Time to get rich! If you have read any of my work before, you may have seen me say that real estate is the best wealth generator for the average middle-class person. Today I will explore this statement and more to give you an idea of the power of real estate.
What is a wealth generator? A wealth generator is an investment vehicle or technique that can be used to make large sums of money, usually faster than other methods. The idea is to use your wealth generator to fund your money system.
Your money system grows slower than your wealth generator, however, it is completely passive. The money system is also called your investment portfolio. In action, you would use your wealth generator to make 20-30% returns. Then you would fund your money system with that money. Your money system would earn around 4-5% in dividends. However, it is truly passive. When you have enough money in your money system, you would have the ability to fully retire.
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This is called the fast track to wealth. For a deeper dive into these methods of wealth creation read the book “The Millionaire Fastlane.” I want to review some of the standard wealth generators and compare them to real estate. This will give you an idea of why real estate is so effective in wealth creation.
Employment W-2 job. Using your job as a wealth generator is the Millionaire Slow lane. This is what we are taught. Make a small amount of money. Get taxed at 30%. Invest 10% of that into our retirement account. Our retirement account is based on capital gains, so when it is time to access this money, we will have to sell our investments to fund our retirement.
In this method, taxes and control are factors we cannot leverage. We have no control of our taxes and no control of what investments we are using in our retirement accounts. This method will take us 40 years to become millionaires.
Investment Portfolio. Using the method above in addition to using an investment account will speed up wealth generation a little. You can control what investments you apply to your portfolio. If you invest in Amazon or Telsa, you may be able to speed up the process.
Again, you do not have much control over other companies. If you try to speed this process up too much you will be assuming a large amount of risk. You can take a lot of risks just to get a 10-15% return. And if you do really well investing for capital gains, you will have to sell your investments to lock in your profits. Then you will be taxed.
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Business- Content Creation. Creating content can be a speedy wealth generator if you have the skills to do it. In order to create content, you will usually have to have some form of talent. This includes music, videos, and writing. It will still require an amazing amount of determination. To be honest, most people do not have this level of dedication to commit to becoming big in content creation. Or they have limiting beliefs related to public speaking, public writing, and fear of failure.
Business- Online Business/Software. Online business is similar to content creation without the need for specialized talent. You will need to be able to navigate in an unstructured environment. Everything about control and structure is thrown out the window in an online business. The internet allows your business to be open all day, every day. This is probably the fastest wealth generator out there. This includes building businesses on Esty, Amazon, and Shopify.
For software, you will need to have some sort of computer skills. Skills like programming, coding, app creating, videogame creation, etc… Again, you can strike it rich if the stars align. Due to the speed of the internet, you can get in, make a few million, and get out. But, this is not for the average person. The average person cannot disappear into a hole, create an app or software, and release it to make millions.
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Real Estate. This brings us back to real estate. What makes real estate such a powerful wealth generator? There are many facets that lead me to say real estate is for the average person.
–Sweat Equity. You can force yourself into a good deal by hitting the streets and going door to door. You don’t have to purchase any properties at market value. You make your money when you buy, not when you sell.
–Leverage. Once you find this amazing deal, you can take out a loan to fund it.
–Team up. You can form your own team of investors, builders, real estate agents. You do not have to work alone.
–Infinite Return. If you want, you can be 100% funded by other people’s money. I do not recommend this much leverage, but it may be required when starting out.
–Diversity. The different types of real estate are staggering. Billboards, tax liens, past due land, apartments, commercial, wholesaling, etc… You can go from deal to deal, taking the best deals for your current situation.
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–Options. Even if you do not want to get too involved in real estate, you still have options. Renting rooms is the best wealth generator for the average person. You begin renting rooms in an infinite return. Everything is pure profit. Then you put this pure profit into your money system to make even more infinite profits. This is the magic of an infinite return.
These are the reasons I recommend real estate as your first wealth generator. You can continue to work your W-2 job. You can start your investment portfolio. You should start your content creation journey. However, real estate has to be at the top of your priority list.
It’s not the amount of money you make, it is how you make it. For instance, if you build an RV hookup in your yard, it may cost $3,000 to install. Then you can rent it out for, say $500 a month. Within 6 months you will have your initial investment back and you will be in an infinite return. That $500 then is pure profit and can go directly into your money system.
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If you were making $20/hr on your W-2 job, you would need to make $650 before tax to make the same $500. That is almost a week of work. Now, start renting out your master suite for $800, and you will have $1,300 of pure profit funding your money system.
Believe me, these systems work. You are also diversifying your income away from your W-2 job. Not only are you bringing in income from rental income, but your money system is also generating cash flow. Everything in your life is compounding, and suddenly your job isn’t as important as it used to be.
This is the power of understanding wealth generators. More specifically, using real estate as your main wealth generator, at least until your business gets off the ground. How do you feel about real estate? What are some of the limiting beliefs holding you back from getting into real estate? If you own real estate, what are some of your future plans? I would love to hear more from you below.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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