A Stealth Wealth Solution For Real Estate Investors With Kids

A Stealth Wealth Solution For Real Estate Investors With Kids

If you want to raise better adjusted kids, you probably want to practice some level of stealth wealth. Stealth wealth helps so that they don't grow up spoiled and unable to recognize prosperity. This article provides a stealth wealth solution for real estate investors with kids.

A couple readers have pointed out that I was raised rich given I had two parents with stable jobs. Instead of having to walk, I got to ride a bicycle to school. I even got a 486 desktop computer my junior year.

Yet, I wasn't unable to recognize I grew up rich because my parents drove an 8-year old Toyota Camry and we lived in a modest townhouse for the four of us.

Thanks to my parent's frugal ways, I was highly motivated NOT to mess up my life by slacking off in high school and college. My parents simply did not have a large enough financial buffer to overcome a deadbeat son.

Being unable to recognize their wealth also pushed me to attend a public university, which turned out to be a financially sound choice. If I had attended a private university, I would have felt too much guilt and pressure to prove the expense was worth it.

I still wonder to this day whether my parents are actually much richer than they've led me to believe.

My dad still drives a Toyota he bought in 1997. My parents still live in the same old house since 1980. They also never buy any new clothes or luxury items. If there is an early bird special at 4:30pm, my parents are first to get in line!

The Easiest Ways To Stealth Wealth

The easiest ways to stealth wealth are to drive an old economy car and never wear anything expensive. By doing so, you can still send your kids to private school. You can join country clubs without people looking at you funny. You can also go on nice vacations without raising too much suspicion from the outside world.

But what if you are a strong believer in real estate as an investment? What if you don't like stocks or any other type of asset class as much? Further, what if you want to protect your children from spoiling? Screw what the outside world thinks. You've also got enough capital to buy a luxury home.

The answer is simple: own a modest primary residence that is no larger than the median-sized home in your city. With your excess capital, buy a second residence as a rental home, second home, or office.

For example, let's say you live in Austin, Texas where the median home price is ~$370,000. You have the ability to buy with cash one very nice $800,000 home to live in a better neighborhood and gain more real estate exposure. After all, you believe Austin is going to be the next San Francisco.

But if you buy a 6,000 square foot mansion, your kids will obviously know you are rich. Your kids will start asking for larger allowances and nicer things since they're rational.

They'll probably stop doing chores too. Most of all, they will lose their motivation to work hard. They'll assume someone will always take care of them.

It's sometimes very hard to skillfully signal your averageness to blend in. However, during difficult times, you must try. Otherwise, you will experience more anger and jealousy from others.

A Better Stealth Wealth Solution For Real Estate Investors With Kids

Instead of buying the $800,000 mansion, buy the average three bedroom, two bathroom, $370,000 home. With your surplus capital, then buy another $370,000 – $430,000 home and turn it into a rental.

This way, you'll not only increase your child's chances of having a normal sense of money, you will also better allocate your capital for potentially higher returns and less cash drag.

When your children grow up to be well-adjusted adults, you can then surprise them with a modest home of their own to live. Or, you can give them the home to manage. These rental properties act as career insurance in a highly competitive, unknown future.

You won't have to go through what a couple of my neighbors go through. They both had their adult children live back at home with them for many years. I swear, my adult kid neighbors will never leave. They don't have the FIRE within them to stand on their own.

The only “downside” is that you are living in a smaller or less ideal location than you can comfortably afford. But I strongly believe large homes with unused rooms are a waste of money. They are purchased more for ego purposes rather than utility.

Further, if you buy two median priced homes, you own property that is affordable to more people. There is less risk of being stuck with an unsellable property if you one day decide to sell.

There are plenty of luxury properties I toured in Honolulu in 2014 that are still on the market today.

A House Is The Most Obvious Wealth Indicator

A Stealth Wealth Solution For Real Estate Investors With Kids

If your kids return to a luxurious home every day, it doesn't matter if you dress like a hobo and drive a beater, your cover is blown.

Further, there are plenty of poor people who wear nice clothes and drive nice cars. The reason is because credit is readily available for such things. Therefore, not everybody will automatically think you're rich if you have a penchant for Gucci and BMW.

