I have been getting feedback in disbelief about my previous blog.
Where do I get 18% return on my investments? Surely at that level the investment has to be risky?
There are all sorts of problems here, and none of them have anything to do with what I recommend. They mostly have to do with ingrained beliefs that have been passed down from people who have been doing things wrong all their lives, and so the inefficient, or downright lousy methods persist.
I was taught by a rather famous and wildly successful businessman, Sir John Templeton. He was a friend of my mother’s and therefore ended up being one of my Uncle Johns. He taught me several things. Let’s start with some simple points.
First, he said, look around you and note the differences. You will see successful people, and those who are not very successful. You will find that the least successful are always the ones ready to give advice. Dont listen. Instead, watch, and see what the successful people do.
Second, dont let emotions interfere with business. Emotional arguments never, repeat, never bring success.
Third, success initially requires dedication and a certain amount of serious work. That includes knowledge. You get your knowledge from people who have been there, done it, and got the bruises to prove it. If you listen to them you will hopefully be successful without all the bruises.
When I was a young kid it was painfully obvious that all the people around me were unhappy one way or another. They were always moaning. It therefore appeared to me that they were all doing something wrong unless life was always that way.
As I grew up I realised there was a class of people who seemed to be doing very well. That was when I thought it would be a good idea to watch and listen to John Templeton.
There are some basic facts which most people dont seem to understand. Let’s have a look at some of them.
Most people borrow to spend. That way you pay more for what you buy. After all, you pay the purchase price, and then you have to pay the interest on the loan. When it comes to buying houses, that fact becomes a very painful reality. What is for sale at 90,000 ends up costing 330,000. Anyone who thinks that is a good deal wants their head examining.
I keep saying, rich people get others to pay for the things they want. There is another way of saying that, but I need to start somewhere else.
Money is a mathematical construct, therefore to get the most out of money you need to be good at maths and use maths in all your financial dealings. Always look at the maths first.
In that sense money is a servant, and probably the most useful and valuable servant you will ever find. That means you should put money to work for you. If you want to buy something, get money working for you to pay for it.
Whenever I want something I first work out how I could buy it without dipping into my savings. I also try to work a formula that is self replicating. In other words, get it to be able to carry on providing. That’s when I decided that a very easy way to make my life a success was to borrow money (use someone else’s servant) to buy an apartment, rent it out, and get the tenant to buy the place for me.
Rule number one: make sure you enter a deal only when the formula underlying the deal will produce a positive result. In other words, the end product produces money, rather than losing it.
If you buy a holiday, maybe you borrow to pay for it. You take the holiday. It’s done, and gone. You are left with paying back any loan. That’s pure stupidity. You entered a deal that produces a financial loss.
I bought an apartment. I first did the maths to show whether the deal produced a positive return. When I found that the rent would pay the mortgage I did the deal. Now someone else is buying a house for me.
There is a famous investment mantra: Buy low, sell high. I only buy real estate when prices are very low. When prices are high, I do the opposite. I sell, and invest the money in something that produces more than the property does.
It is all so very very simple.
Back in the nineties an apartment on the edge of Central London cost 41,000. At the same time the rent would easily cover the mortgage payments, plus some extra. Thirty years later the finances look very different.
As I pointed out in my previous blog, prices are now high and likely to fall, that means it is a good time to sell. That same property is now worth about 400,000 and is bringing in 2,500 a month.
Do the maths.
I can get 18% on my money, but let me do the sum on a 10% return. 10% of 400,000 is 40,000 a year.
Excuse me, but 2,500 a month brings in 30,000. Why would anyone not want to sell that, or a similar apartment and invest elsewhere?
Here are links to two of my books; one on real estate, and one on making money.
The Ultimate Real Estate Guide: https://www.amazon.co.uk/dp/B07D3ZW8D2
In the USA the link would be https://www.amazon.com/dp/B07D3ZW8D2
Being Rich is Easy: https://www.amazon.co.uk/dp/B0CLS37VX1
In the USA the link would be: https://www.amazon.com/dp/B0CLS37VX1