Any of you who have heard me speak about building wealth or purchased our educational course entitled, "Creating Massive Passive Income," realize that I am adamant about focusing on a single asset category, such as business or real estate or paper assets. I use the examples of Bill Gates and Donald Trump to show that this is the true way to build substantial wealth.

One of our students, Bill, has a question about this. I'm going to paraphrase his question, as it is quite lengthy. Here it is:

Q: Mr. Wheelwright, I am working through module 2 "Creating Massive Passive Income", and I here you specifically state that we should focus on just one asset class and maybe two asset classes, but no more. I think I should be investing in all of the asset categories, especially since I have considerable training in finance and business. What are your thoughts about my situation? Even Donald Trump invests in entertainment besides investing in real estate.

A: Bill, I am going to stick to my guns on this. I, too, have considerable training in finance and business, having created my own successful business from scratch and built considerable wealth. If it's okay, I would like to share my personal experiences and failings to help you understand why I feel so strongly about this.

I view investing in asset classes outside those of your true expertise as an unnecessary and significant distraction. Nobody can be good at everything. I, myself, learned this the hard way. Every time I have tried something outside of my true expertise, I have paid the price. Let me refer you to one of my favorite authors, Malcolm Gladwell.

In his book, Outliers, Gladwell explained that those who have truly excelled in their field beyond the ordinary success all shared certain commonalities. The one common attribute they all shared that is within everyone's control is that they all had 10,000 hours or more of dedicated experience in their field of success. This includes the Beatles, Bill Gates, and every other person Mr. Gladwell researched.

My own experience tells me that Mr. Gladwell is correct in this assessment. If you want to be truly great at business, you must stick to your business. If you want to be truly great at real estate, focus on real estate.

I'm not saying that you cannot be moderately successful investing in all asset categories. I'm saying that to be absolutely the best and to build the most wealth in the fastest way, you must focus on a single asset category.

You are certainly welcome to try your method of working in several different asset categories at the same time. I wish you the best of luck. This simply is not my personal recommendation. As for Donald Trump, I have to believe he would be more successful at his real estate business if he spent less time at the Miss USA pageant. Of course, this could really just be a hobby for him and I am not one to criticize anyone for their hobbies, especially those that involve evaluating hundreds of beautiful women.

Warmest regards,

Tom

Recently, I had the opportunity to travel through Europe with Robert and Kim Kiyosaki and Ken McElroy. What a wonderful experience. We met great people who are dedicated to improving their lives instead of following the blind (see "mutual funds"). One of our stops was in Stuttgart, Germany.

While in Stuttgart, not only did I get to tour the Porsche factory, I also met with a terrific German tax advisor from Nuremberg. He came to Stuttgart on his own time and nickel (euro) to meet with me and tell me a little about the German tax laws so I could be prepared for the seminar we were doing that evening.

I learned that the German tax laws are full of great incentives for real estate investors and business owners. Just like the U.S. and other countries' tax laws. How great is that?!!

One of our School of Tax Strategy students is doing some investing in Germany and would like the referral for my new friend from Nuremberg. If you would please call my office and ask for my assistant, Jessie, she would be happy to share that with you.

If any of the rest of you do business in countries outside the U.S. and work with a terrific tax advisor in that country, please let me know. I am searching for the best tax advisors in each country so we can refer our clients in those countries to a great tax advisor.

Thanks.

Tom

Recently, I spent a few days in Tallin, Estonia. What a beautiful place. Right on the Baltic Sea, not far from Finland. And the people are beautiful as well.

One of my new friends from Estonia, Senya, asks the following question about using credit cards in the U.S.A.

Q: I ll start from the begining. I am young entrepreneur from Estonia. Right now I am founding a coproration in the US, CA based. Garrett Sutton is going to be my attorney for the articles of Inc. But before that I must recieve a special visa (e2 or eb5). I am in procces.

Yesterday I started to examine American credit cards for business purpuses. I Have found two interesting types. First one is like more for benefits and the second one allows you to pay 10% of your debt and the rest you can pay within/after 2 months.

