“The secret to getting ahead is getting started.” — Mark Twain
How do you become a passive investor in great cash flowing deals?
I’ve talked with over 1,500 investors one-on-one.
Oftentimes, people just don’t know how to get started.
What’s step one, two, and three?
Looking at and analyzing these deals feels a bit daunting.
I have a simple three-step strategy that can help you get started.
Let’s jump into it!
1. Education First
The first thing I tell people is to get educated.
You need to get yourself comfortable with whatever you invest in.
We’re not talking about degrees.
We’re not talking about lengthy training sessions.
What I mean by education is going to local meetups.
Go to conferences.
Listen to podcasts and read books.
These are all things you can do wherever.
If you’re in a bigger city, take advantage of more frequent local meetups and conferences.
Listen to a podcast or an audiobook whenever you can.
All of these things create an education around investing and build a foundation around you.
Podcasts in particular are great because you hear about people’s experiences, both the good and the bad.
The biggest thing I do at events is ask questions.
When you’re new to investing, there’s no shame in going up and saying: “Hey, I’m new. What kind of investments are you involved with?”
Down the road, you can ask even better questions such as:
“Is there anything you would do differently?”
“What are the mistakes you made?
“Have you faced any serious challenges?”
Those are great stories to hear.
There’s the old saying that a wise man learns from their own mistakes, but a genius will learn from the mistakes of others.
These questions give you the opportunity to learn from other people.
One of the most powerful relationships you can have, particularly as a passive investor, is with other passive investors.
However, you should always be aware of potential bias.
If I share information with you, it’s always going to be a little biased towards our stuff.
If you talk to another passive investor, however, they’re trying to do the same thing you are.
They’re trying to make money.
They’re trying to get cash flow.
You also need to be clear about your goals.
Are you looking for cash flow? Tax reduction? Appreciation?
What are you trying to do?
After determining that, find the people you want to get close with and get on their list.
People join our list to hear about our deals in multifamily, gas, and other types of alternative assets.
We also share those deals with our prospective investors.
2. Review 5-10 Deals
After educating yourself, you should review five to ten deals.
Why five to ten?
Well, if it’s only one or two, you’re not really seeing enough deals.
If it’s more than five or ten, it can be daunting.
You can find them by signing up for those investor lists.
A lot of these deals will have webinars where you can ask questions.
After analyzing the five to ten deals, you’ll learn so much.
You might even find exactly the deal you’re looking for!
But how do you actually analyze the deal?
I have a three-stage process for analyzing any deal, no matter the asset class.
I talk about it in my upcoming book, Fire Yourself.
The first stage is the market, followed by the operator, and finally the deal.
You start with the market.
When I say market, it can mean a geographic market.
We buy in Jacksonville, Florida and love that area.
There’s population growth, job growth, and income growth.
If we buy in an area with all that growth, the deal will almost always turn out fine, even when things go wrong.
It’s the same with ATM machines or car washes.
When analyzing these markets, look for what factors are in effect.
With ATMs and car washes, there are different macroeconomic factors, which is why we focus on that particular market.
Usually, if somebody sends you a deal, you have to ask if it fits within the market you want to invest in.
After you’ve analyzed what the market is, then you look at the specific operator.
What’s their experience?
What’s their track record?
Have they completed any investment cycles?
Sometimes, they’ll have a record of rinse and repeating-type deals where they have done 10 similar deals and are on number 11.
Other times, they could have had success in one area but have just moved to a new market.
I’ve seen some issues with that.
Make sure you understand who the operator is, their experience, and what they value.
When I started investing, I thought everybody had the same values.
The reality is that not every operator shares your values.
It’s important to look online.
What’s their reputation?
What information is on their website?
It would also be helpful to talk with other investors who have worked with them.
The last thing is to analyze the deal.
Does the deal make sense?
How do you make money?
What’s the focus?
Warren Buffett once said: “Don’t invest in anything we don’t understand.”
That’s a really good rule.
The last thing you should look for in a deal is one or two primary risks.
How could you lose money?
Every deal, no matter the asset, has one or two primary risks.
If you can’t find the risks, then you need to keep looking or move on.
You probably don’t understand the deal well enough.
That’s a good question to ask the operator as well.
If they don’t give you a primary risk… beware!
There’s always risk in any investment.
3. Invest in 1-2 Deals
The final step is to act and invest.
Look at five to ten deals.
Invest in one to two.
I have a mantra that I use often: Life has an action bias.
If someone puts a great plan together but never does anything, they’re always going to lose to someone taking action.
The action-people are going to meetups, talking to people, and reading books.
They’re actually investing.
This person will always learn more.
Be that person of action.
One way to do this is to give yourself a deadline.
You could say in 60 days you’re going to invest in one deal.
Make a wager with a buddy to hold yourself accountable.
If you don’t meet that deadline, you have to give them $500, or something similar.
You learn the most by investing into a deal.
During my calls with investors, one in particular comes to mind.
There’s a physician with a net worth around $5 million.
He never invested in anything except for stocks and bonds through his financial advisor.
If you invest $50,000-$100,000 in one two deals, that’s typically 1% to 2% of someone’s net worth.
It’s not a lot of money.
But what happens after that is you get some experience.
Over time, investing becomes like a muscle you didn’t even know you had.
You may become sore at first from gaining those muscles, but after a while you’ll feel strong.
The more you invest, the more you’ll grow.
You will get better over time.
The conclusion here is that no one cares about your investments like you do.
You need to invest in yourself, educate yourself, and grow.
As you invest, you’ll pay attention and you’ll learn.
Take action and you’ll be a pro in no time.
Now I want to hear from you!
What will your first investment be?
Let us know in the comments.
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.
