They Turned Real Estate Into Wealth, But Still Feel Stuck | Making a Millionaire

Becca (34) and Christian (35) have an $821,000 net worth, $276,000 household income, and two rental properties generating $65,800 combined annual rent, but they have no time, self-managing six rental units while raising an 18-month-old and working full-time. They came asking whether to sell the "break-even" duplex to fund $80,000 in renovations on the quadplex or exit real estate entirely to reclaim their lives. But when we crunched the real numbers, separating principal payments from interest and capital improvements from operating expenses, what we discovered completely changed our recommendation. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠DRINKAG1.com/MONEYGUY Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:31Speaker 01

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• 0:59Speaker 02

  You're now at the place where you get to make financial decisions, not so much because you have to, but because you get to, or because you want to. But you have to define that. Is real estate a job for you? Or is it, hey, part of our financial life is that we have some real estate properties? Because those are two very different things. And how do you want to approach it? And how do you want to attack that?

• 1:25Speaker 03

  So I'm a manufacturing engineer in the aerospace industry 10 years now. And

• 1:30Speaker 02

  Does that mean like building planes and stuff?

• 1:32Speaker 03

  I like to say it's we, as a manufacturing engineer, we build the Lego assembly set, you know, that, that, that, you know, gives the instructions from the design to the operator.

• 1:42Speaker 02

  Okay.

• 1:42Speaker 03

  So it's, it's really cool stuff.

• 1:44Brian Preston?

  And how about you?

• 1:44Speaker 05

  So I manage a team of associate recruiters for like a tech-enabled search firm that's based out of Chicago. Full-time, remote. I've been doing it for almost five years now. And we specialize in like high-impact placements and executive recruiting. So we've worked for anyone like Dude Wipes to Peloton.

• 2:04Speaker 02

  Oh, wow.

• 2:05Speaker 05

  Software companies that you may never have heard of, but are doing very well. Topgolf is a client of ours.

• 2:10Speaker 02

  That's awesome.

• 2:12Speaker 05

  It is, it is fun.

• 2:12Speaker 02

  You've been doing that for five years?

• 2:14Speaker 05

  Yep. And I manage a team internally. So I kind of like more ops, people management.

• 2:19Speaker 02

  I love it. So you guys have an 18 month old little boy at home. How old are you guys?

• 2:23Speaker 03

  I'm 35.

• 2:24Speaker 02

  35?

• 2:25Speaker 05

  34, going on 35.

• 2:26Speaker 02

  34, going on 35.

• 2:28Brian Preston?

  That's kind of that progression.

• 2:30Speaker 03

  That's the way it works.

• 2:33Speaker 05

  I turned 35 in March, so I was like, I can say 34 on air, that's great.

• 2:36Speaker 02

  Well, it's interesting, you know, you guys were kind enough to share a net worth statement with us. And I'll be honest, when I saw it, I was like, holy cow. Do you guys feel like you're way out ahead of the curve and crushing it? How do you guys feel about your current situation?

• 2:51Speaker 03

  So when we really started looking at this, we pieced it all together and realized where we were. And it, it, yeah, it was eye opening for sure. I don't think we expected it to be as high as it was and, and, but I, I feel like we've been very diligent about it, you know, in the past couple of years. So, yeah, I think it's.

• 3:10Brian Preston?

  Well, how long have you all been together?

• 3:12Speaker 03

  So we've been married for about three years now.

• 3:14Brian Preston?

  Okay. And is this the first, doing this exercise, was this the first net worth statement you've done?

• 3:19Speaker 03

  Of like a fully comprehensive net worth statement, yes.

• 3:23Brian Preston?

  Okay.

• 3:23Speaker 05

  He likes to run the numbers on the backend, but yeah, we met during COVID. I like to say he's my COVID cutie.

• 3:28Brian Preston?

  Love that.

• 3:30Speaker 05

  Our first date was virtual.

• 3:32Speaker 02

  Amazing.

• 3:33Speaker 05

  But yeah, we've been working, but it hasn't felt like we've, like we've, I feel like we've reached more of a tipping point in the last, let's say, six months when things started accumulating a little bit more and we felt like, oh, we need to talk to someone and figure out what our next steps are because the decisions we make

• 3:50Speaker 05

  could lead us in a direction pretty significantly at this point, yeah.

• 3:52Speaker 02

  Well, when we look at the net worth statement, you can see that you guys have absolutely crushed it. Now, it's interesting, you said you've been married for three years, so it sounds like both of you had some success before you got together. I'd love to talk about that, but as it stands right now, total net worth of almost $821,000. Like rapidly approaching the two comma club in your mid 30s, which is insane. Uh, and a very healthy household income. You make almost $300,000 a year, $276,000. So not only do you have a big income, it looks like you've been able to turn a big income into wealth. How'd you guys do it? Like, what was the, what was the secret sauce? You said you've, you've reached the tipping point. What were you doing before you got to the tipping point?

• 4:34Speaker 03

  So I think we were pretty diligent on like our savings rate, you know, definitely, even before knowing, you know, the 25%, you know, it was how, how high could we go? And not always, but certainly in my late twenties and let's say for the past six, seven years. But I think for Becca, it might've been most of your

• 4:55Speaker 05

  I've always been a saver and I've always been a worker. So like the day I turned, the day I turned 15 was able to work, I walked into Burger King was like, I need a job.

• 5:04Speaker 02

  I love that.

• 5:04Speaker 05

  And then one of my first like financial memories really is of like just watching my parents be very frugal in different ways, but both frugal. And my mom saying like, okay, you get your paycheck. That's not all yours today. You have to pay yourself for tomorrow. So like at least that should be saved. And so when I entered, that's been, I've always had a job. I've never not had a job. Even when I was full time in school was working as well. And when I got my first like more professional job post grad school that started my career, we'll say, at one point of like the financial person that our accountant was like, do you know how much you're saving? So because it wasn't normal, right? I was like probably at 20% at that time. And

• 5:46Speaker 02

  For like a young person, that's wild.

• 5:47Speaker 05

  Exactly. And I was like, I do actually, and I'm going to keep it that way, you know? So it was interesting. She's like, not financial advice, but I just wanted to make sure, you know, some people save and then don't realize it's not vested. Like it was kind of that conversation, but on the other side of the spectrum.

• 6:00Speaker 02

  Love it. You guys just figured it out early on that, hey, if I save and build a limit for tomorrow, it stacks up pretty quickly.

• 6:06Brian Preston?

  So who's the, the, the person that's kind of driving all of the financial decisions in the house? Who's like the financial person? Or y'all both? Are y'all like collaborating on everything?

• 6:15Speaker 05

  He's the spreadsheets guy more so and more of like crunching the numbers. Like he says that the, I mean, he's, he's tried to do like net worth statements and stuff like that before and like trying to calculate when we could potentially go into coast by or something. For me, I'm much more the person that's like, what's the impact on our family? And what is our lifestyle actually? What is, what does it look like now? And what is it going to look like? And I think especially since having our son, that was kind of like the shifting point for us because we manage real estate and we do it all ourselves. Like we don't, we don't contract out most of the stuff. And I'm like, this is taking into a lot of time and our priorities have shifted a little bit. So. Yeah.

• 6:54Speaker 03

  Yeah. And I think, yeah, so that's where we're here now is, I mean, we have fairly tight margins on our real estate properties. We both bought them before we were married as like a owner occupant, multifamilies, and decided when we got married, we would buy a single family and keep both properties and still manage them, self-manage, right? So it's kind of like now we're looking at it and we do a lot of the work ourselves. How much is it, you know, helping support our journey on, you know, financial dependence? Or not, you know, and we think it is, but you know, this is where we'd like your take on that.

• 7:33Speaker 02

  So you both lived in your own houses and you got married, got a y'all's house, you just held on to the houses that you had. Did I hear that right?

• 7:40Speaker 05

  So he bought his in 2020. It's a quadplex. It's four units.

• 7:43Speaker 02

  Oh, wow.

• 7:44Speaker 05

  And he lived in one. Yeah. So that's, there's a lot of multifamily real estate in St. Louis.

• 7:49Speaker 02

  Okay.

• 7:49Speaker 05

  And so he has a quadplex. I have a duplex. There are ours now. I know. So.

• 7:54Brian Preston?

