Growing up in a small town in Alberta, Canada I was surrounded by farmers and small business owners. Many people made a modest living, but for a small town there were actually quite a few millionaires.
The attire of the towns richest men was usually a pair of ripped Wrangler jeans, worn out cowboy boots and an oil covered John Deere baseball cap.
My Dad often told me that these men didn’t look like rich guys but they were worth a lot of money. He explained that you can’t really judge how wealthy someone is by how they look. He said a lot of the wealthy people he knew didn’t drive fancy cars or live in mansions. He also said that a lot of people that look rich aren’t. They just owe the bank an awful lot of money!
These lessons were a bit confusing for my teenage mind to absorb. I didn’t want to grow up looking like a poor farmer but actually being rich. I also didn’t want to look rich but actually be poor.
Since then I have spent a lot of time trying to understand the mind of the self made wealthy person. I have studied the habits, actions and lives of many of the wealthiest and most successful real estate investors and businesspeople to figure out just how they have created their wealth.
It’s become very apparent to me that most wealthy people focus the majority of their efforts, energy and money on investing in 3 things.
I know this isn’t going to come as a surprise. I’m a real estate investor and this is a real estate investing blog but the point goes beyond simply investing in real estate. There are a lot of people that spend money on things that they think are assets but they really aren’t. Just because an accountant will put something you own on the ASSET column of your net worth statement doesn’t make it an asset. Warren Buffet is my favourite example of this. He still lives in the same home he purchased in 1958 and in general has focused on investing his money not buying luxury items – even though mansions, yachts and fancy cars would technically be considered assets.
The thing that Buffet and other wealthy people know is that an asset has intrinsic value AND it creates cash flow.
In most cases your home is not an asset for the simple reason that it does not generate cash flow.
I like how Keith Cunningham, author of Keys to the Vault put it “Assets feed me. Liabilities eat me.” The wealthy invest a lot of their money and their time into finding, buying and holding on to assets that generate cash flow and will likely appreciate in value.
It’s cliché to say that it’s not what you know, it’s who you know but in many cases that is true. When we begin working with a new real estate investor one of the first things we suggest is that they begin attending their local real estate investing club meetings and even join other clubs they are interested in just to meet more people. A strong and supportive network of people around you is critical to your success. And as a real estate investor, you never know where you’ll meet a future partner, lender, contractor, tenant, property manager, realtor or so on.
Can you succeed without a big network and strong relationships? Yes, but it is going to be a lot more work and definitely a lot less fun. And why are you doing this if it’s not going to be fun? Great relationships can make real estate investing so much more fulfilling and a whole lot easier … so do what the wealthy do and get out there and find people that you can help and that you can collectively add value to each others lives.
Do you think each President of the United States gets elected into office because of how smart they are? Sure, each has some knowledge, experience and education behind them, but the biggest factor in becoming the leader of a country like the US or even Canada is the quality and quantity of relationships they’ve developed over the years.
The same can be said for real estate investing. You can know everything there is to know about real estate investing, but some things will just never be possible to do if you haven’t built the right relationships along the way.
Wealthy people pursue education in order to grow their wealth, be fulfilled and be enormous contributors.
In many cases the successful people I’ve studied never set foot in a college in their early years. Education does not have to come from a secondary institution. Many of the self made wealthy people simply realized they had to learn something, and they went out and found a way to learn it.
By becoming an unpaid assistant to someone who held the job they wanted or by reading books and applying what they learned many people created their wealth without investing big bucks in a college degree. Others went out and hired the experts they wanted to learn from.
The point is that the wealthy and inspired people I have learned from have all been avid learners. They recognize when they need to learn something and make the effort to learn it. And as an avid learner, they have more to talk about with the people they have relationships with and more ideas for lucrative assets to invest their money into.
There are plenty of things to spend your time, money and energy on in your life. But if you truly want to grow your wealth and live a fulfilled and prosperous life you should consider investing the majority of your time, money and energy into the three things most successful self made wealthy people invest in. Invest in real assets, bigger and better relationships with more people, and knowledge and education to help you create the life and the relationships you want.
Julie Broad is a professional real estate investor with a passion for teaching others how to succeed in real estate. Sign up for her free real estate investing newsletter, packed with resources, tips and stories to help you get started with real estate investing. You can also check out her blog at http://www.lifeasrealestateinvestors.com