The goal of your financial life is to obtain assets that produce you money. Many types of assets make money in various ways. You have assets that build capital gains, such as growth stocks, gold, housing, and collectibles. Capital gains, or price appreciation, can be risky because you only make money when someone purchases the item from you at a higher price.
Another way assets can make money for you is through buy-and-hold techniques. This strategy is when you hold the assets, and they pay throughout the process. Some buy-and-hold assets are dividend-paying stocks, royalties from books, rental property, and bonds.
I prefer buy-and-hold techniques because you get paid while you hold, but your asset’s price can appreciate as well. But what if you don’t have the money to buy an asset? Well, this is where your creativity comes into play.
How do You Define Being Rich?
Your creativity can help you create an asset for free. Self-publishing a book on the Amazon Kindle platform can be an inexpensive way to create an asset. Also, starting a YouTube channel can be a great way to produce income via royalties.
Your creativity can also help you buy hard assets- that’s where the Creative Financing Series comes onto the scene. In a perfect world, you go to the bank, and they lend you money for an asset. For most people, the only asset they own will be their primary residence. According to Robert Kiyosaki, of “Rich Dad Poor Dad” fame, your home is a liability, not an asset. I tend to agree.
So how can you obtain assets that produce money for you? First, you have to become financially educated by reading books and watching videos. Next, you need to learn how to use leverage. Leverage simply is using other people’s money to buy assets that produce more money.
Leverage intends to cover the loan (or debt service) and all expenses and still has money left from rental income. When you achieve this, it is called cash flow or being net positive. I tend to like the word Cash Flow because it sounds badass. Leverage can be tricky because the mortgage, or loan payment, is due no matter if you have a tenant or not. You have to be smart when using leverage.
Leverage is a magnifying device for whatever skills you may have. If you are good at balancing your expenses and making money, leverage will make you great. If you suck at money, can’t manage your finances, leverage will make you even worse.
Buy Land, Start Farm
America is becoming too expensive to operate directly in rental properties such as single-family homes, multi-family homes, or apartment complexes. To become a property owner in these commodities, you will need to leverage partnerships and syndicates. However, if you are an owner-occupant, you can obtain financing through particular loans. For more on these loans, read “Maximum Leverage 1 and 2.”
Buying homes, one by one, as you live in them is a great way to build wealth slowly. This process is how my wife and I obtained our three homes. The military moved us, and we bought different homes throughout our careers. Because of this method, we are now receiving a good amount of rental income per month.
However, now we want to buy more property, and the pickings are slim. The home we purchased in northern Florida in 2017 for $180,000 now (2021) appraises at $240,000. This home was a fantastic deal in 2017, and my mortgage is only $1,100/month. I can easily rent this home for $1650/month. So I am cash flowing nicely.
Print Your Own Money
However, if I were to buy at today’s prices, this would not be the case. At $240,000, you are looking closer to a $1,300/month mortgage. Your Cash Flow cushion has taken a considerable decrease in amount. With this, I make my bold new prediction.
The future of real estate will be in affordable housing- so we want to buy raw land, mobile homes, tiny homes, Recreation Vehicles, shared homes, and overseas housing. I aim this series to entrepreneurs who are focused on these real estate ventures.
I am not looking to be a big-time real estate mogul, and I feel that is the only way to leverage big homes in real estate, at least in America. However, I love that sweet, sweet rental income, so we will need to find affordable assets to leverage. Let’s look at each type of commodity individually.
Land. By researching adverse tax liens on properties, you may be able to find land at discount prices. It will take time and skill, but I believe you can be successful at this. Remember that land will not produce income for us unless we sell or harvest it. Read the article “Become a Land Millionaire.” You will need money to get started; that is where our creative financing will come into play.
Mobile Homes. Mobile homes are becoming expensive as well. The best way to leverage mobile homes is to buy a single-family residence with a friendly loan with a nice amount of land. Ensure that the house can have multiple homes on it, and drop a couple of mobile homes. Banks don’t like mobile homes, so creative financing is necessary.
Become a Private Money Lender
Tiny Homes. Tiny homes are all the rage right now, but people will need land. Again, as with mobile homes, you can buy a lovely single-family home and drop some tiny homes on it. Small homes, however, are in a different category than mobile homes. Your county probably doesn’t like tiny homes. There is a lot of research to do here. However, I believe that this is the actual future of housing. IKEA has even started producing tiny homes.
Recreation Vehicles. Similar to mobile homes and tiny homes, I think there is a market for people who want to live in these types of properties. However, RV people will need land, power, and sewage. There is an opportunity to build out these RV hookups on your land. They can then bring their RV or you can utilize creative financing to buy RVs for them to rent.
Introduction to REITs part IV: REITs vs. Rentals
Shared housing. When I envision shared accommodation, I think of a single-family home with multiple people living inside, not necessarily the family. I am a firm supporter of shared housing. It has allowed my wife and me to invest over $100,000 in two years. We use roommates to make our monthly mortgage amount zero. There are also many other ways to add rental space to single-family homes, including detached in-law suites and finished basements.
Overseas Housing. If you missed the real estate 50% sale of 2009-2010, as I did, then you will have to look overseas for good deals. Yes, there is a lot to learn, but you find great deals by using American money overseas. Of course, as with all investments, you will want to diversify your income across multiple categories or countries. There is always a risk of a change of government or regulations. I believe the best way to invest in overseas real estate is through people (family, relatives, friends) who are locals. You apply American leverage to overseas real estate.
As you can see, there is much to talk about throughout this series. I have plans for eight articles thus far, but we will see how it plays. I love talking about obtaining assets. Assets are the wave of the future and the only way to get ahead in life, honestly.
As humans, we can only work so many hours in a day. To build wealth, we need assistance in our pursuit of earning money. Help comes via assets. So obtaining assets needs to become a top priority. To develop our pool of support, we need to think creatively. We may not need to buy huge homes that become liabilities; we may just need to buy an RV hookup.
Financial education is the web that ties all these ideas together. “To have more, we need to become more”. Read, study, research, and destroy any limiting beliefs. Doing these things will make us rich beyond our wildest dreams. Welcome to Creative Financing in Real Estate.
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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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