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FIRE (Financial Independence Retire Early) is a grassroots movement that excites me greatly. It's been fascinating to follow the many blogs and podcasts of people self-confident enough to go so against the grain of American consumerism. And there's good reason to: while American households make an average of $74k per year, two-thirds of them would have trouble coming up with $1,000 for an emergency like a hospital bill or a car repair. I can't imagine wants to go through life like that, being stressed about unexpected events that turn into financial emergencies.

But until FIRE, our culture has so much attached baggage to good financial behavior:
  • That's what rich people with stock portfolios worry about, not me, I'm just a normal person. 
  • Only geeks can understand all that math and financial concepts, I don't get it and I don't want to be a weirdo.
  • People who obsess about their money are greedy and antisocial. I like hanging out with my friends and having fun. Besides, I don't want to be one of those 1%ers who don't care about the rest of us.
  • Everyone has (credit card debt, student loans, home loans, car loans, etc). I have my whole life to work, so why wouldn't I (go on that trips, buy that car, buy that house, go to that school)? YOLO.
FIRE, on the other hand, is a welcome antidote:
  • People in the FIRE community practice asking not what you do for a living, but what you enjoy doing outside of work.
  • They acknowledge that not everyone wants to have to work their entire lives or until they're 65. This is something most of us can agree on and get excited about!
  • As a consequence, the discuss pretty quickly turns to how to achieve the option to work less or stop altogether. This is something that many Americans think is utter fantasy. Financial advisors treat this (early retirement) like super-extra credit or a luxury for the rich. But it's not - it's just cause and effect. Want to work less and enjoy life more? Figure out how.
  • FIRE isn't made up of rich people - just people who are willing to think about and make tradeoffs to make their lives better. And that usually involves saving money somehow, either by making more (career hacking or side hustles) or saving more (frugality, index funds, retirement accounts, tax strategies, credit card rewards) - all of which are within anyone's reach, once they realize they don't want to have to work forever to support their lifestyle.
  • No one judges you for not having the newest, best, or most expensive thing. If you do sometimes, it's fine, as long as it fits your values and goals. 
  • There is a bit of one-upsmanship in the areas of extreme frugality and travel hacking, but that's just certain subgroups' version of coupon clipping. People like to make games out of anything. Those things are options but definitely not requirements. And it's nice that if there is any social pressure, it's in a direction that saves people money.
That said, where do I stand on the tenants of FIRE? I'll go through a few of them:

Credit card rewards 

The FIRE community has dove deep into maximizing the value of their credit cards. Some use churning, or opening new cards in rapid succession to cash in on sign-up bonuses. Some chase the best hotel and airline point exchange rates. Some use travel hacking, and build their trips around the best bang for their points.

This is all great, but I'm too boring for that (OK, that's my polite version - I think it's a waste of my time). I have a 2% cash back card (MasterCard Double Cash) and stick to that. I tried churning for a year, but I felt like having all the points in different places was really inconvenient. I also realized that after that year, I had a bunch of accounts with short lifetimes, which actually hurt my credit score. At my point in my life, lower mortgage rates save me thousands per year, so I prefer to have a decent credit score than a free plane trip now and then.

If I were still a frequent traveler or a single person, I would probably give travel hacking more of a shot. It seems like a practice that anyone with discipline could master.

High savings rates

While the average American's savings rate is less than 5%, and 15% is Dave Ramsey's stretch goal, the FIRE community is claiming savings rates of 30%, 40, even 50%, and sometimes more. The shockingly simple math of early retirement is highly motivational in this regard: while folks saving that 5% may never retire, getting to 30% will allow you to easily retire at 50.

My favorite financial planner, Pete The Planner (who has a phenomenal podcast), prescribes saving at least 20% of your income, and really wants Americans to get to 35%. I'm more in his camp - which would make me more like the FIRE community than like the typical spendthrift American - and I'm somewhere in his recommended range. But I doubt I'll take my savings rate past the 50% mark until my career hits "baller" status and I have a title with the word "president" or "chief" in it. 

Why? I live in a high cost of living (HCOL) area in southern California with an amazing wife and kid, which ups the YOLO factor for me. Sure, everything's a balance, and I try to stay on track for both college and retirement. But there are lattes to sip, choo-choo trains to ride, dates (and playdates) to enjoy, and occasionally, non-travel-rewards-trips to embark. 