But with your primary residence, it's just too hard to explain away a mansion. Unlike buying a $200 t-shirt with a credit card, getting a mortgage has much more stringent requirements given the dollar amount and leverage.

With my latest mortgage refinance, even though I've showed them liquid assets equal to 3X my refinance amount, I still feel like I'm under interrogation by the CIA. My mortgage officer said he hasn't worked with anybody with under an 800 credit score over the past 24 months.

At the end of the day, it's best to own a modest home. A modest home is one that can comfortably house your family without a single wasted room. Use the capital you saved by your modest purchase and invest it in another property or asset class of choice.

Being able to grow your wealth in a low key manner and raise grounded kids is a wonderful combination.

Eventually your kids will realize you've been a stealth wealth grandmaster for decades. By then, they'll be so inspired they'll follow your lead. They will instill in your grandkids a healthy relationship with money as well.

Real Estate Recommendations

You can buy other physical properties in your city or you can diversify your real estate investments by buying commercial real estate around the country with Fundrise.

They've been around since 2012 and are the creators of the private eREIT. Fundrise manages over $3.5 billion in assets under management and invests mainly in the Sunbelt, where valuations are cheaper and net rental yields are higher.

Another good platform is CrowdStreet. CrowdStreet focuses mainly on individual real estate deals in 18-hour cities. 18-hour cities tend to have lower valuations, higher growth, and higher yields.

I've personally diversified my SF real estate holdings by investing in 18 different commercial properties around the country since 2016. I've invested $953,000 so far and plan to invest even more in this inflationary environment.

Related posts:

The Ideal House Size And Layout To Raise A Family

Don't Let Ego Make You Buy A Bigger House Than You Need

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60 thoughts on “A Stealth Wealth Solution For Real Estate Investors With Kids”

  1. This idea that stealth wealth equates to hard working responsible kids is insane. Teach your kids the relationship between hard work, discipline and planning and success via any means you see fit. The parents have worked hard, assumingly, for all they can responsibly afford and have a right to it should they desire to spend the money. I believe firmly in educated children in terms of personal finance, and I believe in doing all I can to set them up for success on their own… Clear the path… Now they have to travel it. If they choose not to, well… I also believe in consequences.

    Why work 20-30 years and not enjoy your success to it’s fullest degree because your too lazy to parent in other respects?

    Sam, used to love your site because it was full of well thought out, fact based analysis. Now it appears to be a (somewhat) I personal manifesto on parenting kids as a wealthy adult. You retired in your 30s bro! Your kid is going to notice. Stop recommending strategies that largely miss the overall point.

    1. I’m curious to know what else you think is insane if trying to stay frugal and modest with your wealth is considered insane.

      How many kids do you have and what are some ways you go about managing your wealth and trying to keep your kids’ head on straight.

      What I’ve noticed is that so many people who dislike post about kids or who have advice about parenting are not parents themselves. I hope this is not the case with you. And I’m wondering why this is. Thanks

  2. Have you read The Millionaire Next Door by Thomas Stanley (recently updated by his daughter after 20+ years or Everyday Millionaires by Chris Hogan? Sounds like your parents were simply living by the standards discussed in these books, which allowed them to slowly build wealth.

    1. Most definitely. I’m assuming they are now millionaires because they own a house free and clear in Honolulu and I’m looking at the valley right now and it’s over $1 million. I strongly believe that Financial Samurai readers will become millionaires after at least 20 years of discipline savings and investing.

      1. At 69, I finally figured out why certain vehicles are considered “luxury vehicles.” It can be a sedan, a truck or a suv. When we buy these, the owner of the dealership lives in luxury. Not us.

  3. I don’t know Sam. You are implying that anyone with a mansion will have unmotivated kids. That’s simply not true. Raising financially minded highly motivated kids goes much much deeper than the house you own. I grew up really poor and lived in an apartment most of my life and there are still a ton of people I knew around me that lacked the motivation and FIRE to be financially secure. To me, the reason you hear the story of stealth wealth working is because more than likely those parents are teaching their kids at an early age the value of money. And showing them how to amass wealth the right way. There are plenty of rich families that continue to raise highly motivated kids that in turn create their own wealth. Why? Because their parents probably teach them the value of wealth.

