BenzForce will be closed from 12/4 through 12/14. We will ship orders promptly on December 14, 2022
×

Funding your Build in a Bear Market???

I’ve dabbled in a lot of investment strategies including stocks, bonds, options trading, real estate rehabbing, tax liens, trust deeds, wholesaling contracts, and business ventures.  Back around 2004 while I was a Principal Software Engineer for America Online, my brother and I started investing in real estate to grow our cash.  First came the rehabs which brought in some good money and by 2006 I had a unique employment situation where I was paid to sit in a cube with no real workload other than answering questions from business analysts and other engineers.  Armed with some knowledge from options trading courses, I used my free time at work to day trade.  It was exciting!  It was also unsuccessful because I wasn’t focused, so I shelved the day trading for a later time when I would treat it like a profession.  I then moved on to the funding side.  I remember my brother and I buying the past due taxes on an entire subdivision.  All the infrastructure was in, but they didn’t build any dwellings yet.  We were mid-foreclosure when we were bought out by the owners for a nice gain.  Later, around 2007, we bought trust deeds from a mortgage broker that funded construction loans for small, custom home builders.  Can you guess what happened next?  2008 is what happened, and I had hundreds of thousands of dollars out for loans that borrowers could not pay back.  We ended up foreclosing and getting back the properties, but it wasn’t until around 2021 that the last property sold.  The value of the homes was 42% of what was funded and raw land about 25%.  Throw in the lawyer fees and other costs and it was a painful experience.  The biggest reason I am not financially farther than I am could probably be summed up as a commitment problem.  I get bored and move on or am spread across multiple things and just not focused.

A couple of months ago I received a call from a nice young man that was thinking of taking out a personal loan to buy a Jeep and do a 617 swap.  He estimated a good build would take about $10k.  Having seen some significant losses I warned that things were about to get bad and if he lost his job for any reason or had a financial emergency, he would be risking his family’s financial future.  I told him that I would love to sell a pump, turbo and rebuild parts but did not think that sinking the cash into a financed build would be the best move at that time.  From a business perspective, this is a bad thing for me to do but most people still fail to understand the BenzForce *thing* and its not all about the cash.  A personal loan has an interest rate that is considerably higher than a rate tied to a physical asset.  So, this wouldn’t be purchasing a used car to get to and from work and financing at a lower rate.  It would be an unsecured personal loan.

I knew things were going to get bad and I think they are still going to get much worse.  My suggestion to the young bucks out there looking to build a cool ride is the go read Dave Ramsey’s total money makeover.  Get an emergency fund as fast as you can, dedicate to saving some cash every payday, pay yourself first (IRA/401K) and after all that is done, put what’s left into a car build account.  When you have enough cash in that account, build your car.  Some say you should have 3-6 months’ worth of reserve funds.  Could you imagine the peace of mind if you had 3-6 years’ worth of income in reserves?  Peace of mind and cash on hand don’t depreciate like the car in the driveway.

BenzForce is navigating this time in an interesting way too.  I am buying all that I can before inflation goes higher.  The cost of everything, especially transport/shipping has gone through the roof so I am buying at a lower cost even though the shelf life will be longer as the market takes some people out.  This year is also the first time I have ever financed anything for the business.  Using debt for business is hard for some to understand and it took me a lot to bring myself to do it but if you follow Ken McElroy on infinite return principals then you would understand.  Basically, I am pulling all my cash out and the business is standing on its own two feet. If things get bad, then I have no personal accountability (or financial loss) and if it doesn’t then the business is financially on autopilot.  This is a company guarantee, not a personal one. 

Whether professional or personal, capital preservation should be paramount for everyone at this point.  Leave nothing on the table.  If you are in a business, make sure it is funded with other people’s money, without a personal guarantee, and if it is personal then save for your build, PLEASE do not finance it.

Be safe and guard those dollar bills; every single one counts!

Rodney

The cookie settings on this website are set to 'allow all cookies' to give you the very best experience. Please click Accept Cookies to continue to use the site.

Your cart

×
x