“You might as well realize that the time for opportunity is past.  There’s no longer any use trying to save for investing.  The best you can hope for is to keep a steady job and stay off welfare.  Nobody will ever again be able to build an estate big enough to produce an independent income.”

These are the words from a senior economics professor at a prestigious Californiauniversity.  In just a moment, I’ll tell you the rest of the story – but first, let me stress how important it is to choose who you listen to very carefully.  You can help yourself the most by taking advice from positive people. 

If I were an impressionable young man without a great deal of worldly experience, the professors’ words would certainly make me gun-shy about charging out of his economics class to invest in real estate anytime soon – especially the kind of properties I’ve purchased over the years.  Being cautious is always wise, but hanging out with negative people and paying attention to their advice can be totally disastrous.  After all, real estate investors must shoulder a certain amount of reasonable risk in order to build an independent income.

The world is full of “chicken littles” who are always telling anyone willing to listen – the sky will surely fall by some arbitrary date they pick!  I’ve been around for more years than I care to brag about and I’ve yet to see even a small piece of blue sky lying on the ground!  I’ve even quit wearing my hardhat, except for those rare occasions when I visit my tenant to pick up his late rent payment check.

Nickerson Calls Professor Prophet of Gloom

Certainly, I’ll be the first one to agree with the professor – the Californiaeconomy has been in the toilet!  There are many discouraging things we could talk about.  Housing prices have fallen sharply, rents have been stagnate, unemployment is way too high and a whole boat load of business folks have simply packed up and left California looking for greener pastures – but that’s how economic cycles work!  Still, looking for a steady job to keep off welfare seems like pretty negative advice coming from an economics professor.

Real estate cycles, both up and down, are nothing new to ring-savvy investors!  Every investor who has been successful enough to stay in business for a while has been through them!  The biggest lesson to be learned by investors, is how to stay afloat during rough times and make lots of hay (prosper) when times are good.  Real estate cycles can create winners and losers alike!  The secret to survival is learning how to surf (stay afloat) during rough seas!  If you’ve ever watched skilled surfers from the beach – you can’t help but marvel how easy they roll with the waves.  Good surfers are not toppled by even the highest and most treacherous waves.  In fact, many look forward to experiencing the thrill that comes with meeting a challenge head-on.

Before I forget about the economics professor and his gloomy prediction about future opportunities – let me just say that he’s the kind of educator who can keep an entire graduating class working their buns off at Burger King.  The only salvation is – his advice has been proven wrong for a long time now!  You see, he offered that advice during his speech to the graduating class at Fresno State College in 1931.  William Nickerson was in that class!  Obviously, he was not overly impressed by the professor’s outlook.  Bill recalls the professor’s speech in his best-selling book How I Turned $1,000 Into Five-Million In Real Estate, Simon and Schuster (Rev. Edition) 1980, Page 18.

Changing Markets Create New Waves of Opportunity

Real estate investors can prepare themselves for treacherous times just like surfers.  They do this with each new experience and by continuing their education!  When you are knowledgeable about what you’re doing and have the added confidence that comes with that knowledge, the doom and gloom predictors will have very little effect on your investment success.  You’ll learn how to ride through the rough waters till they’re calm again.  Today, opportunities have never been better for wealth builders as we begin a new cycle.  It’s the perfect time to tune up your plans for the future.  It’s also a time to look back and see where you’ve been.  Contrary to what several popular economists have written in the newspapers, real estate is not likely to lose its wealth building qualities anytime soon.  Millionaires will always be created.  Naturally, I’m talking about the kind of real estate I write about – income-producing houses and small rental properties.  The kind of real estate I’ve earned my living from like many of my readers.

Education is the Answer to Long-Term Wealth

If William Nickerson’s old college professor could have somehow looked ahead 84 years to see a future with lead-based paint, asbestos and Obama’s new health care, he might have strongly suggested that all his students sign up for welfare right then, before ever leaving his classroom!  Times change however; and so must investors who wish to prosper in a world which is constantly revising the rules.  Turning down cycles into opportunities is not about luck!  It’s about knowing the rules and making them work for you, rather than against you.  As serious as the housing downturn has been for many, there’s also a positive side with wealth building opportunities for those who have a vision!

