Where I Started

Escapees - 

My parents retired around 2000. Growing up, I never recalled that they were ever rich or anything approaching rich. We were fine, but nothing remarkable. By around 2010, I started thinking about how they’d set themselves up for retirement. Their careers as educators included an annuity benefit - in essence, a pension for as long as they should live. 

Here I was, in my forties, feeling that my 401k was falling behind - despite contributing regularly (about 60% of folks feel the same way).

This was my first epiphany: the model that I’d learned - build some nest egg, spend it to zero, die - probably does not work. It’s certainly not stress free because you will throttle your spend according to your life expectancy. At some point, I began to see that my nest egg wasn’t the problem. The lack of recurring income was a bigger concern. 

To test this with your financial picture, try honest math and plug in your existing information. Now add $1000 / mo in recurring income, and see how much less you money you need stashed away to retire. $2000, better, etc, etc. 

Not to sound like a conspiracy theorist, but it wouldn’t surprise me if you said that your 401k broker makes more money than you do from your retirement investments. You cannot access those funds, the broker charges various fees, and they can utilize any surplus (cash reserves) to their advantage. The same would be true of any kid’s 529k, any leftover money is illiquid until the kid is retirement age.

So, that’s when I started investing in real estate. My LLC’s charter suggested that I would buy rental properties to create a steady passive income stream. 

In practice, however, the first properties were flips. My logic at the time was that because I didn’t know what I was doing, it would be good to get a couple of repetitions before moving into rentals. My first flip made a few thousand dollars, but I learned a lot, and was building a network that still serves me today.

Tying this back to the spirit of this newsletter, I had just started my second flip when I was laid off from a W2 job. While the money did not cover the loss of income, it gave me a sense of confidence, I was doing something right. And it broke up the monotony / rejection that demoralizes job hunters. Despite being only a few thousand dollars, it totally changed the way I saw myself and the opportunities before me.

 The profit from my second flip doubled from what my first had done, and the third doubled that profit again. I was making good money with little effort. I turned my HELOC into some $60,000 profit ($5k/mo!) or so over a year and a half. That awkward time of year (taxes) came around, and my accountant was less than pleased - this profit increased my taxes significantly, maybe even bumping Jen and me up a bracket.

I started to realize that some of the ancillary services were eating into my profits, too. When I said that I was making good money, that’s true. What’s also true is that my realtor was making at least as much as I was, with all of these purchases and sales. My attorney in South Carolina started sending me Christmas cards!

With this convergence of factors, it was time to move into rentals. Suffice it to say, that is mostly going fine, and my competence is growing as the portfolio (slowly) grows. My real estate plan is to be slow and steady. To use a baseball analogy, I’m looking for base hits, and occasionally lucky enough to score a double. But not putting our family at risk for the home runs. 

To me, the lesson has been “get in the game, it’s worth the risk” if done in a controlled, methodical way. 

Newsletter Update

In Sunday’s newsletter, I mentioned that I would insert an ad to test the waters of monetization. How much did I make? $1.00 (thank you, honey!) What did I learn from that? A lot. 

Why does this matter? It’s an example of the lesson above - had I not written newsletter one, there would be no ad opportunity. Without the second, I wouldn’t have seen how the process works and now could at least try some bumbling strategy for monetization if that’s the route this goes. Now I’m wiser if this experiment extends beyond April.

Oh, I could probably start deducting expenses from my taxes, too (a computer?). I’d have to confirm that with my accountant, but my logic tells me this newsletter is a real business now.

Thanks again for the support. Any feedback welcome!

Erik