If You Were To Start Over, What’s The Best Thing To Do Today?

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July 1996
Vol 19 No 11

I get asked that question all the time. Turn it around. Suppose you were a young person just entering the adult labor force. What decisions would you make differently about what you did to earn a living or to how you invested your time and money? Looked at from another angle, what advice would you give your kids, if they were in the same position? We’re facing a brave new world with shifting values and economic tides. How can someone become an economic ‘winner’ just starting out in these unsettled times? To begin with, it helps for a person to write down what he/she might want to accomplish in terms of a field of endeavor and desired income.

Of course, one could get lucky. I stumbled into real estate quite by accident. The summer that I turned 22, I helped some friends build a small house in Cookstown, NJ. Using only hand tools to do everything, and recycled materials bought from a nearby salvage yard, it took 5 weeks to complete working on weekends and long summer evenings. Our salvaged materials didn’t cost much. Labor was even cheaper. We got paid with free beer. For an amateur project, it turned out pretty well. The residence was occupied for some 25 years before it was bulldozed to make way for a shopping center. I’m still proud of the fact that I build a house once by hand, and I never forgot the lessons I learned doing it.

My first advice to ‘starters’ would be to pick something you like to do, and work for any wage for the chance to do it. Focus on getting some kind of work which would enable you to gain experience in a growing field. Think of all the non-productive hours people waste when they could be doing something constructive even if only for the experience. Experience creates market value for you that enhance your education. Remember, you’re not worth much to an employer until you’ve learned enough to generate profits to him that will pay more than your wages and benefits. Anything one can do to add to his/her value as an employee increases job security.

With major employers switching to computers, automated processes, and global labor resources; down-sizing has truncated many careers in mid-stride. In the 21st century’s world-wide competitive labor market, the untrained, unskilled, inexperienced job seeker will face a much tougher future. That also applies to anyone who wastes 4 years in college learning something that no employer wants to pay him/her to do. The job market and our society are changing much faster than our institutions can adapt to them. The predictability of what might have seemed a secure career track in or out of government is fading away.

Only supreme optimists would dare to pin their financial future on the hope of getting a job leading to a successful long term career with either corporate or government organizations. In India, a few years ago, three of us hired a car and driver. He had a PHD in Economics, yet he was grateful to be driving for us. Why? Because in India, where 60% of the people work for the government, he’d bet everything on a government career, but hadn’t been hired. Many Americans who bet on government or corporate America to provide cushy career may be in for a similar experience. I’d advice young and old to cultivate an entrepreneurial second source of income to supplement their earnings in the event they were to lose their job.

A viable back-up business might be to build small homes, one at a time, for resale. It costs a lot more than it did when I build that house so long ago, but it would be much easier to do. Today, we have pre-assembled roof trusses, fireplaces, kitchen cabinets, doors, shower and bath units, pre-hung double glazed windows, sliding door hardware, ready-mix cement. One could easily rent any necessary power equipment. Today, it would still be just as much fun – and a lot more lucrative.
FIND A NEED AND FILL IT . . . AS EFFICIENTLY AS YOU CAN

A long time ago somebody figured out that real job security lies in meeting the needs of both your employer and his customers. That can be a tall order. The first thing you should do in a new job is to burn the midnight oil to learn all you can about it, and to improve on it so that your impact on profits can be seen by those above you. But there’s much more to the process. If you want to be successful, you’ve got to learn a lot more than your particular job. You’ve got to prepare yourself to take over the position your boss holds so that he can be promoted upward, taking you along with him. Aim to be the most qualified person to replace him. Prepare someone else to take your place. The last thing you want to be is the only person who can do your job. Your company will be reluctant to move you up if there’s no qualified person that they can put into your old position.

The reasons why people succeed and fail are varied and complex, but studies have revealed two significant factors that have nothing do with job skills. Marrying the right person, and staying married aren’t on anyone’s resume, but ask around among divorcees. You’ll hear the same story over and over. Divorce exacts enormous economic and emotional costs. These include not only property settlements which wipe out savings, but also the child-care burdens that deprive a single parent of the hope of being able to apply him/herself to succeeding in a job. Taking time off because of parenting obligations is a real career-killer when it comes time to be considered for promotion. Getting ahead can be many times harder.

