Month: February 2022

Mindy:
Welcome to the Bigger Pockets Money Podcast show number 277, where we interview Pete McPherson from Do You Even Blog and talk about leaving your job and jumping into entrepreneurship with both feet.

Pete:
I talk to my wife and I tell her, “I just need to change. I really want to try entrepreneurship. I really want to try starting my own business.” I mean, I started 50 plus blogs and online businesses and stuff like that over the past decade, and none of them worked, right? I didn’t make that much money, but I wanted to do it so badly, and I was like, “I got to figure out a way out of this.”

Mindy:
Hello, hello, hello. My name is Mindy Jensen, and from time to time, Scott schedule just doesn’t have any room for me. Rather than let my listeners down, I’m calling on my friends to join me. Today, Sarah Putt from OT for Life is joining me with a rather unique perspective on Pete’s story. Pete helped Sarah launch her podcast, which is all about occupational therapy for OTs, by OTs, all about OT. Sarah, thank you for coming on the show today to help me out.

Sarah:
Thanks, Mindy, for having me. I am super excited to be here, and honestly, I cannot wait to jump into this conversation with Pete. He has been such an inspiration to me, and I know so many others, and also a wealth of knowledge. Money pun, totally intended, even though Scott is not here, it doesn’t mean that the puns don’t have to be, too.

Mindy:
I love it. I love it. Thank you for taking over as Scott. We’ll call you Scott Lite because he’s a lot bigger than you. Sarah and I are here to make financial independence less scary, less just for somebody else to introduce you to every money’s story because we truly believe financial freedom is attainable for everyone no matter when or where you’re starting.

Sarah:
Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate or maybe start your own business, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy:
Sarah, I am so excited to bring Pete McPherson in from Do You Even Blog. He is a very interesting story of entrepreneurship. He started and stopped more than 50 blogs and podcasts, all of which failed, and then when he lost his job, he decided, “Oh, I’m going to do it again,” without having another job. I think that’s very interesting. I don’t recommend it, he doesn’t recommend it, but it worked for him. Today, he’s here to share his story of exactly how he did it.

Sarah:
Yeah. I think whole journey into entrepreneurship or even the idea of entrepreneurship can really be glorified a lot. I do think it takes sitting down with somebody who has been in the weeds, and Pete’s been doing this for years. Like you said, he started a lot of different endeavors, and it’s going to be great to just hear his insights and just hash out all that happened, and hear really how this intertwines with his money story.

Mindy:
Yeah. Also, we coin a new phrase today, hulture. You’ll have to listen to find out. Pete McPherson is a tall drink of water with a silky smooth podcast voice and a flaming hot passion for digital media and online business. What? He was an accountant, a CPA with an amazing salary, and he walked away from all of that to start his own business because you can’t keep an entrepreneur locked up working for the man. Pete, welcome to the Bigger Pockets Money Podcast.

Pete:
Thank you so much for having me here. This is absolutely without a doubt the number one podcast I’ve ever been on. So I am honored to be here as a guest. Thanks for having me on.

Mindy:
I told Pete to say that.

Pete:
She did, literally word for word.

Mindy:
Yes, literally word for word. I wrote it down for him. So Pete, I am really excited to tell your story to our listeners because you did leave a very lucrative CPA job to start your own business, and I know that there’s a lot of people who may have at age 18 we are expected to make these lifelong choices on what we’re going to do for the rest of our lives, and let me tell you, 18-year-old Mindy did not know what she wanted to do. I didn’t even go and get a CPA license, but it sounds like CPA-ing is not what makes your heart sing.

Pete:
That would be correct. You want me to start at the beginning, the most-

Mindy:
Well, skip the whole “I was born in a small town in Southern Illinois” part, but yes, I want you to start-

Pete:
Oh, man! That’s where I was going. I was going back from my lineage long term. No. Let’s start with a piece of paper because this is the very beginning of my money story, not a piece of paper like a piece of money, but a piece of paper. I still remember this clear as day. I remember exactly where I was. I was crossing a street in downtown Rome, Georgia. I was going to work as a barista. My coffee shop was across the street. I was holding this piece of paper and I literally stopped dead in my tracks. There’s no cars around, really, but I was right in the middle of a road just looking at this sheet of paper that would undoubtedly change my life, which it did.
To spoil it for you, the piece of paper was an offer letter from my first big grownup job, $52,000 a year, and I didn’t necessarily grow up poor, but I was looking at that number just like, “There’s been some sort of mistake. They’re going to offer me a job.” I’ve worked 50 plus odd jobs, part-time jobs. Never had a full-time job offer. It was in accounting, which we’ll get to, and $52,000 a year. I was just mind blown, right?
So of course, I accepted the job, moved to Atlanta, CPA. I got my CPA license over the next two years, and pretty standard corporate America, 50-60 hours a week to begin with, just accounting work. It’s not that I hated it. I didn’t love it either. I didn’t really know what I was doing. It was just they’re paying me money. This is great. It’s the only money I’ve ever made really in my entire life. So I do that for a year. I do that for two years.
I ended up getting another job in accounting, corporate America. There’s nothing exciting happening during these years except for the fact that they keep paying me more money. I’m a good employee. I’m not a great employee. I’m a good accountant. I’m not a great accountant, but that’s just the way the corporate America world works for me. They’re giving me more money and more money and more money and more money.
So four years in, I got to tell you, I’m board to tears. I am starting blogs and podcasts and trying to start side hustles while I’m at work. My boss knows this. I mean, I’m just doing everything and I’m bored, bored to tears. I don’t see customers. It’s not forward-facing. I commute two hours a day to my job. It’s a typical story of people getting burnt out of their career, and that was me. So I was getting bored.
So the story transitions when I talk to my wife and I tell her, “I just need a change. I really want to try entrepreneurship. I really want to try starting my own business.” I mean, I started 50 plus blogs and online businesses and stuff like that over the past decade, and none of them worked, right? I didn’t make the out much money, but I wanted to do it so badly, and I was like, “I got to figure out a way out of this.”
So here was my solution. I took a job with a startup back in my hometown, Rome, Georgia. I was living in Atlanta at the time, and they were going to pay me a salary, a much lower salary than accounting, but still a salary with benefits and health insurance and the whole nine yards, and I only had to work 20 hours a week. So in my head I’m thinking like, “This is it. I’m going to start side hustles more. I’m going to grow my own business. I’m going to jump into halftime entrepreneurship while still having the nice, cozy comfort blanket of a full-time job,” right?
So I quit my accounting career. I took the startup job. We moved my family of four. Actually, my wife was pregnant with our second child at the time. She also stopped her work to stay at home with the kids. We sold our house in Atlanta. We moved back to Rome, moved into my grandmother’s house because it was vacant at the time. I was like, “Cool. Life change. This is awesome.”
Well, I went to work. I got the job. I was pretty happy with it. They gave me one paycheck and I got laid off. So to sum this up, we moved across the street. We sold our house. My wife quit her work. I quit my job. I took this other startup job. I got one paycheck and then they laid me off. They did not have any money.
So at this point where we had a decision to make, it took us about a month. We cried a little bit. I drank some whiskey here and there, and I ultimately decided that I think I have enough of a safety net, which I want to talk about here in a little while to try this just for three months, six months to see if I can make something work so I don’t have to go back to commuting two hours a day, accounting work that’s unfulfilling, all this sort of stuff, right?
That was when Do You Even Blog, my current business for four and a half, almost five years now, that’s when it was born. We can talk about building that if you really want to dive in further, but that is my money story in a nutshell.

Mindy:
Okay. I want to dive into a lot of these things. First of all, you moved across the state, you quit your job, your wife quit her job, you had one kid and one on the way, you sold your house, and you moved into your grandmother’s house. So your cost of living I’m assuming is lower because you don’t have a house payment.

Pete:
Correct.

Mindy:
Your income is lower because you’re working part-time and then your income’s even lower when you’re working no time.

Pete:
Zero was our income.

Mindy:
Zero.

Pete:
Yes, zero.

Mindy:
So did you make money sell … Oh, what year is this, by the way?

Pete:
October 2016 is when I quit the job and moved back. Yup.

Mindy:
Okay, and then you lost your job in November, December?

Pete:
Correct. Well, I got my last paycheck in November 2016.

Mindy:
Nice. Okay. So did you make money on the sale of your house in Atlanta?

Pete:
Yes. Yes.

Mindy:
Okay. Yes. Let’s talk about that.

Pete:
Yeah. So I also told Mindy this off air. I got a little lucky, and not even a little. I think I got a lot lucky when it came to being able to survive long enough to make something else happen. Number one, the house. So my wife and I, we’re into real estate and we fixed up the house, we renovated it in our time that we were living there. When we sold it, we did have a chunk of change. I’m just going to be frank with you. It was $20,000 extra that we just had. After we sold the house, we had moved, we had $20,000-ish. It’s not a ton. It’s not enough to live off a family of four for years or whatever, but it was money in the bank so we weren’t going to go hungry. That’s part one.
Then I mentioned my grandmother’s house. So when we moved in, it was a temporary thing, right? We’re like, “Oh, we’re going to do here, and we’re going to buy a house.” We’re thinking about buying a duplex in the town where we moved, et cetera. Then November happened and I didn’t get another paycheck or whatnot. I have a loving grandmother who just let us stay there. She was in the nursing home, by the way. Her home was vacant. There’s nothing there. It was just sitting there. She let us stay there without rent and without a mortgage payment. There’s absolutely no way we could have gone any further than that if we had had to go find a rental right then. I would’ve been looking for an accounting job straight up.
The only other piece of that puzzle was we also had an emergency fund that we had been saving up. It was not massive. I don’t know the exact number, but it was less than 20,000, more than 10,000, somewhere in that ballpark. We just had as an emergency fund saved up that we could also use. So right there, and given the fact that we knew we had to forget budget, we couldn’t spend any money on anything frugal, just food to survive, we at least had several months worth of figuring it out, looking for more jobs, figuring out what we need to do.
That little three month buffer right there, if we didn’t sell the house and make a little bit there, if we didn’t have the 10K, 15K emergency fund, if we didn’t have my grandmother’s house to fall back on, yeah, I don’t know. I’d be the world’s most boring accountant somewhere in corporate America. Hopefully, that answered your question.

Mindy:
Well, that is a feat to be the most boring accountant. Sorry to all of our accountants who listen. Some of you are exciting.

Sarah:
So Pete, I want to know, I feel like most people don’t just jump into entrepreneurship. They go from getting laid off or losing a job to like, “I’m going to start something on my own.” I feel like most people are going to be like, “I’ll go get another job and figure out the side hustle, figure out something that I’m doing in conjunction of that.” Also, because you said you had started 50 plus blogs and podcasts at that point, what gave you the idea that, “I’m going to into entrepreneurship right now,” and also, why did you think that this one was going to stick? Why now? Why this whole thing at this moment? Why did it happen?

Pete:
Yeah. So there’s two questions there. Number one being, what makes me tick that I might want to do this instead of going and getting another job? This is going to sound like I’m floating my own boat a little bit, which I suppose I am, but I swear this is the truth. I have always been this rebellious person who just wants to do what he wants to do. I’ve always been this person.
I don’t like taking orders. I mean this from tennis coaches in middle school and high school to teachers, to parents, to bosses in corporate America. I just like doing my own thing. Freedom is my number one value in life over money, over time per se, freedom. I love being able to do my own thing. I’ve known that well before I went into accounting, which is we could talk about this separately, but the number one reason is I did not want to go back to a “real job”. I just didn’t want to do it.
In fact, I really, really, really, really, really did not want to do it. This is a big takeaway I think for those who listen to this podcast, and that is, I would not recommend anybody do what I did. I can’t make that recommendation. I got really lucky in a lot of different ways, and I’m one of these people who just I really truly don’t think I was cut out for being an employee of any sort, and I think a lot of people think that when they first discover entrepreneurship, and I don’t know if they’re actually correct. I think it takes people a while to realize like, “Oh, maybe entrepreneurship is not for me. Maybe being my own boss is actually way harder and less fulfilling and less happy in life than yada, yada.”
I’m the opposite of that. I actually feel like I was not cut out to be an employee. So I was passionate. I really did not want to go back to a job. That’s the answer to the first part of your question.
There’s a metaphor that best explains the second part of your question about what made me think this was going to stick. Well, the truth is I had no idea and I was absolutely terrified that nothing was going to work out and that would last three months and then I’d be back on the job market for accounting. Number one, I got lucky. Number two, the metaphor I was referring to is set fire to your ships, burn your ships, burn your bridges. Are you guys familiar with this concept?

Sarah:
Yes.

Pete:
The metaphor is lost to me, but I had no choice but to make money and survive. If I didn’t, I was going back to corporate America and I really desperately did not want that. So I worked my tail off. I hustled in the real sense of the word. I don’t like hustle culture, which we could talk about later, but at that point I had no other option. So I was emailing. I was hustling. I was staying up late. I was really working my tail off because it had to work. I did not have any choice. I did not have any time. I had to make money in month one from something, and I had no idea what it was, which again, we could talk about Do You Even Blog later if you want to, but I had no idea if it was going to work or not. In fact, I doubted it was ever going to work, but I didn’t have any other choice. I was working 70-80 hours for a couple of months because I really, really, really, really, really wanted it, if that makes sense.

Mindy:
So I just want to point out that you said, “I like to do my own thing,” and then you choose a job where there’s literally no creativity. These are the laws, these are the CPA rules, and do this. Okay. So when you sat down-

Pete:
You get fired for being creative in accounting, by the way.

Mindy:
Yeah, and then you go to jail. When you sat down and said, “Okay. I just got my last paycheck. I lost my job,” did you set any parameters like, “I’m going to do this for X number of months and if it doesn’t generate any income, then I’ll go get a job,” or did you just wing it?

Pete:
Yes, yes, absolutely. I’m going to be really honest with you. I don’t think my wife is going to listen to this podcast episode. So I feel comfortable saying this right now. We did have those parameters and I never told her this, but my one goal, it was never to make X amount of dollars in X amount of months or see X amount of success. It was never any of that. My true goal was to make enough revenues to keep postponing going back to accounting.
My wife would be like, “Okay. Three months, so we need to make this happen,” and I was like, “Yes, sweetheart. I totally agree with you. I’m 100% onboard.” My only goal was to extend that three months to six months, and then at six months, my only goal was to be able to tell my wife, “We can go another six months. We could work this out,” until eventually, she started to believe in me and there’s no more parameters, but yes, we absolutely set pretty strict, I would just call them deadlines, right?
We need to see the future after three months, six months or something. I have no idea what those numbers were, but we did have those conversations where, “We’re going to try this for a while. We’re also going to analyze our expenses and budget.” We also want to retire before we’re 120 years old. So we’ll come back and have discussions about these things. Yes, we did that. No numbers, but I know we had those conversations.

Mindy:
Okay. I think you basically had the same goal. She wanted you to earn enough money to keep living and you wanted to earn enough money to keep pushing that goal out. So same goal, different ways of coming about it.

Pete:
Totally.

Sarah:
Do you think that your wife at any point was like, “I think I’m going to have to go back and get a job,” and here you are dragging it out and she’s like, “All right. I’ll step up and I’m going to have to do it.” Or was she like, “No. He’s got this”?

Pete:
So well, that’s an interesting question because my wife wanted to work. She’s in music. She’s a world class musician. She’s performed all over the world. She’s taught at really nice private schools. She’s a chorus or a choir director, a choral director. So she wanted to go back to work eventually. So that conversation has been had. She does now, by the way. She’s been at a job for two and a half years, almost three years now. She always wanted to do that, anyways. So it was just a question of when.
Another thing, and to be honest with you, I don’t feel like this subject gets talked about enough in personal finance, and that is location, small town versus big town, job opportunities, cost of living, all of this little mishmash equation of how to make your life work, where you want it to work. I don’t think we talk about this enough. Our conversations always revolved around, “We’re going to have to move.” We’re living in my grandmother’s house, which is rent-free and mortgage-free, by the way, and we can get by on $1,000 a month in a lot of different scenarios. “If you want to go get a job, if I want to go get a job, we’re going to have to move.”
So we’re looking at renting. We’re looking at purchasing a house, probably just renting, and all these other factors like cost of living. Also, my parents were next door to us, right? My grandmother lived next door to my parents. So we had babysitting there for our two kids and I like being near my family. So I loved that. So to answer your question, there were definitely freak out moments where we were like, “Okay. One of us has to go get a job sooner rather than later,” but surprisingly, they were few and far between because we knew that a big component of that equation, that question, that answer, if you will, was we are going to have to move.
So it took us three years before we were comfortable moving, again, renting and changing our cost of living, our budget, our expenses because my wife did find another job that she really wanted, and so we took that. That’s skipping ahead a little bit in the money story, but I hope that answers your question.

Sarah:
Well, now, I want to take it back a little bit because you’ve said so much, and I feel like there’s been a lot about luck and how things have lined up and how things just presented themselves throughout your entire journey, but I want to go back to that moment with the piece of paper, with you standing in the middle of the street dodging the cars, holding that piece of paper, and if you could tell yourself one thing at that moment now with all these years of everything that’s happened since then, what would you say to yourself?

Pete:
This is always one of those crazy questions. The real answer, the truthful answer is that I wouldn’t say anything. I would let those mistakes. I wouldn’t say taking that job was a mistake, but it led to some turmoil in the life and so on and so forth. I wouldn’t say anything because I’m happy with where I’m at now, but, man, you know what? That’s actually my only answer. Really, I don’t regret going into accounting. It’s worth talking about why I went into accounting, by the way, because Mindy was asking earlier, a career with zero creativity, not customer-facing. You never see the results of anything you work on. It’s all spreadsheets and sitting alone in an office, and yada, yada.
I like where I’m at now, and I have accounting to thank for that. I would not be doing what I’m doing now if it weren’t for taking those jobs and learning what it is I value in life. I did not know that freedom was my number one value until I took those jobs. I had no idea. I was working as a barista, right? I had zero experience working a full-time job, commuting, living in a big city, all the things. So truthfully, I wouldn’t tell myself anything. I know that’s a cop out answer that you hear when you ask these questions, but that’s the truth.

Mindy:
No, no. I love that answer. I think it’s a really powerful answer because I went to college in Chicago and there was one night, I’m sorry, one day where the temperature, this is unreal, the temperature was 30 below zero and windshield was 70 below zero. A few years later, I don’t know why it didn’t occur to me that Hawaii had colleges, but a few years later, somebody said, “University of Hawaii,” and I’m like, “I should have gone there.”
Well, if I went there, my life would be very different. I like the life that I have now, and the struggles that you go through help shape who are now, and that’s relationships, that’s schooling, that’s classes you choose to take, that’s your money experiences. Everything that you have had in the past is shaping the person you are today. So I would’ve loved to have gone to the beach in Hawaii, but that’s not going to actually make my life that much better by attending school in Hawaii. It would just make it different, and maybe it would be better, but I wouldn’t know. I also discovered that they have colleges up in the mountains and you could go snowboarding on powder days and then have class later. That would’ve been really cool, too, but that would not make me who I am today.

Pete:
Yeah. There’s something so hard, and I just didn’t get this, by the way. So I don’t consider myself an expert on mindset in any sense of the word, but I do believe in this notion that we can always learn from our failures. We can always learn from our mistakes. We can always learn by making just bad decisions, for example, me figuring out that I actually don’t want to be an accountant even though I studied it for years and I worked in it for years and so on and so forth. There’s just no way I would’ve been able to figure out what I really wanted to do for a vocation, how I wanted to impact the world if I didn’t have that. It was always an unanswered question in my head, and I made bad decisions or not bad decisions, but I made decisions that I would later want to change.
I mean, if we’re being honest, the big takeaway is no matter what you’re going through, person hearing my voice right now, whether it’s not liking a job or having desperation when it comes to your finances or whatever it is, there’s always some lesson to be learned even if you don’t know what it is yet, right? I’m a firm believer on that.

Mindy:
Yeah. Well, because you’re right. Okay. So you said something that I identify with very much and is at a cross between what you’re doing now. You said, “I don’t like hustle culture,” but you quit a job that was steady to go hustle or side hustle or side job or start your own business. Why don’t you like hustle culture? I know why I hate it, but why don’t you like hustle culture, and then why did you go and do a hustle?

Pete:
Well, it’s the same thing we’re just talking about. I didn’t know I disliked hustle culture until I was in hustle culture, working my tail off, trying to grow my own business, trying to connect with anybody under the sun that I could get my emails in front of, and just working my tail off, and yada, yada. I didn’t know I didn’t like that until I did it, right?
So again, the truth is, so I am doing what I want to be doing. I’m very happy with how I work at the moment. I’m in my basement right now. I renovated my office. We bought this house. I am literally just going to go hang out with my parents because they’re in town after this. It’s going to be 11:30 AM Eastern. I make my own schedule. I answer to myself. I work 20 hours a week. This is the dream life in a lot of respects, but dot, dot, dot, but dot, dot, dot.
Once a quarter or so, I get really burnt out on working on anything. It almost doesn’t matter what it is. I get jealous of people who are still working really hard at things and seem driven and seem motivated to, for me it’s entrepreneurship, right? I look at my friends who also run online businesses or podcasts or blogs or YouTube channels. This is my world. I get super jealous of people and I’m like, “Look at how they’re growing. Look at how they’re succeeding,” and it also comes down to finances like, “Look how much money they’re making. Look how these people reached FI in two years because they just did this and this,” and I go, “Oh, I wish I could do that. I wish I wanted that,” and I get burned out, and I get depressed.
This happens every couple of months for me, personally. Inevitably, this actually happened to me last week, inevitably, I will come round to remembering what it is I value. I’m going to say that one more time because I think this has been a game-changer for me. I come back around to remembering, re-realizing what I value in life, and I’ve already said it on this podcast four times. I value freedom. Once I remember that, I feel so much better. I don’t like working. I don’t like working. I don’t like working 40 hours a week. I don’t really like working 20 hours a week.
I like watching Marvel movies on repeat. I’ve seen all of them a couple of times. I like watching Harry Potter movies on repeat. I like reading. I like mechanical keyboards. That is my hobby. I’m holding one up for those that can’t see it right now. I don’t like working. I’m on this cycle at the moment, I don’t mind being honest with you, where I’ll feel great for two months. I don’t like hustle culture. I don’t approve of people just working hard because they think they want that. I don’t know. I can’t speak for other people, but then I’ll reach desperation and depression and jealousy in my own business and in my own finances and in my own life, and I’ll have a week or two where I suffer from that, and then I’ll come back to remembering the values, and so on and so forth.
So to sum that up, it’s not that I necessarily disapprove of hulture, hustle culture. Did you see that right there?

Mindy:
Hulture.

Pete:
Hustle culture. That was impressive. It’s not that I necessarily disapprove of people who want to work a lot, but I think it’s glorified. I went along with it and I still do go along with it every year, every couple of months, and then I remember that it’s not for everybody, and more specifically, I remember that it’s not for me, right? One of the things I preach from my own brand, from my own podcast and YouTube channel is this idea of identifying what the heck your values actually are. What is it that you actually want out of your life and out of your work? Maybe it’s absolute growth. Maybe it’s becoming a billionaire, and maybe it’s not. Maybe it’s just a little bit more time freedom in your life, whatever that looks like.

Mindy:
Okay. I love that answer and completely identify with a lot of what you just said. I do actually like working, but for a long time, I didn’t. I was in your CPA job. I wasn’t a CPA. I was doing things that I didn’t particularly like and working for people that I really didn’t like, but what I don’t like about hulture, hustle culture, is that there is this perception or this push that everybody has to hustle, everybody has to be doing something productive with their time, and this whole idea that you can’t sit around and read a book or watch a movie, you need to be generating income, you need to be doing something all the time. I think that a lot of people get sucked into this and they don’t remember to enjoy their life.
It’s 100% okay to work a W-2 job, work for the man, and collect your paycheck, and go home, and have downtime, and enjoy your life. It is okay. 100% okay to read a book that doesn’t teach you anything, and trying to get my husband to get onboard with this after he retired was difficult. He’s like, “Well, this is my time now so I need to be productive. I need to be reading books that teach me things.” I’m like, “No. You can read Stephen King, 100%. Don’t leave that book face up next to the bed, but you can read Stephen King. It’s okay.”

Pete:
Yeah. You want to hear something really funny and ironic?

Mindy:
I love it.

Pete:
Since we’ve been talking about my story, this has happened just the past two months. For the first time since I got laid off and stopped receiving paychecks and salaries or whatnot almost five years at this point, yeah, five years since I got laid off. That’s right. That’s crazy to me. Just the past two months, I’ve actually been feeling more okay with the idea of going back and getting a job, and you know why? It’s something you just mentioned. It’s like with the right job, not that I would want to go back to commuting and corporate America necessarily, but if I had the right job that would allow me to make not even great money like a million dollars or 250,000 a year, but just make a decent income and also just leave my work at work, meaning I work 40 hours a week, I clock out, I come home and I don’t think about it anymore, for whatever reason, that actually seems appealing to me now.
Part of it is because this idea of now I just get to absolutely do what I want to do with more freedom. In fact, that’s weird because it’s now 40 hours a week, but now, hopefully, I can think about work less, which allows me to spend more time with my kids and do more reading. I might have a little bit less time freedom, but I feel like there’s actually some leverage there financially to do more hobbies stuff, right? For example, I worked, two, three days ago, I worked after my kids go to bed. I don’t usually work at night anymore at all, but my kids went to bed, and it was 8:45, and I was like, “I really did want to finish this video tonight, and I wanted to do X, Y, Z,” yada yada.
So I went and I worked for two hours, and I don’t always do that, don’t get me wrong, but little moments like that that actually have me thinking like, “Maybe I could be an employee at the right job, right? It’s just interesting. It all comes back to defining and figuring out what exactly you want out of life in your work. I think that process takes a while, at least it does for me.

