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Everything you need to know in order to start a successful vending machine business!
I've recently became interested in vending machines and maybe going into the vending business myself. On the surface it looked like a way to make good money without working too much so i decided to dig deeper. I ended up performing comprehensive research and here i'm sharing what i've learned so you don't have to figure all this out on your own.
It's not "passive income"
And i also never expected it to be. But people on social media, youtube, tik tok etc. often make it look like it was. As i mentioned earlier the time:profit ratio is pretty good but it's not passive because these machines need to be stocked and maintained (they can break down with angry customers calling) as well as once you have a certain amount of machines it becomes a fulltime job and/or you need employees.
Still if you have like (as an example) 16 machines placed at 8 decent locations (1 soda & 1 snack machine per location) using the 30-30 rule (explained below) they should generate a nice income while still being manageable on your own in 2-3 days/week.
But wait there's more...
While maybe not right away after a certain number of machines you need a warehouse and vehicle(s) to transport your machines as well as the products sold in them. Don't forget employees. Of course you do not necessarily have to grow your business as big that you need all this stuff. Especially in the beginning you can hire a mover to transport your machines (costs usually ~ 100$/machine) and use (or rent) a garage or spare room in your home to store products.
What are good vending machine locations?
Good locations are those with high foot traffic / employees (aka the amount of people walking by your machine everyday). More people walking by your machine meaning more possible buyers and ultimatively transactions. You ideally want at least 100 better 200+ people/employees walking by your machine everyday.
It's also dependent on the demographic. From my research (general rules of thumb) machines placed in poor neighborhoods make more (but also suffer more from vandalism) while rich neighborhoods hardly make any money. Blue collar workers eat from vending machines and busy people who are not going to go out to eat for lunch. 24/7 businesses like manufacturing are the best. Offices are less likely, manufacturing and bus drivers are more.
I also recommend using the 30-30 rule. Only place your machines in locations within a 30 min or 30 mile drive. Reason being is you do not want to spend to much time and gas on refilling and maintaining your machines. The closer all your machines are to each other, the better.
With all that being said, here are some examples for good locations:
24/7 Industrial (Manufacturing, Warehouses etc.) Airports Train Stations Subway Stations Large Hotels Busy Streets (Outdoor) Schools Again basically every location with 100 better 200+ people/employees walking by your machines everyday.
How to find / get these locations?
In my opinion the best way to get started would be buying an existing route. That means buying machines that are already on location. You can buy one or multiple locations. You can find these on routesforsale.com, bizbuysell.com, facebook marketplace or craigslist.org.
When buying an existing route you need to make sure that:
The locations make enough in sales and the seller is able to proof that (Take commissions into account if applicable) Also what is the daily foot traffic / how many employees does each location have? The locations are outfitted with quality machines that at least support MDB (ideally also DEX) * IMHO the machines should have at least a coin changer AND bill acceptor already installed When buying you need a written contract with the seller When buying you also need a written contract with each location that the machines are allowed to stay there. Make sure the locations (companies) aren't getting sold anytime soon After purchasing it would be a good idea to swap out the locks on all vending machines If you can't afford buying an existing route then your only option would be trying to find locations on your own. You can do this by cold calling, emails, getting a website and advertising but what probably works best is driving to locations and asking in person. Having a business card and brochure would help. If necessary tell them that vending machines do not consum more electricity than a fridge.
* If you don't know anything about vending machines make sure to keep on reading. I will tell you everything you need to know in some of the following chapters below. Knowing which machines to buy, those to stay away from as well as what to look for when buying used will help you avoid costly mistakes.
Do you have to pay the locations a commission?
Well, it depends!
Some locations let you place machines without paying a commission. Others may ask 10% of net profit while the upper end seems to be 25% of gross sales and everything in between. You ideally want to pay nothing at all or a fixed monthly fee so they can't reverse engineer your revenue then decide to kick you out and install their own machines. But sometimes on really good accounts paying 25% of gross revenue is still a good deal.
Problem: You're unsure if you can justify the commission an account is asking but you really want the account.
Solution 1: Offer them a trail period of like 2 months or so. If it's working out: Great, pay the commission moving forward. Otherwise just move your machines back out. This way you can't get stuck with a contract loosing or barely making you money.
