I invest in real estate for one reason and one reason only:
To accelerate my journey to financial freedom.
Through monthly cash flow, debt pay-down, appreciation, and tax benefits, I’m convinced that owning rental properties is the fastest way to reach financial freedom.
We’ll soon discuss each of these advantages in more detail. For now, here’s a quick overview:
- Cash Flow: After paying all the bills each month, whatever is left is considered cash flow. You can use this cash flow however you want.
- Debt Pay-down: If you have a mortgage on a rental property, your tenants are the ones paying down that mortgage each month. That means your net worth grows because your debt is shrinking.
- Appreciation: Real estate tends to increase in value over the long-term. If you hold real estate long enough, you should benefit from appreciation. This also means that your net worth grows.
- Tax Benefits: The tax code favors real estate investors. Whereas W-2 income is heavily taxed, many real estate investors pay little in taxes (and sometimes nothing in taxes). Some of the biggest reasons for this are depreciation and lower tax rates for capital gains.
With these four major advantages in mind, you can hopefully start to see how investing in real estate will accelerate your journey to financial independence.
Additionally, you may have noticed that investing in real estate provides both immediate and long-term financial benefits.
Let’s focus on that point for a moment.
Investing in real estate offers immediate and long-term financial benefits.
To be truly financially free, you need to cover immediate life expenses and prepare for future life expenses.
In terms of your Budget After Thinking, your Now Money and Life Money are considered immediate life expenses. Your Later Money is for future expenses.
Rental properties can help you in each budget category. The monthly cash flow and tax benefits will cover your Now Money and Life Money needs. Debt pay-down and appreciation offer significant upside for your Later Money.
I’ve been hard-pressed to find any other asset class that provides as many benefits for both for the here-and-now and the future.
There’s another major reason I believe in the power of investing in real estate.
It has to do with one of my ultimate life goals: to create more time to spend with my family. This is one of my major life goals, in part, because of what I’ve learned in my career as an attorney.
What I’ve learned about time and family as an attorney.
I graduated law school at age 24 and spent the first couple of years of my career clerking for an appellate court judge.
To this day, I tell my students that clerking for a judge is the best job for recent graduates. I recommend that all my students apply for judicial clerkships.
When my clerkship ended, I joined my current law firm where I continue to represent people with mesothelioma, a rare and terminal cancer caused by asbestos.
If it wasn’t for what I’ve learned from my mesothelioma clients, I would have never started investing in real estate.
Let me explain what I mean.
I’ve learned invaluable life lessons from my clients with mesothelioma.
Most of my clients are in their 70s and 80s. That’s because mesothelioma is a disease that takes decades to manifest. A person can be exposed to asbestos in his 30s and not get sick until his 70s.
A significant part of my job has been meeting with my clients in their homes after they have just found out they have incurable cancer. Before we ever get around to talking about the case, we inevitably end up talking about life.
During these conversations, I do most of the listening. You can imagine what I’ve learned about life in these moments. It is not a stretch to say that many of my core beliefs have been shaped by these powerful experiences.
When I listen to my clients talk about life, certain themes continue to surface.
One major theme I hear from my clients is the importance of family. They’ve taught me the importance of creating experiences and memories with loved ones, usually involving family vacations or time spent with friends.
Like my clients, I want to create as much time as possible with my family and friends. When I look back on my life, I want to look back on all the experiences and memories I’ve created.
With rental properties, I can earn money without being physically present. And while investing in real estate is not completely passive, it provides tremendous upside without requiring all of my time.
That means I can spend more time with my wife and three kids while still making money.
Because of what I’ve learned from my clients, there’s nothing more important to me.
I started investing in real estate in my mid-30s.
By the time I reached my mid-30s, I had paid off my student loan debt. I had successfully saved up for an engagement ring and a wedding. Newly married, my focus shifted to saving up for a downpayment on a home.
At the time I started saving up for a home, I had no idea that I could use my savings to invest in real estate.
It wasn’t until I went to a Cubs game with a good friend of mine, The Professor, that I learned about real estate investing. This is when my journey to financial freedom really accelerated.
See, The Professor had a beautiful condo with an incredible rooftop deck near Wrigley Field. During the game, he told me he was selling the condo and moving into a 4-flat with his fiancee in an up-and-coming part of town.
Huh?
Why on earth would you give up your amazing condo? And move to a random neighborhood I’d maybe been to one time in my life?
I thought The Professor had lost his mind. Back then, I had no idea what a 4-flat even was. I couldn’t even point to his new neighborhood on a map of Chicago.
The Professor set me straight.
He walked me through the numbers. He explained that he was going from paying $3,000 per month for his condo to receiving $700 per month on top of living for free in the 4-flat. That’s a $3,700 difference per month!
I immediately thought about the experiences and memories that I could create with my wife if we had an extra $3,700 per month to spend.
I already knew what my clients would say about the opportunity to create such memories.
It almost sounded too good to be true.
I did my homework and bought my first investment property less than a year later.
During my talk with The Professor, he introduced me to BiggerPockets.
If you haven’t heard of BiggerPockets, it is a treasure trove of online resources to help real estate investors of all levels.
At BiggerPockets, you can listen to podcasts, read blog posts, and ask questions on the forums. You can also choose from a wide selection of incredible books on real estate investing.
One of my favorite BiggerPockets books is Chad “Coach” Carson’s book, Small and Mighty Real Estate Investor: How to Reach Financial Freedom with Fewer Rental Properties.
Coach Carson’s message is right there in the title: you can use real estate to efficiently reach financial freedom. He makes a compelling argument to use real estate to build a life, not the biggest bank account.
Being introduced to BiggerPockets was a game changer for me. I believe in the motto, “Trust but verify.” With BiggerPockets, I could do my own research and decide for myself if real estate investing was for me.
Over the next few weeks, I read everything I could about investing in real estate. When I wasn’t reading about real estate, I listened to podcasts.
It didn’t take long before I was convinced that I wanted a 4-flat of my own.
I am using real estate to accelerate my journey to financial freedom.
To me, investing in real estate is all about fast-tracking my journey to financial freedom. It has not always been easy, but it’s definitely been worth it.
I’m fortunate that my career has introduced me to so many wonderful people.
I am convinced that I would not have been as motivated to act if it weren’t for my conversations with my mesothelioma clients. If nothing else, I know that talk with The Professor about real estate would not have resonated with me the same way.
Fast forward to the present day, I now own 10 apartments in Chicago and a rental ski condo in Colorado.
Coming up in the blog, I’ll share with you everything I’ve learned about investing in real estate along the way.
As always, reach out if you have any questions or leave a comment below.
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