I haven't rented a place in Finland since 2008, which was when I bought my first apartment here with a past girlfriend. We bought for 126K, but spent 140K all up on it for small improvements and to furnish it - as we had very furniture little ourselves and it needed some appliances. We broke up a couple years later and it was valued at 145K, so after already lessening the loan, I paid my ex 5K and took over the entire mortgage.
A couple years later, my now wife moved in with me and we spent a couple thousand redoing the floors and repainting a little, which I did myself. Two years after that, we sold the apartment for 170K, which gave us the complete deposit and then some on a larger, but much cheaper (92K) apartment in an outer-suburb, which needed a full renovation, including large-scale work to the entire building. This made the place a lot more expensive than the purchase price, but we sold it for 175K last year, which gave us the minimum deposit for the house we are in now, plus some extra to add into the renovation kitty, which we burned through a long time ago.
At each stage of the last 13 years of home ownership in Finland, owning was cheaper per month than renting something of a similar size and type. And because I was able to make some smartish design decisions and do a lot of the renovation grunt work myself, I was able to build sweat equity into each of the properties and have both a place to live, a store of value and come out ahead when selling, which gave means for the next purchase.
Property isn't always a good investment, but so far, It has meant that every time I have sold, I have been able to get about 25% of my salary out of the apartment. For example, the first place I held for 6 years had a profit of about 1.5x my yearly salary at the time, which is a pretty good result, since at the time I wasn't able to save much of my salary at all. It was the same with the second place with my wife, which was vital considering complications after the birth of our daughter meant that our cash savings were completely wiped out and the first three years we were living hand to mouth, often with salaries gone for medical expenses before any could reach the mouth.
Having that collateral in the apartment was necessary for being able to secure our home loan and give us some buffer for the renovation work. Since we moved to the house Easter 2020, we have done a lot of work and sunk a lot of loan and capital into it, but hopefully most of it will hold its value with very little updating if we do ever decide to sell, but we are planning on being here a while anyway.
The reason I started thinking about this is I noticed that the way I visualize returns on things is relative to my current salary, rather than a disconnected figure floating in space. I think this is because I have a better understanding of my financial situation through the perspective of my IRL income, so relating other revenue streams to it makes sense for me. Since I know that I am able to survive off my current income now, it would mean I would need a 100% equivalent to "live off crypto", and that would have to be relatively steady through bulls and bears. However, if I look at it as a supplement like a payrise or a bonus, I am able to get an understanding of what that means to me in the real world.
For a hypothetical example, for me to get a 10% yearly bonus, I would need to calculate what I get paid in about 5 weeks of work. If that is 4000 dollars (800 a week), I would need to earn about 75 dollars a week consistently, or 11 dollars a day. If I wanted to have a 20% payrise/bonus, I would need to earn 2x that amount.
Now obviously, this is going to depend on how much I earn, but for someone who for example in the US who earns the minimum wage of $7.25 (hasn't changed in 11 years), they would earn about 290 dollars a week, or 15,000 dollars a year. A 10% payrise for them is 1500 dollars a year or, 28 dollars a week, or 4 dollars a day. This might not seem like a huge amount, but it is significant. Apply this to somewhere like India where a typical salary is half that, and 2 dollars a day is a significant boost to living standards.
However, none of this can be charity based, it has to come through investment in order to be both sustainable and somewhat healthy, meaning people have financial freedom. This means that it is up to individuals to find ways to create the additional revenue streams that can support their lives, which is going to leave disparities of result, because people are going to be investing different amounts. However, one of the good things about crypto is that people gain mostly relative to their inputs, at least from the passive side of the equation.
I am not saying visualizing it in this way will work for everyone, but I do think holding a strong understanding of situations and conditions and then building some kind of story around things helps build clarity. Using this, it is then easier to get a sense of what is needed to be accomplished and how, rather than just playing it all day by day, in the hope it leads somewhere good in the long-term view.
For me, it has also helped diversification into several revenue areas, including posting, curating, trading, pooling and holding. I am a holder by nature, but I have been able to affect my conditioning by changing the narrative and framework, helping to develop a different mindset.
Now, so far, this isn't where this post was meant to end up at all, but I think it is a useful post anyway, at least for me. A lot of our habits are blind to us and exploring them can help identify opportunities that we have missed, while we go about our days on autopilot. Stepping away and getting perspective gives us a chance to see the bigger picture and consider if our daily grind is the right grind to get us to where we want to be.
When it comes to money, we often look at the total amount we need in order to be able to retire, or something along those lines. This sum can be very large. However, if we break it into smaller chunks and instead look at what we need to get daily, or weekly, we have more chance of making small process and investment changes that help get us there.
If my plan was to save for a house as a renter, I would imagine that I would still be saving, as even if renting was the same cost as owning, having access to that money monthly would have likely eroded some of it before I had a chance to put it away. Sure, there are many people that will say "but you could have invested it into Bitcoin" and the like - but most of those people aren't millionaires or billionaires - because they didn't invest either.