Sarah:
What I keep hearing, Pete, is that you keep going back to figuring out your why and realigning your values with your work, with your money, with everything, and being the occupational therapist that I am, I have to bring the OT perspective right now because occupational therapy, it boils down to occupations. It boils down and a lot of people think that’s your job and I say, “It’s not just your job.” It is everything that we’re talking about right now. It is what occupies your time. So yes, that could be your job if it’s a full-time job or more than full-time job if you’re working 80 hours, 100 hours, however many hours a week you’re working, but it’s also all these other things that fulfill our lives and bring meaning to our lives.
I think, at least in my perspective of what happens, especially when we’re talking about this hustle culture, is that it’s always the next thing. It’s the next bright and shiny object. It’s the next numbers, the next paycheck, the next whatever it is that we are always striving for, but we forget that playing a video game, reading that book, sitting on the beach with a drink in your hand, this is what actually can have such an influence on our health to allow us to get to that next step even if it looks like you might be taking that step back and taking some time off.
I think when we’re talking about this, this portion of it is so often overlooked because so many people are like, “I have to go. I have to go. I have to go. I have to keep going, and if I take a step, if I breathe, I’m not going to make it to where I need to get to next.”
I think this applies across the board from working say in a traditional W-2 job and also being an entrepreneur. We’re always faced with getting to that next step, but we always have to remember the why, what it is that we’re doing, why we’re showing up for our jobs, why we’re either neglecting the occupations that we should be doing that we want to be doing, and just making sure that it’s really working for us. So I love that you have really shared this because I think it’s such an important topic that really should be talked about more.

Pete:
Yeah. It’s funny. You hear this all the time. Nobody on their deathbed ever said, “Oh, I wish I had worked more.” We hear stuff like that all the time, right? We internalize it as being true like, “Yeah, that’s probably true. I’m on my deathbed. I’ll probably be thinking about family and stuff like that,” but then what do we do? Right? We’re all the time comparing ourselves to others on TikTok, and socials, and Twitters, and conferences, and the next door neighbors who drive a Tesla, and we want a Tesla, but we don’t have the Tesla yet, and we want to hustle for the Tesla, and all this other stuff, right? We lose sight of the truth, which is probably that when you’re on your deathbed, you won’t look back and care about your Tesla, right? That’s probably true. We know that, but we’d lose it. We lose it all the time.
One more thing. Oh, I don’t know if you guys read Ryan holiday or not. I’m pretty sure it’s Ryan Holiday. I could be mistaken on this. I’m pretty sure he has a tattoo that says, “Memento Mori”. You guys know what that means?

Mindy:
No.

Pete:
It means you’re going to die, essentially, right? You can go Google it, Memento Mori. It basically just means your days are numbered and you need to remember that. You are mortal. You don’t have forever to live and so make the best use of the time that you do have. I just paraphrased a bunch, but you guys can go look that up, Memento Mori. He literally has it tattooed on his arm, I believe. I could be wrong about that, but just an everyday reminder to remember that, remember what you probably should be focusing on in your life.

Mindy:
Okay. We have sidetracked a little bit and gotten into some very important things. I really like this conversation about the take time to enjoy your life, but let’s get back to your money story. Since becoming self-employed and an entrepreneur and doing the things that you love, what does your financial position look like?

Pete:
Yes. Thank you for that. Thank you for bringing me back on track.

Mindy:
No, no, no, no. This is all very interesting. This is all going to stay in the show, but I also want to talk money, too.

Pete:
Okay. So before I talk about it right now, let’s talk about the two and a half, three-year gap between having income go down to zero and then where it is now because there’s a three-year period in here that was a roller coaster of ups and downs both financially and emotionally and everything tied to that, and it was also that period in which I’m pushing the deadline back every three months and six months like, “Oh, I made this much money. Now, we can keep going.”
So during those three years, it was, well, I mean, it was a roller coaster if you looked at my revenue, too. So I started the business. I did hustle for quite a while because I had to make it work. I was able to pull in I think somewhere around $42,000 in the first year of starting this business that I do now, Do You Even Blog, which I consider fantastic. I was thrilled. I was over the moon. This is enough proof that I’m probably going to be able to make this work. Maybe it grows fast and takes off. Hint, it never did, but that’s enough to put food on the table. We can continue our current lifestyle. We didn’t spend a ton. We all had paid off cars. We were all pretty frugal, in general. When I got laid off, of course, that frugalness went to the next level.
The first six months told me that we could probably do this. We have enough. We’re not contributing a ton to retirement just yet, but this is enough to keep going. In fact, we’re able to not completely destroy ourselves living off credit card debt completely. There was a period where we went into credit card debt and it got paid off pretty fast, but that was the first three years. It was ups and downs. I’m not sure what’s happening. I’m not sure if this is going to work financially or whatnot.
Now, two things happened. Number one, my wife got a job. She wanted to go back and do music, and she did. She found a good opportunity. It’s actually where we live now in Michigan. We moved across the country. It’s where my wife is from. It’s where her family lives. So she got a job with a salary and health insurance and benefits. That right there I was like, “Okay. Cool. This is great,” and I don’t know if it’s due to luck and hard work or 50% of both, but my own business also started growing enough. Again, not exponential. I want to be completely honest here and say it’s been painstakingly slow, if I’m being real, but it was growing enough to be like, “Now, I am making what I would’ve been at accounting, anyways.” Right? An entry level, that $52,000 a year piece of paper that I was holding, that was year three of Do You Even Blog. I was right there. do you even block? I was like right there, and even a little bit more so.
Since then, it is still on the turtle’s pace of growth, but the business has been producing enough revenue to make it easily sustainable, contributing to retirement accounts, not a diehard fire like say 40% of my income, 50% of my income thing at all, but very reasonable I would argue. Again, coupled with my wife taking a salary job about two years ago, life has been pretty normal. Finances have been, well, normal for what I think is normal at least. I have no idea, of course, but it’s been pretty good. I don’t know if I answered your question at all during that period, but that’s what I got.

Mindy:
No. That’s great. That’s exactly what I wanted to know because I think that there’s, again, I don’t like the hustle culture, hulture. We’ll coin this term right here.

Pete:
We’re going to hashtag this. This is now going to be trending now, hulture.

Sarah:
I feel like people are going to think we’re talking about like horticulture every time we say that.

Mindy:
Hulture, hustle culture, but you said that people compare themselves on TikTok and Twitter and, “Oh, they have 52,000 followers, and they’re doing …” I like income articles when bloggers say, “Oh, I made this much income,” but after a while, it’s like that’s not helpful to see that you’re making $75,000 a month, $100,000 a month, a million dollars a month. That’s great for you, but that isn’t helpful to me when I’m just getting started, and I made my first month with blogging, I made 17 cents from Google AdWorks. That’s 17 whole sense.

Pete:
That’s good. You’re crushing it.

Mindy:
Thank you very much. Then you see an article where somebody made $100,000 and you’re like, “Well, I should just quit.” Comparison is the thief of joy. If you like what you do, and we did, I say we, my husband and I have a blog, it’s mostly his, but we liked what we were doing so we kept doing it, and we didn’t read these articles that said, “I made $100,000 a month,” which is good because we might have stopped. We might have just been like, “Oh, I guess there’s no room for me,” and if you have something you want to do, there’s room for you to do it.

Pete:
Yeah, 100%. I don’t know if there’s a question in there, but I agree with everything you just said.

Mindy:
No. I’m just talking. Sarah’s got a question.

Sarah:
I got one. I got one. I got one. One of the words that you’ve said a lot just in the last couple minutes that you’ve been talking about this word.

Mindy:
Hulture? Oh, sorry. Go ahead.

Sarah:
Hulture, yes, outside of that hashtag, is enough. You kept saying enough. I want to dig into this a little bit more. What is enough to you? I understand what is enough to you might not be what is enough for other people, but I don’t think this is one thing that is talked enough about. So what is enough to you?

Pete:
I see what you did just there. So this is great. Again, I always feel a little awkward saying this, but I am going to self-deprecate a second and say that I suffer from the whole comparison is the thief of joy thing. This happens to me like clockwork every couple of months. I mentioned that already. I get super jealous, and my enough is never enough, but then inevitably, I will come back to remembering my values like I discussed earlier and then remembering my enough.
So I’ll tell you what my own personal enough is right now. Number one, having enough income coming in, which for us is about between 5,000, and this is a wide range I realized for a lot of people, but between $5,000 and $10,000 a month in revenue. We live in a very low cost of living area, by the way, by design. We chose this for this low cost of living. Our expenses are still pretty small. We could survive, we make more than this, but we could survive on $50,000-$60,000 a year, gross family income a year. That is enough for us not to be stressed from paycheck to paycheck and hating our life, right? We’ve been that. We’ve felt that. I know what that feels like. We felt that for two or three years and our enough revenue, salary numbers are around there. That’s one. There’s three pieces to this puzzle.
The second piece for me, personally, is my time freedom. Again, I don’t realize it until I get forced to doing a freelance contract or something that reminds me of doing a full-time job where I have to work for somebody else, and I have to put in 40-50 hours a week. Whenever I do that, I’m reminded like, “Oh, no, no, no. This is not what I want out of life,” and I go back to what I love doing, and I want to continue this.
So this is my enough. Number one, I make enough money to not feel stressed paycheck to paycheck, my wife and I, and make enough money, and I already told you what the number is, so that I can continue watching Harry Potter movies in the middle of the day. Then number three for me is retirement. Obviously, I don’t want to be left hanging, let alone with 65. I’m part of the FI community. I would rather be financially independent sooner rather than later. I don’t have a very specific date at this point in my FI journey like a lot of people do, but I do want to make sure that I am contributing, my wife and I both, are contributing to retirements every single month.
If I’m being really honest with you, this has actually been not a struggle but a challenge over the past year because we’re trying to make sense of our financial situation, right? We moved across the country. My wife took a job. My business has been growing and still, this is a piece of my own financial puzzle that I’m still putting together, but that’s my enough trifecta, my salary, my income, my revenues from business, as well as my wife’s job and stuff like that. There is an enough number that allows us to not be stressed, to allow me to watch Harry Potter movies in the middle of the day, and to still be contributing reasonably to retirement.
Of course, I would love to do more. I’d rather reach financial independence faster, but just being reasonable about that because I have felt what is unreasonable in the past four or five years. So I have that metric in my head, too. So yeah, I like this concept, though. I think more people should spend time doing real world research, not where they want to go, but where they’re at right now like, “In the next year, what can we change or what do we need to change or what investing can we automate? What saving can we automate? What can we slash from our expenses? What lifestyle changes can we make to be enough, happy, and fulfilled?” and et cetera, et cetera.

Sarah:
Coming from the entrepreneurial mind that you have, I feel like the amount of money that you can make is unlimited. So when you talk about enough, you’re talking about what you need to have to make you be okay at that moment or for the next three, six months, 12 months, whatever it is, but then when you look at the other end of, “I could be making X amount of money if I keep doing this and I keep hustling,” hustle culture, all that, how do you keep yourself in check? How do you balance the enough and the unlimited to make it work for you besides watching Harry Potter?

Pete:
Oh, I don’t. I stink at this. I don’t. I stink at this. I’m just being honest with you. So yeah, it’s all the time. So okay, I’ll tell you a story. I’m a skier. I like skiing even though I’m terrible at it, still a beginner. I went skiing just last year with a friend, also happens to be part of the personal finance community, also happens to be very rich person, and I mean rich as in rich, right? I’m not talking about reasonably rich. I’m talking about extremely rich.
So I’ll hang out with this person who’s absolutely incredible. Honestly, a friend, the truest person, the dearest person ever, down to earth, et cetera, but it just reminds me of the potential of what other people are making, what other people are doing, how other entrepreneurs are growing, and all this other stuff, right? Just getting reminded of that once a month sends me down this rabbit hole of like, “Oh, I should be doing more. I should be working more. I should be trying more,” all these things.
Actually, we should just name this podcast episode Comparison is the Thief Joy because I suffer from this. I stink at keeping myself in check. I’ve tried different things. I have tried ignoring what other people are doing and earning, and whether they are already financially independent or not. I’ve tried just ignoring it, staying away from social media, disconnecting with people that I wasn’t really friends with, but I would be on Facebook and see this person share results, share financial wins, share that stuff.
I tried avoiding that stuff, which it I guess worked, actually. It was helpful to stay in my own little bubble, but at the end of the day, I do value friendships and relationships, and my skiing partner, and these other people. So that wasn’t really an option, but the truth is, Sarah, I have zero answers for you because, I don’t know, I fall into this trap all the time of comparing myself to others and wanting more than above my “enough”, if that makes sense.

Mindy:
Okay. I have a comment here and this applies to finances as well as success in business, but don’t compare your beginning to my middle or my end. I say that all the time and I don’t say that enough. You are still relatively new in your entrepreneurship journey. You have defined enough as having the freedom to watch Harry Potter movies in the middle of the day. So basically, you have a job that allows you to watch Harry Potter movies in the middle of the day.
Outside of being the Harry Potter movie editor, I didn’t even think that job existed. So your enough is where you are. You are at the top of your game. You have hit it because that’s what you want to do and that’s what you get to do. Your ski partner who makes $50 million a minute, how much time are they working or how much time have they put into their job, and how many processes have they set up to be able to be here now? “Comparison is the thief of joy,” that is a C. S. Lewis quote. We didn’t just make that up ourselves, but it’s so true. Stop comparing yourself, Pete, you do great. There are people who compare are themselves to you, “I hope I can be like Pete someday.”

Pete:
It’s true. Oh, well, thank you. Just to be fair with you, I’m feeling really good about myself now in the past week. I mean, it just happens occasionally falling back into these comparison thieves, and then I generally work my way out. In fact, let me brag for a second. I made this metaphor the other day. It’s funny how people who have a lot of money, not always, but they generally, they don’t drive Lamborghinis, right? They don’t have massive mega mansions. They might have a nice house, but it’s not like when you grow up poor or lower middle class, I grew up lower middle class, we used to think that everybody who had a million dollars was just living the dream life, and splurging on everything, and drinking fine wine for breakfast, and it turns out, people who have a lot of money, they of look at that and they’re like, “No. I’m good. We have nice things, probably. I could splurge if I wanted to, but it’s not a necessity.”
I am that person when it comes to time. Every time I ask somebody how they’re doing and they’re like, “Good, good, busy,” right? We say this all the time. You ever heard this?
“How you doing?”
“Oh, I’m doing great. Yeah, busy. Yeah, busy.”
I just shake my head like that super for rich person and I’m just like, “That’s not me,” right? Yeah. I am super rich. I am incredibly wealthy when it comes to my time and how I spend my time, Harry Potter or not, yeah, I’m incredibly rich in that way.

Sarah:
I always hate when people say, “Oh, I’m busy. I’m so busy, so busy.” I always like to be like, “You know what? Busy is not an excuse,” right? That’s not an excuse for everything else that you’re doing.

Pete:
Not only that, but it doesn’t make me think more of you. I don’t think you a cooler person because you are more busy. Maybe some people might associate that with success, but not me. I’m like, “I feel sorry for you.” Yeah. Sorry.

Mindy:
Wow. I feel seen. No. We are actively stopping and ramping down. This is the issue. When you’re so busy, you’ve committed yourself to so many things, then you have to extricate yourself from that. Sometimes extricating yourself is actually finishing the task and sometimes it’s delegating it to somebody else, and sometimes it’s like, “I’m not ever going to get that done,” but many of the things that we are so busy with are things that we now have to extricate ourselves from and finish the job, but we’re actively saying no to things, and this is not something that we’ve ever done before, and it is tough.
I mean, I’m working from home. My commute, your commute is two hours, that sucks. My commute is two seconds. I walk from the upstairs, down to my office, and turn on my computer, and blam, I’m at work. I haven’t been in the office in a month. In 2021, I’ve probably been in the office six times, and it’s a 40-minute commute when I go, but that’s six times over a whole year. That’s a real low, daily commute average time, but the problem with working from home, and this came up during the pandemic is I get up in the morning. I like to drink coffee and I’m a real estate agent, and I also work at Bigger Pockets.
So in the morning, I have my cup of coffee and I go through real estate listings because I have several clients who can’t seem to find a house right now because the market’s insane. So I’ll go through the real estate listings and then, “Oh, well, I’m already on my computer so I’ll check my social media accounts,” and “Oh, well I’m already here. Let me start checking my work email.” I’m not starting at 8:00. I’m starting at 6:15, and I’m not going until 4:00.

Pete:
Hulture. Hulture is what this is. It’s what I’m hearing right now.

Mindy:
I’m going until 5:30 because there’s just one more thing. Who has a job that’s ever done? I mean, Pete, if you wanted to work 80 hours a week, could you?

Pete:
No, no.

Mindy:
You don’t have 80 hours? Yes, you do. You could easily work.

Pete:
I have two small kids.

Mindy:
Well, but you could easily work 80 hours a week if you chose not to spend time with your kids and you put all of that on your wife and you decided that you weren’t going to leave, “Oh, I just have one more thing.” I mean, how many of us have just one more thing? You have to set parameters.

Pete:
Oh, you mean like do I have the work that would take up 80 hours a week? Oh, my God! Yeah.

Mindy:
Yeah. Do you have the ability to work 80 hours? Of course, you do. I do, Sarah does. Everybody has. I mean, I can always find something to do, but I can always find a stopping point, and I think that so many people don’t set their stopping points, and I’m just as guilty of this. I’m not trying to talk smack about anybody listening or either of you two, but I didn’t set a stopping point. I have a job. I’ve worked at a lot of jobs that were like, “Eh, whatever.” I punch a clock, I leave, I don’t care, but now I have a job where there’s always something available to do. I could always do one more thing. It was creeping into nine, 10 hours a day every single day.
I drink coffee on the weekends, too. I don’t just drink coffee during work hours. So I would jump on the computer. Why can’t you just sit with a cup of coffee at the table? Why do you have to be on your computer? Why do you have to be on your phone? Why do you have to do stuff? So I’ve stopped checking my email in the mornings. Once the kids wake up and get ready for school, I go upstairs. I have my coffee with them. I talk to them about their day.
It’s changing our relationship. It’s changing our lives to just step back from the computer, but you have to do that consciously. It starts with what is your why. Pete, what’s your why? “I want freedom.” Well, then don’t work 80 hours a week, Pete, because guess what? There goes your freedom, but you have to make that choice. You trade the time for money. If you had 80 hours that you were putting in, I bet that your income would increase.

Pete:
Oh, yeah. I’m sure it would. I’m sure I could grow in all sorts of ways, but I think it’s always a trade off, right? I think a lot of people don’t analyze that trade off. What do I want and what does it cost to get there, and am I comfortable giving that up? It might be time with kids. It might be just straight up hours in a day. It might be giving up hobbies. Joining the hulture and giving up my mechanical keyboard hobby, I’d rather die. I’d rather die. So yeah, you’re preaching to the choir. I’m over here just digging.

Mindy:
What’s a mechanical keyboard?

Pete:
You know what? Unless you guys want to go another three hours to this podcast, I think maybe I’ll avoid it, but I will say that it’s my obsession for about the past year or so. I build my own keyboards, custom keyboards with mechanical switches and key caps and I loop them, and I do foam modifications, and I own entirely too many different keyboards. I literally have two or three within grabbing distance over here. Yeah. I could talk here for four hours, but I won’t do that.

Mindy:
Thank you.

Pete:
You’re welcome. If you care about your finances at all, don’t get into mechanical keyboards. It’s also the most expensive thing ever. People get in and they’ll spend 15 grand. I saw a screenshot of a guy who bought his first mechanical keyboard four months ago, and he had a Google Sheet open with everything that he’s bought and spent money on, and it’s $15,000 the past four months. I was like, “What? How?”

Mindy:
You can get them for free at the thrift store.

Pete:
That’s true. That’s absolutely true. Yeah. It’s just a hobby. It’s collecting anything, probably, collecting stamps. You don’t need to collect stamps, but people do it because it brings them joy, and this brings me joy, not $15,000 worth of joy, but it brings me joy.

Mindy:
I collect stamps because I can never find them.

Mindy:
Oh, okay. So Pete, what’s next for you? More Harry Potter?

Pete:
I’m going to hang out with my family and kids. I continue to do what I’m doing. I have some side projects that I work on outside of Do You Even Blog. It’s actually new. Just keep doing what I’m doing. Yeah. Trying to avoid the comparison trap once a month that I have historically gotten sucked down into and just keep doing what I’m doing. I’ve got my enough lifestyle, figured out, and growing would be nice, but most of the time I don’t care that much. I just care about maintaining the enough, the status quo, the fulfillment and happiness that I think I’ve set up for myself. So there’s no next. It’s just what I’ve already got rolling.

Mindy:
What does retirement look like for you? Are you pursuing early retirement? You’re part of the personal finance community. Are you pursuing regular retirement like age 65 or it’s just going? I mean, what is that stat? 40% of Americans can’t foot in $1,000 emergencies. So even thinking about retirement puts you head and shoulders above everybody else or well above 40% of Americans and there are people who are like, “Oh, I’m going to go whole hog and race to early retirement,” and it’s okay to have a job. It’s okay to enjoy your job. It’s okay to hit your financial goals and continue working. So what is the financial Pete McPherson look like?

Pete:
You just said it. You just said it, actually. So I am one of these people. I think of retirement as a very fluid thing. I have no intention of setting a retirement date period, whether it’s 65 years old or 45 years old or 85 years old. I have no intention of ever doing that because I like my work now. I like hobbies, and I’m always going to enjoy some work and some hobbies, even if it’s not exactly what I’m doing right now. I mean, over the past 15 years, I’ve gone from coffee shops and baristas and part-time jobs to accounting and CPAs, to entrepreneurship, to what I’m doing now. I guess you could call it entrepreneurship, but it’s a little different.
So the financial stuff I’m working for is just making sure that I am always pointed towards the north star. The north star is the enough number where I get to live the life I want and reasonably retire. I was going to say at any point. I don’t mean a very specific age or date. Of course, I want to get there sooner rather than later. I am one of the people that leans towards reaching financial independence as soon as possible. I would love for it to be today. It’s not today. I’m not financially independent, but I also realize the trade offs that we’ve been talking about all episode, right?
I’m not going to join the hustle culture. I even tried to screw it up on purpose and I messed up. I actually didn’t really said the right words. I’m not willing to hustle that much right now to reach a fine number in five years. I’m just not willing to do it. Again, I wish I had a very concrete number for you, but I don’t, but this idea of a reasonable enough number is my status quo. It’s my goal right now. I don’t plan on ever retiring. I’m already retired. I like the work I do in 20 hours a week.
If I had a billion dollars right now, tax-free, I would be doing the exact same thing, not roughly what I’m doing now. Well, maybe there’s one or two things now that think about it, but really, really close, a lot closer than other people. I’m doing what I want to be doing. I’m retired now. I’m just not financially independent yet. Luckily, I’ve reached my enough number where I am reasonably contributing my family towards retirement, sooner rather than late. Of course, if income grows, I’m going to try and get to FI sooner, but I don’t have a target date. I don’t plan on setting one anytime in the near future.
So I realized that’s probably a little bit frustrating of an answer to what I’m working towards right now, but I think the real answer is that I’ve somehow figured out what I’m happy doing at the moment. I know it’ll change, but as long as I’m working towards that reasonable enough retirement, I feel comfortable just doing what I’m doing, right? I guess the only other part of this is looking forward into the future and feeling reasonably comfortable that nothing drastic is going to change, right? My business could technically go caput a year from now and I make $0, but that’s probably not going to happen, right? I feel like there’s a very small chance of happening in the next year, three years, and five years. So I don’t feel compelled to change anything. So that’s the last piece of that puzzle.

Mindy:
I love that answer. I don’t think that that gets said enough in the personal finance community is that it’s okay to not want to retire tomorrow. It’s okay to like your job. It’s okay to continue on. It’s okay to not have a hard and fast retirement date. It’s okay to have not a hard and fast financial number, a FI number. It’s okay to have this fluid retirement plan. You’re still doing all of the things that we are all recommending that people do. You’re contributing to your retirement accounts. You’re enjoying your life, although there’s not that many people that are suggesting that. I think they should. You’re contributing to your retirement accounts and you’re doing the … What are the four levers that we always talk about on this show? Spend less than you earn, earn more money, invest intelligently, and start a business. You started the business, you spend less than you earn, you invest intelligently, and you’re earning more when you choose to, which is, I mean, personal finance is personal. We say that all the time.

Pete:
I like that one.

