Beginners guide to becoming WEALTHY

[Joe The Homophobe]

hey STR8UP, what states/cities are the best places to buy homes with the no money down system?

from what I heard you have to do it in cities where the prices are really low or it won't work. So it is really that great a deal to buy a home in some boring no good place like Idaho or north dakota where you even have a risk of having the house vacant because you can't find people to rent it.

 

[SELF-MASTERY]

Also, can you get interest-only mortgages in the States, like you can now here in the UK? That cuts the monthly outlay back by quite a margin as well. It's so simple, it's sick.

Yes you can get interest only loans, alot of hard money lenders provide this package, as well as, other brokers.

Alot of ppl consider interest only loans to be predatory, when offered to low mid class people with sketchy credit, because of the balloon payment . One of the reasons why GA has a huge foreclosure rate. Good for investors, bad for ignorant home owners.

 

[Page]

Thanks for the info, str8up!

I have a great idea for something I can market on the side later in life for some extra money, so I'm considering getting a patent for it now and then sitting on it for a few years until I'm in a better position to develop it. I would have 20 years from the date of filing to develop/exploit it, and another 20 if I renew the patent.


Here's the thing...I consider a patent to be an asset, even if it isn't generating money for me currently. Would you agree with this? Kiyosaki probably would, but i want to hear it from you as well.

 

[STR8UP]

>>hey STR8UP, what states/cities are the best places to buy homes with the no money down system?

It depends upon which “system” you are referring to. There are MANY ways to buy property without having to save for years to make it happen. The area you buy in might change your holding strategy, but creative financing can work in just about any market.

You want to get in with little or no down payment when you are starting in investing because it is likely you won’t have the capital to get you started. After you build up some cash later on in the game, you will want to CONTINUE to invest with as little cash as possible in order to be able to buy MORE ASSETS.

It’s all about LEVERAGE. Between my business partner, myself, and our investment partners we could have easily purchased 2 or 3 condos for cash. Or, we could have put a 20% down payment on maybe 10 units. Instead we chose to buy with as little money as we possibly could get away with, and now we have managed to recently ink 19 total contracts on new properties (some closed others pending).

If each property were to profit us $40,000 (some have already surpassed this mark) and we were to have bought only 3 units, in the end we would have $120,000. Not bad, but since we LEVERAGED our resources (cash and unsecured credit) by putting 5-10% down the profit would be $720,000. Which would YOU rather end up with? Play it “safe” and buy yourself a nice vacation, or invest like a millionaire and in the process BECOME one! Take your pick.

>>Alot of ppl consider interest only loans to be predatory, when offered to low mid class people with sketchy credit, because of the balloon payment

Why would anyone consider interest only loans predatory? You don’t make money paying off principal, you make money off of appreciation.

That said, unless you have at least a semi-passive sustainable income (you can make the payment with your “play” money) you shouldn’t be buying anything more than a basic house anyways. If you have to rely on your job to make a $5,000 per month mortgage payment and the only way you could have even gotten your payment that low in the first place was to get an interest only loan, then you are asking for trouble.

And what do you mean by balloon payment? Most interest only loans I have seen don’t have this. The interest rate might be adjustable and therefore the payment may increase, but I don’t know about the balloon thing.

>>Here's the thing...I consider a patent to be an asset, even if it isn't generating money for me currently. Would you agree with this? Kiyosaki probably would, but i want to hear it from you as well.

Most definitely. Anything you own or own the rights to that you can sell is an asset. Any asset that can be LEVERAGED (there’s that wonderful word again!) is especially valuable because a little goes a long way. Think about it. You create it ONCE, yet you have the potential to benefit from it for YEARS. As a matter of fact I just started another thread about creating and marketing some intellectual property of my own. Check it out CLICK HERE

 

[Tempest]

STR8UP,

I don't really understand the whole "no money down" thing. If you do the "no money down", then aren't your monthly mortgage payments excessively HIGHER? If that is the case, then how are you suposed to find tenants to be willing to pay that much for rent to cover the mortgage?

