A while ago, I came across a very bright individual who understood the principles I've discussed in this book so far. Without realizing it, this person used the principles discussed in this book in order to set the stage for him to become rich. This person told me that he had worked for “seven years” as a freelancer “building websites and then turning around and selling them.” During this seven year period, he successfully saved up about $1,000,000. He was asking for advice on how he could invest this money.
The truth of the matter is that this person can do a lot with the $1,000,000 he accumulated. For instance, he could take just a small portion of this money, say $80,000 of it, and use it as a down payment towards purchasing a 30 unit apartment complex in a growing area. Lets say for instance that the apartment complex has a value of $800,000, and after putting down $80,000 the bank is willing to finance the remaining $720,000. Each month, instead of this person making payments on the apartment the way most people do a mortgage, the tenants would pay the down the mortgage while the guy who put down the $80,000 would earn say, $5,000 each month in “passive income.” What this means is that, this freelancer who worked for seven years to save up $1,000,000 is now being rewarded by earning $5,000 each month, or $60,000 per year, regardless of whether or not he works.
At this point, the freelancer no longer has to continue building and selling websites, unless he wants to. In a couple of years, he will earn back his initial $80,000, and in addition to the cash flow of $5,000 per month he is earning from the property, it may also increase in value, which means he earns money from capital gains as well. A few years down the road, perhaps the apartment goes up to a value to $1.5 million due to a boom in real estate in the area, and this investor decides to sell the property. The bank gets back the $720,000, and the investor gets to keep the rest, meaning he walks away from the deal with $780,000. Not bad for a guy who started off as a freelancer.
In addition to this, there are numerous other ways that the guy could invest this money for positive cash flow. He could put a down payment on a car wash, laundromat, restaurant, or convenience store, each investment of which pays him a given amount of money per month in positive cash flow, whether he works or not. At this point, the $1,000,000 he saved up will begin working for him, instead of him working for it, and this is the key which will allow him to transition from being a self employed freelancer to being rich.
This is the basic secret to becoming rich as a freelancer; you first become highly skilled in an area that gives you a high salary per year (at least $50,000 annually), you reduce your debts and begin saving as much of this money as possible, and after a period of about five to six years working as a freelancer, if you have followed the money management principles of this book, as well as my other book SAVE MONEY, BUILD WEALTH, What the Government, Banks, and Credit Card Companies Don’t Want You To Know, you should have amassed the “capital” which is necessary to invest in a cash flow deal, a deal which pays you passive income each month that is at least two times your living expenses. At this point you will be financially free.
The paragraph above reveals the basic formula to becoming rich, and it doesn't require you to be a rocket scientist or take enormous financial risks. Most importantly, you don't have to wait 30 years before you can begin enjoying the type of lifestyle you desire. Everything discussed in the above paragraph can be accomplished in 10 years or less. The critical factor to success is to make sure you pick an area of expertise you love, and you must also make sure it pays you an annual salary which is higher than average. You will also want to make sure you maintain great credit and save lots of money during this time.
The reason why you must save lots of money during this period is because this is the money you will use down the road to acquire a cash flow deal that pays you passive income monthly. By maintaining excellent credit, and having a substantial amount of capital at the same time, the bank will be much more willing to finance your investment when you're willing to purchase the cash flow deal. If you have poor credit now that is fine, because it will take time to achieve success and during this time you can build your credit and cash. It is also important for you to read books in real estate investing and related subjects to make sure the cash flow deal you get is the best, and gives you the maximum return on your investment. While this is beyond the scope of this book, there are some great books we will recommend for this subject in later chapters.
Many financial authors recommend transitioning from being an employee to being a big business owner, but we don't agree with this path, primarily because in our opinion, it is the hardest transition, and has a high likelihood of failure. In order for a business to be classified as being “big” it must have 500 employees at the bare minimum. Five hundred people is a lot to handle, and it is very difficult for someone to transition from being an employee to suddenly becoming the leader of a big business where they must be responsible for hundreds of people. In addition to this, the capital necessary for starting a big business is immense.