The “Make And Keep $1,000,000” series will be capped off with a free training class at PerfectlyPassiveIncome.com.
How I Got A Tesla For Free (Almost)
I tend to save too much money. (I know, “boo hoo” your first world problems, Ryan.) Put a different way, I tend to make money and then worry about losing it all. Or at least, I used to, until I developed a systematic way for investing my money and allowing myself to feel good about spending the money that I made.
I now implement a strategy that I call “The Cash Flow Acquisition Model,” which I used just last month to get my $100,000+ Tesla Model S for free (almost). Here’s how it works:
BIG TAKEAWAY: Rather than paying cash for toys, I put my cash into investments that make the payments for my toys.
The result is that my principle (the cash) stays in my control (and adds to my net worth), while its cash flow pays down the debt of my vehicle. When I’m done making the payments, I still have the asset AND the cash that I started with.
The Numbers Breakdown
The Tesla cost approximately $100,o00.
The monthly payment is about $1,400 per month.
I could have paid cash for this. (Where did the money come from? We’ll talk about that in video two.)
Rather than pay cash, I put the money into a basket of investments that will pay me 15% per year or more (this number can be more or less depending on the aggressiveness of the portfolio).
The cash flow from this investment will be $15,000 to $20,000 per year, which pays for the payments of the car. PLUS, the chance exists that the value of the investment may go up, so I may actually increase my net worth while making the payments. Of course, all investments carry some risk, so there is some downside exposure, too, as is with any investment.
Most importantly, at the end of six years, I get to keep my car, my principle, and my new income stream!
IMPORTANT NOTE: When I call something an “investment,” I never mean something that will go up in value. I only ever mean that it produces cash flow. In my opinion, the ONLY reason to buy an investment is for the cash flow. However, if the value goes up, then I win twice. If the value goes down, then I don’t really care.
In this example, if the price goes down, I still do much better than if I paid cash in the first place. For example, if I bought a house that paid 1.4% per month in rent, then it would pay for the car.
If, however, the value of the house PLUNGED 50% in those six years, then I would *still* be better off, because I have kept 50% of my net worth, rather than spent it on paying the car off. Plus, I still have the income stream of the house!
How I Cut The Price In Half
The true cost of the car is actually only about $55,000. Why? Because I bought the car in my company name, giving me a fat write off.
Since I would have paid tax on that anyway, putting the expense in my company name (and I did so legitimately) saves me about $45,000 that would have gone to the government.
Note: I’m not a tax attorney or an accountant, so please do not take my advice over the advice of a professional.
With this in mind, the true cash flow needed to pay for this car is only about $800/month after we factor in the tax savings (this does NOT factor in the additional tax credit that I receive for buying an electric vehicle).
With these numbers, my investment only needs to return approximately 8% per year to pay for the car, which is much easier to swallow, and much easier to get. We’ll cover more on the Make And Keep $1,000,000 training class.
Where do you get predictable 8-15% ROI on investments?
There are lots of places. I personally like real estate, real estate investment trusts, and LendingClub.com.
The best place, however, is by investing into businesses that you know and can impact. For example, I know that I could invest into Amazon-based businesses and get not just 8%, but 80% ROI. But that’s personal to me. I know what to do to explode an Amazon based business.
Few people know this, but I work with companies who invest in websites. I advise them on how to get them to make more money. Since I can directly impact them, my ROI is much higher than other people who invest in websites. If you invest in what you can impact, your ROI is never capped.
Cash Is King
I always heard Robert Kyosaki discuss how there is “good debt” and “bad debt,” but I always had a hard time understanding that concept. The truth is that you can utilize debt by leveraging your cash and get it to make more debt than it costs.
If I could finance the world at 1.99%, I would take as much of it as I could get, because I know that I can generate much more than 2%. In that case, the debt that cost 1.99% would be considered “good debt.”
Note: this is how Trump made his billions, by leveraging good debt on all of his real estate projects.
How to Pay For Your Life Forever
If your life costs approximately $8,000 per month, then you need a dependable $8k in passive cash flow to technically retire.
In all of my cash flow, I shoot for a conservative baseline of 1% per month, or approximately 12-14% per year. This is doable using less common investments (or, again, by investing in a business that you can impact).
If you need $8,000 per month, and you know that you can get 12% per year, then you need approximately $800,000 in net worth to retire.
$8,000 x 12 = $94,000 in net expenses per year
$94,000 / .12 = $800,000
So, if you want to spend $8,000 per month, and you know that you can get $12%, then you only need $800,000 to retire.
Where do you get $800,000? We will talk about that in video two.
Comments? Questions? Leave them below and I’ll do my best to get to as many as possible.
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