Can you create financial freedom now?
What Asset Could You Use to Create Passive Income Immediately?
If Savers lose, and Spenders lose, what’s left?
Chris Miles discusses creating passive income that leads to financial freedom so you can live the life you dream of.
Tune in now!
--------------------------------------------------
Hello! My fellow Ripplers! This is Chris Miles, your Cash Flow Expert and Anti-Financial Advisor. Hey, I’m going to welcome you out for a wonderful show. Show that is for you and about you. Those of you who work so hard for your money, and you’re ready for your money to start working harder for you. Now! You want that freedom. You want that cash flow. You want that prosperity. Today! Not to have to wait 30 or 40 years from now. If you’re lucky the market smiles on you the right way to finally retire. No, that’s not why you’re here. You’re here to create that life that you love today to be with those you love doing what you love. And on top of that, you know that as you’re blessed financially, you have more options. Because cash flow creates options and options is where you create freedom. And as a result, that’s where you get, create a ripple effect to the lives of others that help people and be able to create value and serve ways that you make this massive imprint on the planet.
When whatever way you feel like you want to do that, it’s not just about your own comfort convenience, it’s about blessing the lives of others and creating a legacy beyond you. Guys, I’m so proud to be a part of that ripple effect with you. Thank you for allowing me to share my gifts and talents with you. And thank you so much for bingeing, for sharing with other people. I love just seeing how this show has grown and expanded, by the way, we just surpassed over 300,000 downloads. We just did a hundred thousand dollars in the last nine months. So that’s all because you guys, so thank you so much for being a part of it. It just gets bigger and bigger. And even more importantly, not just a bunch of you listening, but you’re applying it and making it work in your life.
Guys. That is a thing that I love. So thank you so much for being part of this show. As a reminder, check out our website at www.MoneyRipples.com We’ve got the free eBook Beyond Rice and Beans you can download there as well as some great videos and blogs and things like that. You can also check out, so go check that out. So guys, today, I want to go into a subject that actually came up twice in one day. And it’s funny because I put a note on there. I had an old memory. So I have a friend that some of you guys may know, you might even be following him, a guy named Garrett White, or he goes by Garrett J. White. And so, I knew him back in 2006, when he owned a mortgage company this was, if you have ever heard his story, he talks about those kinds of stuff.
He’s got his own channel and that kind of thing too. And his own podcast. Anyways, it’s like, I remember one of the presentations he gave that blew my mind. Because I had just quit being a Financial Advisor, but he taught it. And remember, he’s a mortgage company owner at this point, Right? So he’s teaching about mortgages and what you can do with them. And it expanded my mindset to help me teach what I’m teaching you. And he called it “One Night Retirement”. Now, obviously that is a pretty dang good hook line and sinker, because I thought “One Night Retirement”, how is that possible? Well, I go to his little seminar he’s put on these were live seminars. He was doing and it got me. It was great. Well, you know what? Some of those same strategies and principles that go with it apply today, right?
Because of the principle we teach here is that, It’s not about how much money you have, Or how much net worth you have. It’s about how it actually creates month to month difference in your life, whether that’s less expense or more income, right? It’s gotta be one of the two. And that’s what I mean by cash flow. Cash flow means that your income is higher than your expenses. Ideally, if you want to be out of the rat race or as I call it, you know, be able to retire, right? Or hit your freedom number or whatever you want to call it. Everybody has different terms for it. You want to be financially independent where your income, you know, especially your passive income is surpassing your expenses each month. Now you’re in a place of power. Now you’re in a place where you can actually say, Hey! I can work or not work.
I can play. I cannot play. I can do whatever the heck I want. Right? Because now I’ve got passive income streams coming in that are replacing my money. You know, it’s paying for my expenses, my day to day living. And this is what we’re all trying to do to get to that point of retirement, right? This is not even relying on Social Security from the government. We’re not trying to rely on them and be the victim here or hope and pray that someone’s going to bail us out. This is about creating freedom now. And it’s about you taking the reigns and taking control of it. Now, I’m not going to go as much into the investment part of today. I’m going to talk about this concept that we talked about with “One Night Retirement”, right? Now, So I want to go into that specifically.
