On this episode of the Epic Wealth podcast discover better investment plans without stocks. We share proof that real estate is more secure than other investments and examine the reasons that people don’t pursue real estate investing more. Uncover common mistakes real estate investors make and learn a few simple rules for building wealth. Get your fundamentals for staying on plan!
Wealth is inevitable as long as you stick to your plan of passive income. However boring and predictable it can be. In the world of investing, boring is good. Boring is steady and certain; it’s reliable and persistent. Stay on course and get rich permanently with the Epic Wealth podcast. The sure climb to financial freedom!
What You Will Learn About Better Investment Plans Without Stocks:
- A new approach to investment planning
- Five reasons that nothing beats real estate investing
- Why your Return On Investment from real estate crushes wall street
- How leverage accelerates your journey to wealth
- The bottom line boosting tax benefits of real estate
- How risk can be virtually eliminated creating a safe path to wealth
- Reasons more people don’t pursue real estate investing
- How risk can be virtually eliminated creating a safe path to wealth
- Primary reasons investors fail at real estate investing
- Fundamentals for staying on your long-term plan for Epic Wealth
- How better investment plans without stocks can bring steady cash flow and financial peace of mind
Read the Transcript:
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Narrator: This is Theriault Media. It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so. You don’t have a money problem. You have an idea problem. Welcome to the final frontier where the average person has a legitimate shot at creating epic wealth. Your host, Matt Theriault.
Matt: Hello and welcome to the creating Epic Wealth show, the revolutionary new money show disguise as a real estate show. As real estate, it's the final frontier where the average person has a legitimate shot at creating epic wealth. I mean you really just don't have a chance at any sort of financial freedom unless you incorporate real estate into your financial plan. If you just don't have the time to do it, nor the desire to take on all of the heavy lifting? Then this is just the show for you. Glad you found us.
So we left off last episode of one way to accelerate your wealth creation, that being how the government rewards you for using debt. I mean as long as you use it in the way that they want you to, and one of those ways happens to be investing in real estate. Then I mentioned a second way to do that, that's what I'm going to talk about today. A way that's even more powerful than the first, and that is by harnessing the power of leverage. So if you're using debt in the way that the government wants you, you're also simultaneously harnessing the power of leverage, so you get the best of both worlds. I mean, but with leverage I mean there's really just no other wealth multiplier like it. Nothing can accelerate your journey to wealth like leverage and here's how it works. You see, if you were to invest $100,000 into the stock market and you experienced a 5% growth of your investment, your total investment would be valued at $105,000. Your $100,000 it earned you $5,000 that year. Now, if you were to invest that same $100,000 into a real estate investment, say that $100,000 was your 20% down payment, so that would make that a $500,000 investment. So it's $100,000 of your own money, $400,000 of somebody else's likely the bank, and you experience the same 5% growth on that investment, your $100,000 earned you $25,000 that year. Five times what it did if it were in the stockmarket. That's actually a 25% return on your money. The reason being is you received a 5% growth on the entire value of the real estate, the $500,000, but you only have $100,000 into the deal right? That's how leverage accelerates your journey to wealth. This does not include any income that the property produce, it doesn't include any of the equity that was paid down through amortization, and it doesn't include the depreciation, the business that the actions-- the all of the stuff that Uncle Sam rewards you with by investing in real estate. The average person just doesn't have a better vehicle in creating wealth than real estate. It crushes every other investment from stocks to bonds, to mutual funds, the annuities, the gold, the silver, the commodities, I mean you name it. Certainly, wealth can be built using any of these individually or any combination thereof, but none of them beat real estate. None of them will outpays real estate and there are five primary reasons, although they're probably more than five I can think of some few more but there are five primary reason I want to draw your attention to.