One of the major benefits with my kind of investing is that it’s quite stable and almost totally predictable.  And unlike pony express riders, blacksmiths and Kirby vacuum salesmen – you can pretty much expect to enjoy a very long career and a rosy future if you invest in basic rental housing, like I recommend.  However, do not allow yourself to get side-tracked.  A few words of caution are appropriate here because of all the emails and phone calls I receive asking for my opinion about the best kind of real estate opportunities.  It’s basic rental housingya got it!

The Shortest Path to Money and Freedom

I shall always be grateful to those folks before me who sold me on the proposition that investing in income-producing real estate was truly the safest and shortest path to financial independence.  I soon discovered it’s also the same path that leads to genuine personal freedom.  Real estate investing has given me the opportunity to control my own lifestyle and most all my affairs.  People often ask me – “What do you enjoy most about being your own boss?”  It is making more money or the freedom to spend your time doing the things you really like to do?  The answer is both.  The way I see it, life would be very dull indeed if I had to spend all my hours awake hiding my real estate profits in a big iron safe and guarding them.  What would be the purpose in that?  On the other hand, without having cash flow and profits, I certainly wouldn’t be able to do all the things I enjoy with my freedom of time.

At least once every year, investors should sit down at their kitchen table with a pen and big yellow writing pad and plot out exactly where they’re going, where they’ve been and perhaps most importantly – are they still on the right path taking them where they’d like to be?  You’d be totally amazed at the number of folks I talk with who don’t have the foggiest notion whether they’re headed in the right direction or not!  It should certainly come as no surprise – if you don’t know where you’re going, how could you possibly know where or how you’ll end up.  Friends, that’s far too much uncertainty, in my opinion.

My Basic Strategy Has Always Served Me Well

Over the years I have always invested my money (sometimes very little) and my personal efforts in properties that would pay me every month.  Sometimes my pay wasn’t very much, but the idea of investing for a steady income stream has always been my number one goal.  When properties generate cash flow, you’ll always have money in your pockets.  It may not even be positive cash flow sometimes, but it is still income paid to you as the property owner.  Once in your hand, it’s you who can decide how much to keep and how much to pay out every month.  That’s very important over the long haul.

Never underestimate the power of making small profits consistently!  You don’t need “killer deals” to make you wealthy.  What you need are properties that will earn you money on a regular basis, preferable every month!  A solid brick house, built to last for centuries; always begins with the first and lowest level of bricks.  Properly laid, this first layer of bricks will provide a strong foundation with enough strength and endurance to support the entire house when it’s done!  Building strong income-producing properties works the same way.  It will pay you to concentrate on execution rather than speed!  Making sure you earn a little profit on each new property you acquire is a much better strategy than going for some high risk “killer deal”.  Creating small profits that keep building on themselves (compounding) is the way most of the super-rich end up where they are!

Ray Kroc, founder of McDonald’s corporation, consistently sold hamburgers and french fries for 15 cents each from 1955, when he started, until 1967.  He then raised his prices to 18 cents.  That certainly doesn’t sound like some big “money gouging” operation – but when you keep making a small amount over and over again, even tiny profits add up to big bucks.  When Mr. Kroc retired from McDonald’s and bought the San Diego Padre’s baseball team in 1974, only nineteen years after serving his first bag of french fries, his personal net worth exceeded $400,000,000.  That’s a whole bunch of zeroes for selling 15-cent french fries!

Walt Disney was absolutely delighted to draw the first moving cartoons for the big theater screen.  He was paid just $12 apiece for each one, but he kept drawing hundreds of them, over and over again.  It’s history today of course, but those $12 drawings eventually made Disney a very wealthy man.  It didn’t happen overnight, but when you consistently have small profits rolling in, they eventually add up to a staggering amount. 

Buying Properties That Earn Profits Today

I’ve spent a lot of years trying many different strategies to earn money with real estate, and I can tell you without the slightest hesitation – it’s not a sound idea to buy houses that don’t “pencil out” on the day you acquire them or very shortly thereafter!  To me, there’s only one reason in the world to own investment real estate – that’s to  make money.  If it don’t or won’t, then I don’t want to own it regardless of whatever else it might do! I’ve been “sucked in” and “shucked ‘n jived” about a property’s future value and its high potential so many times, I’m embarrassed to admit it!  Fortunately for me, I learned this valuable lesson early in my career before I had enough money to lose much!

