Investing and climbing

The five-house rule:

While researching investment housing, there’s something I came across while doing that research that I found incredibly interesting. Something that I now call the five-house rule.

When people think of these real estate investment gurus, they often think of people who own thousands of apartments, condos, and houses that cost millions of dollars and it is just so complex that it is out of their depth. But, I don’t think that could be farther from the truth.

The five-house rule is based upon principles that aren’t new. It incorporates something that is very similar to leverage investing with an investment in the housing market of the area rather than the house itself.

Now, to give an example and explain how the process works.

For the sake of the smaller investor, we’re going to consider properties that have a $300,000 list price and a $275,000 purchase price.

With a 20% down payment (which can be significantly less if you’re able to house hack) of $55,000 you gain access to a $300,000 investment. Furthermore, let’s assume that the rent that you collect from this property is exactly equal to how much it costs to maintain and mortgage per month (which is not a recommended approach, but will help to simplify this example).

Over the course of the next 10 years, if the market experiences around 6% growth each year (the average is 4% —we’re betting on the market), the property will be worth $465,000.
At this point, you have a few options:

1. Begin paying down mortgages with extra payments, which increases profits, with the intent to sell a fully paid-off home.

2. Pay down mortgages with intent to hold the property for a longer period of time while collecting passive income

3. Sell the property and keep the profits.

The reason the five-house rules works is because once you have the houses paid off through the snowball method, which very basically consists of directing all funds to the smallest debt first and working your way up, you will have an asset that will return around $75,000 per year, or, $2.3 million dollars worth of assets, that once sold can return over $90,000 per year in a high yield savings account with no risk.

In summary:

Purchase five houses as quickly as possible
Reminders: You’re betting on a high-growth housing market and only get incredible deals under market price

Pay off the loans with a debt snowball method.

Do it all, as fast as possible.

Not too complicated, right?

Well, the execution can be difficult but not impossible, and I hope that we can begin this process together by the end of this year.

Mountaineering

I love the idea of mountain climbing. There’s something so intriguing to me about reaching the highest points on earth. Being the farthest away from the core that we can naturally be, being the closest to the stars that humans maybe were meant to be.

It began with a simple statement, “I want to climb Everest.” Which came from a little bucket list I made months prior but hadn’t thought much about since.

Then, researching mountaineering became something like a hobby.

I learned a few very important things.

While a lot of people die climbing mountains, with proper training or guidance, the probability of dying while climbing mountains is not as high as many may think.

Most famous mountains like Everest or K2 has become SO touristy and guide driven that spots seem to be held only by those that can pay enough to go, and become so crowded that you’re often not trying to beat the elements of the phsyical exertion, but getting around and waiting for other people.

You cannot climb most of the world’s largest mountains without a guide. Some of the largest guideless mountains are in Ecuador, the Andes mountains. I understand that it’s fuel for some of the world’s most unfortunate economies with the hardest workers, but for people like myself who want to say they did it without help, it’s quite unfortunate that there is no option.

Another one of the largest barriers is the cost of equipment, often approaching or exceeding $20,000, the investment upfront is too large for me at this point, making the hobby inaccessible for many people like myself.

Mountaineering at this point, for me at least, is a distant dream. I still enjoy researching and finding mountains that I would someday like to climb but have to sit on the back burners until a little later in life.