How to Use Other People's Money to Get Rich

Rich Dad Radio Show: In-Your-Face Advice on Investing, Personal Finance, & Starting a Business

The Rich Dad Company

Entrepreneurship, Business, Investing

4.1 • 3.9K Ratings

🗓️ 26 September 2024

⏱️ 29 minutes

🔗️ Recording | iTunes | RSS

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Summary

In this episode, we dive into one of the most powerful strategies in real estate investing: leveraging Other People’s Money (OPM) to build wealth. If you've ever wondered how to invest in real estate without putting up a large amount of your own capital, this episode will change your mindset and give you actionable steps to get started. Host Jaren Sustar shares his own journey and breaks down the key methods that can help anyone scale their real estate portfolio using OPM.

Why Real Estate?

Jaren shares how real estate has been a historically reliable wealth-building tool. When he started buying rental properties in 2018, his goal was financial freedom. Real estate, with its ability to provide both time freedom and financial security, has consistently been a path to wealth for many investors. Whether it's through rental income, property appreciation, or tax benefits, owning real estate can put you on the road to financial independence.

The Six Pillars of Real Estate Wealth

Jaren outlines the six foundational pillars of real estate investing:

**Leverage:** Buy properties with little to none of your own money, which is unique to real estate.
**Forced Appreciation:** Increase property value by making improvements.
**Traditional Appreciation:** Property values tend to rise over time.
**Cash Flow:** Income earned after all expenses are covered.
**Debt Pay Down:** Tenants paying down your mortgage.
**Tax Benefits:** Leverage depreciation, 1031 exchanges, and refinances to reduce taxes.

Strategies for Leveraging OPM

Jaren explores the three key methods for using Other People’s Money to fund your investments:

**Private Lenders:** Individuals in your network who prefer passive investing.
**Hard Money Lenders:** Companies providing short-term loans for real estate projects.
**Institutional Lenders:** Banks or DSCR lenders offering long-term refinancing options.

The BRRRR Strategy

Jaren highlights the BRRRR method as a winning formula for scaling your real estate investments:

**Buy:** Purchase a distressed home using private lenders or hard money loans.
**Rehab:** Improve the property to increase its value.
**Rent:** Generate cash flow by renting out the property.
**Refinance:** Secure a long-term loan at a higher valuation to pay back lenders.
**Repeat:** Use the refinancing proceeds to fund your next deal.

Real-Life Example

Jaren walks through a real-life example of purchasing a $100,000 property, renovating it to increase its value to $150,000, and refinancing at 80% to cover the initial investment and turn a profit.

Timestamps:
- 00:00 - Introduction
- 05:30 - The six pillars of real estate wealth
- 12:00 - Strategies for using OPM
- 18:45 - Understanding the BRRRR method
- 25:00 - Real-life examples of OPM in action
- 30:00 - Conclusion: Building wealth with OPM

Transcript

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0:00.0	We take the property from being ugly to make it pretty and immediately force appreciation.
0:08.0	We get traditional appreciation over time just because real estate is an asset that goes up in value based on historical data.
0:14.8	Tenants are going to pay off our debt or our leverage for us.
0:18.4	Plus all the extra money they are going to pay is going to go in our pocket in the form of cash flow and then we slap the
0:23.8	cherry on top by paying less to Uncle Sam. Welcome to the Rich Dad Real Estate
0:28.6	show where we talk about the good news and bad news of real estate hosted by yours truly
0:34.0	Jarensustar. So chances are you have been wanting to buy real estate but you just
0:39.6	don't have a ton of extra cash laying around or maybe you have more than you give yourself credit for, but you're
0:45.3	scared to part ways with it all. Look, I know how it feels because I was stuck in that position
0:50.4	back when I started just a few years ago. But spoiler alert I was able to
0:55.6	overcome that roadblock, build a large portfolio of properties worth millions of
0:59.2	dollars, and it's completely changed my family's life.
1:03.2	So today I'm going to show you exactly how I did it and how you can do it too without
1:08.7	having to use a lot of your own capital.
1:13.0	When I started buying rental properties in 2018,
1:16.0	the reason was because I want a financial freedom.
1:18.0	Everybody I've ever talked to has the same desire.
1:21.0	Freedom.
1:22.0	However they want to word it, that's what it always boils down to. So I personally
1:26.0	wanted time freedom, meaning I could choose what each of my days looked like. And second, I wanted
1:31.1	financial freedom, which just meant that money wasn't going to be a stressor for my family and I any longer.
1:36.7	And I knew, based on history and based on data, that people who have bought real estate and held on to it for a long time had no other option than to become wealthy.
	...

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