Although it does go into investments, I’m not doing that. Here’s the key thing for this to work. You have to be of the right mindset, the right mind frame here. You have got to be a steward. You can’t just be a spender because you’ll blow it. You’ll ruin the strategy. If you’re a saver, you won’t be able to see it anyways, because if you’re too much in scarcity and fear, you know, especially if you’re being, you know, if you’re doing these things haphazardly or arrogantly or even ignorantly, whichever way you’re going, right?. Whatever you’re doing here, this could actually reverse the results we’re trying to get here. And so let me give you a real life client example, had two clients reach out one client asking about refinancing their mortgage and ask for options there. They’re ready to retire. Another client wants to replace his income his active business income that he has.
He was asking about, Hey, I’m getting a, you know, I’m getting more extra money coming in from a business loan and things like that. I can have that pay for my expenses, but that frees up a quarter million dollars. Should I invest that? Or what should I do? And how do I know if it’s a good thing? Well, let me give you those examples here specifically. So, let me go and start with this one client, because this client would probably apply to most of you to some degree or another, right? Here’s the thing is that cash flow is key here? It’s always about what kind of income do you have coming in that can replace it? Especially if you’re relying on your active job or your business income that could go away. We already know with COVID and everything going on.
So everything’s temporary, right? And so they said, Hey! Chris, like we realized that our house appreciated. Remember I talked about, in the previous episode? We talked about the golden opportunity. I would re-listen to that. Again, we talked about their house. They did appreciate it. They said, our house is worth 400,000. Our mortgage, we owe 210,000 and they’re in their sixties. So they’re saying, we are getting ready to retire? And but they have two different philosophies between husband and wife. And I’m sure those you have married have never run into the situation before where you have an idea and your spouse has a different idea and you guys are trying to figure out which one is the best way to go. Sometimes, I feel like I’m a marriage counselor, some of my consulting clients, and when we strategize and game plan, these things here.
And so that’s kind of what happened here. She’s saying my perspective is, I think we should refinance cause they had their mortgage. They’re seven years into their 30 year mortgage. They’re at four and a half percent rates have dropped, right? They could easily get 3% on a 30 year mortgage. So her idea was Chris, I think we should, you know, do a refinance and do another 30 years to free up more cash flow. That’ll allow us with the passive income we’re trying to create to hit our goal faster, right? Because now the expenses have lowered. Our passive income is still the same. This allows us to still free up cash without any money out of pocket. She said, I would like to cash money out, but my husband’s kind of against it. He’s more thinking 15 year mortgage, which would raise our payment.
Now they’re paying about 1,220 bucks a month. If they get a 15 year mortgage payment and it goes up to almost 1,450 a month. So they actually ended up paying a well over $200 more a month to pay it off in 15 years. And I ran that at I actually about a 2.6, to 5% interest, right? So they could shorten the timeframe just by lowering the interest significantly, almost a full 2%. It would increase their payment by about 200 or so dollars a month. But that’s the option. And I said, okay, let’s look at those options, right? And again, you have to look at it from a steward. You have to look at it from a space where you’re willing to use money. But you’re also looking from a space of what’s the best and highest use of this money.
What can I do to create real freedom? And so, I said, let’s look at it. I said, we’ve got two options here. One, I told her, I agree. I would not do a 15 year mortgage because at their space, why would we want to increase costs? Just so that hopefully in 15 years they have a paid off house. By the way, 15 years would put them well into their seventies going on to their eighties, right? This is not ideal. So I said, I do not agree with the 15 year mortgage. Do not do that right now, by the way, any of you here, I would not typically, I would not agree doing a 10, 15 year type of mortgage the longer the term, the safer it is, the lower the payment, the less commitment that you have in case something does go wrong. Beause if you’re always fearful about what might happen. Everyone’s fearful about.
What if I don’t have my mortgage paid off? I’m more fearful about the time in between. Because you’re talking about 15, 30 years out that somehow you’re going to have this perfect life. Not assuming that something could go wrong and that’s what we’re trying to attract it, but we never know life can throw us curves. Having a lesser payment is ideal. That is good. The true principle here that fits this strategy is that you want to live within your means, right? You want to produce more than you can consume. The worst. Most riskiest thing you can do is get a short term mortgage, increasing your payments. That’s great for the bank, puts them at less risk, puts you at more risk. And how do I know this? Because I had just a client just about a month ago, say, yeah, I couldn’t qualify for a 15 year mortgage.
