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How to Grow Your Wealth Like the Real Estate Moguls Do

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Many investors suffer from the paradoxical behavior of taking risks with their investments, but when it comes to the strategies I’m about to explain, The idea of ​​shortage..

It is well known that entrepreneurs and real estate investors make the most wealth in the world. I will explain how you too can benefit from the same strategies that wealthy people use to generate wealth.

But first, we need to identify why people in these two categories are better suited to creating wealth than the other categories. I believe there are three things that make them stand out:

  1. They use the money of others to grow their wealth.
  2. They continue to enjoy profits when the assets they own are valued over time.
  3. They enjoy exponentially large cash flows from asset leverage and management.

1st place: Utilize the money of others

In most cases, real estate investors get a loan from a bank to fund a project when buying real estate or building a building. They rarely pay for real estate in cash. The more resources you partner with in one property, the less cash you can use to acquire another. You can use your bank’s money to take advantage of your purchases and use the same amount to acquire multiple properties. It’s easy to see why this is important.

Investors secure assets in exchange for capital to acquire them. Suppose an investor buys $ 100,000 worth of real estate. Banks fund 75% of the purchase price and investors fund 25%. By doing this, investors will have $ 100,000 worth of assets that they have paid $ 25,000 from their pockets to acquire.

From a retail perspective, you might point out the fact that you have a loan and your equity position is only 25%. That’s true, but there’s much more to understand why this is a huge advantage for investors. That leads to the next point.

Second: Benefits are built into asset growth

What many people don’t understand about real estate is that real estate is of the same value with or without a mortgage. In this example, even if the investor has a $ 75,000 loan, the asset is worth $ 100,000.

This is important Investor – Not a bank – Benefits when the property is highly valued. Investors can benefit from valuing $ 100,000 in assets with an investment of only $ 25,000. In other words, if real estate rises 5%, or $ 5,000 for $ 100,000 real estate, this is effectively a 20% yield for an investor’s $ 25,000 investment. This is known as an internal return.

No. 3: Cash flow increases exponentially due to leverage and investment

Of course, investment real estate will not be acquired unless there is a possibility of generating cash flow from the business. Investors have plans to generate cash flow from the use of real estate, whether it is a business operated within the real estate or a rental contract.

Now, where the multiplication occurs, the idea of ​​internal and external returns becomes clear … I’ll explain how this strategy grows wealth.

Continuing with the $ 100,000 property example, let’s assume the property is rented. Let’s assume that the rent collected is $ 1,200 per month, or $ 14,400 per year. Using the same calculations as before, $ 14,400 is equivalent to 14% of the value of the asset and 57% of the investor’s $ 25,000 investment. This is an external return.

Investor returns are still over 30% even after canceling $ 75,000 mortgage payments, which is about $ 6,000 (6%) annually. And if you combine this cash flow with the building valuation, you’ll get over 50% year-over-year revenue, all in all.

This is why investors prefer to spend bank money. The return will be higher. And if you multiply this example four times, you can see why using $ 100,000 to get a property worth $ 400,000 is better than using $ 100,000 for a single property.

Of course, this involves risks like any other investment, and the actual return on a real estate investment varies from transaction to transaction.

Benefits of this concept if you are not an entrepreneur or real estate investor

This concept of internal and external revenue applies to everyone who owns real estate, but also to anyone who has a cash-valued life insurance policy. But before explaining how these two assets can help increase wealth, it’s worth dispelling some common myths.

Mortgage myth

The challenge it faces for many in relation to mortgages is the misunderstanding of what constitutes sound financial advice. On the one hand, investors believe that they can invest in the stock market and earn 8% to 10% over time, but at the same time having a 3% to 4% mortgage is a bad idea. I have the contradictory views that there is. If this is yours, sorry, this idea doesn’t support your own logic.

If you believe that you may get a higher return than you would pay to a bank for a mortgage, there is no mathematical evidence to support accelerating mortgage repayments.

Of course, simply I don’t want to have a mortgage — And it’s a personal preference, not an economic decision.

Life insurance myth

Few subjects are more misunderstood than life insurance. All uses and uses, and multiple types of policies, make it easy to understand why life insurance opinions and views are all intertwined in a web of confusion.

But let’s be clear.When paying dividends Whole life insurance Well designed and funded, the benefits reflect the benefits of most real estate. Both are similar in that they build fairness, defer and grow taxes, provide tax-free cash access, and have clear ownership for free.

Due to the overlapping characteristics of life insurance and real estate, I think both are used as conduits for receiving both internal and external rates of return.

So here’s what we know to be true:

  • Real estate is valued the same with or without a mortgage – internal revenue.
  • Accessing cash through real estate refinancing is a tax-exempt transaction.
  • You can improve your cash flow by sticking to cash while leveraging your capital – external returns.

The same is true for specially designed life insurance policies.

  • The value of cash is equally valued with or without a loan – internal revenue.
  • Access to cash It is a tax-exempt transaction through a loan.
  • You can improve your cash flow by sticking to cash while leveraging your capital – external returns.

One of the advantages of life insurance policy loans over bank loans is that you don’t have to repay the loan. This is a cash flow advantage because you can set conditions.

Here are some simple examples

Let’s say you are investing and need to make some home improvements. Consider using Home Equity To make these improvements rather than using investment. This has three advantages.

  1. You invest your money and keep growing.
  2. You are using fairness in your home where you are earning nothing to increase the value of your home.
  3. Depending on your investment yield and your current mortgage balance, you can increase your cash flow.

Another example is the use of specially designed life insurance.

  1. The insurance company will lend you money while your money remains in a growing policy.
  2. Use the money you receive as a loan to create a new, highly valued asset and receive the policy’s internal rate of return while providing both internal and external returns.
  3. You can increase your cash flow with new assets and current bank payments. In other words, the policy acts as your bank.

Proper use of these strategies can be a catalyst for building wealth and increasing cash flow efficiency in the personal economy. For more information on how to develop this system yourself, visit the following website: BUILDBanking.com.

Benefits and guarantees are based on the insurance company’s ability to pay insurance claims. Results may vary. Instructions for life insurance contracts and their use as an alternative to financing or risk management techniques are provided for illustration purposes only and do not apply to all situations and to fully invest in current or future investments. It is not indicated and is subject to change in the following locations: It is at the discretion of the insurer, general partner and / or manager and is not intended to reflect any guarantee of the performance of the security. The term BUILD Banking ™, an alternative to private banking, or a specially designed life insurance policy (SDLIC) means that the issuer is creating a real bank for the customer, or the life insurer is traditional. It does not mean to imply that you are telling us that you are the same as a banking institution. This material is educational in nature and should not be considered a solicitation for a particular product or service. BUILD Banking ™ is provided only by Skrobonja Insurance Services, LLC, not by Kalos Capital, Inc. or Kalos Management. Skrobonja Insurance Services, LLC does not provide tax or legal advice. The opinions and views expressed here are for informational purposes only. Talk to your tax and / or legal counsel for such guidance.

Founder and President of Skrobonja Financial Group LLC

Brian Skrobonja is a writer, blogger, podcaster and speaker. He is the founder of a wealth management company based in St. Louis, Missouri. Skrobonja Financial Group LLC.. His goal is to help the audience discover the roots of their beliefs about money and challenge them to think differently.Brian is the author of three books and his Common sense podcast Selected as one of the Top 10 by Forbes. In 2017, 2019, 2020, 2021 and 2022, Brian was awarded the Best Wealth Manager and in 2021 the Best in Business and Future 50 from the St. Louis Small Business.

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