Stealthy: behaving, done, or made in a cautious and private manner, so as not to be seen or heard
Rich: having wealth or great possessions; abundantly supplied with resources, means, or funds; wealthy
They live in modest houses and drive older but reliable cars. They don’t take extravagant vacations or spend frivolously. They understand the value of a dollar. They buy things on sale and delay gratification. They buy quality over quantity. They don’t buy expensive cable packages, and they don’t pay for services they could easily do themselves. They value their most prized possession, their time.
When I was younger, the book called “The Millionaire Next Door” was written, and it defined those people all around us who had at least a million-dollar net-worth. We believe the “stealthy rich” are all around us. You don’t know it because they don’t flaunt their wealth. After my first day at my new shiny job out of college at an accounting firm, I was so disheartened because it was boring and I was doing the grunt work. I thought to myself, “There’s no way I’m going to do this for forty plus years, I’ll go crazy first!” There had to be a better way. From that moment, I have always been looking for ways to short-circuit my “working for the man” years. I know I needed to pay “my dues,” but I also knew there had to be a way to do it faster and smarter than the average American.
Becoming The Stealthy Rich
Over the last several years, my partner and I have entered the Stealthy Rich “club.” Being The Stealthy Rich means we could quit our day jobs and be just fine, working our side hustles to keep us busy. We work because we like our occupations. (Or better said, we don’t hate our jobs enough that we quit.) We have ample “F you” money. How did we accomplish this by our late 30’s?
We’ve done it by killing it at our day jobs, slaying it on the side-hustle front and not falling into the trap of “Lifestyle bloat.” Our side hustle is real estate, and we have gotten pretty darn good at it. We aren’t perfect at minimizing lifestyle bloat, as I love a good pair of Allen Edmond shoes (quality over quantity, right?) Also, I willingly signed my boys up for club soccer. D’s kids are on a club diving team. Most Financial Independence peeps (we will refer to it as “FI” from now on) would consider those activities not “FI”; however, as a percentage of our total net worth and our yearly income its negligible in the grand scheme of things. Plus I love my 11-year-old Santa Fe. It’s my humble SUV that keeps me grounded.
So the question is, how did we get into the Stealthy Rich club? Was it luck? One big break?
“Sometimes you need to slow down to go fast.”
The book that changed my life and helped me to see my true financial potential was The Slight Edge by Jeff Olson. This book taught me that small course corrections along the journey and the power of compounding would propel me to unimaginable financial levels if I just stayed the course. I needed to be intentional about my decisions and manage my wealth so that it would grow. Adding 1 to 2 percentage points ever so often through small changes would add up over time. It also taught that we need to align ourselves with people better and smarter than us. Only then could we climb to their level. We knew there was a better way. We didn’t hate our jobs, but we didn’t want to do it for 30 years either. Also, we wanted to take more entrepreneurial risks, as well.
The Wonderful World of Real Estate
We decided we needed something that we could do on the side, while still keeping our golden handcuff W2 jobs. If we were able to work and earn a significant regular income, then we could further expand our net worth by getting good at something else on the side. For us, the answer was to buy and hold real estate, and here are the reasons why:
- Control – You have more visibility and command of the variables that can affect your return. The property, the tenant, the financing, all within your control. Bad stuff still happens, but you can limit it
- Leverage – Borrowing to buy assets is typical for real estate. Where else can you borrow 80% of the asset’s value but get 100% of the return? Leverage is the rocket booster for net worth on which we wanted to be connected!
- Principal pay down – It’s a magical world when you can get others to pay down your debt for you (tenants) and in return get some profit as well (cash flow)
- Appreciation – While you should never rely on appreciation in real estate for your returns, its a nice boost when your properties go up in value and therefore so does your net worth.
- Tax Efficiency – The first year I got my K-1 for our rental portfolio, I thought my CPA had done something illegal because I thought we should have seen an enormous profit. Little did I know the power of passive rental income between, expenses, mortgage interest, and the wonderful world of depreciation. We were legally allowed to show little to no profit from our assets. WOW.
Armed with these five reasons, we had a voracious appetite for rental houses. We craved them. With them, we could achieve our goals, as we would eventually be able to quit our jobs because we wanted to and embark on riskier, more exciting endeavors. All we needed to do was find the deals, and we knew they were out there.