    1. There are no absolutes. Just different levels of probabilities and we take action to do what we think is best.

      I believe in modest home and raising kids to appreciate the value of money.

  4. LaughingDad

    9 years ago, while I was driving my then 10th grade younger daughter to school, she suggested I work more hours so I could buy her $350 jeans and a fancier house like “all” her friends had in the Seattle suburbs. I laughed at her and told her i’d remind her of that after she got her first full time job. In the meantime, I told her she’d continue to get more time from me instead of more money, which, at that age, made her roll her eyes, flip her hair over her face, and stare out the car window. She said I worked the least of any parents she knew, which is exactly what I wanted her to think. She rarely saw me working after she went to bed or on weekends when she was hanging out with her friends.

    I got my I-told-you-so moment. She graduated from college with an applied math degree and I helped her get her first technology job – the biz I’m in. I never gave her any financial support after college – she lived in a dump with a bunch of roommates – paid less than $500 a month. I waited for the first time she complained about the grind…corporate politics, waste, inequality and how expensive life was compared to the pay she got. I laughed and repeated her high school recommendation from the car ride years before…told her to just double her work hours and screw people over to afford fancier stuff. She rolled her eyes again…this time at her former self….

    Now, at 24, she works at the same company I do, in the building next to mine. We get lunch and talk life + money, and it’s pretty awesome. I plan to be mostly retired in the next 10 years and she’s already on track to be financially independent far younger than I will be. After she showed me she was maxing out all retirement savings options + saving money, I laid out all my investments, net worth status and goals, and strategy for retirement. That strategy isn’t all about money, by the way, it’s also about spending time with her and the rest of our fam/friends NOW which she now values instead of resents (well, usually). Oh, and she plans to laugh at her future kids when they complain about mama not flaunting wealth.

  5. Good points. I bought a house in a good school district for $205k. I haven’t had the time to build a real estate portfolio because my wife and I both work. We prefer to put the max into 401ks and IRAs to get the full tax benefit.

    Interest rates and real estate prices have gone up so I’m hesitant to start funneling money in that direction. If we look at the middle class on down, there’s a real wealth building problem; that could have a long-term negative impact on the real estate market where I live.

  6. Since housing is our costliest expense, I don’t have a problem letting our adult kids live with us. They went to community and state colleges,lived at home and graduated debt free (we paid community college only) now with finally secure jobs they are able to save save save. More options for them now and in the future saving up to 75% of their income. Any housing hack that everyone is ok with should be considered. Ps. They had previously lived in their own so they appreciate everything and all our lives are much richer.

    1. How old are they and at what age is the limit?

      Saving on housing by living at home is great. But be careful, because they might take you guys for granted and never leave.

      There is no greater feeling than being an independent adult after college. To know that you can stand on your own two feet.

      1. Good point!
        All in their 20’s. Oldest graduated high school into the Great Recession so they got a slow start. $14 per hour + benefits with a bachelors degree.
        2 already out.
        I don’t think it will last much longer but Maybe 30?
        Great great blog. Thank you

  7. I do not stealth my wealth infront of my kids. They are just 8 and 9 years old, but they already know pretty well, that buying real estate for example is much smarter than buying a lamborghini (appreciation vs. depreciation). They already have their own stock depot and on every birthday they select additional stock they would like to buy. They fever with me when it comes to finish a new real estate deal, and I discuss with them what are the pros and cons of a deal. Don`t get me wrong, I do not push them, everything we do together like this, it is only when they ask me or want to know. But I think one of the biggest gifts I can give them is to raise them financially fully aware and learning from my experience and handling of situations. To stealth this in front of my kids and let them not take their lessons does not make sense to me at all.

    1. Do you think being humble with your money while also teaching the lessons of personal finance as mutually exclusive?

      The goal is to walk the walk instead of just talk the talk. I think showing by doing is way more effective than just telling.

