In this article, we will give a brief summary of three key strategies for investing as well as provide more resources on these types of investments. Some have very little involvement while others could become your day job. A lot of these will take up a significant part of your free time to accomplish. This can make increasing your knowledge base and skill more difficult. Having access to audible books is a great way to help past the time and learn new ways to be productive, this is why we recommend Audible. Using Audible, we have listened to many of the books referenced in this article while commuting to work, business meetings, and even trips. You can use the above link to sign up for a free trial of Audible. This article will contain affiliate links to the books that we have found to be helpful on our journey towards our first million dollars. If you want to help out the blog, use these affiliate links for each book. But, like we’ve mentioned in previous articles, these books are available in a variety of places including local libraries.
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The three key strategies for investing are traditional, accountant, and real estate.
Traditional Investor Strategy
As a traditional investor, you often take advantage of Traditional IRA, Roth Ira, and 401K matches. These are accessible at any income level with the emergence of consumer trading apps that make free trading more accessible. Another way this is one of the strategies that is the most accessible is due to the benefits of AI investment funds. These cost the investor a nominal management fee. This was first introduced by Vanguard which is one of the investment firms that we personally use. To learn more about them, how to build your wealth, and intricacies of the stock market explained using beer, check out Simple Path to Wealth by J L Collins.
Traditional investments are a “set it and forget it” system. If you can auto set-up your investment and learn to live without 15 percent of your income for 40 plus years, you will have a modest retirement account. The biggest risk to this investment is huge swings in the stock market. Reducing your withdrawals may be necessary to ensure that you don’t run thru during downturns. Rising inflation can also affect it if they rise to a level that wipes out any gains you may have achievement. Most advice when using this strategy is to weather the storms. Don’t allow the swings to cause you to make rash, emotionally driven choices that could be detrimental to your financial goals.
Key things to consider:
- Repeatable
- Long term strategy
- Risk is significantly reduced
- You are often an employee taking the Career Path
Accountant Investor Strategy
Most of our experience in this strategy we learned through The Richest Man in Babylon. In this book, it touches on loaning your money to a skilled tradesman so they can grow their business. This strategy takes this a little bit further.
This strategy has the benefit of standard paychecks and the ability to reap rewards of growing a business. The paychecks make sure you have adequate funding for your lifestyle and to keep the business afloat in the start-up year. This also gives you the advantage of reinvesting everything you make on growth because you can go without a salary. This make growing this type of business scalable. Often, you will hire a manager to run the day-to-day operations, but this can reduce your cashflow. The two-income source, however, is hard to dispute.
To make the best return, you will need to have skills in government compliance and bookkeeping. This will allow you to take on craftsmen that can manage the front end of the business while you manage the back end. This can cut your profit in half but makes it easier to manage a job and a business. This can also turn into a steady investment that pays in cashflow for when you retire. You can also retire early as long as the business stays profitable. That is if you actually retire instead of working for yourself to give yourself something to do. Cashflow businesses are also resistant to inflation. As prices go up, you can increase your prices to protect your bottom line.
Key things to consider:
- Scalable and can grow quickly
- Reduced risk
- You are often an employee
Real Estate Investor Strategy
Of the three strategies we’ve mentioned, this one can be more difficult to get into. We’ve been trying to diversify into, but with rising interest rates in an attempt to curb inflation, this has been difficult. Getting a new home loan can come with a 7 to 8 percent interest rate. Which doesn’t look like that big of a number, but bottom line, it can double your payment and reduce your ability to purchase in half. There are different ways to help combat this. Funding sources such as VA, USDA, THDA, and FHA loans can make this process more accessible and can help you finance your purchase with very little down. Keep an eye out for our explanation of these types of loans and the pros and cons of each.
Because you are purchasing the property with the purpose of it being an investment, you must run it like the business that it is. A lot of investors like this method as this is double dip in profit. You have the rentee pay off your mortgage, and if you’re able to, you can charge enough to get some spending money. You can write off AC units, roofs, gutters, etc. as depreciable asset to hide your income. This can provide a massive cash flow, and you can just keep adding additional housing. If you have 10 houses all renting for 1000 dollars with a mortgage of 700 dollars, you would be making 3000 a month. That amount of money can help propel you into financial independence.
A concern is the nightmare stories about cleaning toilets, stopping leaks, and being woke up in the middle of the night for repairs. This is not a scary reality. This is bad management. A great resource to learn how to effectively manage properties is Managing Rental Properties: A Proven System for Finding, Screening, and Managing Tenants with Fewer Headaches and Maximum Profits by Brandon Turner. Like we mentioned, this is the field we have the least experience in. We are still in the learning phase, but we will share with you any and all successes and mistakes we make along the way.
Key Things To Consider:
- Can vary from Easy to Stressful
- Scalable
- Requires a lot of properties to be independent
There is so much more that we can tackle about these strategies.
Is there a strategy that interests you that we didn’t cover or is there one you want us to dive deeper into?
Let us know in the comments.
