Real Estate Investing for Everyone

A Guide to Creating Financial Freedom

Martin Stone

• Publisher: Ixia Press
• Year: 2019
• Print ISBN: 9780486820859
• eBook ISBN: 9780486837758
• Topic: Business
• Subtopic: Real Estate
• Index: Business

This guide demystifies the process of real estate investment. An expert investor and advisor traces the process from beginning to end, helping readers define their financial and personal goals.

PART 1

Setting Your Dreams in Motion

1

Building a Great Life

“The highest use of capital is not to make money but to make money do more for the betterment of life.”

—Henry Ford

In the book Invest in Yourself: Six Secrets to a Rich Life, coauthor Marc Eisenson notes that once we become adults, “we often lose track of life’s simple pleasures and of our own personal goals. We take a wrong turn or two, then spend a good portion of our lives doing things we’d rather not—while not doing the things we’d enjoy.” He goes on: “While we may obsess about how unhappy we are, we don’t focus clearly on what we can do to change the situation, on how we can invest our time, energy, and, yes, our money to consciously create the life we want.”

In this chapter I want to accomplish three things. First, I want to help you get a handle on where you stand financially at this very moment. Second, I’ll see what it will take to at least maintain your current lifestyle—how to generate that 80 to 100 percent of your current income needed once you’re through working. Third, you’ll do some realistic dreaming about the kind of life you’d truly like to have. Like Eisenson said, there are ways we can invest our time, energy, and money to consciously create the life we want. Here, in chapter one, you’ll consciously start down that road.

FOCUS UP

While this is a book about using real estate to create freedom in your life, the first goal is to get the attention of those who don’t already “get” it and help them focus on making life enjoyable. Any investment we choose is just a tool to help generate the money necessary to find or pay for happiness. Investing in real estate is no different, for it will be a means to an end. It’s like trading our time for dollars at our jobs. We don’t get up every morning at six thirty to be at work by eight o’clock because we simply love entering data into a computer. Rather, we go to earn the money we need to generate the type of lifestyle we desire. It’s an added bonus if we enjoy our jobs, but in the end it’s all about the money.

As we get older, we learn that though our jobs may be about the money, our lives are certainly not. It’s those priceless things that usually hold the most meaning: coaching our son in his first Little League game or watching our daughter in a ballet recital, wearing the dress we had the time to make. No, it’s not just about the money. But, alas, money is the tool we need to obtain the things we really want. We may not like these rules, but they are the rules nonetheless.

At this point you’re probably saying to yourself, “If it’s not about the money, then why am I reading this book?” What I’m talking about is finding a balance in life. I want to strike a chord in you, so you will start actively thinking about creating something special for yourself in the future, as opposed to just living for the present.

FINDING BALANCE

When most of us make comments about the rich, we usually say things like “Ah, they never have to work” or “They can do anything they want.” Thus, we resent the wealthy without realizing that with a bit of planning our lives could be abundant as well. Success is about finding a balance between wanting what you don’t have and being happy and content with what you do have. Poor people aren’t always unhappy, and rich people aren’t always happy.

Author Whit Hobbs says that “success is waking up in the morning, whoever you are, however old or young, and bouncing out of bed because there’s something out there that you love to do. Something that you believe in, that you’re good at—something that’s bigger than you are, and you can hardly wait to get at it again.” Hobbs doesn’t talk about money or a job. He’s talking about doing something every day that you love to do. Thus, money can’t bring happiness. But it will provide the opportunity and wherewithal to find what you love to do.

It’s the task of finding out where we would like to be that evades most of us. We get so caught up in surviving each day that we fail to make the time to remember what it is that really makes us happy. Worse yet, the things that probably would make us happy are with us daily, but we are so busy working at life that we fail to enjoy the happiness we do have. Remember the scene in The Wizard of Oz where everyone got their wish but Dorothy? The Tin Man was shown what a big heart he had; the Scarecrow realized that he was, indeed, the brains of the operation all along; and even the Cowardly Lion came to own his courage. For Dorothy, though, all hope seemed lost. That is until Glinda the Good Witch arrived. Glinda reminded Dorothy that she had been wearing the slippers that would take her home all along. Well, that’s what we’re talking about.

