how to take the risk out of entrepreneurship, buy income, don't chase it

Summary

entrepreneurs love talking about risk. most of them are way more exposed than they think. the move that actually de-risks your life isn’t a complicated portfolio. it’s buying income.

“buying income” means using business profit to acquire assets that produce predictable cash flow without you. for me, that’s single-family homes, owned outright. no leverage. no tenants paying my mortgage. the rent is the income.

most entrepreneurs do this backwards. they chase growth, lever up, and hope it works out. then a slow quarter exposes how thin the floor is. the boring version, buying income, is the version that actually lets you sleep.

the playbook I use:

1. focus on increasing income inside the business first. nothing else matters until that’s solid.
2. when there’s real surplus, buy income-producing assets you fully understand.
3. single-family homes owned outright are my version. yours might be different. the principle is: own the asset, capture the income, eliminate the debt risk.
4. resist the urge to over-optimize the investment side. complexity is where amateurs lose money.

the entrepreneurs who quietly stay rich aren’t the ones swinging the biggest. they’re the ones who bought income early and let it compound.

Transcript

discussion on buying income through single-family homes

The most impactful business is the business that genuinely improves another human, a better human business. And to grow a business like this, you have to continually improve yourself. This podcast is a documentation of that thesis, scaling businesses and also personal growth. My goal is for you to shortcut this journey.

So if you’re ready to try hard, subscribe. If you like what you’re hearing, please share and enjoy. All right. Today, let’s talk about taking the risk out of entrepreneurship. This is the better human business podcast. I’m Jerred Moon, and I’d love to talk to you about the game that you should be playing as an entrepreneur.

So we’re gonna be talking about kind of like investing to some degree and how you, how you can start removing more and more of the risk as you get deeper and deeper into your entrepreneurial journey. And this is not financial advice. Like I know all that, all the disclaimers out there, I don’t do any of those things, but I want you to start thinking about, um, things a little bit differently in your entrepreneurial career because when you first start, all you need is, uh, you know, optimism and you just need to stick with it, right?

risks of over-diversifying investments and losing focus on growing your business

You just need to keep going and, and continually have the mindset that you can grow, that you can build, that you can have a bigger future. You can make more money. I think from a mindset perspective, that is how you should be thinking as an entrepreneur. But at the same time, I don’t like to push people in the scarcity mindset, but at the same time, I think that you should have be planning for a rainy day.

Like, and I’m not just talking about saving up money. I’m talking about planning for your plan B, your plan C. What if something does happen to the economy or something does happen to your business and you don’t have as much cash flow anymore? Like what are you going to do? So here’s the game I’ve been trying to play in entrepreneurship.

So ultimately you are going to go out there, you’re going to provide as much value as you possibly can and in return, in exchange for that value, you receive money and you can spend that money. You can invest that money or whatever. What I look at for me is yes, I want to live a big life. So there’s going to be a certain level that just goes to living that life.

I have a family, like supporting all of my kids’ activities and school and all of those things. But at the same time, what I’m secretly looking at with our finances is how do I buy income? How am I going to buy income right now to where if anything were to happen, we’re not going to be as concerned about it in the future.

And the more income you can buy, the more safety you have. And there are a lot of different ways to do this. I’m not a big finance guy. I’m not a big investing guy. But the main way I look at doing that these days is through single family homes. There’s this through real estate. And I’ve gone all over the place of loving single family homes and thinking they’re great investments.

I’ve gone from my first investment in the world to thinking they’re awesome. I have been all over that rollercoaster. I have owned multiple investment properties for a long time. But I recently shifted my strategy in the last couple of years, and it’s a very slow strategy because it takes a lot of money, is owning single family homes outright.

And you don’t have to have the same strategy as me, but I think a lot of people early on in the entrepreneurial game is they start chasing, okay, I’m making a little bit of money. I have a little bit extra each month. Maybe it’s 500 bucks, maybe it’s 1,000, 2,000, 5,000, whatever it is. You have extra money at some point, and you’re like, okay, what am I going to do with it?

I guess I’m going to invest it. And then they start looking for investment strategies. And now you’re starting to divert your attention away from ultimately what could be growing your business, making more money. So that’s where you should keep your focus is how do I provide more value? How do I earn more money?

How do I continue to grow this thing? That should always be the focus and never the investing side. So that’s why you have to pick something that’s simple and easy, and that’s why I do like single family homes, real estate, just because you kind of put your money there and you can hire a property manager to do it yourself, but it’s not a ton of work.

analyzing the cash flow versus appreciation in real estate investments

Now it can be incredibly stressful if AC goes out, hailstorm takes out the roof, whatever. There are all these things that make it really stressful and can make it very time consuming. But ultimately it’s pretty low threat. You could also throw all your money into index funds, like very conservative, doesn’t throw as much cashflow, but ultimately you are going to try and buy income.

So the reason I like single family homes purchased outright, think about how much money that would take in your area. Could be, I mean, you don’t have to buy like the best property, like you could start at anywhere here, but if you can save up enough money to do that, you just put money aside, put money aside, put money aside, maybe a high interest savings account, and then you go buy a $200,000 house after you’ve saved up 200 grand, you know, you, and let’s say that cash flows, you know, $2,000 a month is the rent or whatever, and you spent 200,000.

