Velocity of Money
The example demonstrates the differences of how your money increases when invested in a mutual fund, a rental property, and a rental property where you borrow the appreciation every two years. Choices 1 and 2 are examples of people who park their money and choice 3 is an example of people that increase the velocity of their money.
The investor needs to first invest in their financial education before expecting such accelerated returns.
The formula professional investor follows:
1. Invest money into an asset
2. Get the original investment money back
3. But keep control of the original asset
4. Move the money into a new asset
5. Get the investment money back
6. Repeat the process
Don't count your money while you're sitting at the table. ~ A professional gambler.
In summary, as a professional investor, you need to know when to enter, when to exit, and how to get your money off the table, and still in the game playing with house's money, banker's money, and the tax man's money.
By financial definition, my ROI - return on investment - is infinite.
Professional investors want CONTROL over their assets and their cash flow.
| 20,000 | Description | Net Equity After 7 Years | Average Annual Return on a $20,000 Investment |
| Choice 1 | Invest in a mutual fund that earns 5% a year | $28,142 | 5.8% |
| Choice 2 | Invest $20,000 and borrow $180,000 from the bank for a $200,000 rental property and let your equity compound. Assume rental income only breaks even with expenses and the property appreciates at a rate of 5% a year | $101,420 | 58.2% |
| Choice 3 | Invest $20,000 and borrow $180,000 from the bank for a $200,000 rental property. Rather than letting the equity compound, you borrow out the appreciation every two years and invest it in a new property at 10 percent down. | $273,198 | 180.9% |
The investor needs to first invest in their financial education before expecting such accelerated returns.
The formula professional investor follows:
1. Invest money into an asset
2. Get the original investment money back
3. But keep control of the original asset
4. Move the money into a new asset
5. Get the investment money back
6. Repeat the process
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Financial institutions understand how important it is to expand their money supply in order to increase their earning power. Most investors do not realize they too can expand their own money supply and thereby expand their earning power. Financial institutions do this by making their money move. The more times a dollar moves, the greater the money supply and the greater their earning power of that dollar. The movement of money increases your money supply ! |
Don't count your money while you're sitting at the table. ~ A professional gambler.
In summary, as a professional investor, you need to know when to enter, when to exit, and how to get your money off the table, and still in the game playing with house's money, banker's money, and the tax man's money.
By financial definition, my ROI - return on investment - is infinite.
Professional investors want CONTROL over their assets and their cash flow.
