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1. How to invest in real estate
Real estate is an excellent way to build up your assets and/or alternative sources of income. But beware – investors’ enthusiasm for real estate can be excessive.
Why invest in real estate?
I personally own four properties that are worth €700,000 and bring in €3,000 per month in revenue.
The big advantage of real estate is that you can invest using a bank's money, and there is a significant leverage effect.
Let me give you an example.
Let's imagine that you invest €10,000 of your savings to buy a property that costs €150,000, including notary fees and renovation.
So, you borrow €140,000 from the bank.
Now let's imagine that you put this property up for rent and that in the end, once you have deducted all the costs and expenses, this property nets you €300 per month.
That's €3,600 a year.
For your initial investment of €10,000, you get a return of 3,600/10,000 = 36% per year!
I don't know if you realize it, that’s a huge number. If you invest your €10,000 in a Livret A, you’ll earn a little more than 1% per year.
The difference is massive. And it gets better...
Every month, you pay back not only the interest on your property but also part of the borrowed capital.
So, this is adding to your estate every month.
Moreover, your property might increase in value. My wife and I bought an apartment in Lisbon in 2015. The total cost of the purchase and renovation was €155,000. Three years later, this apartment was worth €350,000.
That’s €200,000 of capital gain!
Plus, we were earning about €1,800 per month from this property. Would you like to do the same?
My method for investing in real estate
It is important to know the trends in real estate. Some niches are profitable, while others over time become less profitable.
What defines a niche:
- Geographical area (e.g., New York City or the Mississippi Delta)
- Type of business ("buy/sell," "short-term rental," "long-term furnished rental," "commercial premises," etc.)
For example, at the time of this writing, it’s a popular thing to buy investment properties in Florida’s “sun belt” region because of low property taxes and high demand for rentals.
Here in Lisbon on the other hand, buying to rent in the city center is no longer very profitable; it is better to go to other niches (commercial premises, or developing areas on the outskirts like Beato).
So how do we know what works?
The easiest way is to follow investors online through platforms like YouTube and Instagram. They share a lot of content about what they do, so you can learn a lot without having to dig too deep.
These investors tend to share their operations, their numbers, and their profitability, so all the information you could want is right there.
You just have to be a little curious!
Once you have an idea of your target niche, you can start your property search. The key is patience and responsiveness.
Every day, check for new ads. Create email alerts so you receive new ads right away.
When you look at an advertisement, the first thing to do is to calculate the cost per m2 (divide the price of the property by the number of m2).
This will give you an objective indicator of the value of the property.
As you go along, you will get to know the average rates that are practiced on the market you are targeting. As soon as there is an interesting deal, you have to be reactive and visit the property immediately.
It's so easy to do.
The advantage of this method is that it removes the need to visit 50 properties.
For our apartment in Lisbon, we visited just four or five properties. It took us about two months to find the right deal (which is not very long, either).
Once you have found a property with an interesting price per m2, you need to calculate the profitability of the project.
For purchase/resale: Estimate the amount of work needed and the rate at which you could resell the property.
For rental yield: Estimate the amount of work needed and the potential rental income you could earn over a year. Then divide the annual rental income by the total acquisition cost (purchase price + notary costs + renovation and furnishing).
Different types of rentals will have different costs, but let's say that for long-term rentals you should aim for at least 7% profitability.
For short-term rentals, aim for at least 10% profitability.
The bottom line: be patient and wait for the right opportunity. Good deals are released from time to time, and when they happen you have to react quickly.
Is it better to rent or buy one's principal residence?
My wife, daughter and I are currently renting the unit we live in and renting out the apartment we own.
Why do this?
To sum up: the most beautiful properties and/or those located in the best neighborhoods are generally unprofitable.
This makes sense since one of the basic principles of investment is that profitability is linked to risk.
So, in uptown areas where there is less risk of the tenant not paying you or of the property devaluing, the return on these properties is lower.
This is the main reason why the yield of buildings in the uptown areas of Paris is around 1% when the yield of an investment property in a provincial city is more like 10%.
Let's take a practical example: in Lisbon, we pay €1,400 per month in rent for a large apartment in a beautiful area, 20 minutes on foot from the historical center.
If we had wanted to acquire this property, we would have had to invest about €450,000. (Note that the profitability of this property would have been 16,800/450,000 = 3.7%.)
Instead, we invested €150,000 to buy a property in a developing area on the other side of town. This property started out bringing us €1,800 per month and has since increased in value.
So, instead of investing €450,000 to stop paying rent, we invested €150,000, which pays our rent. And we even generate extra income every month.
With just a few simple tips, you can manage your money and assets in a completely different way.
Like I said at the beginning, leave luck for other people. You don’t need it!
Final real-estate tips
The more debt you have, the higher the risk you take on.
Don’t forget too that real estate requires work – small technical problems are bound to happen, as are disputes.
However, don’t use these cautions as excuses not to invest.
Remember: an entrepreneur is someone who makes decisions and takes action. In five or 10 years, you'll be very happy you made this investment today.
And above all, try to have fun. Think of it as a treasure hunt. When you find an interesting ad or you visit a property with potential, it's really exciting.
2. How to invest in the stock market
Important: transparency is particularly important to me, so before I start this chapter, I want to make something clear.
I've never bought a stock in my life!
The reason is very simple: in recent years, I have invested a lot in real estate and systeme.io. So, I haven’t really had the chance to invest in the stock market.
That said, I have learned a lot about it by reading reference books on the subject. And I'm eager to share what I've learned with you.
The most important books I've read are William Bernstein's The Four Pillars of Investing and A Random Walk Down Wall Street by Burton Malkiel.
These are not new books. Bernstein published in 2002, and A Random Walk Down Wall Street was first published in 1973.
But this is precisely what gives them their strength! What is new has not been tested, whereas the methods taught in these books have proven themselves for 15 and 40 years!
Both books share a similar message:
Portfolio managers cannot beat the market over the long term.
Example: over X years, manager Y has had an average performance of 4% per year. Meanwhile, the market has increased by an average of 5%.
Of course, you will always find portfolio managers who beat the market for a few years, but after a while, their performance drops. As time goes on, their performance averages out to be lower than the market.
There are exceptions like Warren Buffet, who has been performing exceptionally well for decades, but you have to take this information with a grain of salt.
First, investors like Buffet are a handful out of hundreds of millions.
Second, Buffet is highly publicized, so the mere fact that he's investing in a company is going to boost his stock price.
The point is that you have about as much chance of beating the market in the long run as winning the lottery.
Add on management fees to compensate your portfolio manager, and you’re hurting your chances to make money.
The bottom line: it's better to invest your money in listed index funds than to pay managers to manage your money.
On average over the long term (i.e., over 20 years), the stock market brings in 8% per year – that’s huge!
This return is linked to the high volatility of the stock market. Some years you can make -20% or even -30%, and when that happens you have to keep calm.
All studies show that day traders (people who try to speculate by buying and selling securities quickly) on average lose money.
Experts now recommend a “passive” approach:
- Only invest money you don't need, keeping your vision long-term
- Buy index funds (trackers) that replicate the market’s performance (e.g., US equities or global equities) so you can diversify easily and keep management fees to a minimum
- Invest regularly over time rather than a large sum all at once to limit your risk.
- Mix stocks and bonds, depending on your age and your appetite for risk. A ballpark estimate is to have a percentage of bonds in your portfolio equal to your age. For example: at 40 years of age have 40% bonds and 60% shares.
- Once you have decided how to allocate your assets, you need to rebalance your portfolio. Every year or two, sell some securities that have performed well and buy securities in the asset class that haven’t performed as well. This is counter-intuitive, but if you want to make money you have to buy low and sell high.
There are other strategies like buying high-dividend stocks, but this gets complicated.
You have to choose these stocks individually – which requires a lot of research – and if these stocks generate dividends, they’ll likely be less valuable than stocks that distribute fewer dividends.
In short, the passive investment strategy is the one that gives good results for a minimal amount of time spent (literally a few hours per year).
3. How to invest in your business
My first real estate investment in Portugal provided some food for thought:
I had the know-how to make money in real estate, but what was my added value compared to another ex-pat or a local?
They too could invest in real estate. My added value compared to them was not enormous. On the other hand, I had a lot more added value in my business because I'd been doing it for years, and the expertise I'd developed was much rarer.
