Your first $100,000 is the hardest

I was thinking back to when I first got started in REI about 18 years ago. I hardest thing I ever did was making making my first $100,000.

I don’t mean $100,000 in equity, I mean CASH. I know that some people hit the long ball first time up to bat. I was never one of those people. When your starting out, your learning everything, have very limited funds and this is where you can get in trouble. I remember the first home I purchased. I was very nervous, but the price was good so I robbed Peter to pay Paul and made a small but important first profit.

Building that intial $10,000 profit (18 years ago) into $100,000 cash took about 5 years, a lot of sweat, a lot of 80 hour weeks, and a ton of learning. But a funny thing happened along the way, I learned how to make money with money. It amazes me that this basic concept is NEVER taught in our schools to children. I had to learn myself, and the teacher didn’t spare the rod while teaching. No better way to learn than by losing your own money.

Interesting how once you reach that $100,000 level your thinking clears, you have confidence in what your doing and the deals come easier and more often. New guy’s ask me for advice and I always tell them that making your first $100,000 is the hardest thing you’ll ever do.
Once you get there, that cushion gives you much more leverage and options. The hard part is SAVING that money until your reach that $100,000. Making the $100K is not that hard, SAVING it IS. In this business money is blood. Without it you die. When you can get a cashiers check from your bank and buy a home in one day with very little carrying costs, your profits grow very quickly. Another intersting thing happens when you hit that level. You banker suddenly wants to loan you money for anything. It’s like a giant snowball rolling down hill, as it gets bigger it picks up speed.

Save, build, save some more. Use credit to your advantage not to theirs, and never stop learning.

Great country we live in. THE BEST!

Great advice, thanks for sharing!

Dynamite advice. I would like to know was your goal to make 100k? or was it to get a certain amount of income?

My goal is to get enough income to replace my wages at work. Would I get there faster saving the 100k or working towards cashflow/income? (In the past I would have said the 100k is the prefered option).

Jay

Great post. I also got my real estate education in the school of hard knocks without a scholarship. I never had a $100k goal, so I don’t know when I got there. It took me 24 years to make my first million, but only 3 more years to make the second million.

Your posts are fantastic.

A true blood and mud investor.

I think Dave T brought up a great point that I forgot to mention. Making his first Million took 24 years, making his second only 3 more!!!

That is the exact reason I used the first $100,000 example. Making your next $100K is infinitley easier.

My personal goal originally was just to get to that $100K level. I used that because…

  1. It was reasonably obtainable.
  2. It gave me a goal to work towards.

It is VERY EASY to “sleep walk” through life. If you don’t set tough, but obtainable goals that is exactly what you will do.

Once I made that first $100K the next came much faster and much easier. Once you have $100K in cash, in the bank, you have OPTIONS.

Case in point…At the time I had been watching Chrysler stock. This was 1991-1992 the height of the recession. Chrysler was at $10/ share. Bob Lutz had just been named president and they had some GREAT product in their pipeline. The beautiful thing about car companies is they’re cyclical (when the economy sucks so do they) and they always release pictures of upcoming models. They also rebound when the economy does. As real estate investors we can see signs of this before most people due to increases in our sales/prices or demand. I took $40,000 and bought Chrysler based on signs of a rebounding economy, their product pipeline, Bob Lutz (formally of BMW) and other info, and waited… The result?? Chrysler went from $10 to $60 in 2 years.
I got out too early in the $50’s but hey, I’ll take a 500% return any day. My $40K was now $200K!! I didn’t do this on a whim, I had seen these types of stocks do this over and over. I researched, had a plan based on real world info, and followed that plan. Sort of the same way I made the original $100K. (having a plan)

Don’t ever under estimate the power that a beaten down stock can provide you. 2 years ago Merck & Pfizer. Ford (right now) soon the “Home Builders Stocks” will fall into this catagory. By having those funds available you can exploit these opportunities when they come along. You need to recognize that these things do not happen everyday or overnight. It takes years for these things to develope. It’s boring, you need patience, everyone, especially “THE EXPERTS” will tell you your wrong, it’s not that easy, and on and on. I do not believe in a diversified portfolio. I know that flies in the face of conventional investment wisdom, but I don’t want to dollar cost average. I wait until the odds are in MY favor and MOVE. It doesn’t matter if it’s a home or a stock, having CAPITAL available immediately is the key.

Read everything you can, learn how to do this. It will take you to the next level. And the best part is you never get phone calls from your stocks at 3am. Real Estate and Stocks are tools, take the time to REALLY learn how to use them, then as they say…

“Let the tool do the work”

"Let the tool do the work"

Well put!!!

-Mike

All the experts (in any field) were at one point in time beginners. Thanks for sharing.