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HOT TOPIC Book Review: The Millionaire Real Estate Investor

andviv

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A friend of mine gave me this book as she knows I do REI.

Title: The Millionaire Real Estate Investor
Authors: Gary Keller, with Dave Jens and Jay Papasan
Subtitle: Anyone can do it... Not everyone will... will you?

http://www.amazon.com/dp/0071446370/?tag=tff-amazonparser-20

I will be posting my comments here about this book as I am going through it.
Please feel free to add any comments about this book.

Andviv.
 

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andviv

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Introduction and Overview

The book has three parts:

Part One: Charting The Course
Part Two: The Four Stages
Part Three: Staying On Top

I just started reading part one.
In the Introduction the author mentions that "Money Lives on the Other Side of Fear". Here he mentions that Fear could prevent you of taking action and then regret it. But also it is important to understand that Fear is also a sign that something is not right. His approach is: "Don't be afraid of fear. Respect it, keep going, and move past it"
He also mentions that the books has two main parts, one that focuses on your thinking, while the second one is about taking action.

In the Overview, the author talks about the effect of Luck in investing. He says that many people believes that Luck is one of the essential ingredients in REI, but he says that, even though Lady Luck does play a hand from time to time, the professional investors do not rely on luck to make their investments successful.
As an example of this he mentions that there are models that the pros use, and says that even Monopoly, the game, has a strategy that you can follow to maximize your chances to win. This is one of the points I was talking about with some friends, as many say that most of the accomplishment of others are pure luck; personally I think that this is one of the most offensive things you can tell to a successful person, as I am sure that SteveO or RussH are not successful just out of pure luck. They made it because they design it that way and followed a plan.
 
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andviv

andviv

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more from the Overview

Another interesting point is that in order to get to Big Goals you have to do things the best possible way.

This is one of the ideas that I completely agree with: "if you look to the very best people in a field and study what they do, you often can repeat their success. The key is to learn how they achieved their goals and then understand why they did it that way. When you grasp those two things, you can start where they left off"

Also he says that every success story worth exploring has three fundamental parts: What a person thought he or she could do, how that person did it, and what that person accomplished. "Big Goals powered by Big Models lead to Big Success"

"Successful investors clearly follow proven models, and those proven models for selecting, buying, and owning real estate can generate the kinds of remarkable results those investors have achieved"

Another section he mentions is the typical example of the $xxx-thousands that got away, where he cites one of those examples that I'm sure we all relate to: Do not do an investments cause you are second guessing yourself, only to find out later how good it was and you just lost the opportunity to make $xxx-thousand dollars had you acted correctly. His point was to not make the same mistake again.


Next section: Financial Riches vs Financial Wealth
 
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andviv

andviv

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The section about financial riches vs financial wealth is rather simple for those of us that have read RDPD. Here the author talks about his weekly mornings meetings for breakfast with his friend/mentor. During these conversations his mentor explained to him the difference between the two terms.

Being rich is about having money (you can have a high paying job and be rich) while financial wealth is to have assets that generate cash for you. Key in the distinction is the small amount of time used to manage these assets compared to the income generated. I liked the fact that he mentions that all of the assets demand some time from you.

Part of the teachings from this mentor was to have keep a personal balance sheet to summarize his net worth (accountability). He does mention that these financial principles are not new, that have been around for ages.

Next section: The three areas of focus for the millionaire real estate investor.
 
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andviv

andviv

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I wonder how many people actually follow this thread.... anyways, it is a nice exercise for me to write about the book and try to give back to the forums...

Today's section is called The Three Areas of Focus for The Millionaire Real Estate Investor

In this section Keller talks about the Pareto's Principle (also known as 80:20 rule) which states that 20% of your actions lead to 80% of your results. The idea behind this rule is to maximize your returns by focusing.

"Focus is the key to great success, more than effort, experience, or even natural ability"

Keller also mentions that when studying the highest achievers in any field one discovers that they have powerful focus. As part of this studies the authors tried to discover what the highest achievers focus on and came to the conclusion that they focus in three criteria:

CRITERIA: WHAT YOU BUY
They are the standards that define what kind of property you are looking for... it is about identifying predictable value. Its purpose is to filter the deals that you analize so you only buy those that are "good".

TERMS: HOW YOU BUY IT
Terms define how you turn an opportunity into a deal. Terms are about maximizing financial value. Buying right means getting the right terms.

NETWORK: WHO HELPS YOU
The author mentions the importance of networking so people sends you opportunities, offers mentoring and provide services so you can buy the right properties. He mentions this as Leverage: the fact of getting more done with qualified people than by yourself.


This is today's section. Hopefully tomorrow I will post about the four stages of growth on the path to a million.
 

