Beginners guide to becoming WEALTHY

[Docs]

Anything that pays you more than 6% (but you also have to figure taxes). Doesn't matter what it is, as long as you make more than you spend you come out ahead.

Only question now. I know a reinvestment property would suffice, but do you remember any of the other investment ideas that can kick out a 10, 20, 30% like you were saying?

 

[Page]

2. invest in a mutual fund (probably smp500)

No, don't do that.

When you buy a mutual fund, you are taking your money and putting it into the hands of a planner and you can only hope that he knows what he's doing. Plus, you're giving up a lot of your control and are still incurring all of the risk.

Stick with regular stocks, at least you can call the shots there.

 

[Monster]

It's the S&P 500. Haha SMP. Anyway, if you can spend just a little bit of time each week to look over your portfolio, I recommend you make your own picks. Mutual funds can make you money, but after fees and everything it is a lot less than what you can possibly do on your own.

 

[Page]

My best friend's dad is also a mortgage guy at bank of america, and he's going to follow in his father's footsteps, so i think getting loans shouldn't be too big of a thing for me.

Unless you have documented income, you will probably need someone to co-sign with you the first time. From the lender's POV, Banking responsibility usually trumps personal connections, especially for a first-time borrower. Your connections might help a little, but they probably won't make or break the deal.

It helps to learn how to negotiate with lenders, too.

 

[Kev07]

ahh i guess i'll just buy stocks on my own. well i'm going to start building up my credit as soon as i can, and i'll do it smartly. lets see how things go in a few years

 

[djbr]

If Brazilian interest rates are higher than property returns, no way its a good idea to borrow, you will just go bankrupt. Not to mention, the state of the Brazilian economy would be more prone to fluctuations or even a crash. You could really be risking your livelihood by investing simply to aquire assets.

Haaa... that hit home.

I will just say that Americans have it too easy to make so much excuses regarding debt and whatnot. Credit card rate is 7,6% per month. Nuff said.

Of course, if you're borrowing in USA and putting it here you will surely have some amazing returns. But to people who live here the game is completely different. And because of that, there is SO MUCH money to be made...

Always look on the bright side of life... :cheer:

 

[synergy1]

Tax deferred still sucks, plus you have to deal with inflation. Retirement accounts also suck because they dictate what I can/can't do with my own money that I put in before I retire. (I hate CDs and mutual funds for the same reason) By the time you're ready to retire, your nest egg will be a lot smaller than you expect.


disagree, one doesn't need an exorbitant amount of money in liquid accounts if your smart and live within your means. Retirement accounts are a part of the puzzle, hardly the whole thing. I never said otherwise. You still make money with tax deferred amount taken out of ones paycheck, its a fact. Not doing it is throwing away free money/

Also if the ROI statistic for investment holds true, it does not keep up with inflation either. so according to your logic, why do it?


Basically, Debt/Credit is a powerful weapon in the right hands. Don't knock it.


Don't knock house payments, either. If you have a mortgage on your own property you probably have equity that you can tap for other investments and you also have tax write-off. Renting does nothing for you except keep you off the street. You think you're being smart but everyone is really getting rich off of you.

I don't knock it, I simply state I am not ready to do it. Read my post carefully since you obviously did not. I was simply stating that without large monthly payments and simple investments of an income, one can amass a large amount of money for retirement. its just mathematics, no bias...

Renting, buying a new car etc are , as you said, ways others will be making money off of me. The car depreciates so much ones you drive it off the lot, the return on investment on a new car is absolutely terrible. We make mistakes, we learn from them.

On the other side of the coin your limiting the freedom you have by buying a house, thus rendering relocation possibilities much more difficult than someone who is renting. I would much rather feel out what I can do with my degrees, and what kind of money I can make as opposed to simply settle down and limit my geographical freedom.

 

[SmoothTalker]

So, just out of curiosity, how are all you RE investors doing now? A few years ago my family read Rich dad poor dad, got excited, etc. We even went looking at a bunch of houses, but decided that it was not a good idea. Absolute dumps were selling for 300k.

I thought, and still think, that this whole thing is a bubble. Sure it doesn't seem like it, but to most people, the tech boom was just the start of a very bright future...

With the whole mortgage mess and huge declines in property values, how's the business looking now?

 

[synergy1]

might as well tackle this one after a few months.