  And y'all both house hacked it. You both lived in part of it.

• 7:58Speaker 05

  So.

• 7:58Brian Preston?

  Oh, y'all are like prodigies. Good for you guys.

• 8:01Speaker 05

  He had his first and I had just moved back January 2020 from Michigan, which was a very expensive market. And I was single at the time and I was like, I can't afford to live here. So when I moved back to Missouri to be closer to my twin, I decided like, I'm going to rent for a year and then I'm going to buy. And I wanted multifamily so bad. I was actually going for a quadplex, but it was crazy COVID times and they were just getting like swooped up. So I was, I ended up buying a duplex and owner occupying it too, like house hacking. He moved in there with me for a little bit.

• 8:30Speaker 03

  Brief time.

• 8:30Speaker 05

  And then we bought our single family.

• 8:32Speaker 03

  Yeah.

• 8:32Speaker 02

  Can you imagine their first date?

• 8:35Brian Preston?

  When y'all start talking about commonality and interests and stuff, and y'all start talking about duplex and quadplexes and house hacking. I mean, I just, all of a sudden, I'm sure bird chirps and, you know, and harp sounds started playing in the background.

• 8:48Speaker 05

  We deleted the apps immediately. This is it.

• 8:51Speaker 02

  We've done it. We've found him.

• 8:53Speaker 03

  I think, yeah, we've had experience with, you know, in the past with, you know, our relationships. We've learned, you know, we really learned what we wanted in life, what kind of partner we would want in life.

• 9:03Speaker 02

  Sure.

• 9:04Speaker 03

  And we, yeah, absolutely. That's very true. Yeah, we've, we've realized we click. This is it.

• 9:08Brian Preston?

  I love it. Deleted the app immediately.

• 9:11Speaker 02

  So when we look, when we look at the net worth statement, obviously, $820,000 net worth. Well, of that, we have about $530,000 of liquid assets of, same as you've been on, I'll talk about that. But the real estate is a pretty big portion. If you look at just the value of the assets that you have for real estate, it's like $815,000 with debt on that real estate of a little under $600,000.

• 9:36Brian Preston?

  Look at those interest rates.

• 9:38Speaker 02

  Well.

• 9:38Brian Preston?

  Haga, haga.

• 9:39Speaker 02

  Well.

• 9:40Brian Preston?

  Two, two of the three are haga, haga. On the, on the rental property, I mean, y'all have to be feeling pretty good about those.

• 9:46Speaker 03

  Yeah, yeah.

• 9:47Speaker 05

  The rental property number two, the 2.75 is the duplex, and that's actually the one we might be considering selling.

• 9:53Speaker 02

  Mm-hmm.

• 9:53Speaker 05

  Um, and I'm like, ooh, that 2.75 is so nice.

• 9:57Speaker 02

  Well, walk us through it, because you said you have some questions, right? Like, because I'm sure for a lot of people out there hearing this, like, holy cow, these two are killing it. Net worth is amazing. They have a duplex, they have a quadplex, they have the primary residence. What possible issue could they have? What could they be worrying about? So walk us through, what are the questions you have?

• 10:15Speaker 05

  Time, Bo. Time is the issue.

• 10:17Speaker 02

  Time is the issue.

• 10:18Speaker 05

  Yeah. So we have pretty tight margins, and Christian could get a little bit more into the numbers there. But, um, we, so for our properties, all, most of them, we have six units altogether. Five of the units are long-term rentals, and one is a midterm Airbnb. So for the Airbnb, for example, like, most of the time, tenants will stay from two months to sometimes six or nine months. But we flip it every time. So if someone's going in cleaning after a tenant, that's us. Um, if a pipe bursts, I'm the one helping manage contractors most of the time, because I work from home. Um, and we screen all of our own tenants. We, like, I'm basically the general contractor managing, um, work that needs to be done.

• 10:57Brian Preston?

  Are you good at that? Or have you been burned?

• 10:59Speaker 05

  Um, I think I'm pretty good at it, actually, but not without help. I'm a part of like a women's investor community in St. Louis. It's very strong.

• 11:07Speaker 03

  Oh, yeah.

• 11:07Speaker 05

  Super resourceful. So I honestly, like, if I need a plumber, the first thing I do is go onto our shared Facebook page and either ask or like... Search for if anyone's got recommendations because recommendations go a long way in this industry. Sure, sure. You can get burned. And so I've had some mentors to help along the way in that regard. But it's still a lot of time that goes into it. Probably spend, I don't know. It depends on if there's a project happening, but probably five hours a week or something. So nothing crazy, but it's never planned.

• 11:37Speaker 02

  But you're still work, you both work full time, right? So you're working full time and this is an additional, additional thing every week that's taken away.

• 11:44Speaker 03

  Yeah, but we, yeah, so I think we, you know, we make, you know, the positive margins on these properties. And so we see that and we see that, you know, we're paying off our mortgages diligently, our equity is raising. And, you know, we, we know it's, it's going to help in the end with our financial independence journey, you know, to, to break away from traditional, you know, work environments in the future, but you know, how, how is it compared to our traditional retirement investments?

• 12:15Speaker 02

  Sure.

• 12:15Speaker 03

  Um, is it something we should swap focus on or not? And we could give you the numbers like specifically in the real estate.

• 12:21Speaker 05

  Yeah.

• 12:22Speaker 02

  So. Yeah, I'd love to hear a little bit about, about the numbers and the margins because where my mind is immediately going is like, okay, you have this issue. We don't have enough time, but you have resources. What was the thought between you guys self-managing this and not having a management company or not outsourcing?

• 12:36Speaker 05

  Yeah.

• 12:37Speaker 02

  That.

• 12:37Speaker 05

  So it felt very simple when we started by owning them, right? Like if something happened, I could do it.

• 12:42Speaker 02

  You live there, makes sense.

• 12:43Speaker 05

  Right? And then there's obviously some tax write offs implications to that too. Um, and so that's why we chose to self-manage. I had thought maybe that I could transition from a full-time W two to managing property. So for example, we need some renovations on our quadplex. Um, it's got four units and two sides or two units are very outdated. And so we basically have to do, probably put forty to fifty thousand dollars into each unit.

• 13:07Speaker 02

  Right.

• 13:07Speaker 05

  Um, to bring it up to.

• 13:10Speaker 02

  Current market.

• 13:10Speaker 05

  Current market, exactly. And so it's like, I actually think that would be a fun project to take on. But it sounds horrendous when you think about working a full-time W2 and doing that. And so, but we like it. Like I work from home, full-time, remote. I manage a team, so I do talk to people. But like, I actually love that I know my, who my tuck pointer is for brickwork. I've got a roofer. I mean, I think for us, he's not from St. Louis originally, but like for me, like, we've all had our share of like slummy kind of landlords and I think we pride ourselves in like being.

• 13:41Speaker 02

  Not being.

• 13:42Speaker 05

  Not being that and being like a service to the community and, you know, in that way too. Like if I sold, I mean, obviously money matters, you know, I'm not going to get super undercut, but like, I would love if it was someone who was owner occupying and also lived in that space, you know?

• 13:55Speaker 02

  Sure.

• 13:55Speaker 05

  So there's a values piece there.

• 13:56Brian Preston?

  I would love to know some more numbers because there's, there's a few things that jumped out to me is that, first of all, with rental property, sometimes one rental property is a pain in the rear because you have to deal with it, but y'all have five to six because you've done.

• 14:11Speaker 05

  Yeah.

• 14:11Brian Preston?

  So you start, it's not, scale is not the proper word, but you at least got enough coming through.

• 14:16Speaker 02

  It's scaled to an extent.

• 14:17Brian Preston?

  Yeah. And then I, and then I look at, and I look at what y'all's barrier, I mean, your price to entry was with, with the debt and stuff. So I need to know the numbers to know the hassle factor. Why is it taking so much time? Is this something we can buy our way out of?

• 14:32Speaker 05

  Mm-hmm.

• 14:33Brian Preston?

  Because, and then also you're kind of talking out of both sides of your mouth a little bit because.

• 14:38Speaker 05

  Let's go there.

• 14:39Brian Preston?

  Well, no, because, no, and I'm not picking on you, but I just, I want to just give you the feedback.

• 14:42Speaker 05

  That's why we're here.

