I have spent some time recently reading the BiggerPockets investor forum, which is probably the most well-known tool for amateur and new real estate investors to learn about the process and presumably ask those with more experience for the lessons they have learned along the way.
While I do consider the internet to be a better, more educational place because the Bigger Pockets world exists, I should note that there are many contributors who understate costs, provide ethically dubious recommendations, are generally under-knowledgeable about what advice they give, and sometimes exhibit a certain naivete regarding whe actions that people being forced out of their homes (such as via foreclosure) may take on the way out.
I have compiled of some of my most notable criticisms that I would encourage any frequent user of the forum to keep in mind when browsing:
The best investment advice often involves the combination of the following steps: (1) acquire a specialized skill so that your labor generates meaningful money; (2) save some portion of your labor as surplus; (3) take that surplus and invest it into assets that grow in value over time; (4) maintain cash so you will never be forced to make decisions on disadvantageous terms during times when you are vulnerable; and (5) do not react stupidly to the inevitable moments when assets you own fall in value.
1. Recognize that the the value of your labor relates to your ability to acquire specialized skills that can be integrated into tasks. The harder the task, the more remunerative the reward is.
One of the most influential moments of my life occurred when I met a man who spent his life cleaning up the property after a hoarder property owner had died. He … Read the rest of this article!
Every now and then, I like to write “big picture” posts that put my finance articles into the proper perspective of the overall whole. Today, I wanted to talk about the five sources of power that you can acquire while you are here on this earth, and the more of each that you possess, the more others will seek out your presence and companionship:
(1) Skill Set/Economic Power—When Warren Buffett gave a young man at the 2008 Berkshire Hathaway shareholders meeting the standard advice “to invest in yourself”, he elaborated by mentioning that certain skill sets will always command a higher premium in the marketplace, regardless of the country in which you live. The example Buffett used is that a heart surgeon will always make more money than a janitor (regardless of whether you live in 1800s Germany, 1920s Japan, 1950s Great Britain, 1970s Ireland, 1990s Mexico, or 2010s … Read the rest of this article!
Dividends, plus the passage of time, can make a stock price chart look silly because of the easily understated nature of dividends in the wealth-building process.
That’s it. That’s the secret to building wealth. It’s amazing how much different investing appears when you only look at a stock chart (such as you typically see on CNBC) and then step back and adjust it for the passage of time to get a full picture of a company’s total returns.
Because dividend payouts typically amount to 2%, 3%, 4%, or 5% in a given year, they can become quite easy to neglect, perhaps regarded to the untrained eye with the same appreciation given to a dollar bill found in a seat cushion.
But if you find a company that either has a law starting yield with a high dividend growth rate, or has a pattern of returning a good chunk of income … Read the rest of this article!
By making court appearances on behalf of clients in small towns across Missouri, I have observed that certain businesses have extremely strong footing in each and every small town. People get gas at the Casey’s General Store or the Exxon franchisee station, go to McDonald’s or Dairy Queen to eat, and grocery shop at Wal-Mart or Kroger.
People rarely think in these terms, but of McDonald’s 34,000 locations, almost 22,000 of them are in areas with populations less than 15,000.
I contend that these businesses, when bought at the right initial price of 15x earnings or cheaper, will lead to 10-12% annual returns over the long haul. I also contend that these investor returns will be well-earned, in that one will encounter many doom-and-gloom newspaper headlines as they go through the process of earning these superior returns.