Thanks.

 

[STR8UP]

Originally posted by Tempest
STR8UP,

I don't really understand the whole "no money down" thing. If you do the "no money down", then aren't your monthly mortgage payments excessively HIGHER? If that is the case, then how are you suposed to find tenants to be willing to pay that much for rent to cover the mortgage?

Thanks.

It depends on your strategy, the market, and a variety of other factors.

A downpayment can't make a bad investment good. What you have to realize is that when you add to your down payment you are subtracting from capital that could be invested in other assets.

Lets say you have $20,000 cash. You want to buy an investment property for $100,000. Most people would use the entire amount as a downpayment to help bring the payment down to avoid negative a cash flow and having to pay mortgage insurance.

The smart investor realizes that a mortgage is "cheap" money (lets say 6.5% at today's rates). If he takes the money he would have used for a down payment and instead invests it in another asset that produces a rate of return that is HIGHER than 6.5%, he pockets the difference. Follow me here?

Your apprehension is purely psychological. I could logically illustrate on paper how you would ultimately end up ahead by looking at it the way I just explained, but it is very difficult to comprehend because it goes against conventional financial "wisdom".

You have to be willing to look at it from ALL angles. Your $20k has the potential to "work" for you. If you bury it in your back yard it isn't going to work very hard. If you are smart you would at least put it in an interest bearing account at the bank. It still isn't working very hard in the bank, so you might be tempted to invest it. If you know what you are doing it isn't difficult to get a 10, 20, 30% return OR MORE with your money.

So why on earth would it make sense to pay down a 6.5% debt when you can make 20% on the same money? If you put a small down payment and let the rest rot in the bank then OF COURSE you would be better off increasing the down payment. If you are a serious investor you are constantly seeking to maximize your returns and this DOESN'T include dumping a bunch of money into dead weight equity. Remember, it is a lot easier to put money INTO a property than it is to get it OUT.

Most people are naturally defensive and tend to neglect the more important offense. I crack up at the coupon clippers and the other tighwads who step over thousands of dollars to pick up a few pennies. If they would spend the same amount of time learning how to invest and make money rather than living a miserable life trying to nickle and dime everything they would never have to work again.

 

[Page]

Originally posted by STR8UP
I crack up at the coupon clippers and the other tighwads who step over thousands of dollars to pick up a few pennies. If they would spend the same amount of time learning how to invest and make money rather than living a miserable life trying to nickle and dime everything they would never have to work again.

I know exactly what you mean. my parents are like that. They count pennies and clip coupons and go apesh!t when they find a coupon that saves them 50 cents on whatever, but they live beyond their means and have considerable ammounts of bad consumer debt spread across several cards. My time is valuable, and sitting around all day looking through junk mail for coupons is counter-productive to me. I'd rather use my time for something important and pay the extra few cents.

 

[Page]

Also, should I bother getting a real estate liscense? My uncle recommended that I do that b/c I would know the trade and all the ins and outs of buying property then b/c I would automatically learn it as I am trying to qualify for the license, Seeing as the full extent of my knowlwedge is what you've taught me and what I've learned from Rich dad. I told him that I plan to buy and hold, not buy and sell. He still recommended that I get it.

 

[STR8UP]

Originally posted by Page
Also, should I bother getting a real estate liscense? My uncle recommended that I do that b/c I would know the trade and all the ins and outs of buying property then b/c I would automatically learn it as I am trying to qualify for the license, Seeing as the full extent of my knowlwedge is what you've taught me and what I've learned from Rich dad. I told him that I plan to buy and hold, not buy and sell. He still recommended that I get it.

I will answer your question, but first I want to give you an example of a rich mentality vs. a poor mentality.

My real estate agent is one happy guy. He just ordered a new Porsche. I would be happy as well. Problem is, this is the same guy who always complains about how bad his credit is. Obviously not bad enough to keep him from getting financed on an $80,000 car!

This guy has watched my business partner and I purchase several million dollars worth of real estate in the last 6 months. He has seen and acknowledged that on paper at least, we have already made several hundred thousand dollars worth of profit.

