James and I started out in real estate business with, knocking on doors together for listings. We were unsophisticated and dirt poor.  Over the years, James acquired a few properties and opened a brokerage office and managed his own properties. After a few successful and fun years, he went on his separate ways. We both continued in the real estate industry and continued to purchase properties to build our own portfolios. However, we were different in our strategies and went about our own business.  One of the reasons this story is worth sharing is that when James died at age 75, he left many friends and family a financially secure family after leading a full life of doing whatever he wanted for the past twenty five years. How did he do it?

 In the early days, James was a volume dealer. He purchased as many properties as he could by taking titles subject to existing loans. He made a decent living, but James was much more methodical in his approach, only acquiring houses for specific reasons. James rarely took big chances. His goal was to try to buy ten houses every year and he had a system that took care of all his financial needs and wants.  The sale of five houses would be enough to support his family.  James also he kept five houses as rentals for long term equity growth. He always used seller financing and refused to buy a house that didn't produce positive cash flow after all the costs of ownership.

Over the years, James' position continually upgraded by selling off older, smaller houses that had less value while keeping the larger, higher value houses.  This steady and cautious approach always produced enough net income to support his family comfortably. With that as a base, James used as much of his remaining money as he could to pay down personal and mortgage debts.

By the time his children left home, James had enough income from his rental houses to retire. At that point, he owned twelve houses free and clear. Rental income from three of them allowed him to remain debt free. Two of them produced enough income to enable him to keeping buying new cars for both he and his wife. Income from one house paid for food, clothing, and utilities. One paid the taxes and insurance on all of his houses. One paid for recreation and a vacation three times a year.  Rental income from the last two paid for all necessary health, accident and life insurance coverage ... you get the jest.

Upon getting a little older, James no longer had the ability or desire to maintain all of his properties.  One by one, he sold them all off. After paying off the last of his mortgage loans, James net worth was more than $1,500,000. With all of these investments, he had a net income of $85,000 before taxes not including Social Security.

James paid capital gain taxes and invested his net proceeds for income and growth. He also created a Living Trust to provide for his wife and son. Because he had a plan early and had the discipline to stick with it over the years, they are now financially secure.

This story provides several good lessons for me and real estate investors who is just starting out his or her career:

• Many investors subscribe to the high risk/high reward philosophy. This is a risky proposition, but you don't necessarily have to take on high risks in order to create enough income and net worth to support a good lifestyle.
• Plan your work and work your plan. Think about where you want to be and what it will take to get there in terms of how many and what kind of properties you want to buy. Also think about what you're going to do with the money your investments generate.
• Don't get too far into debt. Figure out a way to be able to support your family and pay off your houses without running up huge debts. Bankruptcy filings and foreclosures have become all too common in today's market. One big reason is taking on too much debt to manage with your regular income.
• Early in your career, develop a plan to provide financial support for your family when you can no longer work to earn a living. The earlier you can begin to plan for this; the better off you will be later in life.
• Always carry enough insurance to take care of your needs in case your health goes bad or if you have unforeseen circumstances like an accidental injury. These kinds of circumstances could James your family income and savings if you are not properly insured.

Putting together a comprehensive plan to provide for all of your needs takes a lot of discipline and responsibility, particularly when you are younger and those things seem far away. However, developing your plan and sticking to it will help protect you and your family in the times when it's needed most. Have you protected your future and your family as well? Why wouldn't you start right now to do so?