Your #1 Job As A Real Estate Investor — Along With Sleepin’ Well

Everybody wants a retirement with more than ‘enough’ income, stability, more than a little tax shelter — all while knowing their capital is relatively safe. That’s a huge order for one reason — great return, heck any return on your capital, is a distant second to the preservation of that capital.

The assessment of risk is one thing. Even if you’ve convinced yourself the inherent risk in a particular real estate investment fits your comfort zone, the analysis isn’t over — not by a long shot.

Let’s pause here for a reality check. Has it ever really hit you between the eyes why it’s called risk capital? It’s cuz your capital is — at — risk.

All the Purposeful Planning in the world won’t purge risk from an investment. It can’t. Only Mom, with her gazillions plus her unconditional love, eliminates risk entirely.

This is why we insist on generous cash reserves, what we’ve for years called Sominex Accounts. (Again, for the under 40 crowd, think Ambien — you know, sleep better at night.) Two clients might be put into the same type property with the same cash requirements to close. Often though, one will be advised to have bigger/smaller sized cash reserve account than the other.

Why?

Cuz people are different. The late 40′s couple making $162,000 between ‘em while saving $24,000 a year after taxes, might need less than their neighbors who make half that, have four kids, and just wanna get their retirement program going any way they can. The two couples simply aren’t equal when it comes to Murphy’s unscheduled visits. And he will visit you. Sooner or later everyone gets their turn in his barrel.

I’ve lost property before as a direct result of a surprise visit by Uncle Murphy. Based upon that experience, I’ve never forgotten O’Toole’s Corollary to Murphy’s Law.

It says simply, Murphy Was An Optimist.

When establishing Sominex Accounts we tend to error on the abundant side. Nobody gets upset cuz they’ve been able to handle an unforeseen four figure expense without breakin’ a sweat. It’s when you have $11,000 in the bank, and a freak storm requires $9,500 in repairs and a new roof. How do ya think yer sleepin’ that week? So when you think Sominex Account — think a big pile of cash.

Remember — minimizing risk ain’t synonymous with removing risk. Cash reserves must be part of any thinking investor’s Purposeful Plan. We believe this so fervently we won’t work with folks who won’t establish them. Won’t — Period.

Just recently I told a long time friend of mine, also an agent for which I have great respect, that he’d have to work with a young first time investor, himself. I’d met the guy, and liked him a lot. He’s smart as a whip, works like a dog, and earns six figures a year — all while he’s under 30.

Oh, did I forget to mention he’s married with two toddlers?

We refuse to play any part in putting this young man’s future, and/or his kids’ futures, in jeopardy because he’s got more testosterone than is safe. Remember now, I liked this guy. He impressed me to death. And I still won’t work with him. His wife and kids and their immediate financial future, not to mention a decade down the road, are far more important to me than if he begins to execute a Purposeful Plan now or in the near future. He makes enough to save serious ‘bank’ over the next couple three years.

Meanwhile, he won’t be risking the loss of his great credit rating, maybe his own home, or even his marriage. No Sominex Account can ever be enough to pay for that kind of a loss.

So many times we’ve lowered initial investment plans as a result of changes in the lives of clients. Life happens to all of us in real time. Cash reserves are like sleeping pills in many respects.

What you may not understand is most of the sound sleep resulting from generous Sominex Accounts?

It’s mine.

Let’s talk about your retirement — and great sleep. Gimme a buzz at 619 889-7100. Have a good one.

Related posts:

1. #1 Job of a Real Estate Investor — Plus Getting a Good Night’s Sleep
2. How Much Is A Good Night’s Sleep Worth To A Real Estate Investor? Thou$ands
3. The Real Estate Investor’s Ceaseless Search For Ever Higher Returns
4. As A Real Estate Investor Ya Gotta Pick — How Ya Gonna Roll?
5. Are You A Real Estate Investor Keepin’ Up With the 10 Year Treasury? Oops