The Velocity of Money - PART 4

The Velocity of Money - PART 4 Posted: 26 Feb 2008 04:45 AM CST This post is the 4th and final installment on a series of posts titled "The Velocity of Money." It might be helpful to read Part One, Part Two and Part Three before reading this post. Another option would be to invest your real estate profits into your own IRA, stocks, mutual funds and/or bonds. I think the average return in the Stock Market (S&P Index) for the last 25 years is around 10 percent. If you have credit card debt at a higher interest rate, you are better off paying down your debt. I am not a stock picker and don't own any stocks myself. I don't think I would put much money into the stock market because of the lack of control. There are many other options providing a better overall return. However, this may not be the same for you. You could invest your profits into starting your own business or investing into someone else's business. Now, this is a very risky option. Everyone knows the failure rate of new businesses. Only around 4 percent of all businesses ever surpass a million dollars in revenue. However, a small business without much overhead could be good option for you. If you plan on taking this route, please learn marketing and sales skills. If you aren't willing to learn these skills, don't start your own business. You won't make it. Sorry for the tough love, but you will thank me later. One word of caution when discussing where to invest your house money. Make sure that you don't cut down your money tree. For example, when one of my tenants bought out one of my rent to own homes. I got a check for $24,000. (I didn't use a 1031 exchange on this sale and actually received the money. This means I owe taxes on my gain.) The $24,000 received was 100% house money. The key to investing is to not take your money out of the game. If I were to take the entire $24,000 and pay off debt or setup an emergency fund, I would be taking all of the house money out of the game. The house money would completely disappear. At a minimum, I would recommend that you invest at least half of the money back into more real estate. In this example, you could take $12,000 and use to pay off debt, start business or setup an emergency account. However, $12,000 MUST go back into real estate. Real estate is the goose that lays golden eggs. Don't kill the goose. I know that my way is the hard way. It is a lot easier just to make contributions into your company 401(k) plan and not think about it. Let's face it, you don't have to go look at homes. You don't have to show your properties. You don't have to go through any evictions. But you do have to work until your 65. You more than likely won't be able to live the life you really want in retirement. Applying the Velocity of Money to my investments has increased my net worth by significant amounts within a very short period of time. I would have to think it would do the same for you. Where will your net worth be in 2012 if you apply the Velocity of Money to your investments? Rob Minton P.S. One last final reminder on special IFL Tuesday Conference call series. You can join the call for free simply by dialing 1-212-461-8613 at 8 PM on Tuesday evening. In this free conference call series we interview various Income for Life Members about their real estate investing experiences and lessons learned. These calls are priceless, don't miss out! P.S.S. The goose photo is by Starrlett