Are You a Consumer or an Investor?

You’re about to have a moment of self discovery, where you find out who you really are. And this understanding could have major implications on your financial destiny and whether or not you become rich. Two simple questions will help you find out if you are a consumer or an investor. And its not about where you are today, but it’s really about where you are going. Consumers eventually go broke (or close to it) while Investors eventually thrive financially. Have the courage to find out which one you are in this video:

Are You a Consumer or an Investor?

 

I am going to share with you two questions who’s answers will help you to determine exactly which one you are. This is important information because consumers are broke or they’re about to be, while investors are wealthy or will be eventually. In this blog you will learn to determine the differences between the two, so that even if you’re a consumer now, you will know how to become an investor.

Question 1: What Do You Do With Your Extra Cash?

 

I want you to picture the last time you had some extra cash. Extra cash is any money you have leftover at the end of the month after you have paid all of your bills. It could be from a work bonus or big tip night, or even a lower monthly bill then usual. The question is, “What did you do with that extra cash, the last time you had it?” I am not talking about what you would do with extra cash in the future, I am asking what you have done with extra money in those past situations where you had leftover funds at the end of the month.

If you spent that money on something that has absolutely no chance of any financial return, then you are a consumer. This would include splurging because you deserved a big vacation, taking a hot girl on a big fancy date, or buying your friends a round of beers. If the last time you had extra cash you spent it on anything without a financial return then you are a consumer.

If the above does not describe you, and you spend your extra money on things that have a good chance of financial return, then you are an investor.  This could mean investing in yourself by buying education and training like this, or books like the ones I have written, it could mean purchasing real estate or stocks, or anything else that has a fighting chance at having some form of financial return,.

In this example we will assume that you have passed question one and are an Investor. Question two is where we separate the men from the boys. If you are looking at an investment, the first thing you focus on is the price of the return, which is what you could potentially earn by investing in the project.

 

Question 2: Are You Focusing on Your Return on Investment?

 

Time and time again I have seen people save up money to purchase stocks, but the stocks they purchase are penny stocks, because that’s all they can afford. Or if someone wants to get involved in investing in the Bay Area of California, where every single family home is a million dollars plus, they will go to a site like Auction.com and purchase a single family home of the same size in some terrible part of Detroit just because it is only $10,000. They think they are getting a cheap investment that they can actually afford, but they are actually purchasing a terrible investment because they were only focused on the price of the property instead of focusing on the returns first.

A true investor focuses on the return on investment (ROI) because they know that if the returns are strong enough, whether you can or cannot afford it is not a problem, because there are many options available for financing good investments.  There are many ways to acquire an asset if the return is high enough like:

  • Banks
  • Private Lenders
  • Angel Investors
  • Venture Capital
  • Creative Financing (which is what I teach in many of my videos)

 

Example
I know a guy that is working on a deal using creative financing that could generate $600,000 or more per a year net profit, and the crazy thing is the development cost may actually be less than a million dollars. Many people would be intimidated by the idea of a million dollar investment, but an investor will look at it and say, “If  I can bring in a net profit of $600,000 a year on a million dollar investment then the cap rate would be 60%.”

Let me put this into perspective for you. The next time you are driving down the road and see a class A apartment building, it might trade for as high as 6%. In other words, you’d have to have a $10 million apartment building to bring in the same $600,000 return on investment that this one deal could bring in net positive returns.  Focusing on your returns first does not mean that you don’t look at the price and costs of taking on the investment, because these are the numbers that help you to determine what your return on investment will be. Focusing on the return on investment first is like focusing on what is possible prior to figuring out how to structure and make a deal happen. A common mistake many people make is to assume that the investments they find are the only ones out there. As Henry Ford once said, “Whether you think you can or you think you can’t, you’re right.”

 

Price Vs Return

 

Another challenge is figuring out whether you have the ability to afford a deal or not. The first step is to  look at your bank account and credit cards to figure out how much of a down payment you can afford, then you need to assess your finances and bills to determine what monthly payment you can pay. Next you have to look at the returns which are a lot more complicated to calculate because there are a lot of factors involved in determining an investments ROI. You have to calculate in any risks, costs, and tons of other factors involved in purchasing an investment. Henry Ford also said, ” Thinking is the hardest work there is which is why so few people do it.” You have to use your brain when it comes to figuring out the return on investment and that is exactly what investors do. That is what the biggest difference between an investor and consumer is. An investor doesn’t just take their extra cash and put it towards things such as the purchase of assets and investments, like stocks or pieces of real estate. Or even the purchase of a domain business idea they have or an investment in themselves and a new business concept or project they have been working on. It doesn’t matter which way you choose to invest your money, if it’s going to produce a financial return, you have to ask yourself: “What is that return going to be?” And, then spend the time and energy necessary to finding out the answer to that question.

A real estate investment is not just about the price of the property. You can acquire a property with creative real estate by structuring a deal creatively through creative financing. I have some great videos on how you can purchase real estate with little or no money by structuring credit financing. My team and I do this all of the time, every single day of the week, including today. Creative financing always works but there is so much more to it then that. There are so many banks and hard money lenders looking to invest in good real estate deals and other smart investments. If you can find a good deal, you can get the deal funded, all it takes is some creativity.

So those are the two questions to ask yourself, to determine whether you are a consumer or an investor. I have also provided you with some tools you can use to become an investor if you are stuck living the life of a consumer but want to do more.  If you want to become a first class, market leading, real estate money making machine, check out my apprentice program where my coaching staff and I, work directly, hand-in-hand to transform people into real estate entrepreneurial professionals.

 

 

Comments

  1. Tusingwire Julius says:

    For sure,You are the man.
    I have learn about a consumer,i spent all my youth as a consumer but from
    today on I AM an investor.

  2. Edward Gombeda says:

    Can you send me the information I just watched your video about training to become an investor thank you

  3. dwan ford says:

    Excellent video

  4. dwan ford says:

    Excellent video

  5. Danny Medina says:

    Phil, you’re invaluable. Thanks for another awesome video!

  6. Anil Kumar Kapuwan says:

    Great knowledge.

  7. CAROL HAYS says:

    I am trying to learn how too become a real estate investor. I will get your book and, study. thanks carol

  8. i am a investor Mr. Phil and this info is awesome you are amazing i love your energy

  9. Cliff Fung says:

    Phil, thanks for sharing this video is awesome. Love it.

  10. Great video Phil.

  11. Salva Wright says:

    Thank you so much for these videos.

  12. Danny Trujillo says:

    PHIL, oh man, you present your info just right!…….

  13. Love your videos Phil

  14. Francis Horne says:

    Hi Phil, your videos are very good , explained with such clarity, keep up the good work.

  15. Cool presentation, show me the money…

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