  8. Great thinking. Stealth wealth is important to raise kids that don’t feel entitled. Hard work is what gets you to the place where you want to be!

    “The answer is simple: own a modest primary residence that is no larger than the median-sized home in your city. With your excess capital, buy a second residence as a rental home, second home, or office.”

    Agreed. Although the temptation is there to buy a nice place! Whenever I get tempted I just run some numbers and conclude ‘ouch, that’s a lot of money for a house that provides the same utility as my current home’.

    Another reason why I want to buy a rental property is to help my kids to understand that investing pays off. An investment portfolio is probably too abstract to explain this concept in a way that kids under 10 can understand.

  9. I couldn’t get past the 486 computer. Those were the days.. using dos (maybe windows 3.1), playing Doom back when it was THE game… back when computers really took some skill to use. Ahh memories. Does any one still play Doom? I still remember all the secret spots.

  10. I know some may frown upon this but when report cards come out I give my oldest daughter a couple of dollars for an A, a dollar for a B and nothing for a C or less. I’ve told her this is your “job” and you’re expected to do well at it. I remember one time she came to me and said…you know..”my friends get $5.00 for an A or B.” “Really?” I replied. “Can you see if your friends parents will adopt you?” I also asked her “While they are at it..can you see if those parents can bring you to your activities on a daily basis, feed you, and take you on their family vacations? If so, I might be able to raise your amount with all the money I’ll save.” She’s never asked me again.

  11. When it comes to raising kids, there is one thing I will splurge on: a short commute. Empty rooms are wasted money, but long commutes are wasted time.

        1. Gotcha. As someone who doesn’t work a traditional job, it is always a little amusing to me when I hear some buyers in SF say they live closer to work, hence the premium they paid. I view work as kinda of a punishment now, so one should get to pay a discount to live closer to work! But of course, that’s not how economics works.

          I want to live away from downtown and view the ocean b/c I don’t like the traffic and crowds. Give me peace and quiet as a writer!

  12. We are not exactly like your parents, but close. We are just not stupid — spenders that is. Our best purchases were the ones we did not make. It’s just that we can’t find value in things. My guess is that you were much, much more expensive than you realize. A little was a lot back then.

    Our non-stupid spending patterns and working really hard yielded two structural results.

    By the time we were in our mid-50s we had more than others who should have done better. That gap has continued to widen. It’s like coming in second or third, instead of the expected sixth or seventh.

    Our kids learned almost nothing. They still think everything was just laying around for us as it was for them. So that is one lesson here. Your parents are a lot smarter than we are – or perhaps just more clever, or both. The other lesson – every dollar you do not spend is like two dollars earned. So do that a thousand times a year times 40 years, with interest.

  13. Once your kids know you’re rich, they’re done. I grew up in a series of rented apartments with working parents (mom was a teacher, dad in military), and my cousins always knew their wealth because of they lived in a huge five-story building and my uncle never worked (except from collecting rents from buildings which were passed down from his dad, my maternal grandpa). Even though my cousins were way smarter than me, they never put in the efforts at schools and only finished high schools. Now they are all poor (decades of idleness costs them to sell buildings after buildings and now have nothing left)

    I’m seeing the same mistakes in my own generation – many coworkers, especially first generation immigrants with no experience of wealth, sold most of their stocks after IPO to buy the biggest home they could afford and missed the 30x stock run up post-IPO. Now they’re stuck w/ $4-5M homes with few other assets. Even worse, their kids knew they live in $4-5M homes (from Zillow) and have no motivations to do well in schools.

    Thanks to the lesson of my cousins I bought the smallest home (<20% of net worth) in 2009 after the financial crisis so we can avoid selling stocks at distressed price. Now the stocks have appreciated 6x and we are looking to retire in bay area in a few years when we reach $10M. 2018 SALT deduction cap @$10K is especially brutal for folks who are already paying $50K a year in property tax. Will see how this affect bay area home prices.

  14. Hey Sam, I’ve heard that a lot of my friends don’t know how much money their parents have. My parents have always been very open with their finances with my sister and I. They always said “this information doesn’t leave the family”, but we were always included in big decision making and any discussions about finance.