Solution 2: Include a "revenue minimum" in the commission agreement. In other words, you're only paying the agreed commission in case your revenue is above amount X in a given month.
How much money can you make?
Once again, it depends! And on a lot of things...
The biggest factor is the quality of your locations followed by how many machines you have, markup on products (usually 50% / purchase price x2) your operating costs, comissions paid to locations and so on and so forth... So it can vary greatly from case to case. But i can give you an idea using industry averages.
While its possible to generate gross sales from 0-4500$ per machine/month, you should be making at least 700$/month/machine with a good location. Factoring in the 50-30-20 Rule, meaning 50% is product costs, 30% net profit and 20% other operating costs like warehouse rent, insurance, gas, comissions and employees those 700$/month/machine in gross sales would translate to 210$ net profit. (Gross sales minus all costs)
So lets assume you make 200$/machine/month net profit (some more, some less - average amongst all your machines). That means if you had 16 machines you would make 3200$/month in net profit (which you can use as your salary or to reinvest in the business/expansion). Those 16 machines could for example be 8 soda and 8 snack machines placed at 8 different locations using the 30-30 rule mentioned earlier. A route like that could be easily maintained by just 1 person in about 2-3/days a week and using a garage or spare room at your home such as a suitable vehicle for transporting your products. And if you have really great locations you can even make a lot more with these 16 machines. Double (6400$), triple (9600$) and beyond.
Here's some further information regarding the correlation of foot traffic and sales volume:
Foot Traffic 200+/People Day = 2000$+ Monthly Sales (High Zone) Foot Traffic 100-200/People Day = 1000-2000$ Monthly Sales (Medium Zone) Foot Traffic 50-100/People Day = 300-1000$ Monthly Sales (Low Zone) Foot Traffic 0-50/People Day = 0-300$ Monthly Sales (Danger Zone) Source: https://www.youtube.com/watch?v=-s_Y-O1nosw
Again these are theoretical assumptions based on industry averages, rules of thumb and experience. Worst case scenareo, you could also end up loosing money.
What you need to know about vending machines
One of the first steps when starting a vending business is buying machines or an existing route (with machines already placed). But you shouldn't be buying just any machines. Buying the wrong machines can be a costly mistake or even make your business fail altogether. So here's what you need to know before buying machines...
New vs. used machines
New machines come with a warranty and should work fine for several years without any major problems. However quality new machines are very expensive and from what i've researched also not aswell built as the old ones. A nice new machine can run up to 5 figures. That's a lot of candy bars. But you also do not want to cheap out and buy an ancient machine that does not support the MDB standard and also can't be upgraded to do so. But i would still recommend buying these before buying anything from china.
In my opinion, buying used machines that support MDB and ideally also DEX is the best choice in most cases. Ideally buy them refurbished from a reputable dealer and also consider machines that have been upgraded with new MDB and DEX capable electronics or buy them cheap and then upgrade them yourself (if you can).
Good machine brands
In the US, i recommend brands like Automatic Products, Dixie Narco, Vendo, AMS, Wittern/USI, Industrial or Crane/National/GPL. New, used or refurbished. If you're in germany, checkout Sielaff. (Vendo is also pretty big there). An alternative would be wurlitzer machines if you can still find someone able to supply you with parts and service since the brand no longer exists.
What is MDB and DEX and why do you need it?
MDB
MDB stands for "Multi-Drop Bus" and is a standardized protocol used by vending machines that first appeared in the 1980s. Your vending machine as well as installed modules like your bill acceptor, coin changer and credit card reader all use the standard. This makes MDB modules (like coin changers and bill acceptors) interchangeable between different MDB capable machines * but more important, credit card readers like nayax are only available for machines that support the MDB standard. That means that if your machine does not support MDB, you can't install a credit card reader. Some non MDB machines can be upgraded to support it, others don't. All new machines support it.
* To my understanding (not 100% sure) that means you can install any MDB coin changer or bill acceptor module (regardless of the brand) in any MDB capable machine and it should work. If so the module housings are probably also standardized to fit in any MDB vending machine's enclosure plug and play. (Except if it has been upgraded and did not originally come with MDB from the factory)
Despite my research (10/2023) implying that coins and cash are still used for the majority of vending machine transactions i strongly advice against buying machines that do not support MDB and also can't be upgraded to do so.
