5-1-16 Mey, Jordan & Jomel  at the Aston in Waikiki

11 Tips From Young Financially Free Entrepreneurs on Wealth, Passive Income and Investing

Did you know that over the last 7 years, I paid off almost $50,000 in debt, create a passive income stream that pays me monthly, and also increase my Net Worth to over $100,000?!?

Not only that, I became completely debt free in April of 2016 and left my bank job on December 23rd of the same year.

I have gone from working over 80 hours a week for money to now working less than 5 hours per week for money, as an internet entrepreneur who helps other mothers create financial freedom.

I had a lot of help along the way, from young financially free entrepreneurs in their 20s, 30s, and 40s.  

Here are 11 tips that I learned that changed my life on wealth, passive income and investing.

11 Tips From Young Financially Free Entrepreneurs on Wealth, Passive Income and Investing

Tip #1 – The Habit of Saving is Important (Not the amount)
You would think that saving a lot of money makes you rich, and saving a little won’t.

However, the key is not how much you save, it’s the habit of saving. So, every time you have money come into your life, you take at least 10% and pay yourself first (meaning you save it for investing).

If you are waiting until you have more money to save, then you will never be rich.

The reason you don’t have enough money to save, is because you don’t have a savings habit.

Even if you have to borrow an extra dollar every month just to save money, do that, and at least start saving every month. Make it a habit.

Tip #2 – Understand The Rule of 72 and How Interest Rates Work So You Can Grow Investments and Grow Debt

The ‘Rule of 72’ is a way to determine how long an investment will take to double.

72 / Rate = Years to Double Your Money

Example:

72 / 14.99 = 4.8 years to double your money

Now you can see why it’s important to lower all of your debt interest rates as low as possible, and to increase the rate of return on your investments.

Tip #3 – Play Cash Flow (Board Game created by Robert Kiyosaki) every week until you can win the game in 30 minutes or less every time

This game really had me focus on financial freedom, rather than what everyone else does…focus on making more money so they can spend more money.

Financial Freedom = Passive Income > Expenses

When you play the game, you have to increase your passive income to be greater than your expenses.

If you’re passive income does not increase, you cannot get out of the rat race.

This helped me really focus on my passive income.

Tip #4 – 8% is the Minimum Return for Real Estate Investors, Don’t Invest in Real Estate Overseas Unless You Have a Resident Manager

So I was thinking of buying property outside of Hawaii at one point, and I talked to my wealth real estate investor friend, and he told me this advice.

First of all, I wanted to buy the house I lived in, but it was on the market for $1,000,000+. So I needed an investor to go in with me.

However, when I asked my real estate investor friend, he said that no investor would go in on that deal, because they would only be making 4%.

Then I looked to make money buying property in Las Vegas or LA, and then he advised me not to invest overseas unless I had a resident manager. The reason is if you have only one house or condo that you are renting, then if something goes wrong, you have to rely on a Property Manager, and they are not going to care about 1 small property owned by someone far away.

Repairs will be more expensive, and your tenancy rates will be worse, because they won’t look for new renters right away. You will be low priority.

The only way to keep expenses down is to have a resident manager.

Tip #5 – Have a Big Burning Why
If you don’t why you want to be financially free, then when obstacles come (and they always do), you will not get past them.

A burning desire fuels the energy you need, to learn what you have to learn, to make mistakes and learn from them and keep on going, no matter what.

My friend’s big why was that he felt embarrassed by his lack of wealth, and had great pride. And he also wanted before his dad died, so he had a time limit too.

Tip #6 – Negotiate With Your Creditors (Debt, Credit Cards) to Lower Your Interest Rate

So, when I got this advice, I had at least 3 credit cards that I had debt on. And the interest rates were all pretty high. When I heard this advice, it really helped me. I used it to lower the interest on ALL of my credit cards…so it works.

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Tip #7 – Track Your Net Worth

Tip #8 – Set The Next Big Goal Before The Current Big Goal is Achieved

Tip #9 – Do The Mental Work

Tip #10 – Only Take Advice From People Like You, Who Already Do What You Want To Do

Tip #11 – READ, READ, READ
Rich Dad Poor Dad by Robert Kiyosaki
The Cash Flow Quadrant by Robert Kiyosaki
Money is My Friend by Phil Laut
The Richest Man In Babylon by George Clason
Secrets of the Millionaire Mind by T Harv Eker
Your Money or Your Life by Joe Dominguez & Vicki Robin
It’s Not About The Money by Brent Kessel
How To Make A Hell Of a Profit and Still Get To Heaven by John DeMartini
The Values Factor by John DeMartini
You Can Heal Your Life by Louise L. Hay

5 Biggest Mistakes People Make When Investing in Real Estate

Would you like to avoid the 5 Biggest Mistakes People Make When Investing in Real Estate?

Well, pay close attention to today’s training and learn what I’ve learned from multiple millionaires who are successful real estate investors, including Tom Wheelwright from his book Tax-Free Wealth, and Robert Kiyosaki from his book Rich Dad Poor Dad.