For whatever reason, he hasn't figured out that if HE were to have purchased a couple of these units himself that he would have then been able to have paid CASH for his new toy. He is so busy selling property (and I'm sure he is making good money right now from it) that he hasn't bothered investing much himself.

What happens when the market slows down and his income tapers off? He will have to hustle even more to keep up with his lifestyle. He will probably end up making $30-40,000 off of my purchases over the next couple of years, but my business partner and I are hoping to make anywhere from $500,000- $1,000,000 OR MORE on what he has sold us!

Enough with the story. There are different ways to look at this.

If you are getting a license to learn about real estate investing, forget it. For the most part the real estate courses teach you how to avoid geting into legal trouble when you are selling real estate to others. You might learn some of the terminology and such but nothing you couldn't learn from many different books at Barnes and Noble.

If you are getting a license to be able to SELL real estate to make money you should be aware that getting started is difficult and most people don't have the personality for it. Remember, real money is made with a pen, not a hammer. If you are trying to sell property to make a couple thousand dollar commission you are swinging a hammer, plain and simple.

I don't want to discourage anyone from making this a career; certainly there are people who make a very good living doing this and most agents invest as well. You should just be aware of what you are getting into and what it can and cannot do for you.

The flip side is that if you DO have a main focus on investing, if you are in the business you will always have your ear to the ground and plenty of contacts for financing, etc.

The main point I am trying to make is that selling real estate is a JOB that requires a lot of work to produce a return. If your goal is to retire in 10 years you are usually better off sticking to your current steady source of income and investing on the side until the investments can pay your living expenses. If I would have continued bartending and investing in property instead of trying to monkey around selling real estate and running a business there is NO DOUBT I would be 10 times farther along than I am today.

 

[Page]

okay, so forget the license, in other words.

I'm starting to work on building good credit now. (currently, I have no credit whatsoever, my first card is in the mail)
That's phase 1 of my master plan. Phase 2 involves using my good credit to borrow large ammounts of money from my local bank and using that to buy a 2-4-unit place. Phase 3 involves doing it again and buying another property, and so on. The going rate around here is around $500,000 for a no-frills 4-plex, which is what I want. (that's 4 possible rents, which is enough to offset mortgage and give me a nice slice every month. renting out all the units shouldn't be a problem, so I doubt I will have vacancies for very long)

I was at the bank today and I went digging for information by asking them about loans. Turns out, They can give me a loan at 0% up to $500,000, but the catch is that I have to have a very good credit rating (around 700 or better, although it can be done with a lesser rating, just not as easily.)
Obviously, i have to have good credit before even THINKING about doing this. In the meantime, I'm trying to learn all I can.

am I on the right track?

(one more question: suppose a place I want to buy sells for $500,000. Is that the ammount I should borrow, or should it be less? More? )

 

[STR8UP]

Originally posted by Page
am I on the right track?

(one more question: suppose a place I want to buy sells for $500,000. Is that the ammount I should borrow, or should it be less? More? )

The right track is avoiding consumer debt and acquiring appreciating assets. If you are working towards that then you are in good shape.

You obviously know the value of good credit, which is a good sign. Continue to build it and guard it with your life. HOWEVER....there ARE ways to buy real estate without credit. You could find the deal and partner with someone who HAS credit. You could convince an owner to finance you. Don't use the lack of credit as an excuse for inaction. You will definitely have to knock on more doors to make something happen but it will pay off by teaching you how to get creative.

If you are ready to start get out and make a deal happen without good credit to back you. By doing this you are TRULY starting at the bottom and getting down and dirty with the creativity. This will open your eyes BIGTIME. You will then be able to see that where there is a will there is a way, and you will truly be able to accomplish what others deem impossible!

I don't understand your other question. Are you asking how much down payment should you use?

If the road to wealth is buying appreciating assets, the vehicle that carries you is LEVERAGE. You need to buy as many assets as you can. This means stretching your resources to make them go as far as possible. This means usually means borrowing as much as possible.