At that time, I was making about €25,000 per month of turnover selling online courses in web marketing and English language learning.
I had a few expenses, so I was making about €15,000 of profit per month.
Rather than investing this €15,000 per month in real estate or the stock market, I decided to develop software.
I listened to several interviews with Nathan Barry, the founder of Convertkit.
His idea was not revolutionary – it was a kind of software to populate an email list and send newsletters.
But he found an interesting marketing angle: he targeted bloggers, and with the help of several influencers, his turnover went from $5,000 per month to $500,000 per month in a year and a half.
It is important to know that SaaS (software as a service = you pay a monthly subscription to use the software) is generally sold between two and four years of turnover.
So, $500,000 a month is $6 million a year, which gives the software a valuation between $12 and $24 million.
All this made me decide to launch my own software in the summer of 2015.
It took me a few months to find a provider who could help me. In November 2015, I signed with a software development company in Morocco.
After a year I wasn’t making progress, so I discontinued working with them. That partnership cost me a year and €30,000.
A few months later, I found a freelance developer I could trust. In early 2017 we started to build the software I had been dreaming of for years.
Little by little, we migrated my two training businesses onto it and launched at the beginning of 2018.
The turnover increased by 10% per month. One year after the launch, we reached €50,000 of turnover per month.
It was a huge success, with the biggest gains still to come since we were targeting at least five million in annual sales.
In the end, I invested about €200,000 of my own money in this project. So, what was the profitability of this investment?
With €50,000 per month of turnover, that's €600,000 per year.
Let's imagine that this software is valued at two years of turnover. That would give it a valuation of €1,200,000.
The profitability of this €200,000 investment, made over two years, was 240% profitable per year (€200,000 x 2.4 x 2.4 = €1,152,000).
Compare this profitability with the roughly 40% yearly profitability of my real estate.
Then compare with the returns you can get in the stock market (8% over the long term). Or with Livret A – currently just 0.75%!
This shows you just how much you can make your assets grow when you are an entrepreneur. Again, think about the long-term value of your business.
It's not just the software. You can also invest:
- in your team (today I have nine people working for me)
- in online advertising to make more sales
- in the services of a marketing consultant who can help you take your sales to the next level
Bonus: How to Get Fit
Why talk about losing weight in a book about financial independence? Because being rich is good, being rich and fit is even better!
Being fit allows you to:
- Feel better about yourself and have more self-confidence;
- Be healthier;
- Project a better image of yourself.
I see some interesting parallels between money and fitness, too.
- To increase your wealth, you must earn more than you spend. With weight, it’s exactly the opposite (you must spend more calories than you consume).
- Like in business, losing weight is hard at the beginning but becomes easier the more you invest in yourself.
In my case, I've always tended to put on weight easily. You know, those infamous and unsightly “love handles.”
For a long time, I was what you’d call “skinny fat.” I looked ok when dressed, but as soon as I got into my swim trunks you’d see my belly and spare tire. It wasn’t a good look.
A few years after starting my online business, I went through a stressful period and gained about 12 pounds.
I decided to get back into sports, but more importantly, I started learning about nutrition.
I’m now back to the shape I was in my 20s, and I’m leaner and have more muscle than ever. So what did I do to get these results?
But before getting into it, remember that we're all different, and your health is important. You should always ask a doctor for specific advice.
Now, we’ve all heard the news. Obesity is affecting more people than ever before.
It’s not at all surprising when we think of how the average activity level has changed over the years.
Sedentary work, like sitting at a desk, has replaced physical labor.
But even more than that, our diets have changed – and not always for the better.
For me, I found that the Paleo Diet was great to lose those few extra pounds hanging out around my middle.
The idea is to eat as hunter-gatherers did before the advent of planned agriculture. That means as much meat, fish, fruit and vegetables as you want.
Meanwhile, you remove carbohydrates (bread, rice, pasta, sugar) and dairy products from your diet.
If you are significantly overweight, the Paleo Diet is a simple way to get good results.
But if you want to get a body like in the magazines, you're going to have to go a bit further. For years I avoided terms like “nutritional value” and “macronutrients” like the plague.
Then I read Strength Nutrition by Julien Venesson.
