Buying an asset is the rare instance where you buy something and don’t actually lose your money.

When people think of spending money they think of money that they will never get back.  When you buy a TV or a pair of sneakers or food, that is money you will never see again.  The only way to get more money after you spend on items like those mentioned above is to make more money.  A common misconception about investing is that people invest with a consumer’s mindset.  They invest with the thinking that your money is gone forever or that you could lose it all in a crash.  This couldn’t be further from the truth.

When you come across a property that requires a downpayment most think that you are spending money to acquire the property.  What you are really doing is taking money in your savings and placing it in another secure vehicle.  You still have the money you are just now earning a greater return on your money.  You still have your money.  You are no less wealthy than before.

This is not the same when it come to consumer items that depreciate and lack the ability to generate cashflow.  This is not to say that some liabilities cannot take on the traits of an asset.  if you have a car and you can drive it through uber, or you have an apartment that you can use for air bnb you just created an asset because it produces cashflow.  But still, in their typical use, these purchases don’t actually allow you to retain your wealth.  They take you backwards and chain you to your day job.

If you have $10,000 in your IRA and you use that money to acquire a property you acquire the property and the cashflow but you also still have your $10,000.  For example, the property cost $50,000 and you put $10,000 down, took on a mortgage for $40,000.  Your net worth did not change.  If you sell or refinance the property you can get all or most of your money BACK.  This isn’t the case with a car or jewelry or a vacation.  If you take $10,000 and go on vacation you will never see the money again.  If you take $10,000 and buy a car you will be lucky if they give you $2k on the trade in.  If you take $10,000 and buy jewelry you will still lose money.

The key is that once you own the property you can make money in any way that you choose.  You can rent the entire property, you can rent a room, you can air bnb it on certain weekends and live there during other weekends. You have the freedom and flexibility via ownership.

The ROI question is one question I get a lot and I think that the hidden ROI in investing is that you maintain your principal.  We live in a consumer society.   Most people live paycheck to paycheck and most people spend any windfall that they come across.  Yes our investments yield a return but sometimes a return is just keeping money that you never had.  That is a 100% return on investment.  If the average person doesn’t even have $1,000 saved and you take that $1,000 and put it into a syndicated deal as opposed to blowing it fast you could not make a dime on that investment and still be wealthier than the average person just because you preserved what you owned.  You made a purchase but not in line with the way consumers purchase.  You shifted cash into assets.

I went on a twitter rant a while back bout how people spend $200 on shoes that cost $20 to manufacture.  Or thousands on dollars that cost pennies to produce.  We spend money on those items and its a 90-99% loss.  You will never get that money back.  The most you will get is #TBT pics and likes.  Well, your kids can’t inherit those.

The point of this post is that buying assets is unlike buying anything else.  Buying an asset is the rare instance where you buy something and don’t actually lose your money.  You are merely shifting money from one place to the next.  That is the key here.  If you have $1,000 and decide to invest in our syndication you still have $1,000 its just in a piece of property yielding you a monthly or annual return.  You don’t lose.  It is a total mind set that has to take place.  People are so used to hearing “buy” and thinking reduced numbers in your bank account.  That may be true when you are acquiring liabilities that look good but aren’t good for you.  But in the land of wealth that is not the case.

We are currently in the process of funding our first real estate deal and we would love to have you on board.  If this post made sense to you and you are interested in working with us please email propertymanagement@capitaltodd.com for more information.  We would love to have you on board.

Be great,

Todd Millionaire

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