Mindy:
You get to choose what you want to. Choose your own adventure. You get to choose your own adventure, and the only people that it has to work for is you and your wife.

Pete:
Fun fact, completely unrelated to anything, but you have to be really careful using the words choose your own adventure if you create content on the internet because I tried to do a series one time on my blog ages ago when I had no audience, no traffic. I was super tiny. I got cease and desist letters from lawyers. They were like, “You need to take this down immediately,” on behalf of whatever company owns the Choose Your Own Adventure books. I literally got letters from lawyers. I was like, “I’m nobody. Why are you treating me like this?”

Mindy:
Wow.

Pete:
Yeah. Sorry. Unrelated to anything.

Mindy:
Okay. This podcast is not sponsored by the Choose Your Own Adventure series.

Pete:
Thank you.

Mindy:
However, I did read a lot of them as a kid. So that’s why I said that. Wow. Okay. That’s a good point. Yes. Don’t choose your own adventure.

Sarah:
Totally unrelated, but there was a brewery that also put out a line of beers that was affiliated with something, and they got these letters, too, and then they actually named their beers Cease and Desist and all. They literally went off of that. So yeah, I mean, I guess you could use that as your content as well.
So Pete, you were talking about not having concrete numbers, and I think for life and for entrepreneurship, and for retirement, not having a concrete number is perfectly fine. I operate the exact same way, but being on the Bigger Pockets Money Podcast, we got to get into having a concrete number. We got to get into the famous four questions right now.

Pete:
Okay.

Sarah:
Mindy, what you got?

Mindy:
Pete, what is your favorite finance book?

Pete:
Okay. So I knew you were going to ask this. So I tried to pull one that hasn’t been said. I have been influenced by Ramit, I Will Teach You To Be Rich, all the typical, even Rich Dad Poor Dad back in the day, and all the things, but that’s not what I want to recommend. I’m actually going to hold it up right here, How to Get Filthy Rich in Rising Asia. Have you ever heard of this book, Mindy or Sarah?

Mindy:
No.

Sarah:
No.

Pete:
You can’t see it, sorry, on my screen, but this is the book I’m going to recommend people go check out. It is one of the most unique books that you’ll ever read because it’s written in the, uh-oh, I’m going to mess this up now, the third person or the second person. It basically just says you. There’s no character names, whatsoever or there are character names, but the main character is you reading the book.
So the first page is literally, “You wake up in a dirty mud floor, in a slum somewhere in China. You do this and you do that.” It’s written that way. I won’t spoil the ending, but this book right here, it talks about the whole money journey. In fact, stuff that we’ve talked about on this podcast, the hustle culture, doing whatever it takes to make enough, to survive, but then also hustling to get rich, and then coming to terms with different values and life once you’ve gotten rich or things you learn on the way to earn money, and so on and so forth.
It’s a really interesting book. It’s by Mohsin Hamid. I believe it’s how you pronounce it. You just go to Amazon. You should be able to look it up, How to Get Filthy Rich in Rising Asia. It’s also incredibly short or it’s relatively short, I suppose, but the way it’s written, you’ll get through this thing in just a couple of days, and it’s fantastic. It’s really good, and you’ll probably cry at the end of it.

Mindy:
Oh, good. I need more reasons to cry. You are correct. That book has never been recommended on this show, and I’m excited to check it out.

Sarah:
Yeah. Me, too. So Pete, what was your biggest money mistake?

Pete:
So many to choose from. I feel like there could be something said for the whole quitting my job too soon sort of thing. So I’m going to go with this one. Actually, I’m going to share something else. This is my actual money mistake. When I took that startup job, startup shall remain nameless, but my mistake was not doing the due diligence before I took that job. I wanted out of accounting so bad that I would take almost anything that came up, right? I did like a little bit of research into the job, the company, the founder, who my boss was going to be, the role, some basic stuff, but if I had spent any more time doing research, I would have learned they didn’t have a good track record. People spoke very negatively about their founder, and some people actually even warned me ahead of time, not explicitly, but they made reference to it, and I ignored it. I just let it go, and I only got one paycheck and was laid off. They did not have money.
So I think not doing my proper research, due diligence in quitting that accounting job for the job I was going to take, I think that was a mistake. I think a big takeaway for anybody is, first of all, I don’t recommend anybody to go quit their job sooner rather than later. Do your homework and due diligence and have a plan and reserve. Oh, my God. It’s not just a nice to have, it’s a must have, and that was a big mistake I made.

Mindy:
I’m going to agree, but it all worked out in the end, but yeah, the lure of the job can be so much that you ignore the red flag. You’re not the only person who’s done that. I worked at a job. I got this job, and it’s like three months in. I was like, “I got to leave. I got to leave.” My boss threw a book across the conference room and he didn’t throw it at me.

Pete:
Was it How to Get Filthy Rich in Rising Asia?

Mindy:
No. It was a dictionary. It was huge.

Sarah:
You could have read that years ago.

Pete:
I know. Yes.

Mindy:
It was like the Gutenberg Bible. It was this enormous book, and he threw it because he was so mad, and I didn’t have any money to just quit that day. If that happened to me now, first of all, I don’t work for that guy. Scott would never do that, but if that happened to me now, I would just be like, “I’m out. Here’s my computer. I’m leaving. Goodbye,” but yeah. It’s hard when you get … I was so excited to go there that it was really sad when it didn’t work out the way it was supposed to.

Pete:
Totally.

Mindy:
Okay. What is your best piece of advice for people who are just starting out?

Pete:
I’m assuming you’re mostly referring to a financial journey. Is this correct?

Mindy:
This is Pete McPherson’s best piece of advice for people who are just starting out entrepreneurship, financial, however you want to take that.

Pete:
I want to take it the financial route, and maybe you’ve heard this in the podcast before, but I want to triple down on it. Automate as much as you can. So me, personally, willpower is a real thing, not only when it comes to eating lots of sweet food, I have a sweet tooth, but also my finances. If I want to cut down on my sweets, I don’t buy them. I, in fact, explicitly tell my wife, “Don’t buy them,” because if they are around in my house, I will eat them. I will consume them and you have no choice about it, and I have no willpower. I just do it.
It’s the same thing with my finance. If given the choice on any given day, week or month or year, I would never invest or I always say I want to invest, but I would probably just spend the money if it was there in my account. I keep my checking account balance, I don’t care how much I make this month for business, I keep my checking account balance extremely low because I don’t want to look in there and see $8,000 that I could be spending on who knows what. I want everything to be taken out. I want to feel a little hungry. For me, that’s been automating everything.
So I subscribe to the whole make sure that you are contributing to retirement accounts of any nature or whatever your saving strategy looks like on autopilot. Set it up. Go in once a quarter and increase it by 1%, 2%. Go in every time you get a raise and increase it by whatever that percent is. We hear these things all the time. I actually believe it’s more important than people in personal finance say. I mean, we talk about it a lot, but I think it’s actually absolutely critical for a lot of people.
So if you’re just getting started and you’re not investing, saving, contributing to X, Y, Z, automatically, every single month, go do that right now even if it’s only a tiny fraction of amount. You can always come back and increase it, but just have some automated thing that takes guessing and willpower out of the equation.

Sarah:
Yup, and not just that brain power that you can be using to do other things and focus your time and energy thinking about other things and not having to think about this automation process. Okay. Pressure’s on Pete. This is probably the most important question of the podcast right this second, okay? Even though Scott’s not here, we got to make him proud. What is your favorite-

Pete:
I’m Googling jokes here because I don’t have one. I knew you’re going to ask this. I tried for an hour to think of jokes to say on the podcast. I couldn’t do it.

Mindy:
Well, let her the question first.

Pete:
Sorry. I was getting nervous.

Sarah:
“I’m Googling. I’m Googling.”

Pete:
I’ve done a thousand plus podcast episodes over the past decade and I’m just super nervous right now. I’m starting to sweat.

Sarah:
Okay. Here we go. What is your favorite joke to tell at parties?

Pete:
You know the best thing about Switzerland? I don’t really know, but the flag is a big plus.

Mindy:
That one’s been told on this show before. So I am going to have one for you.

Pete:
Okay.

Mindy:
Today, I learned the creator of Corn Pops also invented Coco Pops, Frosted Flakes, Fruit Loops, and Apple Jacks. His tombstone just says, “Cereal entrepreneur.”

Pete:
Ooh, that’s a good one. I like that. What did the fish say when he ran into the wall? Dam!

Mindy:
Ouch.

Pete:
My wife says that one a lot. Yeah. I’m not going to lie. That was the most nervous I’ve ever been on a podcast interview. It’s okay. I’m sweating over here Googling jokes to say at parties for the Bigger Pockets Money Podcast.

Mindy:
Ah, you have to Google dad jokes.

Pete:
I should have.

Mindy:
So while we’re hearing the journey, I will be like, “Oh, they’re an entrepreneur. Entrepreneur dad jokes. Oh, they’re a medical doctor. Doctor dad jokes.” That’s where I get all of mine.

Pete:
This is how Mindy is actually funny, ladies and gentlemen. That’s the reason right there.

Mindy:
Yes, because of Scott. Okay. Pete, where can people find out more about you?

Pete:
Great question. Well, I will just point people to my website homepage, doyouevenblog.com. Pretty much everything there. So I help people build up their own audiences from the internet, really, and also just make more money. That’s what I’m about. That’s what I do. That’s what I talk about day in and day out. So if people want to follow along with that or they just want to say hi, I’ll point people to my email, too. I answer all my emails, [email protected] Anybody can email me right away or just go to the homepage. There are links to my YouTube channel, which is mostly where I hang out these days, and that’s pretty much it. There’s probably some social links there, too. I’m not really on social media a whole lot these days, so doyouevenblog.com.

Mindy:
Awesome. Well, we will include links to your website in our show notes, which can be found at biggerpockets.com/moneyshow257. Pete, this was a lot of fun. I have wanted to get you on the show for a very long time. I’m so excited that it finally worked out. This was great, and I appreciate your time today sharing your story.

Pete:
Mindy, and Sarah, this has, without a doubt, been the number one, best, most extraordinary podcast I ever been on. Thank you so much for … Well, despite the fact that I was super nervous because you asked me to tell a joke, but despite that, thanks for having me on. This has been great.

Mindy:
Thank you, Pete, and we’ll talk to you soon.

Pete:
Okay. Bye.

Mindy:
Okay. That was Pete McPherson from Do You Even Blog. Sarah, one of my favorite things outside of hulture, the new phrase that we’ve coined, and please everybody use that as a hashtag when you’re talking about this episode, but one of my favorite things that he said was, “I would not recommend doing what I did. I got lucky.” In the entrepreneurship, there is all is an element of luck. I would, if Pete was calling me up to say, “Hey, should I totally start a blog?” and even though I don’t really have a huge nest egg, I would’ve said no. I would’ve said, “You should go and get a job and do this on the side,” and lucky for Pete, he didn’t call me up because my advice wouldn’t have been something that he wanted to hear, but he does acknowledge that he got lucky, and that doesn’t negate the fact that he’s good at what he does, but that acknowledges that luck has some play here.

Sarah:
I think one of the other really important parts that he talked about in this episode is really recognizing mistakes. I’m going to use air quotes here, “mistakes”. He even said, “I don’t like that word.” One of the words that another podcaster that I listen to, Laura Park Figueroa, from the Mind Your OT Business Podcast, she calls them fail learns, and I love this term because we learned so much from these “mistakes” that we make in life and in business that lead us ultimately where we are today, and it’s without those things happening that you might be in a completely different place in your life.
I love that Pete really brought this energy and highlighted that and saying, “I didn’t do everything perfectly. Don’t do what I did,” because, again, that’s how we all get to where we are right now. Everybody is at this different place in their life with money, with investing, with knowledge, with business, with working, with life, whatever it is. We have to embrace that journey and whatever comes our way, whether it’s how we think it might go, and maybe it’s not how we think it’s going to go, but ultimately, it’s going to help us get where we need to be.

Mindy:
Absolutely. Absolutely. We talked about comparison as the thief of joy. We talked about don’t compare your beginning to my middle or end, and we even talked about how the experiences you have shape who you are. So wishing that they weren’t that way is fine, but you can’t change it. So embrace what’s happening. Embrace your failures, your mistakes, your learning opportunities. Learn from them and move on. That’s the best thing you can do when something doesn’t go the way that it’s planned.
Another thing he said was, “I want to be painstakingly honest. My growth wasn’t fast.” Goes back to that comparison is the thief of joy. You are always going to find somebody online, and it’s not even that hard to find, but you’re always going to be able to find somebody online who did it faster than you. Great, good for them. That’s their journey. Your journey is the length of time that it’s taking you, and just continue on. The worst thing you can do is stop something that’s working.

Sarah:
Mindy, do you know why clowns make bad entrepreneurs? Because they’re into some funny business.

Mindy:
Scott, would be very proud of you, Sarah.

Sarah:
I’m bringing it for Scott here.

Mindy:
Okay. Sarah, should we get out of here?

Sarah:
Sounds good.

Mindy:
From episode 257 of the Bigger Pockets Money Podcast, she is Sarah Putt from OT for Life, again, a podcast, occupational therapist, by occupational therapists, for occupational therapists, about occupational therapy, and I am Mindy Jensen saying, got to go, friend. This has to end.

 

David:
This is the Bigger Pockets podcast show 573.

Henry:
And you never know what kind of leads you can get from that. And as you build that relationship and they’re going to see just like you told us, they’re going to see that you care, you want to provide good, beautiful, nice housing for people. They’re going to want to make sure that the assets in their neighborhood get sold to somebody like you over somebody else. So the relationship networking is huge.

David:
What’s going on everyone. It’s David Green, you are host of the Bigger Podcasts podcast here today with my co-host Henry Washington for another live show. On today’s podcast, we have callers or viewers. I don’t really know what you call somebody if they come in through the internet anymore. It used to be a caller. It used to be a radio show. We’re sort of in a period of limbo where I don’t know what you call these things, but we have live people who are bringing their questions to us for us to answer. And I love doing these shows. Not only do we never know what they’re actually going to ask us, but we get to dive into their specific situation so that the advice we give is custom made. And I love being able to do this because many of the people listening will learn more from what somebody else was advised to do than they would from just listening to the story of someone who’s different than them and is on a different path.

David:
So, in today’s show, you want to make sure that you pay attention. We share some information about what to do when you’re just kind of bored of investing in real estate or the work doesn’t seem worth it. If you get to the point of success where the juice just isn’t worth the squeeze, what can you do? We talk about when loan products are no longer working for you, when you can’t get conventional financing, what can you do to ensure that you still get loans to be able to buy more real estate? We talk about if you should go after cash flow or appreciation, and when the right move is to made. We have some conversations about what to do when you just are in an asset class like multifamily and you can’t make any ground. There’s just too much competition, you feel like the numbers are too tight. You don’t feel like you should be moving forward, but man, everybody else’s too. Henry, did you have any favorites that you wanted to comment on that people should keep an eye out for?

Henry:
I absolutely do. So my favorite part of the show was when you were speaking to the gentleman from Idaho and he was having an issue of trying to find a way to buy cash flowing property in a market where frankly, a lot of people are getting priced out of. And this is why I love these live shows. Because you were able to listen to the struggles that he was having and see beyond that he was having just real estate struggles. And that he was having struggles just trying to figure out how he could add value and still be of service and be of value to people. And you were able to pinpoint that and then point him in a direction that would not only help him feel like he does have something to offer, but that he can use that strategy to then find him real estate. And you just can’t do that on a typical show. So this is… It’s a really special moment and I’m really excited for people to be able to listen to that.

David:
Thanks for that Henry. That’s actually one of the things I enjoy about being in this position the most. Is there’s a lot of people that you can listen to on a podcast that will just spit off information like here’s how you find an ROI and make sure that the house has a good roof when you buy it. But that often doesn’t translate into specific, actionable things that you can take and go put into your business. And it also doesn’t always create a vision for yourself. A lot of the time you won’t move forward until you see what you’re moving into. You have to have some kind of vision of what this would look like. And a lot of people that are listening are stuck, because they know they should do it, but they just don’t know what it looks like to do it.

David:
So they don’t know if they’re doing it right. And if you catch yourself in that position where you feel like you don’t know if you’re doing it right, what you need is vision. And we’re trying to provide that for you here.

Henry:
Yeah. And so, I have one really pressing question for you. I try to bring the hard questions, David. And so, do you practice the numbers thing when you do the intro with the fingers like five? Because I would get five, seven. How does that work?

David:
I hired a personal coach. He was a former Navy seal and a brain surgeon, who’s also a philanthropy billionaire because that’s the level of person that it took to be able to get into my head and help me with this. And much like a Buddhist martial artist, I just sat in front of that person for 14 hours a day throwing up different finger signs until my mind could be honed into the weapon that it’s become. So, I really appreciate-

Henry:
It’s phenomenal.

David:
… understanding of that.

Henry:
It’s phenomenal.

David:
It’s probably the only value I’m really bringing if we’re being honest and I got to hope that like nobody else learns how to do that other than Brandon, because I’ll be in trouble if someone figures it out.

Henry:
It’s impressive, sir.

David:
Thank you for that. All right. Today’s quick tip is go to biggerpocets.com/livequestions and submit a question for us when we go live. I am on social media at @davidgreen24. Henry, what are you?

Henry:
I am @thehenrywashington.

David:
Follow both of us please, so that you can get a notification when we’re going to go live and then follow the instructions on biggerpocets.com/livequestions, so that you could be a part of the show, or you could just follow along behind the scenes and sort of get a look at the stuff we’re saying, the jokes that we’re making, maybe some of the areas that we got stuck and we’re kind of brainstorming on, man, how could we have done that better? Or did we do that well at all? But it’s very cool and we’d love to see you there. Okay. Without any further ado, let’s bring in our first caller.

Jason:
Okay. So, my current situation is, I was in the air force a few years ago, got a little banged up while I was in and didn’t take it easy like the doc said. So I’m currently on VA disability, that and social security in my primary income. Well, those are my only income. The good news is those are tax free. So I don’t have to deal with that. I got the whole thing to myself. I currently live in my primary residence and I live in Boise, Idaho. No consumer debt. I have some money set aside in savings for emergencies, personal emergencies, that kind of thing. With the disability, that’s something that it’s not permanent. It can be revoked at any time. So, my goals are to try to generate $3,000 a month in pure cash flow as quickly as I can just in case that were to happen. And then $8,000 a month within the next eight years.

Jason:
So, I’ve been trying to figure out the strategy of what I want to do, how to go about it. And here in Boise, I grew up here, I know the area very well. I have a friend who’s an amazing contractor who’s done this his entire life. Great real estate agent. So, I have those things in place here. But as you guys know, the appreciation here has been absolutely insane to the point that there’s a lot of native Idahoans and people who have grown up here who are actually leaving the state cause they can no longer afford the housing costs. So, I was wondering, should I focus here where I kind of have that infrastructure already in place, do something such as a rent by the room or student rental to generate that cash flow? Or should I look towards the south and the Midwest and something along that nature at lower price points?

Henry:
Yeah, that’s a great question. So for me, I’ve always been a proponent of if you’re just starting out and you can start where you live, that’s always a strategy that I recommend because there’s so much you don’t know when you’ve never bought a rental property. Right? Even when you’re watching Bigger Pockets and reading podcasts and reading books, man, when you actually get a property and start dealing with things that properties… The problems that properties can create or tenants can create. Man, there’s a lot you don’t know. And so being able to have access to that property is huge from kind of like a comfort perspective. And also from a learning perspective, because you’ll be able to be hands on. Now I understand everybody doesn’t feel like they live in a market where they can get started investing, but there are definitely ways you mentioned one of them right? Renting by the room on some level. Right?

Henry:
Renting to nurses. And there’s other strategies like that where you can produce cash flow. What I recommend to people there is just try to… What people do a lot of the times when they’re going to do rent by the room or Airbnb, is they buy something at a higher price point because they know they can get more rent. And I would say you want to be able to focus on still buying a good deal so that you have more than one exit strategy in the event you don’t get the rent by the room or if something catastrophic happens, you have to turn it into a long-term rental. Maybe it still breaks even as a long-term rental and you’re not cash flowing, but that’s better than losing. Right?

Jason:
Right.

Henry:
And so, don’t be willing to overpay because you’re going to get so much more money renting by the room, still focus on finding a good deal and also try to focus on, with your fixed income, you can think about finding something that you can potentially owner finance. Right? And so doing some sort of targeted marketing to people who maybe are older and own a rental property. So, if you look for something like an absentee owner that’s been owned for a period of time, 15, 20, 25 years or more, and it’s not in an LLC. Right? Those are probably older landlords. You may be able to find somebody who’s even got some sort of military background who you can kind of communicate with, let them know what you’re trying to do and work out some sort of owner financing situation.

Henry:
Because if they’ve owned it for that long, there’s a high chance that they’ve got a ton of equity or it’s paid off. And then when you walk into those owner financing situations, you’re able to get more favorable terms, which helps you produce more cash flow. It might help you get to your goals quicker. And so just being a little more strategic about how you’re finding those deals may be a benefit.

David:
Yeah. My first thought is we’re giving you market specific advice. So, for everybody listening here, don’t assume that whatever we’re going to give advice in this case would work for everything. You’re in Boise, very hot market. My personal opinion right now, I’m not speaking for all of Bigger Pockets, because this might be semi controversial. I think you need to use different strategies in different markets. And I think that as the market heats up in general, which was what we’re seeing due to several factors if you want me to break that down, I’m happy to do it. Your expectations need to be tempered there also. For instance, if you were a farmer and you needed a crop that was going to grow in three months because you needed a food right away, you’d plant a different kind of seed that would immediately produce fruit versus a farmer that said, “Hey, I got 10 years before I need to see any kind of fruit from this thing.” You could grow a Redwood tree. Right?

Jason:
Right.

David:
In certain markets that have a very high upside, like a Redwood tree like yours, you can’t expect a crop that’s going to happen right away. And if you try to use a strategy planting those kind of seeds in that kind of market, the soil isn’t going to work, you’re just going to get nothing. Right? So part of what’s unique about what we’re doing with you right here, is that we’re giving you advice specific to your situation. This isn’t just like, “Hey, in general, this works with, real estate.” So, what I’m hearing you say, if I… And I want you to correct me if I’m wrong is, A, you are not working right now, you’re getting disability and so you’re feeling some pressure about finances and you want to do something to fix that. You don’t want to sit around feeling anxious. And real estate is something you’re passionate about. So you want to go in that direction.

Jason:
Yeah.

David:
And I’m assuming you’re not afraid of hard work.

Jason:
No. No.

David:
Okay.

Jason:
I’ve owned a couple of primary residences, this is actually my fourth one. And each of the ones before that I’ve done things here and there to fix them up and answered the questions myself, because I didn’t know who to turn to. So, yeah. I have no problems with that.

David:
Do you mind if I ask you a personal question right here on the podcast for everyone to hear?

Jason:
Go. [crosstalk 00:11:49]-

David:
You don’t have to answer if you don’t want to.

Jason:
Go right ahead. Do you feel like you’re suffering or struggling with not being able to work since this injury happened?

Jason:
Oh, absolutely. Absolutely.

David:
Okay.

Jason:
Yeah. It’s very hard sitting on the sidelines and that’s why it’s… I think that definitely plays in the part of the urgency is it’s not just because that income can go away, but because I need to be doing something.

David:
There it is. I could feel that. And that’s why I’m incorporating that into what we’re talking about. You’re not a man, Jason, who says, “Hey, I just want to work for 18 months and then do nothing. And I just want to play World of Warcraft with my whole life and never have… I want my real estate to pay for it.” My advice would be different if that was a case. I can actually see part of you is withering away that you miss because you’re not able to get out and get stuff done.

Jason:
Yeah.

David:
So based off of that I think being able to work and be productive will be good for you in many different ways. And you sort of have something to contribute to the world and you know it with the fact you’re not afraid of hard work and the fact you like real estate and then throw on top of that, Boise’s incredibly difficult market to be able to find deals. I’m not going to tell you that you need to just keep looking at stuff on the MLS and keep making offers eventually it’s going to work out. It’s probably not. You’re going to keep planting seeds and they’re going to keep dying in that soil.

Jason:
Yeah.

David:
Because someone else is going to come along that wants that house a lot more than you because they don’t need it to support their lifestyle. That’s just icing on the cake for them. Right? They’re playing the long-term game, you’re playing the short-term game and you’re going to lose in that market. It might be different in a different market. That strategy could work. What I want to encourage you to do is to start a business. Now, I don’t want you to go completely… I’m trying… I was going to say a word I shouldn’t say. I don’t want you to go completely all out in this and dump 50 grand into it or something crazy, borrow money as you’re trying to learn real estate. Right? The business needs to grow in a congruency with your experience and your skill level and your knowledge of how real estate works. Right? And I think Henry was giving you very good advice along that line of you’re going to learn as you’re going.

David:
But I do see that ultimately, I see you doing better running something like a construction team where maybe you don’t do the physical work, but you run the crew. You give the bids on the job, you do the marketing to find… There’s a lot of people in Boise that are going to need construction work. There’s a lot of skilled labor out there that knows how to fix stuff and doesn’t know how to run a business. They got to be out there swinging the hammer. They can’t be at the computer working on an Excel sheet or trying to figure out accounts payable and receivable. Right? I’m guessing in the military, were you involved in some sort of logistical operations?