The first, I discovered it, leverage. I mean if you want 5 times your money on a 5% return, leverage it into real estate. The second is income, both passive and active, you can get both of those income, both of those are available to your real estate, but it's the passive income to what I'm referring. The type of income that flows in each month whether you get up and go to work or not. In fact, it doesn't take long, nor any extraordinary effort to create enough passive income using a real estate to match the minimum household income in United States. No. I mean 40 grant a year, you can do that pretty darn quickly with a real estate portfolio. I mean over at cashflowsavvy.com, we're doing that for people in four years time. Some of our clients are doing it even faster than that. I mean, imagine, accomplishing in four years what 95% of the population is failing to do in 40 years of working a job. That's the second one, passive income. The third reason: tax benefits. It's pretty common, now is that real estate creates epic wealth right? But many people fail to understand that amount of wealth that it actually allows you to keep. I mean it's an amazing wealth producer, as well as an epic expense reducer. That expense being your biggest expense in life, taxes. It makes sense to work from big to small right? Yeah. I mean you want to work on your biggest expenses first. Get rid of the big ones. I mean the TV financial gurus, they got you cutting out your daily latte as a part of your wealth plan. That's insane. Why focus on saving $5 a day when the purchase of a few investment properties-- I mean most-- with a person with few investment properties, most of you to employees can virtually eliminate their tax liability. So what does that mean?
If you don't have to pay taxes, and for most people, double your take home pay. So it's your choice, cut the coffee or double the money you bring home from work? It's up to you. If that's not sinking in yet, here's another perspective. If you take $1 and double it every year, in 20 years, you have $1 million. Crazy right? Now if you are taxed at just at 15% tax rate, you have just $250,000 in 20 years. So just 1/4 of your $1 million. 15% tax rate sucks up 75% of your money, but I mean who has a 15% tax bracket right? It's more like 30% right? So if we'll stay at the 28% tax bracket, that close to the median, you'd only have $51,000 at the end of 20 years. That's 95% of your money, your actual currency and your opportunity cost going to Uncle Sam. The tax benefits of real estate, it might not appear that exciting on the surface. But when you start doing the math, and then you look at that bottom line., tax benefits are downright sexy. So that's the third reason, tax benefits.
The fourth reason: Real estate, it's controllable. This probably one of my more favorite aspects of real estate investments is that you have control. It's real. It's not just a number floating in cyberspace, it's a tangible physical object that can be altered or it can be improved instantly by me. I can increase the income, I can improve the property, I can change its use, I can force appreciation on real estate. Try doing any of that with a stock, or you're nothing more than a passive passenger. With real estate, you're at the wheel, you're free to steer in any direction you wish, you're in control. So that's the fourth reason, control.
The fifth reason that real estate rocks in, and this reason is at the core of my mantra. That mantra being that real estate, it's the final frontier for where the average person has a legitimate shot at creating epic wealth, that one. See real estate has a dual purpose, meaning, your stocks, your mutual funds, your silver, your oil, they aren't going to do much for you in keeping you warm at night and protected from the elements, however you can live in your real estate investments. Shelter is one of human's basic needs. This dynamic is what really makes real estate for the average person, or even I guess the below average person. I'm speaking of means and resources, not the qualities of the person, but I guess it would still apply if that is what I meant. But for people just starting out in a limited means and limited resources, and/or even sophistication, that much needed shelter can be a part of their investment strategy. In many cases by adapting this strategy, living in one unit and renting out the other or even living in one bedroom and renting out the other bedroom, by adapting this strategy can be an even faster strategy to wealth. It's this dynamic that keeps the American dream alive for all that want it.
So with that being the case, why don't more people take advantage of real estate? For those that do, why did so many fail? Well I'll ask the first question: Why don't more people try? Why don't they try? Well it comes down to just, I don't know, three basic things, three excuses: They don't have the time, they don't have the money, or they just don't know how, they don't know where to start. But which, can all be just kind of summed up as fear. Then for some that thought, maybe it's not fear. Maybe is they just don't want it bad enough. Let's say more times than that, that's probably it. They just don't want it bad enough. It's simply not that important to them. Ironic isn't it? Meaning the millions of dollars spent every year on stuff that's supposed to make people rich, like the books and the seminars and the bootcamps, the coaching, the audio programs, the videos, all that stuff. They want it bad enough to go buy the shortcut to get it, but not bad enough to do it actually it takes to get it. That's what I mean when I say it's just not that important to them. I challenge you, I mean if you're not at the level of wealth you want, consider it's just not that important to you. I mean what do you do with your time aside from when you are working on your wealth? Whatever time you have allotted for that, what do you do on outside of that? What do you do with your money aside from when you get the money that you're using to create your wealth, what do you do with that? Those are the things that are important to you, and there's nothing wrong with it by the way. There's no judgement, there's no good, no bad here, no right or wrong. I'm just talking about your priorities.
