Alone you have NO leverage. Alone, you have only YOUR money, YOUR experiences, YOUR time, and YOUR work efforts.
We all have limitations. Unfortunately, too many real estate investors just starting out never learn how to get beyond their limitations by exploiting the power of leverage. No matter how hard they work and how smart they are, they are destined to fail from the get go. You see, people rarely get rich based solely on their own efforts.
But don’t let this happen to you.
Leverage remains a secret to so many investors not because successful real estate investors keep it a secret, but because too many investor wannabees truly don’t understand the power of leverage. Or if they understand the principles of leverage, they fail to properly apply them in their real estate business.
And just to make sure you don’t become another has-been investor, let’s be clear about what leverage is so you can truly harness its power to empower you to get rich fast.
Leverage is anything you can use to multiply your efforts as an investor. When you have leverage, you have the power to control a lot with only a little. You can do more with less effort. This is one of the most important aspects on your path to riches and financial freedom.
There are essentially four “golden principles” that govern the application of maximum leverage in your business as a real estate investor.
1. The leverage of Other People’s Money (OPM).
Even if you’re brand new to real estate investing, you have probably heard about this financial principle before. Using other people’s money – borrowing – is one of the most common forms of applying leverage.
But why it’s popularity?
In real estate, when you buy a property for nothing down, you are able to pay nothing (or use none of your money) and LEVERAGE 100% control of the property.
Not a bad deal! But it gets even better because leverage gives you the ability to magnify the return on your investment. Here’s a simplified illustration of how it can truly propel your real estate investing business to an incredibly higher level and get rich fast.
Just think about what’s happened! You can use your $50,000 (in cash) to buy a single house to earn a 20,000 profit from the sale of the property. Or you can choose to take advantage of the remarkable power of leverage by using the same $50,000 to buy 20 houses by paying $2,500 down on each of 20 properties. Imagine what your bank account would be like if you made the same $20,000 profit on the sale of each of the 20 houses?
Can you do the numbers in your mind?
It was Napoleon Hill who said “If you don’t see great riches in your imagination you will never see them in your bank balance.”
Successful real estate investors make it happen repeatedly and it can happen to you if you apply maximum leverage.
2. The leverage of Other People’s Experience (OPE).
It takes too long to learn everything on your own so borrow from others what they have learned.
The best way to be successful in your real estate investing business is to find someone who has already achieved success and then learn from them what they did to get to that point.
It’s not rocket science!
You can accomplish this task in many ways:
a. Get a mentor
b. Read books by successful investors
c. Attend investment seminars
3. The leverage of Other People’s Time (OPT).
There is a set amount of hours you can work each day. Even if you could do without sleeping or eating, still you would have only 24 hours each day like everybody else. There is only so much time that you personally have to get all the things done that you need to do.
So you must create a duplicable system that is essentially usable by anyone. A duplicable system will help you advance faster and increase your profits while reducing your work.
Your system must be so simple that you could literally teach it to anyone of average intelligence, but yet so effective that once you have taught that someone to use your system, it operates efficiently without you.
4. The leverage of Other People’s Work (OPW).
You can use other people’s labor by outsourcing all of your rehabbing tasks. You must assemble a team to include a plumber, an electrician, an HVAC technician, a foundation specialist, a roofer, a flooring specialist, and a rehab specialist. And don’t forget to include a CPA, a real estate attorney, an escrow officer, and a realtor that specializes in foreclosures.
Here, leverage really starts to kick in because with your team you’ll get a lot more done a lot quicker than you could ever do alone. Assemble several teams simultaneously and you will be on fast-forward in your journey to achieve financial freedom.
Find a way to take advantage of other people’s work to accelerate your real estate success… Just do it!
If you do it all on your own, or said another way, if all the money you receive is directly proportional to the efforts that you make, then you are not using leverage. In fact, the author of Rich Dad, Poor Dad believes that “If you’re working hard physically and not getting ahead financially, then you’re probably someone else’s leverage!”
As one shrewd observer put it, “Wealth is when small efforts produce large results. Poverty is when large efforts produce small results.” Some people predominantly produce a lot of hard work and effort that doesn’t accomplish much. Others do some relatively simple things that make much bigger things happen. That is maximum leverage
To become financially free through your real estate business, you must master each of the four principles that control the use of maximum leverage.
Lee Salinas, CPA, MBA became a corporate refugee when he was blind-sided by a layoff in 2002. But Lee discovered life outside the corporate rat-race when he became a real estate investor. In four years, Lee has purchased over 180 properties. Additionally, Lee has created a real estate business plan that helps investors get all the private money they need to fund their deals. Lee’s business plan is available at http://www.realestatebizplan.com.