Jason:
Yeah. Actually, I was a fuel POL guy, so I refueled the aircraft. And then when I made staff Sergeant, they put me in the control center, actually doing the dispatching, the accounting, all of that good stuff.

David:
Dude, that’s what we’re talking about. You’re just going to be instead of refueling planes and working schedules and keeping things on a schedule, you’re going to be doing that with a crew, or you could do the same thing for… You could become an appraisal management company. There’s a big need for appraisers out there. You could run a wholesaling business. You might put the direct mail together and get the phone to ring. And as you’re sitting there feeling like you’re doing nothing with yourself all day, your phone could be ringing and you could be wheeling and dealing with people who own property and trying to like, whatever makes you come alive, that’s what I want to encourage you to do. And I want you to be okay taking a long-term approach. You’re not going to just in your first six months be crushing it and be that 22 year old on TikTok who’s like, “I got 97,000 doors in my first four days. And here’s how I did it.” Right? That’s not going to happen. That’s how weeds grow most of the time. It’s not how really good crop grows.

David:
And somehow I ended up into a crop analogy on this one. I’m glad that you’re taking it because you don’t look like a farmer. But I think based on what I’m hearing you say is, you know you have a lot to offer. You did a lot in the military, you managed a very difficult job and now your soul is kind of dying because you don’t have any way to use those skills. And that’s, I think what’s going to make you come alive. And if you come alive, “What do I do?” Is just going to answer itself. It’s not going to be that complicated. So, that’s what I want to encourage you to do. Is to start telling yourself every day when you wake up, “I am an entrepreneur. I am a business owner. I solve problems.” And continue to just tinker with different problems that you see until you see which one you start to pick up momentum in and go that way.

David:
And that will open up doors to fine properties. If you have a construction company, people are going to hit you up with a mess of a house that you’re going to be able to offer to buy. If you run an appraisal management company, you’re going to come across those kind of opportunities. In addition to the capital you’re making… It’s going to put you in front of the kind of people that want to sell. And that’s how you win in a market like Boise. You don’t win by go went down the same road that everyone else is walking.

Jason:
Awesome. Awesome. That’s great. Thank you guys.

David:
Well, hey, I appreciate you calling in Jason. I also appreciate your transparency because it’s never easy, especially for dudes like us to have to admit when we’re having a hard time with something or when we feel the way that you’re likely to be feeling. But it was pretty obvious. I mean, you started talking to me at least that you have quite a bit to offer that you’re just not offering right now. So look for a way to do that, and then the real estate will sort of. Sorry. You’ll see those doors start to open on their own.

Jason:
Will do. Awesome guys. Thank you so much for your time. I really do appreciate it.

Henry:
Great talking to [crosstalk 00:16:45] you, Jason.

Jason:
Yep. You all take care.

Evan:
Hey, David and Henry. Loving the new format of the podcast.

David:
Thanks, Evan.

Henry:
Hey bud, how are you?

Evan:
So, my questions are about non-QM lenders. So I’ve used those a couple times. Something I purchased on hard money and trying to get them off of hard money. And I’d just like to hear more about them. I’ve done some deals with them, but nobody talks about them on podcasts or out when you come of the world. And it just seems like a really interesting way for a real estate investor to keep going, because we’ve had the challenge of your global debt service gets a little troubled after you’re accumulating properties without selling or flipping or something like that.

Henry:
I’m not familiar with the QM term. What does that mean?

David:
Qualified mortgage.

Henry:
Okay. Qualified mortgage lender. Yeah. So, I’ll talk a little bit about what I do. Man- I’m-

David:
I’m impressed that you have something say here, I thought you were going to be like, “I got nothing.”

Henry:
No, no, no, no. And so, you’ll have to tell me what you mean by a qualified mortgage. I use small local banks instead of your 30 year fixed rate, those type of qualifying mortgages. Right? So portfolio lenders is who I typically lean on and that’s the tool that I use to grow and scale. Now, the portfolio lenders, obviously they keep their loans in-house, they’re not selling them out after you get them. And so they can be a whole lot more flexible with the rates in terms. They’re also not as strict on debt to income ratio like some of these other typical lenders are going to be because these loans are in place for you to buy income producing assets. And so they understand that yes, you’re taking on debt, but that debt is going to be bringing in income and they can it or that in your debt to income ratio.

Henry:
And so it’s typically easier to get qualified. And a whole lot more friendly with kind of where your down payment terms come from. They all want you… Most of the time, they want you to have some skin in the game, but that skin in the game can be equity on another house you own. It can be a line of credit. It can be just money from somebody else that’s letting you borrow it at another interest rate. Right? So where that money comes from isn’t as important.

Evan:
And what kind of terms are you getting? Are you getting 30 or fixed or is it like a more commercial product where it’s the five, seven tenure term?

Henry:
Great question. Yeah. So, it’s typically 20 to 25 year amortizations and you’re going to be on a three to five year adjustable rate. Now what happens after three to five years is the rate can adjust based on what the new market rate is. Some of them can be where your loan and some can just be where the interest rate adjusts, right? So, you’ll have to speak to the lender. Each lender is different, but the terms generally tend to be the same. And I’ve used those to kind of grow and scale my portfolio. And then where I need to… As deals start to get cash flowing, I’ll refinance them into, into longer-term loan down the road. But I’ve been able to get favorable lending that way.

Evan:
And are they looking at your tax returns? One of my challenges is bankers are looking at my tax returns from three years ago and pointing out some flaws, but it’s like my portfolio in 2022 has nothing to do with that. 2018.

Henry:
Yeah. They’re going to look at two years of tax returns, but like I said, it’s a whole lot more… It’s an easier process in my opinion, to get approved because they are in the business of loaning on cash producing assets. And so they also care a lot about what’s the deal you’re buying. And does it make sense? Is it going to make money? They should know enough about your market to know if you’re buying something that’s going to make money and make sense. And if it’s going to make money, they feel like it’s a safer investment that helps you get qualified as well.

David:
So, let’s break down a couple terms here for people listening. Non-QM or non-qualified mortgage is a industry term for saying nonconforming loan, which basically means it’s not conventional. So, here’s just what you should… In general, this is what that usually means. I don’t know if this is legally exactly right. So don’t hold me to it if there’s actually a slightly different definition. But in practical terms, a conventional mortgage is one at Fannie Mae and Freddie Mac would insure. It’s a government insured mortgage that you’re going to get the best possible terms. And if the borrower or the loan product does not fit within that exact type of borrower box, we call it non-conforming because it doesn’t conform to that, or non-qualified. Now the danger is that during the loan freaking scandals that were happening in 2000 through 2006, a lot of these terrible loans were non-QM loans. They didn’t fit conventional boxes. And so they fell outside of it and that word became synonymous with evil.

Henry:
With bad.

David:
And it’s funny, because right now you hear people talk about HELOCs a lot, but there was a time five years ago that the word HELOC was considered evil. The minute you just said that, people are like, “Oh, that’s a great way to lose money. You’re going to lose your house.” We’ve kind of gotten out of that PTSD, but that hasn’t really happened with the non-QM product. So, Evan I’m in the same boat as you. I do not qualify for Fannie Mae or Freddie MC loans. I cannot get those anymore. I also have such a complicated sort of tax return would be ask this way to say it, but just portfolio in general. That if I try to go to a bank like Henry and I say, “I want to get a loan,” they’re going to say, “Great, here’s what we need.” And it’s going to be like a CVS receipt that just keeps printing and printing and printing and printing and printing.

David:
By the time I got you everything you needed, the first stuff I got you would’ve been timed out and I got to go get it again and I can’t get a mortgage with the different businesses and companies of properties and LLCs and types of them that I own. So what happened is when I started the mortgage company, I have, I started it by going to the guys and saying, “All right, we can do conventional mortgages. We can do the conforming loans that everybody is going to want first.” Yes, let’s do that, let’s give great service to the people who are getting them, let’s give great service to the realtors. Let’s just be better than everyone else as opposed to, I don’t answer my phone after five o’clock and I’m just going to tell you, yes, I can do your loan without making sure I can. That was the first step of that company.

David:
The second step was, when we get a person like David that cannot get a loan, we need a loan to be able to offer them. They need help in these situations. So they went out there and started finding stuff that would work for me. And if it will work, it’s going to work for just about everybody, right? So we found these same non-QM products that basically instead of using the debt to income ratio of me specifically, which would be fine, but I have to prove it. That’s what’s hard, is I have to show you all the ways that the income’s coming in and show why we’re showing a paper loss in certain areas, but the company is still profitable. Instead of that, they just look at the income of the property and they say, “Okay, here’s what it would bring in rent. Here’s how we find out what it would be. It’s a short-term rental.” Or I even bought one that wasn’t a short-term rental and it’s going to lose money on paper.

David:
At least the numbers we showed them when we were first looking at it, it was going to bring in about 80% of what it was going to cost to own. So I had a debt service coverage ratio of 0.8. And the lender was okay with that. They could see that even though the property isn’t bringing in all the money, there’s other money that’s coming in from this borrower, which was me. And so we’re good. Now the property will end up making more than the numbers we showed them. That was just… Because what you can prove and what act see happened is different. Anyone who’s ever been in court understands it’s not what you know.

Evan:
I’ll take your word for that.

David:
So, that’s often a problem.

David:
Okay. Yeah, that’s a good point. I work in law enforcement for a long time, that was something that I was very frustrated by, but I eventually had to learn. It just doesn’t matter what you know, it matters what you can prove. And so we have products now that will base it off the income of the property. We have products now that will base it off of just a bank statement. So now I can get loans by showing them a bank statement of money coming in and money going out in this business and that’s where I make my money, not the full freaking… I don’t know the word I want to describe here. Just very intrusive medical pursuit of looking into your finances. That’s terrible. And the thing that’s cool is these non-QM products are no longer predatory.

David:
They’re still 30 year fixed rate. They’re not adjustable rate mortgages. They’re not like, “Hey, for the first year or two, you get this and then it screws you over when you go to that.” The interest rates are a little bit higher because they’re not being insured by the federal government. And that’s always the case. When you go get a portfolio loan or you go to a jumbo loan or anything like that, the rates are going to be higher than a conventional mortgage. So, that would be the trade off. But for me, it’s not, is it better than conventional? It’s, can I get a loan at all?” Is it better than nothing? Because conventional is just off the table for me. So for the situation that you’re in here, Evan, the first thing is if you’re going to a bank, like what Henry’s saying, that is often a really good option. Especially if you have a preexisting relationship and you feel good that they’re going to green light you, you’re going to get what they have available, what that bank and their money, what they’re willing to lend on their terms.

David:
And that’s why you got to jump from bank to bank until you find one that’s like, “Okay, we trust you.” Now, I’m a big fan. If you find a bank like Henry’s has that trusts him, that will do business with him specifically, who cares if the rate’s half a point higher or something like that. You’re you’re buying property, you’re making progress. Nobody ever said I got rich on real estate because I got great interest rates. You’re never going to find a human being that will ever say that. Okay? So, that’s one thing. But what we do is we’re a broker. So people come to us and they say, “Here’s my problem.” And they just pull it all out there and then we go find the bank or the lender that says, “All right, we found one that will work and here’s what the terms would be. Would that work for you?”

David:
So, that’s your other option. If you don’t want to go from bank to bank, you just go to the person who for a living goes to bank to bank and then they broker that deal for you with the individual lender. Okay. That’s a lot of info. What follow up questions do you have?

Evan:
Yeah. No, that really kind of speaks to where I’m at, where we’ve tried a couple things going on to QM and then we’re using more hard money lately, but then it’s a little bit concerning and stressful when you’ve got stuff on hard money and you don’t necessarily have that clear exit strategy, which we think we do with these non-QM loans. But I just don’t hear anybody talking about it. We’ve got one who’s talking about 40 year money where it’d be like 10 years of interest only, and then a 30 year RAM. And it’s like, “Well, that sounds great.” But I was just kind of surprised because I hadn’t heard about that kind of talked about in the market. But it seems like hopefully is a really important part of like a BRRRR. Take it down with hard money and then stabilize it, increase rents and then put it on QM. And like you’re saying, if you’re paying half a point higher, who cares? You could always refinance it in five years, 10 years, whatever. So, that’s really helpful.

David:
Yeah. As far as why it’s not talked about, I’d have to speculate as to why it doesn’t come up a lot. Here’s what I think it is. The banks that offer these products, they typically don’t want to pay a person like me to bring you to them. I’m the middle man in this case. So if you come to me and my mortgage company looks for it, you’re not paying me, the lenders pay me for bringing you. So, they don’t… They want to advertise directly basically, they want to put an ad on a podcast or in a place where real estate investors might be looking and say, “Here’s our product. It’s like direct lending basically.” But they have a very hard time getting in front of everyone, that’s why you’ve never heard of them. Right? So the people like me don’t typically spend ad dollars to go say, “Hey, we’ve got a product that we can help you with.” Because it’s not our product and we’re not getting paid that much to be able to do it.

David:
So what happens is if I’m not going to market it and they’re not going to market it, well, you’re never going to hear about it. But that doesn’t mean it’s not out there. If you have the relationship with the person like me or another broker that has relationships with these lenders, then that’s how you hear about it. So what it looks like, is there’s this esoteric secret group of Illuminati that have access to all the best loans. And of course David can do it because he’s in the inner circle and he has access to stuff you don’t have. And I’m sitting over here lie the whole reason that I do that is so that I can find out the secret and then bring it to everyone else and I can show them and they come to me and I can bring him into my world.

David:
It’s just hard to get it in front of everybody. So, that’s the best I can answer. It’s really not that hard, man. I go to my partner and I say, “Hey, this is the situation, we have to buy this property in the name of an LLC, not in my own name and the LLC has only been in business for this long.” And he just gets on the phone and starts talking to lenders until he finds one that will do it. The experience is really easy for me. So, if you find the right person that’s also doing the same thing, then I don’t think it’ll be as tough as you think. And Evan, you should be very optimistic. There’s a lot of financing options out there. There is a butt-load of them because the truth is that everyone has money right now and they all need a place to put it. Institutional capital needs to put money somewhere and they’re trying to buy real estate with it.

David:
These lenders are able to borrow money, huge amounts of money to lend out at really low rates because there’s just too much money and they want to give loans to people like you. So it’s not like 2010 where you just couldn’t find money and Jills were everywhere. It’s actually the opposite.

Evan:
Awesome. Thanks.

David:
All right.

Henry:
Thank you sir.

David:
Any last questions or you’re good?

Evan:
I can go all over. One last question if you had just a few more seconds. But when do you stop? When do you stop growing the portfolio and take a step back? It’s kind of a fun gamified process, but at what point is enough enough?

David:
I’ll jump and answer that one first. I can’t tell you when enough is enough. I’ll tell you how it is for me. Because it’s fun and because I see the value in building this thing, not just for my own self, it’s one thing to get financial freedom and I get my time back. That’s kind of one of the tiers. And then there’s financial freedom and where the point is I don’t have to worry about what this t-shirt costs. I could just see a t-shirt I like and I can buy it. Right? And then maybe there’s another tier where it’s like, you can buy a $1,400 t-shirt if that’s what you want and you don’t have to worry about it. There does come a point where the benefit for finances to yourself are just diminished returns. It doesn’t matter. Right? There’re certain people that have so much money that they’re buying a yacht that they use every two years, just to say, that’s kind of stupid. Right?

David:
But if you get the tension off of yourself and you put it onto other people, it’s starts to change when enough is enough, because you’re seeing that you are able to either give money to people or what you learn making that money. You can give that to people and you can empower people. So, that’s the first thing I would say, is there’s always this assumption that there’s only one dimension. Yourself. And there’s a point where you don’t need to go any higher for yourself. And that’s true. That doesn’t mean that you stop. That means you get over yourself. You hard think about other things. And I will say right now I am not wealthy enough that I can just help all the people in the world that I would want to help. Right? David Green is comfortable, I probably wouldn’t have to work anymore if I didn’t want to and I’d have a really good life.

David:
So by many standards, I’m very wealthy, but it’s not to the point that if somebody came to me and said, “Hey, my car broke down and I can’t get to work and I’m in a really bad spot,” that I could just buy them my car whenever I wanted. Eventually I’d run out of money if I tried to do that type of thing. So when it comes to building the portfolio, this is what I’m doing and this is what I probably advise someone like you. The way that you got started like for me was the BRRRR method. I got like 40 houses using the BRRRR method. And then I thought, I don’t want any more of these things. Just the anxiety and the pressure and the time and the headache it takes to manage these rehabs and try to hit these numbers and get my capital back out for what I get out of the property. It stopped being worth it. So now I’m looking to sell those properties and reinvest them into bigger ones and less of them with less headache. All right?

David:
And then, if let’s say I do enough of that and I’m like, “Okay, I’ve got these properties, but I still have to check in with the property manager every single month to make sure things are going well, because that’s all always going to be the case. You’re never going to get out of that, it’s never truly passive. There’s still stuff that breaks and I got to make sure the contractor’s not taking advantage of me. I still got to talk to an employee and we got to keep the books. I’m still getting sucked into this thing. Why don’t I sell all of them in 1031 in one or two big apartment buildings? Right? There’s always something you can do to consolidate the mess and turn it into something that less messy and not as bad that still enables you to grow. And my overall strategy is to get this like, I basically look for equity and cash flow is important, but not nearly as important because I have money coming in from other areas.

David:
So, I build up equity and then I upgrade that equity into a bigger property that cash flows better. And then that property’s cash flow helps me buy more of… Consider it like a hotel and monopoly. That hotel’s cash flow helps me to buy smaller green houses again. So, I get this little… I don’t know what you want to call it. A rhythm or a pattern going on where I buy 20 houses, exchange into a hotel, buy 20 houses exchange into a hotel. Use the hotel to buy houses. And then at a certain point I’ll exchange all the 20 hotels into something that’s bigger than that. So it’s only like the property… I guess what I’m getting at is the property itself determines how much time and effort you have to spend on it. The money can come from all kinds of different places, but the more sources of revenue you have, the more time of your own that you’re dedicating to where managing them. And that’s what makes us not like real estate or like our job or like wealth building.

David:
So as long as you’re scaling up into properties that don’t require as much of your time, and then ultimately put off enough revenue that you yourself can pay somebody to manage it and there’s less of your time. You won’t get tired of this. It’ll actually get addicting and it’ll get really fun. And if you pair that with helping other people to do the same thing, you’ll stay energized. So, I would encourage anyone who’s listening who may be at the point where they’re like, “Yeah, real estate just isn’t fun anymore.” Okay, cool. Well, do it differently. Find a different way to pursue it. Find a way you’re doing real estate that isn’t fun anymore, but there’s whole other frontiers that can be exciting if you get into those. Henry, anything you want to add?

Henry:
Absolutely. I agree wholeheartedly with what David said, because my strategy is very… It has some similarities. There’re some things that echo and so, David’s right. I can’t tell you when it’s enough for you, but for me it’s kind of a three tiered approach. Right? It’s freedom, which is what David talked about. Right? Getting the financial freedom. Tier two is security. Right? Protecting that freedom. And then tier three is passion. Right? What is it that I need to do that I feel like I’m called to do? And how much income do I need to generate to do that at the level I need to? Right? And so freedom is what’s the amount of doors I need to get to that’s going to buy my freedom in my time? Right? We got there this past year. Right? Next is securing that freedom.

Henry:
And so I am actively looking as I acquire more doors right now, I’m actively looking at, Okay, what’s the point where I can potentially sell some of those doors to pay off the majority of my portfolio. Right? That gets me a free and clear portfolio. Maybe less doors, right? Maybe I sell 30. Right? And I keep the rest. Right? And I keep 60, 65, 70, whatever that number is. Right? And doing that, I’ll always have those properties free and clear. They will always feed me, my family, my children. Right? They can be passed down, that’s generational wealth. Right? And then from there I can pursue the passions that I have. And if I need more income to do that, maybe we do more real estate deals, maybe I build another business, whatever that is. But my passion will be driving that and helping me to figure out what direction I need to take there. And so, that’s kind of the way I’m looking at when enough is enough for me.

Evan:
That’s awesome. I really appreciate it. That pivot from [crosstalk 00:35:49] taking care of like the basics to like to pass the basics. But then at some point pivoting to you impacting the world and that I think would be really interesting and enticing and you can’t run out of money giving it away. So, that’s pretty cool. Thanks.

Henry:
And you won’t run out of desire to do this work if you’re seeing that the work is contributing to you getting passion in some other part of your life.

Ray:
Okay. So, I do have a two part question. I guess you can decide if they are interrelated, but it’s around strategy. It just started about a year ago. My first investment property is a cash flowing rent by the room. Thank you, David. It is a full functioning BRRRR, woo-hoo. We bought it by… It was a drive by, it was a for sale by owner and thanks to Bigger Pockets, I stopped by and asked the owner and we made them a cash offer. And so the past year it has been a really great experience building this house from the ground up. So now that it’s up and running fully cash flowing, I am wanting to do more. I’m wanting to expand my portfolio because it is just one property so far. So, in this time I’ve also had an opportunity to take a look at this is bleeding into my second part question about multifamilies.

Ray:
I’m also looking into small multifamilies around the Baltimore areas where they’ve been popping up. And however, the prices and my mentor who’s been walking me through how to do the cap rates and making sure that the numbers make sense. A lot of the properties that we’ve been looking at have been really run down. So when we’ve been running the numbers, we’ve been seeing the multifamilies through a broker. So the properties have been pretty run down. And as we run the numbers, the cap rate in the offer number that we needed to make on a regular basis has been maybe like two to $300,000 less than what the broker’s asking. So, it’s kind of a tough market. And one of the other ones that we really wanted to get, because it’s right next to where my parents have their own multifamily property already.

Ray:
It went for three million dollars over what we had determined our number was going to be through an auction. So anyway, these prices are really, really high in these multifamily. So my question around that is, are these things… What is the strategy I guess, that some of these people are pulling the trigger that’s okay for them. Is it something that maybe me and my investor need to reevaluate because do we need to start being okay bringing up our prices? Are we being too conservative in our CapEx and trying to calculate our numbers that we’re coming up with our low number? My investor is very experienced in the field, so I do trust his numbers, but at the same time, I don’t know. I’m trying to navigate this changing market. And especially with all the energy that’s happening around multifamilies right now, we’re seeing a lot of people wanting to get into it and just taking the dive and being brave about it.

Ray:
So, that’s great. But I would like a balanced view on the markets and perhaps that’s something maybe I just need to stay away from multifamily and its entirety. And that also goes back to arbitrage. Arbitrage I just learned about from the concept of somebody’s almost subletting from you in a retail capacity. So, I was thinking, is that a beneficial strategy from a landlording perspective where if you were to buy a home and find someone to connect with who wants to arbitrage out that rental home? So, those are kind of two separate topics, but hopefully it blends them together enough so that you can understand where I’m coming from. Yeah. So, that’s the question. Your thoughts, your insights, any recommendations on being able to pivot on this market, given those two strategies?

Henry:
Yeah, that’s a lot. So, let me try to break this down a little bit and ask you some qualifying questions. So, when you say you’re looking at multifamily, give me a ballpark on how many units on average you’re looking at for a multifamily.

Ray:
This last one was just a five unit, but the one before that was, we also looked at a 22 unit and a 40 unit.

Henry:
Okay.

Ray:
So, small to medium.

Henry:
Small to midsize multifamily. Awesome. And so I learned a long time ago that man, you’re going to rack your brain trying to figure out why people are paying what they’re paying for some of these multifamily properties or overpay what they’re paying for and how they’re going to make money. And the truth doesn’t matter, man. Some of that money just comes from all over the place. You’ve got people that are 1031ning out of other properties, right? And then they’re pouring it into a larger project because they have to. And they’re willing to forego some cash flow so that they don’t have to pay taxes. Right? There’s all kinds of situations where people would be willing to overpay for something. And so your question around, do I need to think about coming up or raising my offer prices? I mean, that’s hard to know until you dig into the numbers, but my gut would tell me if it’s me in that. But well, I’m typically in that position, is I stick to my numbers and if it doesn’t work, it doesn’t work. Right?

Henry:
And maybe I just need to get a little bit more creative about how I’m going about finding those deals. Right? If it’s in a broker’s hands, especially if it’s something that’s small, that means there’s more than your eyes on it. Right? There’s other investors eyes on it. And the more eyes that are on it, the higher the price is probably going to go up in this market. Right? And so maybe you have to look to doing something direct to seller marketing to kind of find your own deals where there’s not as much competition for you to make the offers. Right? Where you’re solving some sort of problem for that seller in order for you to get that deal at the price point you feel like you need to get it at, in order to make money. Right? And so changing your approach on looking is probably what I would do before I would change how much I’m willing to pay.

