Remember towards the end of 2017 when everyone was talking about tax reform? While many thought it was a done deal, those of us in the tax profession knew that the tax changes were far from being finalized.
Without too much media buzz, the IRS has recently issued some temporary guidance on what tax reform may mean for taxpayers. The key word here is may because what we received recently in August 2018 are temporary regulations and not final regulations. This means that the law is still not finalized and is subject to additional changes and clarifications. Before these temporary regulations came out, the tax reform bill left many questions unanswered. This included who got certain new tax breaks, who might be excluded from certain tax breaks, how the new tax breaks would be calculated, etc. The newly released temporary regulations provide us with some guidance on how the tax law may ultimately read. Although these are still subject to changes, we now have a little more information than we had before, and that can prove to be a very powerful tool for those of us who want to get ahead of the game to take advantage of tax reform. As you already know, there were many changes that took place as part of tax reform. You can read more about those changes here.Today, however, I want to focus mainly on the important updates from the latest temporary regulations and their impact on real estate investors. We will discuss the tax reforms impact on flippers/wholesalers, private lenders, landlords, BRRRR property owners, short-term rental owners, and real estate agents. One of the major tax breaks under tax reform was the Section 199A deduction. Simply put, this tax break provides certain flow-through business income with a 20% deduction, which essentially makes 20% of the profit tax-free. Currently, this deduction does not apply to W-2 wages, interest, dividends, and capital gains income. Flippers/Wholesalers Flipping and wholesaling income is generally eligible for the 20% tax-free treatment. Lets take the example of James, who is a fix-and-flip investor. If James made $100k in flip profit, the first $20,000 of that would be at zero tax. Assuming he would otherwise be in the 24% tax bracket, this new tax break saves him up to $4,800 in federal income taxes. $100,000 x 20% = $20,000 tax-free income $20,000 x 24% = $4,800 tax savings under Section 199A It is important to note that the Section 199A benefit is available for certain types of income generated through LLCs, S corporations, partnerships, and sole proprietorships. This means that having a legal entity is not a requirement to receiving this tax benefit. As such, James is potentially eligible for this tax break regardless of whether he is conducting his flip through an S corp, LLC, or simply as a sole proprietorship. It is also important to note that simply having a legal entity does not automatically mean that the income earned in the entity would be eligible for the 20% tax-free treatment. Ultimately, it is the type of income that determines whether it is eligible for the tax-free treatmentirrespective of whether it is earned by the flow-through entity or in the individual taxpayers name. Lets go over an example of how this works. Related: PSA: Taxes Are the Biggest Cashflow Killer (With Examples) Private Lenders Lisa is a private lender and lends her money to other investors who flip real estate. As a private lender, Lisa earned interest income of $10k. Since interest income is not eligible under Section 199A, Lisa would need to pay taxes on this entire amount, and none of that will be tax-free. This is the case even if Lisa were to put her money in an LLC and then have the LLC lend out to flippers. The reason is because in both scenarios, Lisa is generating interest income. Alternatively, what if Lisa was not a lender and was actually the person flipping the property? In that scenario, Lisa is earning active income from flipping real estate (just like James), and thus up to 20% of her flip profit may be tax-free under Section 199A. This is the case regardless of whether Lisa flips in her personal name or in an LLC or S Corp. As you can see from this example, earning interest income versus flip income can have a notable impact on whether this income is eligible for the 20% tax-free treatment. Landlords Prior to the release of the temporary regulations, most tax advisors were fairly certain that the 20% tax-free treatment would be applicable to rental income. One of the most disappointing things that came out as part of the temporary regulations is that the IRS issued confusing language surrounding this area. Instead of clearly stating all rental income would qualify for this tax break, the IRS instead made references to other code sections that create further mystery on exactly when rental income may qualify for this tax break. Currently, there are many debates in the tax world on what type of rental income may qualify for this tax break: Do you need to own a lot of rental properties to qualify? If so, how many?Do you need to be the property manager of your rentals to qualify?Do you need to spend a certain number of hours in your rentals to qualify? The bad news is that if you asked these questions to three different tax advisors, you would likely get three very different answers. The reason is because each tax advisor may have their own interpretations of the tax law and their own risk/tolerance level. What we are all hoping for is a more definitive language in the final regulations from the IRS that clearly indicates what type of rental income may qualify for this 20% tax-free treatment. When will the final regulations be released? That is anyones guess. Will the final regulations clearly tell us if all rental income qualifies for this tax break? Nobody knows at this time. So what does this mean for us as real estate investors? It means now is a good time to discuss your rental business with your tax advisor. Find out what their interpretation of the law is, and determine whether there are things you can do to ensure that your rentals qualify for this tax break. My personal opinion on this topic is that all rental income may be eligible for the 20% tax-free treatment. There are many court cases in the past where the tax court affirms the definition of rental income to be trade or business income. This can change, of course, pending any final IRS regulations or further updates from the IRS. For now, I see the temporary regulations as favorable to those of us earning rental income with respect to the tax break. Buy, Renovate, Rent, Refinance, Repeat (BRRRR) What about investors involved in the BRRRR strategies? Do they get the tax break? The answer is easy: It depends on your view of whether rental income is eligible for the tax break. From a tax perspective, BRRRR is just like any other rental, so it is treated the same as a regular buy and hold transaction. If your tax advisor interprets that regular rental income meets the definition for the 20% tax-free treatment, then the rental income from the BRRRR transactions will qualify as well. Related: The Tax Implications You MUST Understand Before House Hacking Short-Term Rentals We have seen a significant increase in the number of investors involved in the short-term rental business. For the most part, we are also seeing significantly higher profits in short-term rentals as compared to traditional long-term rentals. In the short-term rental space, there are two potential tax treatments. If hotel-type services are provided to the guests (i.e. room service, food and beverage, daily cleaning, etc.), these may be treated as ordinary income for tax purposes. In this scenario, the income may generally qualify for the 20% tax-break. Most of the short-term rentals we see, however, do not provide these hotel-type services. In these cases, the income is treated the same way as regular long-term rentals. As such, whether it is eligible for the new tax break will just depend on your tax advisors interpretation of the eligibility of rental income. Real Estate Agents & Brokers Real estate brokers and agents who earn commissions income are generally eligible for the 20% tax-break. This applies to such income earned in a flow-through entity, as well as income earned as a sole proprietorship. Please note that real estate agent income earned as W-2 income is not eligible for the 20% tax break. As such, if you are able to earn your income as a 1099, you may get significantly more tax savings as compared to a W-2 realtor. Prior to the release of the temporary regulations, most tax advisors were under the impression that those higher income taxpayers who earn commissions income from real estate may lose out on the Section 199A tax break. In one of the largest welcome surprises to the temporary regulations, the IRS has indicated that even higher income taxpayers with real estate agent commissions income may be eligible for a full or partial benefit under the tax break. As you can see, there are many changes that will be impacting real estate investors taxes for 2018 and potentially more changes to come before the year is over. Make sure to take advantage of these tax breaks and meet with your tax-advisor to do some proactive tax planning. Do not fall behind by waiting until next April because chances are, that may be too little too late to reap the potential tax savings. Any questions about this recent update? Leave them below! https://www.biggerpockets.com/renewsblog/latest-tax-reform-update-means-real-estate-investors/
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Look, when youve been in the industry for as long as I have, you network with a lot of people and do a lot of dealsand then you get screwed. When you get screwed, you quickly realize who is screwing you and what traits they have.
