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How I bought a property by switching to GREEN TEA!

DrewBetts

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Sep 15, 2007
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Hi everyone,

I recently read an excellent marketing book called Made to Stick. There were so many great points in it that I entirely re-vamped my joint venture partner presentation. One of the things I included in the new presentation is a story. It`s been so increadibly effective, that I wanted to share it with you. Feel free to use it in your presentations and materials if you like it. Here`s how it goes...

I was recently reading about something called "The Latte Factor". Now, we all love a good latte. Just a short stroll down the block, Starbucks is the perfect escape from the office. A quick swipe of the stripe and seconds later you`re holding a delicious, enticing latte. It almost doesn`t seem like you`re spending money at all!

But you are spending money. $3.20 to be exact. Say, for example, you`re one of the many who drinks a coffee a day (after all, one a day isn`t bad right?). That`s $96 a month, $1,168 a year, or $5,840 over 5 years. When you add it up like that it seem shocking, and it truly is. Doesn`t it make you wonder, what else you could be doing with that money?

I`m going to use this example to show you how changing a single habit, like drinking a coffee a day, can change your financial future. That`s a bold statement, for sure. But pay careful attention to the numbers and I`ll show you how true it really is. In this example I`m going to use an investment property in Grande Prairie, Alberta. This is a real property that I already own.

The total investment to own this property is $67,000. Instead of using cash to buy it, you get a home equity line of credit on your home and use the bank`s money. The monthly interest payment on your line of credit is $265.21 ($67,000 * 4.75% ÷ 12). Your new property produces positive cash-flow though, and this rises over time as we increase rents. This partially covers your interest payments. Over the 5 years you hold the property, the total interest you pay is $15,912.50 and your total projected cash-flow is $11,609. Subtract one from the other, and the actual interest you pay is only $4,303.50.

But we`re missing one BIG part of the calculation. You`ve stopped drinking lattes! Add back the $5,840 you saved and actually still have $1,536.50 left over. Here`s the kicker. The $1,536.50 you have left is $0.87 a day over 5 years. That`s enough to buy a green tea, so really all you need to do is switch from coffee to green tea and you can own a cash-flow investment property in one of the hottest real estate markets in Canada!

This is just a fun example to put things in perspective. It`s important to realize, though, how powerful it can be to change one small habit and the positive impact it can have on your financial future. It`s my greatest desire for you to have all the health, wealth and happiness in your life that you desire. One of my mentors once told me something that`s really stuck with me over the years, "Success is merely a series of small, incremental steps in the right direction. Each one starts with a choice." I`ll let you ponder that while I enjoy a delicious green tea... Until next time. All the best!
 

DonCampbell

Investor, Analyst, Author, Philanthropist
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Aug 22, 2007
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There is a reason that you are so successful... you`re ability to find reasons WHY to do things rather than WHY NOT!

Great Post
 

vandriani

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Oct 4, 2007
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It`s funny how us westcoasters tend to refer to lattes on a regular basis.

I like the story, it is simple and straight forward. I would have issues claiming it as my own but it does prompt me to think of creative ways to relay the message.

On a side note:
The was a survey done in Vancouver last year asking:
"Which of the following does Vancouver have more of? Starbucks or sushi restaurants?"
Answer: Sushi restaurants
 

Dan_Eisenhauer

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Aug 31, 2007
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Thanks Drew. It does boil investing down to the lowest common denominator. This is what I was trying to do in the thread about the value of a REIN membership

As for taking this story as one`s own, it has been around for many years. I first came across it when experimenting with network marketing 15 years ago. The story can be revamped as a simple example, rather than "your story", if doing that makes you feel more comfortable.
 

Charly

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Jul 7, 2008
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Excellent article:

I am familar with this concept and have just recently decided to skip the many restaurants I do on a daily basis. I am stunned how much I have saved so far. My money is going to a new rental property! This is easy to do and EVERYONE should do it. Good Article!
Charly


QUOTE (DrewBetts @ Aug 28 2008, 12:47 PM) Hi everyone,

I recently read an excellent marketing book called Made to Stick. There were so many great points in it that I entirely re-vamped my joint venture partner presentation. One of the things I included in the new presentation is a story. It`s been so increadibly effective, that I wanted to share it with you. Feel free to use it in your presentations and materials if you like it. Here`s how it goes...

I was recently reading about something called "The Latte Factor". Now, we all love a good latte. Just a short stroll down the block, Starbucks is the perfect escape from the office. A quick swipe of the stripe and seconds later you`re holding a delicious, enticing latte. It almost doesn`t seem like you`re spending money at all!

But you are spending money. $3.20 to be exact. Say, for example, you`re one of the many who drinks a coffee a day (after all, one a day isn`t bad right?). That`s $96 a month, $1,168 a year, or $5,840 over 5 years. When you add it up like that it seem shocking, and it truly is. Doesn`t it make you wonder, what else you could be doing with that money?

I`m going to use this example to show you how changing a single habit, like drinking a coffee a day, can change your financial future. That`s a bold statement, for sure. But pay careful attention to the numbers and I`ll show you how true it really is. In this example I`m going to use an investment property in Grande Prairie, Alberta. This is a real property that I already own.

The total investment to own this property is $67,000. Instead of using cash to buy it, you get a home equity line of credit on your home and use the bank`s money. The monthly interest payment on your line of credit is $265.21 ($67,000 * 4.75% ÷ 12). Your new property produces positive cash-flow though, and this rises over time as we increase rents. This partially covers your interest payments. Over the 5 years you hold the property, the total interest you pay is $15,912.50 and your total projected cash-flow is $11,609. Subtract one from the other, and the actual interest you pay is only $4,303.50.

But we`re missing one BIG part of the calculation. You`ve stopped drinking lattes! Add back the $5,840 you saved and actually still have $1,536.50 left over. Here`s the kicker. The $1,536.50 you have left is $0.87 a day over 5 years. That`s enough to buy a green tea, so really all you need to do is switch from coffee to green tea and you can own a cash-flow investment property in one of the hottest real estate markets in Canada!

This is just a fun example to put things in perspective. It`s important to realize, though, how powerful it can be to change one small habit and the positive impact it can have on your financial future. It`s my greatest desire for you to have all the health, wealth and happiness in your life that you desire. One of my mentors once told me something that`s really stuck with me over the years, "Success is merely a series of small, incremental steps in the right direction. Each one starts with a choice." I`ll let you ponder that while I enjoy a delicious green tea... Until next time. All the best!
 

GlennLasiuta

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Sep 7, 2007
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Thanks Drew, that`s a really cool analysis/analogy. Quite amazing what kind of results we can achieve by changing just ONE small action!

Keep up the awesome posts!


Glenn
 

BHoward

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Aug 30, 2007
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96
Thanks for sharing.
...you are outside the box.
Keep up the good work.
Bryon
 

GarthChapman

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Great motivation Drew. Your posts are insightful and enlightening. You often come at things from a unique perspective and thereby give us a different view of our world.

Thanks for taking the time to put your thoughts down for us.
 

dplummer

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Sep 19, 2007
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I`m a Tim Horton`s man myself. However the story hits home. I`m a 4-5 cup man per day. Thanks for the wake up call!

Doug
 

markl

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Oct 1, 2007
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So what does drinking my pot of homemade green tea net me? Can you help me with the math?

style_emoticons


Regards,
 

GrahamWhite

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Jan 11, 2008
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Ok, but now you`re stuck drinking Green Tea instead of enjoying the luxury of a Starbucks latte! There IS a way to drink Starbucks AND buy property!

HOW TO BUY MORE PROPERTY AND STILL END UP WITH YOUR LATTE:

We began investing in Real Estate when we were $100,000 in debt (I mean REAL personal debt, not including our mortgage). In order to pay this down as fast as possible we cut back in every area of life. I even remember my wife coming home crying one day because she didn`t feel comfortable going for a tea with her good friend because finances were so tight.

For two years we kept our grocery bill ultra-low by eating very simple dishes and never buying things that weren`t on really big sales. We ate out once a week at Wendy`s just so we didn`t go crazy from financial restrictions. We had a 1-year-old daughter and so we scheduled it so that my wife worked days and I worked nights so that we didn`t have child-care expenses.

In just two years we eliminated our debt and were financially free. Our plan for intense short-term delayed gratification got us to where we wanted to be in a hurry, and then we began eliminating those restrictions one by one.

Seven years later now I eat out whenever I want BECAUSE financial freedom for me is the freedom to be able to spend money on the things I enjoy without feeling restricted.

Now that we`re in a better financial position I focus on negotiating $10,000 - $50,000 in my favor on a deal and finding some great sales on upgrades for my properties rather than worrying about a couple bucks on a latte.

(It`s funny because my dad is with me on most of the renovations I do and he always packs a lunch. You know what? I WISH he would let me take him out, but he`s so stuck in the frugal mindset that he can`t get out of it. ***He showed up as I`m writing this, so I took a picture of him with his lunch http://tinyurl.com/6mowm4
)


So, pass up the lattes if that`s part of your plan and where you`re at financially today, but I do hope you`ll get the to point where your thriftiness is better spent finding bargains on your properties, your dream car or vacations to exotic locations that include all-you-can-drink lattes!


"Start out small with big things in mind and then earn the right to grown into them."
 

TodorYordanov

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Oct 10, 2007
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Great post Drew. It reinforces, that when there is a will, there is a way.
Love the whole story.

Todor
 

albainstar

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Sep 18, 2007
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if you had to take a loan out to fund the investment and give up enjoyable lattes just so they have the bragging rights that they own a rental property - that really doesnt earn them money after they pay the loan-are they ahead?

i get your idea but if i was pitched that i would run the other way,
if i have to give something up i want a real clear gain
 

MonteDobson

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Oct 7, 2007
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Hi Albainstar,

Is a 15-20% return on your money (or much higher if you use a LOC) not a "real clear gain"?? Point of Drews story is that it doesn`t take much of a lifestyle change to invest in something that could truly change one`s life in a postive way.

Question to ask oneself or challenge a JV partner...do you have $3.20/day to invest in you and your families financial future?
 
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