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Book Review: The Millionaire Real Estate Investor

andviv

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--I apologize to those that follow this thread for the delay in posting again. I've been busy working on the latest details of the deal I am working on, and refining my financial plan accordingly.

PART TWO
The Four Stages

1. Think a Million
The author starts this section by talking about how the wealth accumulation process is a Spiritual Journey. What you think about money is the way you behave about/around it.

"Money --what you do to acquire it, how you hold onto it, and what you do with it-- reflects your innermost values"

Keller says something that I've heard other wealthy people say as well: "I've come to think of money as being about having choices. Typically, the more money you have, the more positive choices you have. The two go hand in hand."

"The spiritual journey of financial wealth builders begins when they understand that their choices define their lives, that having more positive choices is a good thing, and that pursuing more positive choices is an enlightened pursuit."

One of the quotes in the book comes from Robert Kiyosaki:
"I always hear people say, 'God will provide.' I say, God's already provided. Go out and do something with it"

The next section is called The Seven Ways Millionaire Real Estate Investors Think. I will comment about this section later. For now I will leave you with the list:

1. Think powered by a big WHY
2. Think Big Goals, Big Models, and Big Habits
3. Think Money matters
4. Think Net Worth
5. Think Real Estate
6. Think Value, Opportunity and Deals
7. Think Action

Details will follow.
 

andviv

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1. Think powered by a Big Why
This is pretty clear to me. If you don't have a compelling, personal reason to achieve then you just won't make it. The reason of "having lots of money" usually is not good enough. What is your personal reason? WHY do you want to get rich and be out of the rat race?

If you don't want this 'thing' with all of your mind, heart and soul then you probably will not take that extra step needed to make it. Find that something that motivates you more than anything. Ask yourself what would it mean to you to have that or do that?

I've worked on this for many hours. If you have not done it, believe me, it is harder than it sounds. Maybe for others was very simple, but when I ask many many people about this they don't have a clear idea of what they would do with their lives if they would not need to worry for money ever again in their lives.

"Having no motivation will lead you nowhere. A small source of motivation will bring you small success. Big success, in contrast, requires much much more. It requires a Big Why --an evergreen, ever-growing Big Why!"

The last advice is to remember that you are not competing with anybody, and you don't need to compare to others'. It is purely personal. Once you have identified your big reason, this Big Why will lead you in your life as it will allow you to prioritize your needs as well as your choices and actions that will fulfill them.

Tomorrow I will try to find the time to post the next section.

EDITED:
I added this quote as I thought it was appropriate to this section.
"Dream no small dreams for they have no power to move the hearts of men."
--Goethe

EDITED:
Peter2 posted a great "how-to" about setting goals in this post http://www.thefastlanetomillions.com/showthread.php?t=310
 
Last edited:

andviv

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2. Think Big Goals, Big Models, and Big Habits
The main point the author makes here is that, in order to lead a big life, your thinking has to lead the way.

Some interesting quotes from this section:
[the millionaire real estate investor] understood that the size of their financial lives had been determined by the size of their thinking
also, Life is too short to move slowly We here in the fast lane for sure believe this, right?
If you know where you're going, there is a best path for getting there.

Now I think this is the key point of this section:
Big Goals force you to restate your Big Why in specific and measurable terms, and Big Models represent the proven systems and activities that will get you to those Big Goals.

Keller recommends you go for big goals. Going for small goals make you think about the steps to get there and create habits that will keep you at that level. For example, if you plan of making a flip to make $5k then you will be looking for properties that allow you to make those $5K in profit. But the actions are not that different than working on a flip that will net you $50K or $500K. Yes, there are conditions that change, but you are creating a habit of thinking and going for big properties, and as we know, habits are really difficult to break.

If you follow a model to make $50K, that is what you will be making. If you follow a model to make $500K that is what you will be making happen in your life. That's why I started switching from SFHs to Multis. And I have a model to follow, as I've met somebody that made it happen. I now just need to follow what this model says and I should be able to make it. I don't need to reinvent the wheel.

