When I first started shaping my FireBall journey—achieving financial independence while maintaining balance in life—real estate was not initially part of the plan. I was a ‘reluctant’ landlord of a former primary home that I rented out, dreading tenant interactions and fearing the proverbial ‘3 a.m. call about a broken toilet.’ Additionally, my spiritual FIRE mentor, Kristy Shen, devoted pages in Quit Like A Millionaire to discussing the drawbacks of homeownership, and I found myself agreeing with her perspective at the time.
However, as I took steps to educate myself about the FIRE lifestyle and began focusing on achieving balance—both in my investments and in my broader life—I realized that real estate aligned closely with my values. It offered unique opportunities to achieve financial goals while fostering a lifestyle of intentionality and purpose. Here are the five key reasons I chose to make real estate a cornerstone of my FireBall strategy.
1. Leverage
Real estate provides a unique opportunity for leverage, allowing you to use borrowed money (mortgages) to purchase a high-value asset. For example, with a 30% down payment, you can control 100% of a property and benefit from appreciation on the full value, not just the portion you invested. This amplifies returns while maintaining manageable risk. Additionally, renters contribute to building equity as they pay down your debt, creating an additional layer of value.
However, leverage should be approached cautiously. While it can boost returns, it also carries risks, particularly during economic downturns when market conditions can strain cash flow. Staying mindful of my own risk tolerance, I use a measured approach to leverage, varying levels across properties and maintaining a balance between risk and opportunity.
Leverage is powerful, but as with any tool, using it wisely is key to long-term financial stability.
2. Value Appreciation
Historically, real estate has been a reliable hedge against inflation, with property values generally increasing over time. Investing in areas with strong growth potential—often referred to as the ‘path of progress’—has allowed me to benefit from long-term appreciation. Real estate offers a tangible sense of progress, unlike other investments that might feel abstract or detached.
However, it’s crucial to remember that real estate is a long-term game. While short-term market cycles can influence prices, meaningful appreciation often requires 12 to 15 years. Appreciation rates also vary significantly between regions and even neighborhoods, emphasizing the need for diligent research and analysis when evaluating properties.
For me, it’s not about timing the market but about staying invested and letting time work its magic.
3. Cash Flow
One of real estate’s most appealing aspects is its potential to generate cash flow—the money left after covering all property expenses. Positive cash flow provides ongoing income and acts as a financial buffer during economic downturns. For me, it’s about creating a stable income stream that complements other investments and contributes to financial independence.
Currently, I reinvest my rental cash flow to build capital for expanding my portfolio. In the future, as part of my “Live Off Your Rentals” (LOYR) strategy, I plan to rely on rental income for living expenses. This strategy is inherently resilient to inflation, as rents typically rise with inflation, preserving purchasing power. However, cash flow is not without risks. Unexpected expenses or poor planning can significantly impact returns. To mitigate these challenges, I conduct thorough deal analyses, budget for repairs, and proactively maintain properties to ensure steady cash flow.
4. Inflation and Downturn Protection
Real estate serves as both a hedge against inflation and a stabilizer during economic downturns. Rental income tends to rise with inflation, preserving purchasing power, while property values often hold or appreciate, providing a level of stability not commonly found in other asset classes. This dual protection offers peace of mind and resilience to market fluctuations.
No investment is immune to risk. During downturns, rising unemployment and reduced income levels can stagnate rents and suppress property values. While these challenges are often beyond an investor’s control, there are ways to mitigate their impact. Proactively managing expenses, negotiating insurance rates, and appealing property taxes can help safeguard cash flow and ensure long-term stability.
5. US Housing Shortage
The growing housing demand in the United States, coupled with limited supply, has made real estate an appealing long-term investment. By focusing on areas with strong demand and economic growth, investors can tap into this dynamic to achieve consistent returns. Beyond financial benefits, investing in housing also feels purposeful—I’m contributing to a solution for a critical societal need while building my financial future. This alignment of purpose and profit was a key deciding factor for me.
I’ve experienced this alignment firsthand. For instance, during a recent project to convert a single-family property into a duplex in my home state of Washington, I anticipated delays and bureaucratic challenges. Instead, the city’s permitting team was cooperative and even suggested ways to expedite the process. It turns out that the city hall was highly motivated to increase housing density to meet their growing demand. Their proactive approach to addressing housing shortages highlighted the value of investing in markets with clear growth potential. It’s a true win-win: the city addresses housing needs, tenants gain more options, and investors like me find purpose and returns in the process.
Final Thoughts
Real estate has been more than just a financial tool in my FireBall plan; it’s been a way to harmonize risk, reward, and purpose. Each property I’ve invested in has brought lessons in intentionality, growth, and resilience that I deeply value.
If you’re considering real estate as part of your own financial independence journey, I encourage you to think holistically. Balance the numbers with the long-term vision and focus on what aligns with your goals. In future posts, I’ll share more about how I analyze deals, build my team, and approach challenges—stay tuned!
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