Using Imagination to Create Wealth
by Jack Miller
I think it might have been Napoleon Hill who said you can’t achieve what you can’t conceive and believe. That sounds like on of those aphorisms you can hear, agree with, and shrug off, but it’s a lot more powerful if you consider the accumulation of wealth for the entrepreneur begins with a vision of himself or herself at the end of the trail when all the rewards start coming in.
It was certainly true of Steven Jobs and Bill Gates, and of me, and I suspect of you. Perhaps we didn’t dream of billion dollar empires, but we did think of being able to make a comfortable living on our own outside the limitations of a “regular” job.
It’s easy to focus on real estate as the font from which wealth springs, but to me, any asset is like a candle. What many people miss is that the wick is used to heat the candle wax, and this gives off a gas that provides the flame that in turn burns the wick and heats the candle. This objective of this continuous cycle is to provide light, but the heat it produces makes the whole thing work.
Let’s see if we can’t apply this concept to a house. So long as a house is used solely for shelter, it produces wealth only to the extent that it can be sold for more than it cost. But, when the same house is used as a rental, or as collateral for a loan to be used to produce more wealth, or is improved, sold, with the sale proceeds used to repeat the process, the money earned by these endeavors are the candle flame, but the gas that creates the flame is the creativity, energy, and insight of the entrepreneur.
I think most people have figured that out even if they haven’t articulated it in this way; but where most people leave money lying on the table is not seeing all the other attributes of a house and the land it sits on that can produce additional wealth.
Real estate is defined in most text books as a bundle of rights. When you hold fee simple title, you hold all these rights. A guy named Zeckendorf explored ways to wrest wealth by selling or renting these rights. At one time his company Webb and Knapp grossed over $2 billion a year using what he conceived and believed
His forte was to look at any property and try to envision it being used differently. Then he assigned a value to each use and sold or leased the attribute of the property that produced it.
Warren Harding (named after the President), a disciple of his and an early mentor of mine, depicted this as a sort of X-Ray of a building that revealed all its possibilities.
First came the land: Land has sub-surface rights that include rights such as water, mineral, developmental, etc. When there is a need to run sewer, gas, water, electrical, etc. lines through it, an easement can be financed, leased, or sold through it. The same goes for situations where subways and tunnels must go through it. Thus recovery of cost, interest, rent, and capital gains can be created without disturbing the land at all.
Don’t stop reading now. Next time I’m going to blow your socks off.