 

5 Biggest Mistakes:

1) Thinking that buying a home to live in is an investment

-People end up using all of their savings as a down payment

-They stop saving when they realize how big their mortgage is

-end up paying money to the bank in mortgage interest

-they spend all their time improving and maintaining their house

-they don’t get experience as an investor

-Property taxes might increase at any time, causing some home owners to have to sell their homes

– Consolidating debt with home equity loans often causes increased spending, which leads to further debt

2) Not properly looking at the cash flow of an investment property

-Property Taxes

-Insurance (mortgage insurance, hazzard insurance, flood insurance, etc)

-Maintenance (plumbers, handy men, roof repair, leaks, etc)

-Management (handle rental laws, and evictions, filling vacancies, screening renters)

-Tenancy Vacancies

-Cost of down payment

-Cost of mortgage fees, points, interest

-Fixed interest mortgages vs adjustable rate

-Legal fees

-Accounting fees

-Tax prep fees

3) Buying your first rental property out of state, or out of your country

-Paying more for maintenance (not being able to check work)

-Management will be less likely to service you (as you are farther away)

-Cost to visit your property

-Lacking experience to run your own property and not gaining it as the property is out of state or out of the country

4) Not Claiming Depreciation for the building

According to Chapter 7 of Tax-Free Wealth, by Tom Wheelwright, one of the biggest mistakes people make, is that they do not claim depreciation of their real estate investment property.

Why, it’s because they are lazy, or their CPA is lazy, or they are ignorant of this important deduction.

In his example, he shows what would happen if you have an investor who buys an $800,000.00 apartment building that cash flows $12,000/yr, or $1,000/mo.

$800,000 (cost of home)
-$200,000 (cost of land)
$600,000 (cost of building and contents)
-$100,000 (cost of contents)
=$500,000 (cost of building)

$500,000
x 3.6% (depreciation for building)
=$18,000 (depreciation deduction)

Without claiming depreciation for the building, you would have to pay taxes on the $12,000 earned from the rental property.

When you claim the $18,000 in depreciation, the rental income is completely tax free, because your business claims a loss of -$6,000!

Not only that, if you structured it properly, the -$6,000 will pass through to your ordinary income tax, reducing your taxable income by $6,000!

5) Not Claiming Depreciation for the contents of your rental property

Tom Wheelwright points out that separating the contents from the value of the building alone is the proper way to file your taxes.

There must be a study conducted by either a CPA or an engineer to evaluate which parts of the investment property are considered contents, and which parts are considered the building structure.

The good thing for an investor, is that contents depreciate at a much faster rate than the building, which leads to a higher percentage used to calculate the depreciation of contents vs. the building structure.

In his example which I showed above, the contents of the building were valued at $100,000.

$100,000 (contents of the apartment building)
x 20% (depreciation for contents)
=$20,000 (depreciation deduction)

So, with the building depreciation, you can reduce not only the taxes on the rental income (you pay no taxes), you also reduce your personal taxable income even more!

$12,000 (rental income)
-$18,000 (building depreciation)
-$20,000 (contents depreciation)

Conclusion

The Big Short, the Mortgage Crisis and What To Do With Your Investments

Mey here writing a blog tonight on the movie I just watched called The Big Short and am blogging about The Big Short, the Mortgage Crisis and What To Do With Your Investments

…the trailer for the movie is playing now and I highly recommend watching it, it’s not only informative, it’s actually pretty funny and moving too…

…and in the movie, they basically talk about people who bet against the housing market in 2005, before the crisis hit in 2007…

…the movie is funny, and scary and taught me some basic things that you MUST do if you want to invest wisely in the market…

…so read this blog post to the end and decide for yourself what you need to do to keep your investments safe…

Know What You Are Investing In

…this is usually for your fund manager to do, and in the movie, the fund manager of Scion asks a new employee to look into all the top AAA rated mortgage bond funds and tell him all of the mortgages that are in each of them…

…then when he got the data, he found out that most of the bonds were made up of a large portion of mortgages that were already late on their mortgage payments, or were adjustable rate mortgages that were going to have a huge rate hike in 2007…

…in other words, he took the fund and actually looked inside of it…

…and when he found out that it was made up of mortgages that were already going delinquent, and the rest would probably go delinquent in 2007 when their mortgage rates went up and people would not be able to afford their mortgage payments…

…now how this could happen?

