How to Turn Your Assets into a Cash Flow Machine
October 3, 2016
Most of us have assets that are of little value. It may be something as large as our home, which has grown in value, and therefore, we’ve accumulated substantial amounts of equity. Otherwise your asset may be as simple as items in the garage that we never use, so they are of little value.
Imagine if each of us took an inventory of our assets then created a plan so that almost every asset we own (from our house, our car, our stock market investments and everything in between) was producing a steady flow of cash. We could have more income than we know what to do with!
For those of you that are doers, there are tremendous ways to turn your existing assets into a cash flow machine. For those of you that may whine that you don’t have enough money, or you’ll never be rich because you didn’t graduate from an Ivy League school, or your current job doesn’t pay much, this program is not for you. Get ready, get off your butts, put in the hard work and don’t ever use the word “cant!”
First, I am going to ask you to transform your thinking from that of a growth investor to an income investor. Here’s the difference:
- Growth Investor: An investor whose primary objective is to grow their assets large enough to produce income at some point in the future.
- Income Investor: An investor whose primary objective is to produce multiple, reliable streams of income from both current and future assets.
When placing a value on our assets, there are two types of value – monetary value and emotional value. Here’s the difference:
- Monetary Value: An asset that will either grow in time or one that will produce cash flow for us at some point. An example would be a small business, investment real estate, stock market investments.
- Emotional Value: An asset that gives us absolutely no monetary value, but gives us positive, emotionally satisfying experiences.
I’ll give you a personal example of emotional value – my toys. I remember my CPA (who happens to be my brother-in-law) getting so upset at me every time he saw that I purchased a toy, such as my dirt bikes, boats, etc. That is until I explained my philosophy that these assets provided emotional value. I explained to him that, yes he may be right that it would have been financially prudent to use the cash to buy an asset that grows in value or provides a tax benefit. But, in my opinion, my toys give me quality “down time” with my family. Therefore, I am more productive, happier and I will do a better job for my clients come Monday morning. He finally agreed.
Now let’s now focus on creating multiple streams of income from assets of monetary value.
First, take an inventory of your assets that could give a monetary value and see how multiple streams of income can be created. Keep in mind you will need to derive a conservative and realistic cash flow value to these assets. Cash flow is created when cash is actually being placed into your pocket or providing you tax benefits in order to keep excess cash from other sources of income. Please be sure to check with your local and state licensing laws and ordinances, as well as zoning and insurance requirements, prior to implementing any of these ideas.
Personal Residence – The ability to write off your interest and property taxes is a current cash flow benefit. It’s that simple.
- Spare bedroom: Start a home-based business. This will provide additional cash flow, while building an asset to sell at some point in the future. You could be eligible to take a home office deduction on your taxes, including a write off for that portion of your home, depreciation and write off a pro rata share of the utilities. In this example, this asset could generate approximately $500 per month.
- Equity: If your home has appreciated in value, the equity you’ve built up is doing nothing for you. Take out a HELOC (Home Equity Line of Credit) and invest the cash into something that will provide cash flow. Plus the interest for most of you will be tax deductible. This generates approximately $100 per month.
- Garage: Take an inventory of the things you don’t use or want then sell. List them either or on eBay or hold a garage sale. Take those proceeds and invest them into something that will provide you cash flow, such as stock market investments or a small business. I know people who have made substantial cash flow just by having a garage sale on a regular basis and making upwards of $2,000 per month extra (check with your city code on how frequently you can do this). Secondly, take a look at some of the tools you may have in the garage and see if you can form a business around them. When I was 18, my dad had a weed whip, edger and lawnmower. He let me use those tools to start my first business. It was a gardening business that produced over $6,000 per month by the time I was 19 years old. If you have a pressure washer, start a part-time exterior home pressure washing business. Most people will pay $70-$100 for a standard size home to have it washed. You are preserving their most precious asset, their home, while you are making upwards of $50-$60 per hours to play in the water. Potential income from this asset is approximately $500.
- Boat: Consider starting a charter service, or if you are a good fisherman, start a fishing guide service. Approximately $200 per month
- Camping Trailer: Rent it out to friends on a nightly or weekly basis for an estimated $200 per weekend.
- Land: If your home is located on excess land, rent out a portion of it as storage for a friend’s RV or trailer. An estimated $100 per month is a reasonable monetary value.
Stock Market Investments
- Change a portion of your “growth-oriented” investments into income producing investments. Here are some examples at approximately $150 per month:
- High dividend paying stocks or mutual funds
- Preferred stocks
- Government and corporate bonds
- Real estate investment trusts (REITs)
- Annuitization payments
Investment Real Estate (estimated monetary value is $300) – If you can find the right deal, use real estate to help generate some cash:
- Single Family Rentals
- Lease Option
Vehicle (estimated monetary value is $100) – If you have a truck you have an asset that is in demand:
- Advertise to haul things for people with a car.
- Form an agreement with a local home improvement center for people that have bought things such as lumber or plants, but, they own a car and have a difficult time transporting the items to their home.
- At Christmas time, form the same transportation agreement with Christmas tree lots.
Computer (estimated monetary value is $300)
- Start a business using the computer you already own.
- As previously mentioned, start selling on eBay.
- Set up your own website and begin selling items. If you make handcrafted items, they make to great gifts available for purchase online. Remember the great thing about the internet is that it works 24 hours a day, 7 days a week, even when you aren’t working.
Intellectual Property (estimated monetary value is $200)
- Intellectual property is an asset. This is the brain power and smarts you naturally have. Obviously your employer sees your talent, so should you. Sell your knowledge via consulting services or create a part-time business outside the normal scope of your 9am-5pm job.
- Fill a Need (estimated monetary value is $200)
- Look around you, where you live, where you work. Is there a product or service that you want, but that is not being provided? If so, you probably are not alone; other people want it also, so get creative, fill that need and generate an income.
Network Marketing (estimated monetary value is $300)
- One of the greatest businesses around is network marketing. Hire people below you so that for every sale they make, you get a cut of it. There are millions of network marketing businesses. Do your homework, research and investigate, and take action.Secondly, go back and review how much cash-flow each of these ideas will produce? In our examples above, the total is $3,150 per month, or $37,800 per year. Now let’s assume we decide to grow this money. Your current $37,800 in cash flow per year, growing at 10% per year tax-deferred for 20 years could be worth $2,392,011! Now take 10% of this as a retirement income and you would be producing $239,201 per year or $19,933 per month.
I am a huge advocate of a balanced life. A balanced life is one that is goal driven, wealth driven and career driven. But, equally important, is a life that is also family, health and religion driven. Without this balance, you WILL NOT ACHIEVE your goals. You will burn out, drive others away or suffer from extreme stress at a young age that could ultimately impact your health.
Turning your existing assets into a cash flow machine is only limited by your imagination and your desire. I have given you the tools. Now you need to make it happen!