Isn’t it possible that we’re each wearing our own pair of ruby red slippers right now? To avoid chasing the wrong dreams, it’s important to spend some time now determining what it is that will give you joy and contentment in the future. Like Dorothy, a bit of focused thought on what it is we want might just send us home again. This is a book about making the money to pay the toll of life. This toll will help us secure the freedom to enjoy what makes us happy.

THREE KEY STEPS

Here are some strategies that should help in reaching your goals. Of course, these systems don’t carry any guarantee, but by educating yourself you maximize your probability of success. The Boy Scouts got it right when they made their motto “Be prepared.” This is advice that we all should take seriously for anything we do but especially when dealing with our future.

Besides being prepared, the following three steps must be adhered to when it comes to investing. Each step is essential, and each one builds on the other:

1.Grow your investments.

2.Protect your investments.

3.Enjoy the fruits of your investments.

Growing your investments is the first goal. The rub is that by growing our investments we must put off that all-too-common human trait to consume. As Americans, statistics show that the majority of us spend roughly 110 percent of what we bring in each month. No wonder we can’t get ahead. Now is the time to rethink that behavior. The idea is to deny ourselves a few present-day pleasures to achieve some loftier and more important goals for the future.

Protecting your investments is the second task. Because any profit is the return we earn for taking some level of risk, one can never have a foolproof investment. Nonetheless, if we do our homework properly and stay vigilant, we will realize the highest probability of success in reaching our goals. Thankfully, this probability of success is especially true when it comes to investing in real estate.

Finally, enjoying the fruits of your investments is what it’s all about. In life, nothing is worth it unless there is a payoff at the finish line. With investments, we call that payoff a profit. This is a critical component to the equation, but one that is all too often bypassed by the workaholic. For him or her and for many of the rest of us, we need to remember why we are trying to make those profits. It’s easy to get caught up in the growing phase of our investments and never take time out to enjoy the fruits of our labor. This attitude is just as risky as the attitude of those who live only for today.

DETERMINING NET WORTH

Before you can figure out where you’re going, you should get a handle on where you sit financially today. The next few forms are pretty simple to fill out. The best way to find out where you are at this moment is to work up a balance sheet, which lists your assets and liabilities. Once you’ve completed your list, if you subtract your liabilities from your assets, the remainder will be your net worth. Your net worth is the sum total of what you have been able to save from all the money you have earned to date. Theoretically, these are the assets you will be able to put to work to earn money when you retire. This money plus Social Security and any existing company retirement plan you may have will be the beginning of your nest egg. Don’t fret if you discover that your nest egg is nil or next to nil at this point. The idea is to assess where you are at this moment.

Because the goal of this book is to get you to take advantage of the benefits of real estate, we suggest you complete a standard Federal National Mortgage Association (aka FNMA or Fannie Mae) 1003 loan application. You can get one at almost any bank, mortgage broker, or savings and loan that makes home loans. These forms are the standard in the industry, and once put together with all the required schedules, they will save you a lot of time once you begin applying for real estate loans. Once completed, it will be easy to update any items that change over the years.

In lieu of a standard Fannie Mae loan application, you can start with the form in Figure 1.1 to help you determine your net worth.

FIGURE 1.1

NET WORTH SUMMARY

Home Equity		$________
	(value less loans)
Vehicle Equity		$________
	(value less loans; don’t forget boats and toys)
Cash or Equivalents		$________
	(savings, checking, money markets, etc.)
Stocks, Bonds, Mutual Funds		$________
IRAs, Keoghs, 401(k)s		$________
Equity in Life Insurance		$________
Equity in Other Real Est...

Table of contents

• Cover
• Title Page
• Copyright Page
• Contents
• Introduction
• Part 1: Setting Your Dreams in Motion
• Part 2: Digging Deeper
• Glossary
• About the Author