Here's a list of MDB compatible machines: Compatibility List Mirror
InOne Technology as well as Vendors Exchange offer upgrade boards to make old machines MDB and DEX compatible. Check their websites to see which models are supported.
DEX
DEX stands for "data exchange" which is another standardized protocol used by vending machines. It is necessary if you want to use telemetry for tracking/monitoring sales remotely from home. Nayax card readers for example are also capable of telemetry (they report both card and cash sales) but only if your machine not only supports MDB but also DEX. Otherwise you can only use them to accept card payments. Using the upgrade boards mentioned above, some older machines that are not yet DEX compatible can be made compatible.
Do you need a credit card reader?
My research (10/2023) implies that coins and cash are still used for the majority of vending machine transactions. But that also depends on the region. Apart from a potential boost in sales, card readers like nayax also come with telemetry features for tracking/monitoring sales (reports both card and cash sales) remotely from home which is really nice to have.
At this point you might still be able to get away without a card reader but i would at least buy a machine that supports MDB so you're able to install one later on if necessary. Ideally buy one that also supports DEX so you can use the telemetry features aswell in that case. If you're on a tight budget try to buy a machine that can at least be upgraded to support MDB and DEX later on. (see above)
Combo Machines vs. Dedicated Machines
In general, i would stay away from combo machines because they do not hold enough product for good locations so you would have to come and refill them often. I would recommend buying 1 snack and 1 soda machine per location instead. But if there's only space for 1 machine and it's a profitable location you might have to use a combo machine anyway.
Advice for buying used or refurbished machines
I recommend buying only machines from quality brands that support MDB and ideally also DEX or those that can be upgraded to do so later on. I personally wouldn't buy machines that only have a coin changer installed. In addition to that, it should at least come with a bill acceptor aswell. (That is unless it's cheap and you want to install one yourself) You ideally want to buy refurbished machines from a reputable dealer that come with a warranty. If you buy refurbished from a local dealer you can also get service in case it breaks down. (Also after the warranty)
Doesn't matter if used or refurbished, you want to test the machine thoroughly! Test every feature and selection. See if it leaks anything as well as check for cosmetic damage. In case the machine is refrigerated (All soda machines and also many snack machines are), ask the seller to plug in the machine a couple hours before you arrive so you can verify it's getting cold. Repairs can get very costly. A guy on reddit had to pay $1362 (parts and labor) in order to get a broken compressor fixed on his soda machine. That's exactly why you want to buy quality machines, make sure they work and ideally refurbished with a warranty.
Where to buy vending machines
If you want to buy new machines, just find a local distributor/dealer that sells them and also provides parts and service. Usually they have a warehouse where you can inspect and test the machines prior to purchase. If you want to buy refurbished machines the same principal applies. If you want to buy used just check sites like craigslist, ebay or facebook marketplace. Some example dealers of refurbished and upgraded (MDB, DEX) machines are:
vendingconcepts.com westwayvending.com vendingworld.com Conclusion
While not passive income, it's possible to make a good living with a vending machine business. Many successful vendors only work 2-3 days a week while earning above average salaries. But there's a lot you have to know and consider in order to be successful. Most of it has been mentioned in this article. Last piece of advice: If you're looking to play it safe, don't jump right in but ask an existing vendor if you can accompany him for a while so you can get some real world experience in the field. This way you can't get stuck with a bunch of equipment and contracts that are loosing you time and money.
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Why it's dumb to have a car payment and what to do instead
Lets start with some facts. 85% of americans have car loans. Furthermore 430$ is the typical monthly payment and consumers in the united states borrow $34,635 on average for new automobiles as well as an average of $21,500 for used automobiles. I got these concerning facts from themakingofamillionaire.com and simplyinsurance.com. No matter if you like it or not, financing a car is pretty normal these days.
But here's the problem with financing cars. The reason you're financing is most likely that you cannot afford to buy the vehicle outright with cash. In times where most americans do not even have 400$ saved up for an emergency this sounds about right, doesn't it? So what you're basically doing is buying something you cannot afford and also don't need. Well of course you need a car but you do not need a model where you have to borrow $34,635 or $21,500 in order to buy it. Especially since more expensive cars normally also result in more expensive maintenance and higher costs of ownership in general. Something you really don't want if you already have to borrow money in order to buy the car in the first place, right?
