Comments on: The Perpetual Money Machine begins to wind itself up!

By: Under the spotlight: Josh «

Under the spotlight: Josh « — Mon, 08 Jun 2009 08:40:06 +0000

[...] http://7million7years.com/2008/09/12/the-perpetual-money-machine-begins-to-wind-itself-up/ [...]

By: The allure of diversification … « How to Make 7 Million in 7 Years™

The allure of diversification … « How to Make 7 Million in 7 Years™ — Fri, 19 Dec 2008 19:25:09 +0000

[...] ‘certain something’ up nicely in this recommended twist to how he would set up his own Perpetual Money Machine: Nothing in life is without risk- but you can minimize risks by diversifying- use multiple types of [...]

By: Your Perpetual Money Machine won’t start? « How to Make 7 Million in 7 Years™

Thu, 06 Nov 2008 19:45:34 +0000

[...] am, of course, talking about the Perpetual Money Machine that I covered in a series of posts last month. But, Caprica, who lives in Australia asks: But not [...]

By: AJC

AJC — Sun, 14 Sep 2008 04:40:33 +0000

@ Scott – The 1031 Exchange certainly makes trading up to the ‘hotel’ viable in the US, but in other countries you may be better of keeping your plethora of houses rather than incurring the CGT upon selling (to trade up).

By: Scott

Scott — Sat, 13 Sep 2008 13:22:59 +0000

Sound just like what Robert Kyosaki says; pick up a couple of rental houses and eventually trade up to a Hotel and step out of the rat-race, just like the good strategy to winning on the board game Monopoly!

By: AJC

AJC — Sat, 13 Sep 2008 01:36:54 +0000

@ Caprica – I think ‘being up to your eyeballs’ in RE debt is nothing to be overly concerned about IF they are paying their way (with a suitable buffer against vacancies; repairs & maintenance etc.) and they are not over-geared … it’s probably unavoidable if you want a 7m7y outcome.

As to buying 10 then selling 5 to leave 5 debt-free, that’s possible, although I wonder if you can 1031 Exchange all 10 properties into one or two bigger one/s that you can own outright, possibly (legally) avoiding Capital Gains Tax?

I had a friend who bought a property every year using his business profits, then in Year 5 sold the oldest one to buy a new one and take some cash back out … I said, why don’t you simply refinance the older one to avoid the CGT? Needless to say, he started doing exactly that …

By: Caprica

Caprica — Sat, 13 Sep 2008 00:10:10 +0000

thanks for the response AJC.

regarding property investment, one of the strategies I have been thinking about is one I have seen done a few times, which is around using a making money 201 style strategy to achieve a 301 outcome.

In this approach you basically buy up more properties than you need for the 301 stage and when your equity level in all your properties builds up to a certain level you sell down and then are left with enough properties to generate enough rent to keep you financially free. For example, you spend your 7 years acumulating 10 properties, then in year 7, you sell out 5 properties and use the profits to pay out the other 5, leaving you in a cash flow positive position.

Do you have any thoughts on this? Is there a way of doing this without being up to your eyeballs in debt during the 201 stage and still get to your 7 million in 7 years?

By: AJC

AJC — Fri, 12 Sep 2008 20:56:16 +0000

@ Di – And, Dave Lindahl points to the risk of ‘burnout’ if you DO become your own Property Manager.

@ Rick – Isn’t the Perpetual Money Machine (i.e. make your ACTIVE income one way, then create PASSIVE income another way) enough diversification for you?

By diversifying even more, don’t you run the risk of ‘spreading yourself too thin’ (who can be expert in all of the areas that you mention)? Therefore, don’t you also run the risk of averaging your returns DOWN?

By: Rick Francis

Rick Francis — Fri, 12 Sep 2008 18:31:04 +0000

@ Caprica nothing in life is without risk- but you can minimize risks by diversifying- use multiple types of wealth capacitors some properties, some stocks, even some bonds. You can further diversify with a mixture of commercial and residential properties, properties in different locations, etc.

Similarly you can diversify stocks through buying small cap, large cap, mid cap, and foreign stocks.

If you diversify you can be fairly sure that one bad event doesn’t ruin everything. Of course if the sun goes supernova all bets are off but barring that you should do fine.

Di makes good point- rental properties must be managed and that should be figured as part of the cost of the investment. Even if you plan on doing it yourself your time is still valuable.

-Rick

By: Di Eats the Elephant

Di Eats the Elephant — Fri, 12 Sep 2008 16:02:28 +0000

Think I read somewhere that if you don’t want to deal with difficult tenants, you should hire a property manager, otherwise you ARE the property manager and not simply the owner, and that actually is a negative draw on your income (unless you are a super-efficient property manager, trained and experienced well in that which you are doing and you make more money as a manager than you do as an owner. Back to whether you are getting paid to manage a property or if you are going to be an owner.