How do you plan on creating wealth?

[Moi?]

Is there anyone on this forum who have a plan on creating wealth, and would you like to share what your plan is?

I've been doing some reading over the last few months and have been inspired by this subject. My investing technique is going to be property investment. I am hoping to buy some cashflow positive property, which is going to be very, very hard considering how expensive property is in Australia these days.

But I'm doing my research on the internet to see where the bargains are and saving like crazy. I currently work two jobs, and try to live on my second weekend job, which is great in theory and tough in practice. But hey, I try! I aim to buy my first property by the end of this year.

My property investment plan is a bit sloppy at the moment, but I figure I will get my feet wet and learn as much as I can with my first couple of properties before coming up with a more sophisticated strategy. I've got plenty of time to make mistakes and learn from them!

I am really looking forward to hear what everyone else have got planned.

[Ima saver]

When I was younger, I had the same idea. I would buy small houses, rent them out for enough to cover the payment and some day own the houses free and clear. I wound up with 3 houses and it was the biggest mistake of my life. My tennets tore the houses up and would not pay the rent.
I had to keep paying to fix up the houses and finally I put them all on the market. I lost a lot of money on all of them.
Then, in my 40's, I got interested in mutual funds. I opened several account and had $50 a month going into these funds (each) I opened IRA's and put $2000 a year in those.
I started late, but the mutual funds and IRA's have grown quite a bit.
Now I have a saving acct and money market account that pays 3.57% and 4.14%. I keep our cash in there.

[sweeps]

I'm relying on mutual funds to create wealth over the long-term. This includes 30-40% in international and emerging market funds.

I just don't see how the real estate boom can continue. Here in the Chicago area (which is supposedly not one of the overheated markets), expensive single-family houses, condos and townhomes are being built like crazy. I will be amazed if demand can keep up.

[Ima saver]

Houses are being built like crazy around here too. I really think that mutual funds are the way to go. I have only been investing for 18 years and I have had some really good gains!

[jmjj215]

I'd like to build up a side business that would fund real estate investing to a certain degree. But my long-term plan is to be saving 25% of my gross and socking it away in various investments. I think the long-term key to wealth creation is to live below your means.

[34saving]

Jesse -- Are you thinking of a side business of being a hard money lender or something different?

[dealsaver]

I like the idea of borrowing money at a low rate and investing in bank accounts at a higher rate. It involves a lot of rate hunting/shopping, but if you tend to your credit profile and credit lines, it's a nice way to grow your net worth.

[twins0203]

Originally Posted by dealsaver

I like the idea of borrowing money at a low rate and investing in bank accounts at a higher rate. It involves a lot of rate hunting/shopping, but if you tend to your credit profile and credit lines, it's a nice way to grow your net worth.

I thought about doing something like this, but everything I looked at had a higher rate to borrow than I could get by investing it in bank accounts.

Care to tell where you are looking?

[dealsaver]

Originally Posted by twins0203

I thought about doing something like this, but everything I looked at had a higher rate to borrow than I could get by investing it in bank accounts.

Care to tell where you are looking?

Sure. First here are a couple of resources that you can use to take advantage of these type of deals. One way is to take advantage of 0% credit card offers and low life of the balance transfers and invest the money in a combination of savings accounts and cds. This is described in detail here. .

Another way is to use mortgages and HELOC's with low introductory rates as a source of funds for your investing. This subject is detailed here.

You'll often find that both the lowest loan rates and the highest savings rates can be found at credit unions, sometimes even at a single credit union(Penfed in particular). Here are some sources that I look to when rate hunting:

CD thread, Now self updating
Bank Deals - Best Rates and Deals
Bestcashcow.com
Bankrate.com

Bankrate often has good mortgage information available, but the other three threads mentioned above usually have much better information on deposit rates. There had been 6% rates available on deposit products for much of last year, but they weren't widely publicized. As reported on FW(now mostly archived) and Bank Deals - Best Rates and Deals there were even a number of 10% cds available with limited maximum deposits to certain depositors.

If you follow these threads, hopefully you'll be able to find some deals that match up well for you over the course of the year.

EDIT: Although I haven't done this personally, when student loan rates are below cd and savings rates, I have heard that people will take out a student loan and invest that money even when they have the money to pay for college outright. Some people do something similar with car loans, although they have other complicating factors. Navy Federal CU currently has an opportunity available for those who are eligible to join with their 2.9% auto loan on new and used cars up to 36 months.