    How do you think this strategy would compare to the stealth wealth strategy? I turned out very frugal and more knowledgeable about finance than most of my friends (even before my FIRE research binge).

    1. Nice post Sam. I agree with the concept outlined in your post and as a dad to 7 and 10 year olds am constantly thinking of new ways to get these points across even at such young ages. They see their dad driving his 20 year old Toyota Land Cruiser (constantly remind them how a brand new shiny car is an immediate money mistake), buying quality used goods (again, let someone else pay for the premium of being ‘new’), and they’ve also now endured 3 moves as mom and dad buy an old home, take it to the studs and make it new again (ie, profit from hard-work and a financial strategy using real estate).. meanwhile totally getting it with regard to ‘things’ and ‘stuff’ which are overrated and so much fun to purge.. which is one of the benefits of moving without question.

      This whole topic is right in line with a thought that I, among most here, have had forever.. which is – why is there not basic financial education taught to our kids for at least a minimum attainment of all things financial in life?

      We all do our best to get the message across to our kids as it’s a fine-line for sure.. we want the very best for them, best education, best neighborhood to live in, etc., but at the same time we want them to appreciate how all of these ‘best of’ things came to be. A great dialogue to continue for sure!

      Aloha from Maui!

      1. I’m jealous you’re in Maui!

        Funny about the Land Cruiser, as a new one costs $80K!

        If I keep my Ranger Rover Sport until he’s able to drive at 16, the car will be 18 years old. Shouldn’t be an obnoxious car for him to drive by then right? I want him to drive something big and hopefully still safe!

  15. Great example of living the Stealth Wealth lifestyle! We live outside of Austin and agree it could easily become the next SF. It’s surrounded by affordable cities, but as more jobs come in, we’re expecting that to change as well.

    One counter-thought to;
    “When your children grow up to be well-adjusted adults, you can then surprise them with a modest home of their own to live in or manage one day while also getting to stay in your primary residence.”

    This thought is SO different from how things were done in the 60s and 70s. Only the truly rich thought like that. The norm was preparing children to 1) know the value of money, 2) the importance of a work ethic, and 3) making it on their own because you were getting booted out the door after high school.

    It was get a job, go to college (on a work scholarship), or join the military–but you were trained from birth to know you had to get out on your own. Men that lived at home after high school had trouble getting dates because they were looked down on.

    1. Indeed. But I didn’t grow up in the 60s and don’t remember the 70s.

      I plan to do all of those three things you mention, and then have a surprise talk when my boy turns 30 about our secret assets. By 30, he should have enough time to know what he wants to do and establish his own independence.

      I have a dream of being that librarian who surprised his family and various charities with a level of wealth far beyond what they realized.

      Related: Three Things My Estate Planning Attorney Taught Me Everyone Should Do

  16. I find striking the balance is hard between (a) enjoying the fruits of my labor now and (b) living a stealth wealth lifestyle for my kids.

    I enjoy living in a nice home, going on nice vacations and eating at nice restaurants. Never super showy but what my household income and net worth can comfortably and reasonably afford (still saving over 50% of after tax income).

    Should I stay at a 3 star hotel vs a 5 star hotel? I’ve stayed in both before and I find staying in a 5 star hotel makes my vacation a lot more enjoyable. Now, do I want my kids to grow up staying in 5 star hotels while on vacation? Probably not, but I can’t just leave my kids at home when I go on vacation.

    I think about the balance sometimes but I don’t have a good answer.

  17. We just built a large house, compared to the existing neighborhood, about 3x the size/value.

    Not much for stealth you say, but we teach our kids the value of work/real estate by airbnbin’ this primary residence out a weekend or two a month. Pays well more than our mortgage, and the kids are expected to keep their rooms and toys clean and organized. They also limit the amount of clothes they choose/keep because they are required to empty their closets out for each rental. They help prep the house for the rental and get to pick out toys, activities and places that we go during each rental.