For example-
You contract to purchase this 4-plex for $500,000. You find a way to borrow $530,000 for this property by getting creative (not easy but it can be done).

Lets say you walk away from the closing table with an extra $20,000 after all is said and done. You have an interest only loan and the rate is 7%. If you now take that extra $20,000 and invest it at a rate that is higher than 7%, you pocket the difference. If you turn around and RE-LEVERAGE the $20k your return is compounded. Make sense?

You can justify borrowing more than the property is worth as long as the deal makes sense. Just keep in mind that there is still going to be an added payment to deal with. If you blow that $20k on a new car instead of buying more assets with it you defeat the purpose (been there done that) and you could very well sink yourself.

Pssst.....one more HUGE secret that 99.99999% of people are clueless about-
If you have the ability to borrow extra money, such as obtaining a line of credit on the equity of a property, you can use that money to help you cover payments to allow you to hold an investment until you can sell for a profit.

It's all about TIME. If you can manage to keep your head above water until a later TIME when you can profit, you come out ahead.

People will tell you that's "risky" or "stupid" to borrow to pay on a debt. That's poor talk. If we are speaking of CONSUMER DEBT, they are 100% correct but you need to comletely erase this "never borrow to pay an investment debt" mentality from your mind. If you can understand what this means and use it to your advantage then congratulations! One day you will be entering an elite club few can ever dream about joining!

 

[SELF-MASTERY]

Do you suggest buying your first home (personal domicile) before investing in property. I moved back home 3 years ago, cash rich and credit poor. In the next year I'll be in the market for a house. I'm interested in an owner financed home, paying the smallest down payment I can get away with.

Also, do you have any experience with business credit. For example, creating an relp, trust, or corporation to shield yourself from lawsuits and creditors.

 

[Page]

Originally posted by STR8UP
The right track is avoiding consumer debt and acquiring appreciating assets. If you are working towards that then you are in good shape.

thats more or less what I'm trying to do.

You obviously know the value of good credit, which is a good sign. Continue to build it and guard it with your life. HOWEVER....there ARE ways to buy real estate without credit. You could find the deal and partner with someone who HAS credit. You could convince an owner to finance you. Don't use the lack of credit as an excuse for inaction. You will definitely have to knock on more doors to make something happen but it will pay off by teaching you how to get creative.

Inaction is the last thing that's going to happen to me. Thanks to Kiyosaki and You, I think about this every day and I dream about it at night. I see the world differently than I did before. Everytime I drive past a condo, duplex, or whatever, I think about buying it if it looks like a good place. I can already see myself living in my first building that I myself actually own, even though i'm not quite there yet. My self imposed deadline to own my first property is by age 27, if not sooner. I'm 21 now, so i have about 5.5 years left. This is what I currently want more than anything else, and i'm willing to go as far as I have to (inside the law) to get it.

Re: Getting an owner to finance me, I assume that I would have to find a motivated seller for that. would the average guy that wants to sell his building actually consider doing that for me, or would I have to find someone that is desperate to get rid of the property?

Also, would you recommend that I stick with buildings (by building I mean condo, duplex, 4-plex, etc.) , or should i also look at houses? The way I see it now, houses are not where its at b/c I can charge only so much for rent, and if that isn't enough to offset the mortgage, I'm losing money on it. Buildings, however, seem like a more logical move b/c I have multiple rents instead of just one. Am I correct in assuming this?

 

[George Gordon]

Free Russ Whitney Seminars

Hey STR8UP,

I've read most of the 'Rich Dad' series already.

And a few days after I put "Building Wealth" on my booklist (having read this post), I saw one of those late night infomercials--with Russ Whitney. He was offering a free seminar in my city. I called and registered immediately. And have since then bought and read most of "Building Wealth". It's an excellent read and incredibly educational.

Thanks a million for the lead--perhaps literally.

I'm wondering if you've ever attended a Russ Whitney seminar. If so, how was it?

I'll post my insights after attending on Friday for anyone else interested.

