By Wayne Morgan, The Real Estate Business School

What is your answer? Do you have a financial plan? What will you do for money to pay your living expenses after you stop working? Most of you are working for money; but do you have any of your money working for you?

This is where most people stop reading and move on to the next picture or article. Talking about money and making the effort to create a financial plan is too painful, so they ignore it and hope this problem solves itself or goes away. Neither of these is going to happen.

The process of creating wealth is actually surprisingly easy. Here are the steps:

  1. There are owners out there right now who want to sell their property. Find a property you can buy.
  2. There are lenders out there with money who want to lend on real estate. Borrow money from one of these lenders to buy the property.
  3. There are people out there who want to rent the property. Find a tenant who wants to occupy the property and pay rent and rent it to them.
  4. Collect the rent and pay the lender back each month.
  5. Keep the extra money, the equity, the appreciation and the proceeds at sale.

There are few things we need to know to accomplish this, but that is the essence of it.

As REALTORS, we are in a unique position to create wealth, yet very few do. We see opportunities few others see. During the licensing process we learned how to determine the value of a piece of property by doing a CMA. We also learned how to write a real estate contract. After we obtained our license and joined our local board of REALTORS, we were given access to and trained on how to use the MLS system, which contains thousands of properties for sale.

We can sell these properties to someone else and make three percent and split that with our broker, the IRS and pay our expenses, leaving us with very little or we can buy the property ourselves. Over the years, the mortgage is paid down while rents typically increase, producing positive cash flow each month that increases over time.

In short; you will not become financially independent working three percent at a time. The money in real estate is made by owning real estate, not listing it and selling it to someone else.

When we acquire property with our commissions (cash) we get paid over and over each and every month (cash flow) whether we quit working or not.
This is what separates the “wealthy” from the rest. The wealthy understand the difference between cash and cash flow. The wealthy have money working for them.

The wealthy acquire assets that produce cash flow and grow in value. The wealthy use “other people’s money.” The wealthy only borrow when someone else pays back the loan. The wealthy are wealthy because they think like wealthy people think. They act like wealthy people act and they do what wealthy people do.
So if we want to have what wealthy people have, we simply have to do what wealthy people do and then we will be wealthy. RL