Do You Think You are a Consumer or an Investor?
Today I would like to share with you, two questions you can ask yourself to help you determine this answer. For the most part, consumers are poor or they are going to be, while investors are wealthy or on the road to wealth. In this blog you will figure out to determine the difference between a consumer and an investor so that even if you are currently a consumer, you will know how to become an investor.
Question One: What Do You Do With Your Extra Cash?
I need you to picture the last time you had any spare money. Spare money is any cash you have leftover at the end of the month, after you bills and necessities have all been paid off. This money could have come a work bonus, extra tips, or those extra hours you put it overtime. Where the money comes from is not important, it is what you do with that money that we are going to focus on. The question is, “What did you spend that additional money on the last time you had it?” I am not asking what you WOULD do with additional money in the future, I am asking what you have done with additional cash in those past circumstances where you had remaining assets toward the end of the month.
If you spent that extra cash on something that has no way of bringing in any financial return, then you are a consumer. This would include spending the funds on a family vacation because you deserve a break, buying a round of beers for the boys, or taking your date to the best restaurant in town. If the last time you had extra cash, you used it on anything that has no chance of a financial return, then you are a consumer.
If this does not describe you and you spent that money on something that has a decent possibility of financial return then you are an investor. This would include investing in yourself by purchasing one of my books, or some sort of instruction to better you financial future, or purchasing real estate, stocks, or anything else that has a chance of having some sort of financial return.
For the purpose of this blog, we will assume that you have passed question number one and are indeed an investor. Question 2 is where we dig deeper to discover whether you are a true investor or not. A true investor always concentrates on the potential ROI , or potential earnings, an investment could bring in first.
Question Two: Are You Focusing on Your Return on Investment?
I have consistently seen individuals who are trying to get involved in investing so they save up money to purchase stocks, but the stocks that they end up purchasing are penny stocks, which have a very low ROI. Or, people that live in cities where even a single family home sells for a million dollars, so they purchase a cheap house in some dead end town on Auction.com, just because it is cheap and similar in size to the houses that are selling for millions in their hometown. They think that they are getting involved in investing but what they are really doing is purchasing really bad deals, because they are focusing on the cost of the investment instead of concentrating on the returns first.
A genuine investor concentrates on the return on investment (ROI) because they know that if the returns are good enough, the price of the investment will not be as important. Even if you cannot afford an investment, if it is a great enough deal, you can access numerous ways to obtain the financing needed.
Options For Financing a Great Deal
- Private Lenders
- Angel Investors
- Hard Money Lenders
- Venture Capital
- Creative Financing (which is an option that I discuss in a number of my teachings)
I recently had a student from my mentorship program, who is utilizing creative financing to obtain an apartment building that could produce $600,000 or more per a year net benefit, and the insane thing is the advancement cost may be less then one million dollars. Many individuals would be scared by the possibility of a million dollar investment, yet an investor will take a gander at it and say, “In the event that I can acquire a net benefit of $600,000 a year on a million dollar investment then the cap rate would be 60%.”
Now let me put this explain exactly what this means. If you were to drive down the road and come across a Class A Apartment building, it might bring in as much as 6% in revenue a year. This means that you would need to have a $10 million dollar apartment just to obtain that same $600,000 return on investment that this one deal could get in net positive returns. Concentrating on your returns does not imply that you don’t look at the cost and expenses of the investment, because these are the numbers that help you figure out what your return on investment will be. Concentrating on the return on investment first is simply concentrating on what is possible with the deal, and then figuring out how to structure and find the deal next. A typical misstep many individuals make is to expect that the investments they find are the only ones out there. As Henry Ford once stated, “Whether you think you can or you think you can’t, you’re right.”
Value Vs Return
The next step is to determine whether you can manage the cost of the investment or not. This involves looking at your personal finances and credit cards to determine the amount you can afford upfront. Next you have to budget your bills and earnings to figure out how much of a monthly fee you can afford to pay. Next you have to figure out what your potential ROI is. This figure is a bit more difficult to determine because there are a lot of factors in play including any expenses that could come up if anything goes wrong.
Henry Ford also stated, ” Thinking is the hardest work there is which is the reason so few individuals do it.” You need to utilize your mind with regards to making sense of the return on investment and that is precisely what investors do. That is the thing that the greatest contrast between an investor and consumer is. An investor doesn’t simply take their additional money and put it towards things, for example,the purchase of investments or stocks Or, even the funding of a business idea or an investment in themselves and another venture they’ve been dealing with. It doesn’t make a difference which way you invest your cash, if it will create a financial return, you need to ask yourself: “What is that return going to be?” And, then invest the time and vitality important to discovering the response to that question.
A real estate investment is not just about the cost of the property. You can obtain a property with creative real estate by organizing a deal creatively through creative financing. I have some incredible videos on how you can buy real estate with next to zero cash by organizing creative financing. My group and I do this constantly, each and every day of the week, including today. Creative financing works however there is a lot more to it then that. There are such a large number of banks and hard money loan specialists hoping to invest in great real estate deals and other keen investments. On the off chance that you can locate a decent deal, you can get the financing supported, all it takes is some imagination.
So those are the two questions to ask yourselves to determine whether you are a consumer or an investor. I have additionally furnished you with a few apparatuses you can use to become a true investor on the off chance that you are stuck carrying on with the life of a consumer yet have the need to accomplish more