Adapting wealthy strategies to ERE

[Felix]

This is inspired by the discussion between jacob and SpartanWarrior in another thread about the allegedly different thinking styles of wealthy, consumer and ERE types.

This has lots of practical "lifestyle design" (hate that word thanks to Tim Ferriss) implications.

As far as I understand it, it works like this:

I want X.

Consumer:

I trade my time for money until I can buy X or worse, use my credit card to buy it and spend the rest of my life paying for it.

ERE:

Convince myself I do not really want it.
Remodel my life to not need it.
Find a cheap substitute.
Find a way to trade time and skills for X. Spend time and less money to learn skills.
Find a friend of a friend and borrow X.

Wealthy:

Exploit or arrange reality to make consumers pay for your X (and maybe more).

An example: Housing

Consumer:

I buy a house I like at zero down and spend the rest of my life paying for it.

ERE:
Decide the house is not worth it.
Live in a trailer or a tent or a small apartment.
Save enough money to buy a small place.
Live a couchsurfing life.
Housesit.

Wealthy:

Buy part of the city/buy cheap land and lobby to have it rezoned and build a new part of the city with immigrant labor/buy foreclosures after a crash.

Increase rent. Sell houses to consumers at increased prices. Take the nicest one for yourself.

Profit.

My thinking is that as we (the ERE crew) move from ERE to wealthy over time, we can start using at least adapted versions of their strategies more and more.

In housing this would be:

Wannabe wealthy ERE:

Buy an apartment complex or larger house, rent the place, pick one apartment, live for free while having your tenants pay off the mortgage + x.

Buy a foreclosed house, renovate, rent it, live on the rent.



I was wonder which of these wannabe wealthy ERE strategies you guys know or maybe are already using. I'm sure there's a lot of knowledge on that (available to varying levels of wealth) on this forum.

[chenda]

Perhaps the difference simply boils down to consuming vs investing, or even just using labour vs using capital. In this sense there is not really a difference between ere and the wealthy, except of degree.

[Ego]

I've wanted a particular Arc'teryx jacket for a long time. They sell for about five times what I am willing to pay, so once a week I strolled over to our neighborhood Goodwill store looking for one. Long shot. While looking through the jackets I found several North Face, REI, Marmot and Patagonia jackets, and even found one Arc'teryx jacket in XL. I sold them all on ebay and over the past two years accumulated about 3X the cost of a new Arc'teryx jacket in my Arc'tyrex jacket kitty.

I would go to REI when they gave out their 20% off coupon and I'd try on the jacket. I just couldn't bring myself to pay that much for it. So I waited and watched as I was consistently outbid for them on ebay. Then one day I went to the REI used gear sale. The moment the gates opened I went directly to the jackets. As I was reaching for the exact jacket I wanted, a guy on the other side of the rack pulled it through. In as friendly a voice as I could muster I told him I'd be interested in it if he decided not to get it, and stood there as he tried it on. It was too small and he was nice enough to hand it over. I thanked him several times for being so nice. Perfect condition and 1/5 of retail price. About twenty minutes later the same guy found me digging through the tents. He had found another Arc'teryx jacket in my size and brought it to me. Sold it on ebay. My Arc'teryx jacket kitty will be funding our living expenses for the next two months. No kidding. And some day I will sell the jacket, undoubtedly for more than I paid, and use the proceeds as seed money for the next big thing....

Take fat from the liposuction clinic to make soap which is sold at the fancy department stores to those whose asses produced the fat.

[Chad]

Wow...if that's not ERE arbitrage I don't know what is Ego!

[susswein]

I do a couple of the things mentioned above:

1) I bought a multi-unit property and live in one of the apartments. I highly recommend this for anyone starting on the ER path, even if all you can afford is a duplex or house with a basement apartment.

2) I also do the kind of arbitrage mentioned in the arcteryx post. There's a place in town that auctions off lost/damaged freight and I will regularly buy stuff to sell on ebay and apply the proceeds to my "want it but don't need it" kitty.

[Ego]

ERE:

Convince myself I do not really want it.
Remodel my life to not need it.
Find a cheap substitute.
Find a way to trade time and skills for X. Spend time and less money to learn skills.
Find a friend of a friend and borrow X.

and....

ERE:
Decide the house is not worth it.
Live in a trailer or a tent or a small apartment.
Save enough money to buy a small place.
Live a couchsurfing life.
Housesit.

Apologize for the derail....

All of the above. We pick the one that works best for us today and discard it for a more appropriate option if one presents itself tomorrow. Doing that has some problems. There is a lack of stability that many would find disorienting. There can also be transaction costs and inefficiencies when shifting between alternatives. In my mind those costs and temporary inefficiencies are compensated for in spades by the efficiency gains of the better option.

[workathome]

EGO - Do you live in a high-income / rich area? I'd be surprised to find Arc'tyrex or even decent REI jackets locally.

[vivacious]

Once a week I strolled over to our neighborhood Goodwill store looking for one. Long shot. While looking through the jackets I found several North Face, REI, Marmot and Patagonia jackets, and even found one Arc'teryx jacket in XL. I sold them all on ebay and over the past two years accumulated about 3X the cost of a new Arc'teryx jacket in my Arc'tyrex jacket kitty.

Is that worth doing? I've noticed that there's some surprisingly good stuff at Goodwill. Usually I'll just find a good deal for myself etc. Is it worth the time/hassle/etc to make a little business out of it? Is there good demand for used stuff of decent quality? You seem to make it sound worth it I guess.