• 14:43Brian Preston?

  Because you're telling me we have no time to do this, but then out of your breath, you're also like, but I love. Let me tell you about my bricklayer that I have in my Rolodex and that I can reach out to. I mean, you're, you're kind of giving both, both vibes. So that's why it makes me immediately wonder. Cause like I, I have, you know, what's funny is I have some property down in real, in Florida and my real estate agent also now kind of helps me manage the, the property as well. She, she's fabulous. And that's why, so, and I'm wondering if you, if there's not a, an in-between here, but, but I don't want to jump right there until we know more of your data sets.

• 15:20Speaker 05

  So we'll start, I don't know where you want. So like just. Going back 30,000 feet, I would say we make money on the quadplex and then we kind of break even on the duplex.

• 15:29Speaker 02

  Okay.

• 15:29Speaker 05

  And that's a product of scale, right? We've got four units on that side and two on the other. And then also, last year was a very expensive year for me, for the duplex. Replaced the roof and was actually in the red. So, but I'll go-

• 15:43Speaker 02

  So in a normal year, you break in on the duplex. Last year, you were under.

• 15:46Speaker 05

  Yes.

• 15:46Brian Preston?

  But a roof is more of a capital expenditure because you have to, you get it, I mean, you're hopefully going to get 20 years out of it.

• 15:52Speaker 05

  Yeah, yeah.

• 15:52Brian Preston?

  So, I mean, yes, you're in the red, but if you think about it from an accounting standpoint, you made a big capital investment into it. It's not necessarily just operations.

• 16:01Speaker 05

  See, that's a good way to think about it because I, anything I spent money on is in there. So like, you'll see, we're pretty conservative. When we, like, when it's good for us, we're conservative on the low end, right? When it's bad for us, we're conservative on the high end. And so you'll see that in these numbers.

• 16:15Brian Preston?

  Now, it's negative from a cash flow. You're right. Probably from a cash flow, it's negative, but I'm just thinking in analyzing the venture,

• 16:21Speaker 05

  Yeah.

• 16:21Brian Preston?

  that wouldn't necessarily be a bad thing.

• 16:23Speaker 05

  And we did buy them to buy them and hold on to them for like, we thought like maybe 20 years. Like when real, when our son goes to school, do we just sell one and have that help pay for his school? Or, you know, if we really like diversifying and being, you know, anyway, but so our, do you want to know like what's owed on it? And the potential equity and all those numbers?

• 16:40Brian Preston?

  Well, we got those two numbers.

• 16:41Speaker 02

  We have those. I'd love to know the rents you come in or the net margin you have on these right now.

• 16:48Speaker 05

  So, starting with the duplex, the rent we get is about $25,000 a year. And mortgage payments, including like principal and interest, tax, insurance, all that stuff is like 17.7.

• 17:00Brian Preston?

  So basically you're getting a thousand dollars a month per unit on the duplex?

• 17:03Speaker 05

  Uh, yes, a little over, yeah.

• 17:05Speaker 02

  So that 17K is mortgage, taxes, insurance, all that kind of stuff.

• 17:08Speaker 05

  And then average operating expenses over the last three years, I averaged them was like $11,000.

• 17:14Speaker 02

  There's another, there's another thing you have to do, right?

• 17:16Speaker 05

  Yeah.

• 17:16Speaker 02

  If you just include your whole mortgage payment, you're kind of, you're, you're double counting, right? Because part of your mortgage every month is paying down some principal.

• 17:23Speaker 05

  Yeah, yes.

• 17:24Speaker 02

  So it's not really a cost. It's kind of like a forced saving. So you want to back that out to figure out, okay, where am I actually? Like, what does my number actually look like?

• 17:31Brian Preston?

  And then the capital investment side too, because hopefully you put one roof on, we're not doing it two years in the future.

• 17:37Speaker 05

  And that 11,000 does include like the roof, like that average, the roof is in that average. The other thing is, is I don't think we mentioned these, both of these homes are over 100 years old.

• 17:46Speaker 02

  Oh, wow.

• 17:47Speaker 05

  So they're old, they're beautiful St. Louis brick. Old but sturdy, we like to say.

• 17:52Speaker 02

  I love it.

• 17:52Speaker 05

  So like, we've done like tuck pointing and things like that, which again, like.

• 17:55Brian Preston?

  You see our building. This is our 100 plus year old building. We like to say it's sturdy as well.

• 18:01Speaker 02

  All right, so the duplex is roughly breakeven. Talk to me about about two opportunities. What's the opportunity for rental increase specifically on the duplex? Meaning, are you at top of market pricing right now? And then is the St. Louis market from a rental standpoint increasing every year? Like do rents go up 3, 4, 5% on an annualized basis? Or are they pretty much flat?

• 18:21Speaker 05

  I would say there is an opportunity to move up a little bit. It might be the middle. No, I would say like for what the amenities are. So they don't have, they don't have. Central AC. Central AC, so it's window units. They're good, they work great. Radiator heat. Radiator heat, so they're like older units in that way. So I feel like I'm at the top, top end of rent. I probably have, like, I would go up every year, but, and I do go up every year, but. I feel like unless I've made, this, you guys can correct me if I'm wrong, but I feel like unless I made a significant investment to like, have central AC or an HVAC system, then I really probably shouldn't be at the higher end of the market.

• 18:55Speaker 02

  Yeah, it's not going to move super quickly.

• 18:57Brian Preston?

  And is it the duplexes or the quadplexes that would require 40 grand per unit?

• 19:02Speaker 05

  Two, the quadplex. Yeah.

• 19:04Brian Preston?

  Okay, okay.

• 19:05Speaker 05

  So.

• 19:05Speaker 02

  All right, so we're on the, so on the duplex, we know that the rental increase is not going to be, it's likely going to be cost of living inflation, maybe a touch below that, something in that ballpark. So then the second question we have, if we're thinking about this from an investment standpoint, is okay, what's the capital appreciation opportunity? Right? So when you bought the duplex, right now you have it listed as worth $260,000. How much did you pay for it when you bought it?

• 19:29Speaker 05

  I paid $211,000.

• 19:30Speaker 02

  So $211,000, we bought this like at COVID, like right around that time, right?

• 19:34Speaker 05

  April 2021.

• 19:35Speaker 02

  April 2021, and since then, we've seen like a rapid rise in the real estate market. We've seen it go from $211,000 to $260,000 over that time period. Uh, realistically, what are the outlooks on this property increasing? Is it, is there something happening in the area, the neighborhood, the geography that would cause us to become a much more highly valued property? Or is it likely that, again, it's going to be inflation, cost of living? I think, yeah, they're, they're very stable environments.

• 20:03Speaker 05

  Mine's a little more stable, yours is a little bit more growing. He's on like a, the, he's in an area of St. Louis that's very close to, it's like our second largest park, but he's on the per, like the periphery of that.

• 20:13Speaker 02

  Mm-hmm.

• 20:13Speaker 05

  Still in the neighborhood, but it's just keeps going down, like in terms of development. Like, we've both had on our streets, like, houses that have been purchased and completely rehabbed and things like that. So, signs of positive growth and development, yeah.

• 20:26Speaker 02

  So, you think there is a, a lot of upward potential for the, uh, let's just talk about the duplex. I want to do, let's talk about them individually, just the duplex. A lot of upward potential in terms of what the price could appreciate?

• 20:38Speaker 05

  My Realtor thinks that it could go for 300 now, so 260 is conservative.

• 20:42Speaker 02

  So, you've been very conservative. We're, we're trying to be conservative. Yeah, okay.

• 20:45Speaker 05

  Yeah.

• 20:45Speaker 02

  So, it's probably worth more than 260 right now?

• 20:48Speaker 05

  I think it's probably worth like 285.

• 20:51Speaker 02

  Realistically, let's assume for this conversation, it's worth 300. Where can it go from here? Does it, can it go from 300 to 350? Does it go from 300 to 400?

• 21:01Speaker 05

  Over time, yes. I don't know in like the next handful of years. I think, I would say, I would use St. Louis as an average, like, in terms of like, national growth for real estate and what real estate tends to go up. It's not, it's a pretty stable city in that regard.

