Wealth. Building. Copyright 2015 by I Am O Kah! Inc. All rights reserved.

Transcription

1 Wealth Building

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3 Wealth Building Copyright 2015 by I Am O Kah! Inc. All rights reserved. No portion of this book may be reproduced, copied, modified or adapted, except for the inclusion of brief quotations in review, without the prior written consent of the author. Forward all requests to: Aisha D. DaCosta, Executive Director, I Am O Kah! Inc., aisha@iamokah.org I Am O Kah! programs are focused on cultivating generational wealth within low-to-moderate income minority families through education, business ownership and financial investment strategies. Our scholarship and Financial Rockstar Academy deliver the tools needed for our students to achieve financial security and lead lives fueled by confidence in their vision and purpose. Visit us at: Printed in the United States.

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5 What is Wealth? always broke cause we don t know money. Spend it before we get it and could never hold money J. Cole, Mo Money (Interlude)

6 What is Wealth? Wealth is the creation of a large amount of money without the exchange of time. Wealthy people use businesses and other income-producing assets like real estate to generate income without having to give their time in exchange for income. There are two requirements for wealth: (1) the accumulation of large amounts of money and (2) without the use of your time. For example: Every professional sports team is a business. Most professional sports teams get revenue (income money received) from: (1) sales of tickets to games (2) products purchased in the stadium, (3) television programming fees (right to televise games) (4) licensed sports goods (everything that uses team logos team jerseys, etc). The owners of the team make money when the company (team) makes money the owners use the business to make money. Professional athletes make money when they play in games professional athletes use their time to make money. Making Large Amounts of Money is Not Enough! When an athlete stops playing sports or retires, gets hurt or sick the amount of money they make decreases or stops completely. If an athlete makes bad decisions with the money they received from playing it usually does not take a long time for them to become broke. Unfortunately, 78 percent of NFL players and 60 percent of NBA players face financial problems within five years of leaving professional sports (Sports Illustrated, 2013). 2 WEALTH BUILDING 101

7 Learn From The Rich and Wealthy: Save and Invest Wisely Rich people are those who acquire a lot of money in exchange for their time. They have a considerably high income. When rich people overspend, don t understand finances and investing, put the wrong people in charge of managing their money, and make poor investment choices, it does not take long for them to have financial problems. Making a lot of money is never enough to become wealthy. You have to learn how to control your spending and make money without using your time. When you use your time to make money, things like unemployment (job loss), sickness or injury (getting hurt), can stop you from receiving money. The goal is to use your money instead of your time to make more money. The best way to make your money make money is to make smart investments. You can learn how to make smart investments just like the wealthy. But, you have to be willing to control your spending and practice the discipline that is required to make smart investing decisions. WEALTH BUILDING 101 3

8 Why Should You Invest Now? The key to wealth is the most efficient use your time. The sooner you have your money making money, the less of your time you will have to use to make money. And that is what it is really all about; investing your money so that you can get control of your time! Why Should You Invest Now? Control Your Time Earn Money Invest Money The ultimate financial goal is full control of your time. Once you control your time you can do whatever you want to do with it. The earlier you start, the sooner you will get control of your time. 4 WEALTH BUILDING 101

9 Wealth = Control of Your Time. What do you want to do? Are you willing to spend less of your money now so that you can control what you have to do later? If your answer to the last question was YES then you need some goals in order to make that happen! What Are You Dreams? WEALTH BUILDING 101 5

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11 How to Build Wealth? I make money, make money. That s what I hustle for? You don think the same thing, Tell me what you hustlin for?! Juicy J, Make Money

