Asset accumulation and building up greater and greater cash reserves is an important part of any wealth accumulation strategy. Understanding the cycle of wealth accumulation through the “Law of the Harvest” can more readily help you have available money that you can use to invest in real estate ventures that will help you make even more money. In this post I want to take a closer look at the “Law of the Harvest”:
1. A landlord purchases a duplex and charges rent. He pays the mortgage and improves the duplex to keep it up (represented by the “create surplus & invest” box below).
2. He manages his property wisely, improves the property where needed, and increases rents when appropriate (as represented by the “make a profit” box below).
3. When the real estate market is in a prime position to help him meet his goal for achieving a specified return from his real estate holdings, I’ll say 10% in this example, the property owner determines that it’s a good time to harvest some of his “crop.” The landlord sells the duplex (represented by the “harvest money” box below).
4. Cash is now in the property owner’s hand. He can use some of that money to reinvest in another real estate venture (subject to real estate rules) to make more, but he should also harvest some of that money (say 10% to 15% depending on his particular situation) by locking it down in some secure place, such as debt-free real estate, or FDIC-insured savings, so that all of his income is not being cycled back into his business ventures (represented by the “protect money” box).
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