There are hundreds of traits that may be indicators of this, but Ive selected three that I am going to touch on today. [embedded content] 1. Wrong ExpectationsThe first trait is having the wrong expectations. If you fall prey to this, youre probably going to fail. These people are often brainwashed by what theyve seen online, heard in a seminar etc. Or theyve listened to a guru in a podcast and think that real estate is going to be very easy, that they just have to show up and everything will be delivered to them on a silver platter. Guys, that is very wrong. You have to work hard, and you have to prepare for the worst and hope for the best. I can tell you right now that the worst is going to happen, and its going to be very hard and a lot of people cannot recover from that. So my message to you is lower your expectations. Its going to take you a long time to get you where you need to be. There is no quick way to succeed overnight. A lot of people try and cut corners, but they make mistakes and get into a lot of trouble. So definitely dont be one of those investors. 2. Blaming OthersThe second trait is they are quick to blame others for their shortfalls. This is something that is absolutely mesmerizing to me. Look, to be honest, I kind of did this when I started, but then I realized Im the master of my fate and the captain of my soul. I realized I could control my own destiny, so I took responsibility and began to keep myself accountable. If youre in the mindset of pointing fingers and blaming others, youre not going to get anything from it. You may get some type of weird self-satisfaction, but that wont solve the problem. The problem is still going to be there. All of the world-renowned entrepreneurs and business owners take full responsibility. Something that I remember hearing is when Oprah Winfrey blamed herself for her luggage not arriving at the destination she was traveling to. How extreme is that? She said something along the lines of, I should have sent my luggage two days prior to my flight so it could wait for me until I got there. In my opinion, that is the mindset that you must have. Forget about blaming others. Related: The Top 7 Traits of Unsuccessful People 3. LazinessThe third trait is laziness. There are so many lazy people out there. I like to call them Johnny Talkers. Something I like to say is, Be a Johnny Walker and make it blue with two ice cubes. Not sure if there are any scotch drinkers out there, but Johnny Walker Blue Label is a pretty expensive scotch. Guys, nothing comes without hard work. I have come across investors, employees, and numerous other individuals who are all talk. But when it comes down to setting your alarm at 5:00 a.m. and getting up, no one is willing to put in the effort. Youre looking at someone with no formal education. I cant type, I cant read, my grammar sucks, and my math skills are poor, but I work hard. You dont need any talent. You just need to get up, show up, and put in the effort. Work your butt off every single dayjust dont be lazy. Dont talk the talk; do what you say youre going to do. Whats going to happen is youre going to make mistakes but learn from those mistakes. Pick yourself back up and keep moving forward. Its not going to happen overnight. Ive been doing deals in the U.S. for six years now, and Ive done some amazing business, Ive ran various companies, and Ive achieved tremendous success. I have also lost a fortune, but I make more than what I lose. And one thing that I am never going to stop doing is working hard. What have you seen other lame investors do? What are some of the mistakes youve made in the past? Look, Id love to hear from you. Comment below. https://www.biggerpockets.com/renewsblog/youre-not-cut-out-to-be-real-estate-investor/ Special Thanks to Mashvisor.com for providing some of the critical data used to create this piece.
Let me tell you something that most people hate to hear: Where you live is up to you. The wealth building process, including investing in real estate, is a direct function of both how much you earn and how much your life costs to maintain. If you live in an expensive city and you are an independent adult, you are responsible for your high cost of living. I made a very deliberate choice not to move to an expensive city upon graduating college and sacrificed some earnings potential for a very real tens of thousands of dollars in cheaper living expense. When you decide to live somewhere expensive, you forgo the opportunity to build wealth like those who live in other places. If we accept this, then you have to understand that when you live in an expensive city like San Francisco, you forgo wealth building opportunities for the luxury of living there. I didnt understand this choice personally. Then I visited. I had the good fortune of being able to visit San Francisco last week on a business trip for BiggerPockets. I loved it. I get why the people who live there must love it, too. Theres the gorgeous scenery, the coast, the beach, the mild weather, the beautiful buildings, and the lovely parks. Theres great food, beer, restaurants, and entertainment. But what really stands out are the people. The tech entrepreneurs with their boundless optimism, many of the very best young people just getting started in life and working at the greatest companies in the world. Those continuing the decades old San Franciscan counterculture movement. And of course, those left behind by the incredible progress of the city the homeless and beggars that are impossible to ignore. Overall, theres a culture in San Francisco that is impossible to replicate and one that might (for some folks) be impossible to walk out on. If thats youand you want to get involved in real estate, you are in a tough spot. That said, lets talk about the purpose of this article how to get started in real estate in San Francisco (and expensive cities like it). First, lets define why traditional real estate investing is so difficult in San Fran. There are two main reasons: Real estate in San Francisco is among the most expensive in the country.Rents, while incredibly high, are some of the lowest in the country relative to property purchase price. That second point is the real key here for the aspiring real estate investor. Most barriers in real estate can be overcome by finding great deals and by partnering with those whohave the capital to fund your new business. But if a property loses money, theres not much that can save you. While the average citizen might think that rents are crazy expensive (and they are!), for the owner of real estate, the rents are only material in relation to the purchase price. Below, find a chart indicating some of the larger cities in the country. Here, we divide average Fair Market Rents (FMR) by the average sale price. Note* These graphs are provided using the data from BiggerPockets real estate investment market index. These three graphs tell us three things: Rents in San Francisco are really expensive.Home values are insanely expensive.Because home values are so much more expensive relative to average rents in San Francisco, San Fran has one of the lowest rent-to-home-value ratios in the country. These three points pose a challenge for landlords because when properties generate little cash flow per dollar of purchase price, it means that a leveraged real estate investment might negatively cash flow. In other words, if you are an average Joe looking to buy traditional rental property, you will bleed cash. That doesnt help us with our goal of living for free. But is there a way to make this work? Short-Term Rentals As I discovered onmy visit to San Francisco, not only are rents very high, but hotels are very expensive as well. In fact, the entire short-term rental market is expensive. While searching for a place to stay on Airbnb, perhaps the largest short-term rental platform in the city (and the country), I was shocked at the absurdly high prices and the absurd places being offered. One of the cheapest spots near the financial district (where the conference I was attending was being held), for example, was going for $179 per night. This wouldnt be crazyexcept that I was going to stay in a one bed, one bath 400 sq. ft. apartment with some random girl who would be selling the bedroom and sleeping on her couch! What!? While I admire the amazing frugality of this particular woman, that seems a little extreme. But it also sparked an idea what if San Franciscans could make this womans strategy work as a true investment? What if they could cash flow on these high end condos by renting them out on Airbnb? Perhaps that would allow them to take advantage of their love for and knowledge of the city and purchase property right in their backyard property that actually makes some kind of financial