I don’t know if these are real numbers in your area, but ultimately you just bought income. You bought $2,000 worth of income. Yes, there are going to be property taxes, there’s homeowner’s insurance, there are going to be maintenance and repairs, so you don’t get to keep all 2,000 of that. But if you keep compounding on that, you don’t need a ton of these properties to be able to, you know, buy income, to have a meaningful amount of income.

tips on getting started in the real estate investment game

Now I can take a long time to save up any amount of money to buy these properties outright, but what I see happen to entrepreneurs is they get a little bit over leveraged, and so they want to go start investing, because they’re excited, they’re earning more money than they had previously, and then they go get a property that cash flows $75 a month, and when you do that game, you’re not in the cash flow game really, it took me a while to realize that as well, you’re in the appreciation game.

That means you’re hoping that you can hold onto this property and sell it for a couple of years, sell it in a couple of years and make 10, 20, 30, 40, 50, 100, 120,000 dollars, or you want to flip it or something like that, and that’s ultimately how I recommend you get started, because saving up the money to buy these homes outright takes a long time for a lot of people, depending on how much cash flow your business spits out, but it can take a lot of time.

So if you want to get into the real estate game, then I would focus on one, hey, I am buying one to two properties that I think are going to appreciate, appreciation is a tough game to play because you aren’t in control of all the market conditions, but you can improve the property to help force that appreciation to some degree.

So you can do that, or you can flip a house, and then once you do that, either you’re being patient, you’re like, I’m buying this, I’m waiting three years, I think it’s going to be a great area, you know your market or whatever, and now you do have this big bolus of cash, that’s when you can flip that cash into buying a property outright, plus any additional money you saved, and now you’re starting to buy that income, and this takes time, you have to be very patient with this strategy, and this isn’t some crazy strategy, it’s actually incredibly conservative.

A lot of people would disagree with me in this category because they’re like, no, it’d be better to leverage several properties, utilize debt or whatever, but interest rates are crazy right now, getting things to cash flow is hard, so if you can find these deals, you’re probably in a very competitive situation with other people.

So ultimately, if you can do that, step one, know, hey, my main goal, always and forever as a business owner, is to provide more value and increase my income. That’s the ultimate game, never take your eye off of that, trying to chase investing or whatever else.

The second thing is, okay, I like Jerry’s strategy, go purchase homes outright in full, but that sounds crazy, it’s a lot of money or whatever, then go do what I said, go buy what you can, leverage with a loan, play the appreciation game or force appreciation, flip a property if you have the time and resources, and then take that money, plus whatever additional cash flow you’re saving, and then go buy your income.

Now this, I’m specifically talking about single family real estate, just because that’s what a mentor introduced me into, it’s what I feel more comfortable with, there are a lot of other ways that you can have your money make you money in other investing strategies, so I’m not diving into all those, I’m just diving into what I specifically know.

how to achieve financial freedom by matching your income needs with your investment returns

Now the more you do that, the more income you buy, eventually you will have financial freedom, right? If, and you just have to match your number, and I recommend most people matching their smallest amount, not like, if you live off of a lot of money right now, a lot of your cash flow, it’s more of like what could you shrink to, it’s like an emergency fund.

So let’s say I spend $10,000 a month, and I have the ability to shrink to $5,000 a month, that’s ultimately what we’re talking about. Or maybe you spend $5,000 a month and you wanna shrink to three, it’s like, okay, then I need a $3,000 worth of cash flow, or something like that.

Now when you have that, you’re able to be incredibly selective about what you do, and it’s incredibly conservative, because you own the property outright, there’s not a lot of risk involved, because you can also put these things in LLCs that further protect it from touching your assets, but you are starting to buy your income, you’re starting to lower the risk needed in entrepreneurship, because you don’t need the money anymore.

You know that you have this back-end emergency side taken care of, and it’s not just an emergency fund that lasts for six months, you can continue to improve a property, continue to get the cash flow, and make it better and better over time. And once you buy enough income, you’re at that working is optional standpoint, right?

And so it all depends on how much you need. I’ve talked about in previous podcasts, the big goal, right, like the big goal, ultimately I’d love $25 million in assets or cash stacked, so I can live off the 4% rule, and also have real estate investments. That’s like the big, that’s the swing goal, but then there’s the back-end, again, not trying to push people into scarcity, but the just-in-case, what if I have to go backwards, what do I need to do?

Is that prepared? Am I taking care of? And I think if you can think that way, you’re really eliminating risk as an entrepreneur, because you can still take the big swings and live the big life, but if you ever have to move backwards, it’s not like you’re having to move back in with your parents, because you have a certain level of cash flow that’s coming in, so even if you did get a job, maybe it would be a very, maybe if you get a part-time job plus your cash flow to support what you’re doing until you find out what you’re gonna do next.

It just opens up a lot of options for you, and I feel like that’s the best place to be as an entrepreneur. When you don’t need the money, you are just in a better place mentally, you can really take your time, you can create what you want, you can work with who you want, you can be very selective, and it gives you the freedom to work, because I always want to work, but I want to work on projects that excite me, and I want to work with people who I like.

I don’t want to have to be forced into those situations where I’m doing things that I hate or working with people I don’t like just because I need the money. You don’t want to be in that situation forever, and you can do that through very simple investing strategies. None of the things I’m talking about are easy.

They are very difficult, and if you want to get them done, you’re gonna have to try harder.