5 ways to make money - and why real estate is so well suited here

Are you firing on at least 4 cylinders ?

  • Yes

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  • Not yet

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  • I am too lazy to answer, so no

    Votes: 0 0.0%
  • I already fail at cylinder 1 but aim to improve here first so I can do the other 3 or 4 in time

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Thomas Beyer

Senior Forum Member
REIN Member
There are really only five ways to generate your own cash for a real estate transaction .. and you can do all five in time .. but you have to take them all seriously ! Real estate also covers 4 of the 5 ways to make money .. once you own a even one or a few THs, SFHs, apartment buildings, mobile home parks or commercial real estate assets.

1) You work

This is the most common way to start. You work, i.e. you exchange your time for money. The more time you give, the more money you get. A pretty linear relationship. Proven though through centuries !

Many people fail at that stage already. They don't take it seriously. They show up late. They chat with friends online. They do personal business on the side. They don't understand the business they're in. They don't give 110%. Maybe 50% or 85% .. or 35%.

Yes, you can hide for a few days or a few weeks. Most employers realize after a while who is an excellent performer and who isn't. If you work hard at your job, you get ahead. Give the extra 10% or the extra 4-5 hours every week. Read up on your industry. Go to industry conferences. Seek a mentor. You get promoted. You get more $s per hour. If you have more skills, you get more $s. So, yes, formal and informal education helps. If you work hard, and get more $s than you spend, you can save some $s. Hence:

2) You invest your own $s.

You buy real estate or mutual funds or stocks or GICs or bonds or whatever seems to fit your risk tolerance, skills and timeline. Like 1) it takes time to find out what a good investment looks like. Take it seriously. This investment could be more passive (say a stock or mutual fund) or more active (say real estate or active stock trading)

3) You invest other people's money.

Once you've mastered 2) you have the right to ask for OPM (other people's money) such as JV partners, money partners , mortgages or lines-of-credit to invest, for example in income producing real estate: Usually a combination of your own time, your own money and OPM (mortgage, LOC, JV money or all 3). You borrow money at, say 6%, and invest it for 12% to 150% ! This assume a modest degree of risk as you must pay the rate your agreed with OPM but invest at a more uncertain, yet frequently much higher rate. This assume 1) and 2) is in ship-shape ! If you invest other people’s money you take a fee or a percentage of the profit – upfront, as you go along and/or at the end of the venture.

4) You use other people's time / employ other people


You have a small or large business where you pay people a wage/salary/hourly wage and then use their time to make money for yourself. This works usually only if you're good at 1) 2) and 3) as usually your have to work hard too to lead by example and have some (of your own or other folks') money at risk.

5) You have Intellectual property (IP)


Intellectual property or royalties make money for you once you have created them: maybe you have written a book. Maybe you have written lyrics or songs or music. Maybe you have painted a picture and it is copied widely for a fee. Maybe you have invented a name and copyrighted it. Maybe you have a patent or a system that can be used for a fee. Elton John makes money in his sleep today - but he was very good at 1) in the beginning of his career.

So, there you have it in a nut shell: 5 ways to make money. Are you aiming to fire on 5 cylinders ? Or is it only 1/2 ? Try harder .. or try different ways .. but usually they go in that order of: 1, 2, 3, 4 5 ..
 

Victor Ross

New Forum Member
Registered
Profit from extra cash flow on a refinance. If you are able to refinance the property to lower your mortgage bill payments while the rent stays the same, you are generating more cash flow every month. You can build a cushion for maintenance, save up for a deposit on a new rental, or have more passive income to live off.
 

Thomas Beyer

Senior Forum Member
REIN Member
Profit from extra cash flow on a refinance. If you are able to refinance the property to lower your mortgage bill payments while the rent stays the same, you are generating more cash flow every month. You can build a cushion for maintenance, save up for a deposit on a new rental, or have more passive income to live off.

Just don’t over-lever as many folks did in 2006/2007 or 2013/2014 during the last booms in Alberta and then got bitten by the falling values or rents !!


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 
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