sense. Related: AirBnB vs. Traditional Rental Income: A Creative Way for Investors to Cash Flow in Expensive Cities Perhaps San Franciscans, like the mythical house-hackers of other cities (like myself here in Denver, CO) could live for free. So, I talked to my colleague Peter from Mashvisor.com, and he generously donated some incredible data on Airbnb rental rates, occupancy, and competition (total listings) over the past few months. This data is broken down by neighborhood and includes only the ten neighborhoods in San Francisco that see the most Airbnb action. You can check out that raw data and some of my calculations for San Francisco in the spreadsheet I built here. I then took that data and made a little bar graph (youll notice I like those). Here are the results: Lets break down whats going on here. Airbnb income is a function of two things: Average rent per nightAverage occupancy Unlike a traditional rental, where occupancy is usually 90 percent or higher, short-term rentals typically miss a few days per month. This means that cash flow can vary greatly depending on the month, the time of year, important events, etc. The data here takes the average of both the nightly rate and the average occupancy levels. We then multiply that out to get an average monthly income based on historical averages. Note that some of these neighborhoods had particularly low occupancy rates (below 50 percent). While that may have something to do with that particular neighborhood, it seems to me that a great marketer could substantially improve on these income numbers with some intelligently applied effort. Finally, in the dataset, we take the average sale price of the most commonly sold type of property in that neighborhood. For most of the neighborhoods studied, were looking at condos. But for the Silver Terrace and Outer Sunset neighborhoods, we look at single family homes (SFRs). Looking at the data, it looks like two neighborhoods, Cow Hollow and South Beach, might actually make mathematical sense, on average, for this particular strategy. It looks like the average Airbnb listing could bring in almost $50K in revenue per year for those locations! This suggests to me that it IS possible to cash flow in San Francisco with a typical property in some of the most desirable neighborhoods in the city. In Cow Hollow, for example, Airbnb provides almost twice as much monthly income as Fair Market Rent for the city! And remember, thats the average for this dataset. Think you could do better than average? I do. Again, feel free to download the dataset for yourself here. Drawbacks I hope that so far Ive at least convinced you it is possible to cash flow in San Francisco. I still wouldnt touch this city as an outsider, and Im definitely not saying that things will be easy, but I hope the numbers I present here at least indicate that cash flow is possible. Its possible, that is, if you can overcome some major hurdles: Hurdle #1: You have to LIVE in the unit you are renting out. To quote Airbnbs website (a much more thorough explanation than we will delve into here and one that any and all parties interested in short-term rentals in San Francisco should reference in conjunction with the official documents distributed by the city government): Primary Residency Requirement. To register your listing, you must live there for at least 275 days per year (or if you havent lived there for a full year, 75 percent of the days you have occupied the unit). This means, in effect, that your ability to share your space while you are present is unlimited, and you may rent out your entire space while you are absent for up to 90 days per year. Read more in the Citys Starter Kit or on the Planning Departments information page. For more information on how to get started with short-term rentals on Airbnb, check out this Short-Term Residential Rental Guide, put together by San Franciscos government (also linked above in the Airbnb quote as a Starter Kit). Hurdle #2: Theres a passionate lobby in San Francisco dedicated to stopping you from making money off short-term rentals. Those interested in short-term rentals in San Francisco should be aware that there is a very entrenched lobby against short-term rentals. This lobby likes to patrol the internet, Airbnb, and has even commented on my prior writing here on BiggerPockets. This lobby is extremely diligent about fighting those looking to Airbnb their properties, as I can attest, having been called out by members of various anti-Airbnb lobbyists while discussing this very subject in the past. A savvy short-term rental investor will carefully read the laws and follow the citys instruction to the letter. You have been warned there are those who are strongly opposed to you succeeding in this type of investing, and they will do their best to bust you if you so much as put a toe out of line. By the way, Id be careful with condos, too. Surprise! Many of the folks that are against short-term rentals hold powerful positions in HOAs across San Francisco (read: if thats a surprise to you, you need to do more research before entering this game). Dont put yourself in a position where you could be vulnerable to a large HOA organization that prohibits short-term rentals. That can destroy your propertys income potential overnight. Hurdle #3: San Francisco charges a tax on short-term rentals. San Francisco charges a tax on all short-term (less than 30 days) rental income. This tax is 14 percent and will be paid by the guests. Youll have to note to the guests that this is a fee that will increase the cost of their stay. While the guests pay it and Airbnb will generally take care of the collection and remit payment to the city, it certainly doesnt help your cash flow, and its not very much fun to pay as a visitor. Related: BiggerPockets Real Estate Investment Market Index: The Best (and Worst) Major Markets for Real Estate Investors, 2015 Hurdle #4: The price of property is prohibitive to most. All of this talk about how the numbers might work out for the savvy San Franciscan investor or resident looking to live for free is great, but it ignores the fact that property is so expensive in the first place. How on earth are you going to afford a multi-million dollar single family home or even a condo in a part of town that is reasonable to live in? This is the part where you have to get creative. Unless you make several hundred thousand dollars per year, you probably wont be able to make this strategy work with a traditional bank or lender. You may need to team up with wealthy investors, split equity, and find ways to manage a business that is integrated with your life for mutual financial gain. Or you may need to get creative with your debt structure and find a way to gain access to tremendous leverage. Either way, you will likely have to give up something to purchase property. This will likely affect your returns, but might just be enough to put you in a position to make big profits from future appreciation and enjoy a great part of a great city for free. A Few Quick Airbnb Tips There are a two basic, probably obvious points that I want to leave the future Airbnb investor with before concluding this guide: Airbnb income is heavily dependent on location. Obviously, people want to visit your city and be located within walking distance to the great things your town has to offer. That means getting a great spot within a great neighborhood is critical to long-term Airbnb success.Reviews are key. Mashvisor has found that somewhere in the ballpark of 10 reviews creates a huge increase in demand for Airbnb hosts. Prior to your first ten reviews, expect to have some more vacancies than you might have planned for. Once you get those first 10 reviews, however, vacancy rates seem to drop, and your situation continues to improve as the reviews keep coming. Interestingly, great reviews dont seem to make a vast difference from OK reviews, but bad reviews really do hurt. I guess guests just dont want to have a terrible experience, and ten OK reviews are a good start to providing assurance that you arent ridiculous and/or likely to terrorize your guests. Dont give up until youve got those first ten or so reviews (as long as they arent bad!) its then that youll be over that initial hump and (hopefully) begin to really scale.Conclusion If the above is TL;DR, here are the key points: The math that Ive done for you, with the help of our friends from Mashvisor.com, seems to indicate that it IS possible to seek out some cash flow from real estate in downtown San Francisco using Airbnb. Thats the good news. The bad news is that this cash flow requires work, property is expensive and hard to finance, and you will face scrutiny and opposition from folks all around the city looking to stop you. San Francisco, I love your city, but Im not putting MY dollars in your real estate. That said, if YOU love it enough, theres no reason why you cant push through these barriers and put in a little sweat. If you can use math, common sense, creative financing, and carefully toe the line, you might just be able to own some great property and enjoy your beautiful, wonderful culture for free, courtesy of Airbnb. Mashvisor aggregates data on traditional and Airbnb rental income to help real estate investors research and analyze neighborhoods, cities, and regions for investment opportunities. Their data may be helpful to investors seeking to perform analysis similar to that done in this article, in cities and regions around the country. Thanks again to them for providing this information for free to BiggerPockets! Please leave a comment letting me know if you think this strategy would work or if youve found a way to cash flow in an expensive city, let me know how youve done it! https://www.biggerpockets.com/renewsblog/pros-cons-airbnb-live/ The only thing worse than not reading a book in the last ninety days is not reading a book in the last ninety days and thinking that it doesnt matter Jim Rohn
