Other people’s money (OPM) is one of the most fundamental sources of OP Leverage that can be consistently utilized for massive financial profit. Building wealth is largely about money. The more money you have access to for building wealth, the more leverage you have in building your net worth and purchasing power. I 100% believe in leveraging other people’s money. In fact, I would almost make it a sin to never utilize other people’s money. It is that powerful of a tool at any stage of Wealth Building.

Other people’s money is a financing tool. It can enable you to take on ventures and investments otherwise out of your reach. It can turn an average yielding asset into a homerun. However, at the same time, it can also cause you to lose your shirt and be exposed to substantial legal risk. The second most important thing besides just using OPM is securing favorable terms on this capital. There are two classes of terms for receiving OPM. They are debt and equity. Debt is taking other people’s money as a loan where you agree to pay back the principle and interest in the future. Equity is giving an ownership stake in the asset to the investor in exchange for ownership of the money. There are an infinite number of points that people can demand in the terms on OPM within these two classes. You just want to thoroughly consider all of the costs and benefits of taking someone’s money and make sure that you are putting yourself in a good position.

Let’s look at a couple quick examples when it comes to leveraging OPM for greater results…

1) Buying Investment Real Estate with Debt Leverage

You are looking at buying a $1MM apartment house that yields $130k per year before debt service. You could put down $1MM of your own cash or you could put down just 20% or $200k of your cash and let the bank put down the other 80% or $800k. What would be wiser? Since you are a wise investor and you’ve done your research on the future economics of the property, I’d recommend putting down as little of your own cash as possible and letting someone else finance the rest. Let’s assume that your apartments are going to make the same $130k per year before on paying any property loans. If you put 100% down or $1MM of your own cash, then your annual return would remain at 13%. Nothing to get excited about. However, if you finance 80% of the purchase through a lender, then your annual return on investment shoots way up. Let’s say that the annual cost to finance 80% of the $1MM purchase is $60k. Therefore, the yearly earnings will be $70k instead of $130k. Looks worse, right? Nope, it is better to earn less money here. This is because you are earning more return on each dollar invested. It is all about the ROI (return on investment). Because, now you are able to take the rest of your cash supply and seek out more leveraged investments at awesome percentage yields. So, what is the return you get in this leveraged scenario? Your return here if you only put 20% down becomes 30%. If you took your $1MM and purchased five apartment houses in this leveraged fashion, then your annual earnings would be $300k compared to $130k if you don’t leverage with debt. Well worth the paper work.

2) Taking Startup Funding with Equity Leverage

You’ve got an awesome business that is ready for outside funding so current constraints can be relieved and it can take off and scale up to greater profitability. You currently own 100% of the business and it is making you $150k per year in net earnings of which most goes to feeding your family. However, you know that you could be making multiple millions per if you had more cash to go after new markets. You are willing to give up a chunk of ownership in your business in order to have the chance to achieve this. You agree to take $400k in investment capital from a group of three angel investors in exchange for 40% of your company. You take the capital and hire new staff, upgrade fulfillment infrastructure, and launch strategic marketing campaigns throughout several untapped markets. You are successful and within three years, your annual net earnings are now over $2MM. You are happy since you are now making $1.2MM per year. Your investors are happy since they are earning a significant return on their investment near 1000% in about 5 years time. Additionally, you are both happy because the business is worth significantly more because of appreciation due to infrastructural improvements and increased earnings. You want to make sure that you truly can take your business to the next level and that it is really worth it to do it with the terms you are agreeing to.

You can even combine debt and equity financing into one solution for your assets. However, different agreements with different stake holders can have various effects on each other. Make sure they all support one another and don’t ruin your opportunity to scale.

