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Dilmatz writes:

Thanks for your response. Truth is, I don't even know where to start on my road to FIRE. Well, that's not entirely true, but I'm still in the getting-out-of-debt and build-up-the-efund stage of things. Honestly, once that's done, I'm not sure what the next step will/should be.

You have already started the next step; education. While you are living below your means, paying off debts and saving money you can be getting smarter and preparing to take more ambitious steps toward eventual financial independence.


One thing I like about this board -- or at least what I assume this board will be about -- is getting people like me to even think about this kind of thing. I figure that even if I don't make it (RE), I'll at least retire in a better financial situation than if I didn't think about it.

I agree totally. It is clear to me that you already see through the fog of consumerism which ensnares too may of the unenlightened. You already realize that economic virtue is its own reward.


So, I don't have specific questions. It intrigues me that people can/will buy a property to generate income. My brother has done this and he's not even out of debt yet, but it's working for him. Me, I'm too scared to go out on that limb, at least right now.

Fear of the unknown is healthy. Show me a person who is unafraid of losing money and I will show you a person who loses money. All investors need to have a healthy understanding and appreciation of the role that risk plays in their investing.


Did you get into rental properties before doing other investments or after? (Assuming, of course, that you have other investments.)

I do have other investments. My portfolio is composed of about 60% directly held real estate, 20% fixed-income and 20% equities. My very first investment was a personal dwelling. I call it my first investment because I only lived there a short while before moving out and converting it into a rental property. I purchased the house with nothing down from a retiree who needed income. He held the note. My total cost to get into the property that cost $40K was about $700 to pay the attorney and miscellaneous settlement costs. I moved 1200 miles away with a job transfer. Five or so years later I returned to discover that the property was now worth $95K. The note balance had been reduced to $35K. In a little over five years I turned $700 into $60K of equity. I was hooked. I made it my business from that point on to learn as much about real estate investing as I could. Since then, I have never been without a few rental properties.

This deal taught me a number of things: It's damned hard to lose money when you by an appreciating asset with little of your own money, especially when the asset pays for itself. It seemed magical to me that I could buy a valuable, appreciating asset using mostly other people's money and that someone was willing to live-in, take care of and basically pay off the note for me. I thought that this was better than sliced bread. I still do.

I didn't invest any money in the stock market until about ten years ago. My IRA and 401K had grown large enough that I felt obligated to more actively manage them. If it weren't for these vehicles, I probably would have never ventured into the equities markets. It's probably a good thing simply for diversification purposes. I have no desire to analyze individual stocks. I have severe reservations about both the efficacy of this activity and the amount of time it would require, so I am an indexer.


Regards,
FMO
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