About habits, Keller also says that "There is no such things as a neutral habit. habits are either good or bad. They either lift you up or drag you down." -- so, have you thought about your habits, and which of them you should eliminate as they drag you down? which ones you need to reinforce as they do work for you? and most importantly, which new ones you need in order to get to the next level?

Keller also mentions something extremely important, something that I am still struggling with a little bit: "... but even good habits can be a handicap if they are small and box you into a certain level of accomplishment. Those who take the incremental approach and start with small habits will find that the real challenge lies not in adopting new goals and models but rather in breaking their old habits and forming bigger and better new ones.

This table is presented:

Big Goals, Big models & Big Habits
1. Big Goals -- The specific, measurable targets that fulfill your Big Why
2. Big Models -- The proven systems and strategies for reaching your Big Goals
3. Big Habits -- The consistent actions and right choices that come from following Big Models
 
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Last edited:

yveskleinsky

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Andviv-
Great post- thanks for the book review!

...I've gotta say that I get hung up on finding that "Big Why". I eat, breathe and sleep real estate. Thinking about how something could work, (and now applying it) is the end in itself for me. It is my way of being creative...and I would do it for free. I wrestle with finding a bigger "Why" as my reasons don't seem big enough- but they drive me. What are other people's "Whys?"

What are others gathering from this book review that they are planning on implementing or is there a new insight sparked?
 

andviv

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Your welcome. I hope people do get something out of this review.

I saw this quote that I thought was relevant about this same topic:

You have to find something that you love enough to be able to take risks,
jump over the hurdles and break through the brick walls that are always
going to be placed in front of you. If you don't have that kind of feeling
for what it is you are doing, you'll stop at the first giant hurdle.
--George Lucas
 

HenkHolland

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Great postings.
So far, I always stayed far away from RE (apart from the house in which we live), but I'm now seriously considering to buy the book and to start with RE. No excuses anymore.
 
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andviv

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I haven't post anything about the book lately as I've been busy with the latest investment transaction. I will try to keep updating this thread more often. As you can imagine, I do recommend this book as, so far, it has very good information.
 

TNT

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Thanks for the review... I am goingto go get the book....

Talmadge
 

andviv

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3. Think Money Matters
The main message of this section is to really care about money. If you recognize its importance and it is something you want in your life then you better know a lot about money.

There are two types of income: Earned and Unearned. You work for money or money works for you.

If money matters to you, study it. Pursuit the knowledge of money... its history, its rules and its disciplines. Seek mentors, read books, listen to tapes, attend seminars. Get superb home-school education in financial matters so you receive the equivalent of a master's degree in money. This is an extremely important advice, but I see many people do not do it. They want to be rich without understanding anything about how money works. That's why the lottery is their only way.

Remember that generating enough passive income to sustain your lifestyle does not happen by accident.

The Money Matrix
This is a graphic that shows the difference in behavior between the rich and the poor.

For the rich matrix the elements are:

Consumption
Cash
Cash Flow
Capital


For the poor the matrix is like this:

Capital
Cash Flow
Cash
Consumption

The idea of this matrix is that "Investors build their financial lives on Capital, while consumers build theirs on Consumption. ... Investors understand that your first financial priority has a cascading effect on your financial life. In other words, what you do with your money in the beginning will dictate what you're able to do in the end."

When you invest in capital first you generate cash flow, then you get excess of cash and you can spend it as you want.

Keller says that "In the end it comes down to a person's ability to prioritize investing over spending, to value Capital more than Consumption."

To finalize my comments of this section, there is a quote from an investor that I like to put in here:

"I never let anyone rain on my parade or wreck my day. I never listen to anything negative. I'm in a charge of my attitude. I had a lot of energy, and I had a plan, so it took me only four years to become a millionaire.

May McDonald
Millionaire Real Estate Investor
Coopersburg, PA
"
 
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andviv

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4. Think Net Worth
The big message here is: Keep score. Know your net worth. You can't manage what you don't measure, so be aware of yours.

