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Big Life/Financial Decision, What Would You do?

apollo_web

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Jun 10, 2019
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Hey there guys,

Hope you're all doing awesome, and it's fantastic to connect with like minded people on this forum.

I know I've just registered here, but I'm looking forward to contributing, also I feel that I have to be totally honest and transparent about my situation.

This post helps not only document my progress here on in, but also helps me receive honest feedback.

See, I've been running my online business for 9 years, created multiple digital programs, but the last years I'm been cutting business expenses drastically to show good profit so that I can get a loan from the bank to buy an apartment.

I know it's a slowlane mentality, but I feel having a "base" somewhere rather than constantly moving around paying rent, would help become a fortress to then scale up with some form of stability, that would also help me feel more comfortable taking more risk with paid traffic techniques.

Also say in 5 years time or so, when it comes to selling the real estate, hopefully it'll have appreciated a fair bit which will give me cash to push into other investments. (Long term would be great to build a real estate portfolio that brings income, so that no matter what my expenses are covered).

I'm coming up to 34 years old, single, and guess that having no real estate at all, it feels like time is starting to run out. Not building any equity, not diversified. I guess when I'm in my golden years say in 35 years it'd be great that at the very worst case scenario I'd have a paid for place, a hard asset I can rely on.

Here's the challenge.

Because all I've ever done is internet stuff I'm in a real comfort zone. When I was younger, I was reinvesting back into my sales process / sales copy etc, around $80,000 or so, it's turned a profit and producing cash flow which is great. But because the last years I've essentially suffocated the business (used free traffic techniques the last years to minimize risk and show steady profit to get a mortgage), I've developed a scarcity mentality, I'm scared to pull the trigger, I'm wondering if I can really afford it but I also know sometimes you just got to go "all in" and know you'll figure it out once taking the leap.

The great thing with renting, if you have rocky months in the business, if a recession hits, if technology changes, you're nimble so can move anywhere to scale living expenses to almost nothing. But I know at some point I have to take risk and step out otherwise I'll be in a perpetual state of overthinking and getting nothing done.

Here's the deal: The bank will lend me around £210,000 mortgage based on the last 2 years profit of the business...

I have around £33,000 saved, credit is good, and I know it's important how I use that cash to springboard me here on in.

There's a few options:

Option 1:
Keep 6 months personal expenses as emergency fund: £15,000 set aside.
Keep 6 months business expenses set aside: £8,000
Keep head down and build on the £10,000 to buy somewhere in a few years time on top of the emergency funds.

Option 2:
Build on the £33,000, and go "all in" buying a condo / house in cash in a cheaper part of the country in a few years time.
Would have to move to another part of the country, but I don't mind that if it means a future of financial freedom and not being house poor.

Option 3:
Put 10% down on a studio apartment, live a minimal lifestyle. Could probably buy a studio apart somewhere around here for £165,000, £16,500 down + added fees.

Option 4:
Put 10% down on a 2 bedroom apartment at around £230,000, around £23,000 down + added fees.
Would have a very small cash buffer.
Outgoing mortgage would be around £742 month, rent out the extra bedroom to a friend for £500/month.
£242/month mortgage expense + around £150/condo fees + repairs as and when.
A place to build on my fastlane business, while building equity, an asset that long term should appreciate in value (south of UK, long term appreciation is good).

Option 5:
Start a property company. Use downpayment for first small cash-flowing buy to let deal in a different part of the country. Continue renting but would lose perks of a first time buyer.

Not sure if it's fear of stepping into the unknown, or legitimate concern. I know this is a post seeking validation for my turning point in life, but frankly I feel alone not being able to bounce this off of forward thinking people, and have been constantly running this through my mind. There's nowhere better than amongst other entrepreneurial minds, maybe those who have maybe been in the same situation.

Thank you for anyone that takes the time to read this.
 
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astr0

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I've built a house in a similar situation for stability, but that's mostly because I'm married and we wanted kids.

If I was single I would think about it more from a financial and convenience point of view. "Paying cash" for a house to live in is not an investment, a mortgage is even worse. Hoping that it would appreciate is gambling unless you definitely know something or buy during a recession. You can improve your own property how you like and make living more convenient, but you tied to a location.

I would continue this if I were you:
When I was younger, I was reinvesting back into my sales process / sales copy etc, around $80,000 or so, it's turned a profit and producing cash flow which is great.
kept some emergency fund and tried my best to multiply income from the business.
 

MJ DeMarco

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Based on the money info you provided, I wouldn't do nothing -- which I guess is Option 1.

I'd learn to scale and grow your business bigger and stockpile more money. Then these financial questions regarding buying a home don't become so questionable.

