MINDSET
MONEY TALK
The 7 Steps To Financial Freedom
(PART 2): CHOOSE YOUR PASSIVE INCOME VEHICLE! STEP FOUR
by Gene Powers
F inancial Freedom is when your money makes enough money that you work only when and if you choose to. After educating yourself on various investment vehicles that generate passive income and diving deeper on a few, you now move on to choose ONE vehicle on which to focus on further learning making passive income investments on which you can build your Financial Freedom. Since you will most likely use this passive income investment choice(s) for the rest of your life, it is essen- tial to understand and make your choice well. Assess your own skills, strengths, and preferences, listen to and study with various experts to make the best choice of the passive income vehicle that suits you. You will invest considerable time and money to become an expert investor in this arena, and this investment vehi- cle will be the foundation for carrying you to the passive income levels you desire. The more exploration and study you do, the more likely your choice will be well-suited to you and be one you truly love doing, which makes it much easier to attain your financial freedom. Here is a list of passive income vehicles that we consid- ered and attributes of each that were important to our de- cision. The list of all possible passive income vehicles is much larger. The evaluation matrix gives you an example of how to choose between various available investment vehicles by matching your interests, passions, objectives, and preferences. Although we identified and studied at least 12 possible passive income investment types, we strongly considered only three investments: 1 stock market trading using an analytics platform 2 seller-financed apartment buildings 3 Discounted notes
The attributes of these three investment types are com- pared along with a couple others - You can see from the chart why Discounted Note Investing in performing first lien mortgage loans was our chosen vehicle. We start with definition of the various investment attributes: Capital - Amount of capital required to get started with this investment asset. Availability - the level of difficulty to locate and purchase the investment asset of choice (e.g., stocks are easy with a brokerage account. Rare coins are much more difficult to locate for purchase.) Return on investment (ROI) - the annual return that is realized on your capital purchase after all expenses to acquire and maintain. Liquidity – ability to turn into cash quickly, active market of buyers. For example, stocks and bonds can be turned to cash in a matter of days if sold at market price, unless a stock or the markets stop trading. Undeveloped land or vacant commercial real estate can take years to convert to cash. Volatility - the speed at which the cash value of an asset changes during market cycles. Stock prices change hour- ly, and in a matter of days you can easily lose or gain a large percentage of value. Real estate cycles affect value of that asset, generally over years, though in hot markets can rise or drop 10-25 percent in a year or two. Mort- gage note values are less volatile as they indirectly follow interest rates and the value of the security properties and therefore move more slowly and are buffered by using sufficient equity protection.
94 | think realty magazine :: november 2020
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