Let me confess upfront … I don’t know much about farming. I don’t know the details, but I feel comfortable with the general concept. And, that should get me through this discussion. But, you be the judge.
I do know a bit about property investing. Not that I’m an expert. But, I’ve been doing it since 1984 when I bought my first property. A block of land in Florida.
So, if you do something – anything – long enough, you get to know it. Consequently, I’ve gotten pretty familiar with property investing over the years.
Now that I’ve confessed my knowledge limitations, let’s talk about how property investing is like farming?
Seeds first, then crop
If a farmer wants to harvest a crop, what must he/she do first?
Now, a farmer would look pretty silly standing around waiting for a crop if he didn’t plant any seeds. Can you imagine a more rediculous scenario than this one between Farmer Smith and Jones.
“What are you doing? Asked Farmer Smith.
“I’m waitin for the crop to come up so I can harvest it.” Replied Farmer Jones.
“I didn’t see you out plantin this year. Did you plant any seeds this past spring?” Inquired Farmer Smith.
“Dog gonnit! I knew I forgot something. You know you’re right, I forgot to plant the seeds! That’s the second year in a row I’ve done that! Can you remind me next spring to plant the seeds?” Said an exasperated Farmer Jones.
Bottom line. No seeds, no crop.
No planting season, no harvest season.
Pretty basic stuff. Easy to understand. Not complicated.
Farmers are risk takers
Now, just because a farmer plants seeds doesn’t mean there will be a harvest. It just means there’s potential for a harvest.
Have you ever heard of farmers doing it tough because the crop failed?
That’s the risk of planting. There’s no guarantee of a harvest.
That’s the realities of farming or any business venture for that matter.
The farmer takes risks and is therefore entitled to the harvest bounty – if there is one.
Property investing like farming?
So, how is property investing like farming?
Well, the property investor must also plant seeds in order to expect a harvest. And, just like the farmer, the property investor takes risks. There’s no guarantee of a harvest. The same rules apply.
Begin with the end in mind
There are so many books out there to tell you how to be a successful property investor. So, instead of trying to rehash it all, I’ll just talk about the end result. Give a scenario that motivates you to “get planting”; get your property garden started. A garden which can grow into a full blown orchard or farm.
The scenarios involve two people, Mr Smith and Mr Jones. Both are retired. Both had the same jobs and the same incomes.
Mr Smith: How did you amass such a huge property portfolio?
Mr Jones: I just bought a new investment property every other year for about 15 years. I’ve only got 8 properties, nothing to call “huge.”
Mr Smith: Yeah, but how much money is that? How much income do you get from them?
Mr Jones: Well, it’s easy to figure. Eight properties by about $300 a week, so that’s an extra $2,400 a week. Minus expenses of course.
Mr Smith: How much do you keep?
Mr Jones: Most of the loans are paid off so I keep about half. So, it means an extra $1,200 a week in my pocket. More than my retirement check so that’s nice.
Mr Smith: Yeah, I know. You were lucky, I didn’t have the money to invest in property.
Mr Jones: Why?
Mr Smith: Because I had too many bills. I couldn’t afford to invest in property, I didn’t have any extra money.
Mr Jones: Are you sure?
Mr Smith: Of course I’m sure!
Mr Jones: Didn’t you and the family go on vacation every year? Didn’t you get a new car every two years or so? Weren’t you going out to dinner a lot? Didn’t you always buy everything brand new instead of looking for second hand bargains?
Mr Smith: Of course. We wanted to enjoy life. We never knew what tomorrow would bring so we lived it up a bit. When I was working we had the money. So, why not spend it? Enjoy it.
And so on and so forth.
You see, Mr Smith never planted any seeds. And, just like the farmer who doesn’t plant, he could not expect a harvest. No chance. Not going to happen. Nada.
And that’s how property investing is like farming. Simply put, if you don’t plant any seeds how can you expect a harvest?
You can’t.