I know that you are a god of taxes, could you give me a tips for how to use this cards in business purposes? Including all the limits ($155,000)
And what credit cards do you have and use? And how do you make good debts with this cards?

A: First, thanks for the nice compliment. Second, let me explain that a credit card in the U.S. is really just a line of credit. You can draw on it (up to the limit) any time you want simply by using the credit card. You can also pay it down as fast as you want.

I am partial to more flexibility in my credit lines, so I would lean towards the second card that gives you two months to pay. After all, business is all about cash flow and the more flexibility you have with your credit lines, the easier it is to manage your cash flow.

Remember that you are paying interest on these cards/lines. So, as long as what you used the lines for produces more positive cash flow than the interest you have to pay on the cards, then the cards are good debt and are making money for you. If you use the cards for items that ddon't increase your wealth and cash flow, then they become bad debts.

Pretty simple, huh? One more suggestion. Call my office at 480.467.4400 and ask for Gennifer or Wendy. You absolutely want to do a tax strategy before you set up any entities, as the wrong entity can cause you serious tax consequences.

Warmest regards,

Tom

Just to show you how similar the UK tax laws are to the US tax laws, here is a question from one of our members in the UK. A UK ISA is very similar to a US Roth IRA, only a UK ISA can only invest in cash and stocks (shares). Thank you, Diane, for asking this question.

Q: Hi Tom! I currently have a UK ISA, which in 11 years should mature circa £198,000. Presently it's sitting at £61,000 BUT has a 'significant warning...' marker against it's potential to reach the £198,000. With 132 months left and payments of £595 per month = a further £77,540 + the curent value of £61,000 = total as it stand right now of £139,540, it would seem that it would have to perform exceptionally well if it's to reach £198,000, which is unlikely given the warning marker against it. What are your thoughts on withdrawing the £61,000 (tax free), and re investing this, along with the current monthly payments of £595 back in real estate please? Thanks Tom.

A: The first thing I do in evaluating something like this is to run the numbers. After all, investing is all about the numbers. So, I went to the FREE ProVision Wealth Evaluator (http://www.provisionwealth.com/wealth_evaluator.asp) to determine what the rate of return would have to be to reach the expected goal of £198,000. The answer is 11% per year.

Yes, Diane, that is a very aggressive goal for the stock market. Still, should you invest it in real estate? I don't know. The answer lies in your wealth strategy. What asset category have you determined to use to build your wealth? This is the subject of our two courses, "Massive Passive Income" and "Building Your Wealth Strategy." You probably have these courses if you purchased our 49 Secrets package at the Rich Dad London event. If you don't, go to http://www.provisionwealth.com/products and purchase them from our School of Wealth Strategy. These courses will walk you through how to determine the right asset category you should invest in.

You definitely can reach your goals much faster once you have the knowledge and education to take control of your assets, rather than turning them over to an investment advisor. I am a big fan of taking control of your assets, your investing and your life.

If you are interested in a personal wealth coach to help you along the way, please call our offices at 480.467.4400 and ask for Gennifer. She will help you get started.

Warmest regards,

Tom

This question comes from Vita:

Q: What are the advantages of foreign-filing your Nevada LLC to do business in another state vs. just forming an LLC in that state to begin with?

A: This is an excellent question. I hear all the time from people who have heard attorneys tell them they should always form in the state in which they are doing business or other attorneys who say to always form outside of the state in which they are doing business. The reality is that both of these answers can be correct, depending on your facts and circumstances and on in which state you are doing business.

My general rule is that if you are doing business in your home state and you plan on residing there for the foreseeable future, you probably should simply form in that state. The reason? You are going to be sued in that state anyway, regardless of where you are formed.

On the other hand, if you plan on leaving the state sometime soon, then it’s generally a good idea to form in a good, non-tax state that is outside of your state, such as Wyoming or Nevada. In addition, there are certain states that have bad LLC laws, such as Florida, California and Colorado due to recent court cases that give uncertainty as to the asset protection afforded to LLC’s in these states.