"Do you know where your cash flows come from? Cash Flow comes from Capital, which is the basis of your net worth. I would argue that the fundamental wealth-building number you hsould focus on and track is your net worth. It's the golden goose."

Update your net worth sheet every week and ask yourself the question: "What's the best way to make that number grow?"

If you track this number over time you will start noticing what effect your financial decisions have in your net worth. Make an habit out of this and you will find yourself finding new ways to increase your net worth.
 

andviv

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5. Think Real Estate
Real Estate has many advantages:

1. Accessible -- anyone can buy it
2. Appreciable -- increases in value over time
3. Leverageable -- Buy on margin & borrow against equity
4. Rentable -- Cash Flow! Cash Flow! Cash Flow!
5. Improvable -- Sweat equity
6. Deductible/Depreciable/Deferrable --great tax benefits (right, Diane? ;))
7. Stable -- Slow rise & slow to fall
8. Liveable --Shelter in more ways than one...

Keller goes to explain each of this points but I think they are evident and clear.

"It's impossible not to become wealthy over time in this business."
Stanley Armstrong, Millionaire Real Estate Investor, Washington DC.

"Where else are you going to make a small down payment, let somebody else pay for it, and you reap all the rewards? I can't find anything that beats that."
Will Stewart, Millionaire Real Estate Investor, Sugar Hill, CA

"I think real estate is the platform that gives you the most control."
Robert Kiyosaki, Best-selling author and millionaire investor, Scottsdale, AZ
 

andviv

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6. Think Value, Opportunity, and Deals
This is one of the most important steps that Keller mentions in this book, IMO.
Why?

THIS IS THE SECRET FORMULA TO BECOME RICH IN REAL ESTATE!

This process describes how most Real Estate Investors become rich. This is the answer to the common question that most newbies ask: How do I find deals?

The process is described like this:

KNOW VALUE --> FIND OPPORTUNITY --> MAKE DEALS

There you have it. That is all. That is all it takes.

In Keller words: "... you have to know values in order to recognize opportunities and have to find opportunities before you can do deals."

You just don't go out and make deals (those are not deals, they are just transactions. How do I know? I've made many of those, fewer of the others ;)).

"The millionaires follow a simple process, and that process works."
"We came to understand how it saved them time, reduced their risk, and kept them focused. .... It is how they think, and it does make a difference in the results they achieve."

In this section there are really not that many comments I can make, or add more value to it. What I quote here is the key, in my opinion.

Successful real estate investing begins with identifying value. How do investors identify value? That's easy. They look at real estate. They look at a lot of real estate. They look carefully at a lot of real estate. I wish I could tell you there was a shortcut, but there's not, and I caution you against trying to create one.

"Beginning investors' biggest mistake is that they don't do their homework."
Dottie Bowe, Millionaire Real Estate Investor, Portland, ME

After looking at a lot of RE then you will start getting a sense of asking prices and how much buyers are willing to pay, you understand what's worth what. You learn this for both sales prices and rental rates.

Keller mentions that "the more you look at properties, the more your sense of value becomes accurate and internalized." so when you see the numbers for a property you will determine quickly the price that will make a property an attractive investment for you.

Every opportunity is not necessarily a deal. What turns an opportunity into a deal is that the property meets your Criteria and the seller is willing to meet your Terms.

"Deals aren't found. Opportunities are found. Deals are made."
Dyches Boddiford, Millionaire Real Estate Investor.
 
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Diane Kennedy

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Hey Andviv: Just saw my name.

Three years ago I would have been all over real estate and the tax breaks.

But, that's all changed...or in the process of changing. The real estate tax breaks are going away, unless you invest in a very different way.

How is that for a teaser? I'll post something by Monday on how the biggest challenge to the American taxpayer is affecting 10 million Americans this year AND how we'll soon have to invest in a very different way in order to get the tax breaks back.
 

Russ H

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I'll post something by Monday on how the biggest challenge to the American taxpayer is affecting 10 million Americans this year AND how we'll soon have to invest in a very different way in order to get the tax breaks back.