To be successful in real estate investing, you have to take the right actions. A wrong turn could put you back years and cost you a lot of money. There are two ways of learning what works and what doesnt. You can learn from some one elses mistakes, or you can make them yourself. If you want to do anything great, chances are someone has already done it. Theyve also made a lot of the same mistakes youre likely to make. Theres this funny thing about successful people. They love talking about how they did it: writing books, blogging and giving speeches. Think about this for a minute. If you read a book of distilled lessons from an investor with 30years experience, have you not gained 30years of knowledge? How long would it take you to gain that knowledge yourself? Related: Income Inequality: Are the Wealthy Superior People or is the System Unfair? If you listen to instructional CDs as you drive each year, it would be the equivalent of two semesters of an advanced degree in college. Brian Tracy What would happen if you read two investing or business books a month starting now? In a year you would have read 24books. If each book distilled just 10 years of the authors investing experience, you would now have 240years of knowledge. In just four years, you would have gained over 1,000years. How much time and money do you think that will save you? A book costs $15. BiggerPockets is free. What is the cost of making a real estate mistake? Read 500 pages like this every day. Thats how knowledge works. It builds up like compound interest. All of you can do it, but I guarantee not many of you will do it. Warren Buffett Lets Look at a Few Statistics*Where wealthy = $160,000 or more annual income and greater than $3.2 million in net worth and poor= $35,000 or less in annual income and $5,000 or less net worth. How to Find Time to Read More(& Make It Count)Bathroom Reading I always have a short chaptered book in the bathroom. The One Thing, The Book on Investing in Real Estate with No (and Low) Money Downand Dont Sweat the Small Stuffare my favorites. You can read and re-read these books. Car Reading Audible has a huge selection of affordable business audiobooks available. Most books are 8-15 hours long and easily finished during your work commute. Making Time Before Work Most people learn better if they read in the morning. I like to start my mornings reading something educational. If I read in the morning, I can spend the rest of the day reflecting on and trying to implement what I learned. Related: A Case Against Frugality: Why Pinching Pennies is NOT the Best Path to Wealth ConclusionFormal education will make you a living; self-education will make you a fortune. Jim Rohn Every day you choose what you do and you choose what you dont do. The more you learn from other people, the more successful youll be. Warren Buffett, one of the richest people to ever live, spends about 80% of his work day reading. He started this habit when he started investing. Book Recommendations by BiggerPockets Authors: Were republishing this article to help out our newer readers. What are the top 5 books that YOU would recommend as must-reads? Whats on your reading list? Lets help each other out with suggestions in the comments section! https://www.biggerpockets.com/renewsblog/2015/08/19/simple-habit-wealthy-people/ Real estate is an awesome investment. It is really essential. Still, there is something even more important for us all to invest in.
What You Should Be Investing in Alongside Real Estate This should be a no-brainer. You should be investing in yourself. Ive written on this subject multiple times because it has truly been a game-changer for me. Social media influencer and multi-family real state investor Grant Cardone says the most important thing you can invest in is yourself. Invest in yourself and your mental skills and view yourself as an asset, and youll get the greatest returns. It will positively impact your value, your capabilities, and everything else you do. This is the foundation of being able to work smarter rather than working harder with diminished results for the rest of your life. Abraham Lincoln once said ,Give me six hours to chop down a tree, and I will spend the first four sharpening the axe. What I get from that is you are the axe and the investment is in the sharpening. Chopping down the tree in its entirety is the goal. Investing in yourself will allow you to accomplish each goal that much faster. This is true whether youre building a business or investing in real estate. Related: 12 Reasons Why Rental Properties Are the Best Investment So, how do you invest in yourself? Invest in Connections They say your net worth is equal to your network. So, one of the best things to invest in for self-improvement is your connection with others and the quality of your network. This isnt just about getting names to throw on your email list. It isnt just who you know, but who knows you and your ability to grow real connections. You can do this online with social media and forums to some extentbut you should also go the offline route by attending local networking events and being more sociable. I decided this year that majority of my earnings would go towards attending conferences that not only would help my mindset but that would contribute to building skills and connections. It has been truly beneficial. Invest in Knowledge: Reading & Books When growing up,the mindset I had was that education would end when school did. Little did I know that that mindset is why so many people achieve so little. So few people read and make it a priority to learn and acquire new skills. The average CEO reads a book a week, while common person reads fewer than four a year. I bet those books for the average person are not self improvement-related either. So, read more!Many think YouTube and podcasts are a substitute. Combine the sources to help retain the information. Invest in Building Your Personal Brand Invest in your personal brand, which will allow you to get more deals and clients and increase your perceived value. You might be the best in the business, but people may never know or give you the chance to find out unless you have a strong and visible personal brand. Related: 32 Signs You Might Be a Bona Fide Real Estate Investor Invest in Your Skills Always be learning something or acquiring a new skillit is even more important now with artificial intelligence coming into the picture. Learning is actually fun, especially when you look back a couple years and see your progress and realize there is so much to learn moving forward. For those interested in investing in real estate, there are so many areas you can build on that will give you an edge and make what you do easier and more profitable. That can include taking courses on capital raising, fundraising, sales, appraisals, property management, and construction. Summary Everyone should be investing in real estate. But even more important is committing to constantly investing in yourself. Invest in your mind, network, and personal brand. Dont leave it to chance or your spare time. Just as you cant wait to see if you have any change leftover at the end of the month to invest with, make it a priority to better yourself. Make it one of your goals and schedule it in advance for the year ahead. How do you invest in yourself on a daily, weekly, and monthly basis? Comment below! https://www.biggerpockets.com/renewsblog/what-you-should-be-investing-in-besides-real-estate/ How is it possible to buy a beautiful, debt-free home on 10 acres for full market value and not use a bank or any of your own cash?