[Ego]

New thread...
viewtopic.php?f=7&t=4439

[Riggerjack]

Felix, again, with the rich puppy killers... are all the rich people in your world tieing renters to railroad tracks while waxing long mustaches? Do you really think that the only way to get rich is by oppressing the poor?

My real estate ERE Gamble: find a house that was going to be demolished, buy it for $1, then buy land, clear it, drill well, pay to have house moved, install utilities and septic.
Unfortunately, I started this in 2008, but had I made better decisions, and real estate been stable, I stood to make 100-150k when it was done. Instead, I live in it, and about broke even.
The same lady who sold me my 5 acres in 2008, sold me another lot in 2011, for 40k, 1/3 of what she had been trying to sell it for since 2007. Not because she liked me, but because we'd negotiated for a year, and I could come up with cash. I intend to reset the property lines, clear and park out the property, then try to sell it for 120k, or so.

Buying at below retail price, fixing it up, then selling to consumers who are happy with the product. No lobbying, bribery, or virgin sacrifice required.

[Riggerjack]

Conversely, what is wrong with buying 40 acres, drilling a well, providing access roads, utility paths, and clearing homesites, then dividing out that 40 acres into 8 5 acre lots, then selling 7 to recover your costs?

[Felix]

Not everything the wealthy do is exploitation, and it doesn't apply to each and every single wealthy person, there's a lot of simply smart buying and selling involved, but in the long run it is usually a factor. Also the smart buying is often buying from people with no other choice than to sell at low prices. You don't have to put them into that position yourself to profit from it.

Don't get me started on private land ownership.

But hey, this was supposed to be a practical thread.

I do consider very wealthy people to be at least a little bit psychopathic, yes. And I think they are smarter than your average folk. Combine the two and you come up with great methods for high-ROI methods for wealth creation. Hence the thread. There's something good in there. We can learn something here. And coming from me, that should say a lot.

[Felix]

Travel:

Finance via geo-arbitrage.

You're ERE, so you only need a relatively small bag for travel, which gives you about 10-15 kg of room for products of all kind.
Clothes of a certain brand that is expensive in one country but cheap in the other.
Electronics.
Food items(?)
Duty-free alcohol and cigarettes (?)

Anyone do something like that?

[henrik]

Duty-free alcohol and cigarettes (?)

The Finnish customs recently introduced a requirement for passengers unboarding the ferry to be able to actually carry the amount of alcohol they've brought along. If the passenger is disabled, they can be assisted, but only up to the amount they would reasonably be expected to be able to carry if they weren't:) As a nice loophole, the rule does not concern those who travel by car.

[Sclass]

I've always liked buying stocks. During my analysis I like to fantasize that I've bought a seat on the board and can now control the internal cash flow of the organization. As a poor man I can still buy into the company on a scaled down basis. Of course I cannot do a Carl Icahn and cut a dividend to myself, but the big point is I can spend my money like a rich person.

Jacob really likes to bring out how ERE has a lot in common with upper class money habits. As far as it goes with stocks, the leveraged buyout or the board takeover is the only difference in my mind.

On a littler scale I bought a brand new Cusinart at Goodwill this month. $10. Wedding gift discard. Unused. I was going to salvage its blade and bucket for my worn one since replacement blade and buckets cost more than $10. Then I realized my motor base was looking dingy so I just donated my old one to Goodwill and kept the nice one as a replacement.

I invested in a cusinart so I could make higher quality ground beef out of low cost (lean) cuts of chuck rather than buy the fatty garbage the store is grinding up. Poor little rich strikes again.

[workathome]

Dude! Never thought of using chuck to make my own ground beef. Great idea. I use my Cusinart weekly to make mega batches of Hummus for cheap.

[lazyboy]

Ok, I really need to ask this now.
You could find it all around on the internet. People buy stuff at goodwill and sell it on ebay, craigslist .......
Is this just an american thing or is this possible in other countries too?
As far as I know this is absolut impossible, here in Germany, as long as you are not living on social security.

[Sclass]

Workathome - yeah, you can make really high quality ground beef using the cheap lean cuts. I adapted this trick from a rich college pal who chopped his own steak burgers with a cusinart. Now that is keeping with the theme adapting ideas from the rich. This punk had a 911 Porsche, his own condo and a five store mini mall...and a cusinart. He was nice though, and invited us lesser dudes over to enjoy his steak burgers and gin.

After he pointed out how greasy and questionable store bought ground beef was, I adapted the trick to lean cuts I got on sale like chuck. Technically it's chopped, not ground but it is way faster than a meat grinder. Oh yeah, and when I was really feeling frugal as a kid I'd dump in a carrot or potato to "cut" the burger. I used to convince my then girl that she got her fries and burger in one. I wish I hadn't thrown away her breakup letter saying I was the cheapest guy she went out with. Reminds me, I used to make a good carrot and celery filled meatloaf. I should make one today.

Funny, I did all that stuff as a broke college student. Now I need to do it to be a healthy 44 yr old.

Hummus?!? Dang, I've been getting ripped off buying the overpriced tubs or premade. I'd never thought to make it myself. I'll try it. Thx.

Lazyboy - yeah America, the land of the landfill is a great place to do this. My old classmate from Switzerland visited and saw all my second hand stuff and complained how used stuff was hard to find in one place there. Thanks to yard sales, rummage sales, goodwill, Craigslist I can stay off the retail rack.

[workathome]

@sclass - It tastes best if you buy bulk dried chickpeas and soak overnight instead of canned. This is my favorite recipe so far: http://www.theblackpeppercorn.com/2012/ ... hick-peas/ though I mix the oil and spices directly in. It's sort of a base, you can add other spices or olives or something to mix it up.