Investing in Rental Property

How to Get Rich and Build Wealth

Get rich

Can you get rich or at least financially independent?

That's one question that many people ponder over throughout their lives. The vast majority of us have been schooled in the time-honored wisdom that the best route is to go to a good college and get a good job.

Then we spend our lives exploring the stock market or real estate or network marketing or a business or buying lottery tickets or suing someone if all else fails, without really understanding the basic concepts that will realize our dreams.




I'm going to give you the secret (I sound like a salesman here, but I'm not selling anything) and it is so simple, well....duh!

There are two immutable's in getting rich:

If you understand these two concepts and use them positively, I can guarantee that you will get rich. Now most people spend their lives either not using these or using them in reverse. For example:

  • They work at a job (trade their hours for fixed dollars) and spend all that they make

  • They incur bad debt (reverse compounding)

  • They use leverage with extremely high risk/reward ratios (for example, lottery tickets)

Many of us have read stories of poor ministers or spinsters that die and have millions of dollars in their estate - these people lived on meager incomes but used compounding( the time value of money) in their favor to accumulate wealth. In WV I lived across the street from a 92 year old spinster who had several million dollars in AT&T stock. She had purchased some small amounts from her employer when she was working a summer job in high school and 70 years later - voila!



 

I want to distinguish between bad debt and good debt. Some believe that all debt is bad, but I think it is correct to say that investment debt that has a reasonable risk/reward ratio is acceptable (think of your home). Debt incurred to buy that HDTV is bad debt as is buying that new BMW (even if you can write it off!)




So what is leverage? Basically it is when you use a tool to allow you to be more financially productive. There are many tools that you can use:

  • Starting a business and hiring employees to get more work done (good risk/reward)

  • Franchising your business (good risk/reward)

  • Using the Internet to leverage your efforts (good risk/reward)

  • Buying real estate with small down payment (good risk/reward)

  • Investing in commodity futures (poor risk/reward)

  • Using margin accounts to buy stocks (poor risk/reward)

  • Investing in a college education (may be a poor risk if you choose the wrong major!)

What about ways to use the time value of money or compounding to your advantage to help you get rich:

  • Saving 10-15% of your income -especially in a IRA or 401k (excellent risk/reward)

  • Investing in stocks (could be good or poor risk depending on your diversification)

  • Owning a completely paid for piece of real estate (good risk/reward)

I'm not so sure that college is the best use of investment dollars. With a typical education costing $40k/yr, the $160k invested at 9% for 35 years will yield $3,266,000.




So what should you do? Here's my list:

  • Put some money into an emergency fund

  • Pay off all bad debt - use a snowball formula

  • Accumulate 3 to 6 months of expenses into very liquid savings

  • Invest 15% of your earnings into a Roth IRA or 401k (especially if its is matched)

  • Buy a house from a motivated seller - don't make an emotional purchase

  • Start a business (our tax laws provide magnificent deductions for businesses not employees) Read E-Myth Revisited!

  • Systematize your business (see E-Myth Revisted) so it doesn't run you

  • Invest in real estate

And if you want to get rich - stop buying lottery tickets! That's my perspective.


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How to Get Rich and Build Wealth
Learn the secrets of how to get rich by using leverage and compounding. Learn the 8 steps to becoming financially independent.
The Best Investment - Real Estate, Stocks or Gold?
What is the best investment to make? Investing in rental property can beat stocks, bonds and gold in security, return and tax advantages.
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Investment in rental property page outllines the basic skills and knowledge you need to be a real estate investor and to avoid risk when buying rental houses
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Some tips for buying a house for use as a rental property investment
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Rent to Own Advantage - Using Lease Options
Leasing your house with a rent to own investing concept will optimize your profit and minimize tenant problems. Sometimes called lease purchase, lease with option to buy or lease with option to purchase. This type of renting mimimzes empty property, maximizes rent and gives you the best tenants.
Tenant Screening Tips and Tenant Credit Checks
Some tenant screening tips to ensure that your lease-purchase tenant will take care of your property. Doing tenant credit checks.
Flipping Real Estate - selling your Investment Rental Property
Flipping real estate the slow way makes more sense than the popular TV shows methods
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Use an investment property exchange (also called a 1031 property exchange) to sell your rental property without paying taxes
Real Estate Forms - Free Real Estate Contracts
Some basic real estate forms for rental property investment including lease option contracts for a rent to own concept and free real estate purchase agreement
Real Estate Investing FAQ
Real estate investing FAQ, ask or find answers to your rental property investing concerns, tenant problems or other investment property question
Real Estate Legal Tips - Protecting Investment Property Assets
Real estate legal tips to help you when buying and owning investment rental property - protecting your investment property assets, dealing with tenants, real estate forms
Real Estate Resources to help investing in rental property
A guide to real estate resources - real estate book, real estate courses and real estate web sites
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The materials contained on this website are provided for general information purposes only and do not constitute legal or other professional advice on any subject matter.

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