I love all things money. My kids often see me reading finance books and browsing real estate blogs. They hear me talking about money with my wife. They watch us negotiate deals to buy houses with cash, and they overhear our discussions on retiring early.
I explain what I’m doing with money in simple terms to my kids, but I can’t be sure it’s sinking in. They are 10 and 6. It is my job to prepare them to navigate money and life. I wonder how I’m doing.
This is Rich, but I didn’t write this post!! This is my first guest post. It’s a big deal because I’ve turned down several offers for guest posting on my site.
I met Richelle from www.lifelibertynproperty.com at FINCON16 and was impressed with her professionalism and liked her blog. We chatted and decided we should guest post on each-other’s blogs. Both she and her husband had their own real estate portfolios before they met, and now they are an awesome real estate team! It’s a great article. Enjoy!
Understanding your preferences in investing will definitely help clarify your goals and path to success. Simply put, knowing the investing style that best suits your persona can turbocharge your investing because the distractions are removed. Some people refer to this idea as “knowing your lane”.
It is tempting to get caught up in the excitement of investing and the prospect of being in real estate. Often, however, budding investors end up spinning their wheels without gaining any traction. Taking the time to focus on your personal goals and identifying your investing style can be invaluable to your overall consistency and growth.
Real estate investing is similar to role playing
To illustrate how un-awesome you are, let me first share how awesome I am.
When I was just getting started out investing in 2001, I put all the money I had, $4,000, into an index fund. I called my bank and said put it in the S&P 500 index. Warren Buffett taught me well.
The savvy salesmen on the other end of the phone who was clearly more experienced than Warren told me I was crazy to invest in that. I could make money twice as fast if I invested in their aggressive growth fund.
NOW I’M AWESOME!!!!!!
Yes, I may have done something stupid.
I certainly did something unique.
I sold all the investments in my IRA and bought rental properties! (My Wife’s too!)
The rental properties are held in the Roth IRA as investments, and the rental income accumulates as cash inside the IRA.
And I’ll show you how it made me FILTHY RICH!!!
I did it, and you can too!!!!!
This post is based on and inspired by ideas from the book Fooled by Randomness by Nassim Taleb. It’s one of the most insightful books I’ve ever read. It’s about the role of chance in life, and how we are often blind to and fooled by it.
Get it and read it.
It ESPECIALLY applies to money and the markets.
The points I make in this post are derived from his book. Here we go:
Have you ever played Russian roulette?
I have.
I’m kidding. I haven’t.
Why not?
Because that’s stupid!
Because as exciting as it sounds, I just can’t stomach the worst possible outcome. It’s not an acceptable risk. Not even to play once.
No matter how smart I am (or how smart I think I am), the outcome is ruled by randomness. By chance.
This is going to be a short, simple, down-and-dirty tutorial to help you look for or make offers on rental properties.
Going from simple to complicated, the first thing to understand is the 1% rule, which is easy to do in your head, and can save you the trouble of breaking out the calculator for properties that are overpriced.
1% Rule
The 1% rule is quick and easy. Monthly rent should be at least 1% of the acquisition price. The acquisition price may be a higher number than the purchase price. It’s purchase price plus the money to get the house ready to rent.
Example.
$80,000 to purchase house plus
$20,000 remodeling equals
$100,000 acquisition cost.
$100,000 home should rent out for at least $1,000 a month, or it would not be a good investment.
What is the logic behind the 1% rule?
If a house will give you 1% of the purchase price each month in rent, then it gives you 12% of the purchase price each year. That apparently means the investment makes 12% a year!!!!
WOW, THAT’S AWESOME! I’M RICH (ON MONEY!!)
First, a little about me and my website:
My website is all about helping others to get out of debt and create passive income from real estate.
But you can not mess with real estate until your finances are on a solid basis. You gotta go get Jim’s book! (or at least read his website)
“Spend less than you earn–invest the surplus–avoid debt”
The central theme of Jim’s website and book.
It’s hard to believe the Path to Wealth can be this simple.
But in his book, you’ll see it is.
I got to admit. I love this book! My review is going to sound a little over the top, but it’s a damn good book!
I’ve been big into finance and real estate books my whole life. I’ve read them all.
Ok, way more than this!
About a year ago, I stumbled across financial independence and early retirement websites and it opened up an entire new world to me!
I began seeking out all the top blogs in this field, and one that kept coming up was jlcollins.com.
To put it bluntly, his Stock Series was the most comprehensive explanation of investments I have ever read. There is so much noise and confusion out there in the finance world, and he slices right through it and tells you what’s really important.
He makes it easy to understand the complex world of money. His approach to investment is so simple, it’s alarming!
I followed his blog closely and eagerly awaited new posts.
When he sent out an email explaining he was writing a book and soliciting help from his readers for proofreading, I jumped at the chance!!
The only reason I volunteered was because I wanted to read the book ASAP!!!
As luck would have it, I was selected to be a proofreader, and had the opportunity to read the book before publication. (Actually, I’ve read it about 20 times. Occupational hazard!)
The book is exactly what I was hoping it would be.
This is a fairly basic look at my thoughts on getting out of debt, saving, and investing. Good to read if you are getting started with investing. If you are an advanced investor, you may find it basic.
Among acquaintances, friends, and co-workers, my thoughts on money seem extreme. I don’t have many among those groups to share and discuss with.
I’ve been devouring books about money my whole life. I was soooo happy when I found the world of FI, real estate, and investing blogs. I feel like there is a community of people out there that understands me.
I love the blogs where the average person shares their struggles with real estate, investing, and life in general.
When I was in college, I got a job at Fidelity Investments as a stockbroker. It was a 3rd job, a side hustle to pay back my student loans. It was a great introduction to the world of finance. It made sense for someone like me to get a job like this. I’ve always had an interest in the stock market.
My name is Rich. I like to talk about money.
Let me tell you my story.
How do you summarize your financial life in a blog post?
What if it’s your first post ever?
I’ll give it a shot!
I met my wife in college and quickly realized she was the right person for me. Before she married me, she asked me a question that I didn’t know the answer to. It was a question that I also did not want to know the answer to.
“How much money do you owe in student loans?”
(Very blank look from me)
Thinking back through the last 3 1/2 years of college, I remembered getting some grants and a partial scholarship from the military for majoring in Chinese, how bad could it be? I remember taking out a few student loans to help make ends meet (a.k.a. always eating out and vacations with rich friends).
I paid off our $280k mortgage in six years. Paid of $32k in student loans in 1 year. I flipped houses and purchased rental property with cash while living overseas in the military. I currently own several rental properties mortgage free. Read More…
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Rich
"Chad, thanks for commenting over here. i definitely recommend your blog to ..."
Chad Carson
"This is a great, common sense list Rich! And that's why it's not ..."
Rich
"You want to be LEAN and MEAN for retirement. -Pay off the ..."
Brew
"Rich, I'm an E-8 with 6 years to go until I'm retirement eligible. I ..."
Rich
"Thanks for the comment! Hope to see you at fincon? Time flies. "