4 WEALTH GENERATORS
The sole concept of a wealth generator is to target,
create and execute reliable ways to grow your wealth while freeing up time
by creating passive income. There are only a few select investment strategies
that provide all 4 wealth generators, rental properties being the most
consistent and reliable of them all.
Passive income has long been the anchor to developing personal financial security
that not many have been able to achieve. Once your monthly cash flow exceeds your
monthly expenses you have positioned yourself to be able to take more risks with
your investment portfolio or maybe spend your time on a passion project that you
could not pursue due to the financial restraint. I personally prefer the latter
The universal truth is that time is more valuable than money. You can make money
and you can spend money. Time is finite, it can only be spent once, then it's gone
forever. The older we get the wiser we grow and the more we understand the importance
of time, whether it is pursuing your passion, spending time with your family, or
traveling; to be able to freely choose what you want to do with your time is more
valuable than money.
Cash flow is the most important wealth generator for rental property investors.
To simplify, cash flow is the net amount of income, after all your expenses have
To accurately assess your cash flow you will need to first determine your overhead
(expenses). This includes everything from taxes, property management fees, rental
commissions, maintenance fees, repairs, utilities, capital expenditures etc. I will
go deeper into identifying your rental property expenses in the upcoming weeks.
Overall to understand your cash flow you must first determine expenses against your
investments financial performance. By keeping a healthy and positive cash flow you
will be on a direct path to growth and financial freedom.
“Money won't create success, the freedom to make it will”
Mexico has been known to foreign real estate investors as a tax
shelter for years now. The government both locally and nationally
supports direct foreign investment due to the amount of revenue that
it brings into the country.
Similar to the U.S., Mexico choses to encourage and reward foreign
investors through favorable tax exemptions and benefits, property
taxes being one of them. In the Riviera Maya your annual property
taxes are 1/10th of 1% of the value of your property. So let's just
say your condo is appraised at $100,000 USD you will be paying $100 USD
per year. In municipalities such as Playa del Carmen and Tulum they offer you a
prepayment discount ranging from 10 - 20%.
Another attractive tax benefit that the Riviera Maya offers is a 100% capital
gains exemption. Here's how it works … If you claim a property was your principal
residence for a minimum of three years, and you have not claimed another real
estate sale as your “principal residence” in the last three years you will receive
a 100% capital gains exemption upon re-selling your property.
“Liquidity describes the degree to which an asset or security can
be quickly bought or sold in the market without affecting the asset's price.
Market liquidity refers to the extent to which a market such as a country's
stock market or a city's real estate market, allows assets to be bought and
sold at stable prices. Cash is considered the most liquid asset, while real
estate, fine art and collectibles are all relatively illiquid.” - Investopedia
Typically real estate and liquidity don't go hand and hand however as you are
aware by now the Riviera Maya real estate market is a 95% cash market.
There are no bank foreclosures, short sales or firesales to inflate or recess
the market hence providing security and consistency.
The concept of appreciation is simple economics, supply and demand. Appreciation
is an increase in the value of an asset over time. There is a number of reasons why
this increase can occur however the main variables are increased demand or weakening
Riviera Maya real estate has come to be known as a unique investment opportunity due to
the prolific market and increased demand with limited supply in such areas as Tulum
with a 22% annual appreciation.
I like to save appreciation for last because it is the cherry on top. I received my real
estate degree just like many of you did from 2005 - 2008 or better known as the housing
I was going to college at the time and working at a brokerage company in downtown Orlando,
Florida. We all know how the story ends but the point is I learned that savvy real estate
investors never hedge their bets entirely on appreciation, it's risky and irresponsible.
The lesson here is don't put all your eggs in one wealth generator basket. You need all
four to secure your financial future, remember we are here to build wealth while minimizing