Leveraging Your Money


Are you ready to discover the third key to being a successful real estate investor?

What does Robert say about good management?

Robert talks about his confidence in a $17 million investment in a 300-unit property. He explains that having trustworthy partners, like Ken, who runs a property management company, and Ross, who owns a real estate development company, makes the investment safer and more secure.

Robert explains that good property management and development are key to raising rents, cutting costs, and increasing the overall value of a property.

He stresses that without trustworthy partners, proper funding, and good management, a big project like this could fail. Robert admits he wouldn’t take on such a large and complicated investment by himself. Having control over these important aspects gives him the confidence to borrow money to fund the deal.

However, for riskier investments like stocks or commodities, Robert only invests money he’s prepared to lose.

 

Ready to discover the three strategies Robert talks about?

These are advanced investment techniques that need a deeper understanding of finance. The three main strategies are:

1. OPM (Using Other People’s Money)

2. ROI (Return on Investment)

3. IRR (Internal Rate of Return)

OPM (Other People's Money)

In simple terms, Robert explains that you can use other people's money in many ways. For example, when buying a 300-unit apartment building, the bank provides 80% of the money as a loan (borrowed funds).

financial iq

The bank provides 80% of the funds for the investment, but Robert gets to keep 100% of the rewards and advantages. It's like having the bank as a partner, but he receives all the benefits.

The second strategy is ROI (Return on Investment). Many investors often hear about returns on their investments, such as a mutual fund gaining 10%. However, Robert questions whether that return truly benefits the investor and how it is being calculated.

Some investment funds calculate returns based on the increase in the share price. For example, if a share price goes from $10 to $11, they say you made a 10% return. However, Robert believes the real return is the money that investors actually get, like the cash flow from their investments, not the rise in the value of the asset (capital gains), which only becomes real when the asset is sold.

In simpler terms, cash flow is the true return, while the increase in asset value is just an estimate until the asset is sold. Both cash flow and appreciation are important, but cash flow is the most reliable and tangible return for investors.

 

Matching 401(k) Contributions with Your Money

Robert explains that when your company matches your 401(k) contributions, it’s not really “extra” money—it’s just part of your salary that you would have gotten anyway. Some financial advisors might say this is like doubling your investment, but Robert disagrees with that idea.

He thinks the company’s contribution is just a part of your overall pay, not a bonus. In Robert's view, real returns come from investing using other people's money, not your own

Robert says that using more leverage leads to higher returns.

Leverage simply means borrowing money to increase your potential profits. For example, if you buy a property with your own money and make $10,000, you get a 10% return. But if you borrow part of the money, your return could be greater.

If you borrow all the money to buy the property and still make the same $10,000, your return becomes "infinite" because you didn't use any of your own money. Leverage allows you to earn more with a smaller personal investment.

Robert talks about making money with little effort—want to know how?

He gives the example of a 300-unit apartment building. The plan involves raising the rent and adding washers and dryers to every unit. Robert will explain how these changes lead to big profits.

Want to find out how?

financial iq

financial iq

Robert says that the property owner is making more money by improving the property. He raised the rent by $100 per month for each apartment to stay competitive and added things like washers and dryers to each unit and fixed up the outside of the building.

To pay for these improvements, he borrowed money from the bank, so he didn’t use his own money. Because of the higher rent, he’s now making more money, and the extra income is more than enough to cover the loan.

This is called an 'infinite return' because the bank paid for the improvements, but the owner keeps all the extra rental income.

In simple terms, the owner borrowed money from the bank, made upgrades to the property, raised the rents, and now makes more money every month without using his own money. The extra $30,000 per month from 300 units is profit after paying off the loan.

 

Want to know what IRR is? Let’s find out!

GHL INDIA is here to create a prosperous environment that serves the world at large

Let us join together to live an opulent life