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I used to be the ultimate long-term planner. I saved everything, spent nothing, and that may have been the right thing to do... when I was in my 20s. But with a family, I have a responsibility to take care of them... and that doesn't just mean in the long term. The Bible says tomorrow is not promised, and Jesus says not to worry about tomorrow, because today has enough trouble of its own. I don't want to be a spendthrift, but I also can't in good conscience deprive my family of experiences that bring us joy and show them I love them. It's not right to save everything for retirement, at the expense of today.

Side hustlin'

Many FIRE followers say there's nothing that'll give your FIRE plan a shot in the arm like a side hustle. Conceptually, a second income stream that lets you up your savings rate from good to better is like a Tesla upgrade that takes you from Fast up to Insane Mode. Of course you'd want that. But like the Tesla, there's always a cost. Time. Or effort.

There's a reason why Americans watch over 30 hours of TV a week (apparently a true statistic, despite how impossible it seems to me) - apparently it's easier and more fun than actually doing a side hustle. So, side hustles are hard. I mean, there's Uber, which is easy: you just drive, but the money won't change your life. Then there's the 4-hour workweek (which is really more like a 10,000 hour career pivot): it'll make you money, but not the alluringly high hourly rate you might expect.

My version of a side hustle has been real estate investing with my wife. It's passive enough that it doesn't feel like a part-time job, but active enough to require serious research and bold decisions. And like I've written before, the money can be pretty good. We like that it's made us experts in the local market and taught us a lot of little life lessons over the last 5 years.

Real estate isn't going to be the right thing for everyone. Heck, with the market as hot as it is, I'm not even sure it's the right thing for me anymore. So I'm looking at other ways to keep hustlin':

  • Helping my in-laws take their online store to the next level
  • Helping my wife get a design business off the ground
  • Doing something with an online course I created, and thinking about making another
  • Consulting, teaching, or getting more involved with my local community
FIRE as yoga

I do yoga. Yoga means different things to different people. For some, it's a total religion, with the "ohms" and mantras and chakras and kombuchas (hey, I live in SoCal, give me a break). These people probably attend a high-end studio, drink fermented herbal teas, and definitely go to retreats.

For others, it's a helpful practice where you take what you can, when you can, and challenge yourself to do more when it works for you. These people probably drop into a class at 24 Hour Fitness or ClassPass, drink craft beer, and wear shirts that say namaste in bed.

FIRE is kind of the same. Some people clearly get into it much more than others. While the most popular voices skew to the religious side, that makes total sense, because they're the innovators. Why would people want to read a blog by a dude who's lukewarm about FIRE, when they can read about people who pay zero income tax, travel the world for free on credit cards, and sell their cars so they can bike around town and plan intentional communities? I love reading and hearing about that stuff, even though I'll probably never do a lot of it.

I do FIRE too. My view on FIRE is that it's a helpful practice. I'm better off for being aware of FIRE, getting inspired by the amazing community, and thinking outside the box of nihilistic American consumerism. By being part of the FIRE community, I'm getting new perspectives every week, and learning things I can incorporate into my life.

So what if my definition of early retirement is 50 instead of 30? So what if my definition of frugality is buying a $4 dinner at my work that would cost me $20 at a restaurant? Or grabbing my wife one of their free iced lattes on my way home? FIRE is a big tent. And I guess I'm in that tent. And the cool thing is, the door's open to anyone.

Oh hey look, another remodel

Oh hey look, another remodel.

Don't worry, it's not as bad as the previous one.

Fresh off the heels of our previous renovation, my wife convinced me to do another one.

How does that make any sense?

It's a different property, and it arguably needs it, with about 15 years of age and some clear signs of wear and tear. When we got it last year, it was nice enough to live in. But after a year and a half of renters, it's ready for a refresh.

OK, if you say so. What are you in for?

  • Generally, update the look from Y2K to contemporary. There's a lot of red floors and cabinets, and too many different colors on the walls. Replace the scratched-up floors and blackened carpets with hardy wood laminate. This'll take a little demo.
  • Simplify the color palette and class up the joint with rich coffee brown floors, calm white walls, and maybe one sophisticated accent color. Replace yellow halogens with energy-saving warm LEDs
  • Make the kitchen and living room feel bigger by removing awkward elements and enhancing the flow.
  • Replace the countertops to make the place fully Y2K-compliant.
The total scope of this remodel is much smaller: $20-25k (and it'll only take 2-3 weeks). But it should bring up the value by about double or triple that.

When my wife showed me those numbers, backed up by the local comps, I was sold.

Is it going any better than last time?

It's off to a great start, so I'll post another update when we're done (about 1 more week). Seeya then.

