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How To Start Investing For Financial Independence, Part 2
Last week, we started a multi-part series about how to go from being a beginning investor to being "financially independent" in a steady and predictable way. Many, many people want to overly complicate this process so let's briefly, let's recap that discussion. The bottom line steps that I suggested in the last article was: 1) Look for an opportunity that will return at least 150% in 2 yrs or less; 2) Be mentally and financially prepared if the investment does not work out; 3) Have VERY good reasons why you don't think you will lose money?? You may not make as much as expected, but you would rather not lose money at this stage. 4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan. I gave an example where a hypothetical person had gone through this process and ended up with a profit of $43,000 (before taxes) and $36,000 of after tax profit. When this profit was combined with their original investment, they now had around $55,000 of operating capital for Step 2. Before we get to Step 2, let's take a step back. For a lot of people, if I told them that somebody made $43,000 on a quick investment, they would think these people had "struck it rich". Kind of like winning the lottery, right? NO! In the grand scheme of things, this investment will do very little to impact their financial independence. That is, it will take discipline to now use these profits to go into the next investment, and then use those new profits to go into the 3rd investment, etc. So, in our opinion, this first investment was merely a stepping stone towards a much bigger objective. In Step 2, most savvy investors will now realize they have just been given some extra monopoly money, or money that was not originally theirs, to work with. In the investment and trading world, this is referred to as the "market's money"; i.e., money that you got from the market that you can then use to generate revenues above and beyond what was possible with your original investment. Quality traders can use this concept to produce huge % returns in a year while risking no more than 10% of their original portfolio. So let's say the investor now decides to repeat the process and buy two more preconstruction lots in a different development. In the two years since the first investment was made, suppose now that property has escalated. In addition, the investor finds a good deal on two lots and each is $250,000 to purchase. Now, the investors visits their check list to see if this makes sense: 1) Look for an opportunity that will return at least 150% in 2 yrs or less -- yes, they have reason to believe this will occur for their down payment amount; 2) Be mentally and financially prepared if the investment does not work out--yes, they don't think it will happen but if they lose their entire 10% down payment, they are ok with this. 3) Have VERY good reasons why you don't think you will lose money?? You may not make as much as expected but you would rather not lose money at this stage -- They have done their due diligence and feel strongly about the investment. 4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan-- they are not swinging for the fences but rather patiently using the previous market's money to increase their investment. Well, like the other investment, suppose this one works out in their favor. In their two year holding period, the lots experienced a 35% increase in price. Not bad. They were hoping for more since they knew some places had that kind of increase in a few months but they are not complaining. After closing costs, the investor had about $55,000 invested and netted a total of $162,000 after expenses. Of course their silent partner, Uncle Sam, wanted their cut so now they are left with a $137,700 in profits and $192,700 in working capital. Not too bad after only 4 years. Now let's ask the question are they financially free? We'll, I doubt it. The investor could probably now survive for 2-3 years on the nest egg but only if they did not reinvest it. However, if the family and friends find out about this gain, then they will think the investor is now "rich" and living like the Vanderbilts...... For anybody that has made it to Step 2, you know they are far from rich because now they want to invest to go to Step 3 and this will likely consume most of their money. Frequently you will find people in the $0.5 -$2Million dollar net worth in this category where they are doing great on paper but they don't have any more "extra" money to spend than they did a few years ago. After Step 3-4 however, this can change dramatically. Before we conclude this week's article, let's talk about a very common, and deadly mistake. In the language of Texas Hold'em poker, it is the All In mentality. Frequently, after a first success, people now feel bulletproof and decide they want this process to go faster. They leverage everything the have and take on as much risk as the banks will allow them. If things work out for them, they will explode their wealth with that step. However, if something slips up, they are in trouble. Most people believe nothing like that can happen to them they are too smart. I mean everybody knows that real estate does not go down, Right? I know a gentlemen who is extremely smart, extremely business savvy, and grew his net worth to well over a BILLION dollars. Within a few years of that mark, he net worth was NEGATIVE and had to declare bankruptcy because of real estate. The process of building wealth in a controlled fashion over 6-10 years is so straightforward that I cannot see taking those kind of risks to make it happen in a much shorter time frame. Chris Anderson is a leading authority on preconstruction real estate investing and has been referenced in many venues including the New York Times and USA Today. Get up to the minute information about preconstruction projects at GetPreconstructionDeals.com.