12 7 Steps to Building Wealth Building wealth will require you to take the following steps: Step 1 Earn Income Step 2 Control Your Spending Step 3 Plan For Your Investments Step 4 Find potential business and real estate investments Step 5 Analyze the revenue, expenses and potential profit Step 6 Determine if the potential benefit (Return-on-Investment) is worth it Step 7 Make Your Money Multiply Creating Wealth Wealth is created through: (1) the business of business and (2) the business of real estate. The income that you receive from your wealth is called passive income. Passive income is money that you receive from investing (not actively participating) in a business, rental property, dividends from stocks, and interest you earn on your money. The Business of Business Start, Invest in, or Buy a Business The business of business focuses on investments in business systems that require very little (if any) time from an investor in order for them to make money. Start a Business Entrepreneurship is the process of building a business empire that will grow and survive well beyond the life of the founder. In the beginning, the time commitment of starting a business is huge, but the goal is to setup a system that can operate and grow without the founders (you and your partners). This is very different from creating a business that does not hire employees and managers to run the business while paying the founder(s) from the profits. Think Steve Jobs and Apple, or Sam Walton and Wal-Mart, not the owner of your local corner store. Invest in a Business Investing in public companies buying shares of stock in a public company 6 WEALTH BUILDING 101

13 from the stock market. Investing in private companies buying shares of stock (% of ownership) in a private company. Think: Shark Tank. Buy a Business Investing in franchises is the purchasing of the right to use a firm s successful business model and brand for a certain period of time. Popular franchises include Subway, Papa John s, Buffalo Wild Wings, Five Guys, Outback Steakhouse, Anytime Fitness, etc. Any other business that allows you to invest your money in the operation of business systems that require very little or none of your time in order to create profit. The Business of Real Estate Buy it, Rent it, Profit The business of real estate is similar to the business of business. It requires a system that is wrapped around business operations so that an investor does not have to use a lot of their time in order to make money. This system usually includes: a property management team to manage properties, a lawyer for legal concerns, an insurance provider, an accountant, and a network of property locators (people that can help you find great deals). Having a great system in place is the key to making money through real estate. Buy it Right Calculate (estimate) all the associated expenses (related bills) and anticipated profits before purchasing property at a discount make sure your return on investment (ROI) is worth it. Own the Space then Rent it Real estate is the business of space, for a fee (rent). You will allow other people or businesses to rent your space. The types of real estate that you can rent out for a fee are: residential, commercial and agricultural. o Residential real estate available for non-business purposes such as single or multi-family homes (under four units) o Commercial real estate is used for businesses, restaurants, retail stores and apartment buildings with four or more units o Agricultural real estate is used to grow produce plants, vegetables, fruits, grains, trees, dairy or raise animals (ranches), examples include farms and ranches WEALTH BUILDING 101 7

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15 Control Your Money Pay for vs. Afford

16 Control Your Money Pay for vs. Afford While you are young and free from huge responsibilities like mortgage payments, credit card debt, college loans, car loans, childcare expenses and so on, it is extremely important that you come up with a plan for the type of financial future that you want. This plan will help you know the difference between what you can pay for and what you can afford to spend your money on. Example: You work at the local supermarket for 20 hours on the weekends and earn $200 per week - $800 per month - $10,400 per year. You have talked it over with your parents and have decided that when you graduate high school in four years you want to: buy your first car and join your family in buying a Little Caesar s Pizza restaurant. Goals - Your plan is to save $8,000 for your first car and $25,000 for your share (25%) of the family business. What You Can Afford - Based on the above plan you can only afford to spend $2,150 every year or $179 every month. To achieve your goals you will have to save the remaining funds. This plan will change what you are willing to pay for every month! To keep on track with achieving your goals you will have to create and use a budget to control your spending. 8 WEALTH BUILDING 101

17 Create A Budget Use the below budget to record all your bills and plan your spending. Every dollar that you earn should have an appropriate category. The total money remaining at the bottom should be zero. This budget will help you keep on-track with your financial goals. BUDGET Weekly Monthly Yearly INCOME CHARITY SAVING - Car Fund - Business Fund - Emergency Fund INVESTMENTS * HOUSING CELL PHONE * FOOD - Grocery - Restaurants * TRANSPORTATION - Gas for Car - Car Insurance - Tolls - Car Repairs & Oil - License & Taxes * CLOTHING SPENDING MONEY ENTERTAINMENT Total Remaining: Zero * As you get older, you will have to think about paying for these type of expenses WEALTH BUILDING 101 9