Live-in Flip: Lessons Learned

We're done renovating the live-in flip! From your perspective, dear reader, that may have happened in a flash. But for your truly, it was quite a process. Here's a rundown by the numbers:
  • Duration: almost 5 months. Why so long? I'll tell you.
  • Cost: $140k down payment. About $80k in renovation costs. We're in for $220k. Why so much? I'll tell you.
  • Number of contractors: about 20. Why so many? I'll tell you.
  • Number of stressful moments: a lot. Why so many? I'll tell you.
  • Number of lessons learned: many many lessons about home repair and managing a renovation.
  • Value-add: $200k in home value. 
  • Expected ROI: If we sell next year, we'll pull out $330k after all expenses. That's a 50% return on our $220k investment.
Why did it take so long?

We closed in March. We finished in August. We originally estimated this would take 2-3 months. Instead, it took twice that long. From my engineering project management experience, I've learned that all project estimates will be wrong, but the less you know about the tasks and resources, the more wrong you'll be. And this was our first time doing this kind of project. We'd done tiny things like replacing shutters, lights, and installing a door peephole (and I thought that was tough), but with this project, we had no idea what we were in for.

The first lesson I learned is that this blue-collar project management bore little resemblance to the white-collar variety I perform in my day job. This may sound classist, but it's not: you're working with people who are themselves managing other jobs (and come and go as they wish), who are selling themselves to you (over-promising), who have widely varying professional and ethical standards. Here are some unexpected personnel problems we had to deal with:
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  • A high-priced plumbing company who told us they also did tile, but made big mistakes on everything, wouldn't fix their work without additional fees, were unable to reach for days, and charged exorbitant rates. (Not cheap, not fast, not good)
  • A high-drama flooring contractor with serious cash-flow problems stemming from serious personal problems, who hit us up for cash before he'd finished his jobs, who disappeared for days working other people's projects, and who also wouldn't show up unless we promised to pay him. (Cheap, not fast, fairly good)
  • A day laborer who threatened to shoot said flooring contractor, who we had to meet and pay because said flooring contractor stiffed him on his pay. (Cheap, somewhat fast, not good)
  • A day laborer who we fired because he came to work smelling like he just got out of Cheech & Chong's van.
  • An electrician with fragile masculine ego who wouldn't take direction from my wife, only me...
  • Kitchen remodeler who was super helpful on the pre-install, but wouldn't fix anything post-install.
  • Typical run-of-the-mill mess-ups and do-overs. 
  • Every variation of the Cheap/Fast/Good triangle.
We learned some important lessons on the hiring and managing side:
  • The more you're there in person, the better results you'll get. You can remind people of what you want, fix mistakes earlier rather than later, make sure people show up, and call them on BS.
  • Make the effort to get trusted referrals for every resource you hire. Good Yelp reviews don't cut it. We had much better luck with Nextdoor referrals from our neighborhood, and personal referrals from friends.
  • Get everything in writing, even when it's inconvenient, especially when it's inconvenient. Know who's getting paid, when, how, and for what tasks. Stay on track.
  • If a job is going to be expensive or if a mistake would be costly, try to use a licensed, bonded, insured company, or a company that has a track record of responsibility. If and when someone goes wrong, it's easier to work with a legitimate company to fix it. Our HVAC company made a mistake during the job, but owned up to it and fixed it. We ended up using them again for a different property, despite the mistake, because we know we can trust them to make it right.
  • Money is power. Hold it over people to get them to do the right thing. Once an unethical person gets your money, they have no reason to care about you or what they promised you. 
  • Similarly, employment is power: if someone's doing shoddy work or not showing up, tell them they'll lose the job if they don't straighten up. If you have to threaten them, don't give them more than one second chance. Fire them and get someone new. It's less stress for everyone involved, and it keeps them from taking advantage of you.
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Why did it cost so much?

Well, we had to do a TON of work on the place. For a full look, check out the remodel before & after photos on Houzz. This included asbestos abatement, full HVAC replacement (replace furnace, new A/C, repalce ductwork), demolition (kitchen, 3 bathrooms, flooring), walls (resurfacing, sealing, priming, and painting), doors, windows, plumbing (water and gas), electrical, hardwood flooring, complete room remodels (kitchen, bathroom, laundry room), framing (opening up the kitchen entryway, creating new cabinets and closets), city permits, hauling, trims and baseboards, roof repair...

Like I said, we spent about $80k total. The heavy hitters are what you'd expect: kitchens and bathrooms rank high. But we paid probably thousands more for plumbing that we should've, because we trusted a Yelp review instead of doing our homework. We also paid a couple thousand for city permits and fees. As the project wore on, we also paid a couple thousand too much for the flooring and general contracting, because we didn't address schedule slips and performance problems early on. 