I know what the naysayers are thinkingthats not possible. Youre correctif thats your expectation and youre looking for excuses. If, on the other hand, youre looking for ways to succeed and to properly structure deals, then take note of this deal structure for sure because you can and should be doing these deals. Buying Real Estate on Terms I love doing sandwich leases, but our preference is to own the homes wheneverwe can. Owning for us means buying with owner financing or subject to existingmortgages. The seller had it on the market during the spring and summer of 2016 and couldnot sell by owner at $598,000. Then he dropped it in a panic to $399,000because he wanted to leave the area, and at this point, we started discussions. The holidays were creeping up and his family had already relocated to Texas. His motivation was to be there with them.Its super important to not get caught up on price, but rather, look at the sellers motivation and timingfor selling. Related: 4 Reasons Property Owners Might Choose to Sell via Seller Financing We structured an owner-financed deal with him for 24 months (shorter than weprefer, but it was a gorgeous home) with principal-only payments of $1,540/month. That means no interest, 100%principal pay-down every month. The price we paid was $420,000. That means our balloon payment on or before 24 months is only $383,040. By the way, owner financing can be donemany many ways, but when I refer to owner financing, Im referring to a free and clear property every time.This way, we can structure principal-only payments. We exit almost all of our properties with a rent-to-own buyer, and this one wesold for $499,000 on a 24-month term. Its typically our policy to structureour selling side shorter than our buying side to allow room for delays, financing,or any other curveballs that can come your way (and they will come!). We were notable to do that on this one, so we were super careful with the prescreening of thisbuyer to make sure they could be mortgage-ready in time. The monthlypayment was $2,300. The monthly spread on this property then was $760, less insurance of approximately $110so lets call it $650. On all properties we buy and sell on terms, we create three paydays. The first is the non-refundable down payment we collect from the buyer after theyve been prescreened and have a mortgage-ready plan they can succeed with. These are notalways up front, but typically we wont let someone in the door without at least 3%and a plan to bring that up over time to the 7%-10% range. Trust me on this oneif you take less than 3% and do not have a plan, youre asking for a problem becauseall you really have is a tenant. Now, some might say,Who cares if the buyer cannot cash you out? Just sell itagain and collect another deposit!Morally and ethically, we cannot operate thatway, so we have a strict prescreening and buyer on boarding process that providesthem a clear path to mortgage readiness and home ownership. In this case,it was approximately $65,000 over time, and over time in this case meantevery six months they were putting down $8,000+. Payday number two for the entire termwas $15,600. If we owe the seller $383,404as noted above and the buyer goes the full 24 months(they were prequalified to be mortgage-ready in 18-24 months),our payday number threeis $499,000, less $65,000 paid and less $36,960 principal pay-downor $50,960. Now, as a summary for you, this deal so far with three payday totals: Payday #1: Deposit$65,000Payday #2: Monthly Cash Flow$15,600Payday #3: Back Dnd/Financing$50,960Total: $131,560 By most peoples standards, the fact that we put $100 down on thisand are able to extract$131,560 is out of the ordinary. For us, its rather normal as far as deal structure and is a bit above averagefor size of all three paydays. In fact, our current actual average all three paydays is $80,471.86,and we do 2-4 of these every month with our small family company. Related: Seller Financing: Benefits & Drawbacks Investors Should Know What if the Buyers Have a Life Event? Well, Im the first one to tell you that approximately 5% of your tenant buyersevenif you have a strict protocol like we dowill have life events or other problems thatprecludes them from moving forward. What are our options if this were to happenon this deal with such a tight timeframe? We could: Ask the owner for an extension.Ask for an extension with a small principal pay-down from another payday from another deal.Ask for an extension with a small extension fee, keeping in mind an extension means further principal pay-down.Ask for an extension with the same monthly payments but less than 100% going to principal.Pull in an investor with IRA money sitting around not earning a nice rate of return. It will pay you well to be amaster transaction engineer, understanding how to navigate any deal that comes your way. Whats your favorite way to structure no money down deals? Comment below! https://www.biggerpockets.com/renewsblog/half-million-dollar-estate-no-money You do not need to wake up early to be successful.
