One of my wealthy business coaches taught me a four part formula for creating generational wealth. He said first, you need to build a business. Second, reinvest in your business. Third, invest in real estate. Fourth, buy luxuries.
The fourth part in the formula is what I am writing about today… using your real estate investments to buy your luxuries. Luxuries or “toys,” include cars, boats, trips or any non-asset that costs a considerable amount of money. I emphasize non-asset because if it’s not making you money, it is a non-asset.
Did you know that the average term of a new car note stretches out more than five years to 65 months? This is the longest average term ever reported. Seventeen percent of all new car loans in the fourth quarter of 2012 were actually between 73 and 84 months, and some notes stretched as long as 97 months. Just four years ago, only 11 percent of loans were in the 73-to-84 month category. Experts warned that long term car loans seriously present a heightened risk for consumers because it takes so long for consumers to reach a point where they owe less on the car than it is worth. Although “underwater” cars are pretty common and generally do not come with the emotional issues that underwater houses do, they still are extremely hard to trade or sell when you can no longer afford the payments.
Today, most mid-size sedans cost in the range of $20,000 to $30,000. The higher end luxury cars cost $40,000 and up to $80,000 or more. Now I know that there is nothing like driving a brand new car. The automobile is embedded into the American culture. Like most men my age, I like high end luxury sports automobiles. However, using the formula taught to me by my coach, I have learned to use my assets to purchase the “toys” that I want.
Instead of paying cash or financing a car like most people, just imagine taking your money and buying a house or commercial property either with cash or using the money as a down payment. You can then rent the house or lease the property and use the positive cash flow from the rent to finance your dream car. This way, you use the asset to pay for your “toy” while preserving your capital in the property. In addition, you get all the benefits of depreciation, appreciation, and tax savings on your real estate investment.
This is how wealthy people create and maintain wealth while living a life filled with luxurious “toys.” You too can let your business or your asset pay for your “toys”.
In The Savvy Investor Program™ we teach you how to create your own economy. We help you get off the treadmill. Remember that with real estate investing as one part of your financial plan, you can create the life of your dreams by following a few time-proven strategies and techniques. Today, buy your copy of The Book on Investing.
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