…greed…

…the big banks that packaged the bonds were getting great returns selling them and as long as people bought them they didn’t care…

…it’s like if you know the apples you were selling were poisonous, and you just kept selling them because people did not know and kept buying them anyways…

…so, if you want to avoid huge losses in your portfolio, first step is to take a look inside of it and see what is in it…

Ratings Are Not An Indicator of A Funds Strength

…in the movie, the greatest tension for the investors who bet against the mortgage funds was that the ratings would not go down, even when the mortgage crisis was happening…

…two fund managers actually visited Standard Poor’s to see why they were still rating the bonds AAA when the mortgages in them were failing…

…and the representative told them that if they didn’t rate the bonds at AAA, the banks would go to their competitor…

…so, the banks did not allow the rating to change until they sold all of the failing bonds at the highest price possible…

…after they were sold and no longer at risk, they allow the rating agencies to downgrade the bonds…

…so, the moral of the story is, don’t trust the ratings…

…rate your bond yourself by looking inside it…

We Are All Responsible for The Economy’s Health And Our Own Investments

…I really liked the movie because it wasn’t a black and white “the banks are wrong and we are right” kind of movie…

…the main characters were in the movie making money off of the fact that they shorted mortgage bonds, meaning that they saw that they were bad and they bet against them…

…and then they had to work fast after to sell them before the banks collapsed and would be unable to honor their contracts…

…in other words, they capitalized on the bonds as well, and if the bonds didn’t exist, they wouldn’t have made all of the money that they did make…

…and that’s represented best by fund manager Matt Baum, who was extremely righteous at the beginning of the movie, and then became more humble when it was over, realizing that he also had capitalized out of the misery of so many Americans who lost their homes, retirement and pension funds…

…think about it this way, if someone applies for a mortgage and they don’t read the contract and figure out what they will be paying when their rate goes up is setting themselves up for forelosure…

…of course, there are banks that did not disclose this important rate change information and those banks have been heavily fined by regulatory agencies after the fact…

…however, a lot of people who bought homes, did it without a down payment, and just assumed they could refinance before the rate went up, without actually investigating on whether that would be true…

…even my husband was paying interest only payments on his mortgage and second mortgage…

…the whole structure of it was risky and so each and every person entering into the mortgage also has the responsibility to understand the risks…

…after all, there are no guarantees that housing prices will always go up, as we saw in the housing crisis and market crash of 2008…

…the moral of the story – if we make risky investments without any research or actual facts about our investment, and trust the words of an investment advisor who probably never looked inside of the funds themselves, then we are the fool being let by the fool…

…it is our responsibility to know what we are investing in, whether that is buying a house or investing in stock or fund or business opportunity…

Conclusion

…I thought the movie was very thought provoking, and I see why so many famous actors agreed to be in it…

…it’s very funny, compelling and taught me a lot about the market…

…I know a lot of people who lost a lot of money in the mortgage crisis…

…most of them are my age and it’s interesting to see how they adapted…

…they were millionaires, and now they are still millionaires…

…and you know what they are doing?

…they’re selling educational courses and blogging platforms to help people make money on their own terms…

…now their results aren’t typical, see full income disclaimer here…

…and the thing I like about them is that they are highly ethical…

…selling products that actually help people learn to make their own money on the internet…

…they take full responsibility for their own money…

…no longer going through banks and mortgages…

…if you got any value out of this post, then you need to meet them and to start investing in your education in internet marketing…

CLICK HERE, watch the free video, and get started…

 

 

A Millionaire Real Estate Investor’s Guide To Making a Good Investment

…Mey here blogging on a Thursday evening after enjoying a wonderful glass noodle tofu salad and a Thai curry shrimp (yum), chatting with old and new friends at a Christmas party, and now at home with tonight’s blog A Millionaire Real Estate Investor’s Guide To Making a Good Investment…

…if you are like the many people who want to invest in real estate then this post will help you figure out how to find a good deal…

…my friend who taught me this formula is a millionaire real estate investor…

…he follows this formula when he finds deals in Hawaii…

…so pay attention and use it for yourself!

8% Return Rule

…when the house we are living in went up for sale, I thought it would be a good idea to buy it…

…unfortunately, I didn’t have the capital to buy it (asking was $1,000,000+)…

…so I calculated what the cost would be and profit that would be made through renting and asked him if an investor would want to go in for half…

…he looked at my numbers and said, no, because the return was only 4%, and real estate investors will only put in big bucks if they are getting back at least 8% per year…

…so that’s when I learned the 8% return rule…

Calculate Real Return

…in order to figure out how much we would really make, I had a good grasp of the cost of maintenance and repairs, as well as other costs…

…a lot of investors in real estate start out without calculating all of the costs of owning real estate…

…that included the mortgage, the cost of maintenance and insurances, rental vacancy rates, cleaning up after tenants, eviction costs, etc…

…after calculating the real cost, you can subtract that from the rent, and you get your real return on investment…

…the only reason I could calculate it for the house I lived in was because I lived here so long…

…since it wasn’t a good investment, we didn’t buy it, and someone else did who is renting it to us…

…what can I say, not everyone makes good investments…

Conclusion

…hope you enjoyed this article…

…I’ve read stories of people who are now poor due to their bad real estate investments…

…be a smart real estate investor and work the numbers and do your homework!

…and if you like reading this article, write me a comment below!

…I loved writing it…

…actually, I love blogging about financial freedom…

…it’s a way to make money doing something that I love to do!

…if you want to learn how to make money blogging, then just CLICK HERE, watch the free video and get started =)