Written by: Jorge Contreras, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
For the longest time, we’ve been told to save money for the future. We studied hard and got good grades so we can become highly paid employees. And then after getting jobs, we still carry the thinking that for us to live better and retire well, we need to work hard, save up, and place our money in trusted savings accounts.
We carry this mindset for years and it was taught to us in school. However, this cycle can also be detrimental to your finances. Yes, saving up may work for a lot of people, but it can only do so to a certain degree. Because if you want to make the most of your hard-earned money, you need to make it grow by INVESTING it.
Losing money through Savings
Did you know that money loses value over time? Ever noticed that $20k years ago just feels like $10k today? Well, apparently it's because of a monetary policy called Quantitative Easing.
Every so often, central banks increase the supply of money in the market by printing more. But the market needs to have a certain balance. Imagine it as a glass full of water under an open faucet. As water keeps getting added to the glass, the water spills to keep the volume the same.
This is what happens when the central bank prints more money. Over time more and more is spilled. In turn, monetary value also lowers. Add this to factors like inflation and taxes, and it basically means that the cash you save today will not have the same value at a later date.
Of course, you can always save money for emergencies and other funds. But if you really want it to not lose value, the best way is to make it move through investments.
The 3 risks of not Investing
For a lot of people, investing sounds like a gamble because you don’t exactly know when and how your money will come back after you invest it or if it will ever come back with the same amount.
All investments carry some degree of risk. And oftentimes, the negative possibilities are preventing people from making bold moves. But on the other side, there are also inherent risks to not investing. Here, we've listed some of them for you.
1. Not being able to achieve their life goals
Most of our life goals involve time and money. They may be short-term goals like being able to go on vacation with your family at the end of this year or long-term ones like being able to retire at a certain age.
If you find that addressing these life goals is harder because you don't have enough, maybe it's time to switch up the strategy. Finding something that will allow you to save time and experience financial freedom usually involves investing in something that will yield the kind of result you want.
2. Stopping your money from growing
As we’ve mentioned earlier, saving cash doesn't mean saving its value over time. Of course, you can always save it in banks for fixed deposits. But if you do the math, you’ll see that the money you get from these fixed deposits is inferior to the ones you will get if you put it on moving investments that yield earnings.
Plus, did you know that banks use your money to loan it to other people and you only get a percentage of the interest?
Let’s say you get 2% interest on your bank deposit. Chances are the bank loans your money to other people for 12% interest. This means, you'll only get 2% and they get 10%. That’s how banks make money out of your money.
3. Inflation depletes your money’s value
You've probably heard stories from your grandparents about what they can buy with a hundred dollars during their time. If you compare it to what we can buy now, the difference is huge. That’s because of inflation. The prices of commodities get higher and the value of money gets lower.
This is the biggest reason why you must invest your money. You need to make it grow so that the effects of inflation will be minimal for you.
So you see, investing is a good plan and you need to know which ones are worth the risk.
Are Real Estate Investments worth it?
Now that you know why you need to put up your money, it's time to know where. I've been a real estate investor for many years so I can confidently say that investing in properties is a great place to start. People always need places to stay. It's a basic necessity and investing in it means your service will always be needed.
Long-term rentals are great if you want to have a fixed monthly income. However, if you want your money to grow faster, you might want to go for short-term rentals on platforms like Airbnb. The best part of putting your property on this online platform is that you can start out small like a space or property you already have.
But what if you don’t have any property to list as a short-term rental on Airbnb? Well, you can just use the following strategies to help you get started.
Making money without capital
It is intimidating to start a business if you don’t have enough money to get started. But you can learn the following methods and use any (or all) of them for your Airbnb business.
1. Rental Arbitrage/Subleasing
The Subleasing strategy is a recommended Airbnb strategy for people who don’t own properties but have the means to rent. Because this requires less capital, it is a good place to start. You'll only need to look for properties on websites like Zillow and get in contact with their landlord to get their permission so you can launch it on the platform. Read more about Subleasing here.
2. Co-hosting
The Co-hosting strategy is where you take advantage of your knowledge in managing and helping people who already host Airbnbs. Here you can earn without any capital just by offering your services. This method doesn't require you to buy or even rent properties, and it will allow you to get your feet wet in the business. You can also save up your earnings to level up to a subleasing strategy or even buy your own property soon.
3. O.P.M (Other People's Money)
If you don't have money to rent properties and you don’t feel like co-hosting is for you, here's a pro tip you might want to try.
It's a strategy that banks and rich people have been using for a long time now and it’s where they use other people's money to grow their own.
Here's how you can practically make it work on your first Airbnb.
You can use this strategy called Balance Transfer. It is the process where you transfer money that is available on your credit card, into your checking account. Typically when you utilize this strategy, you get 0% interest for up to 21 months.
Now, let's say you did a balance transfer for $10,000 and you found a property that's available for rent for $1,500. You spoke to the property owner and you get their permission to use it as a short-term rental on Airbnb.
The owner then requires you to pay the first month for $1,500 and the deposit for another $1500. That's $3,000 all in all.
Then you need to furnish the place and spend another $5,000 to $6,000 on furniture, supplies, decor, and professional photography. That's just around $9,000.
Now you've just started your own Airbnb business without having to use any of your money.
Of course, this is just a simplification but this is the main gist of this strategy. With this, you can now create a positive cash flow to pay off your credit card and keep the rest of the profit for yourself.
However, here's also a little caveat to this method:
I don't recommend using this balance transfer to go on vacation or buy a new car. This is a very powerful strategy, but if and only if you are going to create more cash flow-producing assets with it.
If you want to learn more about this method and how to start an Airbnb business without owning property and without using any of your money, download and check out our free training guide here.
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Jorge Contreras, Executive Contributor Brainz Magazine
From poverty to a million-dollar business, Jorge Contreras is a real estate investor and coach. He started his real estate journey over 10 years ago, and he launched his Airbnb business 5 years ago. Before that, Jorge was overworked and underpaid. He barely had time to spend with his family, and his business wasn't exactly thriving. Once he got into real estate, he realized the potential, especially with Airbnb and short-term rentals. When he became a millionaire before the age of 30, he decided to share his knowledge with all the people who have the need to spend more time with their families and less time working. Jorge has already helped over 3000+ people reach their goals with Airbnb.
