The old man and the young investor - Posted by ScottS(NC)
Posted by ScottS(NC) on March 17, 2006 at 22:11:10:
Their was an old man in a certain neighborhood, who was buyin up every home that came up for sale. Their was also at the same time a young investor who had read “all the books” and was convinced that Landlording was way to much trouble. The young investor wanted to see the world and didn’t have time to contend with a bunch of pesky tenants.
The young investor watched the old man buy up homes for 80 to 90k each and thought to himself doesn’t seem worth the effort. The young man was convinced he had a system that would allow him to just “collect the checks”.
So the young man started investing using the system. He had great yields to talk about but very little wealth and needed most of what he earned to reinvest and pay his taxes.
Meanwhile the old man plodded along buying/renting, buying/renting on and on it went. The old man did get “burned out” but he found it wasn’t permanent and he new something the young man failed to see. Property does not loose value it climbs, and rapidly at times. Each property he bought was a new savings account for him and his family. He would often think on his worst days this is bad but not as bad as working for someone else. He new he could hire people to do repairs when he didn’t want to. He also remembered the days on his 9-5 he had No freedom then.
The young man continued buying/selling and buying and selling on and on it went. He often felt like a high paid salesman. He also realized one day that if he stopped after a year or two so would his income. He began to think maybe the old man had something going for him. So the youngster decided he should have lunch with old timer.
They met one afternoon for lunch. The old timer, wearing dirty overalls, greeted the young man warmly. The young man was hesitant to accept the hug from the old grimmy man, he was in khakis and a dress shirt and was working after all. The old timmer didn’t care and wrapped him up in a suprisingly strong bear hug. The old man asked how business was and the young man explained how busy he was. The young man described his business model and how it was far superior to the old mans archaic rental strategy.
The old man sat back with a knowing grin and let the young man explain how his yields were infinite and how he should be a millionaire in no time. The young man continued explaining that he had learned this system from a genius who had thought it up. The old man loved the idea, only he asked how the genius had started out. The young man quickly explained the genius had gained his start by renting and owner financing properties that he had fixed up himself.
At this the old man interjected for the first time. He said so this genius had built up a substantial amount of wealth and then began using the system to keep the wealth growing? Does that sound correct to you? The young man agreed that is what he did exactly. So the old man pondered, you have decided to start with the system and skip the first part?
The young man said he doesn’t have time to be fixing things himself, he just needs to “write checks” and do deals after all thats where the money’s at right? The old man smiled and told the young man he owns hundreds of homes in the area and has for years. Each home has quadrupled in value in the last 20 years. The young man thought to himself he has also done hundereds of deals, using the system and he is doing well but after doing some math in his head he realized what this old overall wearin’ pickup drivin’ man is worth.
The young man quickly realized he had gotten the cart before the horse, if he was trying to build wealth. He kept his money moving but was having a hard time building it. He also new in twenty years no matter how hard he worked he would never reach the wealth the old man had. How was he going to “Travel the world” if he had to continue doing deals because each time he sold one it had to be replaced! When would that end!!! UH-OH.
The young man began investing in some rentals for longterm wealth building. The bad days he smiled and thought of the old man and they weren’t as bad as “everybody” had told them they would be. He often called the old man for advice. The old fella gladly helped in anyway he could. Soon the young man decided with 25 rentals paying he could take that first vacation he had always dreamed of. Take Care, ScottS(NC)