Peter2

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This is the only forum where I have read every single post. :)
 

JK79

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I am interested as well. Is this a book that someone new to REI can understand and learn from? I am interested in learning about REI to see if this could be a new path to follow to get away from the 9-5, and I am looking for some good reading.
 

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MJ DeMarco

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I wonder how many people actually follow this thread.... anyways, it is a nice exercise for me to write about the book and try to give back to the forums...
I'm following it ... just don't have much to contribute as REI is not my knowledge base.
 
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andviv

andviv

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sure, sounds good

I am interested as well. Is this a book that someone new to REI can understand and learn from? I am interested in learning about REI to see if this could be a new path to follow to get away from the 9-5, and I am looking for some good reading.
Have you understood what you have read here so far? if so then yes, you can start with this book. If not then you can still get the book and start reading it and then come back here and ask, somebody will explain it to you.

The reason for me to start this thread was precisely that. I've seen many people asking "what book should I read" so I am hoping that others can post their reviews to books they are reading and want to share with the forum members.
 
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andviv

andviv

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The Four Stages of Growth on the Path To A Million

First, you must learn to think a million which is thinking like a millionaire REI... "the bigger I think, the more I can accomplish. I've learned that what I hold in my mind is what shows up in my life."

The next step is to buy a million which is the best models to invest in RE. The idea is to understand what models are needed to buy a property with a market value of a million dollars or more (he does not talk about any model just yet, he just mentioned this as part of the four stages).

After buying a million, the next step is to have equity of one million dollars in your properties. This is called Own a million.

Last stage is to Receive a Million which is receiving an annual income of a million dollars from your investments.

This small section, to me, was not good at all. I did not get anything important out of this section, but I do want to mention it just to be faithful to the book review (I don't have to like it, I just report what I see and make my comments).

He concludes the Overview by mentioning that Financially Wealthy people think differently from the rest and as a result make different choices and enjoy more freedom in their lives. Also, the biggest obstacles most people face are their own doubts and fears. I do agree with these two points.

The last page of this Overview has a table with Points to Remember:

- Investing is needed. Everybody should invest. Wake up in the morning and say "I am an investor. I'm building financial wealth. Is today the day I find an opportunity and make a deal?"

- A proven model built on the best practices of high achievers in a given area will produce the most desirable and predictable results as well as maximize your chances for continued success over time.

- High achievers use models to take the luck out of the game. They implement big models to minimize risk and maximize profit when buying, holding and selling Real Estate.

- The three areas of focus for the Millionaire Real Estate Investor are Criteria, Terms and Network, and they determine what you'll buy, ow you'll buy it and who will help you.

- The path of the millionaire REI progresses through four stages: Think a million, Buy a million, Own a million, and Receive a million. Order does matter here.

That is the end of the section called Overview.
Next section is Mythunderstandings. I will find time tomorrow to post about that one.
 

randallg99

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Re: Introduction and Overview

as many say that most of the accomplishment of others are pure luck; personally I think that this is one of the most offensive things you can tell to a successful person, as I am sure that SteveO or RussH are not successful just out of pure luck. They made it because they design it that way and followed a plan.
you know, I find this statement ironic. I consider myself lucky: successful biz (or at least was very successful before last year), successful real estate investor, stock investor, beautiful wife and family, enjoy nice luxuries...

I recently read about a sociological/psychological experiment in a magazine that concluded successful people actually consider themselves lucky as a result of their positive thinking. Because of their positive outlook and mental discipline, the subjects actually believe the root of their success is not a result of hard work alone, but ultimately the belief that it takes a certain mental aptitude to pursue that hard work and a little bit of luck.

Mental perception appears to be everything in this fast track game.
 
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andviv

andviv

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Re: Introduction and Overview

I consider myself lucky...

I recently read about a sociological/psychological experiment in a magazine that concluded successful people actually consider themselves lucky as a result of their positive thinking. ...

Mental perception appears to be everything in this fast track game.
Yes, I agree with that but that was not my point.

My point is that, now that I read about what you have done in life, I come back to you and say: "randallg is just lucky". This kind of comments are the ones that really upset me. Why? Cause you are successful not because you have been disciplined in what you've done, or because you worked hard to get there, or because you took the risk/chance and made it... you are here just cause you are lucky. That is the comment that I really disagree with.
 

randallg99

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Re: Introduction and Overview

Yes, I agree with that but that was not my point.

My point is that, now that I read about what you have done in life, I come back to you and say: "randallg is just lucky". This kind of comments are the ones that really upset me. Why? Cause you are successful not because you have been disciplined in what you've done, or because you worked hard to get there, or because you took the risk/chance and made it... you are here just cause you are lucky. That is the comment that I really disagree with.

