you are comparing eggs with apples and multiply them with a random number.
Will use you own example to explain.
I am comparing eggs with apples and my VH portfolio is not worth half million and I could never sell it for such amount. Even though it might earn me that amount one day.
What this calculation tells me is if my egg business goes bust – how many apples i need to get the same return. And since it tells me that I need way more apples that i have – I’ll better be gentle with my eggs
The only thing where local prices comes in play is the fact that after a year my property is paid in full and i own it outright. If property costs 100k and more – obviously it’s very hard to dedicate more than 10k a month to cover interest+principal of the whole amount in one year.
However the 1% rule applies almost any time. Except when you don’t know what you’re doing. the rule states that monthly rent should be aprox 1% of the purchase price. It doesn’t matter if the property costs 10k or 100k unless you buy into a really bad deal- your rent should be 1% of the purchase price. which means 100k property should rent for ~1000$ a month. If it doesn’t – it’s a bad deal unless you can have a really quick appreciation of value and then sell it for profit after a year or so.
If 1% rule applies – it means this property gives you 12% return. (1% of 100 000=1000| 1000*12months = 12 000 | 12 000/100 000=0.12 or 12%) Of course you have to factor in closing costs, financing costs (bank loan costs and interest), vacancy rate, potential repairs etc. So let’s say this brings down the return to 10% a year.
now there is another rule. the rule of 72. Take the 72 and divide by your yearly return rate to find out the approximate time that is required for your investment to double. so 72/10=7.2 years.
If you’re currently renting and estimate that purchase price of that place is so high that 25+ years of rental income wouldn’t cover it – then you should be lucky and your landlord is having a bad business. Stick to that place and never consider buying.
You are comparing work wage with interest here. That is a bad comparison to start with. Let’s say in year 2018 you have your last sale, just lets assume that. And lets say you have earned $150,000 in total from your portfolio since your start here in 2010. So that was the money you got for your work, and earned that over 8 years.
You know how much money I would need to equal $150,000? Answer: $150,000.The reason why people invest in things like real estate or financial investments / stocks is because there is a chance that they can both earn on rent/interest as well as not lose their investment when they sell it one day. So they have a steady stream of income as well as the investment. Otherwise it would make no sense to pay for a real estate as you won’t earn that much in rent in half a lifetime.
Wage vs interest earnings from VideoHiveI see where confusion comes from. Indeed it’s a bit hard to determine whether VH income is a wage or interest. I bet it depends on how you look at it and how you approach the situation. If one is dedicating a continuous work to the portfolio – it is his wage. If you enjoy the fruits from previously invested work then it’s more like a passive income from investment rather than a wage. I haven’t uploaded anything for 6 months now, but my portfolio is still earning me steady income. Dividing my yearly income by hours i spent creating those few submissions i did this year – would make my hourly rate ridiculously high. Besides in some years I’ve devoted more time than other years and this hourly rate is highly fluctuating over time, while average yearly income been steady for 4 years now. For me looking at this as an investment makes more sense than as wage. Meanwhile for someone who is releasing new product every second or third week this is definitely a wage, because his income is rising each month and investment calculations would not make much sense.
Continuous work doesn’t necessarily make your interest earnings a “wage”95% of a time investment doesn’t happen from a heritage or a lottery prize. The investor is working and then allocating part of his wage to investment every month. Comparing this to VH – you never get paid to reinvest the earning, but instead your time spent on your next project is an investment. Besides when you invest your money you have to work on your investment as well. To be 100% sure that you will get back your initial investment and interest without spending extra time on this – your only choice is to invest in bank deposit which gives you return that doesn’t even cover an inflation. If you invest in stocks (which tend to go bust and you loose part or all of your initial investment) and want to get return that is market’s average or more – then you have to spend time studying and analyzing the trends and markets. So financial investment does require some degree of continuous work and it doesn’t necessarily make interest payments a “wage”.
Why the initial investment is less important than return it givesThere is a difference between investors. Seasoned investors are more concerned about the cash flow and steady income than initial investment amount. They consider it in Net Worth calculations, but otherwise why would you need to withdraw the initial investment if it gives you steady return? For example investment in real estate. It has low liquidity because it’s pretty hard to sell and you can’t just sell off part of your real estate anyway. I just hired a licensed appraiser to estimate the value of our rental property and he estimated it to be less than what we invested in initial purchase price and rehab because the market is so low that this is the time to buy not sell a property. Everyone is looking to rent because no one can get a loan even though sellers struggle to sell for cheap. We found tenants in 24hours and if they leave i know that we’ll replace them very quickly. If i consider to get my initial investment back I would struggle to do it and why should I? To put it in bank deposit for a less than 1% return? The rental we have gives us 14% yearly return which means I’ll earn my investment back in full amount in less than 6 years without selling the property.