• 21:14Speaker 02

  If we're looking at national averages, uh, of real estate increase, you know what the national, you know, on average, how much real estate increases every year? Sands the past couple of years? Roughly the rate of inflation. Okay. Right? It's going to roughly keep up with inflation, somewhere 3, 4%, depending on what's going on. Okay. And so, we're thinking about these rental properties as an investment opportunity. Well, generally, when people invest in real estate, they want one of two things. They either want cash flow, they want it to create some sort of income for them, there's a yield to it, or they want some capital appreciation in the future. Well, what you've laid out for us right now, are the mortgages on these 30-year mortgages?

• 21:51Speaker 05

  Yes.

• 21:51Speaker 02

  On these, right?

• 21:52Speaker 05

  They are.

• 21:52Speaker 02

  So, you've got these 30-year mortgages, it's not really cash flowing, it's cash break, breaking even in terms of duplex, and then in terms of... Growth on the real estate property, what do you think is realistic? Well, probably around the rate of inflation over the long term.

• 22:05Brian Preston?

  I want to hear more about the quadplex, but I also don't want to just get bogged down only in the real estate because I think that my outside and Bo and I will do a deep dive after this, this meeting and kind of come up with some thoughts. We'll probably need to get a little bit more specifics on how much of this is expenses versus capital improvements. But I think because y'all's income is so strong. Now, I heard a bird whispered in my ear that y'all might even want to change how your income is structured with both of you working. So we'll want to talk about that too. But it's current status income. I don't know that it matters. It's more of the time.

• 22:43Speaker 05

  Right.

• 22:43Brian Preston?

  Is the most valuable thing for you guys is because y'all should probably have such, y'all have such a strong savings rate. These are multiple assets that are building. So we need to get to the, to the bottom line of how much time is this really taking? You know, and then how profitable is it? And then what are y'all trying to do as a household?

• 23:02Speaker 05

  Yeah.

• 23:03Brian Preston?

  Because that all kind of interconnects.

• 23:06Speaker 05

  And if you, to be honest, like we're flexible, I would say it's a blessing or curse. Like we obviously built ourselves a lot of optionality here and it feels a little debilitating sometimes.

• 23:15Brian Preston?

  I'd heard, because what are y'all, what's y'all's primary? If you were trying to put to one word, what are you hoping happens? Is it, is it like flexibility? Is it simplicity? Is it, what, what are y'all, what are y'all trying to focus on?

• 23:27Speaker 03

  I heard the coast fly a few times.

• 23:28Brian Preston?

  I didn't hear that too.

• 23:29Speaker 03

  So I think actually both flexibility and simplicity are something that we're absolutely looking for and especially into the future as, you know, as our son gets older, you know, we'd love to be able to spend time with him and build memories with him.

• 23:43Brian Preston?

  Do y'all feel in the weeds? I mean, I know y'all make plenty of money and stuff, but do y'all feel like you lay your head down and you're like, there's just not enough hours in the day?

• 23:49Speaker 03

  I think we did a few years ago. I think this today and last night, not as much.

• 23:53Brian Preston?

  Okay.

• 23:55Speaker 05

  It depends on the season, like if we are like seasonality of like what's happening. So for example, like this is future looking, but like when something happens with the property, it's pretty all consuming and you have to think about it because you're managing contractors and doing all that. Looking at like, honestly, we normally lay our heads down and are like pretty peaceful at night. For me, my work can be very consuming as well. And so if there's something happening at work that's all consuming, then it's harder to sleep at night. But in general, like we recognize that we're in a really good spot and then we've worked hard to get to where we are. And if worse comes to worse, like we sell a property and we'll be fine, you know, like we or we'll make it work because even on one income, we would be okay. It's not necessarily where we want to be, but yeah.

• 24:39Brian Preston?

  Well, that's what that's kind of what I'm getting when I said it doesn't matter. It's more of I'm trying to get you to choose a side on because like I said, back to the to speaking out of both sides. Do you want to be a real estate investor?

• 24:54Speaker 05

  So.

• 24:55Brian Preston?

  I mean, but it's a matter of because that's the thing when you're talented at multiple things, you know, it's just I'm watching some documentary and um, gosh, I'm horrible with names, but I found out this this NBA player who's on, you know, the Netflix's five, you know, that they do. He was like an all star baseball player too. And he's like, I could do, I could have done either one. And he's like, I chose basketball. But I and I think sometimes when you're gifted, you have to make choices and y'all have good income, you have good assets, the other things. But do you want to be a real estate investor?

• 25:30Speaker 05

  So I think I'm open to what it looks like because I do like the aspects of like and work, I'm a project manager and the real estate investing and managing projects, whether that's flips or, you know, in our case, like a rehab for units is very much like that. So I see potential in that. And I had thought about that very deeply. But now that we're like a little closer to where our investments are at like over 500,000, I'm like, do I need to do that? Because to be honest, like if I'm if I told you like what my ideal day would be, it is not sitting in front of a computer all day. So real estate investing definitely has that draw of flexibility. But also like after having my son, I had some. Health complications or health flare ups, we'll say. And right now, I feel like I don't have time to like build in gym time, which sounds so

• 26:12Speaker 05

  simple, but it's either like before 6:30 in the morning or when I'm, you know, when I'm feeding my son for dinner, things like that. And so to be honest, like a little more flexibility in my day, which real estate investing would lend to, but it also can be all consuming as well.

• 26:27Speaker 02

  Tell me a little about your savings. I wonder about your savings rate, right? Like, tell me, outside of the real estate, where's your money going right now when you're building?

• 26:34Speaker 03

  So, so we are pretty firmly at 25%. I do 401k match and I do get 10% match. So I, I do that minimum right now. But then we max out IRA, max out my HSA. So we kind of both throw into that bucket effectively. And then we kind of just started, if you look, we just started our brokerage.

• 26:55Brian Preston?

  I saw it on there.

• 26:56Speaker 03

  Yeah. So it's a little small.

• 26:57Brian Preston?

  I was like, man, they had step seven. It sounds like they're thinking about the three buckets.

• 27:00Speaker 03

  Yeah. We were kind of like, I think we should do this. We should probably start. And then, uh, go ahead. What your savings are?

• 27:10Speaker 05

  Yeah, I'm at 25%. Um, he runs what I should be putting everywhere. So that's what I do. And

• 27:15Speaker 02

  Did you max out your 401k? 24 or 5 for both of you, your 401ks? Right. And then you said you're maxing out the HSA. So that's like, what, 87, 50 this year or something like that?

• 27:24Brian Preston?

  You wouldn't let me bring my tax guy in.

• 27:28Speaker 05

  No more papers for you. And then I have a 3% match for work.

• 27:32Speaker 02

  Awesome.

• 27:33Speaker 05

  So.

• 27:33Speaker 02

  And then you're doing, uh, you said you're doing IRAs as well?

• 27:36Speaker 03

  Yes.

• 27:37Speaker 02

  Just putting money in like traditional IRAs, non deductible and building that up?

• 27:42Speaker 03

  Got some ideas there.

• 27:43Brian Preston?

  Yeah, no kidding. Well, I do see a big, it's not a huge, but I see a rollover IRA.

• 27:48Speaker 02

  Yeah.

• 27:50Speaker 02

  Where's, where's each one of your 401ks at?

• 27:52Speaker 00

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• 28:23Speaker 06

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• 28:51Speaker 05

  I'm at 19.

• 28:53Speaker 02

  No, no. Who's the custodians?

• 28:55Speaker 05

  Oh, mine is through, um, oh, wait, hold on.

• 28:58Speaker 03

  Mine's through Fidelity.

• 29:00Speaker 02

  Okay.

• 29:01Speaker 05

  Yeah, I know. I love that. Mine's through a census right now.

• 29:04Speaker 02

  Okay.

• 29:05Brian Preston?

  So Christian, you could roll that, you could roll that IRA rollover over to your Fidelity 401K and then you would be magically delicious, available for doing backdoor Roth contributions.

• 29:17Speaker 03

  Right.

• 29:18Speaker 02

  Is that the Lucky Charms?

• 29:19Speaker 05

  He doesn't want to be magically delicious.

• 29:22Speaker 02

  This episode brought to you by Lucky Charms. That's hilarious.