So instead of financing and having an average monthly payment of 430$ that you really can't afford, what i would do instead is looking for a reliable and cheap (5000$ or whatever you can afford) used car from the 90s or 2000s. Once you found one, just buy it outright with cash. When living in the united states obvious choices would be toyotas or hondas but those tend to be more expensive because people know they're reliable and cheap to maintain.
You might be able to find a better deal if looking for vehicles from domestic brands like chevrolet, pontiac, buick, ford, mercury, lincoln, dodge etc. because those aren't as popular. What you try to find is a well maintained vehicle in good condition, ideally with relatively low miles and best case scenario from an elderly person that took care of it. I would also recommend to buy from a private seller to get an even better price. Since you don't need financing you don't need to pay more at a dealership. (Don't count on warranties when buying a cheap used car)
The good thing when considering something like a 1992 dodge intrepid or 1995 buick park avenue is that you can find great examples for very little money because nobody want's these cars. Other benefits include less competition and less dishonest sellers trying to rip you off. (Simply because there is no big market for these cars) You also don't have to sacrifice much since those cars usually come with AC, automatic, ~200hp engines, leather interior, cruise control, power windows etc.
Now that you have no car payment anymore this means you save - going by the average - 430$ each month. Let's say you invest those 430$ every month in an S&P 500 ETF (like VOO) that on average returns 10% per year (some years more, some years less) and you do that for a timespan of 10 years. After that you would have approximately $87,742.02 instead of wasting your money on car payments. If you did the same for 30 years you would have approximately $901,598.68. That's almost a million vs. nothing because you decided to have car payments instead.
Conclusion
So there you have it. Car payments can cost you a fortune and keep people from building wealth. Because of that i recommend you exchange yours for an affordable used car (paid for in cash) ASAP then start building wealth. Of course you can always buy a nicer car later once you saved up enough to buy it outright with cash. With that being said, many cheap used cars from the 90s and 2000s are actually pretty nice. You might be surprised what you can actually get for as little as 5000$. To sum it up, you can literally choose between becoming wealthy or ending up with a heavily depreciated vehicle worth almost nothing. Which do you pick? Let me know in the comments section below.
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You can't beat the casino! Here's how to win anyway...
First off, i'm not really much of a gambler myself. But over the years i met quite a few people who are and i also love las vegas (for other reasons) so i have seen quite a few casinos from the inside and done quite a bit of gambling myself. Doesn't matter if craps, roulette, poker, blackjack, slots or even sports betting. I have made my experiences with all of them. While i've always seen this as "weekend fun" (just like going to a club) and never betted with indispensable money i still tried to figure out a way to beat the casino and make bank. But at some point, after probably more than a decade trying to figure out a system that works i realized that it's just not possible. Keep on reading and i tell you why and how you can make a profit anyway...
The most obvious reason why you can't win at a game of chance in the long run (that pretty much everybody knows) is the odds are always in favor of the bank (aka the casino). So if you're just playing without a system, chances are the longer you play the more money you will loose.
But this leads me to the second reason as to why you can't win in the long run. Because IMHO there is no working system. Other people that are way more knowledegable than me when it comes to math and statistics also tried and also failed. Don't expect it to be as easy as googling "roulette system" and then you're smarter than everyone else at the casino because now all you have to do is put money on red and then double for as long until you win. That stuff doesn't work. And that's just an example. Complex systems don't work either. Ask me how i know. My guess is that either the casinos invented those systems themself in order to attract more customers or broke gamblers invented them in order to fund their addiction.
And let's face it. If you could really figure out a system that works then casinos would ban you from their propertys pretty fast. That's exactly what happened to people counting cards which by the way doesn't work anymore because casinos nowadays have automatic card shufflers and exchange the card decks frequently. Since today casinos are connected through an international network you also can't just travel around to overcome this issue. Well it's just as they say, the house always wins!
Bonus reason: Well based on my gut feeling after gambling on weekends and vacations for over a decade now - i think that some casinos on top of that actively decrease your chances of winning. I'm not saying it's all of them and i also do not have any proof for that at all. Just be aware of the fact that every game at a casino can in fact be manipulated and in many different ways. It's not just slot machines. Table games can be manipulated aswell. Of course chances of that happening to you are even higher in illegal facilities. I never participated in and based on stories i've been told would also highly recommend staying ouf of those.
