Why your $1 is REALLY worth $5 (Real Estate Investing Mind Trick)

This is also why when you're investing in real estate, how you should look at every one dollar is actually being worth five dollars. Because this is how much it's actually truly worth. So this is something I catch myself doing all the time and I thought I would share it with you guys. Because when you put something in these very simple perspectives, it tends to have a much larger and longer impact. Just this really simple change in perspective can really help take it to the next level in terms of growing your wealth.

So let's start here to bring some of you guys up to speed. I've decided to hold off on buying the Lamborghini right now and instead buy another rental property. But when it comes to buying real estate, you don't just buy the entire thing outright in cash. First off, that would be way too expensive, and second of all, you lose all the benefits of buying real estate, which is leverage.

So what I mean by leverage is that you borrow other people's money at a rate lower than what that money makes you, so you can profit the difference. And then you can also deduct the interest you're paying against your rental income to save you on taxes. I may have lost just like 50 percent of you right there, but let me explain.

So this basically just means that you only have a small amount of your own money in the deal. You borrow the rest of the money, you get tax advantages from doing so, and then over the course of 20 or 30 years, you pay off the loan while still having complete control over that property. I've been about 20 or 30 years later, you end up owning a place outright and, at that point, you're basically just printing money.

So this is the part that might end up changing your perspective on how you view a dollar. I recently deposited a twenty thousand dollar check and what I did, I didn't think to myself, "Oh cool, there's a twenty thousand dollar check, that's nice." I thought to myself instead, "Oh this is awesome because now I could buy an extra hundred thousand dollars worth of real estate."

And I ended up doing this mental calculation for just about everything because I usually put down about 20% anytime I'd buy a property. This means for every one dollar I have is really worth five dollars in real estate. So that $100 pair of shoes I could have bought is really worth five hundred dollars in real estate. That 130 thousand dollars in equity I just pulled out for my last deal, that is worth six hundred and fifty thousand dollars in real estate.

This could be viewed with pretty much anything, from any time you go out to any time you're spending money, to anything you do. Basically, your $1.00 is really worth five times that invested in real estate. And once you see this sort of perspective, it's really gonna change how you view the worth of one dollar. And once you start seeing your money as really being worth five times what it actually is, it really has a lot more significance and importance.

Now just a clarification here because this is the point where a lot of people tend to get confused or tripped up. When I'm talking about leveraged debt, this is really money that you borrow at a cheaper rate than what that money makes you. So as an example, in very simple terms here, if you knew 100% that you could make a 6% return on your money and you knew you can borrow the money that you need and only pay a 3% interest rate, would you do it?

The answer is absolutely because you basically take that money, make 6% with it, pay 3% back as interest, and then profit the rest by using someone else's money. This is really just real estate investing simplified. I have no idea why I'm doing it with my aunt's now. If it sounds too good to be true, it kind of is in the sense that you do need to come up with your own down payment, and you also need to find a property that cash flows.

But beyond that, you are borrowing money at a lower interest rate than what that money can make you and you profit the difference. So here's a quick example using some dollar amounts. Let's say you find a property that's a hundred thousand dollars, and after all expenses, it nets 6% or six thousand dollars per year. You then put a down payment of $20,000 or 20%, and you finance the remaining $80,000 at a four percent interest rate over 30 years.

Now within 12 months, you've just made your 6% return or $6,000. You've also paid a total of four thousand five hundred and seventy-two dollars in your mortgage, which includes both principal and interest. Now since some of that mortgage is principal, this means you paid down your loan by fourteen hundred and eight dollars in the first 12 months.

This means that your net profit after all of your expenses was fourteen hundred and twenty-eight dollars in cash and another fourteen hundred and eight dollars by paying down your loan in the form of principal. This means that your twenty thousand dollars just made you fourteen hundred and twenty-eight dollars in cash, which works out to a seven point one four percent return. And you also just made fourteen hundred and eight dollars by paying down your loan in the form of equity, which is another seven percent return.

This brings the total ROI on the twenty thousand dollars you invested at fourteen point one four percent in the first year. Now on the flip side, had you just bought the property outright in cash, your return would have only been six percent instead of fourteen point one four percent. This means that you more than doubled your return just by leveraging your money on the money that you invested.

This is really the power of using long-term low interest rate debt when investing. This is also why when you're investing in real estate, how you should look at every one dollar is actually being worth five dollars, because this is how much it's actually truly worth. And this is also why you should start seeing your money in the same perspective as well, because it is really worth five times what you think it is.

So as always, you guys, thank you so much for watching. I really appreciate it if you watched all the way through. If you liked it, as always, make sure to hit the like button; it does really help out a lot. Also, if you're watching this and you haven't already subscribed, you got to make sure to subscribe. I'm posting three videos a week. I spend a ton of hours doing this; I'm basically doing these things at like midnight to like 2:00 a.m. almost every night.

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So, Aldi and fro is in the description; check that out. As always, thank you again and until next time.