I Recently had an in-depth conversation with a friend of mine who is a multi-millionaire. Me? I'm barely a multi-thousandaire so naturally, I had a lot of questions. We talked for hours about investments, future business opportunities, and oddly enough robotics and artificial intelligence (which I will get into in a future post). He eventually went on and told me about how he purchases luxury items at no cost to him, in fact, he had just picked up a Ferarri using this concept. Below is the technique he used to purchase this beastly Italian sports car.
First, he explained that he never purchases a liability without Funneling the cost through an asset. What he means by this is he will only purchase something using the revenue received from a cash-generating investment. The vehicle had a sticker price of $205,000 so instead of buying it outright, he purchased a similarly priced 2 family home. After renting out the 2 apartments, he netted around $3700 per month of profit. The next step was to get a loan, he didn't go into detail about how much the monthly payments of the loan were, but he said that they were slightly less than the total rental income. Within 5 years he claims the car will be completely paid for without ever spending a dime of his hard earned money.
Now here is where things get crazy... In addition to the "free" car, the apartments will continue to generate a $3700 per month profit and the 2 family home is expected to sell at a much higher price than what was paid, when and if he decides to sell it.
Now the car could have easily been purchased outright with cash but he's smart and understands the concept of leveraging money. The more money you hold the more opportunities you have to leverage it and make it work for you. He left me with a great line before we parted saying "You've already worked for your money now go make it work for you!"