Like many children, I learned the value of money at a young age by playing the game Monopoly. Modeling my father and grandfather who were successful entrepreneurs in their own rights, I became obsessed with the principles of buying and selling property and becoming an entrepreneur. As a kid, mastering the art of becoming the wealthiest player in the game was a challenge that involved strategy as well as good, old-fashioned fun. Little did I know then that unconsciously, what I was actually doing was casting a vision for my own future of financial freedom by understanding the value of creating significant streams of passive income.
As I grew older, I began reading incessantly, devouring everything I could get my hands on related to building knowledge around investing, real estate, and general business-building principles. Hopping from one training program to the next, I was always on the lookout for the next golden nugget from the latest financial guru. I was no different from anyone else in the wanting of financial freedom; where I excelled was in the planning of how to produce it and grow it.
I had learned that when it comes to making money, I had four choices: get a job working for someone else, become self-employed, start my own business (managing other people to do the work), or become an investor. Think of the first two options as an equal exchange of time and money. Your time produces the money. The second two options not only provide you with time freedom, they can be used as a system that produces money for you.
In starting any business, you need to have a business plan; that’s not rocket science. But one of the biggest mistakes I see people make is creating a strategy before they establish their vision and purpose. If you know anything about creating a vision, you understand the need to first associate a meaningful purpose with it — the emotional reasons that fuel you to stick with it until you’ve achieved your desired outcomes. Only after you’ve emotionally connected with your “business why,” you can move into creating a strategy and setting goals.
My biggest childhood passion led me right into my adulthood vision and purpose. As I began investing in and acquiring real estate in the Netherlands, Portugal, and eventually here in the U.S., I quickly realized that generating a steady flow of multiple streams of passive income was my strategy to generate the time I needed to focus on my next business vision. After all, I had learned as a kid that you’re either paying or collecting, and I wanted to be the collector.
Here are four important rules to help you become the wealthiest player in the game:
1. Make it personal. Create a compelling vision and emotionally connect with how you will feel in the achieving (or failure of achieving) it.
2. Stretch yourself. Develop a business strategy that includes achievable goals that also make you a little uncomfortable.
3. Roll the dice. Be willing to take some intelligent risks. No one ever made it big without stepping out of their comfort zone.
4. Think big and think far. Make a five-year plan that motivates you to continue to grow.
Since I’ve been in the game a while, here is my prediction for the best sectors to invest: real estate, technology and media.
Let’s take real estate for example. I believe real estate is a great revenue stream: continuous cash stream, appreciation and tax advantages. There are way more ways to invest in real estate than other industries; stocks, mutual funds, trade funds, flipping houses and many more. To me, it is a long term play but worth the wait.
While the real estate sector has been affected by the pandemic, it was not as hard hit as other industries. In fact, last year was one of the best years for the US real estate market. In total, 5.64 million homes were sold, 5.6%+ compared with 2019. In addition, real estate prices in all the big markets keep on rising and there or no signs that this will decrease in 2021. Two main factors: low interest rates (mortgage lower than 3%) and a shortage of available housing. I believe the real estate market is far from a crash this or next year.
In terms of strategy, think about location. Where do you want to invest? What are the trends? Right now, you see a lot of people leaving the big cities because of the pandemic and opting for an increase in space and outdoor space in the suburbs.
Now it’s time to execute. Imagine that each property in your portfolio produces an income of $32,000/year (when you are mortgage free.) In order to generate an annual income of $384K, you would need to own 12 such properties. But you don’t have the capital to acquire 12 properties with cash today to produce that kind of income. Thing is, you don’t need to. You can purchase assets with 20-25% down and then use the positive cashflow they produce to aggressively pay down the mortgages. Your portfolio is worth over $6.14M becomes free and clear in 12 -15 years and produces a six figure annual income before taxes? This is passive income, money that you are producing next to your company or job. How fast and how intensely you build this up is up to you.
So why isn’t everyone doing this? You need to have a plan, commitment and dedication. Creating passive income doesn’t happen overnight and for many, execution is the problem. It’s one thing to discuss ideas or dreams, but it is another to get in the game early and execute. If you do not, you will not pass go, and you can certainly forget about collecting your $200.