A little known fact is that my first “real job” in life (as opposed to anything entrepreneurial) was as a stock broker. I think that would have been a fun career, but after only about a year the application I had put in to purchase an athletic franchise was approved and my life as a business owner was launched.
My wife/partner/soulmate of 25+ years, Jennifer, comes from a big family that is heavily into real estate. One sibling is a real estate broker, another a real estate agent, and another owns a construction company that specializes in mid-price renovations and “flips.” Her entire family is always looking for a single family residence that they can buy, fix-up and flip. Or, just rent for year after year.
I don’t like that business because or the personal service nature, you know, the proverbial 3 a.m. call that the heat is out or the toilet has overflowed. Sure, they occasionally use property managers (and, yes, another sibling is one of those, too!) but I still don’t like it. What if the roof needs replacing? If not covered by insurance, how long will it take me to recapture that five-figure expense?
So, I’ve generally kept whatever assets I have in very liquid forms. As an MBA and former stockbroker, I know I should be watching every penny of interest, dividends, appreciation, etc. I have colleagues and former professors who would want to strangle me if they knew I was sometimes content to earn a risk-free 2% on my money. Heresy!
And it is heresy. With just a little work, I could easily boost my return to 5% – 8% with incredibly safe mutual funds and high-dividend stocks. And as someone who is know for his maxim that, “1% is HUGE!” I should not be leaving that money on the table.
So, I vow to do better in 2020. I’m going to move some money out of cash and into stock…especially after the recent, uh, “correction.”
But, you know what else I’m going to do? I’m going to consider investing with Jennifer’s family members in some upcoming deals. I won’t do the property management, but I’m going to repeat what her family members say at every gathering just to make each other laugh:
Real estate…it don’t go to zero!
I guess my message to you here is this:
- You can’t really call your business “successful” until you can consistently take money out to invest in other ways, or what I have coined, “excess cash.”
- When you have that excess cash, you’ll need to determine your own risk profile;
- As you’re thinking of risk, work hard for every 1% that still enables you to sleep at night
- And since you already know a lot about real estate, you might consider investing in rental properties, a flip, a real estate investment trust that’s publicly traded, or the like. You might even be involved in the design phase of a flip.
- And remember: Real estate…it don’t go to zero!