    It’s a win-win for everyone. We take forced vacations, the kids learn that hard works gets you what you want, and we get to enjoy a large luxurious house for free. It took awhile to convince my wife on this idea, but now she says that she feels like she gets paid very well to keep the house looking like a luxurious resort all the time.

    So I say spend that money on the large house, make it a business, enjoy extra vacations, and the best part is every vacation is now a business expense!!

    1. Good idea about treating your primary residence like a business and making your manage the airbnb rental side. Is that working out OK? I’m still not sold on strangers living in my house and rummaging through my stuff. A rental house or second house, no problem. But not my house.

      To clarify, your house is 3X the size and value of your neighborhood’s median size and value house? What happened to the adage of buying the cheapest house on the block?

      1. That is most people’s reaction… their stuff. That’s why I don’t mind discussing how extremely lucrative this is, I don’t see much competition.

        But I don’t really care much about my stuff, I like to keep things minimal. I care more about relationships, experiences… guess that’s the millennial ideologies in me. We don’t have any jewelry, or expensive cars/things. I mean we are practicing stealth wealth right? We lock the basement, master bedroom closet and a large utility room that we put some of the kids things in.

        Yes, it’s now 3x. When we bought 7 years ago it was the cheapest in the neighborhood. Was gonna be a 5-10 year stay until we found a nice piece of property nearby to build our dream home on. My parents retired and were looking to downsize nearby as well. We ended up falling in love with the location; and the cost of available land (without houses) were at prices above what we had paid for our house! We tore down the small house, and re-built with an in-laws apartment attached. My parents helped with costs and now have their own (attached, ground level) 900 sq ft, 1bd, 1 bath with their own kitchen, laundry, entrance etc and are free to travel without having to worry about maintenance/mail/etc at their home base. So that adds to the 3x.

        The PR Airbnb isn’t for everyone, but I love it and it’s working out for us. Did I mention that every monthly vacation is not only paid for by the airbnb, but it’s also a business expense? As well as every high end decoration/improvement/fixture in the house being a write off! I can buy all new “stuff” every single year just from the money I’m no longer allowing the government to waste!

        1. This is fascinating. I’ve been moving toward a more minimalist lifestyle the past few years. Interesting to think about tactics to continue on that path to potentially do something similar to your plan one day. I doubt I could ever convince my car/tool/garage loving husband to do this, perhaps unless we had a detached garage or building that he could lock up. Thank you for taking the time to explain this. Very interesting!

  18. My spouse and I are very good with our money, but we do have one weakness (if you can even call it that). We have a penchant for exotic cars, as in the ones you buy and could turn around and sell for the same price (or more) since you purchased them at their bottom and, let’s face it, they aren’t making them anymore. We don’t buy them to make money – we buy them b/c it’s worth it to drive something nice, safe, and that doesn’t depreciate like crazy. It’s our one splurge and we love it! We pay in cash and forgo loans unless we can make more on our money elsewhere.
    We don’t believe you have to scrimp on absolutely everything, but whatever item you do decide to spend your money on, ensure it’s a worthwhile endeavor. Thanks for the article!

      1. I have never spent more than a couple thousand on any given piece of art, and that was based purely on personal appreciation. Do you invest in art in some form in your portfolio?

        We would love to own real estate beyond our place, but we have too many jobs (a horrible problem to have, I know). And a 1st baby on the way. We have concerns that this would leave us without much spare time. We have invested in REITs thanks to you, though!

      1. I wouldn’t say there is one specific one we are currently stalking. When I do think about buying something to save, I would probably look at older Porsche or Ferrari that time forgot about. When the generation that lived through their announcement and first production, retire, that is usually when prices shoot up. Also, (personal opinion) anything that’s a true manual. I own a 996 Porsche GT3 and it’s a great car at 60-70k. I’m curious what it’ll be worth in 10 years.

        I would love to drive a Vantage V12 though, but honestly, nothing drives like a Ferrari (and I’m a Porsche fan saying that). We have owned 2 Ferrari, driven 3, and they are truly wonderful (minus the fact that they’ve strayed from a true manual).