One of the biggest terms of agreement involved in obtaining OPM financing is the issue of a personal guarantee. I hate the idea of a personal guarantee. In the old days, I was fine with signing a personal guarantee, but since then I’ve learned too many ways to build extreme financial wealth without a personal guarantee to be okay with it anymore. It would take a huge amount of leverage over me to persuade me into signing a personal guarantee on a good-sized deal. It is almost always dumb and unnecessary if you take certain routes of building wealth. I’d hate to walk away from a dying asset but professional investors know that it is an inevitable part of a long career of investing. You win some and lose some, but overall you win. Keeping the liability strictly within the business entity and professional lives of the invested parties is how it should be. Otherwise people’s personal lives are in jeopardy and a lot less opportunities for bringing value to humanity will be pursued.

Many assets can be financed through both methods (debt and equity). So which one should you utilize? You will be limited at times due to supply and demand, however, here is my overall logic that I utilize for myself… Debt capital is usually much cheaper than equity capital if you have a well performing asset. So, I like debt from a sheer profit perspective. However, debt isn’t always going to be the best realistic solution. So, I am open to giving up equity for capital in certain situations. Since I primarily jumped from the entrepreneurship income class into asset acquisitions, I’ve become a lot more receptive of utilizing equity financing. This is because many of my entrepreneurial ventures are going to have a personal significance in my life that help me obtain my dream life. One of the biggest issues here is my personal brand as a public figure. Giving up ownership and control to other people in assets that directly impact these key parts of my life is not something I want to do. Achieving greater odds of making a lot more money is rarely worth jeopardizing these parts of my life by giving control over them to other people. However, in asset acquisitions, I am generally acquiring generic assets such as businesses or real estate that have no direct meaning in my personal life other than the financial resources that they bring to it. So, I am very open to leveraging equity here on a deal level in order to acquire and scale an asset. Overall, I view it as a matter of impact between gauging the hard financial benefits with the personal life perks that an asset of yours provides. Maintaining 100% ownership and control is important to me when the asset is important to supporting my personal dream life. Otherwise, I will look to maximize the assets earnings at almost any cost within the asset itself.

Remember that, fundamentally, there is always cost to taking OPM and that it is virtually always wise to do so if you can consistently outperform those costs. Researching many of the different markets of debt & equity capital, as well as understanding all of the different terms of agreement and how they integrate into the operation & goals of your asset is how you position yourself to continuously succeed by leveraging other people’s money.

In a world where most people believe that to become extremely wealthy you either have to work a lot harder or get lucky, us Wealth Builders know that all it comes down to is just contracts and phone calls. That is almost 100% of a Wealth Builders execution.

If a Wealth Builder would like to go a little beyond that in search of profits then building new strategies and public speaking might help but probably not too much for a sophisticated Wealth Builder.

So why does Wealth Building execution come down to contracts and phone calls for a Wealth Builder?

By nature, sophisticated Wealth Building is all about being an absentee owner. It is not smart to operate any asset that you own. Stay away from your assets! That is right. Most advice that you will get out there by so called “experts” will be to keep a close eye on your investments. That is dumb for a Wealth Builder. The key is time. You have a finite amount of time to build wealth for yourself here on earth. If it takes you 6 hours per month on average to personally keep a close eye on each of your assets then you would be limited to controlling somewhere in the ballpark of around 50 investments. The key here is that you are limited. Your empire is frozen and not scalable beyond this point. Instead you need to install the proper infrastructure and systems to keep your assets healthy and growing without your supervision. This is the only way you can scale your empire once it gets to a certain point.

So once you are no longer managing people and operations, what are you doing? You are doing contracts and phone calls. When you are out to build extreme financial wealth, there will always be something that you need to personally do. You might still retain the final say on major mergers, acquisitions, divestitures, IPOs, CEO hirings, etc. This does not mean that you will be doing in-depth work on these things. It means that your workers will do everything and then give you an efficient presentation. All you do is analyze it and say yes or no. You don’t have to be in person to do this either. You can be halfway around the world lying on a beach while accomplishing this. All you need is access to a modern communication medium such as phone, email, or video conferencing. If you are truly a Wealth Builder then anything big enough to require your personal attention is probably going to be better off with the extra information voice provides over text. Also, when negotiating new major deals with people outside of your empire you will want to at least hear their voice. These are the reasons why I say phone. Video or in person meetings are better but sometimes it isn’t possible or is inconvenient.