You do not need to eat breakfast to be successful. You do not need to meditate to be successful. You do not need to journal to be successful. You do not need to believe anyone elses mantra to be successful. You need to do what works for you to be successful. You need to produce results to be successful. I am tired of people telling me that I have to get up early to be successful. I am tired of people telling me that I have to perform a morning routine. I am tired of people telling me that I need to exercise, journal, meditate, reflect, or whatever other stuff it is people do between the hours of 5:00 and 8:00 a.m. [Cue the flood of comments from people who wake up early about how wrong I am.] This article is not written for the guy wholikes getting up at 5:00 a.m. This article is written for the guy who wouldnever under normal circumstances get up at 5:00 a.m. but does so in the name of productivity and/or success. This is a myth. It can work for some people, but it isnotthe act of getting up at 5:00 a.m. that does anything for you. It is the act of setting aside time and producing results with that time that counts. If that happens to be at 5:00 a.m. for you, great. If it happens to be later in the day for you (like it is for me) thats great too. Please, stop listening to those folks who tell you to get up early to be more productive. You do not have to wake up early to be successful. You do not have to do anything anyone tells you about rituals or mornings to be successful. I do not have to do these things to be successful. And neither do you. Success Doesnt Have to Happen at 5:00 a.m. I do not do these things, and I believe that I am off to a semi-successful start to my career. I have achieved a modest level of financial independence; I own well over $1M in real estate. My assets produce thousands of dollars per month in passive cash flow, and I wrote a best-selling book. I have helped grow BiggerPockets to 800,000 members. I have generated close to $2M in direct revenue for BiggerPockets. I have my real estate license. I enjoy my evenings and weekends, and I play rugby, ski, bike, and maintain my body. Ive read literally hundreds of business, success, management, and other books related to my career. I am 26 years old, and I hope to continue to produce results in perpetuity. Im just getting started, I hope. I wake up most mornings between 7:30 and 8:00 a.m., which I feel is pretty standard, if not a little on the late side for your typical worker. I do not mess around with the alarm clock and do not snooze past the time I set to wake upthat IS a waste of time, in my opinion. I drink some water, take care of personal hygiene by brushing my teeth and showering, pack up my things, and bike or drive to work, depending on the weather. Sometimes I eat breakfast, but much of the time Im not really hungry when I wake up, so I wait until lunch to eat my first bite of the day. Surprisingly frequently, Im just truly not hungry until a late lunch (1:00 p.m. or later). Thats how I roll. Youre going to tell me thats less effective than forcing myself to eat a healthy breakfast? Duly noted. Related: Search morning The 7-Step Morning Routine That Transforms My Entire Day I go to work, work hard, set goals, track my progress, work out in the afternoon or evening, track my progress, and plan my day the night before. I have had success doing this. Yes, I Tried the Miracle Morning I understand that there are books out there like The Miracle Morningthat talk about the profound impact that waking up early can have on your life and the morning routines of early risers who have an almost mystical air of self-righteousness. I read The Miracle Morning. And I tried it. All that happened was I went to bed earlier. Then, I wasted 30 minutes doing the S.A.V.E.R.S. (Silence, Affirmations, Visualizations, Scribing, Reading, Exercise). Great. I experienced no increased results and no profound change over my body. I did not get into shape. I did not suddenly achieve at a higher rate. I did not suddenly feel more energy. I did not write better, communicate better, look better, or produce more. I still felt groggy (I did this for several months and approached this with the highest level of enthusiasm), and I produced less in the mornings that I did in the evenings. I know a large number of people who have read this book, gotten really excited, talked with their noses in the air about how incredible it was that they got up at 5:30 a.m., blogged about it, and then went on to wake up at a more reasonable time within a few months. They now acknowledge their pattern with an abashed grin. They continue to produce results regardless of when they wake up. I was one of those people. I did this in early 2015 for a few months. Again, the big change for me was that I DID start going to bed earlier. I cant go to bed at 11:30 p.m. and get up at 5:30 a.m. and feel good. So, I went to bed at 9:30 p.m. GreatI went to bed earlier. However, there is a problem that comes from waking up early. Because it is so unpleasant for some people (like me), we feel the need to justify our sacrifice. We try to point toany improvement in our lives as a result of this early morning slog. And, when welook for any reason to justify our actions, we find them. Then, we shout them from the rooftops See! Im not getting up so very early in the morning and meditating and visualizing and affirming all for naught!Something happened! Well, of course something will happen if you spend three hours per day on it! Getting up early had nothing to do with it though. Again, some peopledo find this to be a beneficial practice in their lives. But, be wary of any overnight success stories from waking up early. Thats a farce. It doesnt matter when you get up if you are productive with your waking hours. I went back to my old ways and continued working and producing results between the hours of 9:00 a.m. and 6:007:00 p.m. And Im doing just fine. In fact, I do almost all of my writing between the hours of 5:30 p.m. and 9:00 p.m. Thats just when I tend to get in the groove. Stop telling me I have to wake up at 5:30 to produce results. Stop telling me I have to eat a hearty breakfast to produce results. Thats simply not true. I am not knocking people who do get up early. Good for you. Glad it works. Stop telling ME that I have to get up early. I do not. Maybe Ill change one day, but for now, my current routine is just fine. Related: The One Thing Every Real Estate Investor Should Do Each Morning Conclusion The point of this article is to save those of you who are not interested in waking up early from believing the fallacy that waking up early will suddenly change your life for the better. For some people, waking up early is an obvious solution to getting time to working on their most important goals. If that is an obvious way to improve for you, then great, act on it. You dont need someone else to tell you to get up early if thats the only time you can do some specific type of work. But stop thinking that waking up early will have a profound change for you if you are not a morning person. I do get up early sometimes. I do go through phases where I get up a little earlier or get really into making awesome breakfasts. I am not bashing those things. They are great. I like to meet people early in the morning because I dont want to book up my evenings. So, if you want to chat about real estate or personal finance, Ill typically meet you for a coffee at 7:15 a.m. Ive literally never had someone tell me they are busy at 7:15 a.m. Its a good time to schedule meetings. Sometimes, my evenings book up, so if I want to work out, I HAVE to work out at 7:15; otherwise, I just wont get it in. Theres a time and place for getting up early. Im no robot, and I may alter my pattern if future life changes take effect and some advantage to waking early comes back into my life. My pattern has changed in the past and may change again in the future. But that will have everything to do with my circumstances. It will likely not be influenced by my goals, which I plan to achieve with my waking hours regardless of what those hours are. Rising early is not mandatory for success. In fact, Id argue that it has little or nothing to do with MY success. It may also have little to do with your success. Wake up when you want. Make whatever hours you keep count. Dont feel guilty for sleeping in. Focus on producing results whenever you so please and in whatever manner works for you. Be a normal human being, but achieve superhuman results. And do it however and whenever best works for you. Were republishing this article to help out our newer readers. Do you believe there is truly some unique power in waking up earlyor do you think similar results can be achieved by best using your time throughout other parts of the day? Weigh in with a comment. https://www.biggerpockets.com/renewsblog/sleep-in Im constantly arguing with my partner in crime Dominique because she keeps calling me a tight a** and saying that I have a peasant mindset. Maybe this is because I like disputing $2 credit card charges that I dont think I owe. I do that because its $2 today, but maybe its $20,000 tomorrow. Where Im going, those amounts will be $20,000 one day. Look, I guess I remember the days when we didnt have much money and were literally eating peanut butter for breakfast and drinking $1 gas station coffees. I had $36 bucks in my account in 2014, which is not that long ago, right?