I understand your point clearer now, but I think if you asked successful people if they are insulted if their hard work is acknowledged with a sardonic remark about being lucky, I dont think they would give 2 craps . From my experience, my ego is rewarded when I achieve my goals instead of what people say. Maybe its me, I dont know. However, I do know when people congratulate me on an accomplishment, I dont feel the least bit flattered because its not their acknowledgements that drive me....

but that is not to say that I disagree with you, because I dont. It is just that people who are successful (maybe this is too general of a brush stroke) are mainly concerned with themselves than what people say or think of them.

we all work hard... and a little luck doesnt hurt. heh.:icon_super:
 

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Re: Introduction and Overview

Its insulting when someone alludes that you are lucky. Its equivalent to when I'm out driving my car and some retard says "Did Dad buy that for you?" (I look relatively young) .... its jealousy and moreover, highlights that individual's inability to come to terms with their own shortcomings and failures - which ultimately is a limited view of them self.

Andviv nice thorough review. Thx!
 

willymo

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Great book!! I've read it twice and I'm also implementing his spreadsheets for buy & hold, rentals, networth. Right now I am reading his other book The Millionaire Real Estate Agent. In it he shows realtors how to transform their business from a S to B by using the power of Leads, Leverage, and Listings.
 

Cat Man Du

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Re: Introduction and Overview

Not appropriate.
 

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andviv

andviv

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MYTHUNDERSTANDINGS

This section talks about the incorrect ideas that do not allow people to improve and to invest successfully.

These mythunderstandings are classified in two groups: Three personal myths and five Investing Myths

Personal Myths:

1. Myth: I don't need to be an investor -- My job will take care of my financial wealth
Truth: Yes, you do need to be an investor -- Your job is not your financial wealth

2. Myth: I don't need or want to be financially wealthy -- I'm happy with what I have
Truth: You need to open your eyes -- You do need and want to be financially wealthy

3. Myht: It doesn't matter if I want or need it -- I just can't do it
Truth: You can't predict what you can or can't do until you try

Investment Myths:

1. Myth: Investing is complicated
Truth: Investing is only as complicated as you make it

2. Myth: The best investments require knowledge most people don't have
Truth: Your best investments will llways be in areas you can or already understand

3. Myth: Investing is risky -- I'll lose my money
Truth: Investing, by definition, is not risky

4. Myth: Successful investors are able to time the market
Truth: In successful investing the timing finds you

5. Myth: All the good investments are taken
Truth: Every market has its shareof good investments
 
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andviv

andviv

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I think the text for the myths and truths were poor. I think it is kind of weird that a myth is "A is not good" and then the truth is "A is good". I was hoping the myth/truth titles had better wordings.

Despite of this, I mostly agree with the points he is making. The three personal myths are things that I think I overcame some time ago, and I have to thank Robert Kiyosaki as his books helped me to change that perspective. The author did make some valid points, for example:

"Prosperity can provide a false sense of security" usually when both spouses have great jobs with high paying salaries, the family kind of relaxes and think they are set for life. When change happens it takes a long time to react and accept the new reality. Also, I remember when I did my fist six-digit deal, I thought I was the smartest investor ever and did my biggest mistake. Success without control leads to big mistakes (just think about successful rock stars and sport superstars that go bankrupt a few years after retirement).

Another text I selected: "The faster you reach a position where you can begin your investment career, the faster you'll be able to achieve financial independence"

"Realize that whatever your job or work is, you also need to be an investor"

when talking about the myth #3, the author mentions RK:
"People will believe what they want to believe. They find excuses that prevent them from taking a look at what might work. And when they find a reason, they make that reason their reality"

I will talk later about the five investment myths later, for now I need to get ready for my weekend trip to Boston. I will post more when I get back.
 

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2. Myth: I don't need or want to be financially wealthy -- I'm happy with what I have
Truth: You need to open your eyes -- You do need and want to be financially wealthy
I take issue with this one.

Can you be happy with where you are and still strive for something more? - Can you be content and not complacent?

Because.... I am happy with what I have. I have a loving husband and amazing kids. I have my little homestead and time freedom.

I'm not "there" yet, there are many more things on my "to do" list, but I believe you CAN and SHOULD be happy on the journey - not just the destination.:banana:
 
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andviv

andviv

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After a short vacation time in Boston during last weekend and a frantic week at work and in my investment efforts, I finally am dedicating more time again to this book review.

I had already mentioned some parts of the Personal Myths, now I am going to talk about the five investing myths. The author mentioned that even though these myths apply to real estate. they are common for almost all type of investing. Many times they are used as justification for failure.

