Story of the Golden Goose (Infinite Return)

If you grew up hearing the story of the goose (Yes, I am proud to be Canadian) who laid the golden eggs, you may be familiar with the concept of small returns over time creating large returns in time. The story takes a turn when the farmer, believing he can have all the eggs at once, opens the goose to find it empty and no longer has the goose or the eggs. The moral of the story imparts to children not to be greedy. The moral of the story for anyone is not to be greedy. Another moral for real estate investors could be taking returns over time to build a fortune and not focusing too heavily on the quick payout.?

Of course, when talking about real estate, there is always more to the story, risks, expenses, and considerations of the economy and the market. Sometimes the quick payout is the best way to move the needle toward getting the golden goose.?

A golden goose in real estate investing would be an equity share with infinite returns. What are infinite returns? First, let’s consider what goes into calculating the return on an investment. Simply, a return on investment is the percentage of money you earn compared to the money you invested. In a year, if you were to lend (invest) a hundred dollars and you got $12 in interest, your return on investment would be 12%.?

$12/$100 = 12%

Few factors contribute to the return on investment when purchasing real estate. There is cash flow, which is the money from income (rent) after all expenses have been factored in. There is the mortgage paydown that adds up over time; each payment contributes to the interest (expense) and the mortgage principal (gain). There is a market appreciation that is location, supply, and economy-driven, which is projected as a percentage increase each year.

When you invest $100,000 in a property with a 10% return in a year, the monetary amount would be $10,000. If you had put $20,000 in and received $10,000 back, your return on investment would be 50%. If you put no money in and got a return of $10,000 in a year, you would have free money; mathematically, an infinite return on investment, because your investment is zero.?

It sounds too good to be true, right? There must be a catch. Here it is; you have to have the goose. Here are a couple of scenarios where infinite returns occur.?

1. Someone sells a house or property through a creative financing situation to you and you don’t put any money into the deal. You may leverage other people’s money, the bank's money, and/or leverage time to create the equity needed for the property. Over time you have none of your own money in the deal and have returns coming in. This will take your time, education, and effort to create a situation where this works. Always consult with experts until you become one.

2. ? As an accredited investor or someone who falls under an exemption, an investor participates in an equity share real estate project. In a situation of a new build project or substantial upgrade, the investors will be given a projected time for which their initial investment will be held in the deal. For instance, it may be a time frame of 2 years for this example, but it varies for each project. The returns in the first year and second year maybe 10% as in the example above. Therefore, the person would get $10,000 each year. If the $100,000 is paid out at the end of the second year, the investor no longer has their investment money in the deal. The $10,000 they receive in year three and each year after is an infinite return. This continues until the property is sold or they sell their shares, in which case they no longer have the golden goose.

The initial investment returned at the end of the 2 years can be invested in another golden goose and so on producing a flock of golden geese over time.?

For more information, this video goes into more detail (ROI calculation) or contact me.