They Buy Assets, Not Liabilities

Number three on the list of reasons the rich get richer…it’s all about assets.

I run into tons of people that have invested in real estate. Some hated it, others loved it. But hardly any of them truly understood it.

Here’s the typical real estate investor. They save up $10,000, they buy a single family home with a mortgage, and they earn roughly $200 a month ($2,400 a year) by renting it out. Good for them. Now what did they do with the earnings?

• One used the monthly income to cover boat payments.
• Another used the money to pay for his daughter’s tuition.
• The other guy blew it on weekend “fun”.

While some of these uses are more productive than others, are any of these people getting rich from their investment?

Not even close.

The rich take real estate investing to a whole new level. They take their $10,000, buy the house, earn the $2,400 a year in cash flow. They then use that money, pool it with earnings from their day job, and buy another rental house. Now they have $4,800 coming in each year. They do this again.

….and again

……and again and again!

Soon, they are earning tens of thousands of dollars each year with their income increasing exponentially each year!

One of the main reasons the rich get richer is because they salivate over increasing their number of assets while the rest of us climb just one rung of a 12 rung ladder and think we arrived. 

Their assets earn an income each month, which then lead to more assets, which leads to even more income. The upward cycle quite quickly becomes unreal.

(Note: I like to invest in my rental properties with cash to reduce risk. It’s slower, but still more effective than covering boat payments!)

Action Items:

1. Write out a list of assets that earn money
2. Set an income goal. Plan to achieve it by purchasing assets and reinvesting the profits. Do this, and you’ll quickly develop a passive income.