So after I started getting interested in personal finance and reading all of ‘The Millionaire Next Door‘ type books, I started to realize that you have to do more than just collect paychecks from your boss if you really want to investing and start stacking chips.
I flirted extensively with buying rental properties. More on that here, when a slightly different kind of opportunity came knocking, a possible business deal.
My hippy friend had a clothing store that did OK, but died a premature death in the Great Unraveling that was 2008. Her friend, whom she had mentored, started a store across the street that did a lot better. (accessories vs clothing).
Anyway my hippy friend had a solid knack for picking out the next fashion trends but was lacking in capital. She wanted to buy the friend out and own the accessory business.
I used a HELOC, lent her $75,000 and made my first business deal.
We lawyered up for a contract and in the end I will get back my original loan at a rate of $1,250/month. Plus another $80,000 in month to month payments of 3.5% of gross profits.
We are in year SIX of this arrangement. (started beginning of 2014) Everything is still going
smoothly. We had some bumps in 2017 and 2018 over cash flow issues. The original loan is paid back and the gross profits payments average $425/month. The real loss here was that I could have used that same start up capital to buy a rental unit earlier than I did. Maybe I would even have several by now. This is called opportunity cost.
This was my first real attempt at leveraging money to make money.
It was an important step on my journey. It taught me that sometimes you just have to step off of that cliff and do it.