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19 Making S.M.A.R.T Goals Specific Measureable Achievable Realistic Time Bound

20 What Are You Willing To Do In 1 Year To Make Your Dreams Come True? Once you have created a written budget you will have to track how you spend your money every day, week or month to make sure that you are still on track to accomplish your dreams. By breaking down your large yearly goals into small monthly goals you can make adjustments to how spend and invest your money so that you can make your dreams come true. SMART Goal #1 In 1 Month: I will invest (multiply my money) I will deposit in my savings account. I will budget for food, entertainment, clothes. This is realistic and achievable because, I will earn or receive every week. I will invest, save, and spend. SMART Goal # 2 In 3 Months: I will invest (multiply my money) I will deposit in my savings account. I will budget for food, entertainment, clothes. This is realistic and achievable because, I will earn or receive every month. I will invest, save, and spend. 10 WEALTH BUILDING 101

21 SMART Goal # 3 In 6 Months: I will invest (multiply my money). I will deposit in my savings account. I will budget for food, entertainment, and clothes. This is realistic and achievable because I will earn or receive every month. I will invest, save, and spend, SMART Goal # 4 In 9 Months: I will invest (multiply my money). I will deposit in my savings account. I will budget for food, entertainment, and clothes. This is realistic and achievable because I will earn or receive every month. I will invest, save, and spend. SMART Goal # 5 In 1 Year: I will invest (multiply my money). I will deposit in my savings account. I will budget for food, entertainment, and clothes. This is realistic and achievable because I will earn or receive every month. I will invest, save, and spend. WEALTH BUILDING

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23 Creating A Financial Plan turn that 62 to 125, 125 to a to a half a million, ain t nothin nobody can do with me, now who with me? Jay-Z, Clique

24 Your $25,000 Plan The Gateway to Larger Plans Now that you have a written budget and goals, you will need a plan to help you achieve those goals. The following plan is an example of realistic plan based on a teenager earning minimum wage and working 20 hours per week. It is to be used as a guide to help you think about your own financial plan. Chart 1 details how a teenager can earn $27,000 in four year by working parttime earning minimum wage for $8 per hour. This $25,000 plan is the first step to being able to envision larger plans. Your $25,000 Plan + 3 Friends with $25,000 Plans = A $100,000 Plan Your $25K x 3 Friends with $25K Plans $100K Plan o A $100,000 Plan is the first step to a Million-Dollar Plan o A Million-Dollar Plan can lead to a 10-Million Dollar Plan o A 10-Million Dollar Plan can lead to a 100-Million Dollar Plan o A 100-Million Dollar Plan can lead to a 1-Billion Dollar Plan 12 WEALTH BUILDING 101

25 All Dreams Need A Starting Point Dream big, like crazy BIG, but start with a plan. You definitely need to use a plan to get started. If you write down on a piece of paper that you want to be a millionaire or a billionaire and you have no idea how you can accomplish that goal, it will be very hard to make that dream come true. The $25,000 plan outlined in Chart 1, is just something to get you thinking about the possibilities and what you need to do to make it happen. It is a start and all dreams need a starting point. Starting Point: The starting point is your teenage working years. This starting point can be as early as you want it to be if you decide to start a business. There are plenty of examples of children as young as 9 years old employing themselves and their friends and family through their business. The Plan: The U.S. Department of Labor enforces laws on when a child can work, and for how long. Every state has a Department of Labor that can give you state specific rules. This $25,000 plan is based on a teenager working 20 hours per week for minimum wage ($8/hr) from the age of years old. The website is a good resource for your questions on what type of work you can do, how long you can work and how much you can get paid. Save, Invest and Spend: This plan is based on 60% of the income earned being investing, 20% being saved and 20% used for spending. The money that is set aside for investing is used to buy stocks that will return at least 10% every year. WEALTH BUILDING