As I wrote ten years ago, if you gotta think about it this deeply, you probably can't afford it.
 

apollo_web

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Jun 10, 2019
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@astr0 thank you for the feedback! Really appreciate that. Yes multiplying the income from the business until it's a pure no brainer to buy real estate seems to be a good way forward.
 

apollo_web

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Jun 10, 2019
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Based on the money info you provided, I wouldn't do nothing -- which I guess is Option 1.

I'd learn to scale and grow your business bigger and stockpile more money. Then these financial questions regarding buying a home don't become so questionable.

As I wrote ten years ago, if you gotta think about it this deeply, you probably can't afford it.
Thank you so much for the reply @MJ DeMarco. That makes sense and yes would likely have more confidence / have it be a no brainer buying real estate with more stockpiling. I appreciate it.
 

Tiago

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Hey @apollo_web,

A couple of things stand out here.

I'm coming up to 34 years old, single, and guess that having no real estate at all, it feels like time is starting to run out. Not building any equity, not diversified. I guess when I'm in my golden years say in 35 years it'd be great that at the very worst case scenario I'd have a paid for place, a hard asset I can rely on.
What in real estate is so attractive to you, that it makes you feel that you have enough time?

Why would you say your golden years are when you are 69 years old? What if those were your bronze years, and now are your golden years?

It seems to me that right now you aren't very confident in your own capability to generate revenue. Since this is the case, it is a "wise" decision to buy real estate. At least, if all shit hits the fan, you'll be "safe".

I know it's a slowlane mentality, but I feel having a "base" somewhere rather than constantly moving around paying rent, would help become a fortress to then scale up with some form of stability, that would also help me feel more comfortable taking more risk with paid traffic techniques.
Let's say you buy real estate. And then you take a risk with paid traffic techniques. And then you fail. And then you have to sell your house. Now you have some cash laying around, but you have to go looking for some place to rent.

You're back at square one.

What if instead of looking at real estate options, you looked at becoming better at what you do? Serving your clients better, increasing your prices, generating more revenue?

Sorry if I'm being hard here, but I have to point it out. Look at your language. "cutting business expenses, slowlane mentality, stability, comfortable, worst case scenario, rely on, scarcity, etc..."

You can't make a fastlane decision from a slowlane mentality. Change yourself into a fastlane mentality. Ask yourself "If I knew that whatever I did, I would be successful at it, what would I do in this situation?"

Let me know if this is helpful or if I've confused you even more.
 

biophase

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Based on the money info you provided, I wouldn't do nothing -- which I guess is Option 1.

I'd learn to scale and grow your business bigger and stockpile more money. Then these financial questions regarding buying a home don't become so questionable.

As I wrote ten years ago, if you gotta think about it this deeply, you probably can't afford it.
I’d go with the option where you buy a cash flowing property with 20% down, rent it out and keep the rest of your lifestyle the same.
 

Strm

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Would it be difficult to move abroad, to a cheaper country (not sure what your expenses are right now though)? I mean, if we're talking about online business and you're single too..
Not to mention it would kick you out of your comfort zone and quite possibly open your eyes to new business opportunities.
 

apollo_web

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Jun 10, 2019
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Hey @apollo_web,

A couple of things stand out here.



What in real estate is so attractive to you, that it makes you feel that you have enough time?

Why would you say your golden years are when you are 69 years old? What if those were your bronze years, and now are your golden years?

It seems to me that right now you aren't very confident in your own capability to generate revenue. Since this is the case, it is a "wise" decision to buy real estate. At least, if all shit hits the fan, you'll be "safe".



Let's say you buy real estate. And then you take a risk with paid traffic techniques. And then you fail. And then you have to sell your house. Now you have some cash laying around, but you have to go looking for some place to rent.

You're back at square one.

What if instead of looking at real estate options, you looked at becoming better at what you do? Serving your clients better, increasing your prices, generating more revenue?

Sorry if I'm being hard here, but I have to point it out. Look at your language. "cutting business expenses, slowlane mentality, stability, comfortable, worst case scenario, rely on, scarcity, etc..."

You can't make a fastlane decision from a slowlane mentality. Change yourself into a fastlane mentality. Ask yourself "If I knew that whatever I did, I would be successful at it, what would I do in this situation?"

Let me know if this is helpful or if I've confused you even more.
Thank you Thiago, I really appreciate you reading through my post thoroughly, giving an objective response and hitting me with some hard truths.

I'm someone that takes critique on board, there's no use in being a snowflake as it doesn't better us, our businesses & livelihoods.

