I have a close friend that is considering upsizing his house, and he asked me some financial advice. I love this friend to death, but he can drive me nuts sometimes, especially when he doesn’t take my advice LOL.
When my brother and I set out on this journey to become cashflownaires (our Quest4Cashflow 😉), this friend thought I was a lunatic. I was buying up/building single family homes, dealing with renos, tradesman, tenants, banks, etc. Full disclosure, it was a pain in the ass.
He asked me, “why are you doing all this?”
Fast forward 6 or 7 years, and a super hot real estate market, he is now asking me, “how do I do this?”.
At the time, real estate was the only strategy I knew that could produce the cashflow I wanted. It’s a little harder where I live today to get great cashflow on single family homes because of the price increases, but still very doable. (FYI, I live in Ontario, Canada).
This friend of mine, bought his home in a better real estate market. That house has more than doubled since he bought it. He also paid down his mortgage aggressively. I told my friend, “you have a cashflow machine in your current house, don’t sell it.”
His response, “I need it for my down payment on my next house. I can’t access any of my other investments either.”
He believes his home is an OR investment. What he needs to understand, is it is an AND investment. I will explain below.
Do you have AND investments?
Most of us are trained at a very young age the same recipe for success: 1. Go to school 2. Get a good job 3. Save a portion of your paycheque 4. Wash and repeat.
We talk about this recipe all the time. Your classic “financial plan”.
The problem with this plan, it only allows you to invest in OR assets.
What is an OR asset? You can only invest in one asset at a time. Ie. invest in asset 1 OR asset 2.
The mutual fund is a perfect example of an OR investment. That investment you made in the mutual fund hopefully grows. But if you want to use money from that investment to capitalize on another investment, you have to give it up altogether. According to the bank, it’s mutual fund OR bust!
But when you change your mentality to CASHFLOW, you start buying AND investments.
With AND investments, you can investment in one thing AND invest in another.
Since we personally love real estate so much, let’s use it as an example. We have one single family home that pays us $500 a month of positive cashflow ($6,000 per year). We invested $50,000 of our own money. That house has appreciated in value as well.
Since that purchase, we used $18,000 from cashflow of that property to help purchase 2 mobile homes in 2020. Those mobile homes are providing us now with $2,000 of annual cashflow each. So unlike a mutual fund, we were able to keep our single family home AND buy a cashflowing mobile home.
By the end of this year, we should now have $10,000 of extra cash to invest in another cashflowing asset.
See how this really compounds?
In my friend’s example above, the current cashflow from his current home could help pay most of the mortgage on his new house, AND his current house’s mortgage would get paid down by someone else.
Now real estate isn’t for everyone, we get that. We just used real estate in this example.
In fact, in March’s Canadian Cashflownaire newsletter, we focus on a simpler approach of creating a cashflow machine with stocks. These can become AND investments if you use them right.
Become a Canadian Cashflownaire today and see how you too can build a stock portfolio full of AND investments.
Vince & Mike
P.S. These AND investments are what Robert Kiyosaki refers to as the Velocity of Money. Your assets are buying more assets.