4 Absolute Rules for Setting Appropriate Rent Prices

You will have to come up with many thoughts when you start considering to acquire a multifamily property. The first, and likely the most important question which comes across in your mind is, what will the rent be?
This conversation can take a long time to cover all aspects, but I tried here in this article to cover more and more. The conversation about rent can give you a headache. But if you read this article you will get to know all the answers and can get rid of this headache. I try to shed light on all the question, you will have in your mind. Here are absolute rules for setting appropriate rent prices.

  • Rent should cover all your expenses
    Every landlord thinks rent should be high enough to cover all his expenses. Rent is the fixed income you will earn every month. So, it should be enough to afford all your expenses and something should be left over as cash flow.
    Well, I do not like any hard and fast rule, but the purpose of this conversation is, what should be a minimum rent requirement. For instance, a 50% expense ratio, which covers both the economic losses and the operating expense. So, in the case of a $600 rental, a 50% expense ratio would leave us with $300 to cover 3 very important characteristics which are:
  • Debt service
  • Capital reserve
  • Cash flow
    If you think practically, the $300 is simply not enough to cover all three above things. And since debt service is a prime factor, the choice we face is between our profit and Capital reserve. What we usually see is in the landlord’s pocket, the money left over after debt service, and then go to do some other work for some cash flow. This goes for years and years, and then their house gets destroyed.They find themselves needing to repair and renovate their houses like to replace the flooring, new painting, the water heater, and a stove. This is a sad experience for them because they have to do all these repairs from their cash flow. So, the situation can get worse for them. So, in order to get rid of this situation, always try to fix the rent that will cover your 80% expense. It is good if you can cover your 100% expense from the rent, but the minimum requirement should be 80%.
  • Protect and grow your investment
    Every landlord has two main objectives. To protect his investment, and to grow his investment. Protecting your investment is a function of operating at a price point which is attractive to an economically stable tenant base.But,it should not get so high that it limits our audience. In other words, until and unless you are in a very selective boutique market or asset class, you should not want your rent to be in the 90 percentiles. Many people cannot afford that rate.
  • Market range
    This conversation is specific about the market. I am talking about owning rentals that are within the 55th to 70th percentiles, within the range of, availability in the market place. So, if in your market rents range from $500 to $1,200 for class A, you probably want to be in the $725 to $1050 range. This will be attractive to tenants who are stable enough to protect your investment.Remember, it would not be so high that only high class of the marketplace can take on. Always set both minimum and maximum rent requirements for your tenants.
  • Rent of the property should be per square foot
    You have to price your apartments on a per-square-foot basis. Do some research online and then make rents for your property as per square foot not as per rooms.

After 30 Years of Real Estate Investing career, this is what I would do differently

I usually think what I would do differently, after 30 years of real estate investing. It is a good question to ask yourself. And the answer to this question is here in this article.

There are pretty ample things that I would have done differently. Here is the list.

I would have started my real estate business earlier
When I started this job, I thought I needed to work some other jobs and in order to save my own money to do my real estate deals. At that time,I was only focusing on buying and holding properties.

I regret that I would have started it earlier. The important thing I did not realize earlier was that this was a get-rich-slow strategy. I was fully devoted in making other people rich. I was dealingeveryone from builders and developers to apartment owners and real estate brokers. At that time, I was a painting contractor and a real estate agent.

One of my biggest regrets is that I waited so long to say goodbye my painting contractor job. Then, I apply for my real estate license and go into real estate investing business full-time. But I think I would have started my real estate business much earlier. I would have done it more wholesaling and flips. I would have usedhard money for my deals prior on in my investing career.

I regret not assigning tasks to manager
I was doing everything finding the deal, fixing the property, book keeping, being a real estate agent and being a property manager doing all real estate assignments on my own. I was not picking out time for myself,I was just saving money for myself and earning more and more. I used to manage everything like my savings and expenses and I never paid attention on the core assignment that they should be assigned to a manager. I thought I was great in everything so why I should assign tasks to someone else. I realized the real estate business is my passion. I could make more money by investing in real estate. I could do it myself.I was doing all the tasks like cleaning houses, painting and many more stuffs. Even I was having a good savings at the time. I was earning good.

