late to plan on retiring off my "Golf Winnings".

And it is a joke to think that I am going to play any kind of "Pro Anything" at this stage, but it does not matter how old, or how young you are, when you make the decision to start investing, you are only 7 deals away from financial freedom. Assuming you don't mess up the fist couple too badly.

So why don't more people get it in gear and get their first deal done...?

Let't talk more about this tomorrow...

...Now, Back to That Respect "Thing"

O.k. Hopefully I made my point yesterday about "falling in love with your job".

So, let's talk about this RES-PECT thing. I am dead-on serious about "If I only knew then" with regards to this issue.

Respect the fact that someone "took a chance", when they hired you;

Respect the fact that someone(s) is counting on you to show up on time, and fully prepared (This is especially true if you happen to work at the Air Traffic Control Center in Leesburg ;);

Respect the fact that the type of employee you are today, will dictate the type of employees you have in the future, once you "jump the gap".

Respect the fact that the absolute easiest time in your life to borrow "cheap" money for your real estate deals is when you have a 700+ FICO and a job with at least 3 years history (even if your boss hates you).

Respect the fact that the people you work with now, will be the very same people you want to include on your list a year or two from now to participate in your "Private Lender" Programs, when you are on the outside and "FREE";

But most importantly, respect the fact that No Job is "Promised".
You could very well walk in to your bosses office today and be told "your services will no longer be required", despite the fact you got all "Outstandings" on your last performance appraisal. Ask me how I know about this one...

Final thought:

If you were laid off this afternoon, do you have enough passive income from other sources that you could take your "sweet time" looking for your next job, or would you simply have to take the first thing that came along to "survive"...?

If you are breaking out in a sweat right now, you know what you need to do...

Work a little harder at your j-o-b, and a lot harder on your investing strategy.

Till tomorrow...

The Five Things: #1 - Respect, But Do Not Love Your Job...

As promised (albeit a day late), here is the first of the five things I wish "I had known then, that I know now" with respect to making the transition from Employee to Entrepreneur.

Number 1 - Respect your job, but DO NOT "Fall in love" with your job.

I know a number of people who flat out hate their jobs. They get up at O'Dark Thirty, everyday, and put on work attire they hate, get in a car pool or mass transit or spend hours in traffic to spend 1/3 of the day God has given them with people they can not stand.

Quite Honestly, they need to quit and move on - life is too short.

However, I have also known people who enjoy what they do so much that they eventually "FALL IN LOVE" with their job - they, unfortunately are setting themselves up for a horrible sequence of events.

I firmly believe that right way to approach your job is to RESPECT IT.

Meaning, respect the power that a job (any job) has in its ability to set you up for long term success as an entrepreneur, if handled properly. Respect the fact that when it comes time to get a loan to buy your very first piece of real estate, which should be the home you live in, the "cheapest" money you could ever possibly hope for will be directly tied to your demonstrated income from your job.

Of course you knew this, but there are other significant benefits your job can provide for you that will become increasingly important as you transition into becoming an entrepreneur, and beyond.

But first I need to share with you a dirty little secret that all entrepreneurs, with employees, know but will rarely share with anyone, including their spouse.

[WARNING: The following information is of a Mature Nature - if you are not mature enough to handle it, please do not become angry with me... I'm just the messenger].

If you are reading this now while at work, you need to close your door, as what you are about to read may have a significant emotional impact on you. If you can not close the door I would suggest that you print this out and read it later when you get home. If you can not wait until then, you may want to take it into the bathroom stall, close the door and read it there. Please give yourself enough time to recover from what I am about to reveal to you.

WHY YOU MUST NEVER FALL IN LOVE WITH YOUR JOB:

From the very minute of the hour of the very day you said "I DO" to your job, your job has been cheating on you.

Its true! Your job is a CHEATING LOVER!

What's worse is that it has NEVER been faithful to you.