Most importantly, talk to your tax advisor AND your attorney. I’m not qualified to give legal advice. These are simply my rules of thumb as a tax advisor. My friend, Garrett Sutton, is an attorney who generally prefers his clients to form in Nevada or Wyoming. You can contact him at www.sutlaw.com.

For more information about the basics of asset protection, go to our course on asset protection at www.provisionwealth.com/products.

Warmest regards,

Tom

In this economy, lots of people are getting laid off. Good people who work hard and are dedicated to their employer. One of these, Savas, sent in the following terrific question about his situation.

Q: Dear Tom, My name is Savas and I would like to ask you a rather complicated question. I had an food import and distribution business since 1999 up to 2008 which was closed due to lack of financial intelligence and bad advising, and I then worked as an employee in a toy company for 1,5 years, from I was fired last month due to the recession (I doubled checked with them, I always went the extra mile). So, when the problems started in my business I came across Robert Kiyosaki's and philosophy and I recently attended a seminar you had. So my question is what kind of advice would you give in a person like me, to start over and create wealth? Everybody says to continue be an employee, pay my debts , and climb the corporate ladder, however this is not me. What would you do if you had no funds to invest? How would you start? Thank you so much, Seeking desperately for advice, Savas

A: I have been in this situation before, Savas. I worked for a company that was a good company and laid off many employees who were good employees simply because the economy lagged at the time. I myself was fired from another company. Let me share a few thoughts with you.

The challenge I have with being an employee is that you are at so much risk all the time. You really have no control over your life. You cannot even earn more money by working more if you are salaried. I like the idea of having multiple customers, not just one (employer). That’s why I started my company. After I lost my job, I was concerned about my family and what would happen if I continued to look for jobs and then be at risk.

Also, it sounds like you enjoyed being an entrepreneur. That’s very important. I’m like that. After my first year in business, I told my wife that I would never go back to being an employee, no matter how difficult it became financially. Making this strong of a decision was important, so I wouldn’t look back and wonder. And I love being an entrepreneur. The control over your life, the amount you can contribute to other’s lives, and the lower risk by having multiple customers is great.

I suggest you go through our Strategic Wealth Coaching program. It is designed to get our clients who want to be entrepreneurs into the right business for them and then get them in a position where they are always improving their business and their life. Call Gennifer at 866.467.5809 and she will set up a time for us to talk.

Warmest regards,

Tom

One of my favorite types of investing is Angel Investing. With Angel Investing, you invest in a start up company with huge potential and with good management. Our question today comes from Brian, who is interested in investing in other companies in a significant way. Here is his question:

Q: I am currently focusing on building green technology and environmentally friendly companies as a repeat business builder. However, after about 10 years, I would like to settle down to my life's wealth vision. I see myself operating a private investment business remotely from my caribbean home and yacht. I have control over when I want to invest my money to build my wealth further, so I can pick up anytime and spend time exploring the globe with family and friends. My question is related to the private equity and venture capital firms vs. how I desire investing. I want to invest in energy technology companies and nonprofit companies in all stages of growth with a diversified portfolio within green technology and and non-profit with regards to capitalization of the companies, but always investing to take a minimum of 10% interest in the company of interest and continue to build my position overtime as the company grows. Can I do this remotely via technology and decide when I want to invest without operating an active private equity fund or venture capital fund, but still build a team of advisors to help me make informed decisions? I guess I am trying to wrap my head around the technicalities of investing at this level and in a more passive than active role considering I want controlling interest in the companies I fund. Also, would you comment on whether this would be considered business or paper, since I will be a passive private investor and dealing with stocks, debt, and derivatives to acquire the companies? Thanks for you help in clarifying my expectations and vision. It get more exciting everyday with focus.