Oooh . . . looking forward to this.

Hoping it doesn't affect the '06 taxes I'm filing this weekend!!! :smx4:

-Russ H.

Andviv- I've been lurking on this thread for a while. Much of this book mirrors what we've done (and what we read from other books). Seems like a great book to put so much of this all in one place. My only concern would be that it sounds so obvious that much of the good info could get overlooked (i.e., the reader would miss how important some things are).

Great job on the review. Rep speed + + +
 

andviv

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Russ: Yes, I know. And not only that, the advice is so simple that there is a great chance to be overlooked. How do I know? Cause I overlooked many of those simple, obvious rules myself, and paid the price for that. That's why I used colors and other fonts to try to reinforce the point being made.
Also, I kind of feel guilty sometimes by doing this review, as some probably will decide this is enough and will not buy/read the book, missing many important points the author makes and that I either ignore or simplify too much.

By the way, next section should be interesting as well.
 
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andviv

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First of all, Diane, THANK YOU for your post about taxes for RE investors. Really informative.

7. Think Action
The main message from this section is that the right action is required to be a successful investor.

Part of the message is that you could make a big mistake that wipe you out or take you down a path that you can't recover from. This is the biggest fear that RE generates in people. It actually is the number 1 excuse for not doing anything. My only message is, do your homework to minimize risk. I made a big mistakes that put me negative in my net worth. My only alternative was to work harder and smarter to recover. What was my mistake? I was impatient. The deal wasn't a good deal, but I was not finding good deals at the time, so I thought it was important to do something instead of keep waiting for the right deal. I forced the numbers so they seem it would work. I didn't did my homework and had to pay the price.

Also, keep in mind that you just can't wait for all the traffic lights are green before starting your trip. Take action, try to figure out what you don't know, and then find the answers as you need them, but start.

--will continue
 

andviv

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Keller mentions there are four ways people approach investing:
- Observers
- Speculators
- Collectors
- Investors

So, which type are you?
I recognize I was a Speculator two years ago (Loves the action, buys anything). The observer, who is basically almost everybody, Loves ideas, Buys nothing. Collectors Loves Ownership, buys something, while Investors Love opportunity, buy the right thing.

Keller mentions that "Investors follow a straight and narrow path --straight in that they move from knowledge to action and narrow in that they minimize risk and maximize return. It is a way of thinking and a way of acting."

In closing, Keller mentions that successful investors, after building their wealth, start doing things that could cataloged them as Speculators or Collectors. They have earned the right to do that as now their money allows them to do this, and in their heads they are sure that they are speculating or collecting, and not investing.
 

CRBFL

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I have both books. I still have yet to read The Millionaire Real Estate Agent. With all of the reading that I'm currently doing, I'll wait on reading it until I have my license.
 
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andviv

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well, after a loooong time, I'm posting again about this book.
I hope the newest members of the forum enjoy this review and buy the book if it is something they are interested in RE investment.


The Four Stages

2. Buy a Million
Keller opens this section of the book talking about the first Millionaire in the country.
He says that America's first millionaire was a real estate investor, a German immigrant, son of a butcher, John Jacob Astor. He was worth $20 millions when he passed away, in 1848. He made most of his fortune investing in real estate in New York City. He was known as "Manhattan's Landlord".

In the subsection called The Five Models of the Millionaire Real Estate Investor, Keller discusses the 5 key models that stand out in the world of real estate investing:

  1. The Net Worth Model
  2. The Financial Model
  3. The Network Model
  4. The Lead Generation Model
  5. The Acquisition Model

In keller's words, these five models represent the "best practices" of Millionaire REI.
 

andviv

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The Net Worth Model Of The Millionaire Real Estate Investor

Net Worth is your worth in financial terms. It is what you own minus what you owe. It is your assets minus your liabilities.

This model is a simple three-step process:

  1. Learn the path of money
  2. Manage a personal budget
  3. Track personal net worth

Keller says these three steps are sacred.