For me it was a very hard thing to assign my tasks to someone else. I thought I am perfect in everything and no one can do and handle things like me. But I was wrong. These were just stupid thoughts.And it took me a while to realize. I realized you do not have to do each and everything by your own. It is totally ok if you can delegate your tasks to someone else. This is also for your benefit. I wish I did not make this mistake in the past and at an early stage. I must have hired any real estate manager sooner.

After this thought I hired a real estate manager and that was my best decision as an investor in real estate. It is very easy now to share your burden of work. I do not have to do all the repairs and maintenance things by my own self. I wished I had done it sooner.

I regret not using money and IRA Accounts in a bigger way
The other regret I have is not using money properly. I could use other people’s money and self-directed IRA accounts in a bigger way for my own real estate investment. Maybe I was afraid of taking risks at that time. But I should have done this sooner. I should have taken loans. I could do more investment in that way. But I did not do, and that is mu biggest regret.Maybe, Ithought, if I was not able to keep it going, what would happen then. These what and if stopped me. That was my case and a big regret too.I absolutely could have used more money, whether that was my private money or borrowed money. If I took this decision sooner, I could do real estate investment in a better way.

Now I am doing well inmybusiness, but if I could understand these regrets sooner, I could have done better business and deals. I hope by reading this article, you will not repeat the same mistakes which I have done in my career.

The Big Mistake Rookie Investors Fail to Notice: Overestimating People

Rookie investors usually make a big mistake which they even do not realize. They pay full attention to their deals and fail to notice the caliber of their agents, they have hired. What if they have hired not experienced people? What if their agents are stupid and naïve?

As a beginner, you must know all the realities about people and investment business. In this article I try to grab all necessary information which is important for a new investor.

Do not think that your vendors are perfect
Here I am going to share a story of a person I know very well with you. I met a person who became my good friend later, was a rookie investor and watched him put together his first few real estate deals. He worked hard to get his all deals done, but he ran into problem many times with unexpected failures from his vendors. This can happen to you if you think your vendors are doing a perfect job and you do not pay personal attention to deals.

Do not try to do something unique
As a rookie investor, you should do things in a more systematic way instead of doing something unique in your deals. As I mentioned above the guy’s fiasco. He worked hard, but he had to face delays in his all deals because of the wrong choice of vendors. His hard work went in vain because of wrong selection.

The lesson here is not that business is hard or it is not a good thing. The lesson is to know that people are going to disappoint you. So, try to keep your work systematically.In order to crack a deal, you should know the market efficiently. You should not do something unique as a rookie investor. Try to do your deals in a systematic way as per the business rules. Say no to nonsense about people. Do not accept any stupidity of your vendors and other people.

Be alert from badadvisers
I called myself lucky as I find good advisers and mentors in my career.They always told me and guided me where to invest and how to invest. They have invested in my growth by their good advices. When I look back, I feel like the most fortunate person on this planet by having these people in my life as leaders. Just think! What would happen to me and my business if I met any wrong adviser in my life. What if they were not intellectually and smart and also, I do not know what to do. In this case also I had to rely on them, which would be bad for my investment.

Finding the best adviser is the most important thing.Do not trust any adviser and it is absolutely true. Our ambitions are always set by the leaders and mentors who are around us.So, choosing the wrong person as a role model can give you a severe pain.

Take care of your business personally
Just think, you hired an agent, why would he pay his personal attention to your business. Maybe he is a person who is working for salary and some incentives. He is just counting days and waiting for Friday to come. The most important rule as rookie investor, you should know is, you have to do personal care for your business. No one cares for your profit as the way you do. Many few people think for others profit and loss. At the initial stage of your business, you have to take care of deals like a newly born baby. You have to pay personal attention on each and every deal. Your first aim should be to nourish your business.


