Jeremy Roll & I co-founded a investment network called FIBI (For Investors by Investors) 4 years ago. I consider him to be a tremendous resource of knowledge & information in the investment arena. Here is an article that I hope you will enjoy.

There is a common argument in the investment community between people that invest in lump sum pay outs or those that focus on cash flow returns. I believe there are many reasons to concentrate on investments that produce cash flow on a monthly or quarterly basis. Essentially, if your goal is to make passive income, cash flow should be your main goal as your expenses come in an interval schedule, rather than investing in stocks and bonds that do not create a steady and reliable income stream. I asked Jeremy Roll, a full-time investor and co-founder of FIBI, to write some words on the importance of cash flow in preparation for his upcoming seminar on the very topic:

“I have been a cash flow focused investor since 2002 and, after nearly a decade of cash flow investing, I have experienced the benefits of cash flow investing first-hand. For example, while the stock market was plummeting in 2008, my cash flow investments were on their usual schedule, paying on time and with the type of certainty that I knew I could count on. In essence, I could watch CNBC and hear about the day’s plummet while knowing that 10 minutes later I would fall asleep without great financial worries.

If this sounds too good to be true to you then I would highly recommend that you research cash flow investing further, as there are plenty of ways to invest for cash flow and I have nothing to sell you – except for a change of mindset. While most financial advisors continue to push stocks and bonds, both of which aren’t cash flow focused and have great uncertainty associated with them, many cash flow investors have learned that earning stable 10%+ returns in readily accessible cash that can have great tax advantages and that can be used to pay for living expenses and/or reinvest is not only a better path to take but can be much more lucrative than the historical long-run return of stocks and bonds (8% for the former, for example) and, in many cases, with equal or even less risk. As a Wharton MBA who knows many Financial Advisors, I can tell you that it’s a secret that financial advisors don’t want you to know because, in most cases, their earnings are directly tied to how much of your money you let them hold. It’s also how the wealthy invest, as they clearly don’t simply “roll the dice on” stocks and bonds like the majority of Americans.

If you’re a relatively low-risk investor and a conservative person, like me, then you’ll probably appreciate some of the benefits of cash flow investing, as it allows you to:

Earn more predictable returns than the stock market (with equal or less risk in many cases)
Earn better returns than the stock market (with equal or less risk in many cases), resulting in a higher net worth for you and your family in the long-term
Better plan for your future by being able to predict your future returns with more certainty
Have access to your cash flow for living expenses and/or for reinvestment, allowing you to spend or reinvest without encroaching on your invested capital

Sleep better – or at least with less worries – during today’s economically volatile times!
Although cash flow investing is a key focus from my perspective, passive cash flow investing is a more specific approach that makes cash flow investing that much more interesting and worthy of consideration. In essence, many cash flow opportunities exist that allow investors to participate passively, which means that they are operated and/or managed by an experienced investor who earns a fee that is typically aligned with the investor in exchange for managing the opportunity. This type of approach results in an investor simply collecting cash flow from the opportunity, typically on a quarterly or even monthly basis, without any additional effort. This strategy synonymous with “hiring experienced investors” on your behalf and it’s the strategy that I have employed since 2002 with some luck and good success.

Passive cash flow investing is clearly not for everyone, as it involves handing over control to the operator/manager, which some people are clearly not comfortable doing. It can also increase risk, as you’re now counting on an operator/manager and it’s imperative to find honest and capable operators/managers to work with (although these risks can be somewhat reduced by performing background checks and depending on the structure of the investment).

In summary, passive cash flow investing could open the door to a hands-off approach to earning cash flow for investors who don’t have the time to actively create the cash flow or for investors who simply prefer to hire experienced investors on their behalf, like me. It also presents the possibility of a more predictable financial future that allows you to sleep well thanks to less financial worries. If this sounds intriguing to you then you might want to take it upon yourself to investigate this method of investing in more detail, as I wouldn’t expect your financial advisor to make the recommendation to you anytime soon. Otherwise they might be out of a job!”

Jeremy is speaking on this Thursday May 26th at an FIBI event in Long Beach California. If you have not attended an FIBI event, they are networking events for investors that focus on education with absolutely no selling. This is a rare opportunity to hear someone extremely knowledgable speak on passive income without getting up-sold on books or tapes.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Applying Wealth Principles to Trust Deed Investing

I am currently reading a great book recommended by Tim Ferriss, author of “The Four Hour Work Week” & more recently “The Four Hour Body”. The book is called “Poor Charlie’s Almanack- The Wit and Wisdom of Charles T. Munger by Charles T. Munger. Charlie Munger is the lesser know genius behind Berkshire Hathaway. Warren Buffet get’s the lions share of notoriety as a brilliant investor. However, this partnership which has lasted since 1959, exhibits some of the brilliance of decision making skills that have taken place through economic cycles & turbulence.

