Build Your Wealth with the Help of Inflation

April 1, 2016 by  
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If you’ve been reading the last couple posts, you may be asking, can I get more specifics on this 15% rate of return morphing into a huge 60% return? Well, let’s go over some specific examples.

First of all, let’s have a quick review of what I call natural inflation vs forced inflation. Natural inflation is what our general economy goes through over time. It lifts the price of everything especially assets that are in limited supply, like land and houses. Because of this natural inflation many people, if not most, find that owning their own home has increased their net worth by a huge amount without much effort on their part. The average price of an existing home in America increased in value by $56,200 dollars from 2012 to February 2016 or from a price of $154,600 to $210,800 on average. So, without much effort on the part of the home owner, homes increased in value by 36% over those 4 years or 8% per year compounded. Not a bad investment with so little effort made.

Now let’s take an example to demonstrate what so called ‘forced inflation’ can do even if you don’t count on natural inflation. Let’s say you bought that $154,600 house back in 2012, or even last week for that matter, and put 20 % down or $30,920 and then spent another $7,730 or 5% to fix it up. If you found a house that needed a good bit of fixing up plus you did the kind of improvements that really lifted the curb appeal and the overall value, you most likely would have lifted the value by 15% percent which would raise its market price to $177,900.

If you sell it at that price, you would pull $23,300 out of it plus your personal investment of $38,630 (for down payment and fix ups) as well. That 23,300 is 60% of your personal investment. Where else can you get that kind of return? And remember, if you keep up that kind of investment and return over 20 years you could turn less than $40k into a whopping $459 million! I’m pretty sure that’s well worth your efforts.

If you feel uncertain about what improvements will really increase your investment return, take a look around and see what houses in the area are bringing in top dollar and figure out what they have that the slow and low selling houses don’t Also, pick the brains of those people that are good at seeing what brings in high prices. Do your research to find where your efforts will be most heavily rewarded.

You should also research the home prices in your area before you buy. You can go online and search your city or state and see what the average or median price is for existing homes. Many sites will even tell you what the natural inflation has been in the past. If you get the right deal, that natural inflation might well add on another 8% to the 15% you added to the value of your investment. And let me tell you, those kinds of returns over the years will blow your mind even more!



March 25, 2016 by  
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Ever wonder why many smart, hard working people end up making only $40,000, $50,000 or $60,000 a year while others who don’t seem to be any smarter or work any harder, make millions and even billions?  Years ago when I was advertising my first book, How to Wake Up the Financial Genius Inside You, I used as a tag line, “Millionaires are not 100 times smarter than you, they just know the wealth formula.” So, if you are making $50,000 dollars a year, that very rich person, who is no smarter and is not working any harder than you, could be making $5 million.

On last week’s blog, I just touched on the basics of this formula. So if you read it, you may remember that I told you if you go out and buy a property that needs fixing up with a 20% down payment, putting another 5% into the fix up, you could improve the value of that property by 15%. That 15% would equal a 60% return on your actual invested dollars. But just how does that happen?

The million-dollar miracle part of that simple example, which I and others have done may times over, is a matter of leverage. You see, you leveraged your 25% (your 20% down plus that 5% to fix the place up) which allowed you to borrow 75% of the money so you could acquire the property. But your return is on the total value of the house. In other words the 15% increase in value of the property would equal a 60% return on your down plus fix up cost. Then by doing basically the same thing again on another property, you would be doing what is known as ‘compounding your return’.

Now here is the shocking and exciting part of this thing called compounding. Are you sitting down? If you keep getting a leveraged return of 60% on your investments, you can start with just $4,000 and build that into $48 million dollars in just 20 years! Now that’s what I believe is a super money miracle.

It really is that simple. Mind you, I didn’t say easy, I said “simple”. You really have to work your buns off to first find the deals and then fix them up to a point that increases their value. I’ve made a 60% return on many, many properties. I have also received thousands of letters, emails and phone calls from people who have told me that by following what I have been doing for years, they have seen, not just 60% returns, but even 100%, 200% and more.

However, you will no doubt find, as I did, that it usually is easier to get those fat returns on smaller properties.  As you move into larger and larger properties it does become more difficult but it is not impossible to get high returns on your dollar there either. I had one $2 million deal that made me more than a 100% return and even a new $27 million deal that returned more that 60% on my invested dollar.

I hope that this kind of huge potential will motivate you to keep working on deals, even the small ones you’ll have in the beginning. Remember those baby steps are necessary and very important. They show you what you can do. Those huge numbers I spoke of don’t happen overnight and that can be discouraging. Just focus on your success and build on it as you go and just like compounded money, your compounded efforts will also build into huge returns for you!