Owning a place to live, and being paid to live there, will change your life beyond the financial benefit it brings.
What’s it going to take?
I outlined the educational aspects here.
The easiest time to build capital is in your 20s. You can live very cheaply because you’re either at work, or carousing. Your health insurance is peanuts and you don’t need to take on any dependents (free birth control saves lives).
Age is not a barrier. Use the recipe below and you can be living free by 2030.
Big Cities remain the best places to build experience, knowledge, contacts and skills.
When I made partner, a wise man took me out to breakfast and reminded me…
Get what you want, then get out
He didn’t tell me why I needed to get out. I learned that for myself…
- You’ll be tempted to go private with educating your kids => $1 million you need not spend, or earn
- You’ll be jammed into a little place and/or you’ll have your financial life tied up in a single asset – you won’t care about this after graduation, you will care about this when you have preschoolers!
- It requires extreme luck to get yourself on the housing ladder before you’re 40 => get your timing wrong and you’ll feel trapped
- You will be surrounded by social pressure to spend, spend, spend!
Megacities are filled with opportunity and excellent people to whom you sell your skills.
Megacities are a great place to start.
Just remember to leave.
Having played this game three times, I think a small city is your best bet.
- ~250,000 (pop.) in a county with ~500,000 (pop.)
- Natural Beauty – clean water, clean air, the ability to exercise safely without driving
- Climate – I gamed this by having a rental in the Northern Hemisphere and a low-cost Home Base in the Southern Hemisphere. Later in life, I moved to a place I didn’t need to leave (Colorado, Front Range)
- Airport Proximity – needing to take a flight-to-your-flight will get old
Before my first kid was born, I worked in: Canada, England, Hong Kong, New Zealand, Bermuda and Scotland.
The skills to be happy somewhere are the same as the skills to be happy anywhere.
My worst deals (financially) have been the most impressive (visually).
Buy space and let the next owner spend a fortune in renovations. The money I’ve spent beyond paint, carpets and replacing worn out appliances/HVAC has been largely wasted.
You’ve probably spent the last decade renting – your younger self is your target market. Choose a location that will be easy to rent (if you leave, if you need income).
Lock off basements, detached units, split floors… earn rental income, maintain personal privacy.
Margin of Safety – your land premium is “total price” less “value of the buildings” – the closer you get the land premium to zero, the safer your deal.
Coming out of the Great Recession of 2008, land premium was briefly negative – this was due to banks foreclosing and forcing the market down. Five bedroom houses, 15 minutes from Boulder, were selling at $75 per sq foot. Condos, apartments and houses in Arizona got even cheaper, under $50 per sq. foot.
Cheap will happen again.
It can be tempting to go remote. I feel ya.
Escapism is a recurring dream of mine, especially in times of stress. However, you need to be practical – friends, sexual partners, basic services, transport… the practicalities of life.
The purpose of setting up your low-cost base is to provide security within a life with meaning. Go to where there are people with whom you’d want to spend the rest of your life.
Shared values, within an active lifestyle.
Wait For The Fat Pitch
To get this done you’re going to need a trigger that makes the local property market seem cheap to YOU. It won’t seem cheap to the locals, who will be expecting further declines.
- Recession combined with High Interest Rates (UK 1990)
- Asian Crisis (1997)
- Currency Crisis (NZD in 2000)
- Global Financial Meltdown (2008)
I witnessed all of the above. There is ALWAYS a “next crisis”.
2020 was a boom year in real estate. When you’re living through a boom, your FOMO will be pushing you to take action.
One of the best things your first good deal brings you is a reduction in the pressure to do a deal.
To do great deals, you need to be comfortable doing no deals.