For example, oxygen. That's at the top of the priority list, right? Food, it's probably next. We got water, we got shelter, you got the clothes on your back, those are all priorities, those are all very important to you. Given the basic human needs and the society we have created for ourselves, we don't have much choice than to place such importance on those things. But, how we prioritize what comes after those things, that's entirely up to us. Whatever you have in your life right now, you have chosen it. You chose it. You have it matter-- I'm in my current situation because so and so did this to me, or my community never supported me on this or my family never taught me, whatever it is for you. I mean we all have reasons for why we are where we are, but it doesn't take more than a quick Google search to find someone who once had less than you that now has more than you, or that now has what you actually want. Again, no right or wrong here. No good or bad. All there is is what so. That's why more people don't take advantage of real estate, it's just not that important to them.
So the second question, why do so many of those that try fail at it? Well, I'll answer that right after this.
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Real estate investments involve a high degree of risk. Residential income and returns may vary and are not guaranteed. Past performance is no indication of future performance. Nothing herein shall be construed as investment, tax, legal, or accounting advice.
Narrator: Now, back to creating your Epic Wealth.
Matt: Raise your hand. Raise your hand really high if you know someone that's failed at real estate. Go ahead, raise them. Put them up there, get them up there. Alright. So keep them up if you know more than one person that's failed at real estate. Ah! Not many hands are going down there. We all know a lot of people that had lost money in real estate right? So keep your hand up if you yourself have lost money in real estate. Uh-huh, still a fair amount of you. If real estate is so great at creating wealth, and it has supposedly created more wealth for people than anything else, still why do so many people fail? Literally there are three primary reasons, the actual reasons, that are literal reasons. I would say, one, it's bad contractors. Two, it's bad property managers, and I have to say, three, it's a bad strategy. Betting on appreciations, speculative investing, even though you're trying to time the market.
If you get those three things under control, you eliminate virtually all of the risk that's in real estate investing. So those are the three actual reasons, that could be a fourth I guess, you could include bad initial property analysis, getting the numbers wrong. But I want to look at this from a higher level rather than the literal reasons, I want to speak to what's going on inside, what's going on in your head up there. Now, I know, there are many examples of people who have made their fortunes in real estate, seemingly quickly. Even if they did create their wealth overnight, understand this that those are the exceptions, they are not the rule, they are the exceptions. In real estate investing, it's very simple, very simple at it's core. It doesn't have to be difficult either.
When getting down to it and looking at the process, successful investing has more to do with having a solid plan and sticking to it than anything else. That seems simple enough, right? Following a plan, we can do that. No, we can't do that. Most humans cannot follow a solid real estate investing plan because it's dull and it's boring, and they don't stick around long enough for the third adjective that describes the plan. That plan being explosive. So the two key reasons people fail in real estate is either that one: They don't have a plan, they don't have a solid plan. Or two: They do have a plan but they become impatient, start trying to speed up the process with more and more of us, speculative approach to their investing. Leaving the safe, secure, and predictable plan behind ,oftentimes abandoning it altogether. That's it.
So if you want to create your wealth, you need two things: You need a solid plan and the discipline to stick to that plan. You know what? That's great news, that's fantastic. I mean if you can stick to a plan, creating your wealth isn't just possible, nor is it even probable, it's inevitable. Indeed there are ups and downs in the real estate market, but the fundamentals remain as long as you stick to your plan. A plan of which is based on the fundamentals, you're going to get there, and you're going to stay there. But it's so dull and boring you say, yeah it is.