I found it fascinating because everything was explained so logically. To sum up: your body needs a certain number of calories daily.
If you are over-caloric (you consume more calories than you expend), you will store fat.
If you have a caloric deficit (you spend more calories than you consume), you will lose fat. Pretty simple, right?
The big game-changer for me was realizing that it’s much easier to regulate how many calories you consume than to try to burn them off with exercise.
For example: to work off a 450-calorie slice of chocolate cake, you’d have to walk for 1.5 hours! The bottom line is that it’s much easier to pay attention to your diet than to eat whatever you want and work it off later.
That said, if you lose weight but don't build muscle, you might not love the result, either. The solution? Pay attention to your diet to lose fat, and exercise to tone your body.
Now that you have the basics down, let’s talk about macronutrients. Simply put, these are the components of food.
There are three: proteins, fats, and carbohydrates. Proteins are used to build muscle.
Lipids (fats) are essential for the proper functioning of the nervous system. Carbohydrates are just energy and are not essential to our body's ability to function.
1g of protein provides 4 calories, as does 1g of carbohydrates, while 1g of fat provides 9 calories.
This is why we often hear that "fat makes you fat."
Lipids are indeed twice as high in calories as proteins and carbohydrates. However, they play an important role in our bodily makeup.
That's why bodybuilders consume more fat than the average person, especially “good fat.” We’re talking avocados, salmon, nuts, and almonds.
To build muscle and lose fat, it is recommended to consume 1g to 2g of protein per kilo of body weight per day.
To break it down with an example: I weigh 70 kilos, so I should consume 70 to 140g of protein per day.
Personally, I try to be a bit above that to bulk up – I tend to be between 2 and 2.3g of protein per kilo of body weight per day.
To keep your nervous and hormonal systems working well, you should consume at least 1g of lipids per kilo of body weight per day.
You can treat carbohydrates as leftovers. Whatever you haven’t’ consumed in protein and fat from your daily calorie goal, you can have in carbs.
I hear you protesting already.
People don't want to count their calories and macro-nutrients. And I hear you!
For years, the mere thought of counting my calories just seemed impossible.
Eventually, though, I got tired of not making any progress. I gave in and bought a small food scale so I could weigh my food to count my calories and macro-nutrients
I kept track of what I ate on MyFitnessPal, a mobile app that I personally found super easy to use, and that didn’t require much time.
If you feel like counting calories and macros isn’t for you, think about trying it for just one week. At the very least, you'll get a better understanding of what's in your food.
Not knowing what's in the food you eat when you want to lose weight is like trying to save money without knowing the price of the items you’re buying.
Pretty complicated, right?
In my case, I didn't know that avocados are mostly fat – good fat! I also learned that there is a lot of protein in parmesan cheese.
Above all, though, counting your calories and macro-nutrients makes you become aware of how much we all over-consume carbohydrates.
Knowing what's in the food also allows you to put together your own menus.
That can be easier than following a typical set meal plan because it’s unlikely that you keep those things stored in your fridge and pantry all the time.
When you know what's in your food, you learn how to adapt.
For example, if I’m nearing the end of my day and still have extra calories to consume, I know that I can just add avocado or some extra cheese to my meal.
I can also indulge a bit because I know how to balance my other meals.
You might be thinking, “but I'll never make it. I like to put sugar in my coffee in the morning and have ice cream in the evening in front of the TV.”
Remember: I was like you! Everybody's like that. It's normal. The trick is to fool your system.
Think about putting your hands in ice-cold water, then in room-temperature water. It feels like the water is hot!
This is because our sensory system works in a relative – rather than absolute – way.
It’s the same with food. That’s why if you go to a wine tasting, you start with the weakest wines first. If you started with the strongest, it would overpower your senses and you’d be unable to smell the weaker wines.
Same for a cheese tasting.
It’s the same principle when you eat at home. Next to fries and ketchup, vegetables are going to seem tasteless.
And we wonder why kids don’t like vegetables…
When you eat “clean” – that’s to say you avoid carbs and processed foods and instead eat a lot of vegetables – you’ll actually enjoy the taste of the healthier stuff.
I eat a daily diet of meat, vegetables, fruit, fish, and cheese.