A: So, Brian, you want to control companies without working in them on a day-to-day basis. Sounds like you would like to be a VC (Venture Capitalist). VC’s always want to control the companies they invest in. VC’s normally come into a start up not only with capital but also with management expertise. They want to turn around a company, build it and sell it. They put in lots of hours to do so.

I wonder, though, whether you want a controlling interest in a company you are not working. As the majority owner, you will be at the most risk for the company’s success. Personally, I would rather look at investing in more companies as an Angel investor if I were not wanting to be actively involved in the company. This spreads out the risk.

You will want to be certain that each company has excellent systems and reporting set up, including internal controls and accounting systems. For more on this, see our series of wealth strategy courses at www.provisionwealth.com/products.

This would also be an interesting question to discuss on one of our monthly calls, so feel free to bring it up on our next call as well.

Warmest regards,

Tom

The hottest tax topic these days is what to do with an IRA. A lot of people are fed up with mutual funds and other typical IRA investments, so they are looking to either pull their money out of their IRA, convert the IRA to a self-directed IRA, or convert to a Roth IRA.

One such person is one of our School of Tax Strategy students, Lillian. Lillian asks the following question:

Q: How can I save the most taxes for next April when I cash out part of my IRA? It is not a Roth, it's a mutual fund type that increases and decreases depending on the market. I am also thinking about coverting some of it into a self-directed IRA.

A: If you are not yet 59 ½ years old, then you will be taxed at ordinary income rates for any money you pull out of your IRA plus a penalty tax of 10%. You can convert any part of this to a self-directed IRA without paying any tax, so long as you do a trustee-to-trustee direct transfer (you don’t actually touch the funds). This year, you can also convert to a Roth IRA without any penalty and you just pay the tax. I have written previous blogs on the conversion to a Roth IRA that you may want to read.

For the portion of the funds you want to take out, not much you can do. There are some exceptions to the penalty rule, but they don’t give you much control over the funds so I tend to ignore them. The real question is what are you going to do with the funds? If you are going to spend them for personal purposes (vacation, home, etc.) then you really will just have to pay the tax and penalty.

There are some investments that give you great tax benefits right off the bat that would help reduce the tax hit from the withdrawal, such as oil and gas investments and certain real estate investments. Still, I suggest you meet with your Wealth Strategist and formulate a wealth strategy first and then meet with your Tax Strategist to decide how to handle your IRA.

For more information about ProVision Wealth and Tax Strategists, call our office at 866.467.5809 and ask for Gennifer.

Warmest regards,

Tom

A lot of people are finding it lucrative right now to get into the business of buying real estate at very cheap prices and either flipping it immediately (wholesaling) or fixing a flipping. One of our students, Speed, as the following question that is fairly common among flippers:

Q: My brother and I set up an LLC to buy bulk REOs and resell them with 15yr land contracts to the new homeowner. We want to keep some of the contracts for cash flow and purchasing more REOs and we want to sell the remaining contracts to create more cash for more REOs. Can you help me understand how these are taxed within our business both the ones we keep and the ones we sell off at a discount? Anything else we should know tax wise in setting up our business and trying to scale it? Thanks.

A: Flipping is a business, so you need to treat it like any other business from a tax standpoint. This means that income will be subject to Self-employment tax if it comes through a general partnership (or LLC taxed as a general partnership) or through a sole proprietorship (or LLC taxed as a sole proprietorship). In your case, you probably want to form an LLC taxed as an S corporation.

However, before setting up your LLC, be sure to meet with your tax advisor to create a comprehensive, permanent tax strategy. While S corps can be great, they can also be very harmful. For example, in your case, if you decide to hold and rent some of the prime properties, you can get in trouble with an S corp.

For more on S corps and how to use them, see our course on Getting the Most out of Your S Corporation at http://www.provisionwealth.com/products. For more on how to formulate a tax strategy, call our office at 866.467.5809.

Warmest regards,

Tom

P.S. - Regarding your final question - number one answer is to form a team including a great team of advisors, such as a tax strategist, wealth strategist, attorney and banker.