The good news is that you can use all this to your advantage and make a profit (win) anyway! As we discovered, going to a casino and make a bunch of money by using a fancy system doesn't work. But what does work is being the casino yourself! Because as most people know, the house always wins. Pretty obvious right? Well odds are you maybe can't or don't want to deal with running a gambling business. It might be also pretty hard to open a new (online) casino as well as to attract enough customers depending on where you live. Well good thing is that it's not required to do any of that in order to cash in. It works but you don't have to go that route. What i do instead is investing in the casino industry by buying gambling stocks. You have a large variety of options. You can buy casino stocks (Example Stock: WYNN), REITs that specialise in gambling property (Example Stock: VICI), online gambling stocks or even stocks from companies that manufacture gaming supplies like slot machines. When doing this you should obviously know the basics about stock trading, do a lot of research and develop a strategy prior to buying into these companies. But if done right then your odds of making money in the long run are way better than those of anyone gambling at a casino. I by the way generally like to hold on to my stocks for longer periods of time and would advice against a "short-termed" daytrading like approach.
Conclusion
In my opinion it's not possible to make sustainable long term profits gambling at the casinos for the reasons provided above. The only way to make sustainable long term profits with gambling is being the casino yourself. You can start your own or buy into an existing (online) casino but this is only one way to do it. What i do instead is investing in gambling stocks. When doing this the odds are finally in your favor. But you still need a "system" (aka know what you're doing) in order to make that work. In the end it really comes down to the simple concept of "if you can't beat them, join them!"
This article is also not meant to discourage anyone from going to a casino or even las vegas. Just be aware that you will most likely loose. So i recommend to only bet negligible amounts of money and to take advantage of free (or cheap) drinks and bufetts if available. Simply have a great time without spending too much. Doing this you can definitely have a lot of fun without breaking the bank.
Last but not least: Doesn't matter if gambling at the casino or investing in gambling stocks. I strongly advice you never do it with borrowed money or indispensable income because this is a great way to get in trouble. Also payback any debt and take care of your retirement first. Investing in gambling stocks IMHO should not be part of someones retirement plan.
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Let's gamble! My penny stock strategy explained...
When it comes to the stock market, i generally think it's best to follow warren buffets advice of investing in an S&P 500 ETF like the Vanguard 500 Index Fund ETF (Symbol: VOO). In my opinion it's a great longterm option for retirement that requires almost no effort and has proofen to be safer, cheaper and more lucrative than most alternatives in the past. Especially since most investors and investment managers can't beat the S&P 500 in the long run. Unless you've got insider information i would not even bother try. (And that would be illegal)
While this is great, the problem is that the S&P 500 only returns 10% per year on average. In some years you might even end up loosing money. So it takes a long time to really make bank. But in case your greedy and impatient don't worry. 😄 The stock market offers many different ways to potentially generate way higher returns than the S&P 500 and in a much shorter period of time. The downside is that this usually comes with way more risks. But if you're willing to take some chances: Here's what i do if i feel like gambling...
So what i'd like to do in this case is looking for penny stocks (or really cheap 1-2$ stocks).
Why penny stocks? Well because they tend to fluctuate in price way more and faster than higher priced stocks. This results in higher possible gains but also risk. You be also more likely to find something with lots of potential yet so far overlooked by the general public when dealing with penny stocks.
I'm personally looking for those penny stocks that meet the following criteria:
The company has been around for a long time (At least 10 year chart history) The stock price was way higher in the past (At least where you want it to be again) You think the company will not go bankrupt You fully analysed and understand the business You think the stock price has the potential to go up massively within the timeframe you plan on holding the stock Now you have to define "potential to go up massively" and "timeframe you plan on holding the stock" for yourself. I'm personally hoping for at least a 5x (ideally much more) and within 5 years max. (Ideally within months) when using this strategy. Obviously that won't happen with many of the stocks you buy and sometimes you might end up selling for a lower profit, to break even or even at a loss. You might hit it big with 1-2 stocks or decent as a group so you can afford to loose on a bunch of others. At the end of the day you're basically trying to win more than you loose.