MORE RESOURCES: Experts predicted Minnesota real estate agents would quit, 5 INVESTIGATES found a different reality 5 EYEWITNESS NEWS Altadena’s rough real estate market: Slower sales, lower prices, lottery winner plucking up properties Los Angeles Times Real estate magazine reports Les Wexner as Blue Heron buyer The Martha's Vineyard Times Real estate expert warns socialist mayoral candidate could trigger massive NYC exodus - Fox Business Canadian psychologist Jordan Peterson sets up shop in the Valley, records show The Business Journals Bedrock flexes its real estate portfolio to grow Detroit's tech ecosystem - Crain's Detroit Business Bedrock flexes its real estate portfolio to grow Detroit's tech ecosystem Crain's Detroit Business ‘Taken advantage of’: Real estate agent ripped off friends, church, and federal government - WSOC TV Office real estate wide open in Denver as vacancy rate hits 36 percent Colorado Public Radio Vail Valley real estate inventory is on the rise VailDaily.com NAR Real Estate Forecast Summit National Association of REALTORS® Real Estate Partners Dollar Tree Let's Talk Business: June residential real estate sales lagging, heritage grants and more Pueblo Chieftain A New Perspective: Here Comes the Groom | Real Estate Insights Piedmont Exedra Boston Real Estate Times Unveils 2025 Excellence Award Winners: Honoring the Visionaries Shaping New England’s Future Boston Real Estate Times Dawson County weekly real estate transactions, July 18 Central Nebraska Today State lawmaker joins Westport commercial real estate brokerage as vice president Hartford Business Journal Private Credit Surges in 2025 as Real Estate Developers Bypass Banks The World Property Journal Real estate news: Senior apartments in Tustin sell for $83M; Fullerton Metrocenter snares $118M Orange County Register 5 Essential Tech Tools for Real Estate Agents National Association of REALTORS® New York Housing Market Trends 2025: Is the Tide Turning for Buyers? Norada Real Estate Investments Los Angeles Water & Power commits $100 to real estate debt Pensions & Investments Today’s Mortgage Rates: The States Offering Lowest Rates – July 18, 2025 Norada Real Estate Investments Property management with an owner’s mindset J.P. Morgan Corcoran McEnearney Announces Evan Lacopo to Lead the Number One Real Estate Office in Alexandria, Virginia Alexandria Living Magazine Real Estate Market Report (June) highlandscurrent.org SRS Real Estate Partners Arranges $4.53 Million Ground Lease Sale of Walmart Property in Deltona, FL citybiz Licking County real estate transfers for June 30-July 4 range from $200,000-$14.6 million The Newark Advocate Banner Real Estate Group Breaks Ground on 334-Unit The Faywell Multifamily Development in The Heart MultifamilyBiz Bridgemarq Real Estate Services® Declares Dividend Yahoo Finance Moon Becomes Next Real Estate Frontier, NAR Reports Higher Foreign Investment In US Huntsville Business Journal CBRE Announces Strategic Leadership Appointments Across U.S. & Canada Advisory Business Boston Real Estate Times Gravelle advises on current real estate market in Grant County Columbia Basin Herald Mapletree Sells Sun Belt Warehouse Portfolio to EQT Real Estate for $241M Commercial Observer Operation Pawssible: Greenbrier Humane Society gets a boost from local real estate company Mountain Messenger GenesisM Breaks Ground on 154,000-Square-Foot Biomanufacturing Facility in Bedford, MA Boston Real Estate Times AGC MA Announces 5th Annual Building Advancement Externship to Bridge Educators with STEM Construction Careers Boston Real Estate Times What's the most expensive property sold in Rhode Island? July 18 real estate transactions The Providence Journal The Pipeline: Commercial real estate roundup for 7.18.25 Richmond BizSense Frederick Ford, real estate executive and first Black Union League Club president, dies at 98 Chicago Tribune LOCAL REAL ESTATE TODAY 7.18.25 KQEN News Radio Home Buyers: Stop Freaking Out After the Home Inspection National Association of REALTORS® Home Buyers May Have Accepted a New Norm on Rates National Association of REALTORS® Tips on spotting real estate investment opportunities and avoiding risks, from experts at GR Property Group Community Impact SRS Real Estate Negotiates $4.5 Million Sale of Walmart-Anchored Property in Metro Orlando Shopping Center Business Miami-Dade’s self-storage surge a boom for real estate IslanderNews.com Top Stocks for Real Estate Investment Elite AI Stock Forecasts - Massive wealth growth Jammu Links News Hunt Companies Acquires Controlling Interest in Carter, Strengthening Real Estate Development Platform Business Wire Stage Point Europe Launches Its RWA Token $SPET, Setting it up as a Bridge Between Crypto and Real Estate Morningstar July Economist Snapshot: What Will the Big Beautiful Bill Mean for Commercial Real Estate and Housing? Urban Land Magazine New plans unveiled for Water Street’s second phase Tampa Bay Times Vend Leans Into Verticalisation As Real Estate Revenue Grows 11% In Q2 onlinemarketplaces.com Is Apollo Commercial Real Estate Finance Inc. a good long term investment - Explosive market performance Jammu Links News Vendor & Real Estate Partners Dollar Tree Development Services Offers Online Early Assistance for Commercial Real Estate Projects Prince William County Government (.gov) Wood County Recorder reports on second quarter real estate activity BG Independent News Real estate sales in Jefferson, Bullitt and Oldham counties for Jan. 2-5, 2025 - The Courier-Journal Real estate sales in Jefferson, Bullitt and Oldham counties for Jan. 2-5, 2025 The Courier-Journal Real Estate Transfers ~ June 25, 2025 The Bedford Citizen Drake Real Estate Partners closes largest fund yet after pivoting to institutions Private Equity Real Estate | PERE Real estate transfers: Lake Township condominium complex sells for $5.61 million - Canton Repository Manitowoc's real estate transfers include a sale of nearly $1 million to Riverside Dairy Herald Times Reporter CCI Real Estate Obtains $67M in Construction Financing for Mixed-Use Community at University of Georgia REBusinessOnline |
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