I talk to many clients who are about to become first time investors. There is much discussion on what a good first time investment should be. I hear everything from tax liens, foreclosures, government subsidized 4 plex’s, turnkey single family homes, and wholesaling. The truth is that there are a lot of options out there that a person can invest in. But should you? I will breakdown what I believe your first investment should look like so that you can build wealth faster and avoid common pitfalls.
First off, what should you be looking for on your first investment? Cash flow! Why? Because if you’re just on your first investment you still have lots more earning and saving to do. You won’t be rich no matter how great your first deal is. Once you’ve invested you’ll be back to square one. Increase income and save again until you can do it again. Cash flow naturally enhances this cycle so that you can increase the income more and save faster and therefore invest again sooner.
Right off the bat, that means a few things. Appreciation shouldn’t be a priority, tax reduction shouldn’t be a priority, and debt paydown shouldn’t be a priority. You want an asset that cash flows regularly, requires little of your attention, and doesn’t distract you from the thing that allowed you to have surplus money in the first place.
My favorite option is private lending on income producing real estate. Why? You get 2-4x the cash flow on a $50,000 investment as a single family home, government subsidized 4-plex, or other options. It also requires no work. You’re basically the mortgage company. You loan money. The deal pays you interest. You collect. That’s it. If they don’t pay you, to take away their asset. Simple as that.
I have clients that do foreclosures and tax deeds. It’s not an investment, it is a job. You must identify the opportunity, look for a pipeline of them in case the one doesn’t work out, and then you need to underwrite them all so that you can select the right one. Then you must acquire the asset, which takes effort and time. Once acquired to must prepare to sell, which also isn’t passive. By the way, just because you purchased it doesn’t mean it will sell. Guess what? Now you’re a salesperson. This is not investing and I highly recommend against it for beginners.
I also have clients who are into the single family turnkey real estate game. This also takes time and ultimately will only pay $150-$250/mo. Not to mention, the vacancy risk is extremely high. It’s a gamble. Right now, you don’t need tax breaks, debt paydown, or the other benefits touted by single family turnkey investments. In a worst case scenario you’re stuck paying a mortgage, utilities, taxes, insurance, and property management with no tenants. Grant Cardone’s first investment was a single family home and he also highly recommends against it. Why? Because it doesn’t get the job done. You need cash flow with no distractions.
Flips aren’t investments either. That’s a construction and sales job. Can you make money? Yes, but it’s not passive and it will completely distract you from your primary income source.
Look, you have to ask yourself if the goal is to be an “investor” or to be wealthy? There are plenty of investors who aren’t profitable and still worry about the bills. Just because someone has a podcast, cool Facebook ad, online course, or large following on Instagram doesn’t mean they’re a profitable investor. There are plenty of “experts” who make no money on their investments and you don’t know about it because you don’t see their financial statements. You need to look at the top 1% of wealth and how they did it. Why would you gamble with anyone else?
My recommendation if you’re new at investing is to get to $50,000 and pool your money with more experienced investors on large real estate deals. This isn’t a REIT or a Wall Street investment. This is an actual real estate deal that you’ll be contributing to. This gives you the scale and benefits of big money without you actually having all of the money yourself. You will also get the guidance of more experienced investors in the deal with you and build your network simultaneously.
If you’d like to learn more about how to invest, I want to offer a free phone consultation. I help my clients create a solid financial plan centered around investing and coach them through the process of how to get more money, keep more of it, and then invest it in the right deals to return passive income and expand. Click here to learn more.
Own Your Potential,
Jerry Fetta
Grant Cardone Certified Coach
Jerry Fetta helps his clients build wealth so that they can eradicate poverty in their own lives and own their potential.
He believes scarcity and abundance cannot co-exist and that the way to end poverty is to help you build wealth.
You were not created to spend 40+ hours per week serving the 40-year-to-life sentence trading your precious time for money just to live in mediocrity.
However, the truth is that time and money must be exchanged. It just doesn’t need to be you making the exchange.
Jerry helps his clients create wealth that exchanges time and money on their behalf. The only way to do this is to make more money, keep it, and then multiply it.
He has helped clients double their income, save $100,000 tax-free, and secure 8-12% fixed annual returns on their assets.
To get started, go to www.WealthDynamX.com/contact
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