Also, it seems he (or his team) tours around giving free seminars. Stop in at his website and check when he's in your area.

russwhitney.com

Cheers!

!GEORGE GORDON!

 

[STR8UP]

Originally posted by Page
Inaction is the last thing that's going to happen to me. Thanks to Kiyosaki and You, I think about this every day and I dream about it at night. I see the world differently than I did before. Everytime I drive past a condo, duplex, or whatever, I think about buying it if it looks like a good place. I can already see myself living in my first building that I myself actually own, even though i'm not quite there yet. My self imposed deadline to own my first property is by age 27, if not sooner. I'm 21 now, so i have about 5.5 years left. This is what I currently want more than anything else, and i'm willing to go as far as I have to (inside the law) to get it.

You sound like you have it together. Just remember that doing it is night and day different from reading about it and talking about it. Not that it is extremely difficult to get started. It's just that everything is for nothing until (unless) you actually take the plunge. Keep positioning yourself but make SURE you don't spend too much time prepping.

Re: Getting an owner to finance me, I assume that I would have to find a motivated seller for that. would the average guy that wants to sell his building actually consider doing that for me, or would I have to find someone that is desperate to get rid of the property?

In today's market (around here anyway) you might be hard pressed to find a seller to finance. There are just too many buyers out there. Different techniques may only be able to be used in certain markets or at certain times. I was simply giving this as an example of one of the many possibilities that are open to someone who is creative. Don't rule it out though.....you never know what might work until you try.

Also, would you recommend that I stick with buildings (by building I mean condo, duplex, 4-plex, etc.) , or should i also look at houses? The way I see it now, houses are not where its at b/c I can charge only so much for rent, and if that isn't enough to offset the mortgage, I'm losing money on it. Buildings, however, seem like a more logical move b/c I have multiple rents instead of just one. Am I correct in assuming this?

I started with duplexes. When I purchased my first properties it was fairly easy to get a positive cash flow. This gave me a sense of security that was an important part of taking the first step. There is no right or wrong answer. You can certainly make money on almost any kind of real estate if you know what you are doing. Best thing to do is read up on EVERYTHING you can to get different opinions from others and formulate your own opinion based upon what you are comfortable with and what you think fits you best.

I called and registered immediately. And have since then bought and read most of "Building Wealth". It's an excellent read and incredibly educational.

Reading your post I had to laugh because I agree with you 100%. It is indeed a very educational book. Unfortunately a lot of people might not see it that way. They scoff at unconventional material such as this but won't hesitate to pay tens of thousands of dollars for college courses that teach them how to "fit into the sytem". I would rather learn how to "make" the system, thank you!

The way I see it you are either SOMEONE ELSE'S leverage or YOUR OWN leverage. A college education prepares you to fit into a slot that usually has only a limited market value. Books such as Building Wealth teach you how to leverage yourself and your resources to play the "money game" that has unlimited potential.

Thanks a million for the lead--perhaps literally.

Whether you fully realize it or not, you are absolutely correct. The suggestions I made have the potential to make you millions. It's entirely up to you what you do with the info. If you choose to commit and follow through you will be VERY happy you did when it starts to pay off.

I'm wondering if you've ever attended a Russ Whitney seminar. If so, how was it?

Yes. Keep in mind that NOTHING in life is free. The whole purpose is to try to sell you his materials. I personally found it tacky because I could see right through the sales pitch but I know for a fact from reading Building Wealth that Whitney knows his stuff. Keep an open mind and take at it for what it is. You might be interested in picking up some of his stuff. I was at a more advanced stage so I didn't buy any of his materials but if you are just getting started it will probably pay you to invest in some of his wisdom.

 

[George Gordon]

Originally posted by STR8UP
The way I see it you are either SOMEONE ELSE'S leverage or YOUR OWN leverage.

This is the mindset I've been realizing over the past year with the wealth literature I've been reading. I remember reading/hearing someone saying,

"If you don't have a plan for your life, someone else does."

Or, "If you don't have a plan for you money, someone else does."

