Velocity of Money – its just a guru way of saying – sell while the market is high and realise some profit. Use the money for other properties and opportunities that will arise.
Nothing startling there.
Any comments…..
Yeah [angry2] you stole my thread man!!
Nah its kewl Yack no-ones responded to my post yet, hope you do better!!
Pepper
Hey Yack just went back in and deleted my thread seeing no one responded so far anyways.
Heres the what I said in mine:
The dictionary says velocity means speed, but if so many of you investors here believe in B&H how do you interpret this speed??
I’m assuming it was explained in the seminar which unfortunately was sold out before I could get a ticket, but it is funny that this term is getting bandied around a bit in here and I have to wonder if people really understand it fully.
Pepper
Pepper
I did not notice you had posted this. Maybe we could close this and keep yours. Its probably an opinionated thread anyway.
Hi Guys,
Robert Kiyosaki, is a big advocate of the Velocity of Money, in many of his tapes and cassettes he explains how, really it is very easy to put use the velocity of money at work,
it simply like saying how much money will i make on this deal and how long before i can get my money back out and put it into the next deal and so on….
ie.. a good example is, you might have 500k in equity and you have a managme fund that is returning 12% its simply drawing out the money below 12% interest and investing it into something higer…
there are many different examples of velocity of money in his cassette audio tapes and cds he sells…
Cheers,
sisYack,
Actually Velocity of the Money Supply is an economic term that’s been in used for a very long time.
Here’s the actual definition for you: http://www.wordiq.com/definition/Income_velocity_of_money
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
a good example is imagine…
your money as cartoon characters, doing push ups and sit ups, pumping some iron and all, and instead of you having to do those push ups… its your gold coins that are doing all that hard work…
Cheers,
sisSo what is it in a property sense.
My suggestion is that you buy a property, renovate, sell, buy a new property, you have more equity, renovate, sell. ie .you keep turning over.
I will stick to my buy and hold and sell the occassional property to realise the profit when I expect the market to go down a little.
If you wanted to distort it as a guru watch phrase I guess there’s two ways I could see it used:
1) Deal flow….gotta keep turning over deals to keep increasing returns. In this case velocity of deals/Deal Velocity is more appropriate – hmm good book title
2) Financial Leverage – don’t leave money (equity) tied up & inactive as it’s not generating a greater return for you (which is closest to the actual meaning anyway). Equity in a property increases slowest if you’re not leveraging it. On this basis the perfect scenario for maximum velocity is 100% lends for maximum leverage…actually if you can go even higher (150%, 200%, 500%, 10,000%) you’ll go even faster. Of course you have to make sure that you don’t get caught by the debts before you make the profits!!!
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
The Velocity of Money as discussed at Steve’s seminar is related to Multiplication by Division, you would have ‘read’ about that in a recent PI.com newsletter.
LK
So is it “buy at the bottom of the market and sell at the top of the market”? Is that what Steve’s been discussing at the seminar?
I remember when I read multiplication by division and I thought, doesn’t that just mean “buy at the bottom of the market and sell at the top of the market”? I find it interesting when old concepts are given new names and remarketed… I mean, a rose by any other name…
Buying low and selling high isn’t new. But i may have got the ideas wrong. Anyhoo, no matter how you repackage those notions, they’re still sensible ideas.
Does this “velocity” thing have any parts to it? Anyone want to expand on what Steve meant?
kay henry
Hi Kay,
little off the mark there, its taking profits, (that are realised or locked in) and reinvesting those profits again…
do you remember a while back on, one of the topics, were we discussing, the movement of money like in shares….
quick example
you buy a stock a stock at $1 it goes up to $1.50 you sell it, but instead of spending the profits, you reinvest the profits, and out of those profits reinvest it again…
for me personally, the velocity of money works like this, how quickly i can put my money into a deal, get it back out and reinvest that same money and profits into a new deal or into several new deals…
a very good example of velocity of money is, when people make a capital gain in property instead of just letting it sit in a savings account, have straight back to work in a share trading account, temporaily till you can invest it back into another property, while this is happening, your money doesnt become lazy at all….
