LIVING OFF DIVIDENDS & PASSIVE INCOME

A couple of years ago, I went to a real estate seminar and met a successful businessman. He was in his sixties and I was amazed to learn that he had more than a dozen small businesses going and was also trying to start his own bank.

Since I wanted to find out how did he manage to run so many different ventures, I offered to buy him lunch. (Incidentally, that’s a great way to cheaply pick the brains of someone who normally wouldn’t give you the time of day!)

Most of the various businesses he ran were some how interconnected and did a lot of business amongst themselves. Since they were in somewhat related fields, the management was a lot easier. For example, one of his businesses was writing newsletters for Trade Unions and another one was printing & mailing services.

Today’s guest post is from James at DINKS finance:

This posting will be on the topic of doing due diligence when evaluating investment opportunities. When I’m talking about investment opportunities, I’m speaking specifically about taking part in new business start ups. I’m not speaking about investing in stocks or loaning money to people at interest. To invest properly in new businesses, you’ll have to do what’s called “due diligence” or simply put you need to do your homework.

Here are some thoughts on doing this:

1) Research the market. All business operate within given markets. You should consider the demand for the product or service that your candidate business would produce. For example, if you might be considering investing in an internet start up. In this case you should consider the demand for the software or service the company is producing. Is it an American company which is feeling pressure from Indian or China? Is the product going to be used by a growing industry? So, to summarize you might consider using the internet to get a sense of the market.

Its not enough that celebrities people get paid for guest appearances at night clubs and public events. They now are getting paid to host their own birthday parties!

Paris Hilton was reportedly given $200,000 to celebrate her 24th birthday party at “Pure” in Las Vegas. She spent the last 3 at “Light” at the Bellagio, but they were too cheap. They only provided her a free private jet, a free luxury suite, free dinner and free booze. If they didn’t pay me $200,000 to celebrate my birthday, I wouldn’t go there either

Apparently its very profitable for the nightclubs to have celebs. One such club paid Brittany Spears a lousy $83,000 to attend a new years party. They then sold 3,000 tickets to the event at $250 a pop, which means they grossed $750,000 and probably netted around $500,000.

If you’ve ever wondered how much money the vending machine guy at your office makes, here’s an excellent post by GeniusTypes on how he got into the vending machine business.

It all started with having an open mind and buying a route from someone who had lost interest for well below what it was worth.

You’ll see this theme repeated in many successful investment stories.

Every so often you’ll see ads in the local paper about the company that sells large office-type vending machines holding a presentation. Apparently, the charge $1000 each and it takes a long time to recoup your investment. Most of the buyers give up and sell them for $100-$200 each and the second owner usually has better luck.

GeniusTypes kept his initial investment low by understanding how to value the business to begin with. He thus guaranteed his success by keeping a large margin of safety.

If you’ve ever thought of starting an ecommerce site but don’t know how, a good place to start your research is over at Net Business Blog.

Check out the post on
The Golden Rules of Ecommerce where the author describes his experiences at starting an online memory store.

Its a long post but some of the main points are:
1. Love your customers
2. Implement Just-In-Time inventory management
3. Control your marketing budget, especially for print media
4. Learn about marketing and don’t spend too much on it if you can’t genuinely track the results
5. Have an exit strategy and know what sort of business you’re getting into up front. (whether you’re buying a low-paying job or a scalable business).

And if you want more info on starting an Ecommerce Site, you can check out the real secrets here.

Russel Richard of the Dow Letter has a great article on The Ideal Business.

I once asked a friend, a prominent New York corporate lawyer, “Dave, in all your years of experience, what was the single best business you’ve ever come across?” Without hesitation, Dave answered, “I have a client whose sole business is manufacturing a chemical that is critical in making synthetic rubber. This chemical is used in very small quantities in rubber manufacturing, but it is absolutely essential and can be used in only super-refined form.

“My client is the only one who manufactures this chemical. He therefore owns a virtual monopoly since this chemical is extremely difficult to manufacture and not enough of it is used to warrant another company competing with him. Furthermore, since the rubber companies need only small quantities of this chemical, they don’t particularly care what they pay for it — as long as it meets their very demanding specifications. My client is a millionaire many times over, and his business is the best I’ve ever come across.” I was fascinated by the lawyer’s story, and I never forgot it.

Donald Trump wrote a book called “How to think like a billionaire’, which is by far the worst piece of crap ever written on Investing.  A far better book is The Art of the Deal which you can buy for under a buck! [Warning: None of the Donald’s books are on humility. They’re on creating a larger than life image and full of self-promotion and bragging. But then he’s not known for being modest.]

Anyway, I digress. The main focus of this post is this article, 7 ways to join the billion-dollar club. It essentially focused on businesses, but I realized with applies just as well to Real Estate Investors.

Here’s the gist of it:

1. Create and sustain a breakthrough value proposition.
Only buy value. Don’t go for those speculative deals and risky investments. Like buying in San Diego after everyone and their mother has gotten into investing there. Buy in places were the locals are still skeptical.