• 29:27Speaker 03

  Yeah, so that is something that, I mean, I'm aware of, but I'm not too familiar actually how to do that. And it's something that I've kind of told myself that I'd like to learn and understand more because I think it's something, yeah, it's like, are we at that point even? You know, I'm not sure. And I know in the future, absolutely, this is something I need to do before, you know, before, you know, 40, 50, something at that age.

• 29:52Brian Preston?

  Well, it's just an easy thing. Y'all have enough income and it'd just be another thing in the financial order of operations that allow you to, to boost that tax-free bucket because y'all are still so young that the compounding growth on that, it would be incredible. I mean, it would, it would make you think like a leprechaun. Keeping it on the theme, sorry, Bo. We're running a real serious financial show here.

• 30:15Speaker 02

  Okay, so duplexes break in. We've talked about that. Let's talk about the quadplex a little bit. What are the numbers on the quadplex in terms of net margin?

• 30:23Speaker 03

  So, I mean, yeah, you can see I, what it's, what I value it now is 270 and, and I think that's conservative.

• 30:30Brian Preston?

  Is that real or are we doing the Becca game?

• 30:32Speaker 03

  Again, that is conservative. And again, potentially up to 300,000, you know, today, right?

• 30:40Speaker 02

  What'd you pay for it when you bought it?

• 30:41Speaker 03

  So I bought it at 205, April 2020. And honestly, it was literally as everything was shutting down. I thought this was either the worst or the best idea I've ever had.

• 30:50Speaker 02

  Right.

• 30:51Speaker 03

  I have no idea.

• 30:51Speaker 02

  Right.

• 30:52Speaker 03

  Let's go with it. Roll the dice. Um, and but I knew I wanted to do it. So I was like, it's now or never. I just, I can do it.

• 30:59Brian Preston?

  Y'all made the most out of the pandemic. You bought real estate. You found love. You found love. Y'all really, okay. Keep it going. I didn't mean to interrupt.

• 31:07Speaker 03

  No, you're okay. The, um, so, um, I think I, I write about 40,000, uh, rent, um, for the year. And, uh, and again, one of the units is an Airbnb, so it's a little more variable, but it's, you know, pretty average. Um, and then, uh, I think it's mortgage annually with in, and taking in mortgage and, and insurance taxes is 25, um, 25,000 a year.

• 31:36Speaker 05

  Yeah.

• 31:37Speaker 03

  Um, and then it operates about 10,000 a year, utilities and everything that we put into it, average.

• 31:44Speaker 05

  Yeah.

• 31:45Speaker 02

  So it's netting you about five grand a year?

• 31:47Speaker 03

  Yeah.

• 31:48Brian Preston?

  Then, like you said, if we took out the actual principal payments on that, I bet it's, it's even better. So this one, this one seems pretty sweet.

• 31:56Speaker 02

  These two do not seem the same to me.

• 31:57Brian Preston?

  Now, it does require, it sounds like it's gonna have an $80,000 capital expenditure if they, if they have to rehab it.

• 32:03Speaker 03

  We would really like to, if we kept it long-term, we would really like to do that. Absolutely. Yeah.

• 32:06Speaker 05

  Cause I think the rents would probably double on that side.

• 32:09Speaker 03

  Yeah.

• 32:09Speaker 02

  Oh, wow.

• 32:10Speaker 03

  Up to, yeah.

• 32:11Speaker 05

  Yeah.

• 32:12Brian Preston?

  Oh, man, we're getting somewhere.

• 32:13Speaker 05

  Yeah, I know.

• 32:17Brian Preston?

  It's almost like you could, and I don't know. I mean, we'll have to crunch numbers, but it's almost like you could take the proceeds from the duplex, roll it into rehabbing, double your rent. There's some magical things that could happen here.

• 32:30Speaker 03

  It's a cash flow.

• 32:31Speaker 02

  Oftentimes we'll sit down with folks and they'll, they'll be doing real estate and it'll be like, hey, you're, you're kind of missing the mark. You're, you're focusing all your effort and all your attention over here when you're missing some stuff over here. With you guys, it's really tough because you're not missing the stuff over here. You're doing the 25%. You are building for the future. And that's what Brian was diving into. What is it that you want?

• 32:50Brian Preston?

  Exactly.

• 32:51Speaker 02

  Do you want to be doing, because like, yes, we could objectively look at the duplex and we can objectively look at the quad and we can provide some analytics around the best cost of capital. And I could likely say for the duplex, if rents are going to be dead break even, so there's no cash flow and capital appreciation is only going to be at the rate of inflation, there's a really good chance that a brokerage account will outperform that over the long term if you're just buying low cost indices. So that's like a use of capital conversation. But you're already saving really, really aggressively. And so like if real estate is something that you enjoy, that you find fulfillment in, that you want to have, you're kind of in that step seven of the financial world of operations where you get to do what you want to do because you want to, not because you have to.

• 33:33Speaker 02

  So that's what, we don't know what you, like if you're thinking about maximization, optimization, we can talk through that, but I don't know what, what do you want?

• 33:41Speaker 03

  I think we're at that crossroads really where it's just like, you know, we'd like your take on like, how can we build flexibility, more flexibility into our lifestyle? I mean, maybe a little bit more today, but certainly more and more as we age, as our son grows up.

• 33:58Speaker 05

  Yeah, so for me, we're both very risk averse too. So like, for example, like if you ask him, like, when would you, he's like 55 is the latest that'll work the full time. For me, I would love to transition out of a W2, full time W2, like ideally like in the next five years would be great for me. And I do see real estate as part of our futures. Obviously, we bought it. We're not going to be like, I don't know, commercial developers by any means, but if we had a few more units, like we would love that. We, that would be great. Down the line, maybe.

• 34:24Speaker 02

  How's the income differential between you two?

• 34:26Speaker 03

  We're fairly close.

• 34:28Speaker 02

  Fairly close. So like if you went hard stop, no W2 to real estate, there's a big chasm to make up, right? It's like almost $150,000. You'd have to like, figure out how to make up or budgetarily live off of one income.

• 34:41Brian Preston?

  Right. I do, you just said something. I'm slowly getting information and I love it because it helps me paint the picture.

• 34:50Brian Preston?

  Cause you you laid out that, cause one of the things I don't want, I threw out the suggestion, you could potentially sell the duplex, take the proceeds, but y'all's income is so strong. Now, I would challenge you, we'd still want to do a lot of the basics on the financial order of operations with your 401k, with your Roth funding, once we get the backdoor structure set up, but it's, um, if y'all could fund, cause I hate for you to sell a duplex, if you, now you're telling me, we might want more real estate. You see how you're kind of sharing different visions? And I don't want to tell you to take away something that you won't be able to reproduce, because you bought something for $211,000 that now is over 300.

• 35:32Brian Preston?

  So that's why we, part of our job as financial advisors is, cause there's, it depends, is a word that carries a lot of weight, is because you guys, and you're quickly realizing, y'all have made such good decisions at a young age, there's not just one path to success and victory. There's actually thousands, if not even multiple thousands of, and y'all, because y'all have made such good, now, the problem with people who defer and procrastinate, the thousands turn into one, into zero.

• 36:03Speaker 05

  Right.

• 36:03Brian Preston?

  Y'all are the opposite. You get to, you're like my favorite books as a kid, the choose your own adventure. And, um, and we just had to help you figure out what gets you the intersection of both the mathematics, but also the mindset, as well as the happiness that when you lay your head down at night, you go, I spend my mornings and my days doing exactly what I want to do.

• 36:22Speaker 05

  And I think for me, it does mean, like, eventually going away from a nine to five job.

• 36:26Brian Preston?

  Okay.

• 36:26Speaker 05

  Like, I'm a very tech and computer focused in my day to day work, um, and I'd love more flexibility throughout my day to like, I mean, I have nephews and going to their, going to their stuff, if real, whenever our son has field trips, doing that. Like now, it's like, okay, I have to like, I could find time to do that, and I have a remote job, so I could, but it's just like, anytime I do something like that, I feel like I'm taking away from the work that I'm doing, um, and so building in a little more flexibility. But the choose your own adventure book, like, my problem was, I read every adventure.

• 36:56Speaker 02

  She just did them all. She just, go to page 48, and then she would write back to page 27.

• 37:00Speaker 05

  Having a thousand paths is hard for me, because I like them all.

• 37:03Speaker 02

  Yeah.