There’s also the positive aspect of having a supportive helpmate in everything you attempt over decades. One who shares mutual financial and lifestyle goals and the sacrifices required to attain them. I estimate that it’s three times harder for a single person to succeed than for a married couple, working together, to build an estate. Supportive couples are five times more successful than those who oppose each other’s goals, especially when they divide up the chores.

In my case, I’m the ‘front office’. I’m ‘sales’. I meet the customers, find, buy, manage, maintain, and sell the properties, run down financing, hire and fire contractors. My wife is the ‘back office’. She keeps the books, handles the mail, pays the bills and reconciles the accounts, prepares tax returns, maintains a working environment in which we can each do our best. She ‘reads’ the people with whom I might do business as well as the venture itself, and warns me off when it doesn’t ‘smell’ right. She also forgives me when I make mistakes that cost the family money, of which there have been many. We’ve become a real working team.

The second key factor in attaining success or failure hinges on the length of time a person holds a job. It’s become fashionable today to job-hop up the ladder of success. That’s expensive for both employee and employer alike. While the employee may move up swiftly changing jobs, sooner or later, the next prospective employer isn’t going to hire him simply because of his instability. Nobody likes to spend the money it takes to attract and train employees, only to have them leave before they’ve started contributing profits to pay for their hire.

In today’s world of mergers and acquisitions, it’s often the employer who does the job hopping. Every day, people come to work only to find that the job itself has flown the coop to another company. Loss of career job can be a traumatic experience; devastating not only to a family’s finances, but also to self-esteem and confidence. Unemployment is stressful. It undermines the sense of security of both parents and children. Those holding jobs with American companies in fields in which computers or foreigners can compete more successfully are going to have a very bumpy career ride. They may find themselves tossed out onto the street as middle-aged unemployables. It’s happening all over America today as companies down-size in order to compete in world wide markets. To remain competitive in our rapidly changing job markets, we’re all going to have to participate in some form of educational process for the rest of our working lives.

ENTREPRENEURS WILL ALWAYS BE ABLE TO COMPETE – ANYWHERE . . .

What’s our next piece of advice? So far we’ve got our ‘starter’ into a sound marriage, and working on a career track that makes him/her financially self-sufficient. It behooves both generations to work seriously to attain a degree of financial independence that isn’t based on the changing winds of corporate or government policy. Becoming entrepreneurs can achieve this objective for everyone.
There are two areas in which a person can become an entrepreneur with very little money. One is to start a small business. The other involves buying and selling real estate, and eventually building a real estate portfolio. The son of a long time subscriber, Paul Baygents, as an 18 year old, working with his parents, conceived and implemented a business concept that has paid off handsomely in a relatively short period of time. He buys ‘catalogue returns’ at deep discount from major companies all across the country, then sells them at low prices to wholesalers and to the retail trade through an outlet store in Reno. Those attending the ‘Money Camp’ class in Reno should take the time to visit with him at his store.

Paul may be a young man but he’s an old entrepreneur. He started in grade school making money selling things to his friends. At 16 he was operating a retail ‘junk food’ store, selling to other teenagers. He moved from there to buying in bulk at auctions and garage sales, then refurbishing, sorting, and grading used merchandise before reselling it at flea markets and swap meets. As a 17 year old student, he was making $400 per week. Next, he started selling computers through the mails which he assembled himself. This all led to his current business.
The point is, that, despite the Broadway play, ‘Nobody Succeeds in Business without Really Trying’, it takes 12 hour days and 7 day weeks to build a profitable business. That’s the bad news. The good news is that there’s lots of help today for the fledgling entrepreneur. Even some start-up grant money for those who have an idea and are willing to seriously prepare a business plan. For more information, you can write to: Trickle UP, 2174 Broadway, Suite 291, New York, NY 10023-1722. Best of all, it’s hard to get fired from your own business. You’re always paid what you’re worth, so there’s no reason to job-hop to someone else’s.

What about real estate? After building my first house in New Jersey, I built another in Japan which I later sold. With the profits, I bought 2 others to rent and another to live in. I used the rental cash flow to invest in 2nd mortgages by mail. After a series of misadventures, I wound up with nothing to show for almost 20 years of entrepreneurial effort. The reason: Most of the time, I just plainly didn’t know what I was doing. Had I been better prepared, I would have saved two decades of effort. All in all, it was a painful experience, but it taught me to do a lot of things better when I started all over again at age 42.

