Posted on: June 07, 2022
WI 967 | Owning Assets


Trading your time for money is one way to guarantee you will never have a lifestyle of freedom. David Dodge is here today to tell us how the wealthy use assets to fund their lifestyles. You’ll learn more about liabilities and even more about how taxes are paid on these assets.

Key Takeaways:

  • Why trading your time for money isn’t the path to wealth
  • Be focused on owning nothing but controlling everything
  • Secret tax strategies that wealthy people use

Visit to work with David and become financially free.

How Rich People Own Assets by David Dodge

Episode Transcription

We know that finding discounted properties is the most proven path to financial freedom and let’s face it, we all want financial freedom and security, but so few of us have been taught how to build long-term wealth while still earning an income. The truth is owning rental property is the best, most effective way to increase your income and build legacy wealth fast. On this show, you’ll discover how to take control of your finances and make your money start working for you.

I am here to show you how to build that long-term wealth and cashflow while paying less in taxes through owning rental properties. Stop trading your time for money and get off of the transaction treadmill. Let’s get started. In this episode, we are going to be talking about how rich people own assets and how rich people do not work for money. These are two principles that any rich person, any wealthy person that I know doesn’t typically work for money, even though they may work and typically own assets.

Assets And Liabilities

Let’s break this down and let’s dive into this.

First and foremost, if you are unaware of what an asset is, an asset is something that puts money in your pocket every single week, month or quarter. In theory, annually as well. If owning it at the end of the year makes you money and puts money in your pocket and it nets positive, that’s an asset. Ideally, it’s going to put money in your pocket, weekly or monthly. Liability, on the other hand, is the opposite of an asset. Liability is what’s going to take money out of your pocket. It could be daily, weekly, monthly, quarterly or even at the end of the year.

Let’s talk about some examples of liabilities and some examples of assets. Most people think that the things that they own are assets, but in fact, they are liabilities. That car that you own costs you money to own it. That boat, trailer, RV, maybe you can afford an airplane, all liabilities. In fact, the home that you live in isn’t an asset per se due to the definition. It is a liability. Unless you rent that property out, rent out the additional units if it’s a multifamily and/or the additional bedrooms. This is referred to as house hacking.

If you do that and you do that properly and you bring in more money than you spend and at the end of every month, you get paid to own it, then it is an asset. For most people, they do not rent out the additional bedrooms or units in their house. Most people live in single-family homes and that primary residence is a liability. It costs you to live there, get a mortgage payment that may consist of principal, that may consist of interest.

The rich don’t typically work for money. They’re not trading their time for hourly wages or salaries that are taxed very high.

You may have taxes and insurance as well. It could be escrowed. It could be paid out of pocket, but long story short, these things that most people think are assets are, in fact, liabilities. They’re not assets that put money into your pocket either daily, weekly, monthly or quarterly, but basically, at the end of the year, more money came in than went out. That’s what an asset is. Rich people typically own assets. This goes in with the other point that I wanted to make. Rich people don’t work for money. How they typically earn their money is from the assets that they own.

How The Rich Think Versus How The Poor Think

Here is the big difference between the way the rich think and how the poor think.

Rich people know that taxes are inevitable and that you are going to have to pay taxes. They also know that if you earn money by trading time for it aka a job, a W-2. You have a boss and you go report to your desk or your job and you make an hourly wage or maybe even a salary, but it’s W-2. That means you’re trading your time for money. That also means, and rich people know this, that those people are going to pay the most amount in taxes on their income in terms of percentages. They’re going to pay quite a hefty amount and there’s no way to avoid it. You get paid $1,000. You’ll probably have to pay $350 to the government, give or take, weekly.

If you earn your money from the assets you own, like stocks and bonds and maybe some crypto, or my personal favorite, rental properties, those can be assets. You pay the amount of taxes on that income because it wasn’t time that was traded for it, but it was things that you own. Assets that are paying you, the amount of taxes that you pay on those items is much less. In some cases, it’s half as much or half of the savings. Half the taxes that you would essentially have to pay. You could save.

