Leverage It Up

http://i2.wp.com/www.babypips.com/images/leverage.gif?w=200As someone who desires to be a sophisticated investor we should aim to have leveraged assets building, whether it is the leverage of other people working for you, leveraging other peoples’ money, leveraging other peoples ideas, or leveraging yourself with goals and deadlines that make you commit, the way to make fast is to increase your leverage. 

If your fortunate enough to have extra cash available it is wise to find a way to leverage your money.  A sophisticated investor should at least be earning 50-100% ROIs on their money each year.  5%, 10% are you joking? I have people who tell me they invested 10k into long-term cds at 3%, ok [I realize that every product can serve a specific need at a specific time] but if your below 30 years of age and trying to aggressively build your portfolio you should be aiming 15-20% and upwards.  15-20% is easy ROI, I can get a 20% ROI NET [calculating risk in it to] just online via PROSPER.  20% ROI is good for the noob, but crap for the sophisticated investor.

Aim for a much more leveraged, higher ROI, more tax beneficial and more cash flow. 

If you DO NOT have the cash, we need to BORROW it from someone else, and then invest it into something that PAYS MORE THAN WHAT WERE BORROWING IT FOR.

The reason I bring this up because I’m going to be in a cash bind before the end of the year to hit my goals, owning 3 houses, which means I have to buy 2 more with down payments is going to put me out of money.  I won’t have enough money to invest, it is good because my cash will be earning 50-100% ROI per YEAR utilizing up towards 500k of other peoples money for my own good. 

I may take out a personal loan of 10-20k via the internet, or a bank loan to fund my investment.  Did you know even if I paid 20% interest on 20k, I could still make a SIGNIFICANT amount of money paying a high interest rate.  INVEST OTHER PEOPLES’ MONEY AT A HIGHER ROI THAN YOU PAY IN INTEREST TO BORROW THE MONEY.

Thats the reason I don’t recommend paying off student loans immediately, they are LOW interest rates, 5%, why would you pay off a student loan at 5% when u can make 20% ROI somewhere else.  Think about it.  Put it like this.

If you have 10k student loans at 5% interest rate, if you paid that down, just think of it in your mind that paying it off is like investing YOUR 10k at a 5% interest rate.  Would you ever invest into something that pays you 5% interest?

If you had 10k in student loans, and just earned 10k and had decided to pay off your student loans at 5% interest, this would probably mean you don’t know how to make more than 5% ROI investing yourself. 

Take person A, has 10k in student loans at 5%.
And person B, has 10k in student loans at 5% also.

They both earned 10k cash in the summer.

Person A decides, WOW, I can pay off his student loans, pays off his student loans, he now has no DEBT, and also has NO CASH.

Person B decides, hey 5% interest, thats not crap.  I’ll take my 10k and invest at 50% interest.  After one year, person B has 15k CASH, he made 5k, and could still pay off his student loan whenever.  Year two person B has 20k CASH, and he made 10k so far, now just DOUBLED HIS MONEY, because instead of paying off his student loans at 5%, he was smart and invested his money into something that would pay him SIGNIFICANTLY MORE than the interest he was paying.

I hate all of the financial people that say get out of DEBT, cut up your credit cards. What a bunch of losers, seriously, cutting up your credit cards makes u feel miserable [I’ve done it before], and NOT ALL DEBT IS BAD DEBT.

here is the serious question to ask yourself.

Who is going to get richer, someone who waits to SAVE one million dollars, or someone who BORROWS NOW one million dollars at 10% interest and invests it at 50% interest.

Its like my friend, says he doesnt’ use credit cards. COOL MAN! what u gonna do, buy a house cash? By the time u save up 250k for a house, I’ll already have 10 houses because I borrow other peoples’ money.

So I like to say, “leverage it up!” I want to put my money in leveraged investment vehicles.

http://i0.wp.com/www.robertgallen.com/images/LEVERAGE.gif?w=625

I should note, that there are good times to have a safe and slow plan, as the plan I’m currently advocating is a fast high growth, highly leveraged, financial return on an investment so an aggressive wealth building plan.  In this plan I’m advocating a highly leveraged, highly debt serviced investments, that means purchasing houses with, little or no money down thus owning an investment with as little cash as possible. 

Everyone’s plan is different, have a plan, this one may not be for you, but for me, I want leverage, and lots of it, and that means borrowing lots of money, and using OPM to make me rich.

  • shooter

    You will definitely make better gains by investing your money and letting the debt sit with the low interest rate. But finding investments that return at 50% interest are far and few… especially without risks.

    The stock market certainly isn’t going to give you returns like that on a consistent basis (if ever) without major risk.

    Where are you expecting these type of returns?

  • Hey shooter,

    Which is why I dislike the stock market, and in the stock market even if I did make those returns, if it wasn’t in a ROTH IRA I’d be paying a lot of money towards taxes. Also ins stocks its hard to get leverage unless you use options or something like that.

    The main vehicle I know of receiving those returns are in real estate, in an appreciating market and purchasing a building with a high debt to equity ratio. If this doesn’t make sense, u may contact me via aim, msn, gtalk, or y! if u want to message me I’ll show you something.

  • shooter

    hey Wes-

    Thanks for the reply. I understand about leveraging I just don’t see a 50% year-after-year return as a feasible achievement… especially in real estate during the slowdown.

    I’m not sure what your msn IM is but you can send me whatever you have at: shotsix [at] gmail [com]

  • Some markets going down some are still skyrocketing. Same with stocks even when the market crashes, there are stocks that go up. I’ll send you a msg.

  • shooter

    ok, thanks Wes. Looking forward to it 😉

    Although I don’t know what US markets you can say are skyrocketing at the moment. Even the hot Pacific NW has cooled down to single digit appreciation.

    The mortgage meltdown eliminated a ton of buyers nationwide and isn’t going to get any better.

  • Yeah you have a point, its harder that is for sure!

    I just added you see if I show up for you I sent you a message.

  • Pingback: Make Money At Home with Jon Waraas » Blog Archive » Real Estate Investor Interview()

  • wow. that is alot of information. I dont even know if I could do all that. And thank you so much for lettming me in on all the info.

  • The actual fact thаt almoѕt all ԁrіp
    сoffee makеrs mаκe cоffee as part
    of the identiсаl way, not all driρ coffee brewers are made еqual!
    Using the a lot of a νaгiety of styles and mоdelѕ to
    select fгom it is crucial so that you can ԁo some resеarchіng .
    Wheneveг you сan obserѵe a ρгocessed film otherwise
    сrusty build up stucκ your tea pot or thе coffee
    maker you will like to repeаt the рrocess a feω times to еnsure that most
    оf these deρosits aгe cοmpletely removed.