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Automatic wealth The 6 steps to financial independence - Masreson M.

Masreson M. Automatic wealth The 6 steps to financial independence - Wiley & sons , 2005. - 291 p.
ISBN 0-471-71027
Download (direct link): automaticwealththesixstepsto2005.pdf
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My Confidence in Small Businesses Is Rooted in Personal Experience
Small businesses contribute much more to the overall economy than they are given credit for. Most new jobs are created by small businesses. And most breakthrough ideas, too. Small business operators work harder than their larger competitors because they have to. And in working harder, they create innovations that improve the world.
Iíve had the good fortune of having started dozens of successful small businesses over the years. Most of them became multi-million-dollar enterprises. A few got much, much larger. This sort of track record is likely to give you a positive attitude. But I believe my optimism is valid. My evidence is the tens of thousands of other entrepreneurs who successfully launch businesses every year. Many people fail in business, but many more succeed. If you subtract the foolish failuresórestaurants being the most foolish, followed by any sort of glamour business (think travel, bed-and-breakfast, sports, celebrity) or retail businessóthe successes far outnumber the failures.
When I think about my own experience and the experience of people Iíve coached, and I reflect on the larger numbers, it doesnít feel like starting a small business is all that risky.
You can reduce the risk in starting your own small business by sticking closely to what you already know. By ďwhat you know,Ē I mean (1) the product or service you are selling and (2) the primary method by which you are going to sell it.
Serially successful entrepreneurs follow this formula. They spend thousands of hours figuring out how a particular business worksóand once they understand it, they seldom jump into something entirely different.
Step 6: Retire Early 241
My own rule for starting a new business is this: One baby step at a time. By that, I mean that Iím willing to try something newóbut just a little new. If, for example, Iíve learned how to sell cat food with banner ads on the Internet, I might consider setting up a business that sells cat food with small ads in magazines. (Thatís one baby step. If I canít figure out magazine advertising, I can get out quickly and safely.) But
I wouldnít let myself get into a business that sold cat health-care products through direct mailóeven if I could convince myself that Iím an expert in selling cat products. Selling cat health-care products through direct mail is simply too many steps away from my core competence.
If you develop expertise in a particular business and donít stray too far from it, youíll always feel confident that you can create a new business without taking a lot of risk.
Real Estate Has Always Been Good to Me
Iím bullish on entrepreneurship. And Iím at least as bullish on real estate.
Stocks are much riskier than real estateóto meóbecause (1) Iíve lost money investing in stocks and/or stock funds time and again and (2) Iíve seen so many others lose money. Again, I do believe that the stock market has been and will continue to be a pretty good long-term investment. But long term as far as the market goes is a 10- to 20-year time frame. Since we are concerned with getting wealthy in 7 to 15 years (and since the market is currently overvalued, from a fundamentalistís point of view), I donít feel confident in stocks.
Nevertheless, since I began actively investing in real estateóabout
II years agoóI have never lost money on a single transaction. The worst two deals Iíve been in since my first big lesson (i.e., disaster) produced yields of 7 percent and 12 percent annually. And thatís not including tax benefitsówhich were significant. Most of the real estate investments Iíve made have been good to great.
Three recent examples:
1. A house I bought about eight years ago for $175,000 and on which I put in $25,000 in upgrades was sold four years later for $395,000.
2. A triplex my friend JP and I bought four years ago for $250,000 is producing cash-positive rent every month and is worth at least $400,000 today.
242 AUTOMATIC WEALTH
3. A 19-unit apartment complex I bought with another friend last year for a down payment of $400,000 has already appreciated at least $500,000ógiving us a very substantial one-year return on our money.
Iím no Donald Trump. I donít even consider myself a professional real estate investor. Iím a professional marketer who has made real estate investing a nice sideline business. But in the 11 years that Iíve been doing it, my real estate portfolio has grown and grown. As an income producer, real estate has never failed to provide me with less than a very substantial income. As an asset builder, my rental real estate properties have all paid for themselves and provided me with a rate of return that is at least 10 times what Iíve been able to get from stocks and bonds.
I believe we are at the tail end of a nationwide real estate bubble. By any fundamental perspective, property prices have gotten out of hand. In some locations, this may mean a significant depreciation. In other, better locations (the Sun Belt, certain cities), it may mean a two- to four-year deflation of 10 percent or 15 percent. The worst depreciation will probably occur with condominiums, which are traditionally overpriced, overfinanced, and too heavily owned by speculators during bubble periods. That said, Iím confident that you will be able to find good real estate deals this year, next year, and each year thereafter during the downturn.
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