Personal Finance Daily Blog: January 14th, 2021 - Charlie McGill

    On the second to last day of Personal Finance, it was finally time to discuss real estate. By now we had already learned about other forms of asset allocation, and what we had read in Why Didn't They Teach Me This In School and Your Money Or Your Life had discussed how real estate could be one of the best ways to grow your net worth and passive income. To expand on that idea, my cousin Connor McGill came to talk to us. Connor is a young entrepreneur who, using some of the profits from his businesses, is investing in real estate to supplement his active income. Connor talked about the pros and cons of buying duplexes, 4-plexes, and flipping homes. He told us about his successes, struggles, and what he has learned after making three deals. We discussed when the best time was to fairly raise rent, if you need to at all, and what to watch out for when buying real estate. There are often closing costs, repair costs, and advertising costs that go overlooked when you are buying a property and subsequently finding tenants. Connor gave us an account of the difficulties of owning real estate--and the financial upside.
    After speaking with Connor, it was time to put our newfound knowledge to use. We envisioned where we might end up in graduate school and bought a 4-plex in the college town. From there, we wanted to test if we could live for free by staying in one of the apartments while renting the other three out, using the collected rent to cover mortgage payments, utilities, and taxes. The answer for each of our four groups, in four different cities around the U.S, was a resounding yes. By taking a loan to cover 20% of the down payment, and using rent to cover the mortgage, taxes, utilities, and the original loan, we could live cost free while slowly purchasing an asset that is almost guaranteed to increase in value. This exercise showed how valuable real estate can be in building wealth and becoming financially independent. Even for me, who has no plans to own real estate, the project bolstered my understanding of assets, financial independence, passive income, and what to expect on the road to financial independence. 

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