Listen, I'm not talking about getting rich quick, I'm not talking about ultra excitement. I'm not talking about getting rich quick, I'm talking about getting rich permanently. You know what? When I start to think about, when I'm thinking about the term get rich quick, I mean when you take into account the 40-year, 40-year traditional and unreliable alternative of stocks and bonds and mutual funds, the living below your means and the clipping coupons, and the sacrifice in your daily latte, and putting off your life until the best of those years are behind you, real estate is actually getting rich quick too. Not overnight, no, it's not by next week or even by the end of the year, but quick none the less. When you compare it to that 40-year alternative that I just described, quick none or less. So not get rich quick, but get rich quick-er is I like to put it, get rich quicker and permanently.
I guess there is one other way people fail at real estate, they put it off. They put it off until tomorrow, and they fail to realize that today is yesterday's tomorrow, but that's not going to be you, right? No, of course not. So let me give you two rules to follow to create your plan around, because you need the plans, so these are the fundamentals that I want you to based your plan on. Alright. Do not break these rules. That's rule number one, you can't break these two rules. Alright, and these are not my rules by the way. These are the rules that I and thousands of other, or the most successful real estate investors have used to create their epic wealth, but I didn't make them up. This is what everyone that the most successful people, this is what they follow, these two rules, these are the fundamentals. They really are-- there's just two of them. You might want to write these down. If you got some paper handy or you got a pen, now you want to write this down and place them where you can see them frequently, for when the dull and boring part of the plan starts to get to you, you can refer to this to keep you on track and to keep you from losing what you've built.
Alright so rule number one: Invest for income. Invest for income. Cash is not king, nope, uh-oh. Cash is not king, but rather cashflow is king when it comes to this game. Cashflow is king, so invest for income. Each and every real estate investment you make must pay you each month more than it cost you to own it, that's the rule. Even if you decide say to take a stab at a quick flip or an elaborate fix and flip, don't do it unless it cashflows also, because in the event that you're flipped, doesn't pan out, and you get stuck with the property, you want it to pay you until you are able to flip it. As we touched on last week, if it cost more, another thing to think about, if it cost more to purchase in your area than it does to rent, to cost more to purchase than it is to rent which typically-- what that means is that it results in zero cash flow, then you need to go and invest in an area that does cash flow.
Now, what you do with that cash flow, well you got two choices: You can reinvest it to accelerate your wealth creation, or you can use it to supplement your lifestyle. That's yours, you can do whatever you want with it. It's nice to have options right? It's nice to have choices, yes. So that's rule number one: Invest for your income.
Rule number two: Buy low. Buy low. You've heard the expression that you make your money when you buy real estate, right? Yeah, very true, but not all of it. No, now you don't make all of your money when you buy it, but you can get a sprinting head start by buying property right? At a discount? Then once you own it, you can make even more money above and beyond, even the cash flow and the tax benefits. You can actually force appreciation on real estate in a number of ways, but basically by improving the property and/or increasing its income. Even cutting the operation costs, that's going to impact the bottom line, forcing additional appreciation on your investment as well. Alrighty, so got it? That's it. Did you write those down? Invest for income and buy low. Those are the two rules you must not ignore. Invest in properties that already have equity in place and produce income.
So let me check in with you. What have you learned here? What did you notice? How is this different than how you've been going about your real estate investing? What are you going to do next? What's the next action step for you? Oh, but where will I find the time? Oh I don't know how to find this kind of property, help me. Stop it. Those are lame excuses. That's what people say when creating wealth just isn't that important to them. But you're not one of those people, no, you wouldn't still be listening if you were. I'm not that entertaining, you wouldn't be here unless you were interested in, if creating wealth wasn't important to you. Listen, if you truly are stopped by a time challenge, or lack of an idea of where to begin, I understand. I live in reality. So if that's truly your situation, here's your choice, you're going to have to figure it out-- you got to have to figure out a way to do it yourself, or you're going to have to go leverage the expertise in the brawn of someone else. That's it. Either you do it, or you get someone to do it for you. Go to cashflowsavvy.com, download their investor package, and schedule a VIP strategy session with them. It might be a good fit, maybe not, either way, it's a good first step. Remember, yesterday you said tomorrow. Go to cashflowsavvy.com and I'll be back right after this.
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Matt: That's it for today. We'll pick up from where we left off, right here, next week. See you then.
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