Then he goes to talk about Path your Money
This section I will not talk about, you'll have to read it yourself. He basically talks about what to do once you have cash available. Frugality is key when starting.

The next step is to Budget Your Expenses. Don't have more month left at the end of your money.
Discipline is the key here.
Nobody can progress by spending all of his income.

After explaining in a lot of detail about budgets and the need to stick to your budget, the next section is to Track Your Worth. P&L and the Balance Sheet are key here. You don't know what P&L or Balance Sheet are? Google it :smxB:
In general. you can't manage what you can't measure. These tools allow you to measure/monitor your progress.

I am 100% sure you have read/heard ALL of this before. How many of us have actually done it? I can tell you I know at least three people in this forum that are worth at least one million dollars that have done this, and continue to do it regularly.
Do you really think that is just a coincidence?
 

djs13

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I just finished this book. I definitely thought it was a good read. I feel like he goes into alot of detail about building your contact ring opposed to analyzing deals. It's a long read and I feel like some of it was basic common sense. I've definitely read better REI books, but this ranks around the top. I'm about to read "How to Buy and Sell Apartment Buildings," and from what I've read from those reviews it might be more along the lines of what I'm looking to learn.
 
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andviv

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It's a long read and I feel like some of it was basic common sense.
What was amazing to me, given my experience in the field for a few years now, is that those basic common sense things are what make the difference, and most people don't follow them, thus getting into financial trouble (for example, lets buy this house for $100K because a year ago it was worth $200K, I'm buying cheap, so it is OK if it does not cashflow for the next three years).
 

AroundTheWorld

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+ Andviv,

It is so true. Sometimes people throw common sense out the window because they are emotionally involved in the desire to make a buck.
 

andviv

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Sometimes people throw common sense out the window because they are emotionally involved in the desire to make a buck.
Or... make a second bad decision when trying desperately to avoid losing more (for example, not selling when you have $30K in equity, because had you sold two years ago your equity had been $100K, so you would be losing $70K :coco:).
 
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djs13

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Yeah I completely agree with you. I just feel like some of the content about how you should take care of your inner circle was kind of unneeded. Like how many times a month you should call and what types of gifts you should send. Although I don't have an inner circle myself since I'm just starting out, I feel like it would be much easier to just treat these people like close friends than having a systematic almost robotic way of keeping in touch with them. I enjoyed everything else though.
 

andviv

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I just feel like some of the content about how you should take care of your inner circle was kind of unneeded. Like how many times a month you should call and what types of gifts you should send.

I took it as him just trying to establish systems so your investment is run as a business. I actually found value in this as it is very simple to take people for granted.
Fostering relationships comes naturally to some, while it is very uncomfortable for others, so having a system like the one he describes helps to make sure you don't forget/take for granted those relationships (that is why software that help companies to maintain their contacts and sales information is so valuable, and those applications "remind you" of how often to call or email them, just to say "hi" and to check what's new with them and how you can help them).

Although I don't have an inner circle myself since I'm just starting out, I feel like it would be much easier to just treat these people like close friends than having a systematic almost robotic way of keeping in touch with them. I enjoyed everything else though.
Well, I somewhat disagree with this approach... businesses don't always go right and your inner circle may/will be affected by decisions you make. Mixing friendship does not help to deal correctly in this situations as your business judgment is clouded by the friendship.
And, when you call them, you don't have to follow a script. Just call and say hi makes a big difference. Next time that Realtor you called to say hi has a deal, s/he will call you as you are in her/his mind in the first position. Same with mortgage brokers, investors, etc.

For some reason I found this "silly" concepts valuable, maybe because I relate to them --for example, while fostering those relationships may come naturally for you, I struggled a lot with it during most of my life, and only now I'm improving that.

One of the things I've learned lately is that, if I get to know when is my realtors, or my mortgage brokers' birthday, I put it in my calendar with a reminder, so I can send them an email or a card (although I haven't mail cards in a long time), or just to call and say "happy birthday". This has helped me a lot to keep in touch and get to know what's going on in the market.
 

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