Stock market returns about 9 to 13 percent a year on average. Some years are lower, some are higher. In the last 3 or 4 years, you would have made a hell of a lot more in real estate than in the stock market (if you bought the S&P500 and sat on it). There's always a good market somewhere...you just have to be flexible to take advantage of it. If I wasn't learning the stock market I'd be learning foreclosures right now.

Buy and holds are good for investing, but playing the market has the potential to make good money...all without using debt , which is good for me. I guess the return on investment from real estate is not indicative of those who turn the profit at an opportune time as well.


A paycheck isn't a source of wealth. Its a paycheck. A diverse portfolio won't make you enough money to retire young unless you start with a lot of money. Risk is the only way to make real money. It takes money to make money. I pay to have the ability to borrow hundreds of thousands a day just for the opportunity to make a few hundred..and sometimes(most of the time so far) I pay to lose money.

Disagree, anything that builds your total net worth is a source of wealth. I do agree with the following statement regarding having money to make money. A small trading account will get eaten alive by slippage and commissions , and require much larger profit gains in order to be productive.

 

[SmoothTalker]

What, nobody at all?

 

[TooColdUlrick]

So, just out of curiosity, how are all you RE investors doing now? A few years ago my family read Rich dad poor dad, got excited, etc. We even went looking at a bunch of houses, but decided that it was not a good idea. Absolute dumps were selling for 300k.

I thought, and still think, that this whole thing is a bubble. Sure it doesn't seem like it, but to most people, the tech boom was just the start of a very bright future...

With the whole mortgage mess and huge declines in property values, how's the business looking now?

it's looking like a toilet at an Exxon Station.

consider yourself wise. the people that made the bucks in RE were ones who owned in 00-01 and then sold in 06...to all the suckers.

Rich Dad, Poor Dad? they're probably very poor right now. in fact, less than poor because they're upside down in a property, and won't recover for years to come.

Robert Kiyosaki is pretty much a moron. everyone's a genious when a market is hot. you don't see him hawking his book anymore on PBS do you?

what he never told anyone is that real estate is one of the riskiest investments you will make. you're leveraged at least 5:1, probably 10:1, infinity:1 if you did a zero down suicide loan.

let RE establish a bottom, then scoop 'em up on the cheap. it will take 2-3more years for this to happen, so you have plenty of time to plan.

 

[SmoothTalker]

That's what I'm currently planning. The market here in Canada is a bit behind, prices haven't started dropping just yet, but I'll be shocked if they don't start in the next year or two, because the general trend has been the same.

Which will work out just as well, by the time they hit bottom, I'll be finishing school and in a good position to buy a first home and maybe some investment properties.

 

[TooColdUlrick]

That's what I'm currently planning. The market here in Canada is a bit behind, prices haven't started dropping just yet, but I'll be shocked if they don't start in the next year or two, because the general trend has been the same.

Which will work out just as well, by the time they hit bottom, I'll be finishing school and in a good position to buy a first home and maybe some investment properties.

it's a global trend. international investors also bet big on both US subprime morgtages as well as subprimes in their own countries.

 

[strong like bull]

bump!

id also like to know how str8up and others are doing at the moment.

just to add my two cents,

i originally read this great thread years ago and it always intrigued me. obviously the real estate market took a dump, but i know of many people who lost tens, even hundreds of thousands of their hard earned dollars from their nest egg when the stock market nose dived. everyone knows money in the market is money at risk, and over the long haul that risk generally pays off... but the man who is 65 today watched his savings go down the toilet perhaps cant wait another 5, 10 years to ride out the storm.

and as far as mortgages... my mom was one of the people who got into an adjustable rate nightmare, ending up way over her head and eventually having to let her house go.

i think the bottom line is that now more than ever people have to take a proactive approach to savings, retirement, investing, etc. obviously its not practical for every common man to become his own financial planner... but its imperative for people to understand the basics of money and how to safely and approapriately plan for the future.

longterm, the stock market has risen. even through all the up and downs it has historically increased over time. if you can afford to take the gains while minimizing losses, and most importantly if you can afford the TIME to ride out the ups and downs and make an exit on a high note, thats great. but as the dot.com bubble burst showed, not everyone is right for that situation.

similar for real estate. if a determined individual does his homework and buys a house for $100k and 4 years later its $160k, youve got a good deal going. theres opportunity in that situation. or picking up a foreclosure-related property. or a fixer upper. its all gravy if the property and timing is right. but for someone to go all in on that property being a life changing investment is where things get real risky. getting qualified for a loan that will put you over your means... that not might be smart. there comes a point where people have to be financially sound. financially aware. grounded.


