Weekly Wealth Tactic 5

by Ed Barriskill (co-founder, 37th Parallel Properties)

What are Lazy Assets? Lazy Assets are those assets that you have right now in your portfolio that are just sitting there not working for you. These lazy assets might be:

1) IRA Retirement money
2) Cash sitting in your checking or saving account
3) Equity sitting in your personal residence
4) Equity sitting in one or more of your rental properties
5) A relative or friend that has money they could be investing
6) Money sitting idle in a life insurance policy

Having cash or equity in your personal house or rental properties might look great on paper but they really aren’t working for you to help build and grow your wealth.

During the last 10 years my thoughts have evolved dramatically regarding Lazy Assets. Some of you know my story about the first commercial property that Kathy and I purchased; I think it is a good example of where I came from (possibly where you are right now in your investment career) and how I was not using our Lazy Assets to build our wealth.

As many of you know, I have been a Real Estate Broker selling residential real estate for the past 34 years. About eight years ago I knew another bad real estate market was approaching us (I have lived through 3 ½ bad market cycles!) and I didn’t want to participate in another one. At that time I made a goal to work hard and pay off all our rental properties so Kathy and I could live on the rental income.

After three years we accomplished our goal, paying off each rental property and we began a net monthly income of approximately $6,500 from those rental properties. However, I realized that our monthly bills exceeded our monthly income from the rental properties. This meant that Kathy couldn’t retire from her job as planned, and I had to continue selling real estate to pay for additional expenses.

I realized that rental houses were a good vehicle for appreciation but not cash flow. We had plenty of equity in our rental properties, but we still couldn’t make ends meet financially.  They were Lazy Assets! I decided to put these Assets to work and leverage them to realize a new plan.

For several years, I had been educating myself by reading investment books, attending seminars, and spending every available minute I had listening to CDs from successful investors of commercial properties.

My research helped me realize that owning Retail Centers, Business Office Complexes, Hotels and Multi-Family Apartments Buildings was a great way to get Cash Flow out of my Assets. After two years of studying commercial real estate, listening to the advice of my mentors (including my commercial real estate broker in Texas), I began building my team to acquire our first commercial property.

How did we put those Lazy Assets to work?  We refinanced three of our rental properties, pulling out $1,000,000 and then used that Asset to purchase our first commercial property:  University Park Plaza in College Station, Texas on March 30, 2005.

“U.P.P.”, as we call it, is an “A” property, in an “A” location, with three office building complexes on 4.5 acres with 30,000 square feet total. We purchased this property for $4,085,000 with $870,000 down, including closing costs.

I will admit, it was kind of scary purchasing a commercial property for $4,085,000 but I felt comfortable with the knowledge I had accumulated and I knew I was making the right choice in putting my Lazy Assets to work.

Purchasing “U.P.P.” immediately increased our monthly Cash Flow from $6,200 to $14,000. Admittedly, the cash flow has fluctuated up and down during our 4 ½ years of ownership, but the money we have received each month has been Tax Free (more on that in a future Wealth Tactic), and the property is now worth $6,800,000.

By using what we call Lazy Assets sitting in our rental properties, we were able to increase our cash flow position, which allowed Kathy to retire from her job three years ago and I no longer have to rely on selling residential real estate to make a living. Kathy and I now live off the cash flow we receive from our real estate investments.

Looking back, if Kathy and I had not decided to Pull the Trigger and take that calculated risk, our lives would have been much different than it is today. We leveraged our financial position conservatively to enhance our financial future. You can accelerate your financial position just as Kathy and I did. You probably have some lazy assets right now at your disposal that you aren’t even aware of.

Listed below are some places you could possibly find some Lazy Assets:

1. Money sitting in your Retirement Account, such as your IRA, 401K or SEP IRA.
   
   1. Most investors have purchased stocks, bonds, or mutual funds as investments. The Self Directed IRA program is an excellent way to accelerate your wealth (Tax Free). Some of our investors (including Kathy and I), have used Self Directed IRA money to invest in the Hilton Hotel and the Marriott Courtyard Hotel.
      
2. Cash sitting in your Checking or Savings accounts.
   
3. Equity in your Personal Residence.
   
   1. The equity in your personal residence is sitting there doing nothing. Some investors use an equity line of credit or they refinance their home to obtain funds. One investor used an equity line of credit of $100,000 from their credit union and was paying 2% interest. He invested this money in our Private Lending Program where he is receiving 15% interest. He is making 13% on his money ($1,083) each month. Other investors have used equity in their home to invest in our Preferred 10/10 Program, Direct Program and our Multi-Family Apartment Programs.
      
4. Equity in Your Rental Property
   
   1. Again, your equity is sitting there doing nothing for you. You can refinance or sell your rental property, (both of these transactions are most likely Tax Free.) By selling your rental property using a 1031 Starker Exchange, your equity can be placed into one or more of our projects. I can promise you, once you give us your Assets, their lazy days are over!
      
5. Relatives or Friends that have money and invest as partners, 50% / 50%.
   
   1. Ask a relative or friend that has money to invest as partners, where you act as the Asset Partner. Your partner provides the money contribution and you do all the work in managing the investment, or act as the front person.
      
6. Cash in a Life Insurance Policy that is sitting there also doing nothing.
   
   1. You can borrow money from your life insurance policy and use it for investing in Real Estate. Why, your insurance company is probably investing in real estate themselves.
      

Using Lazy Assets conservatively to purchase real estate is a basic economic practice of how to build long sustaining wealth in real estate. Look closely at these six categories of assets mentioned above to see if you have any Lazy Assets that you can use to accelerate your wealth. Why not get those Lazy Assets working for you to accelerate your own financial portfolio?

Related Posts

1. How to Use Your Retirement Funds to Accelerate Your Wealth
2. Investment Property and Permanent Wealth
3. The secret to accelerating your wealth is “cascading up”
4. Increase Your Net Worth By Using The Velocity of Money
5. Investment Diversification: How to Create a Self Directed IRA (SDIRA) to Fund Permanent Wealth