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Financial Freedom & Real Estate: It Starts and Ends With Acquisitions


Surely, you’re familiar with the term “house poor.” It’s a common affliction in which much of your net worth is tied up in your home, and a big chunk of your income goes towards paying the mortgage, maintenance, and taxes to live in a nice home.

The house poor do not experience true poverty as long as the income can keep up, but they’re not set up very well to achieve true wealth, either.

Robert Feol has made it his goal to help people avoid that trap. The Tennessee based author, speaker and real estate investor, and author of The Short-Term Retirement Program: Break Out of Your Financial Prison shares his strategy to use your home to build, rather than squander, wealth.

The examples in this post assume a historically average mortgage rate of 7%, and we know that in 2020, many mortgage lenders will give someone with excellent credit a rate of half that. Nevertheless, the lessons hold up, even if the numbers would line up a bit differently. Let’s hear from Mr. Feol.


Financial Freedom & Real Estate: It Starts and Ends With Acquisitions


There are a lot of ways to make money in real estate, but the primary way (and the best) way to ensure yourself a nice payday, whether it is days or years from now, is by making smart acquisitions.  By training yourself to a certain standard of integrity when it comes to finding investment opportunities in housing, and holding yourself to that standard, you can become very wealthy.

Conversely, if you find a supobtimal or marginal investment opportunity, you can frequently lose money through time attrition, taxation, and holding costs.  It’s a very fine line between a profitable deal and a loser.  You have to choose wisely.  And more importantly, you have to ensure that you have control of a home via contract or option – or else you have NOTHING.

A small bit of good news here is that many people don’t believe that discounted housing and investment opportunities exist, and those that know they exist, generally, are terrible at being able to locate them.

This is why I recommend starting with your primary residence as your first actual investment.  A lot of people fall under these two categories, frequently both at the same time – maybe you do, too:

  • Their housing payment is killing them each month, and;
  • They want to earn more money but are working full time already.


To this I say, with a strategically executed primary home purchase, and a little bit of outside the box thinking, you can ELIMINATE your housing payment and generate a full time income from it without working a second job.  And, even better, you can generate this income through a few hours of administrative management a week.


Back to The Math


You see, most people are conditioned to fall in love, pay retail for, and mortgage for 30 years, their primary residence.  If someone is qualified for a 100k mortgage, they usually will ‘go shopping’ for homes in the 100k – 150k range, then ask their banker for a loan increase, which is frequently granted.

Once they close the house (and pay retail), they walk out of the closing office breathing a sigh of relief, and their agent gives them a celebratory gift – but they might as well be heading off to a 30 year prison.

It’s a financial prison of their own making, because a) statistically the average American moves every five years, and b) on a 30 year note, after 60 payments (five years) are made on time, the borrower STILL owes roughly the same amount of money they originally mortgaged.  This creates two undesirable financial situations:

  • Assuming the borrower wants to move, they have to sell their house, and usually with transactional costs, they will be taking a loss, and;
  • They will have ‘thrown away’ their 60 payments to interest.This is a case where the math doesn’t lie.  Consider this mortgage table, taken from my first book The Short Term Retirement Program:


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Figure A: Amortization Table of Yearly Interest Paid on a 30 Year Loan vs. Principal Reduction on a 100k Real Estate Purchase At 7% Fixed


Yearly Aggregate Amortization Schedule – 100k Loan at 7% Fixed Interest Rate – Monthly Payment $665.30

Payments Yearly Total Paid Principal Paid Interest Paid Balance Remaining
Year 1 (1-12) $7,983.63 $1,016.00 $6,968.00 $98,984.19
Year 2 (13-24) $7,983.63 $1,089.00 $6,894.00 $97,894.95
Year 3 (25-36) $7,983.63 $1,168.00 $6,816.00 $96,726.96
Year 4 (37-48) $7,983.63 $1,252.00 $6,731.00 $95,474.55
Year 5 (49-60) $7,983.63 $1,343.00 $6,641.00 $94,131.59


Looking closely, after five years, we see that almost $35,000 has been paid as interest, with about an additional 5k paid as principal.  That’s a losing proposition!  You paid 40k over five years and 5k reduces principal, while 35k goes up in flames?

Again, you can’t beat the math here.  Making your largest payment where 6/7ths of the payment goes to interest is a LOSING FINANCIAL PROPOSITION.

Now, assume the average family does this thing, the 30 year loan and then move every five years thing.  They are throwing away money and, barring some large life changing financial windfall, will probably always fall into the 76% of Americans who live paycheck to paycheck.


Change YOUR Game


If we go outside the box we can make our biggest payment our smallest, while generating an additional, full time, $30k – $50k per year salary without working.  How do we?

It’s a simple three part plan, as follows:

  • Find a foreclosed property which is about half of its market value, or less, which needs (essentially) cosmetic repair.
  • Ensure the home has an Accessory Dwelling Unit[1], rentable, space, or convertible space where you can create a separate, discrete, living quarters.
  • Decide how you want to rent the space – to a long-term tenant who pays monthly, or set up a daily rental through a website like or Then, start renting your home.

The key here is once you find a property which fits your criteria, DO NOT USE A 30 YEAR LOAN.

Try to use a 10 year loan or less.  In this case, let’s assume you find a home (worth 100k) with an accessory dwelling unit for 50k, and it needs some cosmetic repair that you will do yourself.  You decide to put it on a 10 year loan.  This is also taken from my previous book.