I can't remember what book, or audio program. Maybe it was even this site. Or a few. Anyway, that idea seems to keep re-appearing everywhere I search. Sometimes in different forms.

Originally posted by STR8UP
Yes. Keep in mind that NOTHING in life is free. The whole purpose is to try to sell you his materials.

That's what I figured. But does he offer any insights that weren't included in his book? I'm too poor at the moment to be spending hundreds on programs. If I go, will I get anything new out of it? Or is it more of a 'cliffhanger' where right after he flashes the 'To be continued...' screen in front of me, I have to shell out the bucks?


I've been working on a small Internet business over the past couple of months which I plan to give me the cashflow to cover my living expenses so I can start pursuing real estate investing.

Also, would you be willing to give me advice over the coming two years when I start going into deals? Email.

Cheers!

!GEORGE GORDON!

 

[Page]

I just bought Building Wealth today, best $15 that I ever spent. It's good so far... he goes a lot into technique, which is something that I am severely lacking in. I have the mindset down pat.

This opens up a lot more questions, though.....

On page 55 in building wealth, Whitney recommends using $1000 as collateral to build a good banking credit line so I can get signature loans really easily w/o collateral.


I think I should move on this now, don't you agree?


Most of my family thinks that Whitney, Kiyosaki, and the others are full of bullshyt, so I'm not able to borrow the $1k from them to get started (I tried, they said I was full of bullshyt too for even thinking about this, but that's no worse than I expected) , so I'll have to get an advance from my credit card if the worst happens. I figured out how you can build a good reputation by borrowing and paying back loans early behind the scenes the way the book describes, but my question is, how do I eliminate the debt from the most recent loan after the relationship has been established? Do I get rid of it right away, or do I pay it off gradually? Also, how do I pay back that initial $1k that i originally put up if I took an advance from my card? Would taking an advance from my card be considered investor debt or consumer debt?

I don't want to get in over my head on this, so i'm hoping you could explain it.

 

[STR8UP]

Originally posted by George Gordon
This is the mindset I've been realizing over the past year with the wealth literature I've been reading. I remember reading/hearing someone saying,

"If you don't have a plan for your life, someone else does."

Or, "If you don't have a plan for you money, someone else does."

That's a great quote. Pretty much sums it up. Either you are the puppeteer or the puppet. Sad more people don't realize how little control they have over their destiny when they hand the reins over to their boss and their 401k and hope for the best.

That's what I figured. But does he offer any insights that weren't included in his book? I'm too poor at the moment to be spending hundreds on programs. If I go, will I get anything new out of it? Or is it more of a 'cliffhanger' where right after he flashes the 'To be continued...' screen in front of me, I have to shell out the bucks?

It was years ago that I attended his seminar. I doubt you are going to get a ton of great info, but I would at least see what it's all about. You may even end up meeting like-minded people who have access to resources that you are missing. Sometimes it is DEFINTITELY "who" you know that counts!

If you are on a limited budget stick to the books. PLenty of great info and reading material by several authors will give you a direction as to which style might interest you. I personally have not bought or attended any seminars. I got my started reading the books I recommended and using them to develop my own techniques.

Also, would you be willing to give me advice over the coming two years when I start going into deals? Email.

Might be kind of difficult for me to do, but this brings up another interesting theory I have. It is a little off track so I will write it up in a new thread.

I just bought Building Wealth today, best $15 that I ever spent. It's good so far... he goes a lot into technique, which is something that I am severely lacking in. I have the mindset down pat.

Yea, Kiyosaki is light on technique and heavy on minset and motivation (ALL important, BTW!). Whitney, Allen, and Sheets seem to be more nuts and bolts.

On page 55 in building wealth, Whitney recommends using $1000 as collateral to build a good banking credit line so I can get signature loans really easily w/o collateral. I think I should move on this now, don't you agree?

I have to admit that I am LAZY when it comes to seeking money. If there were anything that I could improve on it would be getting out and making friends with bankers. So, in a word, YES! The sooner you build your credit the sooner you can take advantage of the power of leverage.