Why did we use so many contractors?

When contractors quote you, they give you a time estimate, and for better or worse, they believe it, no matter how optimistic. Trouble is, they're also working and bidding other jobs at the same time. If a job drags on, like ours did, they want to move on to new jobs so they can get paid more. It's understandable from their perspective, but it incentivizes them to slack off after a while, and that's why you hear about contractors falling off the earth and never coming back to their jobs. That happened with our flooring / general contractor before he finished up, so we had to finish the project with a patchwork of handymen.

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Why did this stress us out so much?

I didn't make this process sound stressful enough for you already? Well, besides being in the hole for that much money, here are a few reasons:
  • We were both working full-time, raising our first child, an infant who grew from 9 to 14 months during this project. This alone is enough to strain a relationship without a major home remodel
  • We were living with my in-laws all the while. My in-laws are wonderful, but our living situation had gotten old for everyone by the middle of the project.
  • We ran into some problems with our homeowners' association. Certain people didn't like living next to a remodel, hearing construction noises day in and day out, seeing the occasional mess, etc. Unfortunately, some of them became harsh with our contractors and even broke into our unit before we changed the locks. When I pushed back, they tried to make our remodel more difficult than it had to be: calling the city, levying fines, inventing unwritten rules that only applied to us. This made us expend energy on workarounds that shouldn't have been necessary in the first place.
What did we learn from this?
  • Maaaaybe don't take on a big project like this until we have more stability. We've taken steps to simplify our life since the remodel, prioritize our relationships, and not stretch ourselves too thin. It feels great not to have a project hanging over our heads when we get home from work! I love being able to focus more on my wife and baby girl after a long day at the office.
  • Tread lightly with neighbors. Even though I tried to be respectful, I had a couple flashes of self-righteousness that antagonized them more than necessary, which made the rest of the project harder than it had to be. Being right isn't the most important thing (and that's hard for my engineer mind to accept sometimes), getting along is often more important.
  • Change your locks the day you close escrow! I cannot stress this highly enough.

So... would I do this again?

Man... yeah, probably. We're going to come out fine financially, and the education was priceless. My wife and I are both grateful to have learned so much in such a short amount of time. Despite the problems, I'm so impressed and proud that my wife handled such a large and complex project so well, and that she really carried her vision through from beginning to end. If and when we do another renovation, I'll be happy to let her take the reins and help where I can. Not that either of us are in a big hurry for that to happen. Now that the house is livable, it's time to just LIVE for a while.

New project: a live-in flip

A couple months ago, I wrote that saving for investment real estate is more important at 33 than saving for a 401k. This approach had allowed my wife and I to pay off six figures of student debt and turn a $50k nest egg into about $300k sitting in the bank. The only question was where to invest it.

Last month, we found our new project: a live-in-flip! Basic opportunity stats:
Purchase price: $540k
Down payment: 25%, or $140k
Renovation budget: $50k
Total investment: $190k
Holding period: 2 years (or longer)
Target sales price: $790k ($750k after sales fees)
IRR over 2-year holding period: 39%

Here's a little about the home:
- 1970s (asbestos and vinyl baby!) 2 bed 2 bath + bonus room + backyard
- townhome in a gated community with easygoing HOA
- next-door unit sold for $690k in November (more than comps out)
- excellent 10/10 school district (surrounding homes are NICE)
- super walkable neighborhood, 2 blocks from a 270 degree view of the ocean
- loud, busy street outside
- needs EVERYTHING: HVAC, floors, paint, doors, windows, kitchen and bathroom remodels (lots of fun to be had)

Possible scenarios after we fix it up:
1. Live in it for 2 years and sell - we get our money out and look for another project
2. Live in it for several years, enjoy the fantastic location, and walk our daughter 2 blocks to the best school in the county
3. Worst-case, the housing market has a correction and we make less money, but still turn a profit

Areas of concern:
1. Will all of our renovations be approved? The HOA approved our proposal. We just have to make sure the city is on board. So far, so good.
2. Will we stay within our $60k budget? Probably. We've interviewed 3-4 vendors for each major thing (carpentry, electrical, plumbing, kitchen and bathroom remodeling, flooring, painting, HVAC), so we have a good idea of the cost and the work involved.
3. Can we avoid a major screw-up? Good question. Some of #2 applies here, and we've weeded out sketchy vendors in our interviews. We're making very clear plans for the project, and sequencing each vendor to make each job run smoothly. We're basically managing the project and learning a lot along the way.
4. Will we drive ourselves crazy? The good thing is, we won't be living there while we do the renovation. That will save our sanity and also save time on the project. On the other hand, we're both very excited to do a good job and finish, so we can finally move in to a home where we're picking out EVERYTHING ourselves!