Instead of spending, let’s say 35%. You might be able to reduce your taxes down to, let’s say, 15% or even 20%, which is a big difference between that 35%. Again, these are general numbers. This is a rule of thumb. Everybody’s going to have a little bit different scenario depending on their income and their expenses and aware they’re achieving that income from. Is it from time trading? Having a boss, a W-2 or is it from owning assets? When you own assets like rental property, the income is considered to be passive income. It’s not considered to be earned income.

The way in which these incomes are taxed matters and it varies from different types. I can tell you that the richest people I know typically earn the majority of their income passively through real estate or businesses or other types of investments and other types of assets because it allows them to pay less in taxes. The rich don’t typically work for money. What I mean by that is they work and they want to make money, but they’re not trading their time for hourly wages or salaries. Instead, they’re doing like I do. I am taking after these people.

WI 967 | Owning Assets

Owning Assets: An asset puts money in your pocket every single week, month, quarter, or annually. On the other hand, a liability will take money out of your pocket.


These rich individuals in my life and in my groups and my masterminds, my mentors and all of these individuals. They trade their time to acquire assets or to build businesses. They don’t trade their time for an hourly wage or a salary that’s paid annually or whatever it may be because they know that when they trade time for money, that’s taxed very high. In some cases, it could be taxed as high as 40% or even 50%. When you own assets, that money is considered to be passive income and it’s taxed way less.

Don’t trade your time for money. Stop doing that right away. Instead, figure out how you can trade your time to build a business or acquire assets because it will ultimately allow you to pay less in taxes. A substantial amount less in taxes, which is going to allow to have more money to build and you’re going to be able to snowball and grow your wealth, grow your business, grow your cashflow, grow your income, all of these things much faster than if you are getting taxed at a higher rate.

Operating As A Business Instead Of As An Employee

Let’s jump in and let’s break down why you want to operate as a business instead of as an employee and by owning assets like rental properties. Each rental property is in fact its own business. You can have multiple rental properties in one business or in one LLC or one entity but you can also have them in individual LLCs in businesses if you want. There are lots of ways to do this but if you are a business owner, here is typically how this breaks down.

If you haven’t already read Rich Dad Poor Dad, basically, I’m explaining a lot of the principles that he covers in that book now, so listen up. The way a business operates and the way the corporate structure works is like this. A business earns money, then it spins money and what’s left over is what the taxes are paid on. Let’s do a quick example. If a business earns $100,000 this month and it spins, let’s say, $30,000 this month, then there’s $70,000 leftover and the business is going to pay taxes on that $70,000.

The way that an employee, somebody that trades time for money is going to be taxed. Somebody that is a W2 and has to report to their job or their desk and their taxes come out of their paycheck every week or every other week when they get paid. Their structure looks like this. They earn, then pay tax, and spend what’s left. In my previous example, the way a business operates, they earn $100,000 and spend $30,000 on expenses. These are inflated numbers, but you get the point. They have $70,000 left and they’re going to now pay taxes on this 70,000 that’s left.

If you want to be rich, start thinking like a rich person and stop trading your time for money.

They’re going to get to offset their income with the expenses and go from a gross number to a net number and they’re going to pay taxes on that net number. That’s a huge advantage because all of those expenses along the way are essentially going to be deductions or tax write-offs, bringing the total amount of income that you make and earn down. Reducing your taxes. If those assets or those taxes, those proceeds, that income was from real estate or it was earned passively. The taxes are even lower.

An individual like a W-2 employee, they’re going to earn. Let’s assume the same scenario. We have a higher and earner here because I want to keep the numbers the same. Let’s say somebody earns $100,000 a month from their W2 job. That’s going to be pretty rare unless you’re a CEO, but you get the point here. They’re going to earn $100,000, but they’re going to have to then pay taxes on that $100,000, then they’re going to spend what’s left.

Let’s assume that the taxes on the $100,000 were $40,000 and now they have $60,000 left to spend. You see the difference whenever you are a business. The differences and you operate under an LLC or a business or you have assets and each of these is in their own entity or in multiple entities. It doesn’t necessarily matter. When you operate as a business and are not trading time for money, you get to reduce all of those expenses before paying taxes. If you don’t, you earn, you pay tax and now you get to keep what’s left.