        Some of the ones we test drove and then sky rocketed a few years later: the 1980’s Porsche SC we drove (selling for $8k 10-12 years ago), the 930 Porsche turbo widow maker (selling for high $30ks 8-10 years ago…now worth 6 figures) or the 90’s era Lambo diablo (selling for under $100k). Good luck finding any of those for those prices now (sad face).

        If our history of shopping has taught us anything, it’s that just b/c something is a great deal doesn’t mean that you have the ability to pounce. Even being 2 engineers (1 of us is also traditional military), we didn’t have the liquid funds back then that we do now. It’s a shame! I wish I had a site like this back then. We were and are still very thrifty (own 3 exotics now and all are paid off), but there are always areas for improvement.

        Happy shopping!

  19. Money Ronin

    It’s sad that Sam’s parents have to hide the ski lodge and Ferrari from him, but they’ve raised a heck of a successful kid.

    Few people would be able ascertain our wealth which is primarily only visible on Excel. I have very few things of luxury which in large part is to set an example for my kids. When we do splurge, I make sure they understand it is for a special occasion—not to be repeated soon.

    One time only we used miles to fly first class to Europe (I has no choice). Everytime we fly my son asks when we will fly first again. I tell him “when you become a Managment consultant or investment banker and rack up enough miles.”

    1. Definitely still looking for the Ferrari. I wonder where they’re hiding it!

      Dang… first class for your son? I’m making mine sit in the middle seat in the back next to the toilet until he saves up $10,000 via a middle wage job (1000 hours of work). Let’s go!

  20. Little Seeds of Wealth

    Our favorite kind of property is the smallest or most modest looking house in a good neighborhood. That way you get good schools with a smaller mortgage than your neighbors and can practice stealth wealth. We have some acquaintances doing really well with that line of thought. The problem is it’s not always simple to find that kind of property!

  21. huh, interesting timing I was just thinking about an old childhood friend. It took me a long long time to figure out that she came from old money, like old money. Now that I look back I remember how she complained about the London Vacation house was too small for the family ( it was in the family for generations), even her I think was oblivious to it. Their home was nice in a nice part of the town but nothing too fancy. Any upper middle class couple could have afforded it ( such as my parents, we were almost neighbors), she came to public school with us ( it was a really good one though) and at times we all took public transportations together, and I never recall her wearing super fancy clothes. My friend and her siblings all went on to get good educations, and marry good people of their choosing ( they didn’t need to be rich) and eventually work for the family business, it was interesting because we always thought the family only owned a small print shop, but turned out there was way more to that. ( a lot of properties , farm lands, multiple other businesses )But they had a first cousin who got a whiff of the money and just decided to become a deadbeat and eventually ended up in Prison on drug charges, poor kid he was so bright with so much potential. Money can be a dangerous and wonderful thing at the same time, good thing my friend’s parents knew how to handle it and how to raise wonderful children. And let me tell you if today they took away all that money from them, they will be just fine.

  22. Awesome advice. Also note, going more middle of the road on housing ensures your neighbors won’t be pushing lifestyle inflation. Win-Win!!

  23. Love it. Unfortunately the cat is out of the bag with my daughter (hard to stealth wealth my home which has a 50 ft waterfall behind it) and I already caved in several years ago and bought a Tesla. LOL

    I actually have gone over some of the household finances with my daughter and she has a ballpark figure of my net worth. I don’t think it is causing her to slow down her own desire to go out and make money of her own (she still wants to become a doctor like my dad although I have concerns about this occupation in the future) and I have reminded her constantly that although I have money it does not mean she has money.

  24. Cool article but not sure where in so cal you can buy a $370-$400K home with 3 br 2 ba. That won’t happen unless you live half way to Vegas.

  25. Northwest Islander

    Single, but using this strategy for other reasons. My 1 bedroom/2 bath, 1100sf primary residence is median value for the area and 120% of my 2018 gross income. My car is old enough to drink. I do not own ‘fancy’ anything really.

    Late last year I cashed out of stock to purchase a second home with development potential on a PNW island. Currently working with an architect to develop 2-3 more residences on the same plot (permitted by zoning) that can become extended family residences or vacation rentals. I work in industrial real estate development, so the venture is not completely beyond my skillset. I have also been a landlord before.