Investing myth 1: Investing is complicated
While reading this section I underlined some passages that I want to mention here:

"It's like Warren Buffet says: 'You don't need to be a rocket scientist. Investing is not a game where the guy with 160 IQ beats the guy with 130 IQ'"

"... you never need to know everything in order to do something. You just need to know the right things to do at any given moment. Over time, given enough chances to study and experience something, you naturally and progressively will learn everything you need to know to do it well. That is how you become an expert." this was the best part of this section IMHO

"Like anything else in life, real estate investing is only as hard or as complicated as you make it"
 
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andviv

andviv

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Investing myth 2: The best investments require knowledge most people don't have

The author mentions that "Investing in what you don't know or understand isn't investing at all. ... the real nature of investing is always to invest in what you know and fully understand."

"if you don't have specialized knowledge, pick an area and start learning today. I think you'll discover that investing in real estate is one of the easiest areas of investing in which to acquire expert knowledge and understanding." I agree completely with this!!!
 
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andviv

andviv

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Investing myth 3:Investing is Risky -- I'll lose my money

The definition of the word "investing is "To commit (money or capital) in order to gain a financial return. Nowhere in there says anything about risk. For great investors "it's not about ignoring risk; instead, it's about following sound investment principles and models. By doing that they take the risk out of the game."

The author also mentions that in investing you make your money going in, which in most cases means buying something of value for terms that immediately create a profit for you.

He also mentions "[investing] is about having sound criteria, the patience to find the right opportunity, and a willingness to take correct action quickly." -- for me, the most difficult part has been learning to sit and wait patiently until the opportunity is there. I used to think that I had to keep all the time my money moving, but by doing that I was jumping from investment to investment without following my own plan and/or in investments that did not meet my own defined criteria... man, it is hard to learn to have patience, specially when you are one of those so-called type A persons.

The author also mentions that, once the opportunity you were waiting for is there then you have to be able to pull the trigger immediately -- This has happened to me several times... as I had put money in investments that were not my real goal, when the great one showed up many times I was caught off-guard and had to let them go for lack of cash and/or other resources.

Keller closes this section by mentioning that Investing can never be absolutely risk-free, but it does not have to be risky.
 
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Investing Myth 4:Successful Investors are able to time the market

The opening line for this section was a shocker for me: "Timing is everything. But now that you know that, forget it, because you can't truly time anything."

His point is that timing is about being active, as the real opportunities cannot be observed from the sidelines. You have to be in the game. The best deals come from the best opportunities, and the best opportunities go fast.

Keller says that "Successful timing is made possible by time spent on the task over time" -- I saw a thread about this in the RD forum today, and there were a lot of people complaining about how expensive RE was or how depressed the market was, and many people there were trying to "time" the market so they could buy at the bottom. see that discussion here http://forum.richdad.com/forums/tm.asp?m=616660&p=1&tmode=1&smode=1

Now, about the phrase "being active", Keller goes into explaining that this does not mean that you are buying and selling all the time, but you are searching consistently with your criteria so you can know when an opportunity surfaces.

He closes the section by stating: "Any time an opportunity meets your criteria and you act, you have timed the market successfully"

For me this was 'the' myth. Up until now I had the same perception about timing, but after reading this section and thinking about it I have come to the conclusion that yes, it is critical to keep searching if you really want to find a real deal. I had given up for some time before, frustrated for the lack of good deals. Meanwhile, many others were making lots of money as they kept searching and finding deals while I was out of the game, complaining how tough the market was at the time. Well, lesson learned.
 
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andviv

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Investing Myth 5: All the good investments are taken

The truth behind this myth is: Every market, in every time, has its share of good investments

I think for me the fact that made me realize this is truth was reading Russ' success story. I still have hard times with the fact the he and his wife were able to cash flow positively every month in the California area. And it is not any area, it is wine county... so yes, it is possible.

Keller discusses the market forces and mentions there are two: Economic forces and Personal forces. His point is that many times investors focus on the status of the economy ("real estate is crashing; the market is tanking; interest rates are too high/low; etc) and often overlook personal situations that can create opportunities (here he mentions divorce, death and debt as negative ones; relocation, marriage and family growth as positive examples). Now that I think about it, my first RE deal was possible because the seller was getting married and she was moving in with the groom... so she had to sell the house fast... it was almost time for the wedding.

Because personal forces are always at work, personal opportunities are always at work, it does not matter the economic conditions.
 
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The law of momentum: compounding your success

The closing section for this chapter is the comment about not getting discouraged by starting small. Usually the first deals take a lot of time and money and the returns are not spectacular, but the author recommends not to let this discourage you from continuing, and soon, before you realize it, things will be getting bigger and bigger and your deals will amount to a lot.

I try to constantly remember the lesson that SteveO's story provides. Starting with reading a book, buying four units, and 9 years later owning more than 600 units. If that is not compounding success, then I don't know what it is.

This concludes Part 1 of the book.
Next: Part two: The four stages.
 

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