Of course you could ignore the first 2 criterias and buy into new businesses without any history. But this is even risikier since most new businesses fail. Yes businesses that exist for decades can also go bankrupt. But the risk is lower, especially if you're doing your homework.
Important: Do not cash out just because you lost half your money, your set timeframe is over or there is a recession etc. If you cash out early there must be a very good reason for that. (Backed by numbers/facts not stories) So the media/experts saying there is a market crash coming isn't a good reason to freak out and sell.
Tip: Stock screeners make it easy to find qualifying stocks. I like to use the free screener over at tradingview.com. Just apply some filters and go through the results. It's that easy!
Conclusion
This strategy is not as short-termed or risky as daytrading. But it's still a high risk strategy with matching high possible rewards in a comparably short period of time. I would not recommend you use this strategy with non disposable money. You may want to try it with a paper trading account instead of using real money first. If you hate risk, i would buy an S&P 500 ETF instead.
Disclaimer: I'm not a financial advisor so this is merely my personal opinion and not to be seen as financial advice. You have to do your own due diligence when making investments and you're the only one responsible for the outcome of such investments.
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What i would do if i had 10 or 20 million dollars
I guess most of us from time to time think about what they would do if they somehow became rich. Of course the more money you have the more options you got. You can for example blow it all on girls, fancy cars, parties or invest so you can hopefully retire and do what you're really passionate about. Or pretty much anything in between. Here's what i would do with 10 or 20 million dollars...
Note: The following strategy is custom tailored to my personal situation, goals and needs. I for example already have a paid off house and no debt. If you currently do not have those things i would recommend taking care of that stuff first and only invest the remaining balance. Also if you love your current job and have no desire to start your own business and/or travel a lot than there is absolutely no reason to quit/retire from that job. If possible, i would not tell anyone about your newly acquired wealth aswell. Because of that the following strategy is not meant to be a "one size fits all" solution but best used as a source of inspiration.
What i would do with 10 million USD
With inflation and greed, money unfortunately isn't worth nearly as much as it used to be. So while 10 million sounds like a lot at first it might not get you as far as you think depending on your goals. What i would do is to invest 50% (5 Million) in an S&P 500 ETF and the other 50% (5 Million) in buying income producing real estate with cash. (No debt) The strategy here would be creating enough safe & stable income so i can retire (meaning NOT BEING FORCED TO work anymore just to survive / being financially independent), live comfortably and pursue the things that i really want to do in life. At 10 million i feel this dave ramsey and warren buffett mashup strategy would be the best choice. With this strategy i think you should be able to quit your hated job even if you're only in your 20s. Why? Lets go a bit more into detail...
The S&P 500 returned 10% on average for a very long time now. (I'm talking decades) Inflation was just 4% on average in that same period. Meaning on average you get 6% yearly return after accounting for inflation. At 5 million that would be 300k per year or 25k per month before taxes. If you could manage to live below that your money would not just keep up with inflation but actually still keep growing.
But the S&P 500 will not return 10% every year. In fact in some years you will might even end up loosing money. And what if the us economy collapses? (Which is very unlikely but still...) That's why you should never put all your eggs in one basket. Hence lets add some real estate.
With income producing real estate (in this situation, i'd prefer 1 or 2 local appartment complexes with no HOA that i can rent out) paid for in cash (no debt) you have a pretty safe storage of value (like gold) that over the long run usually appreciates in value while producing income in rent. You might be struggling a bit with tenants and repairs now and then but all in all it provides a second stream of income that's safe and reliable over the long run. If the S&P 500 is temporarily down because of a recession - instead of freaking out because all your money is in that one basket - you can still collect rent and live off that because people will always need a place to live. Just make sure to budget for necessary repairs or renovations when buying property. Have a good margin of safety. Also safe a sufficient portion of your rental income net profit for future repairs/renovations and emergencies instead of spending it all and you should be golden.
That's the basic plan. Maybe i would invest a little less and buy a few things that i really want like a nice classic car for example but the vast majority would be invested as described above. Unless you plan on spending all your investment income (living paycheck to paycheck is never a good idea), you can save and treat yourself later step by step.