But when I went to a 20 year mortgage, I qualified. I said, well that’s because your debt to income ratio. Because even though they’re not broke because they have some other payments, but because they don’t show it a ton of income what happened is that it was too much for the banks to feel comfortable. They say, no, that’s too much of a commitment. We’ll do a 20 year mortgage, but not, not a 15 year mortgage. Isn’t that interesting? Even though the bank wants you to pay off faster, they think you’re higher risk. If you try to get higher payments. They’re 100%, right? But unfortunately in our little brains, because of what we’ve been taught by stupid financial advisors and the pundits out there, they’re telling us no pay off your debt as fast as you can stuff it all in and gamble away in the market.
Why would we pay off a mortgage that was certain to then gamble in the stock market anyways? Dumb. Right? So anyways, so I said, no, 30 year mortgage is better. So here’s what we did. I said 30 year mortgage, if you just refinanced, didn’t take any cash out. Just refinanced it. Add another $5,000 at closing costs that would put you at 3% interest. It would put you at $906 a month, which would free up $315 a month. I said, this is good. Like, Hey, if this puts you at a place of much more certainty, right? Because this allows them to get that passive income up. Now they don’t have to create an extra $315 a month to get there. And I said, this is great. You know, a lower payment is awesome. Worst case, here you go. I said, but I personally, because again, based on my knowledge and my stewardship and they know some of the stuff I’m teaching too, cause they’re clients of mine, right?
I said, I would look more at doing a cash out refinance and a 30 year payment at a lower interest rate than what they’re paying. Remember they’re paying four and a half percent now. Anyway, they go, they win. Right? So I said, what if you cash out up to 80% of your value? So that’s a $320,000 mortgage, but they get $105,000 in cash. They could do whatever they want with. Here’s the interesting thing, guys, their payment goes up $200 a month. So their minimum payment basically goes up the same as if he did a 15 year mortgage. But now we’re doing a 30 year mortgage, but he’s getting an extra $105,000 out. Now somebody is freaking out thinking, Oh! But wait, Chris, what if we can’t make the payment? How long do you think the extra 200 bucks a month can be paid with a $105,000 bucks first, right?
That’s 2,400 a year. Do the math. You can go a lot of years on that. If there’s an emergency again, I always encourage people to have emergency funds set up first, before they just go and try to invest everything, right? Like they need to have cash reserves so that if something does happen, they don’t lose their home. You know, that’s the key, right? You got to have the defense going with your good offense. So I said, now you get a $105,000 to deal with your payments. Now $1,437 a month. If it’s at three and a half percent, they might get lower. But again, I’m trying to be conservative here a 1,437 a month, they get a 105,000. So only $216 more a month. Okay, well a 105,000. What if they earned just 12% on that money? That’s $1,050 a month. You might ask where can they get that?
Real estate, easy place to get it. There are some possible other areas too, that might pay you more or less, but I’m just going with real estate because that’s more, the less risky thing. If you’re going to pull that equity from your home, I don’t see it that bad of a strategy to say, let’s pull the equity from my home to put an equity of other properties. Then your net worth is basically the same, but now you’ve got cash flow. That’s the key. Now they’re getting a $1050 a month. Think about it. You know, they it’s either one. He does a 15 year mortgage where he’s paying over $1,400 a month or two. He has a $1,400 a month payment, but now he’s getting paid 1,050 a month with that extra money. You see my point here, the difference between the two and the only difference.
I mean, you might say, well, he’s in more debt. You would think that. But if you do the balance sheet, you’re not in any more debt, you’re in the same exact position, but that money is going to buy a real estate, right? That’s cash flowing you money. That money right there is now making sure that he only has a net payment. This is where the “One Night Retirement” comes in. His net mortgage payment is less than $400 a month. That’s the only difference he has. Even if they refinance just civil refinance, that could be a good spot. It’d be over at 900 bucks a month, or they can make that net payment less than $400 a month. By the way, even we don’t count rent increases. The fact is rents will increase year after year because property managers will put that in there saying, Hey, we’ll increase rents by 5% that eventually after five years, the rent will probably be at least the same as the mortgage payment by that point.
But I told them, I said, let’s not even count on rent increasing in case there’s unexpected expenses or whatever. We’ll take that out of the equation. Let’s see where you are in five years because remember $1,400 a month, he has to pay that for 15 years to be debt free. So I said, well, what if you bought about $475,000 with the properties with a hundred grand, 105 grand, that’s about three properties you could buy there, right? So you buy three properties, possibly four, depending on how small they are. The cash flow is 1,050 a month. There are times you could possibly get more than that. Again, I’m just going with a nice, easy number. This is the number that I even go for as a benchmark of why I want to make at least 12%. I just closed on a property that I’m currently making about 15 to 16% on right here from day one, i got another property, same thing I’m making about 15% net on that coming up.