Henry:
And that’s just my general thoughts. When you shifted talking about arbitrage, that’s a… I’ve been asked a lot about arbitrage as a strategy for investors getting started, but I haven’t been asked about arbitrage as from a landlord’s perspective. And so I think that’s a great question. And so just for those who may not know, arbitrage is when you rent a property and then turn around and sublet it to make money, maybe it’s through Airbnb. Maybe you rent it by the room to somebody else. Right? Whatever strategy you use to go ahead and make money. But you’re making money on a property you don’t own. If it were me and somebody asked me about arbitrage, I don’t know that I would immediately say no, but I sure would want that person to have history of success in that arena. Right? I wouldn’t want to let somebody who’s never been successful in Airbnb, who’s never been successful with some sort of arbitrage rental business before rent my property.

Henry:
And so I would want to vet that person pretty thoroughly. Now, am I willing to put at that kind of time and effort into researching someone just to have them rent my property? Probably not in this market, because again, this is market specific here. In my market, vacancy rates are so low things rent so fast. I can find somebody, I can find a traditional renter who’s willing to pay the price that I want to pay and not have to worry about the headaches of vetting them to make sure that they run a reputable business on the up and up and that they’re going to be successful. And so, my gut tells me I wouldn’t do it. I wouldn’t be a hard no, but in my market I don’t know that I have to. Does that make sense?

Ray:
Yeah, absolutely.

Henry:
Awesome.

Ray:
It was just something that I had heard from some of the other local groups I was in, some of the newbies are asking about arbitrage opportunities for themselves. So yeah, I was just curious if that would be-

Henry:
I know-

Ray:
… recommended way of connecting, but yeah.

Henry:
I know of some landlords that do that. I know of a landlord who specifically loves that. They rent to the same person who does multiple Airbnbs out of their properties and they just have this great relationship. Landlord feels like they’re getting guaranteed rent. They know the tenant is going to pay the rent, take care of the property and treat it like a good business. And so I’m sure there’re some scenarios where that works out in my market or in a market where you’ve got low vacancy and things are flying off the shelf of rentals. I stick to what I know and what I’m comfortable with.

Ray:
Excellent.

David:
Ray, when you hear that, what type of emotions are you feeling.

Ray:
Which? On the arbitrage?

David:
No, just the advice in general.

Ray:
Well, I really appreciated the boom moment on the multifamily about shifting my strategy on just how do I find the off market deal of these multifamilies before they even get to the broker. So, that is something that I’m going to take home and… Well, home. I’m home. But take it to the market and really run with the strategy on how to market around where I am. So, I know that they’re skip tracing things and lots of ways to find off market sellers, lots of education. So I just need to hit the payment with that one. That was really, really good advice. Simple advice, but excellent. And then when it comes to the arbitrage, yeah, I can see the value in… You’re right about the fact that if the demand is out there, might as well cut out middle man and be able to just rent that out myself.

Ray:
But I guess it would be a strategy for someone who wants to be hands off that is appealing to have less involvement in it. I guess for similar reasons that people have higher property managers. So I will keep it in the back of my mind in case that’s an opportunity, but yeah. Because vacation rentals in general are not something I had dove into until the last couple months, or seriously thought about. And in terms of how that makes me feel, vacation rentals makes me feel excited because that’s one of my passions, is to travel. So I would love to be able to… I’ve always wanted to be able to travel and travel with a purpose or travel with a reason whether it was related to business or whatever it’s doing. So I would love to combine the two and obviously vacation rentals seem to kind of bridge that gap there.

David:
All right. So it sounds like you took a great perspective from Henry’s advice there. Is there any follow up questions you want to ask? I love the way you responded.

Ray:
Awesome. No. So you really have my brain rolling about this whole trying to find these off market deals. It is something that has been suggested… It’s been one of those where you get all those different… The same messages from different sources.

Henry:
Sure.

Ray:
It’s a message that’s been showing up quite a lot. So, I was wondering if you, since you’ve done… Sounds like you do a lot of multifamily. If you have any success stories, recommendations, things that you have found work when it comes to marketing to sellers off market trying to find these multifamilies in particular. And if a multifamily off market marketing strategy is different from single family home since I am trying to both strategies here.

Henry:
Awesome. Love to. That’s a great question. And so, I’ll start by generally talking about off market deal finding, kind of at a 10,000 foot view for those who just aren’t familiar with it as well. And so when you’re looking for a deal off market, it means you’re trying to buy something that is not listed with a real estate agent. Right? And you’re typically trying to buy it under market value so that you can add value to it by fixing it up and then renting it out if it’s a multifamily or fixing it up and selling it if it’s a flip. Right? And so to find something off market, essentially what you’re trying to do is gather a list of people who may be interested in selling their home. Right? They need to have equity and they need to have motivation. They need a reason to sell at a discount.

Henry:
If they don’t have those two things, it’s really, really hard to make a deal. Obviously you can’t make a deal if there’s not equity. Right? But if they don’t have a reason to sell it a deal discount, then they don’t need you, they need a real estate agent. Right? And so it’s essentially finding a list of people and then figuring out a way for those people to get on the phone with you in some way, whether that’s you send them mail and they call you, whether that’s you sending them a text message and they call you. Whether that’s you have somebody make cold calls to them and they answer the phone, right? It’s getting them on the phone. Right? And then it’s about understanding what their reason is for selling at a discount. Right? Is it because the property’s super distressed? Is it because they just inherited it and they have no idea what to do with it. Right?

Henry:
Is it because they’re getting too old and don’t want to be landlords anymore? Right? There’s reasons why people would sell at a discount. Your job is to figure out that reason. So, that’s in a nutshell. So when you’re talking about small to midsize multifamily marketing, I really like that niche because what you find is when you start dealing in the big multifamilies, 100, 200, 300, 400 doors. Right? You’re dealing with big time buyers with big time money. Everybody’s looking for those deals in certain markets of the country. Right? And then when you start looking at duplexes, triplexes, quadplexes, you’re really dealing in the area where the everyday investor plays. And there’s lots of everyday investors right now. Right? The new bees, the beginners, the people who are building up a small portfolio, that area between quadplex and 100 doors, there’s a lot less people playing in that space.

Henry:
Right? And there’s a lot more mom and pop owners playing in that space. And so, market to that demographic, but be a little creative in how you market to that demographic. So, there’s something that’s called… What’s the fancy term for it? I’m drawing a blank. But I can’t think of it. But so when you think about marketing, maybe take the approach of, “Okay, I’m going to pull a list of multifamily properties…” And you can pull a list like this on ListSource or PropStream, wherever you can buy lists from. Right? And you market to properties within that range of doors. Right? And try to look for properties that are either owned in the owner’s name and not necessarily an LLC or owned in a trust, like a family trust or a living trust. Right? Because those tend to be mom and pop type owners, right?

Henry:
Especially if they’ve been owned for a long period of time. So, then you can send them marketing. But I would focus on sending them marketing, it’s called network market. That was the term I was looking for. So, I would focus on sending them marketing as if you were wanting to network with them. Because truly that’s what you’re trying to do. Because what you’ll find is if you send mail that says, “Hey my name’s Ray, I want to buy your apartment complex at 123 main street.” Right? It may get overlooked, it may not. But if you send them a letter, try to do like a yellow letter or something with a handwritten type font that says something like, “Hi, my name is Ray, I see you on the property at 456 main street. I am also an investor in this area and I am looking to meet other investors. I’d love to sit down, have a cup of coffee and talk with you.” Right? And you can start to build relationships that way.

Henry:
And a lot of what you’ll find is maybe that property isn’t for sale, but a lot of these owners have owned these properties for years and a lot of these owners know all the other owners in that same kind of demographic. And so he might not know who’s selling, but he might know, “Oh, Bill down the street who owns that 12 unit, he’s been looking to get out of the game.” And as you start networking, you’ll start to meet some of these people and you can be in their circles. And some of these deals might start to come your way as you build relationships with these people. So don’t just market for trying to buy it. Obviously be open to buying it as they respond to your marketing. But you can also, even if they’re not willing to sell when they respond marketing, try to sit down with as many of them as you can and build those relationships and deals will start to come to you that way in that small multifamily space, it’s a cool niche to play in.

Ray:
Oh, my gosh, light bulbs just went off because one of the units that I was just looking at, it’s down the street from the one that my parents currently have. And I was looking into who’s the owner, it was just recently bought from the original owner, which we have actually made an offer on like two years ago. But they didn’t accept the offer because it was too low. And so the current owner is someone who owns a real estate investment trust. So a REIT where they have a bunch of properties. Yeah. So, I found the owner of that LLC, I’m getting good at all this cyber spy game here. Super [inaudible 00:53:40]. And so I found her on LinkedIn. And so you just… You gave me this boom connector thing about having a genuine conversation because I genuinely have those kind of questions.

Henry:
Yep.

Ray:
That’s great. So, thank you. I have-

Henry:
You’re very welcome. You’re very, very welcome.

Ray:
That’s excellent. And then not to mention for the other places. Yeah, because that area where we are currently looking to expand in that small multifamily area, a lot of the buildings are built the same, a lot of the tenants, the tenant pool that we currently have, they are similar and we’re really proud of the property that we have now that we’ve built up it’s nice. We’ve done a great job of the landscaping, all that stuff. So I do hope to expand that multifamily in that area because we know what to do to make it a good property. And that’s my goals. I want to make good rentals. So, thank you for that part-

Henry:
Very welcome.

Ray:
… and for the multifamily portions. Any other recommendations or I guess this will be a marketing shout out to any kind of tools that you find or resources that you use for off market searching lists?

Henry:
Right. So this episode of the Bigger Pockets podcast is sponsored by all the things I’m about to say. No. No, I mean the tools that I use are pretty typical tools. Right? So I like LandGlide. I like PropStream, and I like DealMachine. And I use those sometimes interchangeably through looking up owners and pulling lists and contacting owners. You can skip trace on all of them and you can find out who the owner is in all of. And then typically, and if I find a small multi like in your situation where you have that… You know who sold the last small multi, you have a family member that owns something close by, I just hop on a phone call at that point.

Henry:
I still probably would send them marketing, but when you have an in like that, when you have something that’s a good ice breaker, it’s a great way to just go ahead and hop on the phone call because you can say, “Hi, my name is Ray, my family owns 123 main street and I saw you just sold X, Y, and Z. And I would just really love to sit down and chat with you about real estate or talk about this property.” And you never know what kind of leads you can get from that. And as you build that relationship and they’re going to see just like you told us, they’re going to see that you care, you want to provide good, beautiful, nice housing for people. They’re going to want to make sure that the assets in their neighborhood get sold to somebody like you over somebody else. So, that relationship networking is huge.

Rob:
Yeah. I want to hop in on that because I think one of the most neglected ways of marketing because we get sold in our heads about using tools and making sure that we’re using all the skip tracers and how do I market on social media? So I just want to say that one of the most neglected ways to market is to literally post your social media channels, asking people and telling people what you want and what you’re all about. Like for me, I started partnering up with people in my early kind of Airbnb days because I was posting photos of the houses that I was actually going live on Airbnb with. I was telling people about the progress that I was making and I was asking for investors. And then randomly when I did and expect that at all, people would reach out and say, “Hey, Rob, I know that you’re into this short-term rental thing. I’m super interested in getting into that. I know that you’re really smart in this, would you want partner up?”

Rob:
And so by putting myself out there, these opportunities came to me. So, if you’re looking for some kind of deal in your network or in your vicinity, I would definitely encourage you to kind of put that out there and make it known to everybody within your family, friends, peer group, and all those old Facebook friends from 10 years ago that you’re looking to get into multifamily. And if there’s a good deal to find you. Because I think that the power of putting yourself out there, will present the most opportunities when you’re starting out.

Ray:
Excellent advice. Thank you. And then I did also have a question too, on there for David. It was about recommendations on how to work with brokers. Because part of my first question was working with brokers and that’s how it landed me asking about the off market deals. But how do I build relationships so I’m working well with brokers? How do I-

David:
Okay. First off, send me a message on Bigger Pockets or DM me and I’ll give you a better response there since we don’t have time.

Ray:
Okay.

David:
Short answer is stop looking at what they can do for you and start looking at what you can do for them. Any human being alive if you want to know how do I build a relationship with them, that’s where it starts. Now, if you’re giving to them first and they’re not giving back to you, well, then that’s not the right relationship you should move on. But brokers don’t care about you, they don’t care about your goals, they don’t work for you, they work for the deal. They’re trying to get that thing sold. So if you can’t show that you are the best person who’s going to buy the property, then as their eyes, you just don’t really have a lot of value. So, I could give you more nuanced answer elsewhere, but that’s the short, cold, hard truth.

Ray:
Okay.

David:
All right. Thanks, Ray.

Ray:
Fair enough. Thank you guys.

Henry:
Thanks, Ray.

Hugh:
Thank you guys so much for taking my call. I’m so excited to be here today. So, I’m Hugh. It’s nice to actually meet you guys live and in-person. I’m a little shell shocked right now. So, my question is I’m going kind of through a very transitional period of my life. I have two rentals in the state of Delaware. I also am a licensed real estate agent in the state of Delaware. One of them has been sold off. I’m selling the other in my portfolio and I have about 95K in reserves that I have to play around with. I’m 22 years old. So, I’m still new in the game. And I don’t know if I want to go into a market that’s heavy and cash flow, if I should invest in a high class asset like you talk a lot about David. And just kind of build my wealth that way. Like I said, it’s a really transitional period of my life and I’ve also had the opportunity to live in multiple different markets.

Hugh:
So I lived in Delaware, which is a little bit slower paced. I recently moved back to the state of Connecticut and I was in Miami. So, South Florida, I was a bit familiar with. Do I go into a place that’s a little bit more cash flow heavy like Delaware, where I have boots on the ground or just looking to get some perspective and advice in this transitional period of my life?

Henry:
What a good problem to have, right? That’s amazing. 22 years old selling a couple of rental properties and having some money to play with and wanting to figure out, “What’s the best use of my funds?” If I’m hearing that correctly.

Hugh:
Yes.

Henry:
These questions are a little difficult. Right? Because you want to do what you feel like drives you. Right? And so I’ll talk a little bit about what drives me and why I do what I do. And maybe that’ll have kind of guide you in a direction. Right? So I tend to buy smaller multifamily and single family homes. Right? I know that multifamily, larger multifamily can be a more lucrative investment if you will. Right? But I don’t find myself veering into those lanes because I really like the impact that I have on families and on my community, by buying smaller multifamily and single family homes and seeing the transformation that has on neighborhoods and driving by those properties and seeing the impact it’s having on families, seeing families playing in a yard in front of a house that I helped renovate. I call it the warm fuzzies. Right?

Henry:
So I really get the warm fuzzies from transforming my community and seeing the impact on almost an individual level. And even though I know I can get a higher return putting that money somewhere else, those warm fuzzies drive me. And so I like being able to put my money there, get a return on my investment and seeing how it impacts my community. And so all that to say is, think about what drives you, think about what makes you happy? What part of real estate do you get the warm fuzzies about? Right? Because real estate has so many ways to be lucrative. And yeah, you can go put your money in a high cash flow market, buy some properties and produce a bunch of cash flow. And that’s awesome if that’s what you want to do. You can also go put your money into a high appreciation market. Right?

Henry:
Maybe you don’t get the cash flow right away, because maybe you don’t need it, but you get the appreciation in the long-term. And from a business perspective, either one of those can make you money, it’s about which one of those is most important to you, your family, your finances and your goals. And so I would think about what is it that I truly want? Is it cash flow or is it appreciation? And what is really driving me to use real estate to get there? And you may find yourself leaning awards one more so than the other. And then that’s where I would say you should go and plant that money to invest. But that’s a super cool problem to have and congratulations to you for even putting yourself in this kind of a position at such a young age. It’s amazing.

Hugh:
Thank you. Thank you. I definitely appreciate it. Just to add onto… Oh, sorry. Go ahead, David. I do just want to add into what you were saying Henry. So, personally I definitely want something more passive to be able to choose to work if I want to, but not have to. That’s definitely my biggest driver. I’m also actively working right now. I’ve also always loved to real estate. I’m currently a controller for real estate investment firm. And then I’ve also worked in accounting with developers prior. So in general, real estate is awesome. But my personal goals is to obtain passive income. The only reason why I’m starting to get confused is because a lot of people are saying… And including stuff that you say, David, on your podcast, you’re young cash flow could be killing your generational wealth if you only focus on cash flow. And I’m still actively working. Right? So, that’s where I start questioning. Do I really want cash flow? But my long-term goal is to make sure I’m building a passive empire.

Henry:
I was going to say, do you want the passive income so that you can get to financial of freedom? Or do you just want passive income because that’s what people say to get? Right?

Hugh:
I want passive income up to get my time back.

David:
Right. So, when I do have that financial freedom, I might decide to continue working or not, but I want to have that option.

Henry:
So, for me, if I want passive income through ownership, right? And not through just lending money, I would look at buying in a high cash flow market and I would look at giving those to a property manager. And that’s, as passive as you can get, you’re still going to have to manage your manager. And I think that’s where a lot of people fail when they hand over to property management. And then you get your cash flow built up and then you figure out what else you want to go do or what else you want go invest in once you have your freedom. But in a nutshell, that’s what I would think about.

Hugh:
Okay.

David:
All right. So, let’s… This is why I like doing these life shows because I get to actually ask the clarifying questions. It’s hard when someone like you, Hugh, comes on and says, “Hey, should I buy here or there?” And I’m like, “Ah, I don’t know because I don’t know about your goals.” So you’ve shared a little bit that, you want to have real estate supplementary income. And that sounds like your current desires are rooted in that, and then every decision that comes after it is going to be the different branches that break off from, “I want financial freedom and I want to be able to live off the rent.” Is that fair to say?

Hugh:
Yes.

David:
Okay. I’m going to tell you something that probably nobody else is going to tell you, and I don’t want you to hate me for it. I want you to understand that this is coming from love.

Henry:
I love it when he says this.

Hugh:
Okay.

David:
I’m about to go Dave Ramsey on here.

Hugh:
No worries.

David:
I don’t think that you are going to accomplish that goal in a very short period of time. I also don’t know that for you specifically is just my personal opinion, that’s a healthy goal. If you are a controller for a real estate firm, you are a real estate agent, you’ve come across $95,000 at 22 years old, you are freaking talented. Okay?

Hugh:
Thank you.

David:
You’re you’re like Michael Phelps. You put him in the pool, he just swims better than everyone else does. It’s not really debatable. Okay? It doesn’t mean he’s better than other human beings. I’m not trying to say you have more value than other people, but in this world that we are talking about right now, you’ve got a swimmer’s body and you’re crushing it in the water. All right? What I hear you saying is how can I swim for a couple years and then never be in the pool? And I just don’t know that’s the best thing for you. I think that you need to swim as much as you can and win gold medals and inspire people through it. I think that when you’re finally tired of swimming, you should be coaching other swimmers. I think maybe you could build an entire building of Olympic swimming pools and put a place together where other people can come swim. You’re two talented to say, “I just want to do this for a little bit and retire and then just be bored.” Am I okay with what I’ve said so far?

Hugh:
Yes you are.

David:
All right. You get real estate. You’re an agent, you’re helping people, you’re a controller, you understand how this works? You understand enough to know that I’ve got cash flow option over here or equity. So, you’re already seeing that there’s different styles. I call them personalities of real estate. So, can I just challenge you to let go of, “I just want to do this for two years and never do it again.” And instead embrace, “I want to stay in real estate for as long as I’m working, but I only want to do the parts of real estate that I love.” Would that be fair?

Hugh:
Yes. That is fair.

David:
Okay. So, do you love being a real estate agent?

Hugh:
I do not.

David:
What do you like about it?

Hugh:
I like having direct access to the MLS. I like that I can do my own analysis very analytical in the accounting department. But the actual customer service transactional part of it.

David:
Okay. Would you believe me if I told you that is… It’s not exactly the same as me, but we have the similarity that I did not like the customer service element of being a real estate agent.

Hugh:
Oh, I didn’t know that.

David:
I despised it. And that doesn’t mean that I despised people. Okay.

Hugh:
Right.

David:
If you just look at my personality, I’m really good at swimming like you in the pool, I’m not that good at tree climbing or something. Okay? So, I could climb a tree, I could do customer service, the energy it takes for me to get up that tree is exhausting. You put me in the same pool, I use the same energy I could be way more effective. Right? So what I do is I turn it into a business. I love teaching. I love educating. I love systems, I love winning, strategizing. I could see in order to sell this client’s home, this is what I got to do. Telling the client what I did was exhausting. I don’t want to have to go and tell them over and over and over, “This is everything I did to make you a bunch of money,” but that’s what they wanted.

David:
So, I hired people that would do that part for me. That were scared of the part I like to do. The high pressure, high risk, the negotiating. We’re going to get every dollar we can. The game I played with the other agents, like, “Fine, we’ll just go sell it to someone else.” And I can get another 30 grand out of them because I pulled the right psychological levers. They were afraid of that. They just wanted to make someone’s life happy. So, what happened is I built a business out of a thing I understood because I didn’t like the customer service side and my clients were way better off getting customer service from someone who’s good at it and having me oversee the big picture. So that’s an option for you. You don’t have to… It doesn’t have to suck forever. No one told me this. When I was 22, man, I was working at a restaurant probably.

David:
I was doing nothing like what you’re doing. You’ve got a long time to get this right. So you could run a real estate team. You could own a real estate brokerage. You could turn into a business where make a bunch of money teaching people about real estate that helps them go help clients. And then you still get that access to the MLS. You just get a million other things on top of it. Okay?

Hugh:
Mm-hmm (affirmative).

David:
You could continue to work as a real estate controller. You could continue to learn information and make connections. And guess what? All those people you make connections with that are impressed by you because you’re super talented, those will become referrals to the brokerage that you have and you’ll be feeding those agents and helping make them money as well as helping make you money. Right? You could give your agents that have money an opportunity to invest with you at a certain point.

David:
There’re so many freaking options that you have that would allow you to just have an amazing life inspiring and teaching and coaching and building wealth and helping people and feeling like a fish in the water that it doesn’t make any sense that you’d say, “I just want to buy a couple properties and get out of it.” All right? So, that’s the first thing that I want to tell you. I’m just shocked you’re 22 years old and you’ve already got this going on. Now, I am willing to give you some practical advice about where to invest to. But is there anything you want to comment on what we’ve said so far?

Hugh:
Well, I do think that it’s interesting you say that. I think I’ve been through a lot more than the average 22 year old. I will say that for sure. I think I can agree that I want to commit to this passive side of real estate, but knowing myself and how I thrive on stress and I thrive on being busy. I don’t know if I could stop when I got to that point. Right? So that’s why I put that little caveat in there saying, “Well, I want to choose not necessarily that I want to stop there.”

David:
The way that people like you and me and Henry and in general, people that just know we’re good at the stuff we’re doing, not arrogant. We just are. There’s lots of things I’m not good at. I have a vision in my mind of how I see it that turns into an analogy. Here’s your personal analogy. We are all people that are on the real estate track going down a hill in our car. All right?

Hugh:
Okay.

David:
It actually takes more energy to stop going down by smashing on the break than it does to just let ourselves go. So to try to stop is harder than to keep going when you’re in this place. All right? So if you just make peace with the fact that I’m going down this hill and I’m going to be picking up speed, instead, focus on what direction do I want to take and what do I want to avoid? Because I’m going to go somewhere, right?

Hugh:
Mm-hmm (affirmative).

David:
So if you see, I don’t like going the customer service route with these people, that’s bumpy road. It’s going to be a miserable ride. Well, take a path that’s downhill in a different direction that’s smoother for your personality. And as you go down that hill, you’ll make more and more of these decisions where you’ll peel off from one path and go another where the road will become smoother and smoother for you. And that’s in general, how it works as you build a portfolio. You get to build a big portfolio, you have a lot of equity, you have a lot of cash flow. Now you make decisions on like, “Well, it’s really awkward and hard trying to own properties that I have to do at this way. Let me take a different path where I sell these ones and get into different ones or get into a different market.”

Hugh:
Okay.

David:
As far as your decision right now, if you are making money, the way that you are and you have the future ahead of you that you do, immediate cash flow to me in your situation is not nearly as important as the long-term game, especially being 22 years old. So, if you go buy… I would say that you should buy cash flow stuff if you said, “David, I’m a bank teller and I have dreams to be more. But I can’t get out of this job cause I need the money.” Cash flow would be your tool to get out of that immediate trap. It’s a short-term solution. And then you have freedom to go build something. But if you already have that freedom, I would recommend that you buy in markets that not, I don’t want to say a appreciation like you’re speculating that it’s going to go up.

David:
That it makes all the sense in the world that population is moving there and jobs are moving there and tenants are moving there and better fundamentals of real estate are going into that market. That will… It won’t make you broke. You’re not going to lose anything over this property, but you delay gratification as long as you can. So, I’ll give you an example. A lot of New York is moving to South Florida right now. They’re making a huge push to become like the new New York, new New York.

Hugh:
Yes.

David:
Right? I don’t think you could go wrong if you buy in Miami in a decent area, unless the HOA you buy in specifically is bad or something. But that area is going to explode as more and more business moves there and they like what Florida is. So if you bought something in say like Miami or the Miami area, and you don’t need money right away, in 10 years in 20 years, your jaw would drop if you understood how much that’s going to be worth. The same property in Delaware would probably be pretty solid return. Right? But something in Miami could be life changing. I’m talking about, you could make seven figures in equity. And I know that sounds, but with the way inflation is going, that’s not crazy. And if you bought a couple of them, that could be like three, four, five million dollars that becomes your seed money to run your own REIT someday or whatever you want. It gives you options. You see where I’m going with this?

