Millionaires Are Made

You hear this all the time right? Don’t use your money, use someone else’s! Now, how exactly is that done? Why do we want other people’s money? Another speech, another cliche. It takes money to make money.

Just so you know, you can be the other people’s money! Don’t earn the same dollar twice! We will talk more about this later.

There are two ways to get money from someone else. The first is debt. This in general is a loan that has an interest rate that you pay back on a monthly basis. There’s a thousand ways to structure it, but this is the most common structure. Another popular way to acquire funds is through equity. This involves selling a portion of your company in exchange for cash. I almost never recommend this, as many new entrepreneurs dont know the value of their company, or the potential value. Remember, all experienced buyers don’t care about your sweat equity, how much effort you put in, but only the numbers on your books.

Debt, the best thing for a business. Nearly all businesses carry debt. Keep that in mind.

There are 4 major ways that debt can work for you. And remember again, it goes both ways. You can let people use your money as well. I already spoke on investing simply, and later will have a lesson much, much more in depth.

The simplest way to acquire debt is through a bank. They have systems and processes and loan money out all the time. From business loans to home loans, this is how banks make money. Fill out an application, get your credit checked, and hopefully approved. You are more than welcome to use their money, at a price, which is called the interest rate.

The next debt is borrowing private money or hard money. This can be from your family member, friend, or an established hard money lendor. These typically have less paperwork and requirements, but have a higher cost. I love lending out hard money, but only do it through a group I am part of with systems and processes to minimize the risk. I also borrow from these. Since I am a cannabis owner, my banking and financial institutions are on a very different playing field. I get kicked out of banks all the time, and don’t qualify for typical mortgages. When I buy houses, it is almost always private money I use.

Another option is using the government. Cities, states, and the feds (SBA) all have grants and loans to spur entrepreneurship and their economies. I highly recommend using this system. There can be lots of paperwork, and it can be stressful finding out requirements, but they are some of the cheapest loans.

The newest and most interesting method is crowdsourcing. This is where tons of people put a little bit of money into your company. Kickstarter and indiegogo are awesome and super fun. You can definitely lend money on here and let people use your money! Crowdsourcing is starting to get more popular. I am about to crowdsource a farm, the 4th largest in Colorado! One of my companies I started last year crowdsources homes. So investors can pay $5000 and get a piece of a house!

So, most people tell you debt is bad. Pay off credit cards, pay off your house etc. They lie. Sorry Dave Ramsey, but that uber conservative approach isn’t for movers and shakers that are making shit happen like everyone in this room. We need debt. We love debt. But, like all strong power, we have to use it wisely. Too much debt, and you can’t pay and your business dies. Too little debt, you may not grow fast enough, and your business dies.

A mortgage or car payment are great debt. Cars themselves depreciate, and that sucks, but is for another time. These loans are almost always under 5%. Guess what, the stock market over the past 100 years gives 10%. So, instead of paying off your car, you could put the money into the stock market and just pay the monthly amount and have more money in the end.

Ready for a dope tip? Finance your car. Then lease it to your business. Write it off and check out this math.

Lets take a $10k car. Payment is $200 a month. Interest is 5%. After 2 years, car depreciates to $8k. You paid $4800 over those years and wrote it off for taxes, which lowers your taxable income. If you don’t have an LLC, you are being silly. Message me or post in the group and I’ll set you up right quick!. So, you lost $2k in value, but you wrote off $4800 PRETAX.. That’s helpful! Now, if you buy a car that holds value (think toyota or honda) it may be even better for you with a lower depreciation!

Pro tip: Never buy a new car. Hope you have heard that before. They lose so much value as soon as they drive off the lot. It’s like 15% or 20%. Don’t buy new, just stand right outside the lot and buy it then.

Have amazing credit and decent income? Get a rare car. Use it for marketing.

Here’s how:

Take it to events. People start talking about it. They want to meet you. They ask you how. You respond with your company. Put a magnet on the back and sides with your brand. Everyone wants to video it, and that makes you go viral. Meet those ego friendly guys that love cars. They want to know how you got it, and you let them go spread the word. These are marketing expenses and you can write them all off! Pay for custom plates! People will read them!

Pro tip after a Pro tip: Montana doesn't have sales tax. Save money on your car, register it there.

Ok, here’s another example on why to use other people’s money.

We have two people with $100,000 to invest in real estate. A house is available for $100,000 and generates gross rent of $1,200 per month. Investor A decides to purchase the property for the full amount of $100,000 in cash. Investor B decides to put $20,000 down and take out a conventional mortgage of $80,000 to cover the remainder of the purchase price. So, now they have $80k. Let’s do it again. And again until I have 5 homes!

Cash buyer gets $1,200 in Rent – $600 in Operating Expenses (based on the 50% Rule) = $600 per month. OPM Buyer gets $6,000 in Gross Rent (5 homes x $1,200) – $3,000 in operating expenses (5 homes x $600) – $1,910 in debt service (5 homes x $382) = $1,090 per month. So, using OPM you can create more monthly income AND have 5 little real estate seeds. If a property appreciates at 12% you now have 5 homes appreciated versus the single one.

Take that extra income and invest it! Go put it in the stock market and get that 10%. Go listen to my investing session and follow it!

Pro tip: Never pay off a mortgage more than required, you can make more money than the 5% interest you are paying by investing that extra cash!

Pro tip: Never work for the same dollar twice. Once you earn it, put it to work. You become the other people’s money. But you charge more!

Take money from others. Use it to make more money. Then lend it back to others.

Millionaires are made