Your job never stopped its "roving eye" behavior - NO, Not for a split second.
From Day 1 it has been on the look out for someone else to replace you.
In fact, your job has been secretly stealing from your paycheck every month, a little here - a little there, while scouting places overseas to sneak off with its "new lover" to settle down for a long lasting rendezvous.

I know you do not want to believe me, I know this may be tearing at your gut, but I am telling it to you straight.
Sooner or later you will get up at O'Dark Thirty, grabbing that one poorly fitting outfit because it is the only thing "clean", and fighting your way to the office - Only to discover that your job has left the country for some exotic place like Dehli, Bangalore or Tianjin.

No warning, no midnight "good-bye" phone call. No, not even a card or box of candy with a softly written note explaining why it needed to "move on..."

Like a slap across the face with an ice-cold fish, you will have raced out of the house with much anticipation to meet your job, your friend, only to discover it never loved you as much as you loved it...

In absolute shock you will go through the four phases:

1 - DENIAL, saying things like, "This only happens to automobile assembly workers", this could not possibly be happening to me. When I come back tomorrow, my job - my friend will be here to greet me". Of course, the escort out of the building by those whose jobs have not left them (yet), will be unsettling to you, but you will still not believe that your job has left. All the way home, adjusting your clothes, you will be saying, "It's o.k., my job is coming home tomorrow - it will be alright...";

2 - ANGER. Then somewhere around 4:00 AM, after an all night session alternating between tears and the shakes you will sit up in bed demanding an answer to the question: "How dare my job leave me - I gave my job the best I had to give..." Ultimately, you come to realize that your job not only left, it had been planning to leave you for years. No warning, just sneaking around and ultimately sneaking out in a manner similar to the infamous 1984, late night departure of the Baltimore Colts <- Wow, where did that come from. I guess I am still not past that.

3 - ACCEPTANCE. This is a critical turning point and can go in one of two directions: Recognition that your job was never going to love you the same way as you had came to love it, or (Unfortunately) shouldering the blame for your job's inability to be honest and faithful to you. The most dangerous thought that can enter your mind at this point is "My job is gone, my job was wonderful, if only I had been better to my job it would never have left me..." DON'T GO THERE, FRIEND. Your job was using your from day one. Getting all it wanted while being continuously on the prowl for another...

4 - MOVING ON. The worst thing, of course, that you can do in this final phase is to seek out another job in the expectation that it too will be faithful. IT WONT. All Jobs are wired the same way, and sooner or later it too will leave you. Ignoring your needs - Stomping all over your emotions and sending you once again through the Employee-Job Roller Coaster Relationship.

Stop the insanity - Don't "Fall in Love" With Your Job!

Now, before you think that I am a jaded (former) employee, please take note. Award Winning New York Times Columnist Thomas Friedman authored a national best seller a few years ago called: THE WORLD IS FLAT, a Brief History of the Twenty-First Century. If you have not read it yet, you need to! (by the way, if you ever get the opportunity to hear Tom speak live - DO IT! He is one of the world's top public speakers, absolutely AMAZING).

In THE WORLD IS FLAT, Tom outlines why as we enter the 21st Century, we as a nation will see jobs come and go at an accelerating rate. In fact, and I believe Tom is correct, there is currently no job today that will be around in the next 5-7 years. That's correct. Every job that we know of today will either be "reinvented", or "off shored" within the next 5-7 years.
This goes for Federal employees, and shoe manufacturers alike. IT workers already know this, but if you think you are safe because, "My job is different", it is only a matter of time before you too are left broken hearted, sobbing on the bathroom floor screaming "why me..."

So you are saying now - "O.k. Sherman, what the heck has this got to do with RESPECT MY JOB...?!!" Simply put, "Learning to Respect Your Job" is not the same as "Falling In Love With Your Job".

I'm out of space (and time), but come back tomorrow and I'll share with you exactly why I think it is important that you learn to respect your job...