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Self Sufficiency – Friday Fundamentals

Hi and welcome to The Real Estate Way to Wealth and Freedom podcast.

I hope all is well on your end. There is so much going on in the world today. I want to acknowledge all the people around the world that have been impacted recently. There are times when things happen that are completely out of our control and we feel like we’re at the mercy of our environment. Just know that this too shall pass.

With the CDC recommending social distancing, I’m glad we’re able to still connect virtually on the podcast today!

If you’re anything like me, you’ve been watching the news cycle lately and maybe even stressing yourself out with all the things going on. While I’m certainly paying attention, I have to turn my attention to more positive news and productive channels to keep my sanity (and be glad most of my investments are in more stable and still cash-flowing real estate!). Here are some books and podcasts I’ve been reading/listening to lately that help offset all the negative news. 

1.   The Wealthy Gardner by John Soforic. I recently interviewed John on Episode 294 of The Real Estate Way to Wealth and Freedom podcast.

2.   Episode 284 of my favorite podcast, Get Rich Education, where the host and my good friend, Keith Weinhold, discusses COVID-19 and how it impacts real estate investing. 

3.   The Code of The Extraordinary Mind by Vishen Lakhiani and the related MindValley community and content. 

 Two things I’m thankful for are my ambition and my habit of looking for opportunities in things. There are opportunities everywhere you look. The eye just has to be open to them. Often these opportunities will not reach out and grab to you. They’ll come as subtle hints. Continue to be open to new ideas and look for opportunities,

 “In the middle of difficulty lies opportunity.” – Albert Einstein

There have been a few exciting things on my end. As you know, I’ve been investing in real estate for about 5 years now and have been scaling up through multifamily properties in emerging markets with strong economic and demographic growth. You can learn more about what I’m doing, including markets I’m currently investing it, and asset classes I’m pursuing at the newly revamped website – AyersAcquisitions.com

 This week’s Friday Fundamental is Social Security and Self Sufficiency

Social security, broadly defined (by me), is a program or institution that provides social benefits to its people. In the U.S. we’re lucky to have a strong social security system. Our social security system provides support to people in the form of financial assistance, healthcare, disability support, and more. Providing this support to those who need it helps our society, by ensuring that basic needs are available to everyone. From there, we’re on our own to strive for more.

Self-sufficiency describes someone who is completely dependent on one’s self for basic needs and prosperity. From a homesteader in the remote Alaskan wilderness to a successful business owner or established real estate investor, self-sufficiency comes in many shapes and sizes.

Being that wealth and freedom are the two pillars of this show, self-sufficiency is where we strive to be. Self-sufficiency, to me, means relying on myself to create my own success and outcomes. It means that it’s my responsibility to determine how I want to live my life, then set goals to achieve those things. It means that my financial success, economic status, and even happiness are all in my control. When you take control of these things, it’s up to you to produce the outcomes you want. Sure, there are things that happen to us all the time that are out of our control. Just see the world around us today. But as Albert Einstein said, in the middle of difficulty comes opportunity. 

Being self-sufficient, to me, isn’t an option, but rather a responsibility. It’s a responsibility to myself so that I can live my life the way I want. It’s a responsibility to my family so I can provide for them, and it’s a responsibility to others so I can support others with my own form of social security.

You are capable of not only creating your own financial success but being so self-sufficient that you are able to help others. And since you are capable of this, it’s your responsibility to do so. Not everyone is in the fortunate position you are.

The vehicle to this self-sufficiency for me is… you guessed it – real estate investing. Being that I have personally only been investing in a bull market, and never have personally experienced a recession in my investing career, I’ve been reflecting on what, if anything, I’ll need to change when a recession does come along. We may be starting to see the beginning of the next recession. I’ve been listening to other people much smarter than I am, on this subject and building my own philosophies to take forward with me.

One thing I’m certain of is I do not know what the future holds. I don’t know if property values will increase, if interest rates will stay historically low, and if borrowing money from banks will be as easy as it is now. There are, however, a few things in my control that will ensure as best as reasonably possible, that my real estate portfolio performs well in a recession or in an economic upturn.

These are the Three Immutable Laws of Real Estate Investing

As Joe Fairless outlines in his book, The Best Ever Apartment Syndication Book, there are three immutable laws of real estate investing:

  1. Buy for cash flow, not appreciation. By investing first and foremost for cash flow, not appreciation, you ensure that the property brings in enough income to cover the expenses. Determine what a worst-case scenario would be. If the property still cash flows in that worst-case scenario, you can be confident in the durability of your investment. If not, then figure out what point the property is no longer profitable. If that number doesn’t have much room for error from an ideal scenario, then you may be too optimistic and not safe come a recession. 
  2. Secure long-term debt. Depending on the property type you are investing you, you can usually get at least a 10-year loan, sometimes even 20 or 30 year for residential loans. By securing a longer loan term, you give yourself options for an exit strategy, not to mention likely improving your monthly cash flow. 
  3. Have adequate cash reserves. This is an important thing that many people miss. Having adequate cash reserves can help you cover unforeseen circumstances, increases in expenses, or decreases in rent.

If you couple these three laws with selecting a strong market you have a recipe for a successful real estate investment. Just like everything else, there is risk involved when investing – this you know. The best hedge against risk is education. Learn as much as you can. Implement what you learn and take action. Use resources like Joe’s book and others, podcasts, real estate conferences, and networking to leverage other people’s experience. Do these things, and you’ll be well on your way to building a real estate portfolio that gives you the wealth and freedom to live the life you want.

 Resources

Visit Audible for a free trial and free audiobook download!

The Wealthy Gardner by John Soforic

Episode 284 of Get Rich Education Podcast

 The Code of The Extraordinary Mind by Vishen Lakhiani

The Best Ever Apartment Syndication Book by Joe Fairless

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