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Are You As Ambitious As Warren Buffet But Lack The Seed Capital, See How to Build Seed Capital

By January 29, 2017Seed Bank
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Warren Buffet is currently one of the richest men in the world. He is a very intelligent man. His methodology in wealth creation is very simple at the same time. He follows a simple pattern in his business that has got him to where he is.

Here is that simple pattern which he applies the principle of compound interest to his business.

It does not matter that you do or do not understand the complexities of compound interest formula; study what he does and then work out how you can do it with your existing resource:a mortgage.

He has been doing this for 40 plus years.

1) He buys a business that has minimal debt and good consistent profits and no debt.
2) He allows a professional and skilled manager to run it.
3) He then annually re-allocates the profit.
5) He allows the manager to use some of the profit for the expansion in the business.
6) He brings the balance of the profit to his holding company.

Then he does something unusual.

1) He takes the profit and invests in another business, that has minimal debt and good profits and no debt
2) He allows a professional and skilled manager to run it.
3) He then re-allocates the profit from the business,
4) He allows the manager to use some of the profit for the expansion of the business
5) He brings the balance of the profit to his holding company
6) He takes the cash holdings and invests in another business with minimal debt and good consistent profits.

Then he does something unusual.

1) He takes the profit and invest in another business, that has minimal debt and good profits and no debt
2) He allows a professional and skilled manager to run it.
3) He then re-allocates the profit from the business.
4) He allows the manager to use the profit thats needed for expansion of the business.
5) He brings the balance of the profit to his holding company.
6) He takes the cash holdings and invests in another business with minimal debt and good consistent profits.

The cash holdings grow like a rolling snowball. At one point he had 50 billion US dollars in his cash holdings.Some snowball!!!!!

If you did that for forty years and bought 70 businesses you too would be a billionaire!

His sucess isnt by accident. He repeats a simple and successful process over and over again. He does not deviate. He is consistent. He has a picture of what he is trying to achieve and does not alter the picture.

The great thing is that what he is doing is not unique. Its not even all that smart. Stop here for a few moments and ask yourself.

Could you do something like that? The answer is that you can. If you own a house with a mortgage you have all the tools needed to get going on the journey.

Now apply the same principle in your own life.

Many look for opportunity. What they dont realize is they have it in their own home mortgage. The use and effect of compound interest on a mortgage can create great wealth in their lives.

There is one qualification for building wealth,not education,not contacts, not age,not gender, its knowledge. Knowledge is Power. And discipline is the engine.

What knowledge do you need? Firstly understand there are two equities in a property.

The first one is your property equity.

The value of the home less the balance of the mortgage, based on the 30 year curve of repayments.Get a mortgage broker to explain this and show you with software and mortgage calculations.

The second is your mortgage equity.

1) The amount that you can freely withdraw at any time from your mortgage.
2) Without refinancing your mortgage or increasing the original sum you borrowed.
3) Never use your property equity to invest in additional investments.
4) You only use your mortgage equity.

There are five elements necessary to build wealth with a mortgage, repeated over and over again.

1) Putting a specific amount of money over and above the minimal monthly mortgage repayment into your mortgage.

This is to be done with consistency over time. You start by building mortgage equity.It is critical that your mortgage is constructed to allow you to do this without fees. Speak to a mortgage broker, dont go to a bank.

2) Ensure that your mortgage is constructed to allow you to withdraw the surplus of mortgage equity created by the extra payment without fees.
3) The money redrawn from your mortgage equity is used on investing in conservative positively geared income generating investments, property managed funds (speak to a financial planner)
4) You apply the returns on your investment to the mortgage to increase the speed you create equity.
5) You redraw newly created surplus in your mortgage and invest it in conservatively positively geared income generating investment.

Now here comes the most common form of failure. You say that you will see what we have left over at the end of the month and put that into the mortgage. It does not work. No one ever has money left over at the end of the month except if they plan to! You will never get started.

There is no slight of hand in building wealth.

1) You need to invest surplus sums on a consistent basis into your mortgage.
2) You redraw surplus mortgage equity to invest in conservative cash flow generating investment
3) The dividends reinvested back into the mortgage as another additional payment.
4)This creates more surplus funds to invest and reinvest

You repeat this over and over and over and over until you have all the wealth you want and need. The first step is to use your mortgage as a wealth creation tool.