Beginners guide to becoming WEALTHY

[oreo_renegade]

Originally posted by STR8UP
I sense a condescending tone. Could it be because you have been taught that wealth is 'bad' or 'dirty'? I see this all to often. Poor parents teaching their children that in order to become wealthy you have to be an evil greedmonger..

no, no, definatly not.

In fact I respect a LOT of rich people.

What I felt you left out of your post is that reaching wealth, wont make you feel succesful neccesarily.

Wealth isnt what you should look upon and go "haha, im so great." All of the hard work you spent on achieving that wealth is what you should be proud of.

^^ That is why I made the comment about becoming a Cuban Coac. smuggler. Also why I said a 20-room house and 50 cars were a neccesity.

Apparently I have to type out these bigass explanations, because "smart people" like Demon obviously cannot understand anything I mean. Your english teacher taught you straight didnt she?

Next time I'll make sure to run spelling AND grammar checks, just so I could hear your intelligent input, instead of complaints about my typing errors.

Some of us dont have time to go over and make sure we spelled everything PERFECTLY, especially for a *gasp!* ONLINE FORUM.

oops i forgot to capitalise the "I", i hope i dont get thrown in jail!

 

[livin large]

Originally posted by Aztec
Hey STR8UP!

Gotta a scenario and questions for you.

I have Roth IRA that I have contributing for 5 years. Since I just started being interested in personal finance, I called that company (a Citibank group) doing the investment and found out that I'm actually losing money (ex. I've given approx 8K and it's only worth let's say 6K). I got in touch with the advisor (a family friend) who started me with Roth. He said that since we are going through a bad economy, people are losing money. BUT hold on to it. Also he said that as investors, we want to have the market to go "up and down."

I don't have any intentions of doing anything to it anyway.

1. I'm not quite sure about what he meant about "up and down." Any ideas?

2. Should I rollover it to a different company like vanguard.com? Although I don't know how would that benefit me.

3. Should I reconsider how I allocate my funds?

1 - I don't know about wanting a market to go up and down (especially the way it did over the last 10 years). The guy is just trying to reassure you though. Don't read too much into that statement.

2 - Chances are it won't benefit you much, if at all. If you want to, you can research what you have in your portfolio (probably all mutual funds) and compare them to vanguard funds. If I were in your shoes I wouldn't switch unless yours have done extremely bad. Based on the $8,000 to $6,000, that's bad but not extremely bad compared to the market, so I'd probably just let it ride.

3 - Chances are your broker knows more about this than you, so you pretty much either have to trust him or switch brokers. Most brokers I've come across diversify ROTH's pretty extensively (almost too much). But without any specific market knowledge it's probably not too wise for you to tell him to mix it up.

If you want to do something, ask your broker why he has you in the funds you're in. Make him justify it, he's working for you. If you're not happy with his explanation, then switch brokers. Just remember with a passive long strategy (buying and holding mutual funds), you're not going to make money when markets go down, and the markets are down.

 

[Demon]

Everyone pay close attention to oreo_renegade. He knows everything!

 

[diplomatic_lies]

About the 4 Quadrants, I think everyone should be an investor. You can do that in your spare time or full-time; investing is pretty much the most flexible of everything (having an uncle who works as a barrister, buying and renting out/reselling houses, in his spare time).

Although self-employment can be pretty bad in Australia, as the government is starting to crack down on people who dodge taxes by offering to work "cheaper" for not having a record.



Speaking of Kiyosaki, some of his concepts seem quite good. When he came to talk to us, he said a toaster is a liability and not an asset (as it takes up power), but I commented that without a toaster you'd have to buy toast from the bakery which costs more money than using the toaster. Hopefully people don't follow his advice too literally (and end up without any household possessions because they don't want to have any liabilities).




Also, I think what Oreo says is that money isn't everything. I agree to some extent, but I phrase it as "money should be there to be spent". Like I said, I'd rather spend 30% of my money and invest only 70% if it would make my early life happy. Investing 100% of your money just for retirement will give you an unhappy early life, and when you're old, its not like you're going to be extremely active or anything.

So many Asians - my family included - have this perception that all money must be saved and invested so you can use it when you retire. I couldn't see the point - so you live unhappy from birth to 45, then have those last few decades of millions? Well for one thing when I grow old I'd rather live in peace and quiet than go around spending....

 

[Big N]

Ok man, first of all I would just like to state that I disagree with your statements about the poor.

Ok, now hear me out on this one. You buy a $100,000 property for $90,000. The first thing I find wrong with this is your statement that you make a quick $10 grand right off the bat. If you are making $10 grand right off the bat, then the seller is losing $10 grand right off the bat. Now, I personally dont know anyone who is willing to just give away $10 grand, but I guess your implication is that there are a lot of people who are. At the very least, it will be a huge pain in the ass to find someone like this.