Also, if you are a smart Wealth Builder and want to play within a modern big business and investment arena then you are going to put everything under contract. Some major deals are going to require your signature so get used to signing regularly. Nothing is tangible until it is backed by the legal system. Details of contracts will need to be hashed out regularly so guess how you will deal with that… on the phone!

So why do almost all “experts” tell people to keep a close eye on their assets? Because it is human nature, the scope of their understanding is limited, and they are not advising Wealth Builders. They are normally advising unsophisticated entrepreneurs and investors. Truly sophisticated investors should operate more like Wealth Builders. Most investors have the knowledge but don’t have the infrastructure to become a Wealth Builder. The truth is that there are very few true Wealth Builders in the entire world. It is the point where smart operation is fundamentally different from every other income class below it. A sophisticated Wealth Builder’s empire virtually operates and grows itself. The only thing you, the Wealth Builder, needs to do is contracts and phone calls.

So if Wealth Building is no longer wealth building, just meaning strategically making money, then what is it? My redefining of Wealth Building comes from a person identifying themselves as a Wealth Builder. There are plenty of people who pursue large amounts of money but do not identify themselves as a Wealth Builder, nor should most of them. Many of these people may define themselves within their careers as things like a real estate investor, day trader, entrepreneur, networker, internet marketer, CEO, etc. All of these have a limited scope in the ways the person builds wealth. A true Wealth Builder goes way beyond that. The closest identity to a Wealth Builder would be someone who identifies theirself as an investor. Investor being generic in meaning where they don’t focus on one single avenue of investing. For example one may be an angel investor and a real estate investor too. But that still is not true Wealth Building. A Wealth Builder is someone who orients their entire career towards extreme financial profit. With the focus completely on this goal, they learn, become capable, and take action on building wealth in several significant ways. People who do this are Wealth Builders. An example of a Wealth Builder would be a person who starts businesses, develops commercial real estate, finances technology startups as a venture capitalist, has taken one of his own companies public, and invests for the long-term in stocks and bonds all without personally doing the work to achieve this.

The core definition of Wealth Building is the creation of extreme personal financial profit through several significant methods and across multiple macro asset classes.

The core definition of a Wealth Builder is a person who is capable of creating extreme personal financial profit through several significant methods across multiple macro asset classes, whose career’s highest governing focus is that of extreme financial profit in relation to the individuals within the lower-upper class of the world’s current wealthiest society.

A sophisticated Wealth Builder goes way beyond the minimum definition of Wealth Building. A few of the likely characteristics of sophisticated Wealth Building are empire building, OPM financing, ROR asset management, asset acquisitions, consistent thousands of percent return on net worth, passive management, and market monopolies, just to name a few. I will be exploring many characteristics of Wealth Builders and the act of Wealth Building in future posts.

This is the 1st post of my Wealth Building Blog! I believe I have invented one of the best approaches in the world to building wealth. In fact, I have redefined the words wealth building and wealth builder. While living it, I am going to release it to the world through this blog. The core of it is made up of a combination of existing principles as well as my own proprietary principles and distinctions. I will also discuss a lot of surrounding issues to Wealth Building here.

I have a question for you… What is wealth building and who are wealth builders? A lot of people use these terms generically. You’ll hear them refer to “wealth building” in a way where they are just focused on making above average amounts of money. Very generic and very wide open. Forget it! I’m going to give a brand new definition to Wealth Building and show you a new identity for Wealth Builders. I will also show you how a sophisticated Wealth Builder looks at business, investing, and resources.

I will warn you that this is extremely powerful information coupled with a very profound perspective. My concept of Wealth Building is the absolute best way I’ve found in the entire world to amass extreme financial wealth. Forget about being an entrepreneur! Forget about being an investor! If you want to predictably be a multi-billionaire and beyond then become what I call a Wealth Builder!

Stay tuned!