“I will teach you to be rich” application real estate

“I will teach you to be rich” application real estate

Los Angeles, CA · Member since 2016 · 3 posts · 1 vote

I just finished reading Ramit Sethi book called “I will Teach You To Be Rich” I loved the book currently applying steps in the book. My only issue is its not really real estate investor friendly.

He mentions his ladder of personal finance

Rung 1: invest in 401k for work to get at minimum a match

-done no brainer

Rung 2: pay off all debt

- done school loans finally gone :)

Rung 3: Open roth Ira and contribute as much as possible to max out

- I was considering rolling my old job 401k into this and add like $50 a month to keep it growing

-I know roths have the potential to be used in real estate, don’t know specifics I’m still a newbie.

Rung 4: If you have money left over increase contribution to 401k max if you can.

-I would prefer to save this extra money on an online savings account to save up for my next house.

...Theres a few more rungs if you have more money to invest but their not really applicable to me

What I’m asking is how can I tweak this personal finance system in favor of real estate intelligently. Open to any ideas and discussion.

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Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
7y

Sethi believes the following:

  • After inflation, the average return on owning a US residence is zero (Robert Shiller stats)
  • Most people don't factor in the true cost of owning a home (interest, taxes, insurance, maintenance, cap ex, sales commissions)
  • There is a lot of work involved in sourcing and managing rentals (vs alternatives)
  • The masses will not have the perseverance to properly purchase RE investments
  • Index fund investing is easy and proven

He is right on many fronts and is speaking to the masses.  We are not the target audience.  Successful RE investors are a very small fraction of the population.

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  • Attorney · Austin, TX · Member since 2019 · 128 posts · 98 votes
    7y

    A little more about the tax aspects of the Roth side of the equation. Looking forward to some fuller answers, as I haven't read the book. Just pitching in what I do know.

  • Mark S.Pro Member
    Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
    7y

    @Richard Escajeda, great book and very basic.  I don’t agree with all of his ladder steps.  I would tweak the steps by putting maxing an HSA before post-match 401(k) contributions, mixing in non-retirement (ie brokerage, rental properties, etc) investing before maxing 401(k), and I absolutely would NOT accelerate paying down low, fixed interest rate mortgages.  For more info on that, look up Keith Weinhold’s Get Rich Education podcasts about home equity or read the book The Value of Debt in Building Wealth by Thomas J Anderson.  

  • Los Angeles, CA · Member since 2016 · 3 posts · 1 vote
    7y

    @Mark S. I’ll definitley check those out appreciate the input.

  • Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Richard Escajeda. Seems pretty basic. I’ve been doing everything you mentioned for several years now along with Real estate. I will say the returns in real estate tend to be better, but if you mess up the negative returns are also greater.

    Stock market is pretty consistent. You can expect 6-8 percent per year, over the long haul.

  • Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    These books are so repetitive. What does putting all my money in retirement accounts get me now? I absolutely agree with leveraging it in the right way to get matching contributions and for tax benefits. Also, I am all about your statement about saving for the next house.

    I recommend Chad Carson's book on BiggerPockets. He goes through a ton of different scenarios and strategies for buying real estate. Not sure if the guy who wrote this book invests in that asset class. 

  • Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Frank Geiger it’ll get you a kickass retirement in 40 years lol.

    I had a real estate agent ask me recently “so what’s the purpose of your rentals, are they a retirement strategy?” To which I said “well I’m about 40 years from traditional retirement age, so I hope not!”

  • Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    7y

    Sethi believes the following:

    • After inflation, the average return on owning a US residence is zero (Robert Shiller stats)
    • Most people don't factor in the true cost of owning a home (interest, taxes, insurance, maintenance, cap ex, sales commissions)
    • There is a lot of work involved in sourcing and managing rentals (vs alternatives)
    • The masses will not have the perseverance to properly purchase RE investments
    • Index fund investing is easy and proven

    He is right on many fronts and is speaking to the masses.  We are not the target audience.  Successful RE investors are a very small fraction of the population.

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