Consumer thinking vs. Investor thinking
Unless you have ever had the opportunity to sit down and talk to a true investor
then you will probably have no idea that there is a difference between the way
consumers think and the way investors think. The reality is that there is a big difference, and that difference is an
everyday way of living. The
difference is what makes the rich richer and the middle and poor class continue
to swim in debt.
Just think to yourself what is it about the rich that appeals to you? Is it the large home, the vacations
that they take, the second homes, the cars, the toys? Is it the freedom to do what they
want, when they want, and with whom they please? Who would you like to trade places with, or better yet who would you like
to be the son or daughter of? Would
you have time to work or would you be so busy enjoying your wealth that work
would become a burden?
Do the rich get there by working harder and longer hours or do they focus their
time and efforts on creating multiple streams of income? Do they create income streams that
bring in the cash weather they are working or not? Of course they do. How else could they do what they do?
Since most of you reading this have no clue how investors think then lets go
ahead to talk about consumer thinking so that you can clearly see the
difference. We will take Robert; a
42-year-old married man making $120k per year as a senior software engineer. He has a beautiful wife (who also
works in retail) and three kids one of which is in high school. He lives in a large home in the nicer
part of town, which he thinks is his biggest asset, drives newer cars and enjoys
weekend skiing trips with his family. They own $446,000 in their home, $43,000 in their cars, $12,000 in credit
card debt, and $10,000 in miscellaneous debts (student loans, and lines of
credit).
Robert and his wife have been planning a big European trip with the family for 2
years and they haven’t been able to raise enough money to pay for it. At the middle of spring they receive
a credit card offer 0% interest for 12 months with a credit limit of $15,000
dollars. So how does the average
consumer think? Vacation!!! Home improvement!!! >Balance transfer!!! What if the offer was a home equity
line of credit for $50,000? Consolidate debt and vacation!!!
What consumers don’t think about is what the debt is actually doing for them. Is any of Robert’s debt making him or
his family any money? Consumers
would say yes. Investors would say
no. Consumers would say that the
house is increasing in value and so Robert is creating a substantial nest egg. The problem with that thinking is
that Robert isn’t going to make a dime on his house until after he sales it and
so in the mean time him home isn’t making him any money.
Guess who is telling Robert and the rest of us that our house is our biggest
asset? People who aren’t financially
independent or banks that make huge returns from you paying interest month after
month. Ok now that we can see what
consumers thinking looks like lets take a look at how investors think.
Let’s take a look at Jim. Jim is
also 42 years old, married with three kids but the big difference is that he is
a professional real estate investor and financially independent. He has two newer cars and owes just
about the same on his home, cars and credit cards. Here is the difference. Jim owes just over $4 million dollars
in real estate loans and has a net worth of $1.1 million and a yearly cash flow
of $120,000. His house, cars and
credit cards are all being paid for from the investments that he has made. He property manager is taking care of
his properties so that his time can be freed up to look for the next deal.
Jim and his family have decided that they would like to go on a European trip. Mid spring they receive a credit card
offer 0% interest for 12 months with a credit limit of $15,000 dollars. What do investors do differently so
that they can pay for what they want? Jim goes out and finds another fourplex to invest in which will bring in
an additional cash flow of $600 dollars. They close on the deal and then go on the trip. They used the credit card just as
Robert did to go on the trip, but guess who is paying off the credit card? The renters in the fourplex paid for
their trip and the best part is once the credit card is paid off the cash flow
remains.
Jim wants to get out and buy a new Porsche he does the same thing. He goes out and purchases enough
property to pay for the item from the cash flow. Consumers ask how much is this going to cost me? Investors ask how much can I make? Consumers are worried about the
market taking a down turn. Investors
can’t wait until the market takes a down turn. Consumers put in more time at the office to make more money. Investors purchase more property to
make more money.
Who do you think will end up rich?
Would it be worth your time to learn how to think differently? The reality is that there is a big
difference in how consumers and investors think, and that difference is an
everyday way of living. The
difference is what makes the rich richer and the middle and poor class continue
to swim in debt.
By Seth Joiner
www.worldwide-propertysales.com
Seth Joiner has been involved with helping sellers for the past 9 years sell
their properties internationally. He
has focused mainly on Argentina in South America and has a unique perspective of
how different cultures interact. He
has also been a real estate investor over the past 5 years, which gives him a
bird’s eye view of both sides of the real estate sales model and enjoys sharing
his knowledge with others.