I have never tried Whitney's credit building methods, but the principles are solid. Build business relationships with numerous lending sources. Also, when Whitney talks about "letting your banker buy you lunch" pay attention. Banks are in business to make money and they won't make a penny if they don't lend it to good folks like you and me!

Most of my family thinks that Whitney, Kiyosaki, and the others are full of bullshyt,

LOL....I am helping my parents buy their first investment property as we speak. I specifically instructed my mom to NOT tell my uncle (who is v.p. of a bank) what she is doing since he will probably try to talk her out of it! That's just what you have to deal with. The poor mindset is deeply ingrained in our instant-gratification world and truth is most people will NEVER get it. Even when you get past the negativity and actually have something to show for your efforts they will still tell you "it can't be done". Good thing I can work miracles!

but my question is, how do I eliminate the debt from the most recent loan after the relationship has been established? Do I get rid of it right away, or do I pay it off gradually? Also, how do I pay back that initial $1k that i originally put up if I took an advance from my card? Would taking an advance from my card be considered investor debt or consumer debt?

You take out the initial loan secured by the money you have deposited. You are simply borrowing from one to pay back the next. You will only ever owe the $1,000 principal (plus interest) because you are only borrowing against what you have. There really isn't much risk. Just pay attention to the fees your credit card charges and don't go spending the $1,000 on anything.

Although you are not borrowing the $1,000 to buy an appreciating asset I would definitely consider this investment debt. You always have the principal and your only real expenses are the interest and fees which should be minimal.

Think of it as a cost of doing business. No different than your educational materials or the pen you sign the contract with. It might not have much value for resale, but the benefit you reap will far outweigh the costs.

 

[Page]

Originally posted by STR8UP



You take out the initial loan secured by the money you have deposited. You are simply borrowing from one to pay back the next. You will only ever owe the $1,000 principal (plus interest) because you are only borrowing against what you have. There really isn't much risk. Just pay attention to the fees your credit card charges and don't go spending the $1,000 on anything.

Although you are not borrowing the $1,000 to buy an appreciating asset I would definitely consider this investment debt. You always have the principal and your only real expenses are the interest and fees which should be minimal.

Think of it as a cost of doing business. No different than your educational materials or the pen you sign the contract with. It might not have much value for resale, but the benefit you reap will far outweigh the costs.

I'm still confused.


so I would not use the $1k for anything, then? Then what do I pay the final loan off with? (assuming i have this right: I secure loan #1 from bank#1 with collateral $$$. I then take the money from loan #1 and dump it into an account in bank #2. I take out a loan from bank #2 and use it to pay back loan #1. I take out another loan from bank #1 (a little bit more this time) and use it to pay back loan#2. I then reciprocate.) Where does it end? The way I see it, I'm stuck with the original $1K I put up and the ammount of the final loan, whatever that may be. How do I get rid of the loan in the end? How do I pay it off? Do I use the original $1k for that and consider the collateral money to be forfeit?

the book also said I should borrow a little bit more with each new loan that I swap around this way. About how much (percentage-wise) would you recommend? I was thinking about 10% additional with each loan. I don't want to get into trouble here, but i'm not going to let unfamiliarity stop me. However, once I start this, I won't be able to walk away anymore without any loss, so I have to be ready for all angles. There won't be any going back, the way I see it. (the moment I secure that loan is the time where I choose to take the red pill instead of the blue pill-- and I'm stuck with the choice I made.) I just need more info and to understand it completely before i'm ready to do this. I want to do my homework and have a plan, rather than run into this blind and relying on instinct and blind confidence. I've learned that confidence in something will go a long ways, but baseless overconfidence can kill you. I just want to know everything I can.

 

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Str8up: I'm also thinking of jumping into the stock market to help build some investment capital to help me get started. My current plan revolves around IPOs. I plan to hold them until they begin falling signifigantly, and then sell them as quickly as possible once that happens. What are your thoughts on this strategy, and what advice do you have re: stocks in general?