Entrepreneurial Investing For Higher Returns

Long-term investing in the stock market can offer a passive return around 5-8% if you remain invested for 30 years;
but, unfortunately, that return is before taxes and inflation. This is so low because the company founders, backers,
early investors, investment bankers, etc., have removed all foreseeable profit from the company before it is ever
offered to the public market. There is a spectrum of investments available to you that is dependent on how much effort
you are willing to put into educating yourself, networking, and performing your own investment due diligence. If you
don't want to do any work, you are going to receive the tiny return of a CD or mutual fund in exchange for supporting
many people (in expensive suits) in between you and the actual business that is making money. For people willing to
educate themselves and put forth added effort, they will be sitting across the table from business owners and managers;
investing directly into a business that pays monthly or quarterly cash returns from 10 to over 20%.

For example, let's suppose that there is a great single-family rehabber in your area. This rehabber buys homes in bad
condition, fixes them up, and then quickly sells them for a profit. If he or she were very good, they'd begin taking on
several simultaneous or larger projects until they run out of money to buy any more homes. Once they run out of money,
they start using their credit until that is used up as well. Once a successful entrepreneur is out of cash and credit,
the only way to grow is to partner with investors. And to entice these investors, they offer higher than average
returns. [I want to make a very important distinction between what I define as a "start-up" and an "on-going business."
A start-up is a few people that only have a business idea who want to spend your money instead of theirs -- never invest
in them! Leave these to the professional evaluation of a venture capital firm. An on-going business is already being run
by someone professional who has current customers, suppliers, location, products, or services -- these are the types of
businesses you want to invest in]. 

You may be simultaneously networking with local business owners, educating yourself about their industries and the
local economy, and checking the reputation of those with whom you are interested in becoming a partner. Introduce
yourself as someone that has been watching their success, and indicate that might want to invest in one of their future
projects. It could be a business owner who has four retail stores and that you'd like to invest with them to open their
fifth store; or the owner of a local manufacturer needs some capital to startup selling products overseas; or invest in
a developer that splits large plots of land into residential lots; or an investor that packages privately held
mortgages. There are many local investing opportunities that offer the investor greater control than buying public
stock, along with higher investment returns.

Direct ownership requires a few skills that buying a CD or mutual fund doesn't require, but you will be well
compensated for developing these skills. The first skill to learn is some basic accounting because financial numbers is
the language of every business. You need the basics to start reading financial statements in order to evaluate potential
deals. If your desire is to invest in car dealerships, you need to know the difference between a well-run or a
poorly-run dealership from reviewing their financial statements. The next skill is networking to locate deals -- get
your phone ringing, business card circulating, and e-mail account filling with potential deals. Private equity and debt
financing is normally offered to family and friends, then acquaintances; and this will only happen if you are meeting
people and talking about what you are looking for. The third skill is performing due diligence; which means
independently verifying as much as possible about the individual, the company, and the transaction so that you can be
reasonably confident in getting paid in full. Few local private offerings will have a prospectus written by teams of
lawyers and accountants who have dissected the offer, so you, personally, have to do the work. No matter if this is a
relative or a friend, there are people who will steal your money and disappear or people that mean well but are unable
to follow-through and build a successful business. In either case, your hard earned money is long gone so you should
take great pains to get independent third-party verification of all the facts and history that you can.

I personally know a few people that have built their wealth with the high returns from private placement offerings, and
wouldn't invest in the stock market due to the lack of control and lower average return. If you have the willingness to
put forth the effort, great returns can be yours as well.