I couldn't agree more looking back over my post there's a ton of scarcity in there. I was spending on marketing my products heavily many years back, and of course had highest revenue years back then. Then I got in my mind I had to save for an apartment, cut the cost and the scarcity then started to creep in.

To be quite honest there's a number of reasons I thought about real estate, mostly I guess it's due to comparison, and also pressure from those close to me "buy a house!" "all these years and hard work, and you could walk away with nothing!".

So I kinda' had in my mind, maybe in buying a condo first I'd lock in & win, then be risking the houses money afterward. Does seem kind of backward now thinking about it.

Of course I take full responsibility for this, but in addition when adopting this kind of thinking around security, you start looking up YouTube channels around personal finance that are slowlane based. They all seem very intelligent and it all makes sense, but if you're running a business of your own and looking for that explosive growth, the conservative approach can be detrimental (in the beginning years anyway).

That's why I've been loving browsing this forum, it's full of ambitious people looking to do big things. What's more people so helpful and willing to give honest advice.

When I was young and had nothing to lose, I went all in and had my best business years ever. Travelled alot so had many golden years, I guess creeping into my 30's, the thought of me in my later years without a roof over my head is kinda scary. I guess that's what separates those willing to take the entrepreneurial route and those that aren't.

The last years I've been super conservative but I guess it's good to have built 6 months runway and then some financially, now in the business + personally, so can now take bigger risks knowing I won't be working at Starbucks anytime soon unless I royally mess up haha.

Thanks again man really appreciate it, it's forced me to take a hard look at myself and the mentality I've adopted. Time to feed my mind with growth, and power back up!
 
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Tiago

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I'll read your response tomorrow as I'm heading out now, but I was just taking a walk on the beach and I remembered this quote:

If money is your hope of independence, you will never have it. The only real security a man can have in this world is a reserve of knowledge, experience and ability.

Replace independence with freedom/security.

True freedom comes from knowing that wherever you are in the world, whatever the circumstances, you are able to create money to sustain yourself. I could drop you off in the Philippines tomorrow and you'd know that you can create income for yourself.

And this comes from having mastered business and generating revenue.
 

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apollo_web

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Jun 10, 2019
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Thank you @biophase appreciate the suggestion. I definitely like the idea of investing into something I can feel and touch, and something that'll never go away (people will always need a place to live regardless of the economy). I'm sure I'll venture down that route sometime soon! Read your story and incredibly inspiring, goes to show what's possible and something for all of us to work toward. Thanks again.
 

apollo_web

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Jun 10, 2019
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Would it be difficult to move abroad, to a cheaper country (not sure what your expenses are right now though)? I mean, if we're talking about online business and you're single too..
Not to mention it would kick you out of your comfort zone and quite possibly open your eyes to new business opportunities.
Hey @Strm thanks for the reply, haha actually lived abroad many times through my 20s working from various co working spaces etc, love travelling. I guess now progressing through my 30s was thinking of putting roots down somewhere and laying foundations. Again this is probably due to a scarcity mentality I've developed to be like "other people" haha. Proof that slowlane can creep in even if living fastlane previously.
 

Matt Hunt

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Remember, your personal residence is not an asset. "Hoping" for appreciation in the value of your house is not a good strategy. It sounds like you're not yet earning enough from your business if you had to pull from your business expense budget in order to save for a house (also not a good strategy).
 

apollo_web

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Jun 10, 2019
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Remember, your personal residence is not an asset. "Hoping" for appreciation in the value of your house is not a good strategy. It sounds like you're not yet earning enough from your business if you had to pull from your business expense budget in order to save for a house (also not a good strategy).
Hey Matt, thanks for the post. True have heard Kiyosaki etc say it's a liability, takes money from your pocket, but isn't it also a hedge against inflation? As in a way to stabilise your living costs? Rent today potentially double what it may have been years ago.

I guess one way is to earn your way to the top and pay cash ala MJ so it all becomes insignificant.

I'm not planning to buy personal residence soon, just heard so many conflicting arguments so sharing what I've been bombarded with.
 

Matt Hunt

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Hey Matt, thanks for the post. True have heard Kiyosaki etc say it's a liability, takes money from your pocket, but isn't it also a hedge against inflation? As in a way to stabilise your living costs? Rent today potentially double what it may have been years ago.

I guess one way is to earn your way to the top and pay cash ala MJ so it all becomes insignificant.

I'm not planning to buy personal residence soon, just heard so many conflicting arguments so sharing what I've been bombarded with.
Consider this... If your house value jumps from $200k to $300k and you decide to sell and get your $100k, that's great! But... now you need another place to live, and comparable houses to what you had are all at $300k now. So you're really no better off.

