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This episode is a business coaching course that teaches the definition of liquidity.

Results-Focused Training, Tools, and Workshops from Expert Business Coaches.

Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Definition Magician: Liquidity - The ability to convert an investment into cash quickly without loss of principal.
  • Lesson Nugget: Highly traded stocks are considered liquid instruments that can be quickly sold and converted into cash, whereas real estate is not an easily liquidated investment.
  • Lesson Nugget: Tying all of your money up in real estate investments can leave you cash poor, especially if you have upcoming payment obligations and are unable to liquidate your real estate assets.

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-All right Thrive nation, today we are joined with Michael "there is no real estate topic too obscure" Burer in sunny San Diego, a place where we can be out sun tanning. We could be out long boarding. We could be doing a lot of things here in San Diego, but instead we are here on Thrive15.com, one of the alternatives to lynda.com, talking about a term that you want to know, that I want to know, that we all want to know. It's called liquidity. And Michael, I'm going to go ahead and read the definition to you, and then if you could go ahead and give some clarity, some context just to give us an idea of what this term really means, that'd be great.

-Let's hear it.

-OK, here we go. Liquidity-- the ability to convert an investment into cash quickly, without loss of principal. Principlal-- OK, what does this mean?

-So liquidity-- well, real estate typically is not a liquid investment. Liquidity means that you can quickly take that investment, sell it, and get it into cash, put it into something else if you wanted to. So obviously the most liquid instrument is cash, but there's other liquid instruments like stocks usually. If it's a highly traded stock, would be liquid. You could go sell it very quickly on the stock market, but a real estate investment a building you own-- you can't convert that easily into cash.

-So let's give an example. If I'm going to the store, I'm going to Whole Foods. I go to Whole Foods a lot right now, because my wife-- we're kind of in an early '30s deal where you're kind of like, if we eat organic, we might live forever. You're kind of into that like, if I eat some more organic, I might live forever. We're kind of in that zone. So we're at Whole Foods a lot. We're there looking for organic avocados, and we're asking, did Monsanto make this? We're doing a lot of-- if you guys don't know Monsanto, just Google it. It'll freak you out, but we're trying to avoid the chem trails, eat healthy, that whole thing. And if you go to the store, and you say, hey, you know-- they say, hey, you owe me $10.74 and you say, well, I own some real estate, you can't buy it with that stuff, right? You need cash, liquid currency.

MICHAEL BURER: That's right.

-To buy it. But the reason why you'd want to own real estate, which you can't use to buy groceries, would be what?

-Well, you're going to have a longer term investment ride with the real estate. So, harder to get into, harder to get out of, but you want to diversify and have a variety of investments.

-Let's talk about this. You have operated as the CFO of a very large real estate firm here for a while, but you've also started off at the entry level with the business and kind of worked your way up. When the recession happened and a lot of people had a ton of their cash in real estate, did a lot of people say, I wish I had more liquid assets that I could use to go to Whole Foods.

-Yeah, so people can be very cash poor, meaning they're stuck. They have maybe some debts that are coming due, some obligations they need to satisfy. They have these real estate investments, but if the market has gone south, it's difficult to find a buyer. And so they can lead to some financial problems.

-Anything else as far as liquidity that you feel like people confused sometimes? Do some people think that-- what's an asset that maybe people think is liquid, but is really not? Maybe not as liquid as they think it is. So when you buy stocks and bonds that aren't heavily traded, is that maybe in a situation where you could get in a bind?

-Sure. So there's a lot of stocks and bonds that are not liquid at all, and based on the volume of them, you can determine how liquid they really are.

-Michael, in each one of these real estate segments, I really try to write down something special for you to show how much I appreciate you being here, and this one here-- I'm gong to see if I can read it without getting emotional.

-Let's hear it.

-I appreciate you more than I appreciate golden retriever puppies for what you said about liquidity.

-I love it. Boom.


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