Skip navigation

The Entrepreneur Maker

Best selling author Loral Langemeier tells her legions of followers to quit passively investing their savings in stocks and bonds. Invest directly, she says, in real estate and in other businesses. Why be so passive?

Loral Langemeier, a “financial coach” and author of the best-selling book The Millionaire Maker (McGraw Hill, 2006), has this to say about financial advisors: “While many financial experts are earnest professionals trying to make a living, they can't help the fact that they are commission-oriented and tend to be conservative. Their interest is to keep your money in safe-and-sound accounts. But safe-and-sound accounts aren't so safe and sound any more…Sometimes, putting your financial plan in the hands of someone else is the riskiest thing you can do.” It's not because you financial advisors are crooks. But, your typical buy-and-hold approach and your reliance on ‘professional’ money managers, she says, exposes your clients to risks like crooked executives, global crises that shake capital markets, pension plans that go bust, etc.

Langemeier, who started her first business at the age of 17 (aerobics instructor and personal trainer), is not anti-Wall Street, per se. She just thinks that the “park and pray” method (as she calls it) fails to build wealth for most people. (After all, she says she became a multimillionaire at the age of 35 by doing it herself.) Better for an investor to take charge himself, use leverage (i.e., home equity) to start his own business and buy cash-generating businesses, like real estate. That is, after all, how the rich do it, she points out. Langemeier calls it “direct asset allocation” or “direct investing.” To build wealth you have to go “beyond traditional investment options, such as stocks, bonds and mutual funds.” And you need help (lawyers, analysts, “field” partners), which is what her financial coaching business Live Out Loud does. Langemeier says her network includes thousands of entrepreneurs who do business together.

Some advisors might find this threatening, but the former farm girl from rural Nebraska, who built a diverse portfolio of real estate and other businesses, isn't totally against using brokers. She even has some who are partners. Her message to the average Joe Investor — to get out there, quit your job and make some money directly investing in business yourself — is inspiring. But, also may be a little light on the topic of risk. Recently, Rep. editor David A. Geracioti spoke with Langemeier about her take-charge-of-your-money philosophy.

Registered Rep.: In your book you describe a form of investing you deride as “Park and Pray.” Please explain.

Loral Langemeier: Park and Pray? Oh, it's a huge problem. I mean, what people do is, well, nothing. For decades, most people just parked their money with somebody and prayed it would do something. I think a lot of the mistakes are made regardless of whom they're choosing [to park it with].

RR: You claim to be able to teach people to become millionaires. Tell us what your organization “Live Out Loud” is about.

LL: Live Out Loud is a financial education company. And we've been literally creating more millionaires for years — aggressively for four years. We probably have 20,000 members in our community. We do direct investments in real estate and other businesses. We have lots of attorneys and financial analysts around us that make sure we do private placement memorandums and everything's papered up.

RR: Does it cost money to join?

LL: It depends on which level you want to play. So, are there places where it's going to cost to learn more to play more? Absolutely. But we have free seminars, so people can get stuff done just with the book and free seminars and free tele-seminars we do. But, if somebody wants a one-on-one millionaire coach, that costs money.

RR: You advocate making direct investments using teamwork and partners to help run the direct investments.

LL: In order to locate the optimal direct investments you need partners out in the field. They provide the legwork and oversight while you provide the cash, the credit or the network of investors. Field partners include realtors, business brokers, even financial planners. The difference in our model is really about taking the middlemen out. We own directly, so we can control it, we know everybody on the project, we know what their skill sets are. Whereas, in Park and Pray, you really don't have any control. The best you're gonna do is get on board and say, “Go team.”

RR: So you're against investing in the stock market.

LL: I'm not saying don't do anything in the market. But, so few people know how to take direct control of their own investments. Real estate is an even better example. The depreciation, the LLCs, the tax benefits, the return benefits of owning real estate direct versus owning in the market are astounding. It's the same with gas and oil. Gas and oil gives you the highest level of depreciation of any of the investments that we've even touched. Yet, most people own the stock instead of owning the wells directly. And, our model, it's about team, it's about really learning due diligence, learning the risk management pieces of it and putting together a strategic portfolio.

RR: Well, that sounds like a full-time job.

LL: It's not a full time job if you're a team. Clearly, if that's all you're doing, running one project by yourself, there's not enough time in your day. I mean, you'll be lucky to do one project a year, because there's so much homework to do. But, right now we probably have 20, 30 projects on the table that have been highly vetted, because we have thousands of people looking at these things, always in conversation. So, the group due diligence is unbelievable. And the openness of our “live out loud” community helps. If a deal really isn't working we speak up, then the person who's actually putting the project together changes it.

We just bought an orange grove in Sarasota, Fla. It was delayed probably 60 days because of all the environmental due diligence that is needed. But, when you say it's full time, that's one person's job, though. And the rest of us are truly passive investors in that project, getting the benefit of this kind of investing, because we do it with a team.

The truth is, Wall Street does the same thing. They just don't have it be known as widely to the American public as we do. You know? I mean, they all know what's going on, you know moment by moment by moment.

RR: I got a chuckle out of the “recovering” financial planner you mention in your book.

LL: Oh yeah, we have lots of recovering financial planners. I had one in class with me this week, and she was presenting more of a traditional model. Most of them aren't that wealthy. Not the kind of wealth we're talking about. And I think there's still a way for those same folks that are doing some of those more traditional things to add a nontraditional component to their portfolios. That's why we call them recovering. The financial planners who have found us have completely changed their portfolios, their client base, their offerings and are making an enormous amount of money in nontraditional ways.

RR: But aren't there liquidity issues with this direct investing approach?

LL: Absolutely. But it depends. Clearly there are some deals you're in for 18 months. There are some turnarounds, for example, that won't throw off cash for some time.

RR: In your book you say something that would be heresy on Wall Street: Taking money out of an IRA and putting it to work.

LL: Absolutely. Now, we're not saying cash it out and get the penalties — never, never, never. There are custodial companies in the country that will allow you to self-direct them to real estate businesses, timber, land projects, gas and oil, but still retain an IRA status. It's just moved into a custodial account, which is far more aggressively managed. And there's probably five to seven companies, maybe even 10, across the country that know how to do this. It's very limited.

RR: What other strategies do you use with your IRAs?

LL: We can play options, land options. You can play real estate options inside your IRAs, you can play them just straight out.

RR: Well, that's a little bit different than buying the S&P 500 index and putting it in your IRA.

LL: Exactly. And the returns are astounding. That's the difference.

RR: But how do you figure out what to invest in? Isn't that harder than entrusting your money to a reputable financial advisor?

LL: The differences in our model is with the team; using other people's expertise and experience, versus the traditional model where everybody thinks they have to figure it all out by themselves. If you look at most of the financial books, they're all about the same old model: go get out of debt and then you'll live happily ever after. No, you won't. You just won't have any bills. That doesn't mean you have any more skills, you don't have any tax benefits, you don't have a better portfolio. Nothing is going to get you through life better than our model. Our model is about creating more, sustaining more, learning more, which means, for the lazy person who wants to sit on the couch and eat bon bons, good luck, cause that's not what millionaires do. Millionaires are the most active learners I know. And they're always pursuing other opportunities, not casually, but strategically. And that's what we're saying. We're saying, get off the couch, turn your brain back on and start taking control, cause the baby boomer portfolios that I look at are never going to make it. Those guys, when they're in their 60s and 70s, will have to go back and get a job, or in our model, we say go create a business for the first time in your life. Let's have a good ending.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.