[embedded content] You Only Control Your Own FinancesBut one thing that I keep telling her is and I want to share with you is something that is going to be contrary to popular belief. It goes against all the gurus seminars, events, and articles you are reading to motivate you to make more money. Im not trying to kill that dream for you by any means, but I do want to set things straight here. You only control what is in your account. Let me rephrase that: No matter how good your product is, no matter how good your service is, no matter how good you at selling, and no matter how motivated and inspired you are, you only control what is in your account. You dont control what I have in my account. So it really comes down to whether I want to buy your product or I want to buy your service. What Im saying is that just because youre making more money and doing better, that doesnt mean you should automatically go out and spend more. Think about it: The money in your account is what you control. Youve got the login details, and you decide if you are going to spend it or save it. Now, no matter how good your product or service is, you do not control what someone else does with their account or money. So, when you earn the money and you have it in your account, save it. Dont be stupid with it, dont spend it, and dont expect that someone else is automatically going to buy your product or buy your service. If you truly want to ensure wealth, youll need to penny pinch, dispute $2 credit card charges, buy gas station coffees if you have to, and eat a teaspoon of peanut butter to survive. Related: 5 Advanced Excel Tips for a Better Home Budget Draw From Your Current Budget to Pay for Important ExpensesNow, let me talk about another cool strategy that I am implementing right now with Dominique, my loved ones, and my family. Lets say youre going to go from earning five figures to six figures to seven figures. You might start seeing these popups for Ferraris, Lamborghinis, and all kinds of cool stuff that you have dreamed of since you were a kid. Im sure that because you are starting to earn six or seven figures, your income can allow you to go out and buy all of these glamorous things. Where people get caught with their pants down is thinking that they are going to keep selling, thinking that their business is going to keep thriving, thinking that theyre going to keep making so much money that they can now go out and spend more money, right? Wrong. Ill give you a recent scenario. Ive got a very nice carits pretty expensive, a dream car. Now, Dominique is saying she wants to put Jay into Montessori school. Interesting. That sounds good, but how much is it? She says $1,500 a month. Oh crap, thats expensive, right? Now, can I afford that? Yes, I can, but will business stay the way it is for the next 10 years? I dont know that because again, I dont control another mans pocket; I only control my own. So you have to be very good at planning and organizing too. So what Im doing now get rid of the car so we can use those funds and put that towards Montessori. I think that is by far the best way to manage your funds. But I dont want you to start getting stupid and go out there and buy another car and another property. Then get into all these expenses, debt, or costs just because you think youre going to keep doing well. Instead, be cautious and make every transaction that you do a wash. So, if youve got $1,000 that you need to commit to something important, try and figure out a way where you can use $1,000 from your budget instead of making more. Dont think about making morethink about using $1,000 differently. Now, by all means, go out and make more money, but keep in mind that you only control what is in your account. Now, the point at which you can stop creating these wash transactions is when you have so much passive income coming in that you dont need to think about money anymore. What I mean is that the first of every month, youve got hundreds of thousands of dollars coming in from your investments and youre protected against any kind of economic downturn in a particular industry. Then, in my opinion, you can go out and spend it all because there is always going to be another month. Of course, do not be that stupid, but you get my drift. Once you have passive income and a lot of money coming in, youre a little safer and within budget to commit to more expenses. Otherwise, pinch pennies, dispute charges, eat peanut butter, and drink gas station coffees. You control only whats in your account. And yes, go out and make as much money as you possibly can. What do you think? Is living frugally integral to building long-term wealth? Weigh in with a comment! https://www.biggerpockets.com/renewsblog/pinching-pennies-secret-building-wealth/ Real estate investors come in all shapes, sizes, and financial backgrounds. There are so many ways to invest in real estate. You can flip houses, buy notes, invest in delinquent property tax, become a foreclosure expert, buy and hold property, invest in single family or multifamily homes, buy into mobile home parks, become a developer or a real estate agent, and much more.
There is one thing all of these types of investorshave in common, and that is a quest for high returns on their investmentsand a willingnessto be thought of as a huckster, fool, and risk taker. Some investors do indeed go broke, but the ones whosucceed can often look back and wonder why people thought that they were a bit crazy. Related: 5 Habits of Highly Miserable New Real Estate Investors (& How to Kick Them!) You Might Be a Real Estate Investor IfYou have driven by a property with an overgrown lawn and shrubs, and rather than think a lazy homeowner lives there, youwondered if there was an opportunity to make money there.You have ever looked at the Empire State Building and put together a rough analysis of the rate of return you could getif only you could get the financing.Someones offer to sell you the Brooklyn Bridge was taken seriouslybut only if they can guarantee you clear title.You have investigated several different ways to get more property financing and more mortgages, even though you currently only have a single mortgageon your primary residence.You understand that every property could be a bargain, but only at the right price.You understand that cash flow is king, and any other so-called return (depreciation, appreciation, equity gains, etc.) is not a factor in the investment formularegardless of what any real estate agent says.You factor in the cost of a property managereven if you plan on managing the property yourself.You understand that real estate is the way to riches and also one of the fastest ways to the poor house.You can look at a prospect in the eye and decline them for a tenancy in your rentaleven if they told you, My credit is bad, but I always pay my rent.You know that bad renters often lie on their tenancy application and let their relatives be their past landlord references.You understand the need for a full deposit for your rental and that a renter whodoes not have enough to pay it is a renter to be passed on.You understand that a bad tenant can ruin your rental returns for several yearseven though your plan says you cash flow.You realize a 5% cash-on-cash return is not an investment; it is an opportunity to go broke.Terms like return on investment, gross rent multiplier, cap rate, cash-on-cash return, and vacancy expense actually start to sound meaningful.You make an offer on a property that makes your real estate agent feel embarrassed to submitand you make a similar offer on a different property later that same day.You already have plans to quit your job as soon as you have a certain number of doors, and you have yet to acquire your first one.Everyone thinks you are crazy to buy that run down property on the side street and thinks you are a genius when you make six months worth of their salary in three months with that same property.People tell you, I looked at that property too, but I could not make the numbers work, and then they ask you, How did you get the property that cheap?People think you are crazy spending so much on a property, and then a few months later, they want to give you their money to invest.You look at a property that needs a new kitchen, bathroom, painting, new floors, landscaping, a new roof, and you think, This is a gem.You look at a weekend of painting as an opportunitynot a dreaded assignment.You are in the business to make yourself money, not the seller of the property.You know the cost of a 40-yard roll-off dumpster without actually getting a quote.Roaches, bed bugs, ants, mice, and rats are just non-paying residents to be evictednot something to be afraid of.Your neighbors think you do not have a job and always wonder how you get all your money.The employees at your local home improvement store know you by nameand you are on their list to call when they have a closeout appliance deal.You not only own a toilet plunger, but a toilet augerand you know how to use it.The house you just flipped looked like a million bucksand your own house needs as much (or more) work.You are about to sign a mortgageand it makes you just as nervous as the first time.You actually want to borrow a million dollars, but only if that same million gets you two million in property.People think you are a pauper, and you are actually a multi-millionaire (on paper).You understand that real estate is just an opportunity, and there will always be opportunities. You just need to find them. Related: The 6 Non-Negotiable Habits of Elite Real Estate Investors Were republishing this article to help out our newer readers. Do any of these things ring true for your world?What would you add to my list! Let me know which of the above traits you can relate to in the comments section below! https://www.biggerpockets.com/renewsblog/2015/06/01/signs-you-might-be-real-estate-investor/ Financial education is non-existent in American schools. I remember learning how to write a check and balance a checkbook in Home Ec, but there were no courses aboutmortgages, budgeting, taxes, or living within my means. Not at school, anyway.
