We emphasize that each trade has a buyer and a seller, so the costs for one party are the trading profits for another party. It is natural to look at costs from the perspective of an impatient trader, who consumes liquidity by placing market orders and pays the bid–ask spread. Adverse selection and inventory costs depend on traders’ behaviour, type
and preferences, and on the characteristics of the trading process. By nature, inventory costs exist only in quote-driven markets, where intermediaries have the institutional obligation to supply liquidity continuously; adverse selection and order-processing costs, on the other hand, may exist in any financial market.

The United States patent database is huge and complicated, and it would be foolhardy for novice inventors to believe that they could do thorough enough searches to base utility patent applications on them. But, with a little bit of instruction in how to get around on the USPTO website, anyone can do a pretty good preliminary search. What we mean by a preliminary search is this: if you go into the USPTO database and, with a limited amount of searching, you find your invention idea staring back at you; it is time to reassess your idea. Is the prior art (patent) that you just found your exact idea? If it is not, is your idea an improvement over that product? If you believe it to be your exact idea, it is probably best to set it aside and move on to your next idea before you spend any more time or any money on it. But, if you think your idea is significantly different or better, print that patent and take it to a patent agent or attorney for a legal opinion.

If you find a patent that appears to be your exact idea, be sure to read the claims section carefully to make sure that it truly is identical before you abandon your dream. Sometimes two products can be made for the exact same purpose and they can look very similar or even identical in patent drawings and still be very different in the embodiments of how they are actually made.

Or, they will be your competition if you plan to build a business around your invention. Either way, it will be to your advantage to know as much as you can about these companies that manufacture products similar to your invention. If your invention is something that is not specifically a retail item, such as a medical invention that would be sold through specialty outlets, you will need to track down those specific outlets and catalogs (perhaps with the help of a medical professional) in order to search in that area. However, if you have developed such an invention, chances are excellent that you are already familiar with those specialized outlets.

If your invention is in a field that is a specialized area in which the products are not found in the usual retail outlets, you may need assistance from professionals in that industry during your research or development phase. Be sure to have each person who assists you to sign a non-disclosure document for your files.

Although determining the GSI should be a pretty straightforward matter, one issue sometimes arises when the current owner has underrented some or all of the units. This is a surprisingly common issue with smaller units, for many passive investors get happy with a certain, reliable level of profit and don’t want to risk rocking the boat by attempting to raise rents.

How is this issue handled? Typically, appraisers will make an allowance for market rents, while bankers don’t; and investors look for underrented properties, for they can mean lower sales prices but potentially higher profits down the road.

This is probably the most difficult of the three methods to use properly when valuing income property, but actually it is the preferred method. Here’s how it works:

For starters, it might help to think of capitalization rates as interest rates. When you put money in the bank you ask, “Whatinterest rate will I get?” Capitalization rates are the same thing. Let’s assume you have $10,000 in a savings account, and at the end of the year you earned $500 in interest. The following formula will show your interest rate:

Interest earned – Amount invested = Interest rate

Or plugging the savings account numbers into the equation, we get:

$500 / $10,000 = 5%

I’m not going to show you step-by-step how to calculate the exact amount you should save each year, but I do want to give you a rule of thumb and show you how painful procrastination is.

My rule of thumb, based on a decade as a retirement planner, is that you’ll need to have 20 times your “unmet income need” for your first year of retirement in the bank on the day you retire. In other words, if you think you’ll need $50,000 per year for the rest of your life, and Social Security is going to give you $20,000, you’ll need $600,000 in the bank ($50,000 minus $20,000, multiplied by 20). This amount would provide you with a large enough nest egg to live off just the interest of your investments.

Not using up the investments themselves is crucial because none of us know how long we’re going to live.

Now, a good percentage of you reading this book will say something along the lines of “retirement is so far away that I’m not worried about it” or “I’ll worry about retirement when I get out of debt.” But, the key thing I want to pound into your head is that retirement planning is monumentally less painful the earlier you do it. In fact, if you wait until 15 to 20 years before retirement to start planning, you may not be able to pull it off.

Why is it such a big deal? Well, the biggest problem is that people are living longer and longer, and our employers and Social Security system are giving us less and less. In fact, it is very possible that you might retire at age 65 and live to be close to 100 years old. That means that 35 years, or one third of your life, will be spent without income from a job. If you are hoping Social Security is going to cover even the majority of that, think again.

I don’t mean to scare you, but rather hope to give you some major motivation for moving forward. Just like my wife kept her eyes on that little sailor outfit during delivery, you need to keep your eyes on retirement as you try and decide what to do with each and every penny of your income and expenses.

Another way of expressing this is to say that when I buy a property, it is a different property from when you buy it. Physically it is the exact same property, but since the ideas that I bring to the table are likely to be different from the ideas that you bring to the table, the property itself ends up being different.

Whether you like it or not, you end up being part of the equation. That is why the more ideas you have in your head, the more value you add. That is how I came up with another signature statement:

The most valuable piece of real estate is the six inches, give or take an inch or two, between your right ear and your left ear. What you create in that space determines your ultimate wealth and happiness.

Just how do these repatriated profits benefit the entire nation rather than just the companies and individuals controlling the investments? First, on entering the country, these funds push up the value of the British pound. And once the profits are in the coffers of a recipient company, that company will tend to spend the money in a number of different ways. They will invest some into research and development, employing scientists, engineers, physicists, chemists, and a slew of technical support staff. They will conduct marketing surveys and advertising campaigns, employing PR firms, communications experts, marketing staff, and legal spin doctors.

They may expand their premises, employing architects, engineers, construction workers, electricians, plumbers, painters, and the like. I think you get the picture. Money coming into a country tends to end up benefiting everyone. Money leaving a country tends to disadvantage everyone. That is why a balance of trade surplus is so healthy for a country, and a deficit is so debilitating.