Investing Outside of the Box
You’re familiar with the term, “glass half full,” right? Well, when it comes to investments, I like to talk about a similar concept, called “upside.”
What exactly is upside?
It’s what makes a prospective investment especially attractive to an investor. It’s the opportunity to significantly increase the income or the value of an investment in the future. After all, it’s in the upside where the greatest profits and returns are made — it’s music to an investor’s ears.
For instance, the upside of a poorly managed apartment building might be to increase revenue by replacing non-paying tenants with ones who pay on time. The upside of a pharmaceutical company’s stock would be the announcement of a medical breakthrough. Are you starting to see the big picture?
It may seem counterintuitive, but the upside is often found by examining the problems. Think about the greatest entrepreneurs of our time — most of them began their businesses because they came across a problem in their own lives and thought of the solution. Steve Jobs solved the problem of individuals needing access to personal computers. Sara Blakely solved the problem of smoothing out the lumps under her own dress and invented Spanx. Anita Roddick solved the problem of chemicals in skincare products and launched the Body Shop.
Investing is really no different. And while many investors shy away from problem investments, I can tell you from personal experience that the problem is actually where the profit lies.
Humans Will Never Fly
The reason so many people said, “Humans will never fly,” was because that idea was outside the border of the known reality of most people at that time. But that idea was not outside the realm of possibility for the Wright brothers, and they spent years working on making the possibility a reality.
When it came to money, that is the same thing rich dad did and my poor dad did not do. Today, the common phrase is, “Be willing to think outside the box.” Rich dad would say, “Everyone can think outside the box for a day. The question is, can you think outside the box for years? If you can, you will become richer and richer.”
Whatever we think is real becomes reality, in most cases. A person who thinks investing is risky will often find all the reality they want to substantiate that reality. This person will open the newspaper and read about all the people who have lost money investing. In other words, the mind has the power to see whatever it thinks is real and blind itself to any other reality. Just as people said to the Wright brothers, “Humans will never fly,” and to Christopher Columbus, “Can’t you see the world is flat?” people will always have their own realities.
One of the most important things you can learn to do is to take control of your own reality. If you can learn to do that, making more and more money with less and less effort will become easier and easier. If you cannot control and change your reality, then getting richer and richer may take longer than you like. It was my rich dad’s ability to continually change his reality that ultimately made him rich. It was not the beachfront property that made him rich. It was his ability to change his reality. After he bought that piece of property, he was soon looking for even bigger pieces of property to test his reality on.
If You Want To Be Rich, Be A Creative Investor.
Rich dad also felt certain personal traits were required to be a successful entrepreneur or investor, one being creativity. You’d be surprised how intelligent you become when you must use your creative mind to solve financial problems.
If you want to be a creative investor, you need to work hard on building your financial intelligence through financial education. Out of your financial education, you will then need to develop three, main skills.
- Find an opportunity that everyone else missed.
See with your mind what others miss with their eyes. For example, a friend bought a rundown old house that was spooky to look at. Everyone wondered why he bought it. What he saw that we did not was that the house came with four extra lots. He discovered that after going to the title company. After buying the house, he tore it down and sold the five lots to a builder for three times what he paid for the entire package. He made $75,000 for two months of work. It’s not a lot of money, but it sure beats minimum wage. And it’s not technically difficult. It just took a different mindset.
- Raise money.
The average person only goes to the bank to get money. When a good opportunity comes around, they say, “The bank won’t lend me money,” or “I don’t have the money to buy it.” The average investor’s mindset about money and investing holds him back.
If you want to be a creative investor, you have to learn to do that which stops most people—raise capital. The creative investor needs to know how to raise capital, even when the bank won’t give her money. The good news is there are plenty of ways to get the money that doesn’t require a bank.
There are many times I have bought an investment without a penny in the bank. I once bought an apartment house for $1.2 million. I did what is called “tying it up,” with a written contract between the seller and buyer. I then raised the $100,000 deposit, which bought me 90 days to raise the rest of the money from investors. Why did I do it? Simple. I knew it was worth $2 million.
- Organize smart people.
Intelligent people work with or hire people who are more intelligent than they are. When you need advice, make sure you choose your advisors wisely.
When it comes to being a rich investor, there are a lot of skills to learn and practice. But the rewards are astronomical. If you don’t want to learn those skills, then being a package investor is highly recommended.
Editor, Rich Dad Poor Dad Daily