Every night I eat the same dessert: Greek yogurt with roasted almonds and a little agave syrup (fewer calories than normal sugar).
I'm having as much fun as if I were eating a chocolate cake!
Changing your habits is not something you can do overnight, so be persistent but be forgiving with yourself.
We all make mistakes sometimes. The important thing is not to give up and to keep trying to improve, even if it takes time.
As for sports, don't think you’re going to get the body of your dreams by going to the gym once or twice a week.
What I recommend is that you practice sports regularly and increase your activity over time. Weight training is practical too because you can isolate the part of the body you want to work on – or avoid, like if you have an injury.
In my case, I have weak knees so I can't run or jump a lot. So, I walk at least 4.5 miles a day, and at the gym, I ride elliptical bikes that are easier on my knees.
I started off going to the gym twice a week, with the goal of building up to three times a week. It took me two years to go from two to three weekly sessions.
After that, it got easier, and two months later I went from three sessions to five. Soon after that, I went to six gym sessions a week.
Before you think I’m insane, hear this: all this exercise adds up to about four hours a week, so not much in the end.
Remember what I said earlier? A little bit every day. Let me break down my gym routine for you:
I always do three weight training sessions (Monday, Wednesday, and Friday), where I work different muscles (chest, legs, and back).
On Tuesdays, Thursdays, and Saturdays I do 20 minutes of elliptical biking with varying intensity (5 minutes at a normal pace, then 1 minute at full speed, and so on).
See? Not so much time at all. Yet these little sessions mean I’m constantly improving my fitness and burning calories.
I’ve also learned to be forgiving with myself with I get sports fatigue or don’t feel like sticking to my caloric deficit. When you feel like that, listen to your body. Take a rest day, eat a little more, it’s ok.
In the end, my fitness journey became a passion.
I now get a lot of pleasure out of it, whether it's through training and the pleasure of surpassing oneself, the sense of well-being after training, or the feeling of accomplishment when I reach a goal that I thought was impossible.
It’s not unlike starting a company:
It takes work, but it’s worth it.
So, I strongly encourage you to take the plunge.
Don't aim too high. Just try to always push yourself a little higher and never give up. You’ll be surprised at what you can accomplish!
Conclusion: How to Get Happy
Why talk about happiness in a book about financial independence? Because in the end, that's what we all want.
This is the paradox of personal development – you want more, but if you always want more, you are never happy.
Studies have shown that once your income goes above €5,000 per month, your happiness stops increasing.
It’s easy to feel like the day you get money is the day all your problems disappear.
Let me tell you, though: when you have money you have problems too; it's just that they're other problems.
More money also means more responsibilities – assets to manage, a business, customers, people who work for you.
If you have money but you work 90 hours a week, is it a good thing?
Or what if you have money but you're under a lot of stress and you're 30 pounds overweight? It's easy to fall into one extreme and neglect other parts of your life.
Personally, I love money and the freedom it brings – but I am aware that there are other ways to be rich.
For me, richness means:
- Not being stressed (this is why I changed my business models to recurring ones, which are more stable in terms of revenue and less stressful).
- Having time (my business allows me to spend a lot of time with my family)
- Being in shape (having time for sports and avoiding stress allows me to be thin and healthy).
Sure, you could also call me rich in the monetary sense of the word. But the things that make me happy cost nothing, or not much.
Things like:
- Having a good time with my wife and daughter (when your 2-year-old daughter hugs you, your heart melts)
- Getting in a good workout
- Cooking while listening to music
- Reading a good book
- Spending time with old friends
- Listening to a podcast while walking around beautiful Lisbon
You see, these are simple pleasures. I don't need a sports car or a Rolex to enjoy them. I advise you to do a simple exercise:
Take a sheet of paper or a text document on your computer and write down all the things you are thankful for.
Absolutely everything.
It can be thankful for being alive. Or being able to listen to music on your phone. Or for having parents who are still alive.
You might find out you’re already rich. Of course, we always want more.
It’s human nature to strive to do better and to go further.
But don't make your success conditional on achieving your goals. Find ways to be happy today. And see life as a game.
If you've already won, then you can’t lose.
I hope this book has motivated you and will inspire you to have the life you dream of.
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