26 Step 1 is a plan that can help you get started! The $25,000 Plan How to Graduate High School $25,000 richer than everyone else! Your Age: The Plan: Years Old Work Part-Time 20 Hours/Week 52 Weeks/Year * Only if you can keep your grades up! Your Pay Check on Minimum Wage $8/hour x 20 hours/week = Earn $160/week Before Taxes The 60/40 Plan Invest 60% Save 20% Spend 20% Take Home $130/week After Taxes $520/month $6,760/year 4 Years $27,040 Year 1 Invest $4,056 Save $1,352 Spend $1,352 Year 1 $4,056 Invest $4,056 in stocks with 10% return on investment (ROI) = $ added to $4,056 initial investment = $4, (after 1 year) 14 WEALTH BUILDING 101

27 Year 2 Invest $4,056 Save $1,352 Spend $1,352 Year 2 $8,517 Add $4.056 to Year 1 investments + earnings of $4, = $8, invested in stocks with 10% ROI = $ added = $9, (after 2 years) Year 3 Invest $4,056 Save $1,352 Spend $1,352 Year 3 $13,425 Add $4,056 to Year 2 investments + earnings of $9, = $13, invested in stocks with 10% ROI = $1, added = $14, (after 3 years) Year 4 Invest $4,056 Save $1,352 Spend $1,352 Year 4 $18,824 Add $4,056 to Year 3 investments + earnings of $14, = $18, In 4 Years 18 Years Old $18, Invested - $5,408 Saved - $5,408 Spent WEALTH BUILDING

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29 Your Personal Investment Portfolio Write Down Your Goals Create A Master Plan Control Your Money Make Wise Investments Control Your Time!

30 Directions: Use this Personal Investment Portfolio to write down: who you want to be, what your goals are and how you plan to get control of your time. My Personal Investment Portfolio Vision Goals The Action Plan Name: Career: When I grow up I want to become Legacy: I want my family to be known for 16 WEALTH BUILDING 101

31 Part 1 My current sources of money: Use the spaces below to map out what your current sources of money are. Under 14: If you receive money from your parents or family monthly or on special occasions and holidays, write down the amount that you currently receive. Young Entrepreneur: If you have a side hustle or business, you can use the money you earn from that business to jumpstart your savings and investments as well. Teenager: Your parents will want you to prioritize your schoolwork before allowing you to work part-time. If you have a plan to balance your schoolwork with your financial goals you will have a better chance on convincing your parents that you are mature enough to work and keep up with your grades and activities in school and the community. One-time Monthly (1) Monthly Allowance from Parents or Guardians (2) Birthday Gifts from Family and Friends (3) Holiday Gifts from Family and Friends (4) Part-time Job (14+ years old) (5) Entrepreneurial Ventures Your Business. Total: WEALTH BUILDING

32 Part 2 My Teenage Years (14 18 years old): I will work hours per week when school is in session (weekends) Friday 4 hrs Saturday 8 hrs Sunday 8 hrs I will earn: week x weeks = /year ($ /month) Part 3 How I will control my spending: The $25,000 plan used an example of 60% of income for investing, 20% for spending, and 20% of spending. You will have to decide for yourself what you are willing to commit to based on your goals. Save % Invest % Spend % Year 1 I will have: Saved $ Invested $ Spent $ Year 2 I will have: Saved $ Invested $ Spent $ Year 3 I will have: Saved $ Invested $ Spent $ Year 4 I will have: Saved $ Invested $ Spent $ 18 WEALTH BUILDING 101

