Why you want assets!

What is an asset and why do you want them?!

Well, I would first say you need to know the difference between an asset and a liability. In short, an asset puts money in your pockets, while a liability takes money out of your pockets. 

Here, let me show you. 

Let’s take your primary residence. I know a lot of people say their home is an asset, but it’s a liability. Does your primary residence produce cash flow? Does it pay you every month with a check? Or do you pay your mortgage every month and send the bank a check? 

In Houston, TX the average price of a home is $231,326. I know coming from California that seems very affordable. But, let’s walk through this…

Let’s assume I put 20% down ($46,265). Let’s say I get a fixed rate at 3.25% for 30 years. 

I would have a monthly mortgage payment of $805. In one year’s time I would have paid the bank $9,660. Did I make any money on my home? Did it provide me with income each month? Obviously it did not. This is the case for the 83 million American homeowners. Every month they pay the bank and continue to think their home is the best investment they have. 

Now let’s flip the coin…

What if I bought the same home with the same loan payments. This time I decided to rent the home out for $1,500/month. I would have made $18,000 for the year in income minus my mortgage payment. Let’s include property taxes and insurance at $3,396/year as well.

Here is what it would look like:

$18,000-$13,056=$4,944

I would have made for that single year $4,944 or $412 a month in profit. 

In 10 years this one home would pay me $49,440. I would have my initial down payment back. And I didn’t pay any tax on the income I received. How did I do it? I invested my money into an ASSET that pays me each month. If I did this with only one single family home, what can I do with a 20 unit apartment building? Or a 100 unit apartment building? Now I am starting to build wealth through the assets I own. 

The trick is to buy assets first that pay for the liabilities. Have the asset fund your lifestyle, a lot of people don’t understand this and often do it backwards where they buy liabilities first.

For example, you get a raise at work and use that money to go buy a second car, or a boat, or a second home, a flashy watch. Instead you could use the additional income to invest in an asset like an apartment building. Maybe you can’t afford to buy an apartment building on your own. So you partner with someone who buys apartment buildings. Now your hard earned money is making money in a real asset! 

I’ll leave you with my top five assets to buy:

1.) income producing real estate

2.) income producing real estate

3.) income producing real estate

4.) income producing real estate

5.) income producing real estate

The best investment on earth is earth!

~ Sean

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