Seth Jones’ Journey from Real Estate to ETFs: A Strategic Shift in Wealth Building
Early Motivations and Entry into Real Estate
Seth Jones’ journey into the world of real estate investing began with inspiration from influential books like Rich Dad, Poor Dad and The Millionaire Real Estate Investor. These books sparked a passion in him to build wealth through property investment. At just 22, after leaving the military, Seth took his first steps by becoming a real estate agent, believing it would pave the way for his future as an investor. Relocating to Port Orange, Florida, in 2013 with his wife, Seth soon realized the saturated market of real estate agents. This led him to pivot his career, becoming a personal banker and eventually a branch manager, all while working towards becoming a licensed mortgage broker. This strategic move was part of his broader plan to save and invest in properties.
The 1% Rule: A Guiding Principle in Real Estate Investing
Central to Seth’s investment strategy was the “1% rule,” a simple yet effective guideline he developed. This rule states that the monthly rent from a property should be at least 1% of its purchase price. For instance, a $100,000 property should rent for $1,000 monthly. This rule, while not infallible, served as a crucial starting point for evaluating potential investments. It was rooted in Seth’s conservative approach, emphasizing financial fundamentals—a mindset that would later influence his decision to exit the real estate market.
Expansion and Diversification of the Portfolio
By 2014, Seth had purchased his first two properties, each with three bedrooms and under $60,000, with a 15% down payment. His portfolio grew steadily, and by 2018, he had opened his own mortgage brokerage, enhancing his income and investment capacity. In 2019, he began targeting higher-quality properties in top school districts, a strategy that reflected his growing expertise and confidence. His 10th and final purchase in 2020 was a property in Lexington, South Carolina, a strategic move to diversify his portfolio beyond Florida and mitigate risks associated with natural disasters.
Navigating Market Shifts and the Decision to Sell
The onset of the COVID-19 pandemic brought unexpected changes to the real estate market. Seth observed a shift from cash-flow-focused investments to appreciation-driven strategies, which concerned him. Despite initial fears of declining property values, the market surged, leading to significant appreciation. Using tools like Reventure and Redfin, Seth tracked market dynamics and decided to sell his properties between 2019 and 2023, capitalizing on the boom. This decision was not taken lightly; it was driven by a prudent assessment of market fundamentals and a desire to reduce risk.
Transition to Exchange-Traded Funds (ETFs)
Seth reinvested the proceeds from his property sales into a diversified ETF portfolio, including funds like SCHD, gold, and treasuries. This transition marked a strategic shift towards a less hands-on investment approach. While he acknowledges the potential for significant returns in real estate, Seth emphasizes the importance of fundamentals and personal peace of mind. He finds the liquidity and reduced liability of ETFs align better with his current lifestyle and financial goals.
Reflections on the Journey and Future Outlook
Seth’s decision to exit real estate has drawn criticism, with some questioning his timing given the market’s upward trajectory. However, Seth remains confident in his choice, believing that market corrections will vindicate his strategy. He reflects on the simplicity and reduced stress of his current investment approach, free from the demands of property management. Seth’s journey underscores the importance of adaptability and aligning investments with personal risk tolerance and lifestyle, offering valuable insights for both real estate enthusiasts and those exploring alternative investment avenues.