its really just making your gold coins do push ups and sit ups 24 hours a day and never giving it time to rest…. and at the same time producing more gold coins doing more pushups and situps and your just sitting back and watching everyone else work out, while you sit back and rest…
steve term of velocity of money, is more on multiplication by division and reinvesting those profits… have a read of Robert Kiyoaski book, “Who took my Money” its about lazy money vs active money
Cheers,
siswhen steve explained the velocity of money, i really had one of those “a ha” moments. it finally all made sense to me. ive heard people talk about add valueing etc but thought it just meant upping the rent. brad sugars say’s if you cant pay cash for your toys then dont buy them. i could never work out how the hell you pay cash on a buy and hold even if it is pos geared. after the seminar the friend i took with me and i sat in the hotel room making plans. this is what i’m doing next.
sell 2 beddy unit, bank valuation 195k but in todays market will get 170k
CGT etc will cost me 12000,
that leaves me with 158,000 dollars (i own it outright)
renovate IP in darwin and sell
costs for reno will be about 5k
sell unit for 250k, and after expenses i will be left with about 20k (this is a neutral geared IP)
then its off to do some velocity of money for the next year (reno’s, flips, sub divisions). i have a meeting with the accountant and the mortgage broker this afternoon, to work out a business plan.
i am now a man on a mission,
will let you all know how i get on
cheers
shaunLead, Follow or get out of the bloody way
I’m just a “Friend” now am I Shaun??? That’s not what you were saying Sunday night….. ; )
(Joking there)
Been a while since I’ve posted anything, but like Shaun I’m now quite pumped by the concept of Velocity of Money. I kept thinking I had to own all these places, and try and drawn down equity to expand all the time, which can make a positive geared place negitive. So I couldn’t see how Steve grew so fast. That’s the real thing I got from the seminar. Find a problem, fix it, which adds value, sell, then find two problems, and fix them…..
Got to keep turning over, and locking in your returns.
Anyway, cheers all
Andy
(By the way Shaun, been off with food posioning all week. Sorry if you’ve been trying to email me. Be back at work Monday. Ate something dodgy when I got back. Not sure, but I have not be a well chappy!)
Buzz, words, buzz words, buzz words.
Call a spade a spade.
Buzz words are traditionally used to conceal & coerce, not to explain and teach.
Every profession uses them to raise the barriers to entry.
There seems to be a lack of understanding on what it was that Steve meant by the use of these phrases.
I hope he posts & clarifies what he means by ‘Velocity of Money’ and ‘Multiplication by Division’ for everyone.
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
not sure if you’re being sarcastic there acey [biggrin], but steve did explain how it worked at his seminar, yes it is basically buy low and sell high. at no stage did he say it was going to be easy.
as for ACTandy, i have to tell you, with the amount you eat, it doesnt suprise me that you got food poisoning.
cheers all
shaunLead, Follow or get out of the bloody way
[clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown][clown]
Editted – Because it was stupid!!
Originally posted by shaunwalker:not sure if you’re being sarcastic there acey [biggrin], but steve did explain how it worked at his seminar, yes it is basically buy low and sell high. at no stage did he say it was going to be easy.
I’m glad it was explained there – and frankly I wouldn’t have expected less of Steve.
However my comments stand as it appears that a lot of people in this thread are having difficulty undersanding what he means….
Either they weren’t listening at the seminar, or didn’t attend
An explanation in here would help settle the discussion.
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
Still in School,
Fantastic analogy Re: coins doing benchpresses, squats, sit ups, drop sets, super sets, etc. Now if I could just apply the economical mechanics of weight resistance training to property investing, well I’d be worth my weight in gold (coins)! Seriously though SIS, you’re analogy is quite apt! Well done!
Cheers,
Gatsby!
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