Top House-Hunting Mistakes

Buying a new house is a very memorable and emotional transaction. Do not let the emotions come into your way while buying a home otherwise you can take a bad decision.In that manner you can make some mistakes while hunting a new house for you. But, you have to avoid such mistakes that are mentioned below.

Falling for a House You Can’t Afford

Never fall in love with a house. Once you have fallen in love, it would be difficult for you to go back.Do not make clouds or bubbles in your mind. If you do this, you may buy an expensive house or you may crack a bad deal.Do not make a fascinating world.  Specially, if you cannot afford that house that would give a bad impact on your emotions. The best decision is always looking for a home which is in your price range. Do not visit any house which is out of your budget. If you avoid this mistake, you will be able to buy a wonderful house.

Assuming this House is the Last Option

When you are in the process of house hunting, visit multiple houses. If you find a home, you like, but the price of the house is out of your range, do not stick with that house. You can find some other identical houses, which would be in your price range. So not assume this is the last option for you. I know house hunting is a hectic process, but a little pain will benefit you later. If you will make a spontaneous decision, this will be regretful later.

Getting Desperate

When you are in the process of house hunting and you do not find any appropriate house, it is an obvious thing that you will get desperate. Getting desperate can lead you to a big mistake. To avoid such mistakes in house hunting you have to keep your passions level high. Or even you like a house and you show your desperation to buy that house can be a big mistake. You can take many wrong decisions in your desperation zone.

Try to Avoid some Flaws

The other mistake that can be done by you in house hunting would be overlooking all the flaws in the house. Nothing is perfect in this world. There would be some flaws in the house. So, try to avoid some small or less important flaws. Do not seek for perfection. If you want to buy a flawless or perfect home, this would be expensive or impossible challenge for you.

Do Not Get Hurry in Making an Offer

When you hunt houses, you may get tired.Then, you find a house you like and want to buy it.So, you quickly make an offer. This would be your one mistake in buying houses. Do not hurry in making an offer for the house you like. In a hurry, you can neglect some important steps like you can make an expensive deal, you can choose a bad neighborhood or a bad decision with location.So, first think and then take a decision.

Careless Decision
As I mentioned above, house hunting is a hectic process. So, you get tired by visiting houses on a daily basis. But it does not mean you will take a careless decision. It is a long-life decision so, you have to pay keen attention. Keep in mind every prospective of the house. Your careless decision will throw you in a worst situation. Take your time before making a deal. But keep in mind, do not take too long to make it. It will require your energy and time. But, a careful decision will give you the best and economical results.

Selling Your House? Avoid These Mistakes

Selling your house is not a piece of cake. It would be tough for you, if you never did this before. It is an emotionally challenging and time-consuming task. Buyers will visit your place and criticize your construction, design, condition and interior. They poke around in your closets, bedrooms and cabinets. After doing a lot of criticism, they will offer you a very less money as they tell you your home is not upto par.

Selling your home would be complex and emotional. But it would be easy for you if you read this article till the end to avoid those mistakes usually people do when they are selling their home for the very first time. Below we have mentioned some mistakes usually the novice sellers do. You can overcome these pitfalls, if you read the full article.

Mistake No.1: Emotionally Attachment

I can understand the emotional attachment you have with your home. But when you decide to sell your home, you have to think like a businessman not like ahomeowner. Keep aside your emotional transaction and focus on financial perspective. Emotional attachment is a natural phenomenon. But,remember your own happiness when you were buying this home and the state of the seller. This feeling will help you out in selling your home.

Mistake No.2: Not Hiring an Agent

Although hiring a real estate agent means losing some portion of your profit.But If you are selling your home for the first time, then I suggest you to hire a real estate agent. I know they demand 5-6% commission of the selling price, butthis decision would be in your favor. Agents know all the tactics to raise the price of the homes. If you sell your home of your own, you cannot convince the buyer at your price. Agents know all the potential buyers and they know how to crack a deal with your set price.