Next steps:
1. Close. Loan is getting funded tomorrow.
2. Start the renovation process, beginning with asbestos abatement.

Why Ramit is wrong about buying a house

Ramit Sethi is one of the voices of the millennial generation. He sounds more like a cocky guy you’d pound shots with at a party rather than a buttoned-up financial guru or a career coach. It’s the fact that he doesn’t sound like your traditional financial advisor that makes him appealing. Instead, he rebels against anything that sounds like it would come from your parents. (Frugality? Don’t waste your time. Focus on earning more!) Ramit also urges readers to learn the facts about so-called Invisible Scripts - standard life advice that may be obsolete - and do what’s right for you.

So I’m surprised (and a bit disappointed) that he’s so religiously against owning real estate. He may be right about a lot of things, but in this area, he’s substantially wrong.
Here’s a breakdown of one of his blogs on the subject, Surprising Real Estate Investing Myths. Here's the video:

The video's main points are:
  1. Return is zero after inflation
  2. When you own, you pay for repairs, and a $290k home becomes a $1M home
  3. There are 50% in hidden monthly costs in addition to your mortgage payment
  4. Stock market returns decimate real estate returns

Let me address these one by one.

  1. “Return is zero after inflation”

NOPE. just saying it doesn't make it true.

Ramit quotes a study by Shiller of average home values over a 100 year period. This is a super macro view. Forget that home prices started picking up in the 70s with the wider availability of credit. This super macro metric may confirm his anti-real estate bias, but it’s irrelevant for a couple reasons.

Real estate is highly local, and is also cyclical. How is the 100-year metric relevant to us? Is our investment time horizon 100 years? No way. Then why should that be the metric we use to gauge return? We should use metrics that are in line with our own time horizon. Since the typical homeowner owns a home for 6-10 years, and I've been investing in real estate for a little under 5 years, I'm going to choose a time horizon more in line with that. To be clear, real estate is not necessarily a long-term investment. It can be, but the vast majority buy and sell long before the 100 year period. (Most of us will be dead by then.)

The real estate market is also inefficient, meaning that individual investors can still find good deals when they know the areas well and know how to fix up a home. My annualized return on the 3 homes we’ve bought and sold have been 63%, 42%, and 11.5%. Adjusting for inflation, which has been around 1% over the last few years, that’s still about 62%, 40%, and 10.5%, respectively.

  1. “When you own, you pay for repairs, and a $290k home becomes a $1M home”

He’s right - home ownership has significant costs. I found an article on Angie’s List that tallies the total cost of owning a home. For a $300k home, the 30-year cost of ownership is $708k. What that statement fails to take into account is what you’d pay as a renter. I did some calculations myself, and as long as rents are sufficient for landlords to make their monthly payments, renters would pay the exact same amount!

You have to think about this from a landlord’s perspective: they’re going to pass on their costs to the tenant whenever possible, and they usually do. If rent wouldn’t cover my home costs, I’d get out of that business. But the great thing is, it does for me. Even if you’re only “breaking even” (covering your monthly costs with no extra gross profit), the tax savings means you could save $152k over 30 years as a landlord, before even considering the equity you’re building over time, or depreciation. Being able to deduct mortgage interest, maintenance, and repair costs, as well as depreciation, is a pretty sweet deal. (After 30 years, you’d have your home paid off, so you’d actually be $452k ahead of a renter, plus any depreciation savings.)

Don’t want to be a landlord? That’s fine, you’ll still save money - about $68k before accounting for equity increases, and $368k including those.

Don’t have 30 years to wait around? Let’s use a smaller timeframe. On a monthly basis, because of tax savings, you should be profitable. My $300k home example gives $214/month ($2,572/year) net income after taxes the first year. But the good things for landlords is that rents have increased at double the rate of inflation over the last 15 years nationwide - about 2.7% (and in LA, 4-8%). Price in those increases, that you’ll make $252/month ($3,035/year) the next year, increasing roughly $500-600 each year after. Again, this calc ignores equity, which makes this an even better deal for you.

Saying that buying a home costs you more than renting is kind of like saying buying a car costs you more than leasing. That’s pretty easy to refute. Renting / leasing’s advantage isn’t saving money, it’s flexibility. Whether you want or need that flexibility is up to you.

