Building a strong, evolving and successful plan for positive cash growth doesn’t have to be complicated, expensive or sexy. You just need to know what to look for, how to find it, and what to do with it when it’s sitting in front of you.
Here’s a great quote from one of my personal mentors, Robert Kiyosaki:
“If you want to be rich you need to learn to think like the rich, learn what the rich know and most importantly do what the rich do. The rich teach their children how to convert earned income into either passive income or portfolio income that will provide the cash flow to live the life they want to live.
To become rich you need to first change the way you think about money because your thoughts lead to your actions that lead to results. If you were raised poor or middle-class, chances are that you were not taught the fundamentals you need to become financially free for life.”
Inspiring, by all means. But what does it mean? It means that every successful property investor must have a personal financial action plan, to help them take these principles and quickly apply them in their lives.
Creating a personal financial action plan isn’t something haphazard you can outsource. It means YOU, taking a serious look at your current financial state, the tools you have at hand, and exactly where each small goal is located on your personal ladder of success.
This process doesn’t have to be difficult, but it does take honesty and commitment. It’s worth it – the prize is ten-fold: once you’ve built the financial growth system that speaks to you, you’ll have a model that can be used over and over again successfully, no matter which market you choose.
Here’s a fact: the most successful investment models tend to be plain boring. That’s because fortunes aren’t made by the Regular Joe through sexy multi-million dollar deals and once-in-a-lifetime steals from that grandma in Florida that never come back again. They’re built through patience, sound investment strategies, a thorough due diligence process and the right network.
I can’t stress enough how important it is to get serious and start building your own personalized plan for financial growth. But I know it can be tough to know where to begin.
Therefore, I thought I’d give you a peek at my own action plan to help you get started. No matter what your personal financial action plan ends up looking like, it’s important to start with a few basic tenets and you can start with these, which have led me to great success.
1) Emerging yet stable markets
Here, due diligence is the name of the game. A few factors that define a stable market is one in which there is a historically steady increase of property appreciation, large prominent employers that are committed to the area, a strong educational system, and a diversity of exports (both intellectual and physical) to maintain a healthy economy.
An emerging market is one which is currently experiencing (or just at the cusp of experiencing) accelerated growth due to an influx of infrastructure investment, foreign retail or resource investment and is actively pursuing business-growth initiatives on a local level to encourage and attract economic growth stimulus.
These markets are strategically located, well connected to sea ports, highway and train systems as well as airports. They are generally within close proximity to a large consumer market which has increasing demand for their local exports.
2) Positive cash flow
There are many factors that can affect an investment’s cash flow, including unexpected expenses. Therefore, my personal action plan automatically weeds out any potential money pits – to me, it’s just not worth the hassle when money can be made elsewhere. By selecting new construction or recent conversion projects you eliminate this potential nightmare.
The price you pay for the property ultimately affects your cash flow as well. There’s no point in sinking your life’s savings into a single property. The key is leverage, that’s why you go after those special mortgage programs, right? So look for low entry price properties in markets that are ripe for the picking. Emerging markets (such as Atlantic Canada) will offer high quality at a lower price than already established higher demand markets (such as Vancouver and Toronto) while giving yourself a cushion against any threat of a housing bubble.
Calculate an intelligent formula and stick to it – mine is an entry point on average of $160,000 and minimum average rentals of $1400 per month. With this formula, after expenses, you’re looking at an above average passive income return of 12% cash on cash.
3) Hands-free property management
Now let’s get one thing straight – I am The Zen Investor, I’m not wearing a tool belt or tearing out my hair over a tenant’s broken toilet. It’s just not happening. I don’t know anyone that got into real estate investment with the intention of spending more time away from their family and loved ones, sinking more cash they don’t have into their investments. So it always shocks me when property investors leave finding a reliable property management system out of their action plans.
Only investing in real estate with a reliable property management system in place gives you peace of mind without any worry about tenant responsibility. You won’t have to spend time or money advertising for tenants. You won’t have vacancy. You won’t have the worry about daily or seasonal maintenance. And you won’t have 3am phone calls about leaky roofs. Property management is the “passive” in “passive, positive cash flow”. Without it, you’re just another overworked landlord with a greasy wrench.
According to my action plan, I only invest in properties that come with fully hands-off management services, including tenants and maintenance, for a minimum lease of 3= years, renewable. The only thing I have to do is cash the checks.
Now I know the title of this article is “The 3 Non-negotiables …”, but I’ll let you in on my secret to success; an extra-credit point #4 for those of you that have read this far …
4) The power of group purchasing
The old saying “There’s power in numbers” should be on a plaque over my door. There are so many benefits to finding the right network of like-minded investors; I can’t possibly list them all here. But the power of group purchasing is a lesson I learned early on in my property investment career, and the one that has served me the best.
By purchasing together, average Jane Investor still holds individual title to her own properties, but can better leverage her individual investments, obtain excellent buying conditions including price, rental income, balance of sale, lease coverage, etc., in a way that she would never be able to negotiate on her own. Plainly put, when a group goes to a developer with the potential for 15, 20, 30 sales as opposed to just one or two, the group has more negotiating power, and the developer wakes up and listens. That’s when we ALL win.
So let’s summarize. Property investment success is no accident or blessing from Lady Luck. While everyone’s plan will have some tweaks for personal goals and limitations, my Zen Investor plan seeks out low entry priced properties with high rental yield in strategically located areas. These projects are negotiated win-win agreements with developers that provide the buyer/investor with a high rental yield with a low entry price point of $160,000 in average. Combine this with hands off management with a minimum lease of 3years. In a nutshell, there’s my recipe to success.
Whatever your plan ends up looking like, one fact remains the same – if you truly seek financial freedom, both for your pocketbook and for your life, you must put in the effort and show commitment to establishing that financial growth, starting right now.
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