Chapter Five: Lesson 5
This was a simple example of how money is invented, created, and
protected using financial intelligence.
Ask yourself: How long would it take to save $190,000? Would the
bank pay you 10 percent interest on your money? And the promissory
note is good for 30 years. I hope they never pay me the $190,000. I have
to pay a tax if they pay me the principal, and besides, $19,000 paid over
30 years is a little over $500,000 in income.
I have people ask what happens if the person doesn’t pay. That does
happen, and it’s good news. That $60,000 home could be taken back and
re-sold for $70,000, and another $2,500 collected as a loan-processing
fee. It would still be a zero-down transaction in the mind of the new
buyer. And the process would go on.
The first time I sold the house, I paid back the $2,000, so technically,
I have no money in the transaction. My return on investment (ROI) is
infinity. It’s an example of no money making a lot of money.
In the second transaction, when re-sold, I would have put $2,000 in
my pocket and re-extended the loan to 30 years. What would my ROI
be if I got paid money to make money? I do not know, but it sure beats
saving $100 a month, which actually starts out as $150 because it’s after-
tax income for 40 years earning low interest. And again, you’re taxed on
the interest. That is not too intelligent. It may be safe, but it’s not smart.
A few years later, as the Phoenix real estate market strengthened,
those houses we sold for $60,000 became worth $110,000. Foreclosure
opportunities were still available, but became rare. It cost a valuable
asset, my time, to go out looking for them. Thousands of buyers were
looking for the few available deals. The market had changed. It was time
to move on and look for other opportunities to put in the asset column.
“You can’t do that here.” “That is against the law.” “You’re lying.”
I hear those comments much more often than “Can you show me how
to do that?” The math is simple. You do not need algebra or calculus.
And the escrow company handles the legal transaction and the servicing
of the payments. I have no roofs to fix or toilets to unplug because the
owners do that. It’s their house. Occasionally someone does not pay.
And that is wonderful because there are late fees, or they move out and
the property is sold again. The court system handles that.