Hugh:
Right.

David:
So at your age with what your resources are, I want to encourage you to do everything you can to delay gratification, to give you options later in life. Because at 22, you’re probably not pulling the trigger on something huge. I mean, unless you’re some absolute freak wonder kid, you’re in a great position to learn, but you’re not going to be the leader at this stage in your life. But when you hit 28, 29, 30, you will probably absolutely find yourself like, “It’s time for me to go do my own thing, build my own brand, go out of my own way.” Plan for that phase of life, put that money in a place where it’s going to grow and grow and grow so when you hit that, you’ve got dry powder. Do you even know what that phrase means? Dry powder at 22? Have you heard that before?

Hugh:
No, I have not. Can you elaborate?

David:
It comes from World War II when they had to load their muskets up with gun powder and if it was wet, it wouldn’t fire. Right. So it’s basically you’re saving resources so that when you need them, you’re ready to go. You don’t want to be like, “I got all this Delaware property that’s been cash flowing for 10 years, but I can’t do anything with it.” Right?

Hugh:
Right.

David:
That’s the advice that I would give you.

Hugh:
Okay. And so specifically regarding Miami. So, I did look there for a little, I know the areas. What areas you might want to avoid, what areas people are flocking towards. And with my current amounts, my reserves, I’m only looking at like condo town home type properties. Right? I mean, I could go more north, like in the Fort Lauderdale areas. But if I were to invest in South Florida, I would want it to be in Miami-Dade County.

David:
Mm-hmm (affirmative).

Hugh:
I know there’s kind of back and forth regarding the HOAs with condos. And sometimes you just have to be careful with them. What would you recommend if I wanted to get into the Miami market to pursue?

David:
First thing I’ll say is either email me if you have my email, you can get it off my Instagram page or send me a match just through Bigger Pockets, I will get you connected to my loan team because we are licensed in Florida. And we can give you options of what type of properties that you can buy with what loan products. In general, I wouldn’t beholden into just Miami. I think Tampa and Orlando are both really solid markets that we should expect a lot of growth from. So, basically what I’m getting at is we should look and see what you’re approved for, look and see what type of properties we can get in those three markets.

David:
And if we can get something solid in Miami, that’s our first option. If the only properties in Miami-Dade are just like, eh, then maybe we look at Tampa and we see what you could get there. And we can kind of compare apples to apples to see where you can get the best property that will actually make sense so we don’t stick you in a condo just because you like you have to, if that’s where you want to invest.

Hugh:
Okay.

David:
I think you’ve got some really good short-term rental options in Florida. Some really good corporate housing options in Florida. And then maybe something on the outskirts of Miami proper, right? Where you can actually get a house that you can rent out. It doesn’t have to be a condo with the down payment money you have, you’d do really well there too.

Hugh:
Okay. Perfect.

David:
All right.

Hugh:
I appreciate you guys taking the time to meet with me and I will definitely be emailing you, David.

David:
Thank you-

Henry:
Awesome. You’re amazing.

David:
… for the call.

Hugh:
All right. Have a great day guys.

David:
All right. That was our show. Henry, what do you think?

Henry:
Man, I love doing these. Man, it’s such a unique vibe to be able to talk with somebody in-person and speak specifically to their problem and their market and their situation, man. How many shows give you an opportunity to do something like that, man? Awesome.

David:
Yeah. Especially… I mean, we had some really good questions on this one and like I said in the show, I really love that we’re able to sort of ask deeper questions to get more of an understanding of their specific situation so we could give advice tailored for them.

Henry:
Yeah, man. It’s… Sometimes we do this all the time and we do it specifically for us. And so you don’t always get a view of other people’s why, or what’s fueling them to make the real estate decisions that they’re trying to make. And so it feels really good to hear those things and then be able to provide some guidance and hopefully we don’t scare them off the path.

David:
Yes. Well, if you guys like this, please follow Henry and I on social media, we go and say when we’re going to be doing a live session so that you can get on and get your questions answered as well. You could also go to biggerpocketsts.com/livequestions where you will see a recording schedule at some point that will tell you when you can be here. And if you scroll to the bottom of the page, there’s a link where you can actually join and get in the chat so that you can get your questions answered on the show or just kind of get a behind the scenes peek at what it looks like to record a podcast.

David:
So, I want to thank all of our guests for coming on. We literally couldn’t make the show if we didn’t have people coming on to ask questions. And if you’re watching this on YouTube, please leave a comment below and let us know what you thought. Do you like this format? What did you get out of it? How did this inspire you to go take action? Or maybe how did it change the way that you’re thinking? Henry, any last words before we get out of here?

Henry:
No, man, just keep logging in and giving us your questions. Like I said, what a unique experience to be able to get your specific question answered by people who love doing this and who love teaching? And it’s just amazing. So, thank you all for being here.

David:
All right. This is David Green for Henry always bringing value Washington. Signing off.

 

Ashley Kehr:
This is Real Estate Rookie episode 158. My name is Ashley Kehr, and I am here with my co-host, Tony Robinson.

Tony Robinson:
And welcome to the Real Estate Rookie Podcast, where we give you the inspiration, the motivation to get started or keep going in real estate investing. And actually every Saturday, we pick a lucky, lucky listener, and we answer their question live on the show. But before we do that, Ashley, what’s going on with you? What’s new in your neck of the woods?

Ashley Kehr:
Well, I went to this real estate event for my property management company recently. It was their 10 year anniversary since they’ve been open, so congratulations to them. But I met one rookie listeners there and we were talking and I was telling him the story of what happened. He was like, “You’ve got to tell that on the podcast.” So if you don’t mind, I’m going to go ahead and tell a story real quick.

Tony Robinson:
Yeah. Story time. Let’s go.

Ashley Kehr:
So I think one of the great benefits of being a real estate investor and becoming financially free and becoming in a better financial position is that you can help other people. And my goal, really, is to be able to do things for my friends, like buy a huge cabin somewhere and say, “Hey, you guys, go stay there for free.” Things like that, I love to do. And so I have a friend that needed to move into an apartment just for a short amount of time. And she was willing to pay whatever, it’s just she couldn’t find anything. And I had something available and that was super nice that I had that available at that time she needed it, and it just worked out really well. So she moved into that and it was a super tiny, tiny one-bedroom apartment for her, her boyfriend, and her dog.
And they were doing rent-to-own on a single family residence. And they were remodeling it before they moved in, so that’s why they needed somewhere to stay for those couple months. So she was about a week before moving into that property and she’d let me know her move-out date and said, “Just thank you so much for letting us stay here for only a couple up a months and worked out really well. We’re going to be leaving in the states. You can get it rented. We’ll have it all cleaned. Everything.” Well, about five days before she’s supposed to move out, I get a text from her at almost midnight saying, “Somebody rammed their car into our house. Can we stay longer? I am not kidding. This really just happened.” So what happened was two meth-heads were escaping the police and drove their car at 90 miles per an hour into the front of her house, and shifted the house off of its foundation.
Just did tons of damage to the house. The people ended up dying on the front lawn there. Well, she had never signed the rent-to-own contract yet. So all that money, all that work, all that time put into rehabbing that property for her about to move into, she lost all of that. And basically, the owner just said, “I’ll give you back the first payment you made.” And I think she had maybe put a security deposit or something down. So, that was really devastating for her and, I guess, a lesson learned that you sign a contract before you go in and do work on a property.
Well, it ended up, I had another property that came up for rent, and so I was able to give that to her to rent for a reduced rate, and now she’s moving into that property and actually hopes to eventually buy that property from me. But just a crazy of something that could happen to somebody. And she is just such a trooper. She just had surgery, too, and she’s transitioning, trying to move in between these places when she thought she was moving somewhere else. And so, yeah, just a wild, wild, crazy story, I guess. I mean, who thinks that someone’s going to drive into the front of their house?

Tony Robinson:
I’m so glad you shared that story, Ashley, because I think a lot of what drives people who are entrepreneurial in spirit isn’t just for their own financial wellbeing or for their own success but like you said, it’s to be able to provide, I guess, to let that success extend to the people that you care out, and to allow your success to positively impact and benefit other people. And what a terrible experience for your friend, and I’m sure so many emotions that she experienced, but where to live was one less thing she had to worry about, because of the success that you’ve had. So, man, for those of you that are listening, obviously, we’re all motivated for what real estate can give to us personally, but sometimes it’s also helpful to think about how all the hard work you’re doing can kind of impact people around you as well.

Ashley Kehr:
Yeah, around here, it’s a very hard to find an apartment right now. And if you are looking for apartment, you have to go through background check, credit check, get approved, fill out an application, pay an application fee, things like that. It was so cool for me to just be like, “Hey, here’s the lockbox code. Start moving your stuff in.” It was awesome for me to be able to do that for my friend and just say, “Don’t worry about it. Stay here as long as you need to.” And so I think that’s definitely a really awesome part of real estate investing, is being able to do those things for your friends and family.

Tony Robinson:
Yeah. Well, thank you for sharing that story, Ashley. I’m sure it inspired a lot of folks.

Ashley Kehr:
Just a crazy story in general.

Tony Robinson:
That too.

Ashley Kehr:
This is the person that something like that would happen to, just these crazy, crazy things. But, okay. So let’s get to today’s question for the rookie reply. So today’s question is sent by Ryan Costner, sent this to my DMs. You can send me a DM at wealthfromrentals, or one for Tony at tonyjrobinson, and basically, whoever jumps into our recording platform first gets to upload their DM. So who knows who it’s going to be?
So Ryan message says this. “Hey, Ashley. I’m Ryan from Chicago. Got a question for the rookie reply. I’m looking to get into rental properties, starting with single-family household or a duplex and doing the stack method. I’m not happy at my current job, and I’m looking to make a change into the real estate world. What would y’all recommend for a job to immerse myself in real estate without making crap for money? Not a part of this question, because I think keeping it broad would help the question for the podcast, but talk about it where you want. I currently work for a contractor who does the maintenance for a property management company.
I thought I would learn more in the position, but after a year with minimal takeaway, I think it’s time to move on. I would also like to go back to a W2. I’m very handy, just got done with a full gut rehab on my personal residence. I also have a bachelor’s degree in business for management. Based on that, what would be your recommendations to change my future by helping me along my journey for financial freedom?”

Tony Robinson:
So do you want to go first or how do you want to take it? I got some ideas [crosstalk 00:07:10] .

Ashley Kehr:
Yeah. I guess kind of break it down real quick is that is in a job right now where he thought that he would learn more about real estate investing by working for a contractor who works for a property management company. So the property management company probably uses his employer as a contractor or saying, “Hey, I need this job done here. Go to this unit and take care of it.” Things like that. And then he’s asking, what are some other positions or other jobs he could do to help him learn more about real estate investing? So go ahead, Tony. What do you have on that?

Tony Robinson:
Yeah, I guess just a couple things come to mind, Ryan. So I think my first question to you would be what were your expectations walking into that position, right? What were you hoping to gain by taking this maintenance position with the contractor? And just kind of ask yourself if those expectations were, I guess, realistic to begin with, right? Were you hoping that you would get this crash course on how to become a world star investor? If so, then maybe your expectations stepping into it are what’s giving you this kind of jaded feeling about the position. But if your goal stepping it was, hey, here’s how you efficiently and effectively manage a maintenance request within a property, then, I mean, I would hope that you’ve gained some experience with that. So I guess that leads me to my next question is, can you reflect, Ryan, within your current role, on what are some of the things that you’ve learned that have benefited you as a potential real estate investor?
The property management side of things, and specifically managing the maintenance requests, I think, is one of the biggest headaches for a lot of new investors, right? A lot of people shy away from managing their own properties, because they don’t want to deal with broken toilets, right? And if you have worked for a company that’s given you a playbook on how to effectively do that, then you’re 10, 20, 30 steps ahead of other new investors that haven’t learned that skillset yet. So, that would be my first question is reflect on what you have learned that has already made you a great investor, and can you lean into that even more? Then my last question, I’m asking you questions, but you can’t ask me back, so take it for what it is. But my last question is, is there an opportunity for you, Ryan, to take some initiative outside of your general job description?
Can you go to this contractor that you work with and offer to help him with some other parts of the business? Can you even maybe go to the property manager that you guys are contracting for and offer him maybe some additional work in exchange for whatever, allowing you to shadow him when he’s doing all these other things? Can you create more opportunity with the seat that you’re in? Because you’re already very much surrounded by real estate professionals, you’re surrounded by a contractor. You’ve got a property manager. Those are two key pieces for everybody’s team when it comes to real estate investing, and you’ve already got a line to those people, so is there a way for you to expand your job description within the current role that you have? Ryan, I know I didn’t quite answer your question, but more so just kind of pointing questions back at you, but hopefully that kind of gets the wheels turning a little bit.

Ashley Kehr:
Yeah, I really liked that last point you made there, Tony, expanding on your current role or even if staying in your current position and taking on a side hustle or something different added on. So maybe working weekends or nights or something for that property management company, even if it’s just doing little handyman things for them. But I think as far as the big things I think of to get started in real estate is so you already have the construction knowledge, the construction skills, and it says that you do have a bachelor’s degree in management, so maybe is there some kind of project management role you could take on? Also, working for other investors. So instead of working for the property management company or a contractor, maybe you could work for an investor directly and get that side of you, because sometimes property managers and also contractors, they’re not investors themselves.
And I think that there’s a big difference as to how they look at a project, as to how an investor looks at a project, and it looks at a property and analyzes a property. So I think going and seeing that if you could be of use to an actual investor and work with them directly would be a really big benefit for you, or even staying in your current role and taking on business partner who is an investor, and maybe he’s going to supply the money, he’ll help you analyze the deal. And then you actually go and do the rehab, since you have that knowledge, and you did your whole personal resonance, too. And you can show that as a sample, as like, “Hey, look, this is my work.” Take them through your house and prove that you can add value to a partnership that way, too. So I think there’s a bunch of different options for you.

Tony Robinson:
Yeah. I just want to add onto that last point, Ashley, what a great idea, right? And maybe even take it one step further. You’re working on different properties for this property management company all day, every day. Can you reach out to some of those property owners and say, “Hey, I’ve actually worked on your property. I know it inside and out. Here’s my skillset.” And then maybe that’s the person that you end up partnering with, right? Because, they’ve already seen your work. They didn’t know it was you, maybe, right? But they’ve already seen your work. You’ve already somewhat established a relationship there. So you can say, “Hey, I’m looking to get started. I have this skillset. You have the experience. You have the funds. Can we come together to take a deal down together?”

Ashley Kehr:
Yeah. And to be clear, Tony’s not saying to go and poach things from the property management company, or the guy that you’re working for now, but to actually partner on a deal and become a part owner on a different deal, and then hand it off to the property management company when you’re done with the deal. Yeah. I think that’s a great idea, Tony, because you can find out who those owners are pretty easily. You can go on to PropStream, you can go on to your county’s GIS mapping system and just type in the address to get the owner’s name and to get their address, and then Google white pages, type in their name, and find their phone number. So, okay. Well, should we wrap this one up, Tony?

Tony Robinson:
Yeah. I don’t think I got anything else for you, man. I know I didn’t give you as much advice. I just asked you a bunch of questions. But hopefully that at least points you in the right direction. But just I guess the last thing I’ll say, Ryan, is that sometimes we don’t see the opportunities that are right in front of us, right? When you’re in the grind every day, you sometimes become blind to what’s right in front of you. And I’ve shared this story before, but I have a friend who lives here in SoCal, and she’s telling me that, “I really want to get started in real estate investing, but I don’t have the team. I don’t really have the resources.” She was like, “I don’t know if I should do this. I don’t know if I should do that.”
And over the course of that conversation, she ends up mentioning to me that her dad is a general contractor for a big commercial real estate company. And I said, “You were just telling me that you don’t have the team or that you don’t have the resources, but your dad is a general contractor.” I was like, “You have all the resources that everyone would die for.” Right? So it’s just sometimes when you’re so close to it, you don’t see the opportunities are in front of you. So hopefully this conversation, Ryan, helps you see some of those.

Ashley Kehr:
Yeah. And one final thing from me, too, is that Ryan had mentioned that he didn’t want to take a pay cut either. So I think a lot of times that there’s two opportunities that are presented to someone. And the first one is you take a pay cut and you work for an investor, you work for somebody where you’re going to be getting that experience and knowledge, and that’s what the reasoning is behind taking that pay cut. The second thing is that you make more time with the job that you have.
So we just had Anthony Michael on, and he works full-time for the military, he works part-time as a hard money lender, and he’s still flipping houses. So do a time study if you need to, and see where your time is going and see if there’s still time to become an investor, or to wholesale deals or work for another investor as an intern for free, and finding that time in your schedule to actually do that, instead of taking a low paying job to learn more. Well, that’s another rookie reply. My name is Ashley at wealthfromrentals, and he’s Tony at tonyjrobinson on Instagram. And we will be back on Wednesday. But first, let’s check out something you can get value from at BiggerPockets.

 

A common goal for many Canadians upon completing their education and gaining employment is purchasing their first home. Home ownership is, after all, the Canadian dream. While it’s general knowledge that saving money for a down payment is the first step to eventually purchasing a home, many are not aware of the mortgage stress test. So, what is the mortgage stress test in Canada, anyway?

To put it simply, the mortgage stress test is a mortgage qualifier tool used to determine if the borrower would still be able to continue making mortgage payments, should they lose their job, undergo some other type of financial strain, or if interest rates were to rise.

Before being approved for a mortgage on a home, the borrower must pass the mortgage stress test. Upon passing the mortgage stress test, the borrower can be pre-approved for a house loan.

However, the borrower may also choose to borrow funds through a credit union or another type of non-federally regulated lender, and in this instance, would not need to pass the mortgage stress test.

Even if you already have a mortgage, you may be required to pass this test. For example, if you refinance your home, change to a new lender, or take out a home equity line of credit (HELOC), your bank will require you to pass the test. Read on to learn more about the Mortgage Stress Test, including changes to the test that may impact your pursuit of the Canadian dream.

The Mortgage Stress Test

When discussing mortgage rates and purchasing a home, most people focus on the interest rate. This is because the interest you pay on a loan to buy a home adds up, and can potentially add hundreds of thousands of dollars to the cost of your home.

Some Canadians opt for a variable interest rate when purchasing their home. This means that the interest they pay over the length of the loan varies with a positive correlation to the Bank of Canada interest rate as it fluctuates. This variance adds uncertainty to the mortgage equation, meaning that banks and lenders want to eliminate as much risk as possible of a borrower not being able to pay the loan. In that, the mortgage stress test is used to determine the borrower’s risk associated with fluctuating interest rates.

Just last year, in June 2021, the qualifications to pass the stress test changed slightly. To pass the test now, the prospective borrower will have to be able to afford the higher of their contracted mortgage rate plus two per cent or a flat rate of 5.25 per cent. The flat rate is the standard rate used to qualify uninsured and insured mortgages. For example, if you are applying for a mortgage rate of three per cent, you would be assessed at the 5.25-per-cent rate, as that is higher than your rate plus two per cent.

The increase in the assessment rate for the stress test has decreased the purchasing power of many prospective homebuyers in Canada because they are being assessed at a higher rate than before. This means that in the past, someone would have been approved for a higher mortgage than they would be approved for now. This new assessment rate has also made it increasingly difficult for current homeowners to renew their mortgages. Combining the increased rate with rising prices and the financial effects of the pandemic, it is no wonder some Canadians are worried about mortgage approval.

Impacts of the Mortgage Stress Test on Canadians

While the increased qualifying rate for the stress test has helped limit the chance of mortgage loan defaults and therefore has decreased the uncertainty for lenders, it has made it more difficult for Canadians who want to buy a new home.

For example, if you want to apply for a mortgage loan of $750,000 at a five-year fixed rate of 2.75 per cent and an amortization period of 25 years, the lender will assess your affordability at 5.25 per cent, since it is higher than 4.75 per cent (2.75 per cent plus two per cent). That 5.25-per-cent rate would then be used to determine how much loan you could afford, even though it is quite a bit higher than the actual interest rate you would pay on your mortgage. When assessed at 5.25 per cent, you would be able to afford far less of a mortgage than you would be able to afford at your true interest rate of 2.75 per cent.

Taking all of this into consideration, if you are a prospective homebuyer, we recommend speaking to a mortgage professional or financial advisor to help you navigate the home-buying process. Further, a key takeaway is that the higher down payment you put on your home, the lower the mortgage required, minimizing the impacts of the new mortgage stress test.

 

Sources

A Housing Affordability Task Force has recommended that Ontario set the ambitious and very bold goal of building 1.5 million homes over the next 10 years.

To reach the new objective it would mean doubling the current pace of housing construction – which would be a remarkable feat by any stretch of the imagination. About 92,000 new housing units were started in 2021, and 79,000 in 2020, according to the Canada Mortgage and Housing Corporation.

Authors of the report have laid out an impressive array of 55 sweeping reforms to reach the target. The changes are aimed at reining in home prices by dramatically boosting the supply of housing.

RESCON has been calling for changes for some time, so I am delighted that we now have a comprehensive strategy to fix systemic barriers to building housing. The current way of doing things has not been working – evidenced by the fact house prices have almost tripled in the past 10 years. 

In Toronto, for example, the cost of the average dwelling relative to income is by far the worst amongst G7 countries, in large part because the approvals process is cumbersome and stymies development.

Many people – even those with well-paying jobs – can only dream of homeownership. Without action, the situation will only get worse. Population growth in Ontario is expected to be about 2.27 million people in the next decade and it’s anticipated more than 400,000 immigrants will be coming to Canada in each of the next several years. They will need homes, so there is certainly an urgent need.

The task force recommendations lay out a blueprint for how to get more shovels in the ground. It is the type of progressive, out-of-the-box thinking that we need to solve this problem. The suggestions will revolutionize how municipalities approve projects and blow the cobwebs out of the housing supply chain crisis. 

I am particularly pleased that the task force is proposing changes that would lessen the grip that municipalities have over developments and, importantly, give the province the tools and authority to increase housing density in neighbourhoods that are presently zoned exclusively for single-family homes.

There would be significant loosening of zoning restrictions in neighbourhoods that currently allow only detached or semi-detached houses. This would permit secondary suites, garden suites, laneway houses, and multi-tenant housing in residential neighbourhoods.

The task force is also suggesting to speed-up construction of much-needed new housing by limiting the amount of time spent consulting the public on housing developments and legislating timelines for development approvals. If a municipality misses an approval deadline, a project will get an automatic green light and the municipality would have its provincial funding reduced.

Authors of the report also suggest the repeal of municipal policies that focus on preserving a neighbourhood’s character and establishing uniform provincial standards for urban design and setbacks.

To some, these recommendations might seem excessive. But we are in a housing crisis and in dire need of change. The present development approvals process is too cumbersome and slow. In Ontario, obtaining a site plan approval from municipal authorities almost always exceeds the established 30-day timeline, taking up to 180 days on average, according to a report done for RESCON. 

The housing shortage is affecting our economic growth. The Toronto Region Board of Trade and WoodGreen Community Services indicated in a report that the lack of affordable housing is costing the Greater Toronto Area up to nearly $8 billion annually – or up to almost $38 billion over a five-year period.

The provincial task force report is certainly welcome news for developers, builders and those in need of housing. We can no longer tinker around the edges and apply band-aid solutions to the problem at hand.

This report provides some concrete measures to speed up the housing development process and I am hopeful that the Ontario government can bring in the reforms before the June 2 provincial election.

The proposals in the report will dramatically shift the needle in terms of building more housing stock. The iron is hot, the need is great, so this is the right time for action.

Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at [email protected] 

Mindy:
Welcome to the BiggerPockets Money Podcast, show number 276, Finance Friday edition. January spending recap edition.

Carl:
No matter how much you have, even if we had $100 million dollars, which we don’t, I would still track it, I think, because I like to think about efficiency. And it’s not about frugality, it’s about using money in the most efficient way possible. Even if I had all the time in the world, I would still plan my trips to be most efficient in the car to not go during rush hour. So, I think about efficiency all the time and that’s what it comes down to for me. It’s using money in the best way possible.

Mindy:
Hello, hello, hello. My name is Mindy Jensen, and with me today is the host of the Mile High FI podcast, and the creative genius behind 1500days.com and all of the dinosaurs and fart jokes you find over there. Also, we’ve been married for like 20 years or something.

Carl:
It has not been 20 years. How long has it actually been?

Mindy:
Like almost 20 years.

Carl:
It’s like 19 years and 11 months, right?

Mindy:
It’s like 19 years and 11 and a half months right now. Nobody wants to listen to us complain and argue over how long we’ve been married. It’s been a while.

Carl:
If we keep arguing like this, we might not make it to 20 years.