Calculate your own situation using this handy rental property calculator. Take a home you’re interested in. I like looking for homes on Redfin and checking rents on Zillow. See how the numbers come out for you. It only takes a minute.

  1. “There are 50% in hidden monthly costs in addition to your mortgage payment”

You can’t say costs are hidden when they’re listed on Redin. Here’s a breakdown for a $600k home (close to the median in Los Angeles County):
With a 4.5% interest loan, Principal and Interest are $2,432. Property taxes are $635. HOA dues are $300 (for this property). Insurance is $110, for a total of $3,477. In this case, non-”mortgage” component is 42% of the “mortgage” component, but you’re still pricing all the payments into your total monthly payment. Lenders routinely ask if you want to include these in your monthly payment. If the total monthly payment is too high, you know before you even make the offer. That’s hardly a “gotcha” by any stretch of the imagination.

By contrast, for our first primary residence, we got a way better value than when we were renting. We went from $1,750/month for a 1-bedroom to $1,300/month for a 2-bedroom. In our case, buying was a way better value, and gave us a much lower monthly payment.

  1. “Stock market returns decimate real estate returns”

Not the case for me (see my answer to #1). Stocks have done 7-8% year over year, and that’s taxable, so the real pre-tax return is 5-6% year over year, if you think of taxes as a large management fee that the government compels you to pay. We used to benchmark stock market growth at 10% year over year, but we’ve learned in the last decade that it might not be sustainable. On the other hand, my real estate deals have done 11.5-63% year over year. Not even close.

To use Ramit’s words, in the last 5 years, real estate returns have decimated stock market returns.

Now what about the risk factor? Sure, with enough volatility, you can get a high upswing. What about the inherent downswings? My answer is to pay attention to market trends. In real estate, that’s not hard to do. The information is publicly available in the number of transactions, median home prices, time on market, Case-Shiller Index, etc. What’s more, the rate of volatility isn’t fast - it’s slow, because real estate transactions are slow, and reports are relatively low-frequency compared to the instantaneous stock ticker updates. Effectively, that market inefficiency is the equivalent of you having one of the fastest fiber-optic trading computers that Wall Street brokers use to buy at the best prices. Putting in a strong offer quickly is just as effective. If you pay attention to your market, great deals are completely within your grasp.

Dissention Within IWT

The interesting this is, even when you read the blogs on Ramit’s site, IWT, you see conflicting statements. This guest post, The Real Scoop On Real Estate, is a telling example. It starts out by saying “Real estate can be one of the most rewarding investments that you can make”.

Hold on, isn’t that a complete 180 from what Ramit originally said? Yup.

Here are the main points, and I actually agree with all of them.

1. Starting to invest in real estate takes time.
2. Real estate is a very local business.
3. It’s hard to make serious money without serious leverage.
4. Real estate can be very illiquid.
5. Real estate can be real time consuming.
6. You are in control.

My general response to these points is “Yes, of course! Please learn about real estate and your local market. That’s how you become successful.”

Later, the post says "Real estate is a great investment for some and a horrible investment for others. If you think it might be for you, or if you don’t know which category you fall into, continue down the rabbit hole and follow your gut." So while Ramit talks a good game, he’s hedging his bets with this guest blog post.

Things To Remember

Calculations about appreciation are misleading, unless you have 100% equity. If your house goes up 3%/year, and you have 25% equity, your investment goes up 3%/25% = 12%/year. This is basic leverage math. Ramit’s correct that leverage goes both ways - that’s how people get underwater on their mortgages. So do your research and if you feel something’s overvalued, don’t buy it. Also, don’t count on insane amounts of price appreciation.

Remember, Ramit doesn’t invest in real estate, and his target audience probably doesn’t either, so he can get away without using actual investment metrics like IRR, NOI, and cap rate. Make it simple: use an ROI calculation and compare for yourself. I included a rental property calculator I like to use. There are others online. Just search for them.

Ramit is correct that there are fees when buying and selling. Home transaction costs might be 5-7% of the sales price when selling. Hopefully, you’re either selling because you’ve made enough money to offset the fees, either through price appreciation (renovating, flipping, or riding the market up), or rental income. Many people say that in real estate, you make money when you buy, by purchasing at a good price. Keep that in mind, and don’t overpay. Also, look at ways to save taxes when you sell. Two common ways are the 1031 exchange, where you can defer taxes and pay no taxes if you’re selling one home to buy another; and the 2-year rule, where you pay no capital gains tax if you’ve lived in the home for at least 2 years. Hopefully, these will far outweigh any transaction fees you have to pay.

