Have you ever played the board game Monopoly? If so, I hope you noticed that the way to win is to buy as many properties as possible, put houses and hotels on them as soon as possible, then sit back and collect the rents. Gradually, the players who were afraid to take risks and chose not to invest early in the game are forced out because it takes all their money to pay rent to those who did.
Here’s what I really want you to notice: when playing Monopoly, the winner is nearly always strapped for cash early in the game. He keeps almost all of his money invested and often borrows more against properties he already owns in order to continue buying. Monopoly is about as close to reality as it gets. The winner keeps very little cash early in the game and invests for the future. Winners in real estate investing do the same thing.
On the other hand, losers at Monopoly sit at the board with a pile of cash and pass up buying opportunities because they don’t want to risk running low on money. As a result, other players buy the properties and eventually force them out of the game.
In real life, those who spend everything they make on fancy cars, motorcycles, boats, the newest televisions, designer clothes and other commodities that go down in value rarely have as much over their lifetime as those who invest. Initially, they may appear to be more successful, but people with this high spending lifestyle usually end up in an increasing struggle to keep up with the lifestyle of those who sacrificed early and invested for the future. Without investments, your only income is to pass GO and collect $200 (that’s your salary).
In real life, properly-leveraged real estate produces an income stream that barely breaks even in the beginning. The early struggle is not exciting or stimulating until you look at the impact of owning it over the long term. While initially it may take all the income it can generate to pay expenses and mortgage payments, over time, rents go up and mortgages pay down. Eventually, this produces what you wanted, an ever-growing cash flow that started as a trickle and becomes a substantial and growing income stream. The longer you own your properties, the larger the income stream grows.
I want to stress that we are in a fabulous time to invest in real estate. Think of building wealth with real estate as a game, like playing Monopoly, a game you play for the long haul. The more you learn and the longer you play, the better you get, the more comfortable you become and the more successful you will be.
Get into the game. Play safe, play for keeps.
Are you already investing? How’s it going for you?