Second thing. You bought the property for $90,000. You claim that you can find someone to rent the property for $1200 (I am going to disregard whether that is reasonable or not because I am not into real estate). Now, you claim that you will make $300 per month (we will disregard upkeep, etc that was brought up in an earlier post). Multiplying that by 12 months, you get $1200 per year. 1200/90000 comes out to 4% per year. Now, I am also not an expert in stock or bonds, but I believe that you could easily make at least 4% in a bond. You could probably make much more in a well-researched stock or mutual fund, especially when the market turns around (I would probably advise against this due to the risk). The beautiful thing about the bond would be that you would seriously sit back and watch the money roll in, albeit slowly (but still faster than the real-estate situation you provided).

Another problem is that, at 4%, it would take 25 years simply to earn back your $90000. That is a crapload of time and energy for so little money.

Alright, Ive said my piece. Obviously, I am no expert in economics, but I think I have some valid points.

 

[livin large]

$300 per month * 12 months is not $1200, it's $3600.

Yes, that is 4%, but you're not paying cash for the house. You're borrowing the majority (if not all) of the money. Say you put down a $5,000 down payment, and take out an $85,000 loan. Your loan payments are made by tenents, and your return is 72%.

Another problem is that, at 4%, it would take 25 years simply to earn back your $90000. That is a crapload of time and energy for so little money.

FYI, this type of analysis is called payback period, and is meaningless.

 

[STR8UP]

Re: Re: Re: Books

Originally posted by Aztec
Basically what Robert Kiyosaki is telling in the Cashflow Quadrant is having four ways in earning, thus quadrant: Being an employee, self-employed, business owner and an investor.

If I would have realized the differences between being self employed and being a businessman back in the day I could have saved myself YEARS of pain.

Actually, people tried to explain it to me in passing, but it was one of those lessons I had to learn the hard way.

LISTEN UP. Much of the information you will read about wealth building will be tough to assimilate at first. If you simply accept it as the truth in the beginning you will come to understand it later.

He tells readers that to be able reaching financial freedom, one should learn and utilize at least two quadrants at a time.

I've been every conceivable combination of the four, sometimes three at a time. Only recently have I made it to the final two, and I can tell you this is the ONLY place to be. Getting there finally makes you feel as if your hard work has paid off.

 

[STR8UP]

Originally posted by DIESEL
Damn, that name's a blast from the past!

What was his infomercial gimmick again? and what happened to him?

He would be your partner in the deal, putting up the moeny and splitting the profits.

He went to the slammer for fraud, conspiracy, and money laundering for putting up a front. He didn't own all the stuff he showed in his infomercials, and hired paid actors to give testimonials.

The story here

I didn't study his stuff but it sounds like he got a pretty raw deal.

 

[STR8UP]

Originally posted by Aztec
Hey STR8UP!

Gotta a scenario and questions for you.

I have Roth IRA that I have contributing for 5 years......

I am not qualified to give advice on the market. Right now I am only involved in real estate and business. As soon as I have piles of cash I don't know what to do with I want to get back into it.

 

[STR8UP]

Originally posted by diplomatic_lies
Speaking of Kiyosaki, some of his concepts seem quite good. When he came to talk to us, he said a toaster is a liability and not an asset (as it takes up power), but I commented that without a toaster you'd have to buy toast from the bakery which costs more money than using the toaster. Hopefully people don't follow his advice too literally (and end up without any household possessions because they don't want to have any liabilities).

I thought you said he was full of doodoo?

His toaster example was to illustrate that MOST things you buy become practically worthless after you leave the store. People use examples such as this to simplify the concept so more people could understand.

I wish I could have heard him speak. It's great to hear someone else confirm the knowledge I have gained through experience....it's reassuring to know that I think as he does.

Investing 100% of your money just for retirement will give you an unhappy early life, and when you're old, its not like you're going to be extremely active or anything.

I have certainly sacrificed for many years but never suffered. You have to find a balance. Thats tough for most people.

 

[STR8UP]

Originally posted by Big N
Ok man, first of all I would just like to state that I disagree with your statements about the poor.

I had a different attitude until I started to realize that I need to take responsibility for my own actions.

In America today there is no excuse to live below poverty level for any length of time.

Ok, now hear me out on this one. You buy a $100,000 property for $90,000. The first thing I find wrong with this is your statement that you make a quick $10 grand right off the bat. If you are making $10 grand right off the bat, then the seller is losing $10 grand right off the bat.

Incorrect.

The seller has likely owned the property for a few years and during that time it has appreciated in value.

Now, I personally dont know anyone who is willing to just give away $10 grand, but I guess your implication is that there are a lot of people who are.