When is real estate worth investing in?
  1. When the market’s not too hot
  2. When you’re willing to own for at least 2 years
  3. When you’re willing to learn about your market

Final Thoughts

Real estate has been good for me. I’m not even that good at it - others are much better - but my wife and I have made 6 figures so far. So have thousands of other people. If you’re looking for a community of people like this, BiggerPockets has tons of tools, content, inspiration, and systems to help you. I’ve only been reading and listening to them casually for a couple months, but I’m enjoying their content and learning a few things along the way.

While Ramit’s opinions on real estate investing are highly suspect, his writings on systems applies to investing too. Ramit’s focused on investing in yourself and starting lifestyle businesses. That’s great! You should always invest in yourself. I have a post about the ROI of my MBA. 4 years after I began, it’s paid off at about 40% per year.

Just keep in mind that your ventures doesn’t have to look like anything Ramit talks about. Real estate hasn’t been good to Ramit, which I’m assuming since he’s never mentioned buying or selling any property. That’s fine for his lifestyle, but remember that it biases him. With his affinity for psychology, he would be aware of this.


Ramit’s done incredibly well for himself over the last decade. He’s set himself up as an iconoclast - the songbird of a generation, if you will. You can count on him to present his views strongly and unapologetically. He’s all about contradicting traditional advice and letting his unique voice be heard. That’s fine. He says not to blindly follow society’s advice about buying a house. If you agree with his point, you should approach these decisions with critical thinking. Don’t blindly follow his advice here.

It’s really hard to fire someone (so you’re probably not going to be fired)

The only people I know who’ve been fired, really legit fired, in the engineering world:
  1. A guy who literally choked his cubicle-mate
  2. Another guy who threatened to kill a coworker, and sexually harassed another
  3. A woman who basically talked herself into a job that she didn’t know how to do, and got found out a couple weeks in
  4. That’s it.

I know lots of people who’ve been laid off, including about two-thirds of my old R&D department coworkers at The Old Place, after a product recall slashed the company budget. There didn’t seem to be a single reason why they were laid off. They basically fell into these categories:
  1. Incompetent
  2. Old (sorry, that’s not politically correct - unproductive and close to retirement)
  3. Socially awkward
  4. A pain in someone’s ass
  5. Just clueless about interacting in a corporate environment.

The main things I learned about the fear or being fired or laid off are:
  1. If you’re not one of the above, you most likely will never get fired or laid off
  2. You shouldn’t be scared of this
  3. What you should be scared of, is staying at your job too long, and become stagnant, so that eventually you are one of those people who get fired or laid off.

There’s a guy I know at work who’s incompetent, a bad communicator, defensive, and slow. He’s NOT getting fired, amazingly. I know because I have it on good authority that his boss (a very patient man) is giving him time to improve. I’ve known this poor performer for the majority of my time at Rocket Inc, and I don’t have any reason to think he will improve. But, he’s survived this long, and he may continue to do so. And this is at Rocket Inc, a place that’s not known for coddling its workforce. (Edit: I'm happy to share that said guy has actually improved a lot in the last couple months!)

If you read this and your response is “awesome, I can most likely just coast at work forever,” then I pity you, but I don’t respect you as a professional. You should be trying your best at your job, because you shouldn’t be wasting your life taking up space in an office! Find what you’re good at or what you love, and save yourself and everybody else the trouble of dealing with you and your lack of competence and/or passion.

If you read this and your response is “phew, I’ve been sacrificing my well-being because I was afraid of being fired or laid off, but now I don’t have to do that,” that’s more of the response I was going for. Life shouldn’t be lived in fear. You shouldn’t let someone hold that kind of threat over you.

I used to have a boss who constantly berated, insulted, cursed, and bullied me. It was the worst. I would call in sick to work to avoid dealing with him. I was medicated for extreme hypertension (my blood pressure was 160/90, which any doctor will tell you is horrible for a young man). But I just dealt with it because I was scared of being fired.

I felt like I was literally at the breaking point, so I talked to HR and told them I was going to resign because of my bully of a boss. They told me they’d actually received complaints about him (but of course didn’t remove him!), and offered to mediate a meeting with us. Or, they said, “we can give you some training and support so you can have the conversation with him yourself, up to you.”
I figured I should talk with him myself, since bullies usually respect you more when you stand up to them. So I set up a meeting with him.

