Author: cbarney.45

Financial freedom through real estate investing

Why I believe in using real estate to gain financial independence.

1. Passive appreciation. Historically, housing prices go up. There have only been a few exceptions to this case (such as when the housing market crashed in ‘08), but with time, the price always comes back.

2. Forced appreciation. Most people look to buy homes for themselves and want something move-in ready. But if you’re capable of renovating/rehabbing a home, you can invest money into a house and get a great return on your investment when you go to either sell it or refinance it (increasing your equity or putting more cash in your pocket).

3. Loan pay down. Where else can you buy a $100,000 property for $20,000 and have someone pay the balance for you? That’s what happens when you get a loan from the bank and the tenants pay off the loan for you. And that’s not even getting into more advanced strategies like the BRRRR method (where you buy a fixer upper, renovate it, rent it out for top dollar, refinance it – pulling out all of the money you had in the deal, and repeat the process). In theory, you could just keep recycling the same $20,000 to build your rental property portfolio.

4. Tax advantages. One of the biggest real estate tax benefits available for investors is in the form of deductions. These tax write-offs, which are generally geared towards rental properties, will include costs associated with mortgage interest, property tax, operating expenses, depreciation, and repairs.

5. Diversify your portfolio. Why keep all of your money invested in the stock market – something which you have no control over? I invest in the stock market, and I think it is important that you do too, but why keep all of your eggs in one basket? Even by investing in different sectors (energy, technology, medical, etc), different-sized funds (small cap, large cap), investing in domestic or foreign companies, etc., you still have everything in stocks. In addition being investing in index funds/mutual funds, I would want to truly diversify my total portfolio by buying properties at a great price and having them provide consistent monthly cash flow.

Giving an inch and taking a mile

There’s a common phrase which says, “give the man an inch and he’ll take a mile.” When you think about it, you can probably relate to this happening to you at some point. You tried to be nice, whether it was helping someone out by literally giving them something or maybe you “let them off the hook” when they didn’t do something, and next thing you know, they’re asking/taking more than you agreed to.

Well, don’t be mad at that metaphorical man because, guess what? You are that person too! I was thinking about this in regards to my own workouts, eating habits, and other self-improvement actions. I get up really early (I’m usually up by 3:15 a.m.) so I can get my workout in, read, write this blog, and get some real estate-related work done before anyone else in the house is up and moving. Sometimes my alarm clock goes off and I just want to sleep in. What’s the harm in missing one day of working out, right? That line of thinking (giving myself an inch) can lead to a slippery slope (taking a mile). One missed workout, just like one cheat day, one binge-watching session, one of anything in which you “treat yourself” can (and often does) lead to another. It feels good. It’s easier and more convenient in the short-term. But what’s best for short-term is often in conflict with what’s best for the long-term.

Whenever you feel like you “deserve” something, be on guard. That’s the most dangerous time! Keep putting in the hard work. It will be worth it in the long-run. Otherwise the habits you need most become like the stereotypical New Years resolution…forgotten after 45 days. Don’t get caught in the cycle of working hard for a month, and just when you are starting to make progress, stopping “temporarily” to give yourself a break. You’ll find that stopping feels good and you either never fully commit like you initially were or you never get started again.

We all want to take a mile when we give ourselves an inch. The key is to resist the temptation to take that given inch in the first place.

Changing opinions and admitting when you’re wrong

The “better” man or woman isn’t the one who is always right (which, by the way, is impossible, as nobody is always right). The “better” man or woman is the one who is able to admit when they are wrong and to take corrective actions.

Nobody is perfect. I’d like to think that most people are good and they want what’s best for everyone, but with a bias towards what also helps them the most.

Our thinking is skewed by our past. Whatever has happened to us previously, or what is happening to us now, any hardships we’ve faced and either defeated or were overcome by, the friends we are surrounded with, those are the things that affect our views in life. So while I may disagree with you, it is because of the experiences that have shaped my life. I haven’t walked a mile in your shoes just like you haven’t done the same in mine. What is most important is that we be respectful of each other’s opinions. We can try to persuade someone else, but ultimately, it is up to them to decide what they want/how they feel. The only thing you should really focus on is trying to be open-minded.

It takes a bigger person to try to understand someone else as opposed to trying to silence them. And who knows? Maybe by understanding others, you’ll be willing to change your mind along the way.

Processes vs outcomes

Don’t fall into the trap of only keeping track of your outcomes. It is important to note the difference between the work you put in leading up to the outcome and the outcome itself. What I mean by this is that no matter what you do to prepare for a certain event, there will always be luck involved which is out of your control. For example, you could know the probability that something will occur “X” percent of the time (like a poker hand) and be a relatively good predictor of that thing actually happening. But no matter how much information you have, you have no control over the amount of luck (in your favor or against you) which will occur.

Say you’re playing Texas Hold’em. You’re dealt pocket aces (two of the highest cards) to start the hand. Unless one of your opponents has the other two aces in the deck, you always are starting out with the higher probability of winning before any other cards are shown. But say you lose with that starting hand 3 times in a row. Would you vow to never play pocket aces again, even though statistically you are favored to win? No. That would be valuing the outcome over the process.

The processes you follow should be based on what gives you the best chance to achieve your goals. It may not always work in your favor, but if you are always putting yourself in position to succeed, more often than not, you will.

Measure your processes, not the outcomes. If the outcomes always seem to be going against you, test your assumptions about the processes (maybe you’re missing something). And be sure to not only dwell on the negative outcomes (it’s easier to remember something bad that has happened as opposed to the many good things that have occurred).

How to think about diet and exercise

For diet and exercise, don’t stress out if you don’t get everything you want done in a single day. Think about it in big picture terms. No single day is going to make or break you. It’s the accumulation of making the right decisions (good habits) that will get you to where you want to go.

When tracking what micronutrients you want to consume or what muscle groups you want to target, aim for a weekly average. Yes, you will need to break that down into what it equates to per day, but as long as you fit it in throughout the course of the week and you hit your weekly goals consistently, you should be ok.

Do what is manageable/sustainable for you and forgive yourself when you mess up. Instead of beating yourself up when missing a goal, get back on track as quickly as possible (with the next thing you eat or your next workout). Reduce barriers to what you want to achieve, develop good habits, and repeat.