All our eggs in one basket. My son would be so disappointed by the “dad-ness” of this.
Focus is our Focus
Are you old enough to recall when multi-tasking was a buzz word? I think it was a 1990’s phenomenon. When it was thought to be a compliment to be a multitasker. We may not use the term as often now, but we do the act of multitasking even more with the technology available today. We often have multiple windows open on our desktops simultaneously while handling text messages on our phones and answering phone calls. I have two computer monitors because one just won’t allow me to have open all the windows I need simultaneously. We watch TV and cook dinner while helping with homework. It’s all a bit overwhelming.
Being an entrepreneur requires you to wear many hats. You are a marketer, a bookkeeper, a salesperson, a manager, and the list goes on. I know that this is required when getting started but doing them all at the same time is not. A lot has been written on this topic lately from The One Thing by Gary Keller, which I highly recommend, to The Four Disciplines of Execution by Chris McChesney, which is my favorite book of 2019 thus far. These books all come back to the power of focus. We are too diluted in our day-to-day “whirlwind” as it is described in The Four Disciplines. We have to get back to digging deep on things that matter and single tasking.
Multitasking was thought to be a badge of efficiency in the ‘90s. However, we are not delving into anything with focus when we multitask. And focus is a VERY powerful thing! Much like sunlight. It takes a lot of exposure to get a sunburn but when a small amount is focused into one point with a magnifying glass it can ignite a fire in seconds. For a rare non-fire metaphor; you can envision a hammer hitting wood. Its force is spread out and it will leave a mark but when focused on the head of a nail, it transmits the energy on a small point at the tip of the nail and buries the nail in the wood. This is the same amount of energy but it has a greater penetration when the energy is focused on a small point.
How Focus Built our Business
This concept has been important to our business. When we decided to focus our energy, time, and money on one thing, our business took off. When we were trying to pay off debts, save a little, do some mutual fund investing, pay a little extra on the mortgage, and whatever was the flavor of the month; it seemed we got nowhere fast. Dave Ramsey gets it. Whether you agree with his financial principles or not, he has a point with his “debt snowball” in which you maintain all minimum payments and focus all extra money on ONE bill. He doesn’t advocate paying a little extra on every bill. He acknowledges that focusing all extra cash on one target at a time will knock them out. He also says that the psychological “win” of eliminating one debt will energize a person by allowing them to accomplish something tangible early. After this, the next debt is attacked, and so on.
We used this concept in regards to investing after seeing success using it with the Dave Ramsey plan. We put all of our eggs into one basket. This is exactly what conventional advice warns not to do. We quit investing in mutual funds. We stopped college savings. We quit putting money into our retirement accounts. WHAT!?!? We quit paying down debts. We sold toys. We even refinanced our house for lower payments even though we started over our 30 year loan. We worked overtime and put those checks with all the other money we had been putting in other places. And it started to build. This allowed us money for a down payment on our second and third rental (the first was my bachelor pad that we kept as our first rental). All rent profits were saved along with these other sources of money. It’s amazing what can happen if you allow your energy and capital to be focused on one thing.
This is all counter to conventional advice to diversify and “play it safe”. But we didn’t intend to be conventional or live a conventional life. So we focused. That diversification that had been advised was by those who played by old rules of an old game. We were playing a different game. We wanted to play a game where we created value and took advantage of the cheapest, longest term financing available. We wanted it backed by real estate, bought at a discount, and improved, in a market with finite supply and lots of demand. We wanted a tax-favored asset that would help to shelter some of our W2 income. We wanted these loans to be a shelter against the destruction of inflation to our saved dollars. We knew these loans were part of the asset. We knew we were at historically low rates and might never see these kind of rates again. We wanted an asset we could control and see and touch. Whenever an investment’s performance is a surprise when you open the statement, you know you have minimal control. This is how I felt opening my mutual fund statements. I might as well give my money to someone to gamble with and send me a letter to open to see how we did. No control.
Maybe we are control freaks. Maybe we just don’t want to risk our future on someone else’s decisions but we focused our energy on an asset class that we studied intensely. We know there is risk with any asset class that has a decent return. But one that you can control sure beats one you can’t. We limit our risk by educating ourselves and learning from wiser, more seasoned investors. We ask them how they weathered the downturns of the past. We buy with significant equity from day 1. We buy in areas we believe will continue to have demand even in a downturn. We grow at what we feel is a responsible rate. And when we open our rent payments, there is no surprise. It is predictable. The payment to the mortgage company is no surprise either. The only part of this equation that is really out of our control is the appreciation or depreciation of the asset. We could have a housing downturn and lose equity. But we believe that cash flow will continue in such a circumstance due to demand for affordable rentals when economies struggle and fewer people can buy houses.
These are all the reasons we decided to focus. If you want conventional results, follow conventional advice. If you want exceptional results, find a new path and follow different advice. There is nothing wrong with mutual funds and stocks and even adding a rent house or two for diversification. This can be a great plan for many. For us, it was important that we focus because we didn’t want to just diversify and follow the path set out by financial advisors. We wanted to make this a sustainable business. We wanted this business to pay for our kids college and our retirement. And the factors of leverage that allow for obscene returns with boring rental properties is amazing. Real estate is awesome but real estate financing is what really inflates returns.
We are in a growth stage of our business but when we get to a debt pay down stage, how do you think we’ll approach it? With FOCUS! We’ll do a debt snowball like Dave Ramsey uses to plow all cash flow into one mortgage at a time until it is wiped out, and then move to the next one with the cash flow freed up by the last one. And we may never put another dollar into the stock market. Time will tell.
I encourage you to find the path that leads where you want to go and then focus on that path. Don’t focus on someone else’s path. Our path is certainly not for everyone. The point is that we often try to do so many things at once that we don’t make progress on our intended path and sometimes realize we are following someone else’s path to begin with. We take cookie cutter advice from advisors who can’t consistently “beat” the stock market any better than a monkey throwing darts at stock picks can. Whatever your route, try to apply some focus and see how it affects your goals. I think you’ll be surprised what you can accomplish when you do. And along the theme of focus, as always, “keep the main thing, the main thing”!
And for those not on Social Media, here is a short video of a recent project we finished. We hope it inspires you.