It happens every day in every city. A motivated seller will chew off his arm to get out of a property. You have to remember that people have financial problems, illness, death, I could go on and on.

At the very least, it will be a huge pain in the ass to find someone like this.

No, having a boss breathing down your neck everyday is a pain in the ass.

Now, I am also not an expert in stock or bonds, but I believe that you could easily make at least 4% in a bond. You could probably make much more in a well-researched stock or mutual fund, especially when the market turns around (I would probably advise against this due to the risk). The beautiful thing about the bond would be that you would seriously sit back and watch the money roll in, albeit slowly (but still faster than the real-estate situation you provided).

Alright rocket scientist listen up.

First of all your math sucks. Second of all you didn't make an attempt to comrehend what I said.

You didn't invest $90k. You invested ZERO. That means ANY return you earn is INFINITE.

And you didn't account for appreciation and tax breaks.

My first property I bought with a $25,000 down payment. In retrospect I should have bought no money down, but that was before I knew better.

This was about seven years ago. I bought it for $85,000. Today it is worth $130,000 plus. I have collected about $23,000 in cash flow. That's a return of $68,000 in seven years BEFORE figuring tax breaks. My $25,000 investment is now worth $93,000. Where else can you nearly QUADRUPLE your investment in seven years SAFELY?

Any more point that need to be clarified?

 

[Drex]

This sounds like solid advice and I'm going to get the books you reccomend tomorrow. I do have a couple questions though as I am pretty ignorant when it comes to real estate but I've always wanted to learn...

First I'm 21 y/o and I'm a bartender (like you used to be!). I have great credit (I've been paying a car loan for over a year now on a $25,000 car I bought)...

So anyways my question. I have $8,000 in cash in the bank and my new car to my name with great credit and living at home at the moment putting everything I earn in the bank. How can I purchase real estate at my age with so little cash? How do I get started here STR8UP? Do I have to keep banking money for a few more years?

Thanks.

 

[Aztec]

Originally posted by Drex
This sounds like solid advice and I'm going to get the books you reccomend tomorrow. I do have a couple questions though as I am pretty ignorant when it comes to real estate but I've always wanted to learn...

First I'm 21 y/o and I'm a bartender (like you used to be!). I have great credit (I've been paying a car loan for over a year now on a $25,000 car I bought)...

So anyways my question. I have $8,000 in cash in the bank and my new car to my name with great credit and living at home at the moment putting everything I earn in the bank. How can I purchase real estate at my age with so little cash? How do I get started here STR8UP? Do I have to keep banking money for a few more years?

Thanks.

Drex, you beat me to that question.

Also STR8UP, please explain how a real estate investor is able to "dodge" tax.

Thanks!

 

[diplomatic_lies]

MOST of what Kyosaki said I didn't really learn much from. Maybe it was the fact he mostly focused on saving rather than the points in his book (considering we were only 16-year-olds). I'd already learnt about saving from my parents ("Save when you're alone, spend when you're with friends or business associates"), and was already budgeting my bank account. So really, all I learnt was that you can buy and monitor stocks on the Internet (which I was all excited about until I found more money could be made by selling goods).


Does Kyosaki offer any advice for business or sales-related stuff?

Since at present I'm not too into long-term investment (considering I need quick yearly money to get that 25% discount on all my college fees), and already understand most of the stuff about saving. Thinking about simply walking into Victoria's largest law firm to offer them the products (after sending a mail), so right now I've reading deeply into this sort of sales stuff, as well as looked on my own ebay experience.

 

[STR8UP]

Originally posted by Drex
First I'm 21 y/o and I'm a bartender (like you used to be!). I have great credit (I've been paying a car loan for over a year now on a $25,000 car I bought)...

Maybe I should write a book called "The Wealthy Bartender".

So anyways my question. I have $8,000 in cash in the bank and my new car to my name with great credit and living at home at the moment putting everything I earn in the bank. How can I purchase real estate at my age with so little cash? How do I get started here STR8UP? Do I have to keep banking money for a few more years?

Thanks.

Read books by the authors I mentioned earlier. They will tell you how to buy for no money down. I couldn't even begin to cover all of the information here.

Definitely keep banking cash. That's never a bad thing. I started with $12,000 I saved over the course of a year. Of course at this point I know I should have KEPT the $12,000 instead of using it for the downpayment.

The whole premise behind building wealth in this way is to buy with no money down. If your cash is tied up in equity it is useless. Until you are ready to retire from investing you are best to

A) Buy the property without using your own money.
B) Continue to pull out the equity indefinitely by refinancing or using equity loans. So after a few years of ownership, you go right back in and BORROW the value it has increased, putting the loan back up to close to what the property is worth. Use the cash for investments that REQUIRE cash and provide a rate of return that is HIGHER than the interest you are paying on the mortgage (like the stock market). Or in my case business ventures.