My parents taught me about being frugal. There werent any overt lessons, just leading by example in their daily lives. They didnt do anything extravagantno big vacations, no fancy clothes, no new cars. In fact, my dad drove the same car throughout my entire childhood. He bought it brand new two years before I was born. I learned to drive on this vehicle, and it had something like 200,000 miles on it when it finally died. With so little financial education readily available, its no surprise that few people know how to manage their finances. So how do some people kill it, while others struggle? Here are 7 habits of financially successful people. The 7 Simple Habits of Financially Successful People1. They check their statements every month. Unless youre completely off the grid, you get statements from your various accounts every month. Whether available online or actual paper statements, you have access to a monthly accounting of whats going on in your finances. How often do you check them? My husband starts each day with a quick peek at the statements. Bank, credit cards, stock investments, etc. He tracks everything going into and out of each account, every single day. While this may seem excessive, he feels uncomfortable when he doesnt do it. He discovered ourcredit card number was stolen a few years ago when a weird charge showed up.We were able to shut down that card quickly, before it turned into a big problem. Keeping tabs on your accounts doesnt have to be a daily thing. Weekly or even monthly is finebut many peoplejust dont even bother to ever check it. When was the last time you checked your monthly statements? 2. They plan their estate. Nobody likes to think about dying. Planning your estate can be a depressing task, which makes it extremely easy to put off. Repeatedly. Like, forever. But without a will, you have no control over what happens to your things. Your house, your car, even custody of your children all becomes subject to the intestacy laws of your state, which may not bear any resemblance to your wishes. Dont let this happen to you. Make a will so that your assets go where you want them to go. Even a handwritten holographic willwill preserve your intentions. Include custody directions if you have children or animals. The best course of action is to have a conversation with the person you are giving custody to you dont want it to come as a surprise to them. Be as specific as you want in your will. You earned this wealth. You helped it grow. Direct your heirs on how to handle your possessions, so your legacy can continue. 3. They create (and stick to) a budget. Financially savvy people have a plan for their money. Dave Ramsey calls it giving every dollar a name. You make a plan for how you are going to spend your money each month, rather than just hoping youll have enough to pay all the bills. Related: 6 Easy-to-Acquire Habits That Will Help You Build Wealth But say the word budget, and people freak out it sounds like a restriction. Look at your budget as a tool. You dont have to give up everything simply because you make one. Instead, you are creating a blueprint for how you want to spend your money. 4. They live below their means. Spending every dime that comes into your pocketis one of the best paths to financial ruin. Having no cushion doesnt allow you to roll with the punches that may come along. Lose your job or have an unexpected bill, and it could take you months or even years to recover. Living below your means allows you to save and invest the difference between what you earn and what you spend. If life throws you a curve ball, you wontget knocked off your feet. Living below your means doesnt mean that you are giving up everything fun. By using a budget to plan your spending, you can include money for entertainment, clothing, or even just a miscellaneous category to spend as you see fit. But instead of spending $500 one month and $700 the next, you plan and stick to your budget, which allows you to save and invest. 5. They pay themselves first. Paying yourself first means to set aside money to invest or saveBEFORE you spend any other money. All too often, people spend spend spend, then save or invest whatever is left over. If you have no budget, have no idea how you spend your money, and have a fly-by-the-seat-of-your-pants mentality, your leftovers are meagerif anything. When you are creating that budget, create a line for investing. Make that the first thing you put money into every week or every month. Funnel any unexpected moneylike a bonus or a refundinto this category, too. 6. They invest. Financially intelligent people invest for their future. But say the word invest, and people panic. You dont have to be able to pick stocks like a pro to invest. In fact, investing heavily in individual stocks is a recipe for disaster. Having a diversified portfolio is one of the best ways to spread out your risk. Index fundsa collection of funds designed to mimic a specific indexgive you broad market exposure. An index fund is a passively managed fund, so the fees are significantly lower than traditional, actively managed mutual funds. Real estate is another way to diversify your portfolio, and having a passive source of income through rental properties or even REITs (real estate investment trusts) is a great hedge against the ups and downs of the stock market. Bonds also providea low-risk investment option, but their return is also lower than what you can find through other investment vehicles. 7. They are money conscious. I went out to dinner with friends one night. We went for sushi, but I dont like the idea of eating raw fish. There are a lot of options at a sushi restaurant, and I ended up withcucumber and avocado sushi, which is significantly less expensive than the fancy dragon rolls and rainbow rolls that my dinner companions were eating. At the end of the night, we split the bill evenly. I didnt eat nearly the same amountof food, but enjoyed my time with my friends and was OK with splitting the bill evenlyamongst all of us. It wasnt going to break me financially, and it wasnt something I did frequently. It wasnt something I did frequently, but it WAS something they did frequently. At the time, I was married with no children. Both my husband and I worked and lived frugally, far below our means. But my friends were all single, living alone, and making far less than my husband and me. They felt they deserved these meals out and went out at least once a week to equally lavish restaurants, spending similar amounts on their meal. Every. Single. Week. They had no concept of their spending. They felt no compulsion to save any amount. They didnt invest. They werent conscious of their spending. Related: 3 Habits of Incredibly Lucky People (For Better Fortune in Business & Life!) SoI didnt talk to them about it. Who wants to listen to someone lecturing them about money? They didnt care about their finances,and me hopping up on a soapbox to try to sway them to my side wasnt going to have the desired effect. Being money conscious doesnt mean you never spend any money. It doesnt even mean you never spend frivolously. It means you are conscious of your spending, conscious of what things cost, and conscious of how your actions affect your future. Being financially successful doesnt mean you give up fun. It means you have a financial plan and you stick to it. You make saving for your future a priority, and you structure your life to reach your goals. If you arent currently financially savvy, start with one of these steps. Then add another when you feel ready. Your very first step, the most difficult thing to grasp, is that you need to make a change. Were republishing this article to help out our newer members. What habits would you add to this list? How do you keep your finances on track? Leave your comments below! https://www.biggerpockets.com/renewsblog/2016/04/08/7-habits-financially-successful-people/ |
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