• 37:03Speaker 05

  Yeah.

• 37:04Speaker 02

  Um, how, with the duplex specifically, how recently was it your primary residence?

• 37:10Speaker 05

  We moved in 2023. So up until fall of 2023.

• 37:15Speaker 02

  So is your primary residence in 22?

• 37:17Speaker 05

  Yeah, so 21.

• 37:18Brian Preston?

  Two of the last five years.

• 37:20Speaker 02

  You're picking up.

• 37:21Speaker 05

  Yeah, okay, we've thought about that too.

• 37:24Speaker 02

  Uh, I, because, because again, okay, if you're going to do real estate, um, similar as you do any investments, like not all real estate is created equal. Some opportunities are more attractive, some opportunities are less attractive. Some opportunities are a better use of capital, some opportunities are worse use of capital. Uh, with the duplex, one of the things that I'm seeing is you bought it for 211, it's worth 300 now. So you saw roughly a 50% run up in price over a very short amount of time. And you've already said, I, not a whole lot is going to improve on this duplex over the near term because of just the way it's structured. So you kind of like, you know, Warren Buffett always uses the analogy, he used to walk around looking for cigarette butts that had one puff on it, one puff on it, one puff on it.

• 38:05Brian Preston?

  Cigars, I can't remember if cigarettes or cigars.

• 38:08Speaker 02

  Your, your duplex, right, had, had a really good puff on it and you got that puff from 2021 to 2025. The question is, does it make sense to continue holding that? Or might that capital be better used somewhere else? Because you just said, if we were to have some sort of capital infusion into the quad and improve it, we could roughly double rent on that one. And it's also one that was bought for 205,000 and turned into 300,000, a 50% rate of return. And yet it does have upward mobility.

• 38:36Speaker 05

  Right.

• 38:36Speaker 02

  So if you're going to be turned into like real estate investors and folks that want to invest in real estate, you have to figure out, okay, well, how do I analyze each property in that sort of, in that sort of way? Uh, and you also have to recognize when opportunities exist, like, okay, if I'm going to do something with the duplex, man, I might need to do it pretty quickly because there's a, there's a clock ticking on me to be able to take advantage.

• 38:58Brian Preston?

  Because it was your primary residence, so there's a chance we could exclude a portion of the game. The other thing, now, look, you also, even if we, the timer ran out on us, you could do a like kind exchange potentially too. Um, where you, you know, you have 45 days to designate and then 180 days to close on properties. And by the way, when you do those like kind exchanges, don't choose one property because real estate is so shaky. You need to go find three to five potential properties to name in that 45 day period is what I always recommend to people. Um, but you have options on this and because you really, it, it does intrigue me, Beau, in some ways. I know we'll, we'll kind of talk about plan of actions later, um, and, and share that, but. We've already heard from Eka that they want to do more real estate.

• 39:42Brian Preston?

  So now it's like, where's the most bang for the buck? And what's the biggest opportunity in this moment?

• 39:47Speaker 05

  I think, I mean, quadplex tend to outperform duplexes anyway. And we want the, like, we have to upgrade the one that he has. And so like, we do, we see ourselves having more real estate in the future. But I think before we were to buy another property, we would fix up.

• 39:59Speaker 02

  Want to shore that one up?

• 40:01Brian Preston?

  Let me ask you a life, lifestyle thing. Y'all have one child, any more kids?

• 40:05Speaker 03

  So that's something we've talked about.

• 40:06Speaker 05

  That we don't know the answer to yet.

• 40:08Brian Preston?

  Okay, because the reason I ask that is because also I noticed on your cash flow, y'all spend, what is it, $1,500 a month on daycare? So that goes into the cash flow analysis on how much income we have to replace. It's not necessarily 130 or 140,000. 20 of that might come off. And if you have another child, now you're quickly realizing now there's even, maybe this thing gets below six figures. Now, how do we maybe build that up somewhere else? Or if it's even necessary, because y'all are, you're not, you're not spending every dime you make. Y'all are very disciplined with your savings rate already.

• 40:42Speaker 02

  You've mentioned coast fire a few times. Walk us through some numbers. If, if you were to, if you were to actually be able to coast, have you done any of the number, like, hey, if we could save this much by this age?

• 40:56Speaker 05

  I'm pretty Christian on this one.

• 40:57Speaker 03

  So I think, yeah, I've tried to look at it from, you know, a lot, a lot of different ways. Here, listening to advice from, you know, yourselves and from others, you know, that I can find. And we've read several books as well. And I really think, especially as we age and as we pay off our primary mortgage and reduce daycare, I mean, if you look at what our spend rate is now, I mean, I think we could reduce it to like 4,000 a month, right? Four to five would be, you know, very fairly comfortable. And I think. Even looking at like retiring as early as 50. I mean, if we, if I were to see, I think the number of like two or 2.5 million.

• 41:38Speaker 03

  I mean, that would be to me, an indicator like, I think we're, we're here, we hit our number. But I mean, that's also something that I feel like is a little speculative. I feel like the high horizon, our time horizon is still a little further out that, you know, things could change. We might have another child. I don't know. And so it's, it does just feels like there's too many variables to like firmly say. But I think that at least is a good base for us to, to start with.

• 42:03Speaker 05

  Yeah. And coast fire for me doesn't mean like not having an income at all on my side. Um, like I could do a part-time job, like also very flexible there, which is helping and hurting this conversation, I guess. Yeah.

• 42:16Speaker 02

  She said, I could do, I don't have to do, I, yeah, I could do these other things. I got all these, I, I can do anything. I can do all these things. I love it. I've already got, I've already got some homework.

• 42:24Brian Preston?

  That's what I've already, I've got ideas too. Cause it's one of those things, we already saving 25%. You could, if we backed into the numbers, a lot of people think coast fire has to mean, and maybe technically it does, if you're going to follow it to the definition. You go from saving 30, 40% of your income down to zero. I always say, but somebody like you guys, you could go from 25% to you're changing lifestyle where you go off of one income. Cause then it says that you can't just save 10 to 15% to maximize the, the employer match and other things. And, and still, you know, get some growth in there, but still fulfill your goals of being financially independent between 50 and 55.

• 43:02Speaker 03

  Yeah.

• 43:03Speaker 02

  What other questions you guys have for us? I mean, I've already, my mind's already kind of racing on, cause here's what's gonna be, I already know what we're gonna do. We're gonna be like, well, they could do this, or they could do this, or they could do this. And she does really good with options. If we give her a bunch of options, odds are she's not gonna do all of them.

• 43:18Speaker 03

  We'll be amenable to all those options.

• 43:20Speaker 05

  Yeah, I guess not necessarily a question, but things to factor in and prep for the show. They're like, what are some expenses that you anticipate? So the house that we're in now, its interest rate is more on par with where interest rates are today. We may like buying another house, maybe an option. So in St. Louis, we may buy to like be in a better school district for our son.

• 43:42Speaker 03

  Which we have a few years to determine that, but it's something with on the back of our mind.

• 43:46Speaker 05

  We wouldn't really do a major, like I don't think a major upgrade. We just really want a second full bathroom because we host family for like multiple times a week. It's like seven people.

• 43:56Brian Preston?

  And you would sell the existing home because it's not really, it's not rental type property.

• 44:01Speaker 03

  Yeah, we've, we've thought about it, but we decided, I think.

• 44:03Speaker 05

  Yeah, we would sell that one. And then in the next five years, we do anticipate we'll need another new to us car. I drive a lovely Ford Fiesta that wasn't made to go forever.

• 44:14Speaker 03

  Well, we both have 10 year old vehicles paid off. I, I drive a Tacoma. It's also 10 years old, but her Ford Fiesta, putting the baby in the baby seat in the back is, it's pretty tight.

• 44:24Speaker 05

  Especially facing backwards. He's really upset now.

• 44:26Speaker 02

  Is there a, is there a reason why you say new car in the next five years as opposed to like in the next?

• 44:32Speaker 03

  Well, we still have the mentality of we like to run them to the ground.

• 44:36Speaker 05

  Yeah, basically.

• 44:37Speaker 03

  You know, so many of our.

• 44:38Speaker 02

  You heard the part where you said your son's like crying when you, when you put him in the bag. Did y'all hear that? But rewind the tape real quick.