    Asset allocation:
    13% primary residence equity, 11% second home equity, 20% cash for 2nd home development, 14% 401k, 41% other stocks. Separate 12 month cash cushion.

    Unfortunately my resume/job title make it pretty easy to determine my affluence. This has had a significant negative impact on my dating life in the last decade, so much so that I plan to stay single going forward. Inevitably the love interest in question takes increasing advantage/liberties with my resources, even in planning for our presumed collective future. I am not signing up to work an additional 20 years to fund the lifestyle decisions of any significant other.

  26. I grew up in a larger home, but my parents both worked hard and were so frugal in other ways that it never occurred to me that we were anything more than middle class until I asked them to help me fill out FAFSA when I was applying for college and they declined. All of us 3 kids have graduate degrees and good jobs and never asked or expected a handout ever, even as teenagers we knew how disappointed they’d be by such a request and none of us would have considered it. You can teach your kids to be disciplined and independent adults while living in a comfortable home, and if your kids as oblivious as we were, they’ll grow up thinking you’re just getting by like everyone else. Give them chores, cook your own meals, vacation in a tent at national parks, or heck we even went on ski trips but slept on Grandma’s floor in sleeping bags, drive a regular car, make them buy their own clothes and pay for their own toys and gadgets with an allowance that they earn for chores actually done, etc.

  27. Thunderwing

    This post hit home for me as I just had a newborn. I bought a condo in a HCOL costal state for $570k 3-years ago that’s now worth $700k and then went in on a vacation rental for $180k a year later. The vacation rental home has been doing well on short term rental platforms, like 2x-3x monthly expenses (mortgage, heating, electric). I’m now tempted to get a 3rd property for short term rental, but have a bit of trepidation of getting over leveraged, especially if everybody thinks a recession is coming in 2020….

  28. Financially Independent Family

    Take a look at the book “The Opposite of Spoiled: Raising Kids who are grounded, generous, and smart about money” by Ron Lieber. The book provided our family with some solid tools with which to approach wealth with our son so that he doesn’t assume that our family’s financial independence is normal but also doesn’t assume he is any better than another just because of that independence. We have found that rather than hiding our wealth we use some of the age appropriate parables from that book to reinforce a positive cycle of give, save, spend. Who knows if I’ve chosen the right or wrong path, still have over a decade until some firm data comes back on that front but when I hear concepts from my 1st grader like “Have I spent my weekly credit for Chipotle?” or “can we donate some markers and paper to our sister school so other kids can draw like me?” or “Can i take a picture of this (toy) to add to my wish list for (insert holiday)?” rather than buy me this, I want that and other cringe-worthy and totally normal kid comments I am hopeful I am helping raise a useful human.

    1. Agree. Great book and concepts that have helped our conversations with our daughter— and between ourselves!

  29. Smart thinking. I think it’s also beneficial to help kids understand the value of saving, earning and rewards. Doing chores growing up and earning a small allowance was a great motivator for me. When there was a toy I wanted that I couldn’t afford I was so excited to ask for extra “work” to help me earn/save faster. I like smaller houses too. Keeps things humble. Plus, so much easier to keep track of things and less to dust and vacuum. Vacuuming is ok but I hate dusting, especially under furniture and it accumulates fast!

  30. I am all about that stealth wealth! Thank you for this Financial Samurai, this resonated with me. Love driving my 1997 Camry around creating the image and jokes that I am broke, if only they knew!

  31. I couldn’t agree more! I’ve noticed that the older generations (at least in my family) tend to live in their house forever while younger people move frequently. We have a modest home that we purchased 11 years ago that just fits our family of four. But I can’t justify moving because of the lack of additional utility a new place would provide for the price.

  32. I use this one too. We could buy a big house, but we moved into our duplex instead. It’s a bit tight for a family of 3, but we could take over the other unit once our son is older. For now, we’ll enjoy the lower cost of living and half the utility bills.
    Being a landlord is a proven way to build wealth. Everyone should try it and see if they can handle it.
    Great job with the refinance.

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