Two Million Burning a Hole In My Pocket

Here's what I said to a wanna-bee, 20-something, with $2M dollars to invest in commercial real estate...

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Dear $2Millionaire,

"You've got great goals and a plan, but for the love of gawd, leave that money where it is!!!!!!

You need to act as if you had about .20c in your pocket, not $2M.

Any investor you talk with that had a wad of money in the bank when he started will tell you about his disasters and losses.  Why?

Because having that much money in the bank (or available) is the instant-rice recipe for making the most short-sighted, ignorant, stress-relieving, prideful, cocky, stupid moves e.v.e.r.  !!!

That much money sitting in the bank is so easily mishandled, it's like holding a lit stick of dynamite in a room with the gas turned on... Something's gonna blow like Mt. Vesuvius, before anything good ever happens.

At 25... honestly, and without insulting your character and intelligence, you need to SLOW down.  You've made a wise decision consulting this forum... Just saying.  But...

$2M is like having an Olympic-sized pool of opportunity waiting for you to dive into.  It gets your juices going.  The problem is you don't have any diving experience, much less know how to swim, much less hold your breath, or even do a lap without drowning.

So, what's the answer?

Start with a wading pool. (OK, this is an analogy, not an instruction to go buy a kiddie pool...)

Fill the wading pool with some water, and splash a little, and learn how to fall face first into the wading pool without injuring yourself.  Then move to the Doughboy pool and learn how to hold your breath underwater until you're confident you won't drown by accident.  Then learn to maintain your buoyancy by dog paddling. 

Then move to the bigger in-ground pool with a diving board.  Learn to do cannon balls off the diving board.  Then move to jumping head first and coming up alive (If you fail at this point, you've got other problems, besides bad depth perception).

Then practice holding your breath at the bottom of the pool until you're confident you won't drown by accident.  Then learn to swim underwater from pool end to pool end without coming up for air.  Then practice laps and learn to breathe.

After all that, you'll have learned how to hold your breath, do laps and dive with ease (and all without a brain injury).  Then you'll be prepared to dive into the deep end of your Olympic-sized pool and begin training for the big leagues.

Short of that, and you'll find yourself jumping headfirst into the Olympic-sized pool, only to discover there's no water, and instantly become a financial quadriplegic. 

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Meantime, anyone with $2M+ is going to be almost compelled to accept what they believe are short-cuts around the practical experiences they need to make profitable decisions.  Decisions based on reality and experience, not on hunches and/or bad advice from others who don't have anyone's best interests at stake, except their own. 

With this much money, many larger, stupid mistakes can be camouflaged.  But if the mistake is large enough the camouflage instantly fades, and the losses become grossly obvious, and one is left with a bulls-eye on his forehead and a message on his back that says, "I Lost $2M And All I Got Was This Lousy T-Shirt"

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It will take some discipline to overcome the temptation to take the fire hydrant hose you've got in your hands and not just spray water all willy-nilly on shiny objects in the guise of "investing."

So, I would suggest that you go buy a four-plex with 20% down with conventional financing, and make that work first.  Of course you want a bargain.  After that purchase, think about what you've learned by buying at the wrong price despite the agent's advice; in the wrong neighborhood, with the wrong demographics, with a wrong management approach, with wrong tenants, and finally with the wrong financing ...all after three of your tenants bail on you and do $15,000 worth of damage to your investment just because.

Then accept the losses, and start over with your more sophisticated understanding of reality.  Go buy an actual deal-of-a-four-plex, raise the rents, increase it's value, understand how to create wealth out of thin air, and then rinse and repeat, until it's second nature. 

Then move up the food chain using the exact principals and experience you garnered with the smaller properties by scaling up to multifamily projects, commercial buildings, and finally to development of shopping centers, golf courses and ...the sky's the limit.

Then, you'll find yourself with several hundred million in savings, and that old $2M you left in the bank will seem like chump change.

Meantime, if you start with baby steps, you'll likely avoid blowing $2M on pipe dreams that professional snake oil salesman will tell you is the steal of the century.   

