21st Century Academy

Using the term Renting Shares has got a few people into trouble. It is not the correct legal term. It’s probably because it make too much sense and we can’t have that, can we? Let’s have a go at explaining what the term is used for. What does it mean and why is is called Renting Shares? Well, I’ll run you through a hypothetical example of one years worth of trading to see exactly what it is. This is effectively an example I learned from 21st Century Academy and Jamie McIntyre.

First, to put this into perspective, I’ll use an analogy.

Renting Houses Like a Landlord

A landlord rents out a house. The house may have cost $100,000 and costs $8,000 a year in interest to the bank. The tenant pays $200 per week in rent and there are fees for real estate agents, upkeep, maintenance, rates etc… Here is a very simplified summary :

Cost of house: $100,000

Annual bank interest on a 100% loan: $8,000
Maintenance, upkeep etc: $2,000
Real estate agent fees: $400
Total expenses per annum: $10,400

Rental income: $200 per week = $10,400 per annum

This means your expenses are the same as the income and your house would be cashflow neutral. Not a bad investment considering properties generally go up in value over time. This means you can make money without any real drain to your cashflow. This example will of course vary heavily depending on different financial scenarios.

Renting Shares Like a Sharelord

Now, if you would be Renting Shares Like a Sharelord, you would effectively buy shares and just like a house, you’d simply rent them out to the stock market. You may buy a share at $10.00 and offer to sell it at $10.50. If the share goes above $10.50 you have to sell it at a 50c profit and cash in.

Cost of shares: $100,000

Annual bank interest on a 100% loan: $8,000
Estimated stock market brokerage: $1,000
Options fees, additional brokerage: $700
Total expenses per annum: $9,700

Approximate Share Rental income, non leveraged 2% per month: $24,000

Profit = $14,300
Return On Investment = 14,3% per annum

Should you wish to have a 90% insurance on your shares to cover yourself against a stock market correction, this would cost approximately 4-7% of the share cost, depending on the share volatility. If you want the added security, you can have an insured portfolio and still make around 6-10% on the share portfolio.

Create Wealth Through Renting Shares

In the above example, I haven’t allowed for the fact that you will get forced to sell your shares at a profit every now and again. This adds to your investment profits and there are some extra stock broker fees to consider. This is just a very simple example of how to create wealth through renting shares. Extra cashflow has never hurt anyone. When adding financial discipline to the equation you can benefit greatly.

Covered Calls and Compound Interest

The correct industry term for Renting Shares is Writing Covered Calls. You do this on the stock market and obviously should use a licensed qualified stockbroker. When this strategy is done correctly and the rules are respected, people can make some handsome returns. I don’t know about you but I’m pretty happy with a 2% per month return on investment. That is 24% per annum and is you were to apply compound interest, well that is whole new kettle of fish… We will cover compound interest when talking about building a Millionaire Mindset.

Until next time…

I wish you abundance in the 21st Century

Sean Rasmussen
21st Century Academy
Universal Wealth Creation © 2004 - 2007

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When I Fired My Boss, approximately 21 months ago, my first thought was on my immediate financial future. I was elated and overwhelmed with the fact that I had acheived my 2 year goal of replacing my income through investing. The strategies I learnt through the DVD with Jamie McIntyre certainly started me off and gave me the urgency to take immediate action. The one strategy that really stood out was: Renting Shares.

Renting Shares like a Sharelord

My first strategy was to be Renting Shares, just like a Sharelord. I’ll explain the term in the next post. Back to the story. I had quit my job. The pressure was now on. I had given up my JOB (Just Over Broke) and now had to step up to the plate. Everyone was watching. At least that was how it felt. One month into the job (or should I say: out of the job), I had nearly doubled my income again. I made over $18,000 in my first month as an unemployed bum! Look up the word happy in a dictionary and there was a picture of me! Smiling!

180% increase in 30 days

What had taken me 23 months to acheive (doubling my income by learning to invest), I had nearly acheived in 30 days once the shackles where off. I wanted to learn to be rich and in the process I had to develop a millionaire mindset. My mentor, Jamie McIntyre certainly had shown me how to do this. Putting it into action isn’t neccessarily all that easy, though. To create wealth you need another skill that takes a bit of time to aquire:

Emotional Intelligence is the key

What on earth is this, you may ask? Emotional Intelligence is the ability to manage a synergy of skills, such as money management when investing in the stock market or making decisions without emotional attachment. A good investor knows that emotions must stay out of the decision process. Investing is 10% strategy and 90% mindset. More about Emotional Intelligence later.

Financial Freedom isn’t far away

A few month later I had trippled my old daytime income. Needless to say, the pressure was off pretty quick. Financial Freedom is a now lot closer now than I ever hoped. I certainly have a lot to thank 21st Century Academy for. My mentor Jamie McIntyre has taught me a lot more than I ever expected. To think that I nearly didn’t even order his free DVD or read his ebook. I suppose, I wouldn’t have known any better if I hadn’t. The thought still scares me though.

To Your Continued Financial Success

Sean Rasmussen
21st Century Academy
Universal Wealth Creation © 2004 - 2007

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