Mistake No.3: If You Do Not Set a Realistic Price of Your Home

The key to selling your home is to set the right and realistic price. Whether you are selling your home by your own or through an agent, the price should be realistic. Do a market survey and after analysis, set the market compatible price. Always do justice with your home. Do not overprice your home or underprice it. Make an offer with a realistic price of your home. Set a price according to the location, landscape, condition and the land of the home.

Mistake No.4: If You Do NotSet a Space for Negotiation

Any buyer, youwill meet, negotiate the price. The key is, set the price that will attract the buyer, but leave a breathing room for negotiation.You can never crack a deal at your set price. So, keep in mind leave some portion of price for negotiation. Every buyer will negotiate. No one is going to pay your full fledge price, you have asked. This technique will work to sell your home. Do not lose your profit in negotiation.So, before setting a price of your home, keep in mind the negotiation amount.

Mistake No.5: Selling Your Home in Winter

Winter is a slow season to sell your home. In winter, people usually enjoy their holidays and they are engage in social gatherings and wandering.So, winter is not an appealing and ideal season to sell your home. Few buyers will come to your home in winter and it is not sure that they will buy at your price. So, if you want to sell your home at a good price wait for the winter to be over.

Mistake No.6: IfYou Do NotFix the Significant Problems

Any significant problem in your home will lower down the price of your home. In order to sell your home at a good price, the best decision is to fix the problems of your home before the buyer’s inspection. You can adjust your fixing money on the home’s price. Fixing the problems of your home is important, otherwise you will be going to lose a potential buyer or the profit of your home.

Mistake No.7: If you Do Not Accommodate Every Buyers

If someone wants to view your home, even he is not a potential buyer, your duty is to accommodate him. It is not compulsory to accommodate only potential buyer. You have to clean your home before any buyer’s visit.

Mistake No.8: Signing a Contract with an Unqualified Buyer

Signing a purchase contract with the person who bring pre-approval letter from a lender will be a big mistake. Sell your home to a buyer who has his own property or property documents.


5 Items to Replace when you Upgrade Rental Properties

Whenever you’re renovating a property, there are some items that you can delay in fixing, but there are other items that you should always replace whenever you’re renovating a property, and you should never ignore them but just so it. Here are five items that you should consider when upgrading, regardless of condition.

The first is the toilet. If it’s leaking, it can create a huge water bill, almost 10x what you will pay for the bill. They run all day, and if they’re leaking, it is continuous and a huge money guzzler.it’s also like super easy to fix, and you don’t even need to replace the whole toilet, just the “guts” of it, and takes only a couple of hours, and 20 bucks.

Then there are locks. You don’t know who all had the keys before. Instead of giving justifications, just change them. If you’ve got multiple properties, you can recycle locks as well, and that way you’re saving money when there is a turnover.

Then there are lightbulbs. Using energy-saving and long-lasting ones will reduce the bills, and they can reduce the number of phone calls to change the light. You can do this in common areas, or even in the places the person is living too. Once you do change the bulbs, it’ll be a long time before you change them again. You can get energy-saving bulbs that last 9 years, and they’re super affordable too, which is great.

GFCI outlets are electric outlets that are shut off when electricity goes through unintended paths. They are more expensive, and they’re perfect for safety reasons. Some places, they may be required by law, especially in areas where water is. You should definitely consider these if you have the budget for the renovations.

Finally, replace smoke alarms and fire extinguishers, for obvious safety reasons. Having these replaced, you won’t have to worry about them needed to be replaced for years. If you do use battery-operated ones, you’ll need to change these batteries a few times a year. You should try to have these replaced when you inspect the property every single month or every few months. You should consider getting the dual-sensor ones where there are ionization and photoelectric sensors, since these can help with detecting the fires that are slow and smothering, along with the fast-spreading fires in a simple, yet effective manner. It’s a great addition to have in the home and a must for replacement.

When it comes to fixing up which items you need to fix, you can do so with these five items. They’re simple, yet effective, and you’d be amazed at the difference that this makes in the home. They’re so simple, and if you want to save money on renovations of rentals, you’ll be able to do this in an effective manner, and you can ensure that your property has the safety precautions put in to help with this as well for you.


