Let Your Assets Pay for Your Liabilities
Do you ever wonder what the wealthy have so many nice things and never seem to run out of money? It's because they don't pay for it.
So, let me give you an example. While I was growing up, my dream car was a Corvette Stingray; a 1970s version of a Corvette stingray. I had a poster of one on my wall that stayed on my wall my whole childhood and I never lost the desire to have this car. Then about the time that I was starting to develop my wealthy mindset, starting to invest in real estate, Chevy released the C7 version of the Corvette Stingray. You car people out there know what I'm talking about.
The one I wanted was the Z51 Le Mans edition, it was a hundred thousand dollars, and I was starting to get pretty good at doing fix and flips. So that started to become a realistic number for me dollar wise, but I knew in the back of my mind that a wealthy mindset individual would never pay cash for a car like that because five years later it would be worth eighteen thousand bucks.
So, what I did was instead I saved up the hundred grand for the car, but instead of dropping all of that on the car and just paying cash for it, I financed the car. By financing the car, I got a $1,600 a month payment. I took the hundred thousand dollars that I had saved up for the purpose of buying the car and I went and purchased a real estate property with it that would generate cash flow. The cash flow from this real estate property is about four thousand dollars a month and my Corvette payments sixteen hundred dollars a month, so you do the math. I affectionately refer to that property as the Corvette property actually.
What's cool is that I don't make those $1,600 payments every month. The money from my tenants that they pay as rent goes into an account, and out of that account comes the mortgage payment for the property and my Corvette payment. So my tenants pay for my car and at the end of five years, instead of having paid a hundred thousand dollars cash for a car that's now worth eighteen grand, at the end of five years, I will have a paid for car, I will have an asset that cash flows, and I will still have my hundred thousand dollars in equity in that property.