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Lessons Learned From A Bankrupt Business Owner

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Last time, we talked about jump starting your passive income by investing in rental real estate. Today we’ll look at what we can learn from a bankrupt business owner.

We came across an interesting article a little bit ago in the New York Times. It was about a young real estate speculator named Todd.

Back in 1994, after attending a seminar on buying real estate, 20-year old Todd found a property which he bought, fixed up, and sold for a $4,000 profit.

By the year 2000, Todd, now 26, was holding as many as 25 houses at a time. He had perfected his system – making up to $15,000 on every house. Eight banks were in line to provide him money when he needed it. Todd decided to start building new homes because prices had gone up so much on the houses he was buying.

Fast forwarding to May of 2006, Todd was living the American dream at 33. He had a 5,000 square foot house that cost $1.2 million. He had a BMW and a Corvette. An inventory of 89 lots was waiting for buyers. He owned an office building. Life was good!

Now, his marriage has collapsed. Banks have taken back his lovely house; he now rents a small one. His beautiful cars are gone. He’s driving a pick up truck. He’s lost everything else. He sells beverages full-time, and brokers deals to other speculators part-time.

We applaud Todd for sharing his story. And a big salute to John Leland for this excellent article – A Real Estate Speculator Goes From Boom to Bust.

So what can we learn from Todd’s experience? Here are some lessons:

Just because a bank will give you $$$, that doesn’t mean you should take it!
Todd had a banker who did him a favor, if he would have only recognized it. She told him “no”. So Todd went to another banker who kept the funds coming. If Todd had only paused to consider why his first banker said no, he may be in less of a mess now.

When you’re living on borrowed money, you may be living on borrowed time.
Todd was highly leveraged, in business and at home. Being levered in business may be fine. Piling on to that with personal debt is a bad idea. Borrowing money is a two-edged sword – it will make you rich, or poor, more quickly.

When it comes to your standard of living, keep your standards low.
Todd had the best of everything – the house, the cars, and more. Which is fine, if you have assets that will produce the income to pay for everything. But when you’re borrowing to buy status symbols, you’re bound to wind up in trouble.

Know how you’re getting out before you get in.
If Todd had done this, he might have noticed that it was getting more expensive for his customers to buy houses. He could have shifted his business model once – find a customer, then build it. That would mean he was “out” without getting “in”.

Fully analyze your situation by considering a number of situations.
Todd did this once – he shifted from flipping houses to building new ones. He didn’t contemplate how rising prices were affecting his customer’s ability to buy his product. He failed to consider how long it would take him to sell his inventory of lots. Had he done so, he may have prevented the major disaster that happened.

Todd learned the hard way – by making the mistakes himself. Hopefully, you can learn from his mistakes so you don’t make the same ones.

Our quote today comes from Jonas Salk, the developer of the polio vaccine.

“I have had dreams and I have had nightmares,
but I have conquered my nightmares because of my dreams.”

So shake off the nightmare and rest assured, your sweet dreams will come true.

Next time, we’ll offer some tips for starting over, for turning misfortune into fortune. Until then, here’s to your bigg success!

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Get Real Estate

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Last time, we talked about how to get started in your own business or franchise. Today we want to discuss how to jump start your passive income by investing in rental property.

You may ask why you should think about investing in real estate now. The daily news is ripe with horror stories of houses in foreclosure, people getting slammed by increases in their adjustable-rate mortgages, and others struggling to sell their houses in this down market.

Believe it or not, that’s why we think now is a great time to buy! Relative to historical norms, things are not as bad now as they were good a little while ago. We’re comparing now to one of the most lucrative markets for sellers in history! Take time to note the word “sellers” in the prior sentence.

There’s less competition for property today. It’s a buyer’s market.
That’s why we think you should buy now.

We’ll assume you’re convinced – where should you start?

Start by buying your own home.
In the past, financial planners often recommended renting and investing in other assets, such as stocks. Historically, stocks have outperformed real estate. The problem – the investing part was voluntary.

Buying a home is a commitment. It forces you to save. And if you’re like most of us, you need that “forced” part. So as you pay your mortgage, month after month, you’re reducing your outstanding debt. That’s why, on average …

… homeowners are significantly wealthier than renters.

So owning your own home is the foundation for creating wealth. Now you’re almost ready for the next big step. Remember our discussion of 38 getting aggressively passive]? You’ve found money from watching your spending and paying off debt. Keep piling that money up to prepare for your next move.

Buy your first investment property.
Your next real estate purchase may be your first rental property. Or it may be your next home. Consider moving up to a nicer place and renting out your first one.

Either way, be sure you have more money coming in than going out. Hook up with a good realtor who can help you determine what your rent should be. Now, estimate your bills – property taxes, insurance, mortgage payment, and all the others. If you don’t project having money left over, don’t buy that property – find another one!