I was so nervous about this. Would I lose my job? Would my boss actually try to hit me with those pointy fingers he always waved in my face? I was shaking, but I told myself that any outcome would be better than how I currently felt. The meeting began, and before he could start his toxic routine, I took control of the conversation. I told him he would not be talking to me like that anymore, or threatening me. If he wanted to fire me, do it! Otherwise, stop being a bully. I actually called him that, to his face. It felt scary… but good. And the sick thing? He told me, “you know, I’ve been wondering when you were going to say that!” He went on to tell me that he respected me a lot for standing up to him, but that I should really be thankful for his abuse, because how else would I learn what it’s like to deal with an asshole at work? (So… he admitted to being an asshole, on purpose, to help me deal with hypothetical future assholes… OK, there’s no much wrong with that.)

Anyway, that was a bit of a tangent, but seriously, if this helps anyone in that category, I’m extremely happy to be of service.


  1. Don’t be concerned with getting fired.
  2. Do be concerned if you legitimately suck at your job, or if people make you feel that way. Do you really want to work there? There’s almost always a job that’s a better fit for you out there. Just go out and find it.

Living with your parents or in-laws (and challenging the traditional American stigma)

I’ve been living with my wife’s parents for about six months now. Since the birth of our daughter, they’ve graciously allowed us to rent two extra bedrooms for $1,000/month.

It’s been a major challenge to my concept of being an adult. I thought being an adult meant being independent. I didn’t know what to think of the all-too-common story of the Millennial college grad who moves back in with her parents, the “boomerang child”.

It’s also a potential strain on our relationship. Being that close to one set of parents presents its own set of problems:
  1. Parents can get on kids’ nerves.
  2. Adult children can get on parents’ nerves.
  3. You don’t want to think about your in-laws seeing or hearing some of the normal married things you do with their precious son/daughter.
  4. There can be tension about your multiple roles. Should you be treated as a guest? As a tenant? As something entirely different?

However, there are many benefits as well:
  1. Parents can be an enormous help with the grandchild.
  2. It makes grandparents feel included, which helps their sense of well-being.
  3. You can also be a big help to the parents with various things (household repairs, shopping, etc)
  4. If your parents have a big house that’s now an empty nest, your financial assistance will help them pay their mortgage. It’s also a more efficient use of housing than to have two big houses (one for you and one for the parents).
  5. Parents don’t always like to take monetary gifts from children, so this can be a creative way to help your parents out. You’re also keeping more money in the family, instead of paying some stranger.
  6. Baby can get to know more family members, which is great for baby’s social, relational, and language development.
  7. You can save money on rent and increase your savings for upcoming expenses.
  8. If you’re at all concerned about your parents or how they live, it’s a way you can keep a closer eye on them and make sure they’re OK.

From a cultural perspective, living with one's parents isn't as taboo as you might think. In the US, it's become more acceptable since the Great Recession. In many European countries, more young adults live with parents, even up to age 40. And in Asia, multi-generational homes are very common.

From the family unit’s economic perspective, we’re saving my in-laws $1,500/month, and we’re saving ourselves about $700/month in rent and $1,200 in childcare costs, so the total economic benefit is $3,400/month. That’s over $40k/year tax-free in after-tax money, or it’s like making $56k/year more before taxes if your marginal tax rate is 28%.  

From the family’s relationship perspective, I think we’re building stronger family bonds, and we’re allowing everyone to spend a lot more time with baby, which is a huge win.

On the other hand, if you’re living with parents, you’re kind of on the same train with them as far as lifestyle, by default. You eat what they eat, if you share a fridge with them. You may not always do what they do, but your activities are compatible. And you may not spend what they spend, but you’re influenced by it to a higher degree. Herein lies the risk of diluting the benefit of multi-generational cohabitation.

How to beat this:

  1. Be really clear on your priorities. Get clear with your spouse on this if you’re married. One of you is related to these people, and may have a stronger emotional attachment to their way of living. On the other hand, they may be more effective or more knowledgeable at broaching uncomfortable subjects with them.
    1. Make specific plans as a couple.
    2. Talk about your specific goals, and any actions you need to take separate from your family’s normal activities.
  2. Make sure you spend time with yourselves, and not only time with family. If you don’t make an effort, you start to feel like siblings instead of romantic partners.
  3. Don’t feel like you need to always do what your family is doing. Chances are, your parents don’t want to always spend time with you either.
  4. You can score points with the parents and buy some leeway by doing thoughtful things for them occasionally. Wash the dishes, do some housework, take them to dinner, and be a good neighbor / tenant / child / in-law.
  5. Know how long you want to do this. Talk with your spouse about how long they’re OK with this arrangement. Decide when to reevaluate. Discuss how it’s going regularly. Have a plan to get out, and don’t be afraid to pull the trigger and reclaim your independence!