I’m closing on that. And this next week, it’s not an unheard number. Okay. That’s cash on cash. Like the actual net cash flow profits coming from the property. So let’s get back to the numbers again. Right? So 1050 a month, you’re making all this cash flow. Well, what is that? That’s 12,600 bucks a year. So I told her, I said, let’s factor in all the other returns with the real estate too, because if you’re buying $475,000 real estate also you’re leveraging bank money to get those mortgages on top of the cash flow, you’re getting that 1050 a month. You’re also paying down your mortgages with the renters’ money. Not, your own, your renters’ money. They’re paying that down. Because that 1050 after you’ve already paid your mortgage payment with their rent, that’s the net profit. After all the bills been paid, right?
So anyways, I said, let’s look fast forward, five years. And I even said, let’s look at even if the property appreciates so much, like only 20% total, which 20% roughly after five years, it’s just a little over 3% a year, not earth shattering, right? I have a property right now. It’s already appreciated about 20% in the last two years. So that’s not farfetched. I think in five years you’ll have a 20% growth again, I’m playing conservative numbers, right? So here’s the numbers. Here we go. So five years total, even if the rents didn’t increase, you would make $63,000 in rent over that period of time. Right? That’s five years at 12,050 a year. So 63,000 in rent on top of that, the fact that your renters have paid down your mortgages for you. I paid it down $39,000 of equity that you’ve built up, a little over that I just rounded down to 39,000.
So 39,000 plus 63,000. Even if the property didn’t appreciate, you still made with your a 105,000, you still made $102,000. Right? Wait, hold on. Let me do the math again. Yeah, that’s right. $102,000. So you made $102,000. That’s pretty good. Right? So you made a 102,000 bucks from that 105,000, 5 years, you’ve basically about double your money. Even if the market was flat, even if your property stayed the same price all five years, not likely, especially if you’re buying lower, you know, lower, you know, like a property is around 120, 150,000 or less. I mean, they’re not going to depreciate very likely even in recession, those things usually appreciate. Because people start downsizing into these smaller homes, creating competition, driving your prices up. So even in a recession, that’s not too unheard of. Anyways, going back to this again.
So you’ve already made 102,000, but this is say you did grow your properties grow by 20%. Over those five years, that’s a $95,000 gain. Now what’s happened is you’ve made 197,000 from 102 or a 105,000. You’ve made nearly a 200% return in five years. Again, this is not guaranteed. This is not recommendation. All the disclaimer to go with this. I’m not saying that’s the case or course figurative. Right? But think about this $197,000. Now, of course, when you sell those properties off, so you get the $105,000 back, guess what? That’s over $300,000 you just made. But wait, there’s more. Here’s the thing you’ve been paying on the last five years. You’ve been paying down that 30 year mortgage after five years, that $320,000 balance is now 287,000. What does that mean? You just made over $300,000. If he decided to sell off all your properties, right?
Those three properties you bought, you sell them off. After five years, say I’m taking the money out and getting my money back. No extra money out of pocket, same payment as you did the 15 year mortgage. But guess what? 300,000 will pay off your $287,000 mortgage. You may or may not even have some change left over. You just paid off your house in five years, not 15 with a lot of risk along the way, five, five years. And again, the X factor is of course that you have cash flow along the way. So something does bad to go wrong. Hey yeah, you get the mortgage payment, but you’ve got money still paying, right? You’ve got other streams of income to support. Maybe your one mainstream income that you have where you’re playing a gamble. You’re basically playing Russian Roulette, right? Where you just hope that that chamber, that bullet’s not in that gun that might hit you that point because your jobs aren’t guaranteed, your business is not guaranteed.
You need multiple streams of income to ensure and create safety in your situation. But unfortunately, financial advice is telling you, Hey, rely on that one stream of income, save up all your money, lock it away in your 401k. So you can’t touch it even in emergencies. Or if you do, you have to borrow at a ridiculous, you know, payback amounts or you know you to try to get to it. But again, you’re getting taxed on money and everything else, right? Lock it up in your equity for home. Here’s the thing. If you had to sell something, would you rather sell your investment property or sell your own home that your family lives in? You don’t want to sell your own home. Let’s be honest. You don’t have to go to the resort to that where you’re trying to sell your house fast, hoping that you have to short sell or even foreclose on it.