33 Part 4 My Stock Investments If you aren t willing to own a stock for ten years, don t even think about owning it for ten minutes. Warren Buffett, Berkshire Hathaway Chairman Letter 1996 When you select stocks for your portfolio make sure you start with a company that you love and then research other stocks in the same industry to make sure that you are choosing a leader (like Nike) or an up-and-coming leader (like Under Armour). There are thousands of companies that are publicly traded on the stock market. You only need a small handful, four to six, in your investment portfolio. Start with one and then build up your portfolio based on what you know and love. View every share of stock that you own as a small piece of a business that you believe in. You don t have to run the business but you need to pay attention to how the business is run. By choosing to invest in businesses that you know and love you are already engaged in how the business is being run. You use the products or services. You already follow them on social media and get read their Google alerts about what s going on. This engagement allows you to understand how the business is being run and when it is in trouble. I would like to own shares of stock in: Company 1 Company 2 Company 3 Company 4 WEALTH BUILDING

34 Section 4.1. Why I am investing this company Remind yourself why you chose these particular stocks over the thousands of other stocks that you could have chosen. Company Name Stock Symbol Reason In sections 4.2.and4.3.we will review following six pieces of information that you need to use to analyze if a company is a good investment and if the stock price is right: (1) Annual Revenue (2) Earning-per-Share (EPS) (3) Annual Dividend Paid to Shareholders (4) Return on Equity (ROE) (5) Overall Stock Market Valuation (6) Price-to-Earnings (P/E) Ratio 20 WEALTH BUILDING 101

35 Investment students need only two well-taught courses - How to Value a Business, and How to Think About Market Prices. Warren Buffett, Berkshire Hathaway Chairman Letter 1996 Section 4.2. In the past five (5) years they have consistently performed well increased profits and revenue Leaders have a long track record of solid performance: increasing revenue, earnings-per-share and solid return-on-equity. Look at a company s past performance over the last five years (at a minimum). Consistent Profits equals increased revenue (sales), increased earnings per share (EPS), and sometimes increased dividend payments to shareholders. This information can be found at: WEALTH BUILDING

36 Revenue is the amount of money that a company makes from selling its products and services Earnings-per-Share (EPS) is an indicator of how profitable a company is; it explains how much net income a company has earned per outstanding share. Dividend is a portion of a company s profit that is paid to shareholders. You earn money from owning stock in a company in two ways: when the value of the stock (price) increases and when you receive dividend payments. Dividends are an immediate return on your investment. In order to receive the profits from increased stock prices (unrealized gains) you will have to sell the stock. Return On Equity (ROE) measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is useful for comparing the profitability of a company to that of other firms in the same industry Nike (NKE) compared to Adidas or Under Armour (UA) On Yahoo! you can search industry averages and individual company performance at: In addition to the above measurements of a stock s value you need to also consider how much cash a company has and the operating cash flow. This information is important because it shows that a company can generate enough cash flow to maintain and grow the business without going into debt. Too much debt is bad for business. 22 WEALTH BUILDING 101

37 Use this chart to record your research on the past performance of the companies that you choose for your investment portfolio. Past Performance Revenue EPS Dividend ROE Revenue EPS Dividend ROE Revenue EPS Dividend ROE Revenue EPS Dividend ROE WEALTH BUILDING

38 Whether we re talking about socks or stocks, I like buying quality merchandise when it is marked down. Warren Buffett, Berkshire Hathaway Chairman Letter 2008 Section 4.3. Is the price right? Stock markets prices are driven by two factors: corporate earnings (which are reported quarterly) and how investors are feeling about the economy and a company s future. These two factors effect the price investor s are willing to pay for a stock and what they are willing to invest in. Investor s emotions can have a huge impact on the price they are willing to pay for a stock. If investors feel positive about the future of the economy and the ability of companies to make a profit in the future, they will be willing to pay higher stock prices. When this positive outlook gets too out of touch with reality prices can go through the roof! Is The Stock Market Value Out of Touch With Reality? 80% of the stocks will follow the general trend of the market. If investor emotion is out of touch with reality then stock prices will be higher than they should be for roughly 80% of stocks. How to Calculate: According to Warren Buffett, the best indicator of the stock market s overall value is when you take the total market capitalization of the U.S. stock market (visit and divide it by gross national product (GNP) (visit GNP measures the value of goods and services that a country s citizens produced regardless of where they live. Any time that ratio is more than 100% of the total goods and services in the economy the stock market is considered overvalued. How To Analyze A Stock Price: Websites like stock-market-valuations.php provides the stock market valuation for you. Once 24 WEALTH BUILDING 101