Human behavior is predictable and most of us don't have the discipline with money we would like, but if we can affect our personal narrative, we are able to change our direction. It takes time, but it is possible to make large scale changes in relatively short periods, if you consider the length of a life.
I know quite a few people from all around the world who have fundamentally changed their financial prospects through crypto over the last few years in ways that I think they probably thought wouldn't have been possible earlier. They didn't get some kind of lumpsum win, they build daily incremental growth into their habits and because they invested to become owners instead of renters, that growth can continue to provide various kinds of revenue streams well into their future too.
There is a risk in ownership of course, which is why a lot of people never make a leap into working for themselves, even though they believe they can do it better than how it is currently being done. In hindsight, perhaps they could have done it better, but hindsight doesn't get paid, foresight does.
Looking forward, I think I will write the post "this was meant to be" later instead.
Taraz
[ Gen1: Hive ]
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Buying, repairing or slight restyling while living in the home a good way to start additional earnings, which as you pointed out has given rewards when you calculate after a few properties.
Something we never considered, I do know some folks who have made substantial earnings working on houses throughout their lives. Finally deciding exactly what they wanted, where able to make the last move to enjoy golden years, sometimes self-build with knowledge gained, some fixer uppers.
Have a great day @tarazkp, sometimes you in the right place at right time to make a little extra, most rewards comes from effort and forward thinking!
In the first place, changing the floors from wood to laminate made a huge difference (normally wood is better of course) because the wood was "cheap" and the style old. We added an arctic white laminate and it made the entire apartment instantly brighter - which is really important in an old building with smaller windows on one side of the apartment only.
If I had a bit of a nest egg behind me already, I can imagine myself flipping houses here. One of the challenges is that it comes with capital gains unless it is lived in for at least two years.
people often forget the first part of that.
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Living in Finland the brighter the better, many dark months... so brighten the inside into glowing warm colours.
Always enjoyed how exceptionally well designed the small places are, and comfortable!
Have an amazing weekend, two years is not long to work at flipping for profit, after all you have a family, earnings, and writing for Hive!
That is why it’s best to have more of landed properties, it always appreciates especially in a developing or developed environment
Housing markets in some areas now are crazy!
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Yea I agree
Reason why some people never go further is fear and that is why we have risk as an important elements in business, if you can not take risk it only means you will not progress as you supposed to.
Risk aversion is strong, because it is part of us naturally. Normally it stops us falling off cliffs or not checking the growl hidden in the trees, but we also apply it to losing money, as if losing money is the same as losing life.
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All that matters is that it's your journey and you're happy at the point you reach at each instance.
Don't keep saving until it's too late to take a return on the sacrifice. The only certainty in life is that absolutely nothing lasts indefinitely.
This is something I have some insulation against, as I have a young daughter. At some point she becomes a very expensive teen! :D
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That's brilliant and I look forward to your angst-ridden posts in a few years' time! The best reason for saving hard to safeguard your family's future.
Don't ya just love when a project goes sideways, comes out someplace you never expected and still comes up roses.
I particularly like that you give an excellent view on how so many of us create our own chains which hold us back from 'success'. Particularly financial success. One thing I try to do in one on one conversations is to get people to realize that regardless of how one earns their principle income, they are in fact operating as a sole proprietorship business. If more of us incorporated the idea that we are a business into our personal finance picture (which requires at least a basic understanding of Profit & Loss and Balance Sheet and Owners Equity) then a much larger portion of the general population would be able to do as you have. Taking an approach like this makes it much easier to adjust ones 'story' as you say and you are correct to point out how crucial this is to changing the path to success.
Something I am trying to figure out how to turn into a 'Side Hustle' is working directly with individuals to create a personal definition of success. This helps people to recognize the 'invisible' chains we so often create for ourselves and gives us the power to break them. Another thing I enjoy doin in these conversations is helping them to realize how easy opportunity is to find and how to take something they are passionate about and build that into opportunity.
As always an enjoyable read.
Blessed be.
I believe that real estate is good opportunity as a side business. I also invest in buying a shop of Rs. 2000k. Now the rate is Rs.2200k. I purchase this shop 9 months ago. I also purchase land of my 🏠 house of 500k about 4 years ago when there is no house around this land. After building some house and 4 years period now rate of same size land is 1500k in our area.
@tarazpk Your post have great encouragement for many people who before depends on only salary.
I've always been a fan of owning things rather than renting. It comes with a lot more responsibility plus my current environment doesn't make renting anything affordable. Taking the leap into self-employment takes a lot more responsibility but is also a lot about owning yourself too.
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Hear hear here. I think that precisely in this paragraph is where it is better summarized and where those old sayings best fit as:
Because certainly that long-awaited and so yearned "future" may well never come exactly as you envisioned it. :)
Rent, own, give up three words that, when used well, open up endless perspectives. Ever read Robert Kiyosaki, and notice the change in mentality when you finish it, Money in motion is much more profitable than leaving it in simple savings that time ends up devaluing it. Each step you took led you to where you are, you might regret some but you would not have the learning and the vision that you have today. Thanks for sharing it with us.
@tarazkp Great post, I will take these words with me on my path to becoming an owner and not a renter 😎
Nice piece