Multifamily Real Estate
Robert Kiyosaki’s real estate advisor, Ken McElroy was the one who really go me excited about real estate. His books taught me all the terminology and the numbers that I needed to understand the value of owning apartment buildings in growing wealth.
As I got to know Ken better and his business model, I also learned a concept from him that I think of as the “holy grail” of real estate investing. I call this concept the Infinite Returns Model.
Let me ask you this, what kind of return do you consider attractive? 8 percent? 10 percent? Maybe 20 percent?
You want to know what I like? I like INFINITE return on investment!
How do you get infinite return? Well, let’s look at your typical real estate deal.
For easy numbers, let’s say you put in $100K into a deal. Every year you get back 10K cash on cash. Most of us call that 10 percent cash on cash, right?
The problem is that in this model it will take you 10 years just to get your initial capital back in your pocket. Even though you are getting 10 percent cash on cash, for the first 10 years what you are really getting is return of investment, not return on investment.
In other words, you aren’t actually MAKING money until your initial capital is back in your pocket, right?
Once you have no more “money in the deal”, your returns become INFINITE because you no longer have money in the deal.
But at 10 percent per year, that will take you 10 years to START really making money!
Remember our equation for maximizing wealth?
Wealth = Leverage (Mass x Velocity)
The best way to think of Velocity is how quickly you get your initial invested capital back in your pocket so that you can then redeploy into another investment.
So…in order to maximize wealth, you must maximize velocity.
Rather than looking at ROI or cash on cash, it might make more sense to ask the simple question, “how long before I get my money back so I can redeploy it?”
This model is THE WAY that some of my wealthiest friends have made their money.
A guy who is great at executing this model is Dave Steele. Dave is actually a friend of Ken McElroy. When I asked Ken about him, here’s what he had to say: “I know Dave well. Great Guy, very smart. Incredible business person and guy.”
Pretty high praise from someone who I have 100 percent confidence in myself. So…Dave Steele has become part of my tribe.
And I LOVE his business model. The idea is simple—get your money back in your pocket as soon as possible so you can get infinite returns and then redeploy capital into the next deal.
In fact, he and his team don’t participate in cash flow or capital gains UNTIL their investors’ money is 100% returned! That’s quite an incentive to perform isn’t it?
If you are an accredited investor and want to learn more about what I call the “infinite return model”, watch this webinar and fill out the contact form!