What Is RISK?

As a real estate investor in one of the toughest economic situations of our time, I find it intriguing that people constantly say (to me) things like “Isn't this rather risky?” or “I don’t have any money”

Let me begin by saying that there is no need to feel naive or claim ignorance. The bottom line is that unless you do this every day for a living you will always feel 'out-of-the-loop'. Funny thing is - most people know what a stock is yet they have no idea what drives stock prices up or down. Yet, because the societal 'norm' is to buy mutual funds because a fund manager must understand the stocks better than you - people go out and buy mutual funds. Then, even if the funds/stocks go down, the fund manager gets paid and people invest more because they are saving for retirement. I buy mutual funds too - but this year they have lost money and I can't do a damn thing about it. In the worst real estate/mortgage crisis of our time, I'm making money in real estate investing. I'll hold on to my funds, but it's about diversification.

Robert Kiyosaki (author of Rich Dad Poor Dad, and co-author of Why We Want You To Be Rich with Donald Trump) said it this way - and he's absolutely right - "the more control you have over something, the less risk. The less control you have over something, the more risk there is!" In my deals I control virtually every factor - when I buy mutual funds I can't tell the fund manager what stocks to buy and what to sell.

Suffice it to say that when you don't eat-sleep-and-breath in a certain industry, there is no shame in partnering with an expert. You rely on an accountant for tax advice, a doctor for medical advice, and a lawyer for legal advice. You probably don't know as much about their industry as they do because you don't study it and don't practice it every day. I am like the real estate doctor. I get paid to study the solutions (educate myself), and then implement the ‘treatment’ (property rehab and contract negotiations) to make the property profitable again.

Passive revenue is a buzz-word these days, and I believe in passive revenue – for the right reasons. People continually talk about MLM (multi-level-marketing). Recently I suggested to somebody (who was trying to sell me on a MLM program where I get paid every time someone clicks on certain websites and web ads) that if you have to recruit each person into the program one-by-one, you could die an old age trying to build your network of people beneath you (the ones you get paid off of). The person went on to explain how the numbers work, and in fact could be massive numbers further down the road. He said “it's the best way I know how” “I truly believe in it as the way of the future.”

Just because I think it is a lot of work for the financial gains you receive in return, doesn't mean it (MLM) will not work, nor does it mean that it is wrong. Many people make money in many different ways in this world. It's all about what you believe in and what you focus on.

I'll tell you this much:
1. Everybody needs a home - AND - the markets where I am buying/selling properties enjoy significantly MORE demand than supply - thus no risk of vacancy or low rent.
2. The price can drop out of a stock overnight - and a company could go bankrupt - a housing market can go down but the house will never be worth zero.
3. The market is probably near the bottom - it has already bottomed out in the area I am buying/selling and is in fact already appreciating

Where the risk is eliminated:
1. Little to no risk of vacancy - carrying the cost of the property out of your own pocket.
2. No risk of property depreciating further
3 No risk of property falling apart b/c you just rehabbed it with all new materials - so cost of repairs is minimal
4. No risk of costing you more money b/c the rental income far exceeds the cost of the property.

But consider this for a moment. In very general and simplistic terms, if I buy a property with a little money down (of my own money), and after all expenses including electric, gas, repairs, vacancy, and mortgage, the profit each month (Cash Flow) is $1,000.00, then I get my FULL investment back in a matter of months, and then my income (Cash-Flow) increases by approx $800 - $1,000 per month from there ever-after … until I sell the place. PLUS, the value of the property keeps going up.

AND ... if you don't have the cash to put down right now, I know of investors who are using their credit line for the down-payment. I don't advise in abusing credit to buy something that depreciates in value or you get into debt and credit trouble. But as Robert Kiyoaski teaches, what I am referring to is good debt – eg. that what you purchase with the borrowed money increases in value AND covers the cost of debt. That my friends is how & why THE RICH GET RICHER - they leverage money! They also buy low and sell high. We've all heard it, yet now when the market is low, everybody is scared. I don't blame them, but I flipped 3 properties last week to "RICH" people, because they (the rich people) want to buy low and sell high.

Think of it this way – let’s assume you get your mail and you have your Verizon bill.
QUESTION: how many people do you have to spend time recruiting into MLM or Pay-Per-Click, or how many clicks do you need to actually do yourself on websites … and how many hours does it take to raise the money (via these said methods) just to pay that one phone bill? Compared to having an extra $800 - $1000 per month coming in without doing any work, above and beyond setting up the initial deal? That's the other way the rich get richer - they don't trade time for money - they try to acquire investments that provide 'passive' revenue.

Again, it's not that my way is right and others are wrong. It's about weighing your options. To me, it's about the amount of time you put in v.s. the amount of reward you get back. Last week I flipped 3 properties and I only spent a little time on my computer to do the deals … and I never used a penny of my own money.

Sure, if it was a very high risk property deal then it might not be as rosy as I make it sound, but we could talk at great length about your options in deals like the ones I am finding and offering to investors, that eliminate almost all of the risk that the average person believes exists.

For details check out our website at: www.mandmproperties.biz