If something goes wrong with where your income stops, this is the safest way along there. But look, it’s only the safest, but it’s the fastest. And that’s again just saying that in five years. So their situation they could have their house paid off in five years. If they chose to, or they could keep building that passive stream of income and saying, why would I want to pay this thing off? This has been a massive golden goose for me. Why would I kill it? And so they might just keep it going. But at least you have options where most people hit retirement. They don’t feel like they have any options, at all. That’s what they tell me. They’re like, I’ve got this money, but it’s not enough. And I don’t think I could save enough in this lifetime to be able to truly retire the lifestyle that I want, where I can actually have some freedom versus living on a very tight budget, fixed income, not visiting my children or my grandchildren.
I have to be stuck here, guys. This is the difference. It’s such a big difference. This is the kind of thing I’m seeing the guy at the SBA loan. He asked the same kind of question. Now the numbers were like about double what I was talking about with them, but it was the same kind of thing. I ran the numbers for him as well. And I said, Hey, even if you had to pay 50,000 of interest on a loan over those five years, because that’s what we calculated with the terms being only at 4% for the money he’s cashing out. I said, that’s $50,000 of interest who cares if you’re making anywhere from 300,000 to $600,000 off of it. That right there from a business standpoint, for things from a business owner’s eyes, if I can invest 50,000 in my business to make 300, 500, $600,000, am I going to stop that?
No! That’s brilliant business sense. That makes common sense. It’s the same thing with your money. If you were looking at your money the same way as looking at as profit, not just all the dumb rhetoric and not even just rhetoric, it’s almost the point where it’s dogma. It’s almost religious in nature for people that you should pay off your home, you should save in retirement plans. Again, all taught by Financial Institution, telling you to do this stuff, right? We’re telling you to do this for years and what’s happened? People aren’t retiring free. They aren’t feeling any better off, if they pay off all their debt. And I know because you guys have reached out to me that have been the Dave Ramsey poster children where all you have is maybe a mortgage. If that, and even now you’re saying, okay, but we have no income.
It hasn’t translated to actual income. And that’s how we will retire. That’s how we become free financially, right? Guys, that is the point of this. So that’s what I mean by “One Night Retirement”, you create so much better options. And that I just talked about a five year timeframe because the calculation, when you get out 10, 15, 20 years, it gets ridiculous. It becomes the point where it’s hard to imagine and believe. You might even think of the five-year. One is hard to believe, but it’s not, guys. Like I said, I’ve got a property for the last two years that already now has got about 75,000 of equity in it. I only put, I only paid 32,000, including closing costs into that. My down payment was 27,000. I now have 75,000 equity, you know, with and plus the cash flow I’ve earned too. So I’ve been making cash flow on that.
Then making about 14, 15% a year cash on cash return. And guess what? Now I’ve got a bunch of equity in two years, even without the appreciation still that was building up equity. They appreciate it. It was nice though. Now that’s what I’m saying, guys, like buy real assets, buy things. A steward wants to buy things that allows them to expand and grow their stewardship. And to be able to create more value in this world to make a bigger impact. You can’t do that for money’s locked up in prison. You can’t do that. If you’re following the same old mainstream advice, you’re waiting, you’re in this waiting game, hoping and praying something will happen. And the truth is guys. The only thing you can do is stop hoping and praying and start taking action. Hey, if you’ve got a situation like this, you’re saying great, Chris, I’ve got money.
I even got money sit on the sidelines and savings or something like that. Or I might have money locked up that I can get out, but what should I do? Guys, this is where you can just shoot me an email, Chris@MoneyRipples.com and Hey, let’s find out. See if that’s a good thing to do. Can we do with infinite banking and do some cool stuff like that? Yeah. In as much as it works with this, using these alternate investment vehicles, right? It’s gotta be something that works together. You can’t just trust. I can tell you, you can not just trust on life insurance whole life to actually help you retire. There is no life insurance product will ever get you to retirement, no mutual fund. None of those retirement plans, not even 401k with a hundred percent match will get you there.
It is only by looking outside of the box, going outside that proverbial box that everybody’s been in, right? That we know has not worked. And even if you think it has, I’ve seen the evidence in the last 18 years, it hasn’t, people are not retiring the way they thought they would. Do you want to be a part of the masses or you want to be part of the few percent of that actually is free and you can even do it before you’re in your golden years. That’s my challenge to you guys. Anyways, I hope you make a wonderful and prosperous week and we’ll talk to you later!
No comments:
Post a Comment