How it all relates to VideoHive’s portfolio value?I don’t care if I’m never able to get the mystical 1/2 million of “initial investment” back. I’m more concerned about the regular return it gives. I’m well aware that this investment will not run forever without my attendance. That’s why I need to occasionally update the old files and create some new submissions. Where the calculation comes in? It tells me – if I don’t do a good job keeping my VH portfolio up to date and the revenue drops – I better find a spare 500k $ to invest in stocks (7% return) or 250k in rentals (14% return) to sustain the same income amount. In other words – it helps me determine the amount of alternative investments I need to get the same return and encourages me to do the maintenance unless i want to spare that half million. Appreciate your portfolio, because it’s worth more than you thought – that’s the initial theme of this forum post.
Pretty nonsense to me, sorry.
[..]If I had to pick now between a pile of money that brings me 50% of the yearly videohive income in interests/stock investment earnings, and the actual videohive portfolio, guess what I would pick? The money of course, because that is most probably more money than will ever come out of the portfolio.
I guess you have to have a solid knowledge on personal finance and investment in general for this to make sense, but even if you miss the juice of geeky finance stuff consider this:
Regarding your comment – I would pick the same, but chances are you will never be presented with such opportunity. You said yourself: “because that is most probably more money than will ever come out of the portfolio.” And this was exactly my point for this calculation. Appreciate your Portfolio because to earn equal amount from alternative investments – would require to invest more money than you’ll ever have in spare.
And the thing about 7% and 107% only applies if you reinvest the interest earned. the same would apply if you take all your VH earning and reinvest by hiring additional designers who work for you, to buy ads etc. You don’t reinvest all of your VH earnings so don’t factor this in comparative equation either.
Hey, I’m glad you did. I guarantee that it’ll make you a better professional and a better artist.
Went through it and I already got some strategies that i will apply to my daily work habits. Fist two parts was better than the last one, though. It’s pretty disconnected from the rest and less applicable.
While looking for this book someone recommended to also take a look at The Path of Least Resistance by Robert Fritz It goes much deeper on the same subject.
Thank you for recommendation.
doru saidSome time ago Collis posted a figure of 140mil in author earnings over 7years. Even though the earnings have been growing exponentially I still doubt monthly earnings have reached 10mil by now. At least that number is not supporting this theory.
Don’t know how much money all the sales are generating each month but let’s say 10 000 000 result: around 143 millions
MotionRevolver saidBy no means this was my intention and as I said – it’s not even allowed so this is off the discussion.
I highly doubt any of us would find someone to purchase our entire portfolios at the valuation we’d expect in return.
DOGmotion saidWell, Investors are mainly looking for ways to put their money to work so they don’t have to. If you’re an investor – there is not much you can do to earn more than market average. Now if you find that your investment of time is also generating you passive income similar to what someone with half or quarter million worth of investment portfolio is getting – suddenly you realize that your time is worth much more than you probably thought. And if someone starts to complain that prices here are so low and you could earn more by freelancing – it’s a reason to think again.
Interesting numbers. But it only points that investment on stocks is very expensive business.
For past few years I’ve been spending more and more time to the personal finance planing and setting our financial goals as a family. The goal is to retire by the time I’m 40. Which doesn’t mean that I would stop working, but that i would have enough monthly return from assets to cover our monthly expenses. This includes income such as interest from savings, rental income from real estate properties and similar things. And if I put things in perspective – my Videohive portfolio is also kind of an asset. It gives steady monthly income even though I uploaded my last project 6 months ago. So it’s kind of a passive income from investment.
The reason I started this thread – I just calculated aproximate value of my portfolio and realized it’s my single biggest asset and I thought it would be interesting for you to run the numbers as well. In fact this changed my attitude towards Videohive complately. I don’t view VideoHive portfolio as an asset to retire on, because obviously portfolio goes out of style and eventually stop generating income if you stop producing new or updating your old projects. So I thought I’m enjoying Vh income, but I’m focusing more on building other assets like rental properties and savings. However after this basic calculation I realized it’s an asset that I need to cherish.
Here’s the math: We will consider 7% yearly return to be reasonable. Meaning if you would take your money and invest it in stocks your average yearly return would be 7% from the invested amount. Now you need to find out your average yearly earnings on VideoHive. Then take your yearly average figure and divide by 0.07
This is the amount of money you would need to invest in stocks to get the same yearly return you are getting on VideoHive.
I don’t want to reveal the numbers here, but I have to say – I was pretty much blown away because for me that number is close to half million dollars. I know it’s not allowed or possible to sell your portfolio and no one would buy it for such crazy amount anyway, but the math is straight – to get the same return from financial assets you would need to invest a huge amount of money. So cherish your portfolio, because It might be your most valuable asset in life.