None of what’s left that gets spent is tax deductions or tax write-offs. Whenever you are an employee, not only do you get taxed at the highest rate that you can get taxed at, but you also don’t get to deduct any expenses. You have to pay those out of pocket with post-tax dollars. When you are a business entity or a business owner, most wealthy people who own assets operate those assets through a business. Any expenses on these assets come off the top. You’re not paying taxes on a gross number like you would as an employee. You’re now paying taxes on a net number.

Any expense that you may have. You may have a mortgage payment with rental properties, which covers your principal and interest. You may have taxes. You may have insurance. You may have property management. You may have maintenance. You may have capital expenditures. You may have other expenses but all of those other expenses, all of these expenses, you get to take off and offset the income. The difference between the gross number and the net number, all the income minus all the expenses, is going to give you your net number.

WI 967 | Owning Assets

Owning Assets: Figure out how you can trade your time to build a business or acquire assets because it’s all ultimately going to allow you to pay less in taxes, which will allow you to have more money to build.


Hopefully, that net number is a positive number, but it’s going to be a whole lot smaller. That’s the number you’re going to pay your taxes on. This is such an amazing philosophy. Rich people don’t work for money and rich people own assets. Meaning that they make the majority of their income from the things that they own, the businesses or the real estate.

Stop Trading Your Time For Money

If you want to be rich, start thinking like a rich person. Start thinking like a wealthy person. Stop trading your time for money. In exchange, start thinking about how you can use your time to build a business or acquire assets.

Now, that doesn’t mean you’re going to be able to stop working and I’m not telling you to go quit your job. These are two things that I don’t want people to get confused about. Start thinking and focusing your time, your energy and your efforts on building a business and/or acquiring assets. I love to acquire assets. Rental properties are my favorite assets to own. I have a little stock, a little bond and a little crypto. I own some marketing businesses. I own some different real estate businesses, but my favorite thing to do is to own rental properties. I own them in a business, so I can deduct my expenses. The income comes from the business. It comes from the assets in it, the rent.

Not only do I get to pay taxes on a net number instead of a gross number, but the amount of tax that I’m obligated under the federal tax law, as well as my local state law, is less because it is passive income coming through these assets versus earned income being traded for all my time. You got to keep these principles in mind.

To recap, business owners earn, they spend, then they pay taxes on what’s left. That’s a net number. Income minus expenses equal your net number. Employees don’t get that option. They don’t get the option to earn and spend and then pay taxes. Those taxes are taken from them before they even see their money. They earn then they pay taxes and they get to spend what’s left over. My advice would be to get away from that W-2, as soon as you can.

I’m not telling you to quit now because you need to replace that income with other passive income before you can but focus your time, energy, and efforts on building yourself a business and owning assets within that business. Wholesaling is a great place to start, folks. I love it.


Wholesaling is one of my favorite things to do, but I’m going to say it. I know a lot of you aren’t going to like it, but I’m going to say it. Wholesaling isn’t investing. There it is. I said it.

Wholesaling isn’t investing; it’s marketing.

Wholesaling is marketing and it’s doing quick flips. When you do a wholesale deal, you’re earning income because you’re trading time for it. You’re not acquiring any asset in the process. If you do this through your business, you will get to offset your income with your expenses. There is an advantage, but I’m going to say it again. Wholesaling isn’t investing. It’s marketing. If you want to be rich or, even better, wealthy. You need to learn how to invest into assets, into rental properties that you can hold long-term and rent out.

Not only do these assets pay you, that’s what makes them an asset. We refer to that income as our cashflow. Not only will these assets pay you with this cashflow every single month but they will allow you to reduce your taxes because that is coming in through passive income versus earned income. Here’s an additional piece of awesomeness. When you own a rental property and it is rented out. You can depreciate that property on your taxes over 27 to roughly 35 years, depending on the class of property. If you don’t know what that means, I get it.

That may be complicated but let me give you a simple explanation. Depreciating your property basically means that you get a Phantom expense on your taxes. Let’s throw out a number that everyone can wrap their head around. Let’s assume that you own a $100,000 property and its value is $100,000, but the land underneath it is worth $10,000. You can’t depreciate the land. Only the building. That leaves you with $90,000 worth of fixtures for that property. If we were to divide that by 27 and a half years, which means a single-family property can be depreciated over 27 and a half years, that means $3,272.

