Real Estate Investing for Financial Independence
After reading several books in my early 20s, I chose to pursue financial independence (FI) through real estate investing. The FI pursuit requires purchasing income-producing assets in lieu of shiny things that depreciate in value.
In choosing to pursue FI through aggressive saving & investing, you’re designing a lifestyle that consists of living below one’s means, hard work and perseverance, side hustles, self-discipline and planning.
One must deliberately allocate life’s most precious resources, time and energy, in ways conducive to optimizing wealth. In doing so, you’ll cultivate a high caliber network of mutually beneficial relationships with skilled and competent professionals.
A successful FI pursuit through real estate investing will be largely dependent on the information you consume, timing the market and developing the courage to take action.
Good Info to Know
It is estimated we consume five times as much information in a 24-hour period than we did in 1986. The information consumed on the road to financial independence is critical. Therefore, vigilance is required to cultivate a selective ignorance.
You must develop the ability to discern whether information is relevant, important, and actionable to your goals. You will guard your time, energy and attention as if your better future depends on it. Because it does.
Your decision to watch every popular Netflix series and Game 2 of the divisional playoff of your second-favorite sport every year will nearly preclude you from achieving FI at an early age.
Embracing the FI pursuit through real estate investing renders information about the “Joneses” irrelevant. No more comparisons. Besides, if Mike Jones (who?) has seen every Bachelor, Breaking Bad and Game of Thrones episodes, they probably don’t share your same lofty ambitions. Whether the Joneses are wealthy or finance their lifestyle from each paycheck, you’ll never know. Nor do you care. So it doesn’t matter.
“If you do what everyone else does, you will get what everyone else gets.”- Stephen Richards
The majority of those pursuing FI do not wear expensive clothes & watches. They don’t drive luxury vehicles or dine at the finest restaurants. FI and displaying high social status are usually incompatible. Statistics show 86% of luxury cars are purchased by people who are not millionaires.
Temptation to purchase luxuries while pursuing FI is tempered with discipline and delayed gratification; luxury items allowable only as a reward purchased with passive income.
“If you can’t afford to lose it, you can’t afford to buy it.” — Mr. Money Moustache
Timing the Market
The key to timing the market is to develop simple systems and processes to produce desirable, successful and repeatable outcomes.
Once you’ve targeted an area for real estate investment (yields are highest typically in working-class neighborhoods), set parameters so you’ll be notified by email when a property matching your criteria hits the market. In this way, you are always on the lookout for a deal. Example criteria:
- Built 2005 or later
- 3 Bedroom, 2 Bath
- Less than $100/sq ft. asking price
- 30 days average to lease
What I’ve just described could be setup today in ten minutes. Once you’re setup and receive an email, go view the property! That is how you time the market.
People talk themselves out of real estate investing frequently because they didn’t start earlier. I’ve heard variations of the following excuse for years: “I would invest in real estate, but prices are too high. If only I’d bought rental property five years ago.”
Do not speculate on whether property values will be higher at some future date. Buy for cash flow and tax benefits; appreciation is lagniappe. If “Sammy Speculator” is trying to convince you to buy a property because it is poised to skyrocket in value, ask yourself why Sam isn’t buying the property for him or herself. Trying to time the market is a fool’s errand.
“The real estate market, like the stock market, is irrational in the short-term. And so are you if you think you can time it.” — Man Overseas
Courage to Take Action
You don’t need wicked smarts to be a successful real estate investor — you need courage. Personal finance is mostly behavioral.
If you’re willing to work hard, get along well with people and show them you care, your odds of attracting a great network and closing deals go way up. “Academically Superior Steve” is handicapped by never having to develop the same tenacity and skill set.
While it may be true the best time to invest in real estate was ten years ago, the next best time to invest is now. So be courageous and decisive. Think long-term and take action! Track your cash flow monthly and your net worth quarterly.
“You need only 10–20 years to become an overnight success!”
Courage to buy your second property comes easily after you’ve taken action on your first one. Like a tattoo or sky diving, doing it once is rarely enough. Investing in real estate can be an insatiable but healthy & rewarding addiction that could set you free from mandatory work. And once you get mandatory work out of the way, you’ll be amazed at what you can do with your life in terms of learning and service to others.
The process becomes more efficient as you do more deals. Less time will be required to assess whether to take action on a property. By then, courage becomes second nature.
“Start small and take action. Empires are built one small deal at a time.” — Man Overseas
Finally, the Rewards!
The day your monthly income from real estate investments exceeds your expenses, you have achieved FI. In doing so, you will have bought yourself freedom from alarm clocks, daily commutes, deadlines, bad bosses and TPS reports. Most of life’s happiness comes from subtraction, not addition. Future post
FI is not about removing the dignity of hard work from your life. It is about getting started quicker on your life’s work, on your terms.
Someone with the discipline and fire inside to retire early from passive investments will rarely be content to sip margaritas between naps on a hammock all day. Retirees with too much idle time die young.
“What man actually needs is not a tensionless state but rather the striving and struggling for a worthwhile goal, a freely chosen task.” — Viktor Frankl
As your day of FI approaches, prepare to transition to fun and exciting projects. Freedom and options are the most beautiful part of real estate investing your way to financial independence. Perhaps you could travel overseas or start a blog!
Books I read in my early 20s:
Originally published at www.manoverseas.com on September 26, 2017.