Are Tech Upgrades goof for Investment Properties?

With new technological upgrades happening every single day, you may wonder whether or not you should get that Nest thermostat, or if you should keep the smart technology out of the rentals. Well, here is the answer to that.

First of all, millennials and Gen X buyers love smart technology, and once understood, it does make life easier. Combination door locks are good because it helps if you forget your keys somewhere, and you don’t have to shuffle for your keys. Virtual assistants are great for changing the channel, or even turning on the lights and turning them off. Electronic doorbells allow for you to see who is at the door so you can stay safe. But are they worth it?

The best answer is, to stick to what you believe is useful. Many people don’t necessarily think Alexa is worth it, but Nest thermostats, for example, are great. The reason for that being, when you rent out a place, you never know what the damage will cost. It’s better to replace a cheaper item with something that is pricer, for obvious reasons. It increases the worth. you’ll start to realize what will happen over the next few years though.

The thing with technology in the home is that in 10 years, they will be antiquated. If the buyer needs to have the newest Nest thermostat, and it affects whether they’ll rent or buy, chances are you probably won’t want this person anyways, and they won’t’ care about a piece of tech that’s 10 years old.

As an investor, you should consider what people will buy. If they want just a Nest thermostat, you can just put one in. That will have the advantage over the traditional thermostats that you have to get up and change. If the properties in the area don’t have these, that will put you at an advantage. You want to look at, as an investor, what will give you the best bang for your buck.

If you have a property that’s been on the rental market for far too long, chances are you should consider putting the upgrade in. even if it’s just smart bulbs, you will put the property over other ones, because people desire smart technology. But, if you’re someone that never has properties that sit on the market for a long time, you should definitely not worry too much about these. But, if you notice this is what people want, then you should ultimately consider these upgrades, for they will help you get the property to a sold deal.

Technology is constantly advancing, and as a property manager or investor, you need to consider what you want to put in. Is the 400-dollar upgrade worth it? In many cases yes, in many other cases no. you have to make the call yourself, and figure out financially which ones will provide the best ROI for you, and what will get tenants into a property way faster.


Avoiding Risks in Real Estate

To get into the real estate business real fast and efficient, people might use several financial instruments or even try to borrow investment from others. Mortgage is the easiest example when it comes to leverages in real estate. With a twenty percent or more down payment the property is handed over and the rest of the payment is done on monthly or yearly basis. In real estate joint ventures, the partners in the contract put all or some of the money in the dealing of the property. When using these leverages the investor should try to avoid the following things.

High level of appreciation
Every deal in the real estate investment is a new experience so one should not keep thinking that the next deal in a process will the same as earlier. The value of a property can increase and decrease at any time so expecting the same appreciation from properties at different times is not wise. Calculating the same rate when using leverages in real estate should not be done. If this is done the investor may have to face a loss or even a worse situation. When using leverages, all three scenarios should be imagines i.e. best case, worst case, and the most likely case. If the market remains calm and unfluctuating we can expect the best case to happen and a lot of profit is generated using the leverages. The real estate market can get effected by a number of factors such as the political situation and change in the map etc. If this happens the property may lose its value rapidly. When the value of the property is lost all the anticipated profit becomes a burden and the borrowed money has to be returned without any profit. This can be quite a situation for an average investor.
Having a too high payment in the end
Higher payments only come with leverages. In the case of mortgage, the buyer will have to go for monthly payments. The more the investor borrows, the higher will be the monthly payments. If the market fluctuates and one may face credit losses, the mortgage payment may not seem easier as it appeared in the beginning.  Not being able to pay the monthly payments can endanger the whole investment. The borrowed money has to returned in a specific time period and if the property has failed to prove enough benefitting at the end, the payment becomes a headache and may turn into a lawsuit sooner.

