Let’s continue the consideration of assets that we started on Monday:
GOOD ASSETS: A “good” asset is one that stays more or less stable in value but which provides positive cash flow from month to month. Over time, the value may rise or fall slightly, but the money that it puts into your pocket each month will more than make up for any fluctuation in the price. An example of a “good” asset would be something like an antique car that you rent out for special occasions. We have all seen the vintage Rolls Royce autos that happy couples rent to ride from their wedding ceremony to their reception. Well, think for a moment: where did they get that car from? They had to have rented it from somebody. And that car is not likely to go down in value, so with each rental it brings in money to the owner.
Another example is flipping a piece of real estate with seller financing. This is where the buyer provides a down payment and agrees to some sort of payment plan for the remainder of the balance (usually with interest). For at least a limited time (a few months or up to a few years) that piece of real estate will be a “good” asset that will hold its value and provide cash flow. But we can’t yet say that it is a “great” asset because that cash flow, even if it lasts for several years, will eventually run out.
Another “good” asset can be something like selling an eBook online. When you first publish a book, there tends to be a swelling of initial interest that eventually slows down to a steady trickle. Now, there are things that you can do to continually promote your book in order to reach fresh audiences, but what’s more likely is that your sales will fall into a natural slump (unless you are the next Michael Crichton, in which case your grandkids will thank you). An eBook is a “good” asset because it provides steady cash flow and doesn’t go down in value; but as is the case with a real estate deal, the money will eventually stop flowing.
GREAT ASSETS: You are probably getting the hang of this asset classification thing, so identifying great assets shouldn’t be that hard. A “great” asset should go up in value, should provide positive cash flow, and the income stream shouldn’t dry up anytime in the foreseeable future. A “great” asset is the kind of investment that you should eventually use to fill up your portfolio. The more “great” assets that you can invest in, the more cash you will have flowing to your bank account every month and the less you will ever have to worry about making ends meet. If you can get your hands on enough “great” assets, you will even have the option of quitting your job and spending your days doing whatever your passion is. So what are some examples of “great” assets? Let’s look at a few and then see if you can imagine any others.
Owning a rental property is a prime example of a “great” asset. Think about it. The property itself will most likely hold its value over the years, and the rent that you charge (in most areas) can be periodically adjusted according to inflation.
The same principles can work even if you are renting out vacant land for people to drive their ATVs on, for agriculture, for hunting or fishing, for camping, or even for stargazing. The land itself is likely to slowly rise in value over the years (they aren’t making any more land, after all) and it will continue to provide a constant stream of income for you and your family depending on how well you market it to
your target audience and how well you treat those clients. Another aspect of a “great” asset is that it doesn’t require your constant supervision to generate income. While some people may hesitate at the idea of being a “landlord”, there are ways to eliminate the stress and potential hassle that come with renting out a property. For example, you can make a deal with a person who you trust implicitly for them to handle the choosing of tenants, rent collection, and the taking care of small repairs and issues on the property. In exchange, that person can keep a percentage of the rent. If you don’t know anyone in the area, then you can look into working with a property management company, who will do all of the above in exchange for a fee of anywhere from 6-10% of the monthly rental payment.
The fundamental purpose of a Forever Cash asset is to give you money each month without your having to work long hours. The same thing can be accomplished by being the owner of a business which is supervised by a competent manager. Because you were the one who put up the seed money to get the business going (or to purchase it) you will be repaid for life with a steady stream of income while others do the actual work.