April 25, 2023
How the Rich Get Rich and How Sellers Can Too
A huge motivation for most sellers is financial success.
We strive to make big commissions through our selling efforts.
Many of us grind and hustle striving to overachieve our targets to meet ambitious financial goals.
We think this is the way to financial freedom but it’s just the path to infrequent good years with burnout and stress every year.
The truth is that there are smarter ways to build wealth by using your commissions as the fuel to start a wealth bonfire.
Before we get started... want to 10x your average deal size? The next cohort of Mega Deal Secrets Masterclass starts May 1. It's a 10-week masterclass that gives enterprise sellers the framework, tools, coaching, accountability and community necessary to close their first Mega Deal. Schedule a call here to see if you're a good fit.
Why is "getting rich" coming up now?
As I evolve my career from full time individual contributor seller into solopreneurship, I am talking with lots of smart people and learning a ton - not only about how to run my own business, but also how business owners and wealthy individuals manage and grow their wealth.
And I want to share what I’m learning with you to shorten your journey to financial freedom.
Today’s edition is about one of the most common strategies high net worth individuals accumulate and protect wealth - beyond killing themselves through toil and sacrifice to make every dollar themselves.
Note: I am reporting here, not speaking from long personal experience, but this is absolutely what I am gearing up to do so I wanted to bring you along for the journey of discovery. Several of the benefits of the strategy depend on tax law. I will be largely covering US real estate investment strategy but it applies to many other countries in part or in full.
The strategy steps are:
- Accumulate $50,000 - $200,000 by saving commissions
- Invest commissions in high quality real estate through direct investment or syndication.
- Reap massive tax benefits (i.e. bonus depreciation)
- Reinvest profits/pay down debt
- Rinse and repeat
Sellers are ahead because of commissions
For most people, sources of investment dollars come from salary savings, home equity, borrowing against 401k savings. We sellers have a source which very few people have - commissions from sales. Just one large deal can set us up to leverage an investment strategy that most people don’t have access to and the wealthy use more often than any other strategy.
Let’s dive into why real estate is so prevalent, so advantageous.
1. Passive cash flow
The benefits of investing in real estate can help individuals expand their wealth, as it creates monthly, recurring, mostly passive cash flow, unlike earning money through trading time, which is limited.
Appreciation, which is an increase in property value over time, can happen due to market growth or targeted improvements made to a property, known as “forced appreciation.”
3. Tax benefits
Federal tax benefits such as depreciation, mortgage and property tax deductions, and no self-employment tax on rental income make real estate investment a more tax-efficient strategy, allowing individuals to keep more of their earnings.
Leveraging other people’s money, time, experience, and the property itself can enhance real estate investment strategy and options, making it easier to build wealth.
5. Principle Pay Down
Real estate investors are able to increase their net worth through a process called “principle pay down”. This involves making regular mortgage payments, which consist of both interest and principle payments, and gradually reducing the amount of debt owed on the property. As the mortgage balance decreases, the investor’s equity in the property increases, which leads to an increase in overall wealth. An added benefit is that if the property generates income, the rent payments made by tenants go towards paying down the mortgage, accelerating the equity-building process.
A new mortgage can be obtained for a property through a process called re-finance. If the property has gained equity from appreciation and principal paid down, a cash-out refinance can be done to withdraw some of the equity. The benefit of this type of refinance is that it is not taxable, allowing the investor to access income tax-free.
An intelligent investor may utilize the cash-out refinance to purchase additional income properties and expand their wealth.
7. Bonus Depreciation
A special word must be said about a special tax benefit called “Bonus Depreciation,” which is a tax incentive currently available to US investors that allows the immediately deduction a huge percentage of the purchase price of eligible assets, such as machinery, rather than write them off over the “useful life” of that asset.
One of the most significant changes to depreciation rules in 2023 is the expansion of bonus depreciation. The new law allows businesses to take a 100% bonus depreciation deduction on qualified property, including new and used assets, purchased and placed in service before January 1, 2024. This change means that businesses can now write off the full cost of new assets in the year of purchase, which can significantly reduce their taxable income.
Real Estate vs. any other investment
Multifamily is timely (especially affordable rental housing). Here's what it could look like with advanced strategies:
- Commissions to leveraged real estate cash flow
- Tax advantages - bonus depreciation
- Asset protection
- Beat inflation
- Accredited investor
The vast majority of sellers I speak with view sales as a vehicle to fund their current and future commitments, goals and lifestyle.
Since leaving the corporate world earlier this year I’ve been thinking a great deal about my business, my plan and why I’m doing it.
At the end of the day it comes down to...
“How can I ensure that I have a great life?"
Selling has always been my vehicle to fund my great life. But the older I get, the more I see my idea of having a great life has been hazy at best and I have been bending my mind and heart to the task of bringing clarity to what a great life looks like for me.
Here are the facts I have uncovered and the ways they have changed and refined my thinking about what is a great life to me:
- Here’s the happiness formula: H=S+C+V. In that, H stands for happiness, S for set point, C for life circumstances, and V for voluntary actions.
- Hedonic happiness is achieved through experiences of pleasure and enjoyment, while eudaimonic happiness is achieved through experiences of meaning and purpose.
- Obtaining more money activates the same regions of the brain as illicit drugs. (Hans Breiter and Daniel Kahneman)
When You Are Ready There Are 3 Ways I Can Help You Get To The Next Level In Your Selling Career.
1. Mega Deal Secrets – Get a free copy of the book that started the mega deal movement.
2. Enterprise Seller community – Surround yourself with the most ambitious enterprise sellers in the game.
3. Mega Deal Secrets Masterclass – Skip the line and get the cheat codes to closing mega deals by investing in my masterclass coaching where I teach all my secrets to close massive deals.
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The Only Way to Overachieve Is By Doing Mega Deals
Throughout my 20 year career as an individual contributor enterprise seller, I was obsessed with finding the secret to personal financial success. Over the top, ludicrous personal income. My search led me to several "aha" moments. Here are the top four: