Wealth Building – Other People’s Money (OPM): What the rich and wealthy have known for years

Getting rich isn’t just hard work. In fact, hard work has little to do with getting rich. It’s not that I don’t approve of hard work, I do. I love working hard, but I especially like seeing myself and others working smart. I know that getting rich and successful isn’t just the domain of blood, sweat, and tears. I’ve seen friends, co-workers, and family members work themselves to the bone for little or no reward.

The cult of hard work, self-sacrifice and the golden goose

There’s a cult of self-sacrifice in our culture that guarantees you’ll be extra busy, work super hard, and put in crazy hours. When it comes to personal wealth creation and success, you are the golden goose. However, you can only push the golden goose hard enough until it stops laying those golden eggs. Every golden goose, without exception, eventually runs out of energy, capacity or enthusiasm. Therefore, learning how to use (i.e. use) other people’s time, money, and skills is a prerequisite to becoming rich, building wealth, and succeeding.

Money and leverage of other peoples

In general, accessing other people’s money (OPM) is a form of leverage that allows you to go beyond the limits of your own resources and instead show ingenuity in everything you do. From a business perspective, leverage is the key that differentiates the self-employed who own a job from the business owner who owns a company. In terms of finance/investment, this means gaining access to cash that you don’t own to buy assets that you control and that generate income.

What the rich and rich have known for years

The richest and especially the richest people in the world have known how to use other people’s money for years. Everyone from Jean Paul Getty, Aristotle Onassis, and Donald Trump has excelled numero uno in this wealth-building principle. Their use of OPM to buy assets is legendary. Onassis in particular is known for making contracts to ship ore and oil in ships and tankers he didn’t already own and then going to the banks to secure the loans to ship the ships and tankers with the contracts to buy. A brash and gifted dealmaker if there ever was one!

People build wealth or acquire assets in different ways based on their background, previous experiences, and what they have been taught or know about money. Most people think that great wealth and riches are largely unattainable because of their model or the way they think about money. What most people don’t understand is that you don’t actually need money to make money. Sure it helps, but what you really need is access to other people’s money to make money.

The benefits of using other people’s money

OPM buys you time; it enables you to do things before you could otherwise do them. It allows you to participate in deals that your own resources do not allow you to do. It enables you to make decisions that you otherwise would not be able to make. It takes the average person many, many years to amass wealth or build a business entirely from their own resources. By harnessing the power of Other People’s Money, you can accelerate your personal wealth accumulation or business growth. It is important that your personal wealth accumulation is no longer limited to what you have been able to save and invest from your earned income.

Get high with OPM – Real Estate

Most people’s typical first experience with other people’s money is when they take out a mortgage to buy their house. Typically, their initial down payment combined with their contract of employment proving their ability to generate future income is enough to secure a home equity mortgage loan. Unfortunately, your home is not an asset, well, but it is the bank’s asset since they receive revenue from the loan, not you. If you can get a bank to give you a mortgage loan to buy an investment property (an asset) while keeping the rest of the rental income after you pay the mortgage, then you have other people’s money to go with Buy uses and assets to generate income. In order to secure this loan, you need to prove to the bank that you are a safe bank. You will typically want to see that you have at least 20% of the purchase price in down payment and that there is sufficient net income being generated from this asset and other sources to offset changes in interest rates, lost rent, etc.

Get high with OPM – Business

In business, entrepreneurs and business owners gain access to other people’s money when they write a business plan to submit to a business representative or venture capitalist, i.e. investors. This process is known as raising capital. In return for the money (known as capital) received, the investor who provided the capital usually receives equity (i.e. a stake) in the company. Money can also be borrowed from a bank, and the bank gets the principal back and also gets interest on the loan. It is the job of the business owner to use this capital wisely; Produce products or services that generate revenue to repay the loan and of course all other expenses of the business.

Other people’s money is always available and more or less accessible depending on general market conditions. Your first responsibility as an entrepreneur or investor looking for capital is to understand and educate yourself about the multiple sources of OPM and the multiple transaction structures that utilize OPM.

Leap through the window of opportunity

Finally, the most important takeaway from all this talk about other people’s money is that you’re not going to say, “I can’t afford to start a business” or “I don’t have the money to invest in this business.” knowing that there are no real excuses or limitations. Not that using other people’s money is without its pitfalls. Like any financial transaction, there are inherent risks. On the one hand, you are obliged to repay the borrowed capital and usually provide the investor with an agreed additional return. But that is not up for discussion here. The important thing for now is to realize that you can always gain access to other people’s money so you can participate in trades and do things you previously thought were impossible. You can begin to jump through the window of opportunity when it’s open…and as you begin to translate this principle of other people’s money into your business and personal wealth-building endeavors, you begin to see that it’s always open !