040: Don’t Take Money Advice From Tik Tok and Other Tips On Growing Your Wealth
These days, it can feel almost impossible to keep up with what is true when it comes to investing. 😵😵 With social media, e-books, and other influencers saturating the market with information, and oftentimes, misinformation. How are people supposed to cut through the noise and get to what’s true?!
If anything it’s a lot of mismoney management and it’s a little concerning. A lot of Wall Street bros are promoting crypto, NFT talk, and credit card hacks that aren’t bad, we just don’t want anyone to lose money because of misinformation. It really does feel like there is so much noise in this industry, that it’s hard to decipher what is true.
People want to know the secret to success! 😘😘 And we can’t blame them, but achieving success isn’t the same as creating sustainable, long-term wealth. Anyone can be successful for a moment. A video can become viral overnight, people win the lottery every day, but what happens afterward? That sustainability is key and a lot of talking heads claim they are the ones who have found it.
So we like to take our investment tips from the pros who have gone before us, like our BFF Warren Buffet. That guy has stuck to the same investing principles for decades. And we don’t think he’s starting an NFT collection anytime soon.
When it comes down to it, there isn’t a lot of variation in how the ultra-wealthy seek to keep their dollars growing. In fact, Rhianna and Warren Buffet have a lot more in common than you think. They most likely manage their money more similarly in comparison to what they don’t do.
So, if everything seems so streamlined for them, why is it so hard to access for everyone else? Especially since that “everyone else” is everyday people like us trying to make a difference for our financial futures in these uncertain times we’re living in?
If there’s one thing to know about the Kitti Sisters, it’s that we aren’t gatekeepers. And in our exclusive group chat between us, Rhianna and Warren Buffet there are plenty of screenshots to be shared.
Recently, the U.S Trust completed a survey of nearly 700 high net worth investors. We’re talking about people who have more than $3M in assets. It’s this super long 67-page report that has a lot of graphs and words like “primary income earner.” If that sounds like your idea of a Sunday morning read, we’ll link it in the show notes.
But for the rest of us who just want the SparkNotes version of the report, we got you. And in today’s episode, we’re going to break it down.
We are sharing what the ultra-wealthy have known for years: sustainable, dollar-growing wealth that will last generations and how you can apply the same principles to your own life today.
So let’s dive right in! 🔽🔽
No 1. The Wealthy are Thinking Long Term
The first thing to know is the wealthy are thinking through the long game when it comes to investing. In fact, 6 in 10 high net worth investors seek well-balanced, risk-managed growth. What does this mean? It means even if they knew their investment would give them lower returns, the value they held was to lower the risk of their investments. ✨
We talk a lot about calculated risk here, on 🎙️ the Cashflow Multipliers Podcast, and for good reason! Even the top investors know each investment they make comes with risk. However, as we’re learning, there are ways to mitigate that risk. How? By focusing on the long-term goal while keeping near-term opportunities in mind as they go.
They ask themselves what’s available to them now, near opportunities, aligned with their long-term financial goals? You might be surprised to know that a vast majority, 83% to be exact, of investors have made their investment gains through a long-term buy and hold strategy.
And if something isn’t broken, why fix it? No one knows this better than the OG investment bro, Warren Buffet. His strategy was simple, focused, and efficient. ☑️ He said money is made in investments by investing and by owning good companies for long periods of time.
Now, you’ll have to ask him what defines a “good” company, but we don’t want you to miss this focused and disciplined approach to investing. Buffet was fully aware of the noise surrounding the many investment opportunities he was asked to participate in but guaranteed he didn’t invest in every person or company who presented him with a pretty-looking deck. Instead, he tuned out the noise, minimized the emotions, and focused on the near opportunities with minimal risk. 🥰
No. 2 They Make Tax-Conscious Investment Choices
The second thing to note from high net worth investors is that they constantly have an eagle eye out for how to minimize the impact of their taxes when making an investment decision. And we’re right there with them. This is coming from me who had to pay a 6-figure tax bill once upon a time and it was an experience I don’t wish on anyone.
In fact, for many investors, minimizing taxes is even more important than pursuing higher returns regardless of the tax consequences. No matter how much they were making at the end of the day, that number could be smoke and mirrors compared against the number that really counts, the net pay, and how much you are really making in returns after taxes.
👉 Now, while people like Warren Buffet and Rihanna have expert teams of people handling their taxes, the bottom line that cuts across the board is that poor tax management will add up over time and can easily cause you to sacrifice large portions of your gains for the year.
Cashflow Multipliers, you know, we say this all the time it’s never about how much money you make it’s about how much you keep!
If you have more questions on taxes as it relates to apartment syndication and apartment investing, we’re your girls. And you know what we made you an awesome playlist full of practical, ethical tax saving tips! Be sure to go back to EP034 Your Tax Savings Playlist for Keeping More Money in Your Pocket (Without Feeling Overwhelmed).
No. 3 They Use Leverage as a Wealth Building Strategy
We’re big fans of using leverage, so when we learned that nearly 65% of high net worth investors agree that leverage is a strategic way to build wealth, we couldn’t help but smile to ourselves.
As a refresher, leverage in investing terms means the use of borrowed capital or debt as it’s more commonly known, to increase the potential return of investment.