same as the stock market, eventually the real estate market will recover. people that buy properties within the next few years, when prices are rock-bottom, will find great deals and great investments. the flip side of the market tanking and people losing millions, is that everything is on sale. and for those looking for opportunity to acquire.. obviously youd prefer to pay the sale price and later resell at higher value.

but i cant stress enough that before anyone invests in anything, they need to build a stable financial foundation for their family. one that protects against loss/risk. after the foundation is laid, (consumer) debt is paid off, an emergency fund of xtra money in the bank.. THEN go and find yourself a great investment opportunity.

at that point, at the right timing, i think real estate and the market will always be a powerful opportunity for the right person. at its simplest, real estate investment, as a business, has the same principle of any business - if there is low demand for your product, until something changes, business is going to be rough.

-SLB

 

[strong like bull]

/double post

-SLB

 

[DonJuan11]

His methods revolve mainly around real estate. There are other ways to acquire wealth, but none as quick and safe as purchasing real estate with no money down. The stock market is another vehicle used by many, but requires an initial capital investment. Sure, you can start with a couple hundred dollars. But the rate of return you would have to earn to make it compare to real estate, over a given period of time, would be astronomical. Business has certainly created a multitude of millionaires, but it is tough to get started in and takes much trial and error.

I have been fortunate enough to have experienced all three. And despite the fact that I started a business last year that looks to have the potential to eventually make me millions, I would still recommend real estate. It took me 6 years to make any money in business. It took less than a year to make money in real estate.

Think of it this way. Lets say you are able to purchase your first piece of income producing property using a no money down technique. Lets say you were able to buy a $100,000 house for $90,000. It happens everyday. You just earned a paper profit of $10,000, without ANY initial investment.

Small effort, large return. That's the name of the game.

I can hear the naysayers now. "But you may not be able to turn around and sell it immediately....real estate commissions would eat up the profit....blah, blah, blah". What they don't realize is that you have already done your homework, and the property you just purchased will be leased to tenants for $1200 per month, while your mortgage payment and other expenses total only $900. You have a POSITIVE CASH FLOW of $300 every month, to do with as you choose (Think FINANCIAL INDEPENDENCE).

You have a positive cash flow of $300 per month. You are forgetting:

(1) Maintenance issues
(2) Non payment of rent
(3) Legal fees to kick tenant out

Suppose the tenant doesn't pay for 2 months. You are behind $2500. Then you have to go to court and kick him out, another $1000 for your lawyer. The judge always sides with the tenant more than the landlord, he'll most likely give him another 2-3 weeks to come up with the money or get out. Almost $4000 you are behind now. Suppose the tenant is angry with his girlfriend and damages the place before he moves out, costs you $5000 to fix the place up again. We will top it off at $10,000 now. You can't find another tenant for another 2 months...we'll make it an even $13,000. You are behind $13,000 in 3 months. Multiply that by 10 properties...$130,000 in 3 months. $520,000 in one year (considering all your properties are completely full for at least 7-8 months out of the year)

We will make it $500,000 to be generous. So you will be $500,000 in the whole in one year if you decide to go in real estate.

Or you could take that $500,000, pick some Warren Buffet stocks, and lay back kick it and enjoy the ride...



They don't realize that you are going to HOLD this property for at least several years. While your tenants pay all of the expenses. You should be able to increase the rent every couple of years (which means that $300 turns into $400 turns into $600 per month and on, and on...). Meanwhile, the VALUE of the property has increased. Instead of being worth $100,000, after a few years it may be worth $120,000, or $140,000.

Another consideration is TAX BENEFITS. Since I started purchasing real estate and have become self employed, I have paid VERY little in the way of income taxes. I paid MORE taxes when I worked as a bartender.

I collect dividends from my corporation, so I pay NO social security tax! This is why the middle class end up supporting the poor. The don't purchase income producing assets that provide a tax shelter. Could you think of a few things you would rather do with your hard earned money than support deadbeats? I can. And do.

So you have purchased one income producing asset. Your confidence is through the roof! What do you do next? BUY ANOTHER ONE! And keep buying them. If one property increases your net worth by $40,000 over five years, what could TEN properties do? You get the picture.

Ten properties = Ten times the hassle.

 

[ChalengeGuyFan]

Oh my God, DonJuan11, you are so pessimistic!

 

[Truman181]

Str8up - a few questions for you.

