Your Investing Parameters

By on May 25, 2017 in Real Estate Investing | 4 comments

           When I sit down with investors or talk with them by phone, occasionally one says they are looking for a great deal.

            “Jeff, I need to find a great deal. Can you help me?”

            “Well, what are you looking for?”

            “I don’t know. I’m looking for a great deal.”

            “What do you mean by a ‘great deal’?”

            After a little give and take, I come to realize they are looking for the once-in-a-lifetime grand slam, the deal where a few thousand dollars become tens of thousands of dollars. Those aren’t “great” deals. Those are once-in-a-lifetime-granddaddy-monster-awesome deals. Those deals don’t just happen. Those deals are designed.

            The first step in designing those types of deals is to determine what your investing parameters are. What are you looking for? What do you have to work with? What capital, talent, skills and knowledge do you have? What investments are you comfortable with? What do you understand? Those last two are important. If it’s a deal you do not understand and are not comfortable with, then do not do it.

            Once you know what your tools are and what you understand and are comfortable with, you can get your calculator and begin to figure out what you are looking for in a rate of return. By that I mean, what are you looking to earn with the amount of cash you have to work with? Are you looking for 12%, 15%, 18%? How certain do you have to be on the return of principle? Some investors I work with need to make sure that every single dime of principle comes back right away. Others are willing to risk principle on long-shot opportunities. What do you need, and how are you making it happen?

            The next thing is to develop a system whereby you are able to consistently add to your pool of available capital. What monthly contributions are you making to your self-directed Roth account, savings account or investment account? If you are not consistently putting aside more money to work deals, then you are going to have fewer opportunities to work on. Deals will come to those who are ready to work on them. You have to be in a position to work on those deals when they present themselves.

            Knowing what you have, growing what capital you have, building your knowledge base, increasing your experience and confidence level, and knowing what your investment parameters are as to rates of return, types of deals, and length of term, are all essentials in getting into the game and getting good deals to come to you rather than chasing bad deals.

            Remember this:

            1. Good deals can be crafted into great deals.

            2. Bad deals can rarely be crafted into good deals.

            3. Great deals are designed by smart investors.

    4 Comments

  1. Jeff-

    What a timely and important topic. You could not be more correct about “get me a great deal = hit me a homerun with huge returns!”
    Baseball games are won with base hits and not homeruns. Just study the stats to know for sure.

    Keep on talking to us Jeff.

    Thanks.

    Lisa Hakanson

    May 25, 2017

  2. I totally agreed. Especially when we first start out we were excited after a few seminar.
    There are all kind of possibilities. It took 2-3 years to realize some of the strategy does not work where I am at and other are hard to come by. Partly because of my lack of experience and not having the right contact. But we still continue on to flip and keep rental, that work for us and we keep doing that. At the same time keep going to seminar and learning, refining and striving to do better deal. Know your present ability, work within it and keep pushing to get smarter and better.

    Paw Lim

    May 25, 2017

  3. When contemplating an investment, few questions are as important as “What is your time horizon ?” The answer can help you decide what type of investment vehicle you should consider, which investments to avoid and how long to hold your investment before selling.

    Cameron Attwood

    June 1, 2017

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