39 you know the stock market value, we use the Price-to-Earnings (P/E) ratio to measure the effect of investor emotion (the hype) on a stock s price. Stock Price = EPS multiplied by P/E Ratio The Price-to-Earnings (P/E) Ratio tells us how much investors are willing to pay for every dollar a company earns. For example, a P/E of 30 means that investors are willing to pay $30 for every $1 a company currently earns. High P/E ratios indicate that investors believe that a company s earnings will grow in the future. In other words, they are buying into the hype surrounding a company. The best situation is buying a great company at a discount. Stock market crashes (corrections) or a temporary company crisis can offer opportunities to buy the stock of a great companies at a huge discount. P/E ratios below 15 are usually considered undervalued or at a discount. When the P/E Ratio is too high, you need to understand why. That s when the stock market s overall value comes into play. Remember 80% of the stock market will follow the overall trend. If the overall stock is filled with hype or overvalued then you should wait for stock prices to drop into a more reasonable range. Business operates in cycles: After periods of hype prices will fall back to reality. After reality sets in, investor emotions will once again start to get more positive and the hype will slowly creep back in. Prices will get out of touch with reality again and the cycle will start all over again prices will go up and then come back down. Use the information above to (1) realize what is going on in the market and (2) if you are paying a fair price for a great company. If the price isn t right at the moment then be patient. The price will eventually catch up with reality. Company Name Stock Symbol P/E Ratio Buy Now? WEALTH BUILDING

40 Wealth is created through investments in business and real estate that do not require you to trade your time in order to receive income from the investments. Below describe your wealth creation plan through business and real estate. Part 5 My Business I would like to own: Why How Part 6 My Real Estate I would to own I will purchase my first 26 WEALTH BUILDING 101

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42 Example Personal Investment Portfolio

43 My Personal Investment Portfolio Vision Goals The Action Plan Name: Career: When I grow up I want to become a professional football player, college football coach or sports journalist Legacy: I want my family to be known for sports (athletes) and charity (working with orphans). Part 1 My current sources of money: Use the spaces below to map out what your current sources of money are. One-time Monthly (1) Monthly Allowance from Parents or Guardians _$40 (2) Birthday Gifts from Family and Friends _$200 (3) Holiday Gifts from Family and Friends $200_ (4) Part-time Job (14+ years old) (5) Entrepreneurial Ventures My Business. Total: _$400 $40/mo. Part 2 My Teenage Years (14 18 years old): I will work _20_ hours per week when school is in session (wknds max 20 hrs) Friday 4 hrs Saturday 8 hrs Sunday 8 hrs WEALTH BUILDING

44 I will work _40_ hours per week during the summer and breaks I will earn: _$130_week x 52_ weeks = _$6,760/year ($520/month) Part 3 How I will control my spending: Save 20 % Invest _60 % Spend _20 % Year 1 I will: Save $1,352 Invest $4, 056 Spend $1,352 Part 4 My Stock Investments I would like to own shares of stock in: Company 1 NIKE Company 2 DISNEY Company 3 UNDER ARMOUR Company 4 APPLE Section 1. Why I am investing this company Company Name Stock Symbol Reason NIKE NKE I like Nike sneakers and clothes. They sponsor my favorite teams and athletes. The company is one of the best sports apparel companies. DISNEY DIS Disney owns ESPN. I like watching ESPN for the latest sports news. Disney also makes great movies for kids. UNDER ARMOUR UA UA isn t as well-known as Nike but they are doing really good at becoming a top sports company and they are from Baltimore! APPLE AAPL I love Apple products. In my house we have iphones, ipads, ipods and we are talking about getting Apple TV and iwatch. 28 WEALTH BUILDING 101