I believe that buying, selling, fixing up, optioning, leasing, managing, and listing single family houses offers to starting entrepreneurs, of all ages, the best opportunity to start up a profitable, cash flow business. Furthermore, it enables the practitioner to become a real estate investor at the same time. You should treat real estate as you would any other career. All you have to do is to get a license as a real estate salesman, and start working toward opening your own brokerage. It’s hard work, but it’s not very expensive to get started. In fact, if you apply yourself, it starts paying off faster than most other enterprises.

The first thing to do is to learn all you can about it. There were no seminars when I started. I read every book I could find in the public and Realtor’s libraries as well as taking night-school classes on real estate law and contracts. For those willing to give 110%, whether a person has a college education or not, earnings can grow faster than in most other fields. When you set out to become good at what you do, you become hard to beat. The more you learn, the quicker you’ll be able to find new ways of doing business, the less competition you’ll have, and the more success you’ll achieve, and the sooner you’ll be at the top of the heap.

BEING DIFFERENT IS THE KEY TO AVOIDING COMPETITION . . .

Conventional real estate brokerage is very competitive. Most brokers don’t make much money. To compete with others who have been in the field much longer than you, you’ve got to approach things differently. Once I’d learned enough to list, sell, and to find and process the financing, I began to focus on ways to sell or buy houses without using banks at all. That enabled me to continue to create profits when all the other brokers were mired down by lack of reasonable institutional financing. I firmly believe that being able to avoid institutional financing during periods of high interest rates, or non-availability of loans, is critical to real success in buying and selling houses. Think about this a moment.

If you can sell when others can’t, you can also buy or sell when others can’t. That means that you might be the only buyer in slow period during which you’ll be able to pay the lowest prices. You can use accumulate inventories of houses using minimum down payments or Options; then selling when low cost loan money makes the markets perk up. Typically, when houses start to sell, salable listings are hard to get, but this won’t affect you. You’ll have your own inventory to sell. This way, you’ll maintain a superior vantage point in hot and cold markets. You can’t play this timing game when you’re dependent upon credit cycles for financing.

Housing is where opportunity knocks. 97% of all real estate transactions, and 95% of all the money in the market involves single family houses. My advice to those just starting as entrepreneurs is to stick with Optioning, fixing, buying, selling, and managing single family houses and mobiles. Unless you’ve got specialized experience, don’t stray very far afield. Huge fortunes have been made by those in other real estate specialties, but rarely by newcomers and hardly ever without institutional financing. It’s safer to start with housing for which there’s growing demand and which has had the best sales track record for generations.

In the single family house category, mobile homes are special. They occupy a growing market niche which will become even more important as the purchasing power of American’s incomes continues to slide. Currently, because of zoning restrictions, it’s harder for the small entrepreneur to make a living with mobile homes. That’s not to say that you shouldn’t be willing to try your hand when an opportunity comes along. A small park and a few homes can produce outstanding yields, but they may not produce enough income to support your lifestyle.

Let’s say you paid $5000 for a really good home which you could rent for $300 per month. Bear in mind that the tenant would also be paying rent on the ground beneath the mobile home, so the total rent might easily run more than $400. You’ll find that mobile homes require less maintenance than houses so long as the tenants don’t abuse them, and all the expenses of the ground would be borne by the owner of the rented land. Thus, you could expect to realize probably $3000 net profit from your rents. That represents 60% return on your investment. It would be a lot higher if you were able to buy the mobile with owner financing. This is a common occurrence. Before you get carried away, remember that you’d need about 15 of these to support a family, so keep focusing on earning a living until you’ve got enough.

So let’s sum up. What would I do if I were to start over? I’d concentrate on learning how to buy, sell, fix, finance and manage medium priced houses and mobiles. In terms of the demographics, they should pay off even better over the next quarter century. Be sure that your particular market is not declining or losing population or seeing per capita wage rates dropping. Possibly the best advice I could give anyone would be to establish a regular income doing what you like to do, then to augment this by starting up an entrepreneurial sideline that you would willingly and enthusiastically spend long hours doing to build your estate.

Copyright Sunjon Trust  All Rights Reserved
Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever.
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