Today’s REI Classroom Lesson

Today, Patrick Donohoe elaborates on where to store your cash reserves as a real estate investor.

REI Classroom Summary

Patrick Donohoe discusses how to take advantage of your reserves and how having money sitting in your bank account might not be the best option.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike:Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.

Patrick:Hi, my name is Patrick Donohoe with Paradigm Life and today, I’m going to be talking about reserves and cash and where to specifically store them and why.

Mike:This REI classroom real estate lesson is sponsored by uglyopportunities.com.

Patrick:So looking at real estate, real estate is an amazing investment. I’ve invested in real estate since about 2004, and have had a lot of success but I, by trade, I’m a financial advisor and we really focus on those who own real estate and invest in real estate because it fits with our financial philosophy. And one of the things that I have really seen as a successful component of individual real estate investing plan, is how to measure reserves, why to have reserves.

And really the deals that I’ve seen people do and the success that they’ve built has come from being able to take advantage of opportunities because they have liquidity and they have cash. Now, there is a saying that I like to use, which is the Robert Kiyosaki conundrum. And what that is, is cash is trash like he says, but actually, cash is also king. So that’s what I want to use as the basis of this conversation.

So if you look at really cash and understand what Kiyosaki is saying is that if cash is moving, if it’s not invested, if it’s not creating cash flow, right, then it’s sitting dormant and it’s not doing anything. But also if you everything invested, all your cash, that puts you in a very risky position. So it’s really looking at, okay, having a cash, having your money, your investment capital in investments producing and making you money but you also want to look at having the proper liquidity so that you are able to take advantage of deals.

Really looking at those types of deals, buying at discount, buying in a distressed sale, your neighbor needs to unload or you have fire sales here, fire sales there, people unloading and really just want to get rid of deals and it’s not even real estate. There’s lots of other things: cars, vehicles, etc., where you can get deep discounts if you’re in the position to help a person when they’re trying to fire sale.

So looking at liquidity, I think it’s a vital part of a real estate plan. I use the saying often times where you have liquidity in cash, opportunities seek you out. So this kind of comes down to really where do you hold your liquidity. So in the previous lesson, I talked a lot about when you have money in a bank account, it’s subject to creditors sometimes and often times, also individuals become somewhat irrational when they see a lot of money sitting in their bank. They want to invest it. They want to but a property. They want to get it productive and often times, that leads them into impulsive decisions.

So looking at really where we as advisors have our clients store their cash is in what we call wealth maximization accounts. Now, these accounts are uniquely designed insurance policies and they provide essentially a rate of return, dividends, privacy, asset protection, that is all helpful to a real estate investor. But really when it comes down to taking advantage of deals, it is liquid to the point where there is no penalty, it’s available within a couple of days and you can take advantage of those deals or those opportunities that seek you out.

And really, these are the financial vehicles that we primarily use and they provide a return, they provide liquidity and it’s much better than having money sitting in a bank account earning nothing. And so that’s really where we sort ourselves apart from the traditional financial advisor who uses ETFs and mutual funds and 401(k)s and IRAs. Those types of investments, most of you guys are investing in real estate because you’ve seen what results those other investments provide you. So we basically take the other side of it where we use products, insurance products primarily, that allow you to not only use them but also participate in real estate.

And so, looking at your liquidity again to summarize, liquidity is really important because that liquidity is going to enable you to essentially get into discounted deals and opportunities that if you do have cash, you can be there and make really good profits right out of the gate. But also, it’s where you store that liquidity, making sure that it has privacy, has asset protection, is earning interest, and is also liquid. Those are characteristics that are vitally important to a real estate investor.

So looking at where you can learn more about this type of account and how you can use it, you can go visit our website, which is www.paradigmlife.net.

Mike:HomeVestors, the “We Buy Ugly Houses” folks, is a franchise system of hundreds of real estate investors that have purchased over 65,000 houses. If you’d like to learn more about the most powerful real estate investing system in existence, whether you’re a pro looking to take your business to the next level or whether you have no experience at all, but a burning passion to be successful in real estate investing, please visit flipnerd.com/ugly to learn more.

Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.

Are you a member yet of FlipNerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at FlipNerd.com.

Please check out the FlipNerd family of real estate investing shows where you can access hundreds of expert interviews, quick tips and lessons from leaders across the real estate investing industry. They’re available at flipnerd.com/shows or simply search for FlipNerd in the iTunes Store.

 


 

Patrick Donohoe
Patrick H. Donohoe RFC, IAR ...is a business person, entrepreneur, investor, and podcast host. Patrick is the President and CEO of Paradigm Life, a private financial service, consulting and education company which provides its services to individuals, businesses, and investors. Paradigm Life started in 2007. Patrick is the host of The Wealth Standard Radio, which has been broadcasting since 2007 and continues to airs live weekly. Patrick is the co-creator of The Cash Flow Wealth Summit - a virtual financial conference. In its inaugural launch, the conference had 33 presenters speaking on 12 different topics which ended up attracting over 5900 attendees from more than 30 countries. Patrick is also the President of PL Wealth Advisors, LLC a Registered Investment Advisory. Personally - Patrick grew up in West Hartford, Connecticut and moved to Salt Lake City, Utah in 2003 to attend the University of Utah and subsequently graduated with a BA in Economics. He currently resides in Salt Lake City, Utah, with his wife of 13 years and their three children.
Patrick Donohoe

Latest posts by Patrick Donohoe (see all)