Good financing but bad purchase
Overpaying during investment when using leverages is a common thing among investors. At that time everything seems to be perfect and no issues are anticipated. Everything seems perfect as the investor is getting the property at a very less initial payment. There are several factors to consider. If the property is priced higher than it should be it can prove to a bad purchase sooner or later. It may lead to a significant loss in the end. Sometimes the deal seems to be so attractive that its overpricing does not seem to be a problem and is not given much importance but this can be a problem when the property does not gain enough value or looses the value it already has.

Importance of cash flow
If the rental property is generating enough cash that pays the mortgage and the expenses of the property, then the fact the property is gaining value slowly does not count much. But if it is not generating enough cash and also not gaining value, this is worrisome. As long as we are gaining from the property, everything is well and good.



The 1038 Exchange For Real Estate Investors

Under Section 1031 of the United States Internal Revenue Code, 1038 exchangeallows an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes. IRC Section 1031 (a)(1) states that no gain or loss shall be recognised on the exchanging of real property held for productive use in trade, business or for investment, if such property is exchanged solely for real property of a like kind which is to be held either for productive uses in a trade or business or for investment.

1031 is gradually making its way into our daily conversations but there isn’t a lot known about the provision. But here’s something you should always remember for information sake; At the time of the sale, 1031 property exchanges are not taxed, that is because you are exchanging property not  selling it. An other important thing to know about it is that “1031” is not restricted to real estate.
That being said, here are some things you should know about a 1031:
The “..if such property is exchanged solely for real property of a like-kind which..” doesn’t necessarily mean what you perceive. The “like-kind” term is pretty flexible, essentially meaning that you don’t really have to swap a condominium for an apartment complex. You could exchange your apartment for raw land! That’s right, the rules are quite liberal.

Though there are a few exceptions, generally 1038 is not for personal use. The 1038 Real Estate Exchange is only for investment and business property. Unless your primary property is now rental property, a 1038 cannot be applied. You can’t swap your primary property for another house.

The delayed exchange is pretty straightforward: the Exchanger swaps property before he acquires property.  To put it simply, you owning the exact type property another person wants and him owning the exact kind is pretty unrealistic. Thusly exchanges are often delayed. So, once one of the exchangers sells the property, the money is kept with the middleman who then buys the replacement property for you. This third party exchange agreement is known as “delayed exchange.”Remember, that the third party must be a qualified intermediary or else the exchange is not possible.

Remember that the property that you relinquish may come with mortgages and debts. If you do not get cash back for the relinquished property but your liability goes down, then that too would be considered capital but it will be taxed of course.

A 1031 exchange allows the investor to sell a real estate property and then reinvest the capital in a property of equal or greater value. The investor cannot make a purchase for less than the original property, (The like-kind rule). This would defeat the purpose of deferring taxes on again.

Both the relinquished property and the replacement property must only be used for the purpose of investment, trade or business. Rental property which is no longer considered as primary property, should be rented for a minimum of two weeks.

You can hold the property for as long as you want, 1031 property exchanges are not taxed. That’s right for as long as you may hold the property, you defer taxes!

That’s all for today folks! 1031 Exchange can be tricky and a bit complicated to get a hang of at first but it’s not rocket science. A little more of reading and researching and you’ll get the hang of it in no time!

7 Fundamental Principles of Investing Successful Wealth-Builders Know to Be True

Let’s directly jump to the principles in detail.

Principle #1: Investors never spend the principal.

Most of the investors understand this fundamental principle. It is the origin of capitalism. It is great divide between the 1%. I would tell you the one phrase that could be a key to wealth preservation.

That is ‘do not ever spend the principal’.

If you obey this principle, you and your children, next and next generation will be financially stable till end of the life. This concept is not easy to understand by new investors. This goes over the head. Let’s jump into the details of do not spend principal.

When you invest a dollar just think it has gone and never come back. You now cannot use it. You are not able to buy anything or you cannot pay any debt from that dollar. This is no more in your life. That dollar has gone in a process that generate returns for you forever.

I am showing you an example through which you can clearly understand the meaning of do not spend principal.