Making a million dollars in real estate is a lot harder than most people say it is!  That’s the bad news!  The good news is; making the second million is a whole lot easier than most folks think it is!  Strange how money making works that way – but, I think I can tell you why!

First of all, most instructors who teach people how easy it is to make a million dollars haven’t done it themselves, so they really don’t know how!  Most investors, who have made a million starting from scratch, are very protective about their hard earned wealth and likely won’t tell you a stinking thing.  Fortunately, there are a few “blabbermouth” exceptions.  Take my advice, find a blabbermouth, but make sure you check ‘em out good!

There is No Substitute for Cash Flow

There are several sound economic reasons why I’ve always favored keeping my flock of rental houses, but the single most important reason is – they furnish me with a pocket full of cash money every month, rain or shine!  Over the years, as my mortgages are retired (paid off) I’ve had extra cash on hand to buy discounted mortgages, including much of my own mortgage debt.  Buying debt makes a very lucrative companion business to my real estate investing.

When you own houses, you’ve actually created your own personal money machine!  Obviously, you must maintain the property and provide good management – but, in exchange for doing that, you control the money!  It’s yours to spend any way you choose.  Owning your own piggybank is the surest path to wealth and financial independence.  When you study the wealth patterns of nearly every rich person, you can trace it back to the ownership of a patent, copyright or a deed!  Owning income-producing real estate puts you smack dab in the middle of the right crowd.

I continually receive telephone calls from real estate investors who blindly charge ahead and buy properties without the foggiest notion about how much money it will cost them for fix-up and repairs!  Many haven’t the slightest idea what I’m even talking about when I ask them – how much money do you expect the property to pay you back?  I must confess, I’m very optimistic when it comes to real estate investing, but I certainly don’t want to own houses that make me reach for my wallet every month to pay for cash shortages.  That’s the wrong direction for building your personal wealth.  Even if you have a few bucks from other sources, you must never forget a basic principal of wealth building — you won’t get very rich writing checks.  It’s deposits that will take you there. 

I’ll often refer to my rental houses as my widgets because it sounds more like I’m a business person, as opposed to being just a plain ol’ real estate investor.  Investors, especially the do-it-yourself folks who follow my advice, need to think a whole lot more like business people, in my opinion!  Business people are constantly checking their bottom line to make sure their cash flow projections remain on target.  Real estate investors should be doing the same thing!

Big Rewards With Minimum Risk

Like any other business, you must always weigh the rewards against the risk!  I’m talking mostly about the risk of losing your assets.  Rental properties, like the ones I own, are about the safest kind of investment you can make.  Naturally, you must avoid paying too much for the property or taking on too much mortgage debt.  It’s your responsibility to learn prices and values and of course, acquire the right properties.  Residential renters are a much easier bunch to attract than commercial tenants.  That’s because all us humans need a shelter.  Houses are considered a basic necessity of life.  The danger of anyone taking your investment houses, with any sizable equity, is almost nil!  If you buy properties right and arrange the financing so that your tenants can afford to pay off your mortgage with their rents, you’ll be very well rewarded for your efforts!

Here’s one final tip that can make you a millionaire faster than anything I can recommend – learn all you can about financing!  Financing controls everything to do with making money as a real estate investor.  No, I’m not talking about visiting your friendly banker!  I’m talking about the kind of financing you can personally negotiate with sellers (the creative type).  Sellers can help you get richer – much faster than anyone else in this business.  Remember, there’s no end to the ways you can structure private (seller) financing.  When you learn this, you’ll be well on your way to a happy millionaire!

Jay P. DeCima, aka Fixer Jay, lives in Northern California where he operates multiple rental properties.  With nearly 50 years’ experience, he’s a street-wise landlord and best-selling real estate author. Nearly 70% of Jay’s seminar students have acquired income-producing properties over the past 28 years.  Investors are invited to download Fixer Jay’s informative eBook, Living The Dream at www.bit.ly/aoa-12.

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