You started this thread almost 6 years ago. Did your method of Real Estate investment work for you the way you planned? Did you increase your net wealth the way you expected to? I'm not asking this to call you out if you weren't as successful as you thought you would be. I'm asking because I'm genuinely curious if this road to wealth works...you've had time to do it long-term. What are your results? What would you do differently, if anything?

 

[STR8UP]

This thread should be a reminder to all the schemers:
GET AN EDUCATION!!!!

Str8up is very, very wrong, and had probably lost his shirt. Real Estate can, and does drop in value!

Prices are correcting, credit is tighter, etc. Nobodie's flipping houses on credit anymore!

Think about it-why SHOULD it work-there's ZERO social value in it...you're speculating, not creating!

1) My post has nothing to do with "scheming"

2) Everything I wrote about in my original post is as solid today as it was back then. I wasn't wrong. I never stated that real estate cannot lose value. Generally it doesn't, but you are witnessing one of those rare times when it has. You probably won't see it again in your lifetime, at least not to this level.

Buying real estate for little or no money down WHEN YOU ACHIEVE A POSITIVE CASH FLOW applies in any market. Credit conditions today will make it much more difficult to buy with no or low down payment, but you can rest assured that people who will be buying real estate that supports itself through rental income over the next couple of years will make a lot of money due to this market correction. Those who have money right now are in like Flynn.

Once again the state of the market has brought prices to a level where you can indeed buy a property and rent it out and not pull money out of your pocket to support it.

3) Although I would be lying if I said that I had never been involved in speculating, I never advocated it.

4) Money and "social value"? What the hell are you talking about? It won't work because you aren't punching a clock? That's the most ridiculous thing I have ever heard.

It's easy to look at a conditions today and start screaming about an "education", but I'll tell you what, there are a lot of VERY educated people out there losing their asses because they relied upon the job that education got them and now it's GONE.

Street smarts will trump book smarts any day of the week.

 

[STR8UP]

Robert Kiyosaki is pretty much a moron. everyone's a genious when a market is hot. you don't see him hawking his book anymore on PBS do you?

Actually, you sir, are the moron.

The reason Kiyosaki isn't pitching real estate materials isn't because his advice isn't sound, it's because people like you who are ignorant to the facts see a down market as a time to hold onto money, when iin reality it is the best time to make money. People aren't buying real estate books, so why would he spend money marketing them?

If you did a little research before spouting off about a subject you obviously know nothing about, you would see that a few years ago Kiyosaki was telling everyone that a storm was a brewin' and that the smart money was going to GOLD.

Here's one of his articles from back then http://finance.yahoo.com/expert/article/richricher/2987

And what has happened to gold prices since then?

It's gone from about $550 an ounce to about $900.

http://goldprice.org/gold-price-history.html#5_year_gold_price

Stick to watching Suze Orman. I'm sure her advice is a little more palatable for sheeple like you.

id also like to know how str8up and others are doing at the moment.

Lets put it this way.

When I have followed the advice I laid out in this thread years ago, I made money. When I tried to speculate, I have made AND lost money.

One thing you have to understand is that if you are a true entrepreneur, there is no such thing as failure. No matter how bad things get, you will always have options.

I am all but out of real estate, and I am getting ready to possibly exit or scale down my retail operation. I have a great concept, but I'm not going to sit on it while the economy tanks for the next couple of years.

I am actually getting involved in a new business that has HUGE profit potential. I am producing informational DVD's and developing a line of "cosmetics". Not cosmetics per se, but I'm not going to go into detail for privacy reasons. Let's just say that I produce the product for $2-$2.50 and sell it for $16-$17. Lots of upside.....

Great post, BTW. Pretty much sums up the current bloodbath. Many, MANY millions will be made in the next ten years due to this recession (this is why the rich get richer....they are buying when nobody else has money). Money changes hands. Make sure it's coming INTO yours.

Str8up - a few questions for you.

You started this thread almost 6 years ago. Did your method of Real Estate investment work for you the way you planned? Did you increase your net wealth the way you expected to? I'm not asking this to call you out if you weren't as successful as you thought you would be. I'm asking because I'm genuinely curious if this road to wealth works...you've had time to do it long-term. What are your results? What would you do differently, if anything?

Like I said, I have made money and lost money. I am currently in a restructuring mode due primarily to not following my own advice, but also due to being involved with business ventures that did not allow me to concentrate on my strengths.

I'm not going to advocate trying to pick the bottom of the real estate market (you don't have to), but people who have the means to buy real estate in today's down market can and will make a killing by buying properties for pennies on the dollar and letting the tenants pay for them over the next 10-15 years.