Time VS Money

[reipro]

Which is more valuable? This is a tough question on the surface I always say that time is more valuable than money. The answer is simple I can make more money tomorrow, but I can not make another day. This goes for deals, charity work, basically anything.

For many of the begining investors this is a critical lesson to learn. Time is one of the most important factors in a deal. The longer you are in a deal the lower your ROI is on that deal. Lets look at a couple of examples

1) I buy a house for 100K I use 80K of the banks money and 20K of my own. I invest an additional 10K in the house and sell it for 130K in 6 months. This gives us a 20K profit. The ROI on this deal is about 133% on an annual percentage basis not bad.

2) I buy a house for 100K I use 80K of the banks money and 20K of my own. I invest no additional money in the house and flip it to another investor for 105K just a 5K profit and turn the house in 30 days. The ROI on this deal is 300% on an annual percentage basis

Which ROI would you rather have???? Always remember how important time is!!!

 

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[Russ H]

I always question annual ROI numbers on these things.

It reminds me of the guy that sold the apples in Time Square during the depression (let me know if you haven't heard this one before). Idea is, if the guy doubles his sales each day, he'll be a millionaire in a month or so.

Thing is, nobody ever talks about SUPPLY AND DEMAND.

Fer instance:

Can you do a 30 day flip every month? Every SINGLE month?

Can you do a fix 'n flip every 6 months?

Me, I take something, put some time into it (sometimes years), and get hundreds of thousands out.

But that's just me.

And it does take more time.

That being said, I am a big believer in the value of time, as has been discussed here before.

As Biophase once noted: Think your time is valuable? How about if, tomorrow, you found you only had 6 months left to live?

How valuable is your time now?

I've indirectly been through this scenario *twice* with my wife's parents (each was given 6-8 weeks to live, her mom a few months after I met them, and her dad, 2 years later).

Has a way of changing your perspective on things.

-Russ H.

 

[Analyzer]

 

[reipro]

Russ,

I would agree with your reply. :thankyousign:The first question you need to ask is capacity. There are many assumptions in my post. We have many investments that are set up on a 2 year payout so we can 1031 the profits. As you accumliate wealth and cash time in a deal does not become as important, but as a new investor it is very important. A new investor wanting to get out of a job, or someone wanting to get into the fastlane must consider time.

 

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[kimberland]

I don't 100% agree with the 6 months to live scenario.
'Cause thinking that way leads to flipping for cash
which takes too much energy from little ol' me.
Plus I'd never have written a novel
or gotten married
or be planning that trip next summer
if I only had 6 mths to live.
That stuff takes time.

Me, I work the odds.
Odds are, I will grow old.
Odds are, if I invest in these 5 companies,
the investment on average will work out.
Odds are, if I meet a 1,000 guys,
I'll meet the man of my dreams (those odds paid off).

As for money vs time,
time, of course, is the most valuable.
Time is truly finite.

 

[Bilgefisher]

Alright newb question alert: If you make x% return in y number of days, how do you determine annual return %?

 

[Russ H]

Kimber-

I agree.

Kinda.

A point was made earlier (on another thread) that the poor live day to day, the middle class paycheck to paycheck, and the rich look at things from a much longer perspective.

You've heard the phrase "Think Globally. Act Locally."?

I plan (and live) my financial life like I'm gonna be here for another 40-50 years (I'm 46).

But I try to live my personal life on a much shorter time scale-- savoring every day as if it were my last.

Make sense?

-Russ H.

 

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[kimberland]

Russ,

Of course, I know that you do the same thing,
plan for the long term.
Heck, you had a child, didn't you?
That is about as long term an investment as you can get.

People are very, very good
at thinking about the short term.
That's our default setting.
We need more assistance with thinking about the long term.

My family has never had someone live past 70
(we all have defective hearts)
so my cap is 34 more years.
May sound morbid but its actually a gift.
No sense waiting around for retirement
to collect a pension and live my dreams.

 

[Russ H]

Kimber-

I know what you mean.

My college roomie had both his dad, and his grandfather, die of massive heart attacks before they were 40.

So here I was, living with a guy who looked at half of his life being over at that point.

A bit creepy, but also a valuable lesson.

Showed me how some people choose to live when they know (or think they know) they have a finite amount of time left.

-Russ H.

 

[nomadjanet]

Plan for the future long term.
Detail you plan for today.
Make sure you enjoy every aspect of the plan.
If you enjoy the work involved in the plan, it does not matter how long or how short the trip because you are loving it every day.
I try, and mostly succeed in loving every minute of the trip. Even the failures even the mistakes because they are lessons to be cherished and learn from.
Janet

 

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[reipro]

Alright newb question alert: If you make x% return in y number of days, how do you determine annual return %?

Here is a basic answer:

If I make 10% on a deal, lets say 10K on 100K then my return is 10%. If it only took me 6 months to make that then my annual % is double that which is 20%. If it only took me 30 days to make that then my annual is 12x's or 120%. Also you only count what you have in cash in the deal to get your cash on cash return not any money that you borrow.

 

[Russ H]

Here is my caveat to your basic answer:

(and REIpro, please don't think I'm picking on you-- I'm not).

If you do the following ONLY ONCE in a year (10% on a deal), your ROI is just what you did for that ONE DEAL, 10%.

Doing this once, and multiplying out to get a higher ROI is like going 120 mph ONCE all year, and bragging to your friends that that's what you do all the time, whenever you're behind the wheel.

In other words, you may be in the fastlane for a few minutes (or even a month). But unless you can keep the velocity of your money at that same pace, you are NOT getting the super-high ROI numbers indicated above.

Make sense?

-Russ H.

PS Only exception I can think of is no money down deals, where your ROI is infinite, whether it takes 2 days or 2 years.

 

[reipro]

Here is my caveat to your basic answer:

(and REIpro, please don't think I'm picking on you-- I'm not).

If you do the following ONLY ONCE in a year (10% on a deal), your ROI is just what you did for that ONE DEAL, 10%.

Doing this once, and multiplying out to get a higher ROI is like going 120 mph ONCE all year, and bragging to your friends that that's what you do all the time, whenever you're behind the wheel.

In other words, you may be in the fastlane for a few minutes (or even a month). But unless you can keep the velocity of your money at that same pace, you are NOT getting the super-high ROI numbers indicated above.

Make sense?

-Russ H.

PS Only exception I can think of is no money down deals, where your ROI is infinite, whether it takes 2 days or 2 years.

I agree that you have to keep it going! That is why put you must have the capacity. We look at turning our deals every 4 months on avg. With that volicity we can multiply our returns by 3

 

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[terrancefoster]

i would think option 2