Figure B: Mortgage Interest Table: Timmy’s Short Term Retirement 50k Loan[2] With a 7% Fixed Interest Rate, Paid Over A Ten Year Term


10 Year, 50k – 7% Fixed Monthly PMT $580.54
Year Interest Principal Balance
1 $3,386.59 $3,579.92 $46,420.08
2 $3,127.80 $3,838.71 $42,581.37
3 $2,850.30 $4,116.21 $38,465.16
4 $2,552.74 $4,413.77 $34,051.39
5 $2,233.67 $4,732.84 $29,318.55
6 $1,891.53 $5,074.98 $24,243.57
7 $1,524.66 $5,441.85 $18,801.72
8 $1,131.27 $5,835.24 $12,966.47
9 $709.43 $6,257.07 $6,709.40
10 $257.11 $6,709.41 $0.00
Totals $19,665.10 $50,000,00



Now in this example, your monthly payment is $580.54, and if you make that payment 120x (ten years), you are done and own your home – which presumably, is worth 100k or more.  Interesting to note here also is in Year One you pay more principal than interest – making your money much more effective in executing your debt reduction.

But wait!  We haven’t added in our rental income yet.  What if you had the option of renting your ADU daily, weekly, or monthly?  How does this stack up?


10 Year, 50k – 7% Fixed Monthly PMT $580.54 vs. Periodic Rental Income Schedule[3]
Income Schedule – Monthly, Weekly, Daily Gross Rent Less Monthly Mortgage Payment Total Net Revenue Annualized Net Revenue
Monthly Rent Collected – $1,000 $1,000 -$581 $419 $5,034
Weekly Rent Collected – $300 x 4.3 Weeks $1,290 -$581 $709 $8,514
Daily Rent Collected – $125 x 30 Days $3,750 -$581 $3,169 $38,034


So recall the two problems discussed previously shared by most people, statistically speaking, in The United States today:

  • Their housing payment is killing them each month, and;
  • They want to earn more money but are working full time already.



What have we done?  We have:

  • ELIMINATED their housing payment(through the application of rental payments of others), and;
  • Generated a 5k – 38k annualized, supplemental income without anyone having to go to a second job. Incidentally, this is treated as business income by the IRS and is not subject to social security tax[4], and;
  • Improved the net worth of the homeowner by 50k(assuming home is worth 100k and they paid 50k), which is spendable money in hand someday when they choose to divest themselves of the home. Additionally, the 10 year loan adds to their net worth each month via principal reduction when the tenant pays the rent.
    • Passive (rental) income

In this case, the strategic purchase of ONE PRIMARY RESIDENCE has provided income from all of these sources:

  • Lump sum (equity) income at the time of purchase
  • Tax shelter of income(creating income not subject to social security tax, coupled with the mortgage interest deduction homeowners are eligible to take, and home office write off also if your CPA allows it)
  • Equity paydown income each month, due to an aggressive mortgage amortization, and;
  • Appreciation – homes, historically, increase in value over time. This additional value is realized at the time of sale.


And did you know, these happen to be the five possible ways a property can provide revenue for you?

Making the WRONG acquisition can be fatal.

The right acquisition can eliminate your housing payment and give you a 40k annual salary, if you so choose setting you up for a LIFETIME of financial freedom.

It all starts with acquisitions.


[1] Known as ‘ADU’ in the real estate vertical, but you could buy a duplex, triplex, quadplex, storefront with apartments upstairs…it’s limited to your creativity.

[2] All amortization schedules can easily be found using simple mortgage calculators online, or your banker can furnish you with these if you want independent verification of numbers.  Check my math if you have questions.

[3] Note rent amounts are $1,000 monthly, $300 per week and $125 per day.  Your rents may vary based on location, economy, and amenity offerings.

[4] See your CPA for details.

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4 thoughts on “Financial Freedom & Real Estate: It Starts and Ends With Acquisitions”

  1. This looks great on paper, but key to this strategy is you actually need to live in the discounted house that you buy. Unfortunately, in my experience most foreclosed houses at a potential deep discount like this are in poor neighborhoods where I wouldn’t want my family to live.

    Also, buying foreclosures is an advanced art and often requires things like running your own title searches and risks such as not being able to tour the house before you buy, as there is often very little time between when the auction is verified to happen and when it actually happens. And most houses set to foreclose don’t actually wind up at auction, so if you tried to nerd out about every potential foreclosed house that you’re interested in, you’d be wasting a lot of time.

    John T Reed talks about these annoying details a lot more in his excellent books, particularly the one about how to buy houses at a 20% discount.

  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. We are majority real estate in our own portfolio so I’m a clear believer. I’m glad people are starting to look at real estate beyond their place of residence and thinking about things like renting, renovating for appreciation, and creative financing (even if that just means looking at something other than the 30-year fixed). That said, real estate isn’t for everyone and it isn’t as straightforward as do X and Y will definitely follow. This article provides one example of thinking creatively, and if it piques your interest, do more research, run your own numbers and start with a small investments. We didn’t get serious till 2013 but it was a game-changer for us and enabled us to hit our FIRE targets much sooner than paper investing would have on its own.

  4. I think the best lesson here is do not buy more house then you can afford.
    By putting down 20% and using a 15 year mortgage you limit how much you can stretch yourself.

    Finding deals and fixer uppers and renting out your garage is over the top in my opinion. But I am sure some people have done very well with it.


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