I’m about to find out if I can make money on-line … read the latest installment (just posted) here!
Your Perpetual Money Machine begins to wind itself up (in the case of selecting RE as your ‘income capacitor’) simply when the property portfolio that we discussed on Wednesday becomes cashflow positive …
… this is a critical point in time, because now we can exponentially accelerate the size of our pool of capacitors!
Now, we can take our 15%++ (continually growing as our income stream continues to grow) and ADD the excess cash spun off by our profitable property portfolio (assuming that we selected real-estate, as our ‘income capacitor’ i.e. storage device for money) …
…. this ALL goes into: new properties!
Now, Scott is building a whole bank of financial ‘income capacitors’ …but, for what purpose?
Aah, until the point in time that the income from these ‘capacitors’ is enough to replace Scott’s income from his inventions and movie royalties!
If you have been following the process, this can happen surprisingly quickly (5 to 10 years) IF the income stream that Scott is seeding with is large enough to purchase large ($1 million+ each) commercial properties.
If residential (incl. larger multi-family) you can expect it to take a little longer, as these tend to start more cashflow-negative, or grow too slowly.
At this point in time – assuming that the income-replacement is sufficient to satisfy Scott ‘forever’ (if not, keep working/building a few more years) – we have our Perpetual Money Machine!
You see, the real-estate will continue to grow, even if you no longer continue to ‘seed it’ with more income … in fact, it will grow (on average) at least according to inflation, producing an income that also at least grows with inflation (even allowing for keeping 25% aside as a buffer against repairs/maintenance/vacancies/etc.).
Scott can spend that entire income with impunity, knowing that his capital is never at risk … just like cash in the bank, only better because the capital also grows (at least) with inflation …. provided that your outlook is long enough.
On the other hand, if Scott chose to put his money into Berkshire Hathaway stocks, instead of the real-estate portfolio that we discussed here, which have grown at 21% compound for the past 20+ years (although, not even Warren Buffett suggests that that rate of growth will continue), then Scott can simply sell down enough stock each year to fund the next year’s income.
Different tool, hopefully a similar result …
In either case, when Scott’s royalty income stops, his Perpetual Money Machine seamlessly and automatically takes over.
Nice for some 😉
PS The mechanical/electronic Perpetual Motion Machine is impossible in physics (although, quantum mechanics may provide a solution) … the one depicted in the image above was built in 1996 and resides in a vault in a Norwegian gallery: it once ran as long as 14-days in a row without stopping … hardly ‘perpetual’ but pretty, damn good!