I read an article in yesterday's MONEY section of the newspaper. They asked two different financial planners their opinion on paying down a mortgage early. One was for, the other against.

If you have no self control and are going to spend your extra money on liabilities (stuff that loses value), then by all means you are better off paying down the loan. But if the object is to INVEST the money, the idea of paying off the loan is ASSININE.

People think they are doing good by paying off their mortgage early. If they were to have put that extra cash into ANOTHER investment they would end up with three times as much in the end.

Does anyone see how this works?

 

[STR8UP]

Originally posted by Aztec
Drex, you beat me to that question.

Also STR8UP, please explain how a real estate investor is able to "dodge" tax.

Thanks!

You aren't really dodging tax. You get to deduct the interest you pay on the mortgage, which can offset income from other sources. You can also deduct stuff you buy for yourself as long as it COULD have been a property expense. Like a new set of tools for your workshop.

 

[Drex]

So you are telling me that a 21 y/o with good credit can go out and buy a 100k piece of property with no money down? heh.

 

[STR8UP]

Originally posted by Drex
So you are telling me that a 21 y/o with good credit can go out and buy a 100k piece of property with no money down? heh.

A bit skeptical, are we?

This is EXACTLY why most people will never be rich. They don't realize that for every problem there is a solution. You are seeking the knowledge; if you can grasp the concept and utilize it you WILL be rich, no if's and's or but's.

If your credit score is over 700 you should be able to find a lender that has a no income/asset verification loan program. Most people have NO IDEA these exist. The lender basically takes you on your word that you will be able to pay back the loan. You can tell the lender that you make $1,000,000 per year and they accept that, because they don't verify. I recently talked to loan officers at Suntrust and Bank of America, and they BOTH have these types of programs available.

The program is designed for persons such as myself that show little income on tax returns. But ANYONE can use them.

Did you know that there is even a mortgage loan program for people in BANKRUPTCY?!?!?! (I apologize for the excitement, this is new info to me) My friend is a mortgage broker and she told me that lenders have been forced to institute these new programs, or they wouldn't be making many loans.

This is a rather new thing, so you may not encounter information on these types of loans in your reading materials.

You need to go toEquifax and pay the 12 bucks or so to find out your Beacon score. You should be pulling your report once a year, and preferrably you should review your report from all three agencies to insure there are no mistakes. Equifax is GREAT because they also have a simulator that allows you to see what your score would be if for example you were to pay off your credit cards, or obtain a new loan. It gives you a point of reference to learn how different things impact your score.

Now, GO READ YOUR BOOKS!

 

[Sir_Chancealot]

Gentlemen,

Str8up is absolutely correct. When you have a motivated seller, you can get that property for nothing down.

The house I am currently living in was obtained "no money down".
Hell, I didn't even have the PAPERWORK signed until about 2 weeks later!

My brother got a place for about $48k. About 5 years later, it was appraised at about $110k (with about $10k in improvements). Had my dumbass OTHER brother got involved and paid CASH, they could have had the property for about $21k.

We currently are running a deal right now on a $1,000,000 piece of property. We have an option on it that. Anything we get over $1,000,000 is gravy.

Unfortunately, people are too f*cking STUPID to see what a deal it is. We are picking up the land for $26k an acre. Land around it is going for around $66k to $150k an acre. We would make around $500k to $800k per year from this land. But no one sees how this is a good deal. (Oh, but this isn't "no money down". It's gonna cost us about $200k down payment)

 

[STR8UP]

Originally posted by Sir_Chancealot
Gentlemen,

Str8up is absolutely correct. When you have a motivated seller, you can get that property for nothing down.

It's good to have an outside party confirm this.

Unfortunately, people are too f*cking STUPID to see what a deal it is. We are picking up the land for $26k an acre. Land around it is going for around $66k to $150k an acre. We would make around $500k to $800k per year from this land. But no one sees how this is a good deal. (Oh, but this isn't "no money down". It's gonna cost us about $200k down payment)

The ex-landlord for the building I leased for my business (actually his brother that manages the building) wants to get involved with us in some cemmercial deals. We were looking at an 18 acre tract for some 2mil picking it up on an option and subdividing.

Wanna talk about a GREAT business connection... This guy deals exotic cars (Porsches, Jags, BMWs) so I get WHOLESALE on any car I buy. His brother owns half of the county and his sister the real estate broker owns the other half.

We were also in talks about developing a package to be marketed via an infomercial showing how to buy and sell cars for profit. The gimmick...to be able to drive a PORSCHE for the price of a HONDA. It is a solid idea. He uses the technique daily. Too bad I don't know enough about the infomercial/seminar biz to justify dropping $100,000 or more into it.