Why do you have trouble earning more money?

It is the most simple of reasons -- because you are working for someone else and not yourself.

Think closely about what I am about to tell you, since it is going to change the way you think about earning more money.

How it Works

My father always told me... as you walk through the cow pasture of life; you are bound to step into the truth once in awhile. Well, the truth that I stepped into 8 years ago was that there are 3 big benefits to investing in fixer-upper houses:

1. It provides financial security in troubled economic times

- the more income streams you have, the better

2. It provides a cozier retirement

3. Its fun and envigorating

This business is particularly well suited for small investors, people 5'6" tall or shorter, and people who wish to keep the security of their regular 8-5:00 job. You can operate your fixer-upper business on weekends and evenings.

People often ask me if now is a good time to invest in fixer-upper houses. I admit that the economy is flatter than Rush Limbaugh's trampoline, but the unvarnished truth is that now is a time that investor's dream of. Housing prices are dropping and interest rates are at record lows.

Investors buy during down cycles in the economy and sell when the economy is hot. Many non-investors do just the opposite.

Remember how we were always told to work hard to get ahead in life? To many people that is the American way, to work hard, save money, and everything will work out. I believe in working hard too. Only I believe in focusing my efforts on what I know will generate more income than I could make on a regular 8-5:00 job.

I believe in saving too. But I believe that money that is in savings is money that is not working. I want my money to be working all the time, not just lazily sitting in a savings account. What is even better is putting not only my money to work but also putting other people's money to work, by taking out home loans.

Working smart is better than working hard, and making my money work hard is better than me working hard.

Can I Really Make Money Renting Fixer-upper Houses?

Yes, you can, and let me show you some examples to illustrate I am talking about.

The average person works at a job for 20 to 30 years, then starts to think about retirement. Let's say that person earns $40,000 and works for 30 years. At the end of 30 years that person has earned $1,200,000. A tidy sum!

However, this average person does not have $1,200,000 dollars in his bank account after 30 years because he had expenses along the way. Such things as groceries, health insurance, car payments, house payments,and of course income taxes have taken a huge bite out of that otherwise healthy chunk of money. He probably has some money in stocks or mutual funds as well.

Most people exercise the extremely good judgment to purchase a house with some of their income. This has the effect of increasing the net worth of a person a great deal.

You benefit two ways when you own a house. At the end of thirty years, you have the original value of the house, and you have the increased equity in the house, or the amount that the house increased in value over time. If you purchased a house for $200,000 today, in 30 years the value of that house would have increased to $575,000 dollars. According to the U.S. Census bureau, the long-term increase in housing values is 5% per year, above inflation.

At retirement age, you are in position to sell your house, maybe buy a less-expensive condo or townhouse, and use the left over money for living expenses.

Buy More Cows

My philosophy is that if a cow gives us milk, we keep milking that cow until the milk stops coming, right?

Right, but we also buy more cows!

If you invest in one rental house, in addition to owning our principle residence, you have income from monthly rental checks, and deductions, and mostly from increases in value of the house over time. Where you formerly owned one house worth $575,000 after 30 years, now you have two worth $1,150,000.

Finally, you add a second rental house, which adds an additional $575,000, for a three-house total of $1,725,000 after 30 years.

Of course, you could keep going, as I have, and continue adding houses to your portfolio. But, even with only one or two rental houses, you are in a much more secure financial position.