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How To Build A Money Machine
first you get the capital, then you do whatever you want.
This post was a hit, so I’ll take it as a sign that this is what I should write more about (your feedback and interaction serves as an incredible guiding force for the direction of this project — thank you)
There is much to say about the getting of money — and if you’re still in the early phases of desire for your first big win —- this audiobook is recommended (on repeat).
Today’s post is a big picture overview on "the game of capitalism” —and more specifically —- how to find and invest in good real estate deals.
The purpose of the game is to acquire capital — one big win is all you need to compound for the rest of your life — you only need to get lucky once.
Once you have capital, you can do whatever you want —- because you’re independent and free.
And the purpose of playing this game?
To have the freedom and luxury to construct a life that most authentically aligns with your soul.
This is what one version of the game looks like:
Build a Business (or receive meaningful ownership/equity as an employee in a great company)
Make Money In Business (ownership is the key)
Invest And Aquire Productive Assets —- I like real estate because in the ideal scenario — it shields you from taxes, spits out cash-flow, and appreciates in value over time.
Live below your means for a while (delay gratification) to continue saving extra cash.
Reinvest the extra cash — to grow your business and/or acquire more cash-flowing assets.
Keep this up as much as possible (forever is the name of the game).
Do whatever you want.
This is a straight up freedom generating money machine.
When executed properly, and with enough time on your side, it can get to a point where your assets are spitting out enough cash for you to buy more assets, that spit out more cash — rinse and repeat — forever.
This is compound interest —- the second most powerful force in the universe (after love).
It takes time (and patience/discipline) to reap the benefits - slowly slowly, then all at once.
And it’s not strictly financial — the forces of compound interest are at play with your thoughts, habits, actions, health, relationships — and everything else in your life.
When I see someone doing well in their 30s, I know that they became a success at least ten years before — when they made the conscious intention to live with healthy habits and make smart decisions that compound and pay off over decade long horizons.
And I see the same thing with people in dire straits — compound interest also works on negative habits (and bad debt) — the chains of habit are too light to be felt until they are too heavy to be broken.
The outcome of your life is often the result of your daily decisions compounded over time — taking full responsibility and accountability for every result in your life (health, relationships, finances) is equally empowering, liberating, and terrifying.
In the world of IG (instant gratification) — everyone wants to “get rich quick without doing anything” — vision, patience, and discipline goes a very long way.
It takes ten years to become an overnight success.
Carey, a reader of this blog, reached out and asked how to find a good real estate deal…
This is what I told him:
Understand Macroeconomic History and Current Trends (and develop a thesis for the future)
Choose A Market
Choose an Asset Class
Develop Deep Relationships (owners, lenders, brokers, investors, contractors, etc)
Obsess And Understand Everything That Is Happening
Monitor The Market Like A Hawk
Hunt Like A Wolf
When you see something that looks good — move as fast as possible and be prepared to fight and kill for a good deal.
The most important factor is the price you buy at - you literally make all your money on day one if you buy at a good price — ideally below market value.
I assume most reading this are entrepreneurs, and going all in on real estate would be a distraction from the vehicle that produces far better returns (your biz) — not to mention, the professionals will crush you if you don’t have an edge.
Stay in your lane.
You can invest in other peoples deals and receive all the tax benefits and cash flow that comes with ownership —- without the headaches of closing deals and managing properties — not to mention, you can get started with smaller amounts of capital — the earlier you get compound interest working in your favor, the better.
Here are two syndicate groups (with great track-records and ethics) that I like:
(Not financial advice, do your due diligence, go to the gym, eat enough protein, etc etc)
First you get the capital, then you do whatever the fuck you want.
When you have money, getting more of it is easier — compound interest works in your favor and opportunities naturally gravitate towards you —- it takes money to make money.
Going from zero to one is hard.
But from one to ten (and beyond) is a hell of a lot easier —- you need to be patient, make smart decisions (stripped of impulsivity and emotional biases), and avoid the potential for catastrophe so that you can ride the massive waves of compound interest - the name of the game is staying in the game.
Getting money and keeping it are two different skills.
Making it requires optimism, risk-taking, and putting your neck on the line…
And keeping it requires the opposite energy — humility, risk-aversion, and a healthy paranoia that what you’ve made can be taken away from you in an instant.
This was instilled into my psyche from childhood — growing up oscillating between upper middle class and below the poverty line - I learned how quickly (overnight) financial situations can change —- when it rains, it pours - so make sure you have an umbrella handy.
Money is hard to make, and easy to lose.
Among common biases of successful people is the belief that if you did something once, you can do it again —- that your success will continue forever.
We overplay our skills and talents, and downplay the role of luck and timing in our stories.
This bias can lead to an overconfidence that leads to reckless decisions that can take us out of the game — when the music stops, you don’t want to be left without a chair.
The name of the game is staying in the game.
If you enjoyed this post — do me a favor and send it to one person that might find it valuable, interesting, and insightful.
Till next time