What i would do with 20 million USD
If i had 20 millions i would pretty much do the same as if i had 10 millions plus:
Invest even more in local hoa free income producing real estate (Maybe in las vegas) Start a classic car and limousine business (Selling, Renting, Repairshop...) (Maybe in las vegas) Treat myself buying a large personal residence with space for my hobbies and some classic cars/equipment that i want) (Maybe in las vegas) Invest 1 million in small units of diamonds, gold etc. At this point i would think about relocating to las vegas, nevada (Because i love vegas and it has huge tax benefits aswell) Of course that specific business would be something i know about and like. You obviously could start any type of business you want or none at all if you had a net worth of 20 million usd. Needless to say you also don't have to move anywhere if you don't want to but las vegas has tax benefits as i said earlier so if you like it it's maybe worth considering in this case.
Conclusion
While more is always better, it is indeed possible to have a really good life with 10 or 20 million usd if invested right. (At least by my standards) Lots of people would utilize debt to maximize this money even further and to save taxes but i would be rather following dave ramsey's advice of playing it safe. With more money (50, 100 million etc.) comes more choices. But in the 10-20 million range i think the plan described above is pretty hard to beat as long as you're looking to play it safe.
Disclaimer: I'm not a financial advisor so this is merely my personal opinion and not to be seen as financial advice. You have to do your own due diligence when making investments and you're the only one responsible for the outcome of such investments.
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In some cases, utilizing debt instead of paying cash can result in a higher ROI. Here's why!
Disclaimer: When it comes to finances i generally agree with dave ramsey's advice of avoiding debt (except for a mortgage to buy your own personal home) and to only buy things you can pay cash for aka afford. So since i'm generally anti debt, i wasn't familiar with the concept of increasing the return of an investment (ROI) utilizing debt until a good friend introduced it to me recently. And while in some cases it's definitely possible to boost your investment returns utilizing debt (and i show you how in just a second) i would still advice against it in most cases. Why? Because it also boosts your chances of loosing money or even - depending on the situation - going bankrupt. I'm also not a financial advisor so this is merely my personal opinion and not to be seen as financial advice. You have to do your own due diligence when making investments and you're the only one responsible for the outcome of such investments. Now with all that said, let me explain the theory behind own capital + debt = higher ROI than own capital alone...
Lets say you're looking to invest 100k of your own capital and the investment return is 10% after 1 year. This means that after 1 year you made 10k profit and now have 110k total.
But now lets say you make a bigger investment where your own 100k is only 50% of the total investment sum. So you take out a 5% interest loan to fund the other 50% of the investment. This investment also returns 10% after 1 year. At this point you would have invested 100k of your own money + 100k of the banks money (5% interest loan) for a total investment of 200k with a return of 10% after 1 year. 10% return on a 200k investment is 20k. But you have to subtract the 5% interest on the 100k loan which is 5k for a total profit of 15k.
Result: In this scenareo your ROI would've been 10k without the use of debt and 15k with the use of debt. Utilizing debt you made 5k more on the same amount of your own money (100k) and in the same timeframe (1 year).
Now lets go even bigger. Let's say your 100k is only 20% and you borrow the other 80% (400k) of the total investment sum. Your interest rate is still 5% and your investment return is still 10% after 1 year. 10% return on a 500k investment is 50k. But you have to subtract the 5% interest on the 400k loan which is 20k for a total profit of 30k.
Result: In this scenareo your ROI would've been 10k without the use of debt and 30k with the use of debt. Utilizing debt you made 20k more on the same amount of your own money (100k) and in the same timeframe (1 year).
Conclusion
When utilizing debt it's not only possible to do bigger investments. The examples above proof that it's furthermore possible to get a much higher ROI when utilizing debt (and with that while paying interest) aswell. Since risk is also much higher, i suggest you only do this if you can EASILY (meaning it's not or almost not affecting your life) cover the full amount (own captial + loan) with your own equity in case something goes wrong. If you can't afford or don't want to risk loosing you should not invest with borrowed money IMHO.
Reason being: Investing with borrowed money IS always high risk. No one can forecast the future. Just think about 2008, covid 19 etc. If you still want to take your chances, make sure to have the best possible odds, a good margin of safety and a fixed interest rate for as long as you need to pay off the loan assuming everything goes as planned. (Preferably longer) Obviously low interest rates (that do not eat away your additional profits) are essential for this to work aswell. At time of this writing (08/2023) you might struggle to find cheap enough credit. But not long ago it would have been very easy.
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