So, don't dive head first into the Olympic-sized pool without first learning to splash in the wading pool.  And then when you're ready to dive in, you'll know to check that there's actually water in the pool. 
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BTW, "The [rea] Donald" crashed and burned with millions to start with.  His answer to why, was that he took his eye off the ball.  Well, if a situation can arise with someone with this much experience, and this many millions to "camouflage" his smaller mistakes, than it can happen to anyone with way less millions and way less experience.  Again, just saying.

TheDonaldJr, you have in your hand either a bomb, or the tools to begin strip mining for Gold.  It depends on how you walk with it.  Either way, you need to take baby steps and start very, very small.  You've got YEARS to scale up, and turn that $2M into $7B "TheDonaldJr. dollars." 

I'm pulling for you and wish you extreme success!!!   

He Made a Mountain Out of a Mole Hill...

Many years ago there was a guy I knew very well that started out in real estate investing with no real money to his name. He earned a small paycheck from his employment in a non-profit organization, but that barely provided the basics.

What set this poor man apart from other poor men, was that he had a dream of financial independence and wasn’t going to take "no" for an answer.

He was old school. He wasn’t a fast-buck operator. He didn’t settle for a string of short term gains from quick flips, and pant like a rodent endlessly rotating his Hamster wheel looking for the next quick profit deal like many insist is only possible to do today.

Instead he kept his nose to the grinding stone looking for solid, long term deals that would eventually provide for a comfortable retirement and time for his family in the meantime. These were just “mole hill” deals. Nothing to get excited about.

As careful and thoughtful as he was, his first "mole hill" deal resulted in a catastrophic loss. After literally saving up for several years for a down payment on his first investment property, the major employer in the area closed its doors and fired thousands of people.

This tsunami of unemployment decimated the rental market as hundreds of landlords lost their tenants and homes became vacant, including my friend’s rental house. Many had to give up. My friend also lost his house, along with all his cash he'd saved and invested.

However, another difference emerged in this man, and that was that he believed that he could overcome this setback and achieve his dream of financial independence ...somehow.

Starting from scratch, he began saving money again, slowly, in order to invest again. Within months, he took another risk and began offering his tiny amounts of money to sellers who would agree to finance him. He endured much rejection. This included negative attitudes and opinions about his goals and ambition from those who knew him and what he'd previously "accomplished."

People also scoffed that such a poor man could make any progress in this market, and that real estate investing was a dead-end, or a fool’s folly. Meanwhile, it wasn’t long before he found a seller, or two, who wanted his money more than their property. So, with that little bit of success, he began looking for ways to come up with more down payment money to give to more sellers.

He decided to buy and sell cars he found cheap. He worked swap meets and fairs selling car accessories. His wife worked a part time job for extra cash. Of course, the important thing to remember was that he maintained a vision of financial independence that kept him motivated when he was tempted to get discouraged.

None of his deals was anything to write home about. They were all small potato deals, or “mole hill” deals.

However, after plodding away unceremoniously investing in deals that anyone would consider small time, he emerged the owner of over two hundred income producing properties in about ten years.

Scoffing turned into admiration and amazement as onlookers and former naysayers proclaimed him to be a genius, and that everything he touched turn to gold. Otherwise, how could such a modest man accomplish so much with so little, they thought.

My friend pushed all those mole hill deals together to create a mountain of wealth. In fact those mole hills together represented over fifteen million dollars in equity. Those small potato deals turned into a mound of steaming mashed potatoes with a slathered helping of gravy on top.

So the moral here is to move forward how you can, and remember that mole hills become mountains, if you get enough of them together, and there’s no stopping you if you are willing to start where you can, and continue without stopping ...and ignore those who can’t imagine your success.

If you are anxious and willing to make a mountain out of mole hills, but you need a way to get gobs of down payment money for profitable, long term deals...or you just want a way to get cash... I have a proven way to scrape up that cash, and would feel privileged to help you.

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