There are a few great quotes from the book that I intend to have mounted on the wall on my office at The Note Guys, here is one of my personal favorites…
“It takes character to sit there with all that cash and do nothing, I didn’t get to where I am by going after mediocre opportunities”. –Munger

“Accordingly, Charlie is willing to commit uncommonly high percentages of his investment capital to individual “focused” opportunities. Find a Wall Street organization, financial advisor, or mutual fund manager willing to make that statement.”– Michael Broggie

Did you know that Berkshire Hathaway’s annual compounded return since 1965 to 2009 was 20.3%?

The term “Compounding Machine” is borrowed from a money manager Chuck Akre (FBR Focus Fund). Two major components of his definition of a compounding machine were
1) A business that earns an above average rate of return on owner’s capital (equity).
2) A business that also has the ability to reinvest excess cash at above average rates of return.

We just may integrate this definition into the mission statement & identity of The Note Guys.

“We are an investment company that focuses our capital in exceptional opportunistic investments to earn above average returns on our capital & also reinvests excess cash at above average rates of return.”

Happy investing!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

I have been invited to speak at the Ventura County Real Estate Investment Club on February 10th at 6:30pm.  The meetings are held on the 2nd Thursday of the month at Marie Callenders restaurant, in Simi Valley.  I will be discussing trust deed & note investing basics.   My goal is to present practical applications to reach financial goals, such as retirement, education funding, salary replacement etc. using income from smart note buying.

I learned how to invest and manage real estate in Ventura County from my parents.  It will be nice to meet investors near my hometown & hopefully other note buyers from other cities in Ventura County .  I am really looking forward to it.

If you can make it out to the meeting I would love to meet you.  There aren’t a great deal of events for real estate investors or note investors out there, so I am hoping for a good turn out.

Happy investing!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

When you hear the words “Financial Freedom”, what images come to mind?  For me it’s being able to choose how I spend my time without regard to cost. I always picture looking out over a balcony to a beautiful ocean vista.  It also meant a certain “number” for net worth. My perception & definition was slightly altered by a friend of mine.   I consider Gary Johnston one of my mentors not just in real estate investing but in life in general.  He teaches a class with one of my other mentors, Clyde Wilson on Financial Freedom.  There is a lot of lip service given by so called “gurus” claiming to be able to teach you about becoming financially free.  Seldom have I been exposed to any real usable education about understanding money by those gurus. Most of it is recycled “motivational” material.

Gary asks this question about wealth, “If you had a lump sum of one million dollars & spent $10,000 per month to live, how long could you live without working?” (assume that your cash is not invested but in a 0% bank account).  The answer is, 100 months or roughly 8.3 years.   Now what if you had 10 free and clear houses that (or assets)  that would pay you $1,000 each house, or $10,000 a month net, for the rest of your life, then how long could you live?  What would you rather have, a lump sum of $1,000,000 or 10 houses that pay you $10,000 a month?

This simple question has helped me clarify my definition on what is financial freedom. It has also given me a new awareness on where I choose to spend my time and effort .  My focus is to create long-term income for my clients, myself & my family.

Here is a quote from one of Gary’s mentors, the late Norbert Volney. He would ask Gary this question when he was a young boy, “What two things pay you while you sleep?  The answer is…Rent and interest.

My work is to find & acquire assets that will pay me either rent from real estate, or finding notes & trust deeds that pay me above average interest for a very long time.  If you would like me to do the same for you, please contact me & let’s see how I can help you.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Welcome to The Note Guys,

Today, I spoke about note investing to a group of real estate investors in Los Angeles.  I spoke about the advantages of notes & how they complement my real estate portfolio with income producing notes.  I think they liked the idea of having a secured investment generating cash flow in an economic climate where there has been so much volatility & real estate prices have been sliding.

Did you know if you invested $100,000 in the stock market (NASDAQ) index on March 10, 2000 your investment would have been worth $51,578.13?  That’s about a -6.60% per year for the last 10 years!

If you had put that same $100,000 and invested it at a conservative 6% for the same period, you would have had $181,939.67!

This really illustrated to me the importance of protecting capital over the long haul & the power of compounding over time.  The classic turtle & hare fable applied to real life.

I’ll post some other tidbits that I shared in the presentation in future posts.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.