Mindy:
We got a lot of positive feedback from our first episode. I am very excited to talk about our spending. If you’ve been following along at biggerpockets.com/mindysbudget, you will see that we have blown our budget kind of out of the water. Oopsie. So, we’re going to talk about what happened, what went wrong, what went right.
The normal disclaimer for Finance Friday doesn’t really apply today, but I’m going to read it anyway. The contents of this podcast are informational in nature and are not legal or tax advice. And neither Carl nor I, nor BiggerPockets are engaged in the provision legal tax or any other advice. You should seek professional advisors for tax.
Oh, I don’t have this memorized. I’m not reading it in front of me. You should seek professional advice for legal tax and any other advice that you need, but we’re not giving advice. We’re just telling you what we did and what we did wrong. So, anyway, onto the show. Carl, welcome back.

Carl:
Thank you for having me.

Mindy:
You’re welcome.

Carl:
Our second time.

Mindy:
Thank you for allowing me to force you to come back. We’re going to bare our financial misdeeds to all of my listeners. But first, let’s talk about this. We started checking our spending for the first time in it’s got to be years. Like every January, we’re like, “Whoa, we’re going to track our spending in January 2nd. Nevermind.” How did it feel to track the spending this year?

Carl:
It feels pretty good. I really enjoy the exercise, because … I’ll back up a second. What we do is we have an app on our phone and every time we purchase anything, we have to enter it on there. The very act of doing that, it’s kind of like quantum mechanics. You can’t observe the phenomenon without changing the phenomenon, any science nerds out there.
The fact that I have to record the purchases actually changes what I purchased, because it’s like coming back after you got an F on a test and having to tell your mom when you were in elementary school. I don’t want to buy something stupid and have to enter it on there for the world to see. I’m trying to think of an example of something I bought or did not buy like beer. I think we hardly purchased any alcohol in January. I don’t want to … Yeah.

Mindy:
Well, it’s dry January.

Carl:
It was. We weren’t completely dry. We were moist January, I would say.

Mindy:
That’s gross.

Carl:
Yeah, moist January. You heard it here first, but yeah, it changes our behavior. I think it makes me better because I have to pay attention and I do less stupid things if I’m forced to acknowledge everything I purchase.

Mindy:
I think that tracking our spending is really important, because it makes you conscious of your day-to-day spending, because it’s so easy to just swipe your credit card. I mean, how do you make purchases? I do have cash, but I spend very little cash. It’s always just swipe a card, and it’s so easy to swipe a card without thinking about it.
Towards the end of last year as we were talking about tracking our spending publicly, I would find myself at the grocery store just … And I don’t even swipe anymore, it’s a chip card. You stick your chip in the thing as you’re gathering up your groceries and then it does its thing. You don’t even look at the total really. So, this is causing me to become more conscious of my spending.
And because we had, spoiler alert, some budget blowouts, it caused me to be even more conscious of my spending. “Oh, we spent so much in these categories. I really want to be conscious in other categories.” The groceries was something that I was sure we were going to just completely blow out of the water. I was very, very conscious of how much I was spending at the grocery store and really tried to make meals out of what was already in the pantry.

Carl:
Your friend, JT. Hi, JT. Asked us an interesting question. We had him over for dinner in January. What did JT ask us?

Mindy:
We had him over for dinner in December.

Carl:
Oh December.

Mindy:
And I had already talked about doing this spending tracking. He’s like, “Why are you tracking your spending? You don’t really need to.” The reason that I wanted to track spending is because it has gotten so out of control and it grows over time. You don’t start out thinking you’re going to spend $40,000 and then you spend 75. It starts off you think you’re going to spend 40 and you spend 41. Whatever, no big deal. And then you spend 45, and then you spend 55.
And then all of a sudden, you’re planning for spending 40, but you’re spending 80. If your investments have grown and doubled, you’re okay. But if you are in the middle of a stock crisis, or if you haven’t had the successes that have allowed you to keep up with that spending, you could find yourself running out of money. So, I wanted to make sure that we’re not going to do that, because you’re unemployed.

Carl:
That is correct. I am. I wouldn’t say unemployed.

Mindy:
I’m sorry. Do you have a job I don’t know about?

Carl:
I bring in money. I am vastly underemployed.

Mindy:
Purposely unemployed, for those of you listening who are thinking, “Wow, that was really weird, Mindy.” No, I tease him about this all the time, and we have spoken about this. He doesn’t feel bad. You don’t feel bad, do you?

Carl:
No. For those who don’t know me, I worked for a long, long time and Mindy did not work, and we kind of just traded places.

Mindy:
Yeah. I was a stay-at-home mom while our kids were little. And now, he is a stay-at-home dad.

Carl:
Yeah, and tile setter, hence all the injuries on my hands.

Mindy:
Yeah. He’s been working on the bathroom.

Carl:
But back to JT’s question for one second. I think no matter how much you have, even if we had $100 million, which we don’t, I would still track it, I think, because I like to think about efficiency. It’s not about frugality, it’s about using my money in the most efficient way possible.
Even if I had all the time in the world, I would still plan my trips to be most efficient in the car to not go during rush hour. So, I think about efficiency all the time and that’s what it comes down to for me. It’s using money in the best way possible. I don’t like wasting anything. When I see people throwing off food at a restaurant, that just drives me nuts. I almost want to get a doggy bag. That’s what they used to call it. Take their food. Those French fries, man, you throw them in the air fryer and it rejuvenates them. Seriously.

Mindy:
You’re not taking somebody else’s food. That’s gross.

Carl:
I’ve never actually done this, but I’ve thought about it.

Mindy:
I used to work at a steak restaurant. At the time, I was dating a guy who had a dog and people would leave their steak on their plate and just walk away, so I would take the steak home for his dog. But that’s the only time. I wouldn’t eat that. Yeah.

Carl:
Yeah. Not right. Don’t take other people’s food, especially in the age of a pandemic.

Mindy:
Yeah. We digress. Way, way, way digress. You’re a huge nerd, by the way. As you were saying, you want to be the most efficient with everything. I’m like, “Wow, what a nerd.”

Carl:
Should we talk about quantum mechanics more?

Mindy:
No. We should talk about our wins.

Carl:
Yeah, let’s do it.

Mindy:
Our wins and our challenges. Do you want to go with wins first or challenges first?

Carl:
Let’s get the bad part out of the way.

Mindy:
Okay. When did gas gets so expensive? Okay. Back on episode 243, Ramit Sethi came on and talked about how he just wants to live a rich life and spends on things that are important and doesn’t like pay attention to prices. I’m paraphrasing. I have never paid attention to the price of gas because I can’t suck up on it. I need it when I need it. I can’t shop around. It might be five cents cheaper across town, but I’m not driving across town to save five cents a gallon.
And my car holds about 10 gallons of gas. So, if I drive all the way across town to save on five cents on a gallon of gas, I’ve saved myself 50 cents, but I’ve cost myself 20 minutes. So, 20 minutes of my time is worth way more than 50 cents, so I have never really paid attention to gas.
Therefore, I said, “Oh, I’ll spend about $100 on gas this month.” We spent a lot more on gas than just $100. Part of that is real estate agent work. I am a real estate agent. I was driving around all over the place. The way that real estate agent reimbursement works is I can claim … Is it 55 cents per mile on my taxes?

Carl:
I have no clue.

Mindy:
Wow. You’re the one who does the taxes. Anyway, I can claim some amount on my taxes, so I go with mileage instead of deducting the actual cost of gas. That seems to work out better. According to Natalie Kolodij from Kolotax.com who told me that, that’s the better way to do it. So, I just tracked my mileage and I just happened to be driving a lot in January. So, we blew the budget on the gasoline.

Carl:
Yeah. I have a solution though. We have free gas that lands on our roof like every hour during the day. Do you know what I’m talking about?

Mindy:
Is that photons for the solar panels?

Carl:
We do. She even knows the word. Probably because I was talking about it last night in bed.

Mindy:
All the time. Oh, that sounds gross.

Carl:
It was hot. Our photons are.

Mindy:
This is a family friendly show.

Carl:
Oh, it was photons. We weren’t doing anything else. I don’t even remember how that topic came up, but we were talking about photons. Right? What was the context of our conversation?

Mindy:
I don’t know. You were talking about the sun. Oh, you were mad, because I turned on the electric blanket because it was freezing.

Carl:
Oh, it was like, I don’t know, 68 or 70. I don’t know what temperature it was. But for $10 worth of electricity, you can go 400 miles in an electric car, 10 cents a kilowatt hour times 100.

Mindy:
Oh, do we own an electric car?

Carl:
10 bucks, and then you could go about 400 miles if you have an efficient electric car.

Mindy:
Do we own an electric car?

Carl:
We do not yet.

Mindy:
why do we not own an electric car? Is it because your wife tells you not to buy an electric car? Or is it because your wife tells you to buy an electric car and you keep not buying an electric car? Hypothetically.

Carl:
Probably the former, hypothetically.

Mindy:
That’s not true at all. Does somebody love Tesla? Yes, that would be you. Does somebody want a Tesla? Yes, that would be you. So, go buy a car.

Carl:
Yeah. Someday we’ll get one and then we won’t pay anything else for gas, because it will land on our roof every day.

Mindy:
For free.

Carl:
Yeah. Photons.

Mindy:
And then we’ll be better with our expenses.

Carl:
We had more issues with cars in January.

Mindy:
We sure did. I have a car that we bought brand new in 2003 and have put almost no money into this car. We had something. Tim’s Toyota fixed something on it a while ago.

Carl:
Yeah. It’s 2003. We’ve probably spent about $1,000 in repairs. I’ve done all the maintenance myself. It had an exhaust manifold that rusted out and the radiator went. I blame both on the Midwest salt that they put on the roads. But in January, we spent more than we’ve spent in the first 19 years of the car’s existence.
We had two things going wrong. The first one was the windshield wiper pump broke. You absolutely need that, as I found out, driving around in a snowstorm if you can’t operate the wipers. When the pump breaks, the wipers don’t do much good, because the windows get all crappy super quick.
These kind of things drive me nuts, because I looked at up the price of the part and I could fix it myself. I think the price is like $13, but I can’t stand working on cars. I just despise it. So, I called up the place. They’re like, “Yeah, we could do it. It will be 250, like 120, 130 for the part.” Because they mark up the part. That’s part of the business. And then the labor, like 129 bucks an hour I think. We ended up actually having to pay someone to do it. I had too many other things going on, but I don’t want to fix a car in sub zero temperatures. So, that was like 200 and something.

Mindy:
And then …

Carl:
I’m in my late 40s and I had not caused an accident in my entire life. So, accident free until January when I was driving around in a snow storm and …

Mindy:
Ice storm.

Carl:
Ice storm. Yeah. It was very bad conditions. I’m a pretty cautious driver, but the car slid out and we hit. I hit a curb and damaged much of the front right suspension, and that set us back I think around $1,000.

Mindy:
Yeah. I had budgeted $100 for automotive. Just a general automotive upkeep and repairs. I didn’t think we would use it, and I have continued to budget about $100 over the course of the year. I think that we will end the year, hopefully. We will end the year under budget because this was $1,000. Or maybe it was $1,300. Maybe we’ll still end the year slightly over budget, but we probably won’t have to do anything else to the car. Knock on wood. Knock on wood. Knock on wood.

Carl:
Okay. Yeah. It does have new tires. We won’t need to do that. I changed the oil myself and I already bought that last year. Yeah, that should be it, unless something else happens. Cue the ominous music.

Mindy:
Okay. One last challenging category we had was household. This is a general catch-all category, and we basically just ran out of everything in January. We ran out of laundry soap, we ran out of bar soap, we ran out of pump soap. Kind of all of the soap. We ran out of all at the same month. We went to the store and we bought a giant thing of soap, and a giant thing of more soap, and a giant thing of a different kind of soap.
We spent more than we thought we would, but I really believe that this will come in under budget next month, but who knows? We will see. Like I said, it’s a catch-all category. I do think that for February, I’m keeping a lot of my numbers the same just to see how it went in January. If January was just a fluke, then we’ll continue keeping them the same. But if it turns out that household spending really is that much every single month, I will increase it for March. Let’s move on to the wins.

Carl:
Yeah. What’s the first one? You have groceries on there. I did not check the list, but we actually went over on groceries, so I’m unsure why that’s a win.

Mindy:
Okay. First of all, you need to be more supportive. Second of all, we went $50 over the projected $650 grocery budget. I completely guessed at the grocery budget. I really thought that we were going to go significantly over. We’ve had months where our grocery spending was $1,000 or $1,200.
Some months, you just run out of everything, so you have to buy and stock up again. But other months, you just aren’t paying attention. This month, I was hypervigilant. I really tried to eat out of the pantry and out of the cupboards as much as possible, and we came in at $700 for the month and I thought that was fabulous. I’m super excited to continue that going forward. I have put $650 for our February spending goal as well, and I’m really hopeful that I’ll be able to hit that. We do have three fewer days in February than we do in January, so fingers crossed.

Carl:
Yeah. One thing I noticed, one observation is … To back up a second, both our children are vegetarians, and a lot of that … I’m fully supportive of that, but a lot of that vegetarian stuff costs normal than actual meat, which is quite surprising. Maybe that will change over time. I don’t mind buying it for them but you go buy a bag of those fake nuggets or fake corn dogs. Yeah, they’re not cheap. They cost more than a bag of regular chicken nuggets. Have you noticed that?

Mindy:
I haven’t. I do need to pay more attention. I also try to stuck up on that stuff when it is on sale. You can get it for or $4 a bag or sometimes you can get it four for $5. Sometimes, I will stock up when I see it on super sale, but yeah, you’re right. It can get really expensive. I would like to get them more into just vegetables and tofu, and that’s the problem. They don’t like tofu. The little one doesn’t like tofu. The big one will eat tofu, but then we’ve got to make two different meals. So, I’d like to just introduce more fresh fruits and vegetables into their diet just in general.

Carl:
Yeah. Our vegetarians do not like vegetables. Yeah.

Mindy:
Yeah. They’re crackertarians.

Carl:
Yeah. Well, let’s talk about moist January.

Mindy:
Moist January. Our friend, the mad scientist, came into town and we were going to do dry January. And right after we announced dry January, he said, “Hey, I’m going to come into town, and I’d like to see this brewery that’s near you called WeldWerks,” which is really delicious. And we’re like, “Yep, it’s going to be a not January when he’s in town.” We went and had some delicious beer with him and then we were dry for the rest of the month, right?

Carl:
Yeah. It was mostly dry.

Mindy:
We had football playoffs, and it was actually a really enjoyable experience. I have decided that maybe we’ll have slightly … I don’t want to call it moist February. Moist is such a gross word. Moist February. I guess I’m going to have to call it that now. Thanks.

Carl:
We have to find some alliteration. March should definitely be moist and maybe May too. Like moist March. Moist March madness. The basketball thing they’ve got going on. Yeah.

Mindy:
We have two different categories on our spending tracker. One is for tap rooms, one is for alcohol. Do we have one for beer? I guess beer that we buy and why this is going on. The alcohol and tap rooms there. We live in a city that has 13 micro breweries and there’s a huge micro brewery community up and down the front range of Colorado, which is where we live. We go to a tap room as a social event.

Carl:
Yeah, sometimes.

Mindy:
But you can sit down and have a $5 to $8 glass of beer over the course of a couple of hours and still enjoy your friend’s company. It doesn’t have to be a super expensive engagement. We’re rethinking the alcohol though, because now I’m starting to get headaches, I’m going to drink it.

Carl:
Yeah. It will be much less.

Mindy:
I feel like such an alcoholic having two different categories out. What do we have? Like 25 categories and two of them are alcohol? Winning.

Carl:
Okay. Let’s talk about our frugal experiment for January.

Mindy:
January’s frugal experiment. We love the symphony, which is not frugal at all. We already bought tickets a while ago. We went to see Danny Elfman from Oingo Boingo, and he was having a conversation where it was kind of like a live podcast recording where he sat down with the conductor from the Colorado Symphony Orchestra, and they just had a chat. Then afterwards, we went out to dinner and came back and saw the symphony play the music of Danny Elfman from Tim Burton movies.
It was a super fun time, but we didn’t want to spend a lot of money on a meal in Denver. Plus, there was not that much time between the two performances, shows, experiences. So, we went and got Blue Pan Pizza, which we picked up and brought back to our hotel room, and we have pictures of our fugal experiment. Do you want to describe it?

Carl:
Yeah. This was all my idea, so don’t …

Mindy:
100% his idea.

Carl:
Yeah. These are fun experiments. We don’t normally do these kind of things, but I like chicken wings with my pizza. If you go to a restaurant, they’re like 15 or 20 bucks. I don’t think this place even had that as an option, although I’m not sure. So, what we did is we have an air fryer and air fryers are awesome. It’s not quite as good as actually frying food but it’s almost as good.
We brought the air fryer with us. We stopped at Costco, which is on the way down and we bought a big bag of chicken wings. When I went to pick up the pizza, you threw the wings in the air fryer. By the time I got back, they were done. So, we had budget chicken wings with our air fryer. What did you think about the experiment? How did you like the wings? Would you do this again?

Mindy:
I would totally do it again. I thought it was fun. The girls were super embarrassed that we were bringing an air fryer into the hotel. I don’t think that the hotel even knew that we were bringing an air fryer in. I’m pretty sure they didn’t care. I thought it was a fun, frugal experiment. Part of tracking spending is now I’m looking at it as a game. How low can I get my expenses while still enjoying my life?
We could cut our expenses so much lower than we’re doing, but it would be kind of an unhappy existence. I could just eat beans and rice all day long, and peanut butter and jelly, and just not enjoy what we’re doing, and only stay at home and never do anything fun. But this was a fun way to have what we wanted without spending a lot of money on it. I would do it again, and I’m looking forward to February’s frugal experiment.

Carl:
Yeah. Do we have any ideas for the February frugal experiment?

Mindy:
I don’t have any. If you have any ideas, please email [email protected], or you can post in our Facebook group. I will write a question, post a question in the group, which can be found at facebook.com/groups/bpmoney.

Carl:
I have an idea. Are you ready?

Mindy:
I’m ready.

Carl:
I know you like your toilet brushes, but we don’t need to buy 15 of them every month. So, why don’t you repurpose some worn out household items into a toilet brush? For sample, you could take an old toothbrush, tie it to a stick and scrub the toilets with that. It would take a long time, but you’d be saving a couple bucks on toilet brushes and helping to save the world too, if you want to look at it that way.

Mindy:
So, send me your ideas to [email protected] or answer the question in our Facebook group.

Carl:
Or you could use a broom.

Mindy:
Ew, gross. Okay, next. Goals for February. You got any good goals for February? I have a great goal for February. How about we don’t spend a lot of money on a stupid expense? Oops, too late. We’re recording this on February 8th. if you follow along on our Facebook group, you saw that we have already had a budget buster yesterday. What happened?

Carl:
These kind of incidents tear me up inside, because our furnace broke. I woke up and it was making a horrible screeching sound. I’m pretty sure I knew what it was. I got out my multi-meter. I verified the capacitor was okay. I verified that the motor was getting voltage, so I knew it was the motor. I fired the thing back up and it went … It made this horrible, horrible sound. Sorry.
I looked up the price of a motor. I know it was like 150 bucks online, but it would have taken a couple days to get there and I’m going out of town, and it was 13 degrees outside. So, we had no choice but to call someone, and this always drives me a little crazy, because how much did we have to pay someone to fix it?
I know a lot of HVAC people, so I know these people to be probably the cheapest and best, and they are very good. I’m not going to say their name, but they are very good and more affordable than other places I’ve heard of. But how much did we have to pay instead of the 150 bucks in a job that would have taken me like an hour or two?

Mindy:
Was it $150? No. Was it $300? No. They did come out right away. We were without heat for less than six hours, but it was still $800.

Carl:
If it was me, I would have lived in the house for a week while waiting for the new one to arrive. Some of these parts are hard to get because HVAC is a closed industry and they don’t want the common person to buy them. So, they make it a little bit more difficult to get some of these parts. Yeah, I would have lived at the house. How do you feel about living in a 40 degree house with a couple space heaters for a week until I got back from San Diego?

Mindy:
No. I feel that we have saved our money and invested our money wisely, and we can spend our money, even if it’s 800 whole dollars on a stupid furnace part. We can do that easily, and we will, because I don’t live in the 1600s, and I live now when we can have heat in the house. So, as much as I hate to spend so much money on such a stupid … It’s like this big too. As much as I hate …

Carl:
It’s like this big. I’ve got it upstairs.

Mindy:
… spend that much money, we did it. And now, our goal for February is to make it more of a game and how little can we spend everywhere else, because it is going to be an over month again.

Carl:
Yeah. There’s one thing I want to talk about, and it is going out to eat. We did go out to one nice meal and I’ll back up a second. Last year, we went out to eat a lot and I think it was a reaction into how we were living, because we were doing a ton of work on the house and COVID was going on, and all these other chaotic things happened. So, it comes to the end of the day and you’re like, “Screw it. Let’s just go out somewhere, pick up food.”
Last month, we only did that one time, but I think the bill was 100 bucks. We went to a nicer place with better quality food, and I’ve got two observations about that. One of them was I really appreciated it because we hadn’t gone out to eat a lot. I’m like, “Well this is really good.”

Mindy:
It was really good.

Carl:
Yeah. It was really good, so we appreciated it more than we did last year, because it just gets mundane in the hedonic treadmill. You get used to it and then it’s not special anymore. But the other thing I thought is like, “100 bucks? We could easily eat for a week on that if we tried. We could have 21 full meals on that or less than 100 bucks, I think, if we really went frugal and ate a lot of vegetables and that type of thing.”
I don’t know where to go from there, but I think the answer is to do things like that less often, because it makes it more special, and we’ll be better with our money for having done so. What do you think?

Mindy:
Wow. last month, I budgeted $100 for restaurants and I think we spent $325 on restaurants. So, this month, I bumped it up to 250.

Carl:
Okay. But still, that’s less than it would be an improvement.

Mindy:
It’s a lot less than what we were spending last year, but I do enjoy going out to dinner and grabbing lunch. We don’t have a lot of time to talk, just the two of us, even though you don’t have a job, I have a job. We are home together during the day when the girls are at school, but I’m working at that same time. And then when the girls get home, it’s just a whole lot of talking and we don’t seem to have a lot of time to connect. So, having lunch out once a week is something that I look forward to.

Carl:
Yeah, I do too. One final thing I’ll say about that is it’s good not having expensive tastes. I think my jeans have a big rip there. I don’t care. I’m wearing some junky t-shirt, but I think the $5 taco box from Taco Bell is pretty great. I think this came up last time or maybe it was a different podcast. We went to a Michelin star rated restaurant in Chicago one time. I’m like, “This is really good. This is really good.” But it was like 200 bucks.

Mindy:
Oh, was it Frontera Grill?

Carl:
Yeah. Which is excellent. Oh, great mole. Really good food, but the thing about it is I think the …

Mindy:
I enjoy Taco Bell just as much as Frontera Grill. I’m sorry Frontera Grill.

Carl:
I wouldn’t say just as much, but it’s like 80% is good for 1/40th or 1/20th the price. 100 bucks per person versus $5. So, 1/20th the price, 5% the price for like 80% satisfaction and no waiting, no making a reservation three months ahead of time. No pretentiousness, no feeling like you have to get dressed up. Yeah. Shout out to the $5 taco box, and the Mexican pizza is coming back too.

Mindy:
The show is not sponsored by Taco Bell.

Carl:
I am though.

Mindy:
But Taco Bell, if you would like to. Email [email protected],

Carl:
I’m cheap too, I’ll completely solve for a $5 taco box, $5 box.

Mindy:
As I have been posting about my misdeeds in my budget, people have been suggesting that this shouldn’t be coming out of my budget. These unexpected expenses should be coming out of my emergency fund. Do you want to talk about the fact that we don’t have an emergency fund?

Carl:
You mean how we don’t keep a lot of cash on hand?

Mindy:
Well, we don’t have …

Carl:
Or in the budget, we don’t keep one?

Mindy:
In the budget, we don’t keep one. In the budget, in the line items, I had slush fund, because in my mind, we were going to just kill it with our budget and all the extra money that we didn’t spend was going to get flushed into the slush fund, so that should we in the future have a month that didn’t come in under budget, we could fund that through the slush fund, but then we blew it month one and it looks like we’re going to blow at month two, five minutes into it. So, we don’t have an emergency fund.
We have never felt like we needed an emergency fund because we can cover any emergency. But I also talk to people every day about their finances and recommend an emergency fund for people who cannot swing the emergency fund or swing the emergency. We don’t have an emergency fund. Should we get one?

Carl:
I don’t think so. I’ll back up and say I’m a very, very aggressive investor. We also have zero money whatsoever in bonds over the long term. Studies show that being 100% in index funds will typically beat a portfolio with any bonds, so I prefer to do that.
The other thing is we still have income coming in, so if we did have a furnace motor die, or if I smack our Honda Element into a curb, we can cover it and it’s not going to destroy us. But if those things were a concern for you or us 15 years ago or 10 years ago, when it would have impacted us severely, then I think we should have had an emergency fund back then. The place that we’re at in life, I don’t think we really need one at this time.

Mindy:
Well, even 10 years ago, I wasn’t working, but you were. And we weren’t spending all of your income. We’ve never spent all of your income.