I have a total sum of $200,000. I buy a rental property with the whole amount. The property gives me $2,000 per month. After a year my property value gets appreciated and the worth now is $220,000. I have total of now $244,000. I sell the property and walks to bank. Now I have $244,000 in my account. I earn $24,000 from rent and $20,000 from appreciation value.A total gain is $44,000 or 22% ROI. The $200,000 of that money in the bank is the principal. I used to invest in the first hand.I can spend $44,000 that I have earned without touching the principal amount.

Principle #2: Investors should reinvest most of the return amount.

Investors should also understand this fundamental principle to the core.  I can also say this the origin of true wealth. The great division of the 0.01%.

The phrase I will use here is:

Principal and majority of return on investment both should reinvest.

If you obey this principle the same would happen to your generations and generations. The fruit will be sweet and big for the life.

If you want to build up wealth then you cannot spend all of the return you get from your investments. Instead, you need to reinvestsome portion of the return you get.

The example I gave in the first principle think again of it. You have earned total of $44,000 do not spend whole amount. Half of the return should be reinvested. Buy new property of $222,000 and it will give you more return with appreciation value. Do it every year and earn more return on investment.  The more you invest the more you gain. Make this habit of investment. That will give you a faster growth in your income.

The core thing for investing is to build your wealth and enhance the life style.  So, you can enjoy the luxury life but be careful do not use principal amount in the over joy.

Principle #3: For investment you should have capital.

When you think about investment you must have capital. You have capital in only two situations one you earn it or the second is you inherit it.This is the reason there is such a great divide in wealth in America. Instead of the fact that America has a relatively low cost of living.

If you want to be potentially strong in wealth and want to gain financial freedom then do not spend what you earn. The amount you have earned that would be your investment. Do not go with the other’s money. If you are a real entrepreneur or want to be a successful businessman than do not seek people’s money. You have to do on your own. The capital must be yours. And you have to earn your capital.

Principle #4: Investment returns do not correlate with effortsalways.

A person who invest all his efforts in finding the right opportunity for investing. His is using his potential energy for market study and undervalued stocks. He is using all his right behavior but his all efforts are in vain Unfortunately. He can use his potential simply in investing index fund and can earn better long-term returns. So, the key is think smart and gather your all efforts for acquiring high return on investment.

Too many amateur investors attempt to pick stocks and beat the experts in public markets. It clearly shows that there is no correlation between their efforts and their returns.

Principle #5: Return on Investment are strongly affected by knowledge.

The most interesting thing is the folks usually pick stocks because they are ignorant of the investment.They do not possess the knowledge regarding math and philosophy of investment. Most of the successful investors suggest do not get into picking stock. That is their lack of knowledge that leads to valueless efforts. Knowledge can be powerful and it leads us in long term financial positions and high return on investment. Just the thing is,apply correctly the knowledge to the business over which we have some control.

Let me give you my example. I have knowledge in Denver real estate market and real estate investing fundamentals. Then it is easy for me to gain high return on the investment. So, this knowledge could not help me in getting high return on stocks.


Without knowledge many of you can go wrong for investing and building businesses. And the problem is that it will not only reduce your return but can destroy the principal you have invested.

Principle #6: Investors do not confuse rapid change with risk.

First thing is to understand the definition of risk. The folks who says that investment in stock is risky they are wrong. They do not know the exact definition of risk. So, stocks are a group which are volatile. Bonds as a group are less volatile.This is the important distinction that investors should understand. See stocks are less volatile so they are less risky while bonds are riskier because they are more volatile.

Principle #7: The best investments could be specific to the investor’s personal situation.

Most of the people, fails to understand that great investment does not return from typically investment, stock market, bond market or rental investment. In spite of this, the greatest investment is reducing your cash out flows. In spite of that reducing your personal expenses is the greatest investment. Reduce your cash out flow that will give you increase in wealth and return on investment.

Cut down your personal expenses. Use energy savors instead of LED light. That will cut down your expense on utility bills. Reduce some cost of the fuel and try to get save more. This is the best way for cutting down your expense and making high income. If you did not try this yet. Then go with this option first.