In my mindset, building wealth should be all about making a difference. And I really prefer real estate investing as the tool to build wealth! The following is an excerpt from my upcoming book on exactly that topic: building wealth for the purpose of making a difference. You can purchase your pre-order copy of Money Mastery here.
For the Law of Acceleration, let’s use the example of that $10,000 again. We’re going to take that $10,000 and purchase a piece of real estate. Then we’re going to refinance that property and take $10,000 out of it in 12-36 months.
Again, the average appreciation rate in real estate has historically been around 5%-6% annually. So if you have a $100,000 piece of real estate and it appreciates in that range, then wait three years, and your property could increase by 15%.
Now if you have enough equity in your property, then you can go back and take that $10,000 out. And now you have $10,000 to purchase another piece of property!
I have that exact same $10,000 I started with, but now I have acquired two $100,000 assets—in this case, single-family homes. Now I own two homes that I control and both are appreciating and producing a positive cash flow.
Then all you need to do to build the green line is simply repeat this process. Over a period of, say, 10 years, based on this illustration, you could acquire three to four pieces of real estate using the same $10,000. That’s pretty awesome!
People often tell me, “I’ve only got $1,000 or $5,000, what do I do with it?” Well, the first thing I tell them is start investing in yourself. You do this through learning. Put some of that money toward classes so that you can start developing the Law of Wisdom. The first step is always to learn what you’re doing.
This illustration shows you how you don’t need to have a ton of cash to start building the Second X. What you need is some money, knowledge, understanding and wisdom and mix them together in this bowl. Get your beaters out, then stick it in the oven and cook it. When it comes out, you should have that appreciating $100,000 asset and $10,000 you’re able to pull out two or three years later. And then you just do it again and again and again and again. That is a possible pattern for building wealth.
Let’s return to that illustration of the cow, the calves and the dirt bike. Instead of taking the money and purchasing the dirt bike directly, they took the money and bought a pregnant cow. That cow had two calves. So they sold one and kept the other. With the money from that calf, they bought the dirt bike. At the end of the day, from the same bag of money, they ended up with a cow, a calf and a dirt bike completely paid for. And while the dirt bike will depreciate, the cow and calf will probably appreciate in value. All for the same $700.
That’s the Law of Acceleration. It’s taking the same bag of money, but thinking differently about how you’re going to use it.
One of the first places to start for young couples is to buy your first home. Get the ball going in the right direction, where you’re taking a little bit of money and using it to acquire a larger asset. That’s the Law of Acceleration. As I begin to acquire those assets, my net worth and my income begin to accelerate as I move forward into building wealth.
When you take specific knowledge and have a team of people you trust, you can mix all of those up in the mixing bowl. So for example, if you’re doing a house for yourself, then you don’t really need a big team. You just need a good real estate agent and a few people to help you. But if you get in the investment area and are starting to grow it, then you need to have a team of folks helping you know what to do.
Take those three things: money—doesn’t have to be a lot; specific knowledge—that means you took the time to learn what you’re doing; and a team—experts you trust. Mix those three ingredients together and you will find yourself in a position where you’re able to move forward in wealth and be blessed.
Preorders of Money Mastery are available until the end of August. Order your copy here: https://wealthbuilders.org/product/money-mastery-book/
Join me every Thursday for tips on real estate investing. To learn more, sign up for some free real estate training videos below: