My revelation in 1983 was that a capital asset – one rental property – could create more profit (cash) than four years of my own active labor (waiting tables at a high–end restaurant in Dallas).
That realization changed my perspective on my financial future forever…
…in a really, really good way.
After dental school graduation, I began private practice and simultaneously began acquiring more rental real estate – using safe leverage as my means to multiply my rental property portfolio (leverage was my fast track to asset acquisition when my capital investment base was relatively small).
Fifteen years into my real estate investing, the light switched on!
There was a better, easier and faster way to increase my wealth and cash flow – via “control without ownership.”
How does one control an asset without owning it? Why is controlling better than owning? I'll take you through it.
First, the idea that ownership equals profit is a common misconception.
Ownership often leads to “the accidental landlord” syndrome and gives real estate a bad rap among lay people.
We’re all familiar with the horror stories of rental property management – the headaches of tenants, toilets and contractors.
The illusionary “Flip this House” promises glamorous rehabs with high profit.
In real life you find the profit margins are elusive and the stress of taking on what becomes a second job, very real.
The better way…
Rather than owning the entire acquisition and investment management process, I found it much more lucrative (easy and more fun) to “joint venture” with others who had already created better systems of acquisition, negotiation and management than I could as a part-time investor.
I could take “participation” as a passive and secured capital investor, receive excellent returns on my investment, and avoid the time suck and brain damage of managing all of the moving parts required in a total ownership and control program.
My portfolio and net worth grew faster with far less time and responsibility on my part.
I increased my diversification over a variety of secured investments in different geographic markets. Made possible via a number of different “boots-on-the-ground” joint venture partners.
And most importantly, I still had control.
Think about banks, angel investors or venture capitalists.
In various forms, these entities provide capital to vetted entrepreneurs for a prescribed return on investment – a participation of cash flow and/or profits.
It’s the same with real estate – profit participations can be created through relatively simple documentation that secures the money partner.
The who, where and how of the Control without Ownership method of wealth-building is a subject for a future article. Suffice it to say that it has everything to do with one’s network, that is, relationships.
There’s a fast way and a slow way to build your network and wealth…
– Fast, leveraging a trusted community and network of relationships.
– Slow, figure it out by yourself.
It's a personal decision. No one can make it for you.
To your freedom!
Dr. David Phelps
P.S. If you've been reading for awhile and you're ready to take the next step…