Is That a Legitimate Shot at a 200% Gain? Or Just a Headache?

Editor's note: This week, we're sharing some of Steve's best tips on living a richer life. Today, he explains how to decide whether that next business deal is worth your trouble…
"Steve, you've got to think of every one of these deals as buying another headache Do you really want THIS PARTICULAR headache?"
My friend Brad Thomason gave me that advice a few years ago, and it stuck.
I'd asked him for his advice… I was interested in a tiny property-investment deal that I thought was a "slam dunk." I called Brad for his advice because he sizes up thousands of potential property deals similar to this one each year.
Based on Brad's advice, I didn't make the deal. And I'm sure glad I didn't…
If I'd made the deal, I would have been taking on a big headache that, in the long run, really wouldn't have been worth it…
While the return percentage would have been high, the actual dollar return wouldn't have been that high – particularly considering the amount of time and effort I would have needed to put in.
And that's the crucial point.
I've repeated Brad's advice to myself ("Do you really want THIS PARTICULAR headache?") many times since then… And I've kept myself headache-free.
Last year, Brad and I met up on the courthouse steps of a county auctioning off distressed real estate.
Dozens of properties were being sold… But we didn't bite on anything. The best property sold had a tax-assessed value of $266,000 – and it ended up selling for $40,000.
Buying a $266,000 property for $40,000 sounds like a good deal to me. It seems like I could have potentially made a 200% return on that property.
Brad didn't bid on it. And he didn't lose any sleep over it. In his case, he didn't need THIS PARTICULAR headache. That deal would have been a small one for his business. It was nowhere near his office or any of his other operations. So he decided he didn't need to spin his wheels on it.
I thought it showed restraint and judgment on Brad's part… He could have made a big percentage return on his investment. But for his actual business, it wouldn't have been that big a dollar return, relative to the time and effort required. So he passed.
The best investors and businesspeople I know fully understand this idea, and they use it every day. They know which particular headaches are worth taking on.
I remember a publisher in my industry telling me (more than once), "Steve, that's a good idea… But since it won't make $500,000, we can't spend our time on it."
He wasn't being arrogant or condescending… He is simply a keen businessman. He understands the value of his time and the value of his employees' time. This publisher had the restraint and judgment to know it was better to either improve my idea or find a bigger one, rather than waste time on a smaller idea.
I also worked for a billion-dollar New York hedge-fund manager, and he understood this concept. My marching orders were simple: Find any investment idea that can potentially make a profit of $25 million or more.
Easier said than done! But thanks to this mandate, the fund manager didn't end up with 1,000 little investment ideas to watch. Instead, he ended up with a couple dozen ideas that he got to know REALLY well.
The point is, just because an investment could make you a big return, doesn't mean you should do it.
Remember that each business deal or investment you enter into is another "headache." It will require effort to monitor and move forward. You have to ask yourself if this is the particular headache you want.
Brad passed on the $40,000 deal. That will keep his head and his time clear for a larger property deal closer to his home – one that could net his fund $1 million-plus in profits over a couple years. One that he's excited about.
I saw the publisher I wrote about pass up on certain profits as well. They both were smart to do it…
The best investors and businesspeople I know have a remarkable ability to say "no" to many likely profitable ideas, simply because they're not worth the headache.
Once you take on this mindset, you'll find that deals that are actually worth your time and hassle are rare. You'll learn to take on projects only when they're really worth it… And you'll have the energy to make those deals count.
Good investing,
P.S. I just released a video detailing the six best opportunities to make huge gains in 2017. And I discuss the one move you need to make before Trump takes office. Don't wait another minute… Watch this time-sensitive presentation right here.

Source: DailyWealth

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