The better way to do it is buy a 4-plex, live in one unit, rent out the other 3. Buy at a price good enough that the rent from the 3 units covers your whole mortgage. Now you're growing equity and cash flow with other people's money.

Personally, I'm continuing to rent, because I'd rather put $50k into a real estate investment where it'll make money a whole lot faster than appreciation of a personal residence.

It's an interesting math equation, but I think if you ran the numbers, you'd find that owning doesn't have as many advantages as everyone thinks. For me in my area, even if I bought a not-so-great basic house, my monthly payment would be several $100 more than my current rent, PLUS I will have put that huge down payment in. It would take many many many years before my mortgage would be less than rent AND the difference covered the down payment. But of course this varies in different markets.
 

MJ DeMarco

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I guess one way is to earn your way to the top and pay cash ala MJ so it all becomes insignificant.
I'm not suggesting you pay cash, I'm suggesting you have earned and saved enough money that the decision isn't complicated.

There's nothing wrong with a mortgage if its cheap money -- and then you can better spend that money elsewhere (growing your business?) hence earning bigger returns.
 

apollo_web

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Jun 10, 2019
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I'm not suggesting you pay cash, I'm suggesting you have earned and saved enough money that the decision isn't complicated.

There's nothing wrong with a mortgage if its cheap money -- and then you can better spend that money elsewhere (growing your business?) hence earning bigger returns.
Thank you MJ, I appreciate the guidance! You're right there's no rush, keep stacking the paper and building the business until getting the mortgage becomes a no brainer.
 

apollo_web

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Jun 10, 2019
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Consider this... If your house value jumps from $200k to $300k and you decide to sell and get your $100k, that's great! But... now you need another place to live, and comparable houses to what you had are all at $300k now. So you're really no better off.

The better way to do it is buy a 4-plex, live in one unit, rent out the other 3. Buy at a price good enough that the rent from the 3 units covers your whole mortgage. Now you're growing equity and cash flow with other people's money.

Personally, I'm continuing to rent, because I'd rather put $50k into a real estate investment where it'll make money a whole lot faster than appreciation of a personal residence.

It's an interesting math equation, but I think if you ran the numbers, you'd find that owning doesn't have as many advantages as everyone thinks. For me in my area, even if I bought a not-so-great basic house, my monthly payment would be several $100 more than my current rent, PLUS I will have put that huge down payment in. It would take many many many years before my mortgage would be less than rent AND the difference covered the down payment. But of course this varies in different markets.
Really interesting Matt. Thank you for your perspective, renting looks to be the best option for me at the moment and to keep building the business. Appreciate the input.
 

Tiago

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To be quite honest there's a number of reasons I thought about real estate, mostly I guess it's due to comparison, and also pressure from those close to me "buy a house!" "all these years and hard work, and you could walk away with nothing!".
Choose wisely who you listen to.

A skill I'm becoming better and better is what I call respectful disagreement. If someone on the Slowlane wants to give me advice, I hear them out, but don't really listen to them.
 

apollo_web

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Jun 10, 2019
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I'll read your response tomorrow as I'm heading out now, but I was just taking a walk on the beach and I remembered this quote:

If money is your hope of independence, you will never have it. The only real security a man can have in this world is a reserve of knowledge, experience and ability.

Replace independence with freedom/security.

True freedom comes from knowing that wherever you are in the world, whatever the circumstances, you are able to create money to sustain yourself. I could drop you off in the Philippines tomorrow and you'd know that you can create income for yourself.

And this comes from having mastered business and generating revenue.
This quote has stuck in my mind Tiago, and you know it's actually given me an idea to create a new scalable business to run parallel with my online business instead of buying something to live in myself which would have near wiped me out.

Continuing to stack the cash over the next few months and pursuing option 5 with the available funds I have, could be a good answer. Buying first property to rent out would not only create new connections and business skillsets, it's also totally scalable and immune to economic uncertainty as long as it cashflows. 1 new rental each year for 10 years = total passive income and turning my current active income into passive income.

Over time when I get a big win in my online business, push it into real estate business.

Even starting small doing the first deal, getting it rented, developing a new business skillset could be invaluable.

Creative juices are flowing!
 

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Mark Mueller

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May 24, 2018
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It's great you are thinking of owning real estate. Don't let some discourage that due to a lack of money. Many have started with much less than you have.

Spend some time on biggerpockets and read, listen to podcasts, etc. There are a lot of creative ideas. Specifically, look into house hacking with your budget. And, analyze, analyze, analyze. There is a great podcast that I don't recall the number of, but there is a term "vacuum the truck" that will be great advice for you.
 

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