Don’t start without a cash stash.
Owning real estate comes with its risks. For example, what if your property suddenly requires major repairs? As with any business, don’t invest in real estate unless you have a cash stash. If you don’t have one, find a partner who does. Otherwise, you may lose everything.

Our quote today comes from the Australian author, Noel Whittaker.

“Becoming wealthy is like playing Monopoly …
… the person who can accumulate the most assets wins the game.”

So roll the dice, take a chance, pass GO, and collect more than $200! It’s not just play money!

Next time, we’ll look at some of the things that can go wrong – lessons from a bankrupt business owner, who happened to be a real estate speculator. Until then, here’s to your bigg success!

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Start a Franchise or Business to Create Passive Income

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Today we want to look at two ways you can jump start your passive income by starting your own business.

Let’s not kid ourselves. Starting a business can be risky. You’ve worked hard to build a nest egg. You have bills to pay. Kids to put through college. A retirement to fund. You don’t want to lose what you’ve worked so hard to gain.

If we can talk you out of starting your own business – so you avoid the financial and emotional turmoil that comes with it – we’ve done a good deed. Alternatively, if after reading this, you’re more determined than ever to go for it – you’ve got a big knot in the pit of your stomach – we’ve served you well. Either way, we want to get you off the fence.

Owning a business is not for everyone. You have to be willing and able to take risk. Numerous studies show that wealthy people accept more risk than the average person. You either have to accept some risk or accept a lower net worth.

Let’s look at two scenarios that allow you to start your own franchise or business, yet minimize your risk:

  • You have the money, but no time.

    • You have a job you love. You want to keep it. That doesn’t mean you can’t enjoy the benefits of passive income from business ownership. Find someone with talent to manage the business for you. But you want to be sure they are careful with your money. How do you do that? Structure your deal so they have more to lose than you do. Keep them up at night, so you can sleep. By aligning their interest with yours, you’ll be likely to develop that passive income you want..

  • You have the time, but no money.

    • You have that burning desire to own your own franchise or business, but you’re missing one key piece – money. Find a partner with money. But beware – you’ll be the one staying up at night! If you can replace your current salary and share in some of the profit, you’ll be jump starting your net worth.

Accepting risk is one thing. Learning to manage it is another. Successful business owners are good at controlling their risk. You need to develop this ability before you start out on your own, no matter which scenario you choose.

We encourage you to sign up for our free newsletter, “Bigg Success Weekly.” It’s published every Friday. This coming Friday, in our Home Office article, you’ll learn about a solopreneur who has built a business worth over $3 million in sales. Check it out!

Our quote today is by Dale Carnegie.

“The person who gets the furthest is generally the one who is willing
to do and dare. The sure-thing boat never gets far from shore.”

Next time, we’ll look at how to build a passive income through income-producing real estate. Until then, here’s to your bigg success!

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The Confidence Game

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If you have owned your own business, you have probably struggled with self-confidence from time to time. You may even relate to and have suggestions for one of our listeners.

We received an e-mail from Beth, who is in the process of starting her own consulting company. She says her problem is that there’s a little voice in her head that keeps pointing out what she doesn’t know. It’s paralyzing her progress, and she would like some advice on how to get past this.

Don’t feel alone, this is a common problem. We congratulate Beth for having the courage to make this move. George has a theory that, as an entrepreneur, the highs are higher and the lows are lower when own your own business. So welcome to the roller coaster!

Here are some tips on how to get past the lows by giving yourself a boost in confidence:

Don’t expect perfection
33 Allow yourself to be human], by setting achievable goals. For instance, many people feel they don’t know the financial side of business. Read books, take a class, or find someone you can team up with. Do what you do well and let others help you so that you can get started and tackle your challenges.

Rebut the cruel inner critic
Counter your negatives with positives. For example, when that little tells you what you don’t know, tell it what you do know. When it tells you why you shouldn’t take a risk, tell it why you should. Focus on what you can do and what you know you will do.

Be Your Best Friend
Friends tell you what you need to hear, but when they do, it’s in a caring way. We help our friends get through tough situations in encouraging ways. So why not offer yourself suggestions in the same manner? Don’t get down on yourself and be critical just because you didn’t do something right or because you don’t know something.

Meditate
It’s important to practice thinking positive. Take a break, think about a task you completed that made you feel confident, and remember how good it felt. When you go to bed, focus on three good things that you did well that day. It’s a great way to end the day, by focusing on what you have accomplished.

Our quote today is by Stan Smith.

“Experience tells you what to do; confidence allows you to do it.”

Get out of your own way…you’ve got places to go! Tomorrow we’ll discuss getting the money off your back. We’ll share some recent research on monkeys that you’ll find interesting.