055 The Investors Trap A Transition from Active to Passive Income

Transitioning from Earned income to Passive income and from little money to big money

This episode is dedicated to Marv McFly who is a member of a private members only real estate education group where I provide mentorship to group of new investors who are learning how to take action in real estate.  Learn more at cashflowguys.com/mentor

The group has five mentors that hosts several video calls per week covering a wide variety of topics and provides a low cost educational opportunities to those who cannot fit traditional coaching into their budget.  This group is a great way to get your feet wet in the investing community and is available at a cost of only $97.00 per month.  For more info on that catch my video at cashflowguys.com/mentor

Many Real Estate Investors / wholesalers and rehabbers who escape their 9 to 5 often spend themselves right back into the job again which is the topic of this week’s episode of the cash flow guys podcast.

Everyone I meet lately seems to want to begin their investing future with wholesaling.  Frankly, there is nothing wrong with that, provided it is thought of as a means to an end.  Wholesaling a great tool to help an investor learn valuable negotiation skills which will help them later.  The problem is for many, wholesaling becomes a trap. A vicious cycle if you will….

You spend a bunch of money on bandit signs that say “we buy houses cash”, you spend tons of money on direct mail using the trial and error method and obtain a few leads.  Hopefully you get something under contract that you already have a buyer for.  If you fell for the common trap of first “getting a deal” you have even more work ahead of you.

Closing happens, you collect your payday and then reinvest most of it (or all) into marketing, taxes and much more to get the next deal.  Worse, you forget all about paying your taxes...or simply try to avoid doing so and wind up with a big tax bill with interest and penalties due.

Systems are critical as an investor, one of the most important is the system of how to adapt a marketing budget, a written business plan outlining the expenses forecasted and the expected returns from the expenses.  From there is is track, measure, verify, then adjust, tweak, measure, track verify until you are confident your operating budget is correct and realistic….that it will allow for future growth.

If you came from a place where you made little money in your job, there is a good chance you will get easily sucked in by doodads, or those things that take money out of your pocket but never put it back in.  You might be tempted to slack off a little when a payday comes.  The problem is that slacking off only serves to delay the arrival of the next payday.

You must pay yourself first as Robert Kiyosaki teaches...instead of spending your earnings on junk, take a portion of those earnings and pay yourself by investing that cash into something that will yield a return.  That comes BEFORE paying bills, BEFORE having fun BEFORE the Bling or doodads…

In a short period of time a few hundred dollars easily can be turned into a few thousand by practicing the art of arbitrage.  That is... buy something low and resell it for more, or put your money to work making you more money by investing in a promissory note. And earn a yield on your investment over time.

The cashflow quadrant teaches us that we can be separated into four quadrants,

E for employee (Has a Job)

S for Self Employed (Owns a Job) (Wholesaler)

B for Business Owner (Owns a Business that provides jobs to others)

I for Investor

 

Instead...wholesale a few houses if you must….but what if you just dove in to buy and hold as a strategy….what if you served only buy and hold buyers in your wholesaling activities…..then learned to manage the rentals...then partner with those buyers and eventually buy your own...how would that change your outcome??

Just about anyone can fix their credit these days with some self discipline in a year or less, sometimes maybe a little longer but the point is it can be done.  You could then buy a duplex with a low down payment...3.5% and move in one side for a year….then move out and do it all over again.  That means a $100,000 duplex requires you to come up with $3,500 down and some closing costs (get seller to pay them)

Buy one per year at $400 cashflow each duplex, in ten years by doing nothing else you are making $48,000 a year passively.  That income will last a lifetime if you want it to.  Want more? Acquire more assets.

Want to learn more? Need help getting unstuck?  Head on over to CashFlowGuys.com/AskTyler to book some time to get on the phone with Tyler and get pointed in the right direction.