Part 3: Learning How To Build REAL Wealth
One of the biggest challenges you’ll face as you begin to make money in your job or business, is learning how to responsibly invest the money you make.
Active income IS NOT passive income.
Making money and creating financial freedom are two completely different things.
I’ve had to learn this lesson the hard way through my own investments while luckily working with real estate mentors as my guides, so today I want to speed up your learning curve, and answer an incredibly important question you need to ask yourself…
“What are you going to do with all the money you make from your job or business?”
Should you buy a plane ticket to the Maldives? Buy a new car? Workout shoes or gear?
Or should you invest it, and if so, in what?
If you want to build real wealth and actual financial independence, the smart answer is to invest that money into assets that produce real passive income.
So today I’m going to walk you through an investment that I’ve personally made. But before I do that, I want to point out why this strategy is so important to creating that lifestyle you want by comparing it to what most other people do.
If you look at your typical middle-class American strategy, it sounds something like this…
You work your butt off for 45 years, putting money into an IRA, mutual fund, or 401 (k).
And you do this with one objective in mind… To build a big enough pile of money to sustain you for the rest of your life once you retire, around the age of 65.
Basically, you have 45 years to build up this nice, big, shiny pile of cash that you now have to live off of, which means it slowly declines every single month.
When that retirement day comes, what you have, (if you make it to that day) is what you have, and now you have to guess how much longer you’re going to live and how much money you’re going to need to pay rent, buy food and pay for car insurance, health insurance, and everything else that you’re going to need to sustain yourself.
In order to pay your monthly expenses, you must consume the money that you’ve accumulated, which means every single month you get poorer.
Think about that… Every single month, your level of poverty gets worse.
So what would happen to your life right now if you pursued it with the same strategy?
If you stopped going into work and producing an income today, but your expenses continued?
Quite simply, you’d go bankrupt.
So the official retirement plan for 99% of Americans is literally, “who can hold off bankruptcy the longest.”
Do you see how ridiculous and backwards that is?
Obviously, at TheStreets, we’re going to say, “F@*k that” and we’re going to do the exact opposite of what the middle class is doing.
Our goal is to take our ACTIVE income, and then use that money to invest in assets that produce more cash on a passive income basis every single month, so we can enjoy life NOW not in 45 years.
So let me walk you through a real world example of how I’m doing that so you can do the same if you’d like…
First and foremost, we need to find an asset to invest in that does two things…
First, it must produce cash flow and second it must beat inflation.
That basically leaves us with a few options…
Rental real estate, such as single-family homes, multi-family properties, or commercial space.
Small businesses like billboards, laundromats, car washes, etc.
And then you have a few lesser known investment vehicles in the oil and gas space.
(Message me if you know of others…)
The next thing that we’re going to do is make sure that finding and managing these investments takes as little of our time as possible.
Why?
Because the single biggest return on investment you can make is NOT from your investments but from your business or job.
As an example, if you look at your job right now and think about the time and money it took to start getting those monthly paychecks you can begin to see why your job or business is where the real returns are made.
Because of that we want to make sure that our time is focused on our active income ALWAYS.
Now turning back to investing let’s focus on the rental real estate investments, just like I have with my portfolio, and let me show you what an actual deal looks like.
Here’s a picture of the second investment property that I ever invested in…
This was with two partners and it’s called McNary Circle over in Manteca, CA (My hometown).
Now there are basically two requirements that you have to meet in order to invest in a property like this…
The first is that you must have the knowledge to recognize these investment opportunities and have the capital to make a down payment to buy the property.
What if you don’t have the money for a down payment? What if you don’t have the knowledge to recognize these opportunities yet?
That simply means that you’re in a position right now where you need to spend 100% of your time and energy on growing your ACTIVE income and acquiring this knowledge until you reach that point. (And I can definitely help you do that).
Nonetheless, this information is extremely important to you right now even if you don’t have the money or knowledge, because it’s going to help you create the right kind of goal down the road.
So, how is my project going? How is my investment working out?
Very well…
In fact, I ended up writing a check for my portion of the down payment & improvement costs for $10,875. And over the last two years I have made $3,744 in profit. (Not to mention my property management fee which more than doubles this amount but we will ignore that for arguments sake)
That’s obviously a 34% return, or as I like to think of it, an extra $1,872 per year in passive income.
And beyond a few hours to find & review the deal, along with managing the property, I didn’t have to spend much time making that money.
This allowed me to stay 100% focused on my number one investment, which is once again, my business.
So let’s say that you’re really happy with these results, and you re-invest that $12,747 back into another apartment complex which is exactly what I’m doing now.
For simplicity’s sake, we’ll keep the same ROI of 17% per year.
So at the end of Year 1, you’re going to have $14,913 dollars.
By the end of year 5, you’ll have $27,947.
By year 10, you’ll have $61,272.
By year 25, that $12,747 has turned into $645,735.
Your passive income in year 25 is $109,774 per year.
Now you’re passively living off your investments while your friends still have another 20 years until their retirement. And the best part? You haven’t touched your principle balance and there is zero “hoping” involved with this investment strategy.
This kind of information, combined with contacts that are brought to you in TheStreet Society, is the difference between achieving a life of true financial freedom, and just making enough money to keep up with your growing expenses.
Happy wealth building!
-Ryan Fisher