• 44:44Speaker 05

  He'll face forward eventually.

• 44:46Brian Preston?

  But, but by the way, I love, because I don't think this is public, Bo won't mind me sharing. I found out that Bo was putting on, he was telling me, you know, my child's diapers keep getting.

• 44:57Speaker 03

  Had blowouts every day.

• 44:58Brian Preston?

  They're blowing out and I'm like, Bo, you realize, and look, this is years ago. He has, he's now a veteran. He has three children.

• 45:04Speaker 02

  This was on the first baby.

• 45:05Brian Preston?

  This is the first one. So we all love to mentor each other. And I was like, you realize that is indicator one, that you're putting on too small diapers.

• 45:12Speaker 03

  I was like, nah, man, I had a whole box. I gotta burn it.

• 45:14Brian Preston?

  That's exactly right. The tightwad side of him is, and that's what I would tell you guys. I get, I can already feel from you, y'all aren't going to die broke. You're not going to die penniless. So you have to, we both, by the way, we were card carrying tightwads ourselves for the very. Beginning part is we're growing, but there was a time that I was like, my income's at a point and the way I'm living my life now, I'm still very good with money, but I'm definitely not a tightwad anymore. And I think you guys are probably in that transition phase right now. And that's where, and when I meet tightwads that are, that are financial mutants that are kind of trying to figure out what money can and cannot do for them. I, I would challenge you from a safety standpoint,

• 45:55Brian Preston?

  from a quality of life, if your child is crying because the cars, you know, that this is an exercise and not good for the family. You know what, let's figure it out. You can buy a nice used car and probably solve that problem sooner than five years.

• 46:12Speaker 05

  I do think there's definitely a mental mindset, mindset shift in that regard to being less frugal.

• 46:21Brian Preston?

  You're still good with money. I'm telling you, it's just that I've seen so many relationships where a lot of those, there's a fine line between financial mutant and financial miser. And you just have to navigate that. A lot of those good behaviors that you're rewarded when you're younger of being a miser, it's great because it builds this awesome foundation. But as a couple, as y'all are making these big decisions on, you know, who stops working, you know, when do we buy a new car? Do we go deeper into the whole real estate investor? You're going to quickly realize that, that all of this also has this umbrella of quality of life. And it's who do we want to be and what gives us fulfillment and happiness from this tool of money? Cause that's all it is. It's just a tool. You're going to find out when you reach three million,

• 47:04Brian Preston?

  five million, it doesn't feel any different than it did when we were getting our first million. We just got to now shape our life to understand our why and be the people we want to be.

• 47:13Speaker 05

  Yeah, it's very helpful to hear from you. Cause I feel like we feel that, but we're still getting around to.

• 47:19Brian Preston?

  You're doing great. I mean, I feel like I'm a coach here just chiseling barely around the edges because y'all do so much stuff naturally good. Now y'all are a financial planner's dream. I will tell you, I mean, after this is because I see so many opportunities for you guys to fine tune this. And you also, and what's cool is it's not just a one-off, come on, making a millionaire. You guys have every year, you're going to have, hey, but we wanted to do, we're thinking about doing this. Well, let's go run the numbers. That's why I love what we get to do for a living is because we, we get to work with our successful clients and kind of build this together. It's not just a one-off thing.

• 47:58Speaker 02

  And so what we're gonna do is we're gonna come up with some of the quantitative stuff. We're gonna come up with some options. We're gonna crunch some numbers. And hey, here's some stuff that you ought to think about, that you should look at. But I've got some homework for you guys, and it's more on the qualitative side. I just kind of jot down some notes. If I were you guys, between now and the time that we kind of send you some of our thoughts, I do some research on both of your 401Ks. You said yours is a Fidelity, yours is a Census. How good are the investment options inside the 401K? Are they robust? Are they diverse? Because there might be a strategy where it makes sense to roll your IRAs into your 401K, zero them out, and open up a backdoor Roth opportunity. So now, all of a sudden, instead of y'all just doing 7,500 into regular IRAs every year, you get to do 7,500 into Roth IRAs every year.

• 48:42Speaker 02

  And you can start growing some tax-free money.

• 48:44Brian Preston?

  That's a boom shakalaka.

• 48:45Speaker 02

  That's a boom shakalaka is the technical financial term for that. The other thing is, you guys really need to sit down and talk about what is it that we want? You're now at the place where you get to make financial decisions, not so much because you have to, but because you get to, or because you want to. But you have to define that. Do we want to do real estate? Do we want to manage this? Do we both want to work? Do we... So you need to have some conversations around that. And in those conversations, you figure out how deep you want to go into real estate. Is real estate a job for you? Or is it, hey, part of our financial life is that we have some real estate properties? Because those are two very different things. How do you want to approach it, and how do you want to attack that?

• 49:28Speaker 02

  And then, I just put the last thing here. I think it'd be worthwhile for you guys to sit down and calculate the cost of frugality. At your income, at your savings, at your assets, you could go buy a new car tomorrow, right? You're at the place where you could do that, but you have this mentality that we want to drive it all the way until the wheels fall off. And that's okay. Again, money is nothing more than a tool that allows you to accomplish the goals that you have. But is... Are you doing that because it's what you want? Or are you doing that just because something's hardwired in you guys? Because if there are things, would being in a newer automobile give you more peace of mind, make family road trips more fun? Whatever the thing is, is there a cost that you are paying?

• 50:11Speaker 02

  Unnecessarily, needlessly to be as frugal as you are because it's okay to graduate and grow out of that. So a lot of conversations for y'all to have and a lot of calculations for us to do.

• 50:23Brian Preston?

  Yeah, I just, the big thing is, I, because I love, I immediately, I mean, kudos to y'all, y'all's superpower. I was in love with y'all the first five minutes. I mean, when I heard about, when I heard that, you know, the way y'all met and then the conversations of what y'all own, I'm like, this is the coolest couple out here. So you, you guys are crushing it.

• 50:40Speaker 05

  Thank you. Also, the like is mutual. So thank you. You guys are great.

• 50:44Speaker 02

  Yeah, we can delete the app.

• 50:49Speaker 02

  Awesome. Thank you, guys.

• 50:50Speaker 05

  Thank you.

• 50:50Speaker 02

  Thank you. Brian, what a great conversation we had with Becca and Christian. For two folks in their mid 30s, they're kind of crushing it.

• 50:59Brian Preston?

  Well, I didn't even hide the fact that I, I thought I loved these people. I mean, the fact that the way they met and then they started talking about personal finance and they both had rental properties. These are my folks right here.

• 51:10Speaker 02

  It kind of all went together nicely.

• 51:12Brian Preston?

  I will tell you, what I think is amazing about them is not only did they have a personal finance focus, but they got into real estate and sometimes it's better to be lucky than good because man, oh, man, did things go a little different once you and I crunched the numbers than what we even kind of laid out in the show for them about their rental property.

• 51:33Speaker 02

  Yeah, it was interesting because we were recording. I was kind of, I don't want to say like soured on them, but there was not like an incredibly compelling story to both those rental properties. But then we began to peel the curtain back a little bit and actually run the numbers and what we found was absolutely fascinating. So what we did is we took the information they shared with us. We kind of went back to the drawing board. If you remember, they told us total rents coming in. For the duplex, it was just a hair under 26,000, 25,800. And for the quadplex, it was just a hair under 40,000, 39,900. And they said that realistically, they were kind of just about breaking even. And while that may have been true from a cash flow perspective, I would not describe either one of them as break even investments.

• 52:17Brian Preston?

  Yeah. I mean, what I think is interesting, if you would have asked me while we were In real time with them. I was like, we're going to tell them to sell the duplex. I kind of knew that they need to invest more into the quadplex. If we can double the rent, let's, let's make some magic happen here. But also I couldn't, we couldn't definitively say that because there was a lot of cloudy or muddy water there. Because they didn't know how much was their, their mortgage payment that was just paying back the mortgage. They didn't know how much were capital improvements, like when they put roof on or, or any of the repairs that were going to, in the long term, be better for the investment. They weren't getting a clear reflection on what the actual cost or operating expenses were,

• 52:57Brian Preston?

  or what the return on their equity really was. But when we kind of looked at this, it was like, I mean, it kind of blew my mind on how good, not only, because remember, let's focus on, this is unique. Where they live, there's, there's actually duplexes and quadplexes. When they brought this during around the COVID era, they got super low interest rates. They've gotten really good rents compared to what their initial low cost purchase. This stuff is kind of amazing when you actually peel back the numbers.