Carl:
Yeah. Emergency things are a tricky situation. I would say thinking on it now, you should think of the most expensive thing that could go wrong with your house. Off the top of my head, that’s probably … At least here in Colorado, a new roof, which would probably be $12,000 for us.
Think of your most expensive expense. If that would break you, then you better consider an emergency fund. But for us, we’d be okay. We could sell some assets. The risk is you have to sell them in a down environment like right now actually. Yeah, it’s a very personal thing.

Mindy:
Yeah. I would just go sell another house, like as a real estate agent. Not sell my house, which generates more income. Yeah. We are fortunate too. We’re not 30. We’re not 25. We’ve been working for all of our adult lives. Some of us took time off to be stay at home moms, which is working in a different way. But we’ve been savers our whole lives. We’ve been investors our whole adult lives, so we have places to pull from that somebody who doesn’t have the same history may not have available to them, which is why we don’t have an emergency fund. But I do feel that I need to address that, because it is something that we just pull from our budget.

Carl:
Yeah. You talked about how I was a nerd. One other thing I think about …

Mindy:
Was.

Carl:
I am a nerd, so we have lots of backup plans and lots of levels of redundancy in our life. For example, we have multiple cars and we barely need one. If one of them dies or if one of them got destroyed tomorrow, we’d be fine, because we have another one and we don’t really need multiple cars. If anything breaks, I don’t have much of a job. I’m underemployed, not unemployed. So, I would just attempt to fix whatever happened by myself and save money that way. Yeah, I like to have backup plans for my backup plans.

Mindy:
I think that’s fair.

Carl:
Yeah. What’s next? Did we ever get to any goals for February yet? I think we did pretty good. I think we should just keep trying to do pretty much the same thing as we did. I should smash into less curbs. And the furnace, which is right next to us over there in the room behind us or in front of us actually. Furnace, behave. Don’t pull any more of that.

Mindy:
Yeah, definitely. Don’t break while he’s gone.

Carl:
Yeah.

Mindy:
We’d be calling Bob again.

Carl:
Yeah. Let’s do the same thing. Maybe going out to eat a little bit less, hitting less curbs. Yeah. Pretty much it.

Mindy:
Something that I am going to ask in the Facebook group and would like commentary from people is, how do you account for expenses that are future expenses, but you know that you’re going to be paying them?
We’ve got a couple of different way of doing it. We have property taxes. I know what they’re going to be. January, I accounted for property taxes based on last year’s bill or two years ago’s bill. We just got the new bill, so I have updated that for February and beyond, and we are accounting for that in our expenses. We’re not actually doing anything with that right now with that money, but we’re allocating that in our budget. Then when the bill is due, we just pay it. I’m not going to mark that whole bill as paid in the month that we pay it. It’s allocated over the course of the year, because it’s an all year expense.
We joined a gym. We paid for a three month membership in January, but that’s a January, February, March gym membership. So, we spread it out over the course of three months. But the automotive repairs is something that’s going to last us, I don’t know, 400 months. I didn’t allocate that out over 400 months. I allocated that for when we made the purchase.
Same with, you can see, in our budget, we’ve got the whole year’s worth of spending. March already has an expense. We are planning on a trip to visit some friends, and we purchased the plane tickets in January, but we are allocating for them in March. I’m not really sure how to work that. I’m not an accountant, clearly, but personal finance is personal and that’s what works for us. I mean, that works for you, right?

Carl:
Yeah.

Mindy:
That’s what works for us, right? So, I’m wondering how you handle your expenses like that. Do you handle it? Do you allocate it for the month that you’re paying it even if it’s a future month like my travel in March? Or do you allocate it over the course of several months like my gym membership?
Everything is kind of just loosey-goosey. Ultimately, I think as long as you are tracking your spending and figuring out where your money is going, that’s what’s most important. My spending tracker is courtesy of Mr. Waffles On Wednesday. I’m going to get him to make a video for us, showing us exactly how to do that, because I had him set up that whole spreadsheet. He’s brilliant with it. He’s like, “Oh, you want to do this and this.” And he’s clicking all around and he’s like, “I didn’t even know you could do all of those things.” So, shout out to Google for making a lovely spreadsheet. Shout out to Mr. Waffles On Wednesday for actually doing all of the work for me. And you’re nice too.

Carl:
Wow. Thanks. I feel so special right now.

Mindy:
Shout out to you for filling out the forms.

Carl:
Yeah. Well, should we summarize?

Mindy:
We should summarize. You go first.

Carl:
Yeah. We spent about 5,300, right? I should have looked at the spreadsheet before we talked. We spent 5,300. I like to talk about that. On the surface, that sounds like a lot of money. $1,000 of that was due to my incident with the curb. So, if I took that out, we’d be down to 4,300.
We choose to have a mortgage, which is a topic for a whole other conversation. That runs us about 1,300 a month. If we took that off, we would have had about $3,000 in core living expenses, which I think is pretty great. That comes out to 36,000 a year. We live in an expensive place, Boulder County USA, which isn’t cheap, but I think that’s pretty good.
Now, in future months, we’re going to have higher expenses due to things like travel. In addition to going to Seattle, we have a trip to Europe in June and that’s going to cost a lot of money. We might spend $3,000 or $4,000 on that trip, but I’m okay with that. The way I like to think about spending is we should keep our core expenses as efficient and as frugal as possible, so we can allocate money to the fund stuff, but like the trip.
When thinking about it all, I just want everything to be thoughtful spending, whether it’s food or a hotel in Germany, which is where we’re going to, and France. Mindy has some fans in France, apparently. I want everything to be thoughtful and I never want to be cheap either. When we’re staying with people, we always make it a point to take them out for a nice dinner or to do something really nice for them. Yeah, thoughtful spending would be how I want to summarize and how I want to live. That doesn’t mean not spending a lot of money, it just means spending in a way that we’ve considered it and that we’ve appreciated the money and we haven’t wasted it.

Mindy:
I think that’s a really great way to phrase that, thoughtful spending, conscious spending. It isn’t about not spending any money. It’s about not mindlessly spending, because it’s so easy to spend mindlessly. You walk into a store and swipe, swipe, swipe, swipe, swipe, and you walk out and you’re like, the next day, “What did I even buy?” Oh, I think I spent something yesterday and I didn’t put it in the spending tracker.

Carl:
Was it a toilet brush? Are you trying to hide?

Mindy:
No, it was not a toilet brush, you big weirdo.

Carl:
Is there a support group for this? We might need to look one up for [crosstalk 00:42:44].

Mindy:
Yeah, it’s called everybody.

Carl:
Toilet brushes anonymous, TBA.

Mindy:
No, it’s just about being conscious of where your money is going. I think this is just something that is beneficial to people who maybe have … What is it? I have more month left over at the end of my money and I didn’t make that up.

Carl:
Okay.

Mindy:
I think that there’s a lot of people who just don’t realize that when … This isn’t something that weighs on my mind all the time. I’m not always thinking about money, but I am more conscious of it now that I know that I am not only tracking my spending and having to share with you what I have purchased, but I am also spending money and tracking it publicly with everybody and having everybody say, “Oh, look at Mindy. She said she is going to spend this. But look, she’s spending that.” And nobody ever actually said that, but I don’t want them too either.
Thank you so much for joining us today. We will talk to you again next month when we recap all of our hopeful successes, but probably failures too with our February spending from episode 276 of the BiggerPockets Money Podcast. He is Carl Jensen and I am Mindy Jensen saying, may the force be with you.

Carl:
May the photons be with you.

Mindy:
May the photons be with you.

 

If you’re anything like me, you began your real estate investment journey by handling every task yourself. Blame it on my entrepreneurial spirit or simply my lack of experience. I was trying to find a rental property; handle all of the maintenance, repairs and renovations; stay on top of my accounting and tax paperwork, and find qualified tenants all without any outside help. Hiring outside help was another cost to add to the list, and I was hoping that the less money I spent upfront, the better chance I had for higher profits in the long run. 

As my portfolio continued to grow over the years, I got to a point where it simply didn’t make business or financial sense for me to manage all of the day-to-day tasks of being a landlord. As your rental business expands, time becomes your most valuable asset. Your priority should be protecting your investments and planning for the future, not unclogging your tenant’s shower drain. 

Adding properties to your investment portfolio diversifies your risk and can certainly lead to more passive income, but with more properties comes more challenges (and more work). If you have the time and skills to manage multiple properties on your own, more power to you. But, if you’re getting to a point where you’re struggling to balance it all, here are four specialists you should consider adding to the team so you can focus on the bigger picture. 

1. Property manager 

Managing the day-to-day of your rental properties is likely your most time-consuming task as a real estate investor. This is one of the easiest jobs to outsource – someone else will be responsible for the clogged shower on a Saturday afternoon or the late-night lock-out. 

You have a range of options when it comes to outsourcing property management tasks. You can consider hiring a trustworthy individual to act as your property manager, or you can hire a property management company that is responsible for many different properties from many different owners. Depending on how you decide to outsource, you’ll find a variety of costs and a variety of responsibilities included. On average, monthly management fees range from 7-10% of the monthly rent collected on a property. Most professional property management companies will handle almost the entire rental process, from showing the vacant property to screening tenants, to managing maintenance requests, to the move-out process. There are also property management software solutions available that can help you streamline most of these processes. 

Make sure you look for a property manager who is reliable, communicative and charges clearly defined fees. Referrals from people you trust or others in the rental industry are invaluable – if you’re ready to start delegating some (or all) of your property management operations, start asking around. 

2. General contractor

As a landlord, there’s a list of vendors that you should have in your contacts, but a general contractor should be your top priority. Especially if you are actively investing in new properties, you’re likely to come across one or two that need some repairs or updating before they can hit the rental market. While many landlords have experience with renovations, home repairs can be a lot harder than they seem. Outsourcing to an experienced general contractor can save you time and money. 

You might consider looking for a project manager or contract coordinator to work hand in hand with your general contractor. They can bring in other vendors as needed (plumbers, electricians, etc.) and make sure the project stays on schedule and budget. Look for a contractor team with a robust professional network and a depth of experience. 

3. Real estate agent

If your priority is expanding your portfolio, the majority of your time will be spent researching new markets and new opportunities that might be a good fit for your goals. A knowledgeable local real estate agent can easily take this off of your plate and only bring the most promising properties to your attention. 

An agent will understand their local markets and dynamics, which can be especially helpful if you are investing in a new area or outside of where you live. They’ll be able to provide insight on which neighborhoods are evolving, which neighborhoods to watch, and where the undervalued properties are located. If you’re buying multiple investment properties from the same agent, consider asking about a reduced commission – many agents will give you a bulk discount as part of an ongoing business relationship. 

4. Real estate attorney 

Every property purchase, house flip, and rental property comes with regulations and paperwork that can not only be time-consuming, but extremely difficult to navigate. To best protect your investment and yourself, you should strongly consider hiring a real estate attorney to handle the legal and regulatory aspects of your investments. Forgetting to file a permit, making a mistake on your closing paperwork, or missing a required disclosure can have serious consequences for your business. 

In addition, there are many tricky laws surrounding tenant relationships once you do have the rental secured and a tenant in place. The right attorney can help you navigate these laws, which differ from state to state and ensure you stay on the right side of any mandates and regulations when it comes to evictions, inspecting your property, and other tenant-related issues.

5. Accountant 

An accountant’s time can be costly, but having someone to periodically review your finances and ledgers is crucial to saving yourself time and money. If you’re working with a property management company or software, accounting features may or may not be included in your agreement. If not, look for an accountant who has specific experience with real estate professionals who will be knowledgeable about all applicable laws, regulations, savings, and deadlines. Tax season becomes increasingly difficult the more properties in your portfolio, so having a great accountant on your team can be a huge asset. 

Final thoughts

It’s common to handle everything yourself when you invest in your first rental property, and it can often be a good idea – you’ll leave with a solid understanding of the budget, timeline, and tasks that go into making real estate investments successful. However, the transition from owning one property to owning multiple is a major milestone and usually means it’s time to scale your investment business. Instead of outsourcing everything at once, you might choose to build a team slowly as your business grows and your finances allow. 

In terms of the growing real estate market, people who are hoping to invest now may have mixed feelings. For those who already own property, price appreciation might be great, but for those just now looking to get in on high price areas like Toronto, it gets harder every day. 

This is not the story everywhere, however. In Calgary, the growth in prices has many investors flocking with high hopes for the market’s bright future.

Despite seeing similar increases in real estate values like the rest of the country, the relatively more affordable price levels and a diversifying city make Calgary an appealing target for investors looking for big potential.

We talked to Mark Verzyl, a top agent in Calgary with over 25 years of industry experience, about why now may be the time to look at Calgary. 

Beyond being an agent, Verzyl is an investor himself and he strives to share his experience with others to help them grow wealth through real estate investing.

“I believe in abundance. Sharing my knowledge and expertise will only attract more like-minded individuals. Knowing that some people are playing with their life savings isn’t lost on me, so I want to help people make the best choices possible based on my years of experience,” said Verzyl. “There are massive companies right now that are buying up property like never seen before: single-family homes, high rise, low-rise multifamily. I would much rather see the average Joes of the world get to invest in those properties and later enjoy the fruits of their investments rather than major corporations.”

“It’s a long-term play, I’m not interested in selling someone something just for the sake of making a commission, I’m interested in creating long-term success for our client,” continued Verzyl. “The second thing, just as important or maybe more important, is surrounding myself with smart, amazing people that have different perspectives and expertise. Together, we aren’t just thinking outside the box, we just invent a new box. We have things coming down the pipe for our investors that, even a year ago, we could have never imagined existed or was possible.”

With things going the way they have in recent years, some may be worried that the ship has sailed on real estate investing while others warn of the looming bubble. In Calgary alone, prices have risen 15% in the last year and they continue to go up. However, Verzyl says “it’s never too late” despite the classic adage that “the best time to buy real estate was five years ago.” 

He stresses that real estate is a sound investment for the long run. Though many investments may gain in value immediately, others do not. Fortunately, Verzyl highlights the cyclical nature of the real estate market which means that with a smart investment strategy, your investments will show great returns if you give them time to grow.

Speaking of Calgary in particular, Verzyl has seen a lot of interest from out-of-province investors as of late. A few reasons given for this interest include the high costs of areas like Toronto and Vancouver driving buyers away, the ability for cash flow in Calgary, and some of the lowest closing costs in the country. Verzyl also points out, for rental investors, that Calgary has no rent control provisions.

He also highlights how initiatives to diversify the city and attract business investment spell a big future for Calgary. Calgary’s lax stance on taxes makes it particularly inviting to businesses looking to set up shop.

“In the 1980s, oil and gas made up 50% of the GDP, while three years ago, it was less than 27%,” says Verzyl. “The Alberta Government, only 24 months ago, lowered the corporate tax rate to 8%, set up tech “attraction” offices in the U.S. and started to tell the world that Alberta is open for business. Combined with the SAIT (Southern Alberta Institute of Technology) opening a new campus downtown primarily to educate tech workers and a high vacancy rate in commercial office space, this has made Calgary lethally attractive for business hubs.”

Verzyl also touches on what he calls “the great migration” of people from out of province who are coming to Calgary for it’s housing and job prospects. He claims this migration could lead to more demand for both buyers and renters and will push the market even further beyond its current highs. /p>

“COVID changed everything. You no longer have to be in a one bedroom apartment downtown Vancouver or Toronto, paying obscene rents, or owning at a price tag of $700k, when you could move here, work from home and own a beautiful house for that price. Not to mention your one and a half hour car ride to Banff in the Rocky Mountains, hiking skiing, you name it, Calgary has it.”

 Finally, Verzyl gave some tips for investors looking to get into the market soon.

“Most markets are so hot, it’s difficult to get any properties. It’s going to be more of the same, but the twist is, be ready to jump when the opportunities arise. The best thing that investors can do right now is get pre-approved so they know what they can afford and ensure that they have some liquidity to be able to ‘flash the cash’, basically show the seller or developer that they are a solid buyer with their deposit ready to go. The investors that have their ducks in a row are the ones that are going to get the opportunities as things get more heated and competitive for properties.

Interested in investing in Calgary real estate? Get in touch with Mark Verzyl through his website for more information as well as to see local listings and tips for buyers.

We can all agree that the Ontario housing market is suffering a critical supply shortage. In fact, the trend has spread across Canada, from coast to coast. This is the root of our affordability crisis that threatens to derail one of our country’s key economic drivers and the futures of many Canadians who, even if they can afford an average-priced home, are unlikely to find one for sale.

There are other factors compounding our housing crisis: homeowners’ hesitancy to list for fear of getting locked out of the market and a growing population that will put further pressure on an already fragile ecosystem. (You can only imagine the impact that a new home equity tax or other such “cooling” measures might have.)

With the Ontario housing market under immense pressure, the provincial government took the right first step of establishing a Housing Affordability Task Force late last year, with a goal of finding realistic solutions to increase supply. The nine-member panel of housing experts and industry insiders has been head-down for the last two months, consulting and drafting recommendations. Earlier this week, the group made 55 of them, for what it calls an “achievable” goal: to build 1.5 million new homes in Ontario over the next 10 years.

But there’s another very real risk threatening progress in the Ontario housing market: NIMBYs. 

I’ve said it before and I’m not alone in my stance: the only solution to our housing crisis is to build more homes. But that message is being drowned out by cries of, “not in my back yard,” from homeowners who want to preserve the character and liveability of their communities, and from city mayors and councillors, who’s political futures hang in the balance. In its report, the Task Force referenced a new acronym to reflect these sentiments: BANANA (Build Absolutely Nothing Anywhere Near Anything).

Quite simply, if nothing changes, nothing changes. Let that sink in for a minute: the lack of listings, the rising prices, and ever-declining options for home ownership.

RE/MAX Canada’s research  shows that Canadians value liveability when choosing a place to live and buy a home, and for the majority, the chief criteria for liveability is affordability. Liveability is impossible to achieve if communities are inaccessible and unsustainable due to prohibitive price growth and a shortage of listings, which is the current situation from coast to coast.

I commend proposals that aim to increase the supply of homes in urban neighbourhoods, which continue to attract the bulk of our population. In order to house them, we need more high-density, infill residential development. We need more laneway housing, secondary and garden suites, and multi-family dwellings. We need less red tape and less politicization of residential development, and less NIMBYs and BANANAs that threaten the freedom and future of home ownership for all.

To balance pressure from NIMBYs with pleas from hopeful homebuyers, we need to recognize that “densification” can be a good thing. It can have positive impacts on our mental and physical health, not to mention the environmental benefits of having more walkable neighbourhoods. We just need to be open to new ideas for densification and expansion of residential development, both within our urban centres and in our suburban and rural communities.

Densification can’t happen hastily. It must be a thoughtful, coordinated effort across all levels of government, that is considerate of the character of our communities, their existing residents, and those who hope to call them “home.” If done right, densification can be a beautiful thing, refreshing and revitalizing aging neighbourhoods, both in their aesthetic and in the fabric of their make-up.

High-density infill that meets everyone’s needs must be thoughtful and creative, in keeping with the scope of the current community while accommodating future growth. The Province of Ontario’s consultation with housing experts and the real estate industry is a great thought-starter, and collaboration with municipal and federal governments, can help make that 1.5-million-home milestone a reality.

My work as a performance coach explores the power of mindset. I teach people how to shift their perspectives to get what they want out of life with more ease and flow.

In my last post, What is the Most Likely Consequence of Setting Unrealistic Goals?, I discussed the importance of creating an environment that is aligned with success. Your mindset establishes the environment of your reality. By aligning your mindset with success, growth, and expansion, that environment becomes your reality.

Most people go through life believing that we are controlled by reality, but the truth is we control our reality. Yes, we are products of our environment, but, at the same time, our mindset determines the reality we experience.

What is mindset?

Mindset is your perspective. It is created by all your experiences—what you believe, what you’ve been taught, where you live, and endless other factors that establish your identity. Whether you realize it or not, you are always working from a mindset. Ever present, your mindset is your operating system.

You have the power to decide what you believe. By changing your beliefs and shifting your perspective, you can change the reality you experience. One important step to changing your perspective is moving beyond beliefs that are limiting your potential.

You are the creator of your reality. The only thing that limits your potential is you. And the fastest way to remove limitations is by evaluating your beliefs about yourself and consciously shifting your mindset.

What is a fixed mindset?

In coaching, I teach the 7 Levels of Mindset Alignment. The lowest levels of mindset alignment are living in reaction to the past—and being limited by the past.

(BP Blog Team: Please insert 7 levels graphic somewhere in this section)

When you are limited by the past, your mindset is determined by things that have already happened and you are in a fixed mindset. In a fixed mindset, what is possible is determined by what you have already experienced. The truth is anything is possible in the next moment regardless of what has happened in the past.

We all have baggage, and someone may have told you that the way to move beyond your past is to simply let it go. I have discovered that the way to stop being limited by the past is not to ignore it or push it away but to face it.

When we are in reaction to the past, we relive past experiences and let them define our current reality. Let’s say you want to aim for a big target, maybe you want to close ten times the number of deals you closed last year. When you think of this goal, a time when you failed in the past comes to mind, and you relive the emotions you felt during that failure. Feelings like self-doubt arise, and you perpetuate the belief that you will fail because you have failed in the past. If you simply try to let those emotions go, or even worse just push them back down, they will continue to come up and continue to affect your mindset around your big target.

Imagine you are a hot air balloon. You want to rise higher, but you are anchored to the ground by sandbags. Emotions, beliefs, and experiences from the past are your sandbags. You must establish a new perspective and change any beliefs that are limiting growth and expansion to remove those anchors.

If you want to hit that next level of success, but you are allowing past failures to your limit your potential, you are in a fixed mindset. You can remove those sandbags by changing your beliefs about yourself and how life works and stop being limited by the past, 

I work with clients to help them face and integrate past beliefs, emotions, and experiences. By integrating instead of ignoring, my coaching methodology guides people from being limited by the past (one of the lowest levels of mindset alignment) to the highest level of alignment—active creation.  

When you are limited by the past, your mindset is fixed. You are a hot air balloon anchored to the ground.

What is a growth mindset?

At Jason Drees Coaching, we avoid viewing what life brings us as positive or negative. Life is what it is. If you have failed in the past, life needed to teach you something. Life was stretching you and preparing you for future growth and expansion. When we are stuck in negative emotions from our past, we ignore the fact that one particular failure does not define us. And, most likely, that failure was an important part of our unique path to success.

By accepting ourselves, failures and all, we can begin to work with life and start to change our beliefs about ourselves. When we hit a wall, life is telling us there is something about ourselves we need to accept or integrate. Hitting a wall can seem negative, but it is simply an indicator. Life is trying to get our attention. Life is saying, “Look over here, I am preparing you for amazing growth and expansion.” We must first find out what limits us to move beyond a limitation. We have to hit the wall before we can move past it.

Put failure in proper perspective. Hitting a wall is life bringing you a message. You may not understand the message at the time. Often, only in retrospect can we see how life was bringing us exactly what we needed at that precise moment, even if it was failure.

What we learn from falling short is the invaluable knowledge we will need to execute on future opportunities. Face the past, learn from it, and integrate the lessons life is bringing you. Decide to work with life and you will begin to operate in a growth mindset.

In a fixed mindset, failure is negative, and success is positive. In a growth mindset, we accept everything that life brings us and utilize it for growth and expansion. The goal is not to avoid failure but to make a conscious decision to face and accept ourselves and what life brings us.

As a coach, I share my discovery of how life really works and help clients expand their understanding of what and who they are. Together, we explore what they currently hold to be true and how that may be limiting their potential. Throughout this process, the goal is to move into active creation—the highest level of mindset alignment.

We have the power to choose what we believe. To move beyond the past, we should acknowledge the emotions that come up and consciously choose to believe they have nothing to do with what is possible in the future.

Scarcity mindset vs. abundance mindset

If you have been grinding but can’t seem to push past a certain level of success, you may have a limited or fixed financial mindset. My beliefs about money and my relationship with money kept me in a limited financial mindset for many years.

Exploring and unpacking your financial mindset or money mindset is a process that I cannot guide you through via a blog post. But one thing you can do right now is to check if you are in a scarcity mindset or an abundance mindset, and start to consciously change your beliefs around what is available to you and what you deserve.

As discussed in my last post, when we set goals, we want to start from a place of success, which aligns us with success. When we seek growth and expansion, especially financial growth, it is important to start from a place of abundance.

Checking your financial mindset can be as simple as watching the way you think about and discuss money. If you walk around saying and believing, “I don’t have enough money. I am working hard and no matter what I do I can’t close those big deals,” you are asking the universe to continue to deliver that reality. You are starting in a state of lacking or scarcity.

If you switch your approach and begin to say and believe things like, “I have all that I need. I am grateful for the abundance in my life, and I believe life will bring me opportunities to grow my bank account,” you are deciding to live in that reality. You are starting in a state of abundance.

This does not mean you don’t have to put in the work. You still have to take action and close deals to increase your net worth. But by starting from a place of abundance as opposed to a place of scarcity, you are better aligned with your goal of making more money. You are creating a reality that is a match to your target. The life you experience is a result of your internal alignment.

Final thoughts

Operating in a fixed mindset allows the past to limit your future and keeps you in misalignment. Moving into a growth mindset and living in active creation aligns you with growth and expansion.

The way you view the world, whether as a place of scarcity or a place of abundance, determines your reality.