45 Section 2. In the past five (5) years they have consistently performed well increased profits and revenue NKE DIS UA AAPL Revenue $27,799 (m) $25,313 (m) $23,331 (m) $20,117 (m) $19,014 (m) EPS $2.97 $2.7 $2.35 $2.20 $1.93 Dividend $0.93 $0.60 $0.695 $0.60 $0.53 ROE 24.88% 22.09% 21.47% 21.67% 19.55% Revenue $48,813 (m) $45,041 (m) $42,278 (m) $40,893 (m) $38,063(m) EPS $4.26 $3.38 $3.13 $2.52 $2.03 Dividend $0.86 $0.75 $0.60 $0.04 $0.35 ROE Revenue $3,084 (m) $2,332 (m) $1,834 (m) $1,472 (m) $1,063 (m) EPS $0.95 $0.75 $0.61 $0.46 $0.33 Dividend $0.00 $0.00 $0.00 $0.00 $0.00 ROE Revenue $182, 795 (m) $170,910 (m) $156,508 (m) $108,249 (m) $65,225 (m) EPS $6.45 $5.68 $6.31 $3.954 $2.164 Dividend $1.37 $1.686 $0.757 $0.00 $0.00 ROE WEALTH BUILDING

46 Section 3. Is the price right? Company Name Stock Symbol P/E Ratio Buy Now? NIKE NKE Wait for price decrease DISNEY DIS Wait for price decrease UNDER ARMOUR UA Wait for price decrease APPLE AAPL Buy or Wait for price decrease Wealth is created through investments in business and real estate that do not require you to trade your time in order to receive income from the investments. Below describe your wealth creation plan through business and real estate. Part 5 My Business I would like to own: an Anytime Fitness franchise. Why I love exercising and fitness. Instead of opening my own gym, I will use the Anytime Fitness franchise to achieve my dream of owning a gym. Anytime Fitness is listed as one of the top 20 fastest growing franchises and the start-up costs are low compared to other fitness franchises. How I plan to team up with my best friend, brother, sister, and uncle to open our Anytime Fitness store. We will each put in $25,000. The $125,000 will be used in addition to a small business loan to open our store. The start-up costs are: $78,000 - $370,000 This information can be found on the company website or by doing a Google search Entrepreneur Magazine produces a list of the top 500 franchises every year at: 30 WEALTH BUILDING 101

47 Part 6 My Real Estate I want to own ten rental properties. I will purchase my first rental property after college. How-to use one rental property to purchase 10 more 10 Rental Houses in 17 years for $33,000/year House #1 1st Rental Property Cost: $17,000 ROI: $3,300/17,000 = 19% Buy 70% < Value Find Cheap Properties: Real Estate Investor Associations Tax Sales Probate Sales Owners who don t want property Fix Abandoned Properties: Buy 50% or less < Value $600 Rent - $120 Reserves (20%): Repairs / Vacancy - $60 Management Fee (10%) - $70 Property Taxes (Annual/12 mos.) - $75 Insurance (Annual/12 mos.) $275 Net Profit $275 x 12 (mos)= $3,300/year After College House #1 $3,300/Year x 5 Years $16,500 Year 6 House #2 $3,300/year x 2 Houses $6,600/year x 3 Years $19,800 Year 9 House #3 $3,300/year x 3 Houses $9,900/year x 2 Years $19,800 Year 11 House #4 $3,300/year x 4 Houses $13,200/year x 2 Years $26,400 WEALTH BUILDING

48 After 4th House: Buy A New Rental Every Year Year 12: 5 Houses: $16,500/yr Year 13: 6 Houses: $19,800/yr Year 14: 7 Houses: $23,100/yr House #5 House #6 House #7 Year 15: 8 Houses: $26,400/yr Year 16: 9 Houses: $29,700/yr Year 17: 10 Houses: $33,000/yr House #8 House #9 House #10 17 Years After College 32 WEALTH BUILDING 101

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