Let’s round it down and make it simple, $3,200 that I get to add to my expense column at the end of the year per property. That is essentially a phantom expense. It’s an expense that I get to deduct from the income. Income minus expenses is going to give you your profits or your net number, but by having this Phantom expense, I’m essentially getting to reduce my income without spending that $3,200.

Not only are you owning assets when you buy rental properties. You get cashflow because they are assets when they are rented. That asset income, that cashflow is taxed less. You get to offset your income with your expenses and the government gives you an additional expense called depreciation to offset that income even more. It’s very simple.

WI 967 | Owning Assets

Owning Assets: Get away from that W2 as soon as you can. Focus your time, energy, and effort on building yourself a business and owning assets within that business.


The ability to offset that income with depreciation, collect income in terms of cashflow on your rental properties is what makes these assets. The taxes are less and you get to also write off other business expenses like marketing and overhead and let’s say you have an office. You get to write off all of these things if you operate through a business. That is how rich people, especially wealthy people. That’s how they operate. They own nothing. They control everything through businesses and they operate through businesses so they can offset their income with expenses.

All this has been done legally, by the way. Their businesses are in the business of acquiring assets. You could have a business that may not be a real estate investor, but that business owner may have another business that buys rental properties or real estate. It doesn’t matter if this is your full-time gig or if you are passively investing in real estate. Rich people own assets and they don’t trade their time for money.

Free Strategy Call

Folks, if you want to book a free strategy call with my friends over at Easier Accounting. They can help you with your entity creation and set up and how to structure it the perfect way. You can take advantage of these expenses, offsetting your income. You can take advantage of operating the same way that rich and wealthy people operate. If you are looking to buy rental properties and own assets, you are going to want to have your ducks in a row. You are going to want to have your entities structured and set up the right way.

You are also going to want to stay on top of your income and your expenses and make sure that you’re calculating these properly. You want to make sure that you are depreciating these properties properly when it comes time for taxes at the end of the year. You are paying the right amount of tax if they do fall into a passive income bucket versus an earned income. What I am telling you is setting this up, in the beginning, is very important. As well as managing not only the structure, the entity but also the way in which it’s managed is very important.

My friends over at Easier Accounting are here to help. They helped me create entities and restructure entities all the time. They helped me with my bookkeeping. They even helped me with my tax filing at the end of the year. They can help you too. They’re offering a free strategy call. All you got to do is head on over to That is a free web page that they have built for you to get a free strategy session call to help you set up an entity.

Create an operating agreement. Get an EIN number. Help set up your bank accounts. Help to structure the way in which you are offsetting your income and making sure that you are filing your taxes properly and taking advantage of all of these things that rich and wealthy people are taking advantage of. Again, head on over to and right there on that page, you can book yourself a free strategy call and get in the game. Start doing and start acting like rich people.

If you want to be rich, you got to take advantage of these tax laws. Reduce and mitigate the amount of taxes that you’re paying and make sure that when it comes time to file those taxes that you are saving every penny. Let me tell you if you are paying it all the way to Uncle Sam, it’s going to be very hard to build your business. It’s going to be very hard to snowball your portfolio of rentals. You want to make sure you’re doing it right. Book yourself a free strategy call and get this set up the right way. Do it right from the beginning. You won’t regret it. I promise you.

I hope you’ve enjoyed this episode and I hope you found a ton of value in this episode. If you are interested in creating wealth through rental properties, using the BRRRR method and achieving financial freedom in your life, go to, check out what the program is all about and schedule a call with my team. On the call, we’ll discuss your real estate investing goals and how BRRRR method mastery can help you get there. I would love to help you get started on your way to generating passive income and creating legacy wealth with rentals. Every single one of you is capable of success. More importantly, you are worthy of it. Thanks for reading. Sign up.


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About David Dodge

David Dodge is a real estate coach, author, and investor with over 17 years of experience. David specializes in using the BRRRR Method to acquire Rental Properties with NONE of his own money and has taught others how to generate passive income using his systems. He’s also the co-author of the book “The Brrrr Method” and currently has over 90 properties in his rental portfolio with a goal to grow to over 200 properties in the next 24-36 months.

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