Are you open minded?
I have had several conversations recently with BP members and during the conversation I mentioned that I was always open to looking at any and all opportunities. Reflecting upon this statement, I realized how seldom I get that response back from other people.
I am writing this post with the goal to provide some lessons that I have learned from almost four decades of investing experience. I made my first investment in 1977 at the age of 15. I worked a construction job for my Uncle and had saved enough money to purchase a lot. With the assistance of my Uncle, I secured financing for constructing a small single family home. I supervised every part of the process and did much of the work myself. I made $6000 which I turned into another construction lot and a car. I repeated the process and sold the second house prior to departing for the US Air Force Academy in 1979. Here are some of the lessons that I have learned over the past 37 plus years of investing.
Lesson #1: Don’t reach broad conclusions based upon a small sample size.
After entering the Air Force Academy, I used the profit from my second house for a down payment on 5 acres in my home town. I had planned to subdivide and eventually build on those lots. I sacrificially made the payments on that property while I was a cadet and eventually paid off the mortgage for the property soon after graduation. I would sell those 5 acres ten years later for the same price that I paid. Because of that experience, I avoided real estate investing until 2003. Can you say “Big Mistake?” Although I was still investing in mutual fund and stocks, I missed out on some great real estate opportunities in those years.
Lesson #2: Be flexible to changing market conditions:
I became an instructor pilot in gliders while I was at the Academy. We would often use rising pockets of warm air called “thermals” to extend our flying time. One day while I was “Thermalling”, I was spending more time enjoying the scenery and not enough detail to my flight conditions. When a “thermal” collapses, the warm updraft can quickly turn into a strong down draft. The thermal collapsed on me that day and I did not recognize that situation for some period of time. I was lucky to make it back to the airfield that day. I have made a similar mistake multiple times in my investing career. I will share just one of those examples. In 2003, my wife and I decided to jump back into the real estate market. We purchased a vacation rental and 8 duplexes. Our vacation rental did so well that we eventually built three more finishing our fourth vacation rental in the summer of 2007. We had offers to sell our vacation rentals in the summer of 2007 that would have resulted in a 400K profit prior to taxes. As gasoline prices reached $4 per gallon that fall followed by the ensuing recession, the vacation market crumbled. We are now in contract to sell our final remaining vacation rental next month. What could have been a 400K profit has turned into a 300K loss. To state this in another way, what is working now may not always work in the future. Pay close attention to changes in your market and be prepared to make appropriate adjustments.
Lesson #3: Know what you are trying to achieve
I always knew that I was striving for financial independence which I define as the time when your passive income meets or exceeds your required expenses. I achieved that in 1998 through a combination of investments, business income, and low expenses. I left the active duty Air Force at the 15 year point of my career. Many called me crazy but I will not take the time here to share how vital that decision was to my family. I would eventually join the Air National Guard and serve another 13 years: however, I did that because I wanted to and not because I required the income. Know your personal priorities and ensure that your strategy is helping you support the attainment of those goals and objectives.
Lesson #4: Multiple streams of Income
I am a big believer in creating multiple income sources. One of the important income streams that I created in the 1990’s that was essential to my leaving the Active Duty Air Force did not survive. Had I relied solely on that income, I would have been required to find a job to pay for our lifestyle. Today, my wife and I own a portfolio of rental properties which provides our financial independence. I am also working on several other business projects as well. One of those projects is a renewable energy company that I invested in several years ago. This past summer, the owner asked if I could put some time to help on the project. It is very rewarding to be in a position to help because I want to and not because I need to.
Lesson #5: Be a giver
Share your wisdom freely with others but be wise enough to know when you are the one who should be doing the listening.
Lesson #6: Use your resources wisely
It has become common lately to talk about working smarter not harder. In my experience, you are going to have to work smart and HARD if you are going to achieve financial independence prior to traditional retirement age. Your most important resource is your time. Ensure that you are allocating your efforts wisely. By being on Bigger Pockets, you are already light years ahead of me in my early years of investing. I learned much of what I know through trial and error. You can avoid many of the mistakes that I have made just by being a part of Bigger Pockets but understand that there will be many hours of hard work ahead of you on the road to financial independence.
Lesson #7: Keep an open Mind
I am continually startled by those that have nothing and yet are not open to making changes. I challenge you to analyze your thinking to ensure that you are not overlooking opportunities by being closed minded. As I continue to expand my network of business owners and entrepreneurs, I am amazed at the vast number of opportunities for creating and maintaining wealth.
I wish all of you a prosperous and joyous future.
