AJC has written his first article on US News magazine’s ‘alpha consumer’ web-site. It’s all about what US News calls Recession 2.0 … check out the article here then PLEASE leave a comment on the US News site!!!

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Your Perpetual Money Machine won’t start?

… then it probably just needs a little oil and a good kick!

I 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 all perpetual motion machines are that seamless. If you want to invest in cash flow positive properties here in Australia, either you are buying into regional areas that are subject to seasonal trends or you become a slum lord. Furthermore, the boom on “cash flow positive” properties and the high interest rates here in Australia has meant that the cash flow positive opportunities have all but dried up.

Similarly, a Berkshire Hathaway portfolio can easily loose large chunks of value during declining markets (sub prime for example).

Is there a such a thing as perpetual motion machine (short of having more than 7 million in the bank earning interest) that means that I don’t need to deal with difficult tenants or worry about every jitter in the market?

Caprica is right, of course … not all Perpetual Money Machines are ‘seamless’, run entirely smoothly, or even start without a ‘kick’ in the right place!

But, start – and run – they will, if you do it just right …

You see, there is one ingredient that you need, Caprica, regardless of where you live: time.

Any reasonable property can become cashflow positive if you allow time for the rents to build up such that you ‘overtake’ the costs … in our analogy, it takes time for the ‘capacitors’ to build up enough ‘charge’ to kick-start our Perpetual Money Machine.

It helps if you can buy when the market is off its highs; it helps even more if you can lock in interest rates when they are still relatively low; it helps if you can put in your research and buy a property that will rent reasonably well and appreciate over time (but, we aren’t looking for ‘home runs’ in either category, here).

Similarly, stocks may go up/down, you just need to keep pumping money in (i.e. buying more stocks) until you have a buffer (excess of stocks) that will allow you to ride the waves and sell down a little at a time to live off (after you ‘retire’).

Equally, it helps if you have the fortitude to ignore the waves entirely -better yet, be contrarian – knowing that the inevitable ‘upwards correction’ will come ‘eventually’.

The Perpetual Money Machine will work anywhere, anytime … you just need to give it time to warm up properly 🙂

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