Before we discuss building an opportunity fund, I want to point out that if you don’t already have an emergency fund with at least 3-6 months reserves then that should be your first goal. Now that that’s out of the way, lets move on to the fun part.
Okay, some of you might be asking “what is an opportunity fund?” In short, it’s the money you set aside to take advantage of opportunities that arise. Starting one is as simple as opening a separate savings or checking account solely for investment cash-on-hand. The amount is up to you, but remember that this money is at best earning very low bank interest until deployed so make sure to keep it working. The possibilities are endless, but some examples are listed below.
- Market opportunities: Imagine if you would have had a significant cash position to deploy immediately after the financial crisis or in the early stages of the Covid pandemic.
- Real Estate: Once you start paying attention, there are always opportunities in real estate especially if you have significant capital. These can range anywhere from a single family rental or flip all the way to large multifamily syndications.
- Passive Business Opportunities: There are small businesses everywhere that are open to giving you debt or equity in exchange for a capital investment…for example: small loan companies, pawn shops, liquor stores, etc…
- Invest in yourself: You may want to start your own business or side hustle. While this isn’t usually passive, done correctly over time you can build any business to run with or without you.
- Buy an existing business: Small businesses in financial trouble are best as they can usually be bought at deep discounts. You can also invest in established businesses where the owners are retiring.
- Simply taking advantage of a deal: You’d be surprised how often you can buy something for $10,000 and sell it for $12,000 or more in a very short period of time. Cash strapped people and/or businesses are often willing to sell assets at deep discounts.
We stated earlier that the possibilities are endless, but one thing is certain. If you don’t have the cash, you can’t take advantage of the opportunity. If you think back, how many times can you remember when you could have really reaped the benefits of something if you would have only had the money to do it? It’s time to get proactive. Start building you opportunity fund today.
NOTE: Remember that your opportunity fund is a living thing…it’s a business. Once you’ve deployed capital, make sure you are reinvesting proceeds back into the business so that you can use it time and time again. It will get to a point where the fund finances itself and there is no need for you to add additional personal capital. The snowball effect is truly amazing!!