Borrow Equal To Your Own Money

Category: Finance, Personal Finance.

Other people s money and your payday. One example might be in finding a stressed real estate owner who would allow you to take over his/ her existing loan to free them from the debt.

There are a number of applications of OPM concepts and leverage which can earn a worthwhile return for the prudent investor. You might even pay the stressed owner a minimal amount for their equity in exchange for their relief of debt. I might add, using other people s money for investments only works if you maintain your good credit standing. It preserves their credit rating and allows you to acquire a property for very little or nothing down. The application of OPM can be used in business and numerous other forms of investment. Circumvent the bank and become a lender.

If a bank can take your savings account money and pay you four percent while lending the same money for up to 35 percent, you can also. There are contractors, home buyers, small business owners, and many others who will pay a healthy percentage for use of your money. It does no good to tie up your money in one place- keep it turning over. $1, 0000 at 35% for three months tops. Always make short term loans. You will make$ 3500 off of your$ 1, 0000 which you have borrowed at 10% a. p. r. from the bank. Your credit rating is maintained as excellent because you paid it off early.

Pay the bank loan off at their 2% per month rate, 3mo. x2% = $300 total payoff= $1, 30- you profited$ 3100 in three months using OPM. Turn around and repeat the process. Borrow equal to your own money. Within one year you can be using$ 1, 0000 of your own money plus$ 1, 0000 OPM, doubling your profits while not increasing your expense. This sets the leverage fulcrum so it may apply double the pressure on the gain or profits. When I was in the Air Force, I loaned money to guys who thought they had needs greater than their pay.

The more pressure exerted, the more gain received. They would always run out of money a week before payday. I loaned 10 dollars for 20 dollars to be paid in one week. They always needed cigarettes or gas or something for a girl, they were willing to pay 100% for a one week loan. I stood at the head of the pay line and collected each pay day. You have to attune yourself by keeping your eyes and ears open for the sounds, look and feel of opportunity.

Opportunity knocks, if you are not willing to open the door, it will never come in. She s a fickle mistress who will leave you for another if you don t attend to her properly. Ernest Henderson, of the Sheraton Hotel Chain, authored an interesting book telling how he and his brother George along with a former roommate, turned, Bob Moore$ 1, 0000 of personal money and added leverage to build a billion dollar empire. After a few months, I used that money to buy a car. How could they accomplish such a thing? It s true, at the end of World War 1, the three men had only$ 1, 0000 between them. Chiefly by using the concept of using other people s money as leverage.

They considered such a sum a fortune, even though it started shrinking immediately after a months advance rent payment. One thing led to another, the Sheraton Hotel, and by 1933 Chain was born. Keeping overhead to a minimum, they set up shop in a Boston ground floor office, proclaiming themselves as bankers and dealers in foreign exchange. (there were no Banking laws in those days) The foreign exchange business led them into the import- export business and distribution of surplus binoculars once destined for the German Army. (seizing opportunity) As they looked around for even more lucrative opportunities, Henderson soon entered the new era of radio, underselling firms that were not cost- conscious and forward looking. Another application of OPM and leverage is in stock purchases. You are renting this borrowed$ 5, 0000 while your savings, represents an equity, in turn interest. Assume that you have savings amounting to$ 5, 000You wish to purchase$ 10, 0000 worth of stock, and in order to do so, you must borrow the remaining$ 5, 0000.

Financial maturity and mental competence are the necessary ingredients. Now you and I both know this example simply wouldn t happen. If the stock you have bought appreciates 50% in a year, then it would be worth$ 15, 000From this, you deduct your borrowed$ 5, 0000 and the interest paid on it- say$ 4000 for an interest rate of 8% leaving you with a net worth of$ 9, 600you have nearly doubled your holdings, earning a return of 92% in one year. But, if you did the exact same thing only this time lend the$ 10, 0000 to a small business owner or contractor. They have a great idea, but commercial lenders, product and expertise won t stake them. Many small businesses need funding but don t have the track record to satisfy a bank. I have a friend who provides venture capital for small businesses.

Need I say, he is a very wealthy man. He sets up the business management and provides consultation for, repayment and 10% of the business. He uses money to fund people in need. In return for his services, he is paid handsomely. These are people who could not go to a bank because they do not fit the banks criteria. I ask him why he would risk his money on new business start ups.

The thing is, leveraging money is not a new frontier, quit buying things that depreciate and put your money to work. He told me, "someone has to care about another man s dream. " He has made a lot of people wealthy and has received a certain amount of satisfaction while getting very wealthy himself. It s a tool like any other tool. Think- increase- multiply- growth- gain- profits and most of all wealth. Use it to plant, cultivate and harvest riches. Happy Trails

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