2nd Lesson – My first trip to do property maintenance (at 12 years old)

This is the second most important lesson I ever learned about investing

Enjoy the last lesson? Learned the power of compounding?

It truly is amazing. When you put in the power of compounding and keep at it consistently something phenomenal can happen with your money. It just grows and grows and grows.

Bottom line is, we want our money and hard work to earn that money to continue paying us dividends and earning us more and more forever.

That is the only way to become wealthy.

This leads me on very well into the second most important lesson I learned about investing…

Picture this… So it’s been a few months since I discovered the power of compounding, I haven’t really done much with it, as a normal kid I went about and got distracted with daily “kids stuff”…

So my Dad receives a phone call, and he’s gradually raising his voice to the person on the other side of the phone, you know when you can just sense some tension… It was like that.

He puts the phone down and says to me, “get ready you’re coming with me, need to go and check out the kitchen at the flat in Chadbourne Street”.

As a kid would, I protested and eventually got my shoes & jacket all, ofcourse not without letting him know just how dissappointed I was that I was going and just how PRIVILEGED he was for me agreeing to go with him…

Anyway, we get to Chadbourne Street, and my Dad says “this investment is a pain in the backside…”

I don’t know why, I don’t know how, but the word “investment” shot me back to the power of compounding.

So, I decided to be smart, and give him some of his own wisdom back by saying “but investments are long term, you can’t complain in the short term…”

Feeling very smug, a feeling which was soon to end. I got out the car and started walking towards the building block doors.

He said from behind “right, here’s something else you need to learn about investing, yes it takes time to compound, but in that time, you NEED to be able to service the investment.”

I looked at him with a confused look, and said “what do you mean service the investment, this flat, you own it, you hold it and sell it when it goes up. Simple.”

To which, now we’re standing at the door to the building block, he looks at me and says, you know this flat, it has expenses, mortgage that’s paid monthly, the electric bill the council tax, the heating bill… the..”

I interrupted him, “so who pays for all of that if you haven’t made any money from the investment?”

He started smiling, he does that everytime he feels I’ve asked an intelligent question, he said “exactly! you need to be able to pay for, maintain and keep the investment alive for the 10 years while it’s compounding your money. Property is just…

The lift arrived, we stepped in…

“…one thing, you can have stocks, gold, silver, diamonds, companies, whate,, whatever as your investment…. BUT you have to be ablelele to pay for the investment WHILE it’s going up in value.”

Lift door opens… we step out…

“That’s why every investment MUST be able to generate you a monthly cash-flow that’s higher than the monthly expenses for maintaining the investment.”

We turn two corridors and head to our flat…

“There is no point you holding and owning an investment that costs you money every single month. That’s stupidity, you’ll lose whatever you make on the compounding on the maintenance of the asset. Especially when, like in this flat, the tenant is paying rent, which covers all of our costs for maintaining this investment.”

Ricardo, the tenant, opened the door.

That was the second biggest lesson I learned about investing. This is a fundamental that people just overlook, they think once they’ve bought the asset, that’s it, it’s done, you can go to sleep.

But that’s just not the case, you have to, every month make sure you’re getting a monthly cash-flow from the asset, it pays for any costs of maintenance, servicing any debt related to the asset, anything.

Never, ever, ever buy any assets that do not generate you a monthly cash-flow. It will cost you too much and you will end up going bankrupt, if not struggling financially to pay for the asset.

Pretty important lesson.

Next one, which is a KEY, key key key lesson in investing that allowed me to do my first £1,000,000+ property deal at the age of 17 is out on Sunday.

Keep an eye out for that.

Have a great evening.

Minesh Bhindi
www.GoldForLife.com

P.S. Are you finding these lessons valuable? Shoot me an email back if you are so I know…

1 Comment

cathi

November 18, 2012 at 10:12 pm - Reply

yep ….keep going…more to come I believe it reminds me when I started similar age but in market stall….you pushed the boundaries much bigger but same principles so its interesting to hear about your experiences thanx

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