Leverage to Lift Your Profits

November 7, 2014 by  
Filed under blog

Today I’m going to continue talking about making those huge returns that I touched on last week. Remember, with only a $30k salary and saving just 10% for only 5 years, you can bring in as much as $21 million dollars by age 70! How is it done?  It’s done by using two different types of leverage.

No. 1: Financial leverage. This is Other People’s Money (OPM) as in mortgage loans, personal loans, signature loans, loans from family or friends, or even through having family and friends as partners.

No. 2: Labor Leverage. This is Other People’s Efforts (OPE). You bring on other people, including employees, part time contract labor, day laborers, contractors and the like, to do the fix up work that will create added value in an asset.

Basically what these two types of leverage can do for you is help lift something that is bigger than you can take on yourself. To paraphrase what Archimedes said, give me a long enough lever and a place to stand and I could by myself lift the earth.

Using these two levers is exactly how it is very possible to receive a return of 15% or 20% or even more, turning a meager income of $30,000 into $21 million! The math is pretty simple. As I said in my July 25th blog, if you go out and buy a $500,000 dirt bag type property, one that needs some fixing up, and do this with a $100,000 down payment (a down payment that itself may be borrowed) and then go out and use some OPE and improve the value by $50,000, that gives you a 50% return on your money,

But of course it will have cost you something to fix it up. Let’s say it cost $30,000 in material and labor to fix it up. That puts you at a 20% return. Now keep doing that on additional properties and you’re looking at a cool 21 million by the time you hit 70 years old. Let me emphasis that you can only do this if you control your own money and do the work or have others do the heavy physical work.

Anytime someone comes along and offers you a 20% or 30% return on your money without you doing a thing, grab your wallet and check book and run away as fast as you can.  These very high returns are possible but, for the most part, only with your efforts or the efforts of other people that you control.

Think of it this way … if you are making 30% or more on most every deal you do, why would you go tell others about it? Wouldn’t you just borrow more money at 5% or 6% and take home the difference? You certainly wouldn’t give someone else a big fat return of 20% or 30% in passive income for not doing a thing to help.

I’m not saying these returns are easy and take no effort and there are other details such as income tax that will eat into that profit (although there is a way–see the IRS 1031 section of the tax code to help delay some taxes) so these numbers aren’t exact. But what I am saying is that it doesn’t take as much savings capital as most people think.  In fact it takes relatively little savings to reach some very big financial levels.

By the way, I’ve had more than a few deals that have topped the 100% return level. Compound that for a few years and your eyes will pop out! That’s the potential. Now, doesn’t that get you motivated?


The Six Wealthiest Letters

August 22, 2014 by  
Filed under blog

I just got back from Las Vegas where I gave a speech on financial matters; this was mainly what formulas and so-called secrets I’ve learned over the years on how to make a fortune in today’s world. I gave this presentation to a great new little company that I am pretty sure will not stay small for long–it’s called LyfeStart. I think it will grow at a very rapid pace, for two main reasons: The super sharp and experienced founders and the great product they’ve developed that helps people’s health and longevity as well as putting money in their pockets.

In my speech, I presented the financial lessons I’ve learned from a few millionaires and a couple of billionaires. Specifically, guys like Paul J. Meyer, Larry Rosenberg, Curt Carlson and Aristotle Onassis. There are two formulas that most super financially successful people have discovered and used. They can be summed up with 6 letters: OPM and OPE. OPM is “Other People’s Money” in the form of loans from banks or individuals used to purchase the right assets. OPE is “Other Peoples Efforts” which we talked about in recent posts. How do either or both of these help insure that you will make a fortune? They help you leverage yourself. As all of know with a long enough lever we can lift almost any heavy object that we want to. And believe me the same is true if you use the right lever to lift the financial part of your life. Just about every wealthy person I’ve ever met or read about has used either OPM or OPE or a combination of both.

You see what you are doing is multiplying yourself since there is not enough time in your life to do really big things financially by yourself. Believe me, billionaires know what they’re talking about. They’ve done it. Salary, commission and other income just doesn’t cut it; you don’t make a billion dollars that way and, in most cases, not even a million. There are just not enough hours in your life to make those huge numbers happen. The average person lives only about 700,000 hours. So, if you made $200,000 dollars a year and didn’t spend one penny of that, do you know how long it would take you to be a billionaire? The answer: a whopping 5,000 years!

To make it big financially you just have to use OPM or OPE or both. When it comes to OPE, what I hear the most is that “there’s just not many good people out there anymore” to which I say that’s a bunch of bunk! There are many super people out there that can and will assist you. You just need to go out there and find them. Then give them enough incentive, sell them on your dream and provide them with good direction. I’ve associated and hired so many great people that many times do a much, much better job at certain tasks, than I do. This has greatly enhanced my life and my net worth.

One of the secrets that my wealthy mentors also taught me is to be sure to study what talents and natural abilities people have and then put them in the positions that best use those very talents. That makes them happy and fulfilled while moving you faster and closer to your goals.


Big Money in Cosmetic Fixes

August 8, 2014 by  
Filed under blog

As discussed last week, you can turn a 10% gain into a 100% gain using your sweat equity on the right real estate asset. Grabbing up run=down properties worked miracles for me, eventually adding millions of dollars to my net worth. You can do the same thing. But, you ask, exactly how do I direct my efforts? What do I fix up to make the property worth more? The simple short answer is paint, carpet, cleaning and basic accessories such as attractive plants and pictures on the walls and a nice green lawn and shrubbery in the yard. This is because you would be buying property that doesn’t needs more than a face lift but which you can buy cheap simply because it looks bad.

Now if you are like me and not particularly good as a handyman then you’ll probably want to use what I call OPE–other people’s efforts. I hired high school kids for just a few bucks an hour. I found from experience that paying people hourly, if you can keep an eye on them, is far less expensive than getting bids on the work needed. I should also say that most fortunes are made through the use of OPM (other people’s money) as we mentioned in earlier posts. So OPM combined with OPE is your formula for great wealth with this approach.

I should also add that I am not very good with any kind of design or decoration decisions, inside or outside. So what did I do about that? Basically two things–I picked other people’s brains as well as copying success, both without cheating. Picking people’s brains is pretty easy since people like to talk about themselves and what they do for a living. I would simply take designers, architects and other professionals to lunch and pick their brains for the cost of a meal.

Copying success is not that hard either, it’s mainly a matter of paying attention to what works then doing the same thing. I will never forget the beat up little house that I bought that was in desperate need of a major design update on the front of this very sad structure. I was trying hard to figure out exactly what to do with the face of this house when the obvious solution suddenly hit me. The basic house structure and layout was almost identical to the house next door–even though you really had to look hard to notice that with my house being such a disaster. The house next door was absolutely beautiful and a delight to look at. It looked like “the little cottage in the woods” that we read about and picture when we were kids.

So what I did was essentially take the lazy man’s option and I had my people do an exact copy of that nice house in every detail– the exact same color of paint, the exact same window coverings and shutters and all the cutesy stuff around the yard and on the lawn. Bottom line, the house looked fantastic and I sold it in short order. There is one postscript to the story–the neighbor was irrate! So much so that he repainted and redesigned the front of his house as he didn’t want to live next door to an identical twin! I didn’t really blame him but it was a bit of compliment to him too. Not sure he saw that.

One big thing to keep in mind as you are using your own sweat equity or using OPE to do this fix up work, keep yourself totally motivated and firmly place in your head that this “grunt work” can and will turn a potential 10% gain into 100% gain. With those kinds of numbers and with enough time, it will turn thousands of dollars into millions!