There’s a lot to this, and again, as your financial BFFs we hope that we can help you cut through all the noise on investing you see on the internet, we have talked about this in length in EP008 Actually, Debt is a Good Thing.
Basically, we’re big fans of leverage and have used debt to build some incredible stuff. And it looks like we’re in the majority on that one because according to the U.S Trust report, it states 8 in 10 investors use leverage to their financial advantage.
However, we wouldn’t be doing our due diligence without clearly stating there are risks with this. Not to fear though, there is a lot that can be learned about leverage and its many benefits by doing a little research (and listening to this podcast!). 😌😌
No. 4 They Beat Inflation with Real Estate
As we move on to the fourth nugget of information in the report, we’d be remiss if they didn’t acknowledge the effects of the pandemic.
As we all saw, those printed dollars that turned into stimulus checks and unemployment perks and the many other relief programs the government was providing were the tip of the iceberg for the problem it was creating down the line– inflation.
And while we’re all feeling the pain after a simple trip to the grocery store 🧀🥨🥚 due to rising prices, it can feel like the worst is yet to come. Every day that goes by we’re getting more and more information about how big of problem inflation really is.
Don’t take our word for it, here are some of the latest headlines and quotes that have come out this year alone.
Larry Summers, who was the former United States Secretary of the Treasury is quoted saying he “warns inflation outlook is pretty grim,” and he urges the Fed to move faster on rate hikes.
Another quote: “Fed Chair admits gas, inflation is not about Putin’,” Kevin McCarthy, who is the Minority Leader of the United States House of Representatives
And lastly, Goldman Sachs said, “Inflation will be worse than feared this year.”
We’re not here to scare you, just share some truths that are happening right now in 2022. As the government continues to create money out of thin air by pumping and pumping it into a system, it’s creating a problem that’s as simple as supply and demand. This will be a flashback ⚡ of economics for some of you, but the concept is simple. The higher the demand, the less there is in supply. So it takes more dollars to purchase the same items that we used to be able to buy with fewer dollars.
And that’s…. Pretty insane right⁉️ I mean how do people even protect themselves from such a flurry as inflation and the rising prices are putting us in? Well, for starters we can look to the people who have created more security for themselves on this issue, the wealthy.
And the wealthy invest in things that will continue to go up with inflation. Any guesses on what that could be? Well, it brings us to the final nugget of knowledge…
No. 5 They Invest in Tangible Assets
The wealthy invest in real estate. 🧡🧡
One of the things we love to do in my spare time is look up celebrity homes. Google is free, and we have no problem comparing tennis courts between Beyonce and Taylor Swift.
While we’re doing that in our spare time, know that almost half of high net worth investors own some sort of tangible assets, such as our favorite asset, multifamily apartment investing. These assets can produce income for the investor and grow in value over time.
An investor’s portfolio says a lot about them. Think of it as a beautifully curated Instagram feed, but instead of the same aesthetic across pictures, it’s similar buildings, properties and stocks, and bonds that hold similar values. Each investment is an individual decision, for them, for us, and for you. There is no doubt the wealthy understand how tangible assets can be a key element of a well-rounded portfolio.
And speaking of portfolios, we had a record-breaking year in 2021 and we’re going to close out today’s episode with a recap of what happened in the multifamily 🏢 segment last year.
As we were coming off the whirlwind of 2020, we were entering 2021 with a lot of uncertainty. And the biggest question apartment investors had was: “are people going to continue paying rent?”
There was a lot happening during that time, between rent strikes and eviction moratoriums. But what a lot of people are surprised to know is that 98% of renters still chose to pay their rent. However, this doesn’t mean 98% in every market because some of the landlords and businesses resided in unfriendly states, but in the states, we invested in? 98% of renters paid rent!
How is that possible during the eviction moratoriums? (which, by the way, have been ruled as constitutionally illegal) It’s because it was never about rent forgiveness, it was about delaying the payment of the rent.
And delaying payment eventually catches up with you as anyone with a credit card knows! And shout out to the Sunbelt market because 98% of those renters kept up with their payments.
So what happened in 2021?
According to Yardi Matrix’s survey 〰️ The annual rent growth of 13.5% was more than double any previous year, and apartment absorption counted nearly 600,000 units, which is roughly 50% more than the previous annual high, set in 2015.
So as we looked around at the circumstances surrounding us, we had a choice to make. We knew we were in an inflationary market, and the Fed was not going to stop sending checks to people who are staying at home rather than working. However, while the Fed may still be supporting those who stay home, their lease is about to expire every 6 to 12 months.
With that in mind, we decided to raise rents with little to no renovation. And that’s why 2021 was probably one of the best years ever for apartment owners. Raise rent without having to fork out dollars for upgrades on the property? Done. ⚡
Again as the dollar continues to lose its value, and inflation is going up, those of us who are apartment meant investors who currently own properties will only see our buildings increase over time. And who knows? Maybe Taylor Swift will be Zillow’ing our house one day!
That’s it from us this week. Did you learn anything?
We hope you did and don’t forget to tune in next week as well! As always, please leave us a rating and review– we read all of them! And share, share, share!
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