• 53:29Speaker 02

  Yeah. When we stripped it back and looked at the numbers, this is what we found. When you pay a mortgage, part of your payment goes to principal and part goes to interest. When you're thinking about the cost, it's really just the interest cost you want to factor in. Cause principal payments are sort of like a forced saving mechanism. You're saving it inside of the equity of the property. So when we just look at the interest expense on the duplex, remember the rate was 2.75%. They were spending about $5,600 in interest and for the quadplex at a rate of 3.625%.

• 54:00Brian Preston?

  It's so low.

• 54:01Speaker 02

  They were spending just a hair under $6,500 in interest. So the money going towards the principal was sort of like this forced savings. So even though they weren't necessarily having a ton of cash flow come their way, because the mortgage payment and the rental payments were roughly equal. It was looking pretty good. So from there, we said, okay, well, let's look at what the average operating expenses are. Let's take the capital expenditures out and only look at the operating expenses. What we found was for the duplex, it was operating on a year-over-year basis with about $11,000 of expenses. And for the quadplex, it had about $16,500 of non-capital expenses. So when you continue like following that down and

• 54:45Speaker 02

  you look at how the numbers played out, the actual net profit on the duplex came into just under $9,000 a year. And then the quadplex came in at 16,900. And so when you look at these properties, now we know what the actual dollar figure of return is. We have to compare that to the actual capital investment or the equity they have in the properties. And if we adjust the values of the properties closer to market value, because and look, me and you love being conservative. We do it all the time. But I would argue in the world that they were living, they were perhaps even a little overly conservative. Agree? Disagree?

• 55:23Brian Preston?

  For sure. I mean, I already see the numbers here, but I'm being a math nerd. I mean, we're gonna do this off of return on their equity, not their initial investment. The number would even be even bigger if we base this off of just what the down payment was on their initial property, because this was levered debt. But they have $100,000, like the duplex, $100,000 of equity right now. And by showing right here, they're making profit of close to $9,000.

• 55:49Speaker 02

  9% yield on their cash.

• 55:50Brian Preston?

  9% yield on that. That's pretty incredible. Once you strip out what's capital investments, you strip out all the, you know, the principal payment on the mortgage. And you look at the quadplex. I mean, they've got $125,000 of equity. You can quickly see that they've got profit of $17,000. Yeah, that's like a 13 and a half percent. And here's what's even so wild for me. We, as I already alluded to. I would have told you, we were going to say, sell the duplex, but after seeing these numbers, we can't do that.

• 56:20Speaker 02

  You can't, it's too good.

• 56:21Brian Preston?

  But they told us, because there's something that we need to at least address, is that they said, hey, if we invest in this quadplex and we put approximately $80,000 into this, we could double

• 56:33Speaker 02

  Double the rent.

• 56:33Brian Preston?

  Our rent. So I want you to, I want you to kind of internalize what that means is, is that this thing that already is at 13 and a half percent, if we could just put a little bit more money into it, we could double the rent, which would easily put their rate of return or rate on, return on equity, over 20% a year.

• 56:55Speaker 02

  Well, $16,000 into an $80,000 investment, that's unbelievable. It's a 21% rate of return on that.

• 57:02Brian Preston?

  They're like a credit card company.

• 57:04Speaker 02

  They have to do it, right? It's too compelling. They have to do it. And so the question that, the homework that I would give for them is they need to have a conversation, okay, what do we want? Obviously, we were wondering if there was a lot of merit to either one of these properties. We have now discovered that when we actually look at the numbers, they are both incredibly compelling investment opportunities.

• 57:22Brian Preston?

  So don't sell either one of them.

• 57:23Speaker 02

  So it doesn't make sense to sell them. They didn't need to figure, okay, well, what do we want our lives to look like? Do we want to add on to our real estate? Do we want to be real estate managers? Do we want to hire some sort of management company? Because I would argue, at the numbers that they have, they kind of have the freedom to choose. They can pick and choose how they want to interact with this and what they ultimately want their wealth building journey to look like.

• 57:43Brian Preston?

  Well, and also, they ought to go ahead and try to figure out if they can come up with a plan to do the improvements.

• 57:49Speaker 02

  That's right.

• 57:50Brian Preston?

  But I think the good news is they have a big shovel.

• 57:51Speaker 02

  Yep.

• 57:52Brian Preston?

  They have a really good income coming in. They have a lot of margin separation from what their living expenses are, from what they bring in. I think that within less than a year, they could pay for those improvements on the property, on that quadplex in the first year, and then get all the fruit, all the yield off of those improvements. So, super powerful stuff. I thought it was valuable. I think there was, there was another question, Bo, and I want to know what we put together on this. What does their retirement look like?

• 58:19Speaker 02

  Well, so again, one of the things we say that makes a lot of sense is they ought to figure out how did they come up with the capital to improve the Quadplex like that makes sense. And one of the ways they had talked about potentially doing that was backing down their savings. Kind of doing like a little bit of coast five thing and saying, okay, what if all we do is just the 401k? And there's a, if I put in 10%, I get a 10% match. What does that look like? How does that play out? Well, what we found is if they do that and they only save up to that 10% and then they get 10% match, that's going to be a total of about $22,000 a year going into the 401k. Well, they already have $527,000 of liquid investment assets saved up. Just saving that, and if we assume an eight and a half percent rate of return from now until they get to retirement,

• 59:04Speaker 02

  by age 55, they'd have almost a $4 million portfolio, not including the real estate, not including those assets. If they did this all the way out until age 60, it's over $6.2 million with just Christian saving that 10%. So again, they've done a lot of the heavy lifting early on that gives them tons of flexibility and margin to figure out how their future should look.

• 59:28Brian Preston?

  Well, if you look, even for my inflation trolls, that's still for 55, present value of about $89,000 a year. At 60 years old, the equivalent of today's dollars of close to $120,000 a year. That's $10,000 a month.

• 59:43Speaker 02

  I love it.

• 59:44Brian Preston?

  I mean, they have, talking about poster child for why if you get in early and do it often on saving and investment, you get lots of flexibility, lots of opportunities. So they are going to be a good definition of good decisions on real estate. Good decisions on investing early is going to allow them to have this coast opportunity and still check all the boxes on what they want to do financially.

• 1:00:07Speaker 02

  So a few piece of homework items I have for them. Number one, figure out how we come up with the capital for the $80,000 to improve the quadplex. Number two, figure out when it comes to real estate, what do we want our life to look like? How actively involved we want to be? How much do we want to expand? How much we want to add to it? And then number three, I think that would really be helpful for them to think about is they're going to have options earlier on in life. We've already said the way that they're going to be saving from a liquid standpoint is in their 401k. So if they leave the workforce before age 55 or before age 59 and a half, they are going to have to figure out how do we bridge that gap, right? If we're saving all in qualified assets and we want to leave at 50, we might need something to get us from 50 out to 59 and a half. Maybe that's

• 1:00:50Speaker 02

  real estate income. Maybe that's some sort of other passive income. But I think they are so far ahead of the curve at this point, they ought to begin thinking about what that

• 1:00:58Brian Preston?

  looks like. Yeah, those taxable brokerage accounts is going to probably be able to create a nice bridge account in there too. But what an awesome couple. I mean, I think I led with it. This was, I quickly knew I loved this couple just from the, the hearing how they met and so forth. And I just can't wait to see what the future builds for them. If somebody else wants to come on Making a Millionaire, where do they apply?

• 1:01:18Speaker 02

  Yeah. If you'd like to be a guest on Making a Millionaire, you can go to moneyguy.com/apply. Or if you want to check out any of our tools and calculators, you can go to moneyguy.com/resources.

• 1:01:27Brian Preston?

  Becca, Christian, thank you. This was an absolute pleasure. We loved creating this content for you and hopefully many out there in our financial mutant universe are going to get a lot of benefit of this. I'm your host, Brian, joined by Mr. Bo, Money Guy Team, out.

• 1:01:47Speaker 02

  Making a Millionaire is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners at Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of Abound Wealth Management.