[JBinKC]

The key to success is to give as little possible back to the government. Frugality, coupled with using a Roth IRA and flipping houses that you live in (every two years) will accomplish you goal over time as long as you understand value in an investment.

[twins0203]

Thank you dealsaver!

My only other question about "borrowing" a Balance Transfer of your credit limit on a credit card to earn on, is how do you actually transfer or get the money into your checking/savings account without them considering it a Cash Advance and charging the 3-6% for that? The balance transfer checks, can they be made out directly to yourself to achieve this w/o a cash advance fee? Or is the cash advance fee usually waived on a card that gives you an introductory rate of 0% on balance transfers?

Best Regards!

[dealsaver]

Originally Posted by twins0203

Thank you dealsaver!

My only other question about "borrowing" a Balance Transfer of your credit limit on a credit card to earn on, is how do you actually transfer or get the money into your checking/savings account without them considering it a Cash Advance and charging the 3-6% for that? The balance transfer checks, can they be made out directly to yourself to achieve this w/o a cash advance fee? Or is the cash advance fee usually waived on a card that gives you an introductory rate of 0% on balance transfers?

Best Regards!

Unfortunately there is no general rule when it comes to Balance Transfer checks. Each card issuer has it's own rules and often periodic promotions may have different rules, sometimes more favorable and without transfer fees. Fortunately, many issuers cap their balance transfer fees at a certain level. A balance transfer fee may be 3% for a particular card, but the cap may be at $50. On a Balance Transfer of $10,000, that $50 is just a one time .5% cost and easily worth it if you get an attractive 1.9% or lower for life offer. Unfortunately, no one truly knows the criteria that card companies use to determine which existing cardholders will recieve the most attractive offers(at least they're not telling me ).

[jmjj215]

Originally Posted by 34saving

Jesse -- Are you thinking of a side business of being a hard money lender or something different?

Heh, I'm not sure where that came from (?), but I like my side business now of selling my personal budgeting system. It's helping a lot of people and is something I enjoy doing. Another venue may be seminars.

[jmjj215]

Although I haven't done this personally, when student loan rates are below cd and savings rates, I have heard that people will take out a student loan and invest that money even when they have the money to pay for college outright. Some people do something similar with car loans, although they have other complicating factors. Navy Federal CU currently has an opportunity available for those who are eligible to join with their 2.9% auto loan on new and used cars up to 36 months.

I don't like this idea mainly because I feel like it's a bit dishonest/unethical. Though you're right DS, I know plenty of people in my university that do just that.

[34saving]

Jesse said:
"I'd like to build up a side business that would fund real estate investing to a certain degree."

Ah. I get it. The side buisiness is the budgeting stuff and then that would fund the real estate . . . I read that the side business would fund real estate by its nature (ie being a hard money lender) Oops

[jmjj215]

Ahh, I thought maybe you saw 25% and thought I was a payday loan loser charging some huge interest rate

[Moi?]

Originally Posted by JBinKC

The key to success is to give as little possible back to the government. Frugality, coupled with using a Roth IRA and flipping houses that you live in (every two years) will accomplish you goal over time as long as you understand value in an investment.

What do you mean by flipping houses?

[JBinKC]

Flipping houses is buying and selling houses in a relatively short period of time. The catch:There is a rule in the tax code that allows a 250K exclusion of a gain 500K exclusion if married filing jointly in income tax as long as you lived in it for 2 years as a residence. The income exclusion becomes prorated if the sale is done by involuntary conversion like a job change or divorce. The gain is also deferred if your trade up to a more expensive home.

[34saving]

I think flipping in this circumstance means . . .Sell your primary home and buy a new one (preferably distressed that you fix up) every two years. In that scenerio all capital gains are tax free. (You can also rent or sell your "old" house on a lease option as long as you sell within 3 years of moving out. In some cases that helps to maximize your tax free gains.)

Oops looks like JBinKC and I were writing at the same time. Sorry about that.

[Ima saver]

I take whatever profit my husband makes on a house and save it to build the next house. I keep it in the highest interest rate savings vehicle that I can find. I pay cash for the land and the house as he builds, so that I do not have to pay any interest to a bank for a loan.