Naval Ravikant once said,

“To get rich, you need leverage.”

Leverage is a multiplier

Leverage is a way to increase your output per input.

Not having leverage is a time, energy, and resource constraint. With leverage, you can scale.

So instead of 1 unit of effort = 1 unit of results, it’s:

1 unit of effort = more or infinite units of results.

Let’s use an example of chopping trees:

No leverage: Johnny chops 1 tree per day with an axe.

Leverage: Johnny hires 20 people with machines to chop thousands of trees per day.

Instead of applying your effort to a task (chopping trees), apply it to something to do the task at scale (finding labor & machines).

Here is how we can apply this concept of leverage to building wealth:

4 types of capital to leverage to build wealth

Human Capital:

Labor is the oldest form of leverage.

It's when other people work for you. They do lower-leverage tasks so you can focus on higher-leverage opportunities.

Let’s say you own short-term rentals.

You can’t scale your STR business doing everything yourself. You can't be the cleaner, handyman, designer, host, etc.

So you hire a cleaner and can focus on higher-leverage tasks, like buying more short-term rentals.

Money:

Capital is money.

Leverage is borrowed money. It helps you buy assets faster.

People rarely pay for a property in full.

To buy a $500k home, your downpayment is usually between 0-20%. You leverage the other 80%+ from a lender.

Therefore, you only needed to come up with $100k to buy a $500k home.

No leverage: You buy a $100k home with $100k

Leverage: You buy a $500k home with $100k.

Technology (or code):

Using technology is using a machine’s time.

Jeff Bezos, Mark Zuckerberg, & Steve Jobs built their wealth on code. Amazon, Facebook, and Apple are examples of technology (and labor) at scale.

The MLS is another example of leveraging technology.

In 1923, you couldn’t view thousands of available properties. In 2023, there’s no additional cost to view 1 property or 5,000.

Same with property management.

In 1923, people didn’t manage hundreds of property from across the country with technology. In 2023, the cost of adding on more properties is virtually nothing from a code perspective.

Media:

Media is about getting other people's attention.

Capturing people's attention helps you find deals, partners, customers, build a following, raise money, etc.

To do this with real estate, you create content, courses, and books around your business.

Once you create the content, there's no marginal cost to share it with 1 person or 1 million people.

Brandon Turner has leverage through media.

The former Bigger Pockets Podcast star has a large following of dedicated investors through media. He can raise money at scale because of his reputation.

All he has to do is record a video on Instagram saying he is raising money and thousands of people will see it.

Much of wealth building is a leverage game. Leverage will build your wealth faster with it than without it.

Leverage responsibly.

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