Speaker 1: Welcome to Hout of Money.
Speaker 2: I'm Joel and I am Matt.
Speaker 1: Today we're answering your listener questions. That's right, Joel, We've
Speaker 1: got listener questions to get to. Today.
Speaker 3: We're gonna hear from a listener who is wondering if
Speaker 3: hsas are overrated. Another listener he's been snagging a thirteen
Speaker 3: percent dividend yield.
Speaker 2: Uh huh.
Speaker 3: Yeah, we're gonna talk about some single stock investing. Another
Speaker 3: listener is interested in the steps to get into real
Speaker 3: estate investing. We'll get to all that and more during
Speaker 3: our Listener Question Monday episode. Here at how to Money.
Speaker 1: Two different kinds of real estate investing, one which actually
Speaker 1: takes more effort than the other, which is kind of,
Speaker 1: you know, pretty simple right through, done through your keyboard.
Speaker 1: And we have different opinions on both quick, frugal, frugal
Speaker 1: or cheap for you though, Matt, you just had your anniversary.
Speaker 1: Congrats nineteen years Yeah, thank you, thank you. It's impressive.
Speaker 1: We've told Kate for a long time she could do better.
Speaker 1: She never listened to us.
Speaker 3: That's what I That's what I told her. It's it's
Speaker 3: the best, it's not a heist. What do you call it,
Speaker 3: it's the I've pulled it off for nineteen years.
Speaker 1: Wool over her eyes. Yes, you have so sour. Our
Speaker 1: anniversary's coming up in the fall, and we just it's
Speaker 1: been a minute since we've had a adults only the
Speaker 1: two of us trip, like an awesome one, and so
Speaker 1: I my mom was telling me about, Wow, this is
Speaker 1: like really cute place north of Niagara Falls. You should
Speaker 1: check it out. And I started to look it up.
Speaker 1: I was like, this place, it's awesome. So I think
Speaker 1: we're going.
Speaker 2: To go there, and sounds very romantic.
Speaker 3: I feel like there's got to be a spot near
Speaker 3: Niagara Falls called Lover's Leap. She should probably go visit
Speaker 3: because somebody one hundred years ago jumped to their death
Speaker 3: because somebody would marry them or something, right.
Speaker 1: Carve our initials into a tree or something like that
Speaker 1: to mark the occasion. Well, I was I got the
Speaker 1: okay for Emily, but I'm curious to hear your take
Speaker 1: on this. Because the by far, the cheapest ticket to
Speaker 1: get up there to Buffalo, New York was using Frontier Airlines,
Speaker 1: and the round trip price on Frontier round trip NonStop
Speaker 1: from Atlanta was eighty eight dollars eighty eight. Oh my gosh,
Speaker 1: I'm like, you has a steal, dude. And then at
Speaker 1: every other airline was at least triple that often quadruple
Speaker 1: or more. Wow, they had the best flight times, And
Speaker 1: it was like, you just got to go to Buffalo.
Speaker 1: But yes, and of course with Frontier, like you pay
Speaker 1: extra foreverything. So you want to bring a bag on
Speaker 1: board to carry on, You're gonna have to pay quite
Speaker 1: a bit of money for that.
Speaker 2: Okay, I know what your question is.
Speaker 1: I talked to Emily about this and I was like,
Speaker 1: you said, friguler cheap. I'll say we can get this
Speaker 1: great B and B we can pay more eat at
Speaker 1: this nice restaurant. But are you down with jumping through
Speaker 1: the Frontier hoops so we can save a ton of
Speaker 1: money on the flight?
Speaker 4: There?
Speaker 1: Is it frugal? Chief for me to try to do
Speaker 1: that on anniversary right out.
Speaker 5: Of the gate?
Speaker 3: Frugal dude? Because you you led with the punchline, which
Speaker 3: is that Emily approved it, so there's nothing to discuss.
Speaker 3: If it's okay with her, then it's so it should
Speaker 3: be okay with you. It's okay with me.
Speaker 1: Yeah, she debated it, though you know she was. She
Speaker 1: was not like one hundred percent sure off the bat. Yes,
Speaker 1: this is a great idea, but I think part of
Speaker 1: it was they were they were truly the best flights.
Speaker 1: But then the story she doesn't care whether or it's
Speaker 1: the best flights.
Speaker 3: She cares about whether or not she can take whatever
Speaker 3: she wants to wear on your trip.
Speaker 1: You know, like you don't want to get on this
Speaker 1: flight to come home, right right?
Speaker 2: Right? Oh gotcha?
Speaker 3: So the best flight from the Yeah, yeah, I'm paying
Speaker 3: my attention to that as well.
Speaker 2: Yeah, I used to.
Speaker 3: I used to always look at, okay, whatever is the
Speaker 3: most affordable. Yeah, I am prioritizing now. Uh, just fast,
Speaker 3: fastest overall flight time. To me, that's the biggest thing.
Speaker 3: I just don't want to spend and I don't care
Speaker 3: if it's I'll even do a uh what do you
Speaker 3: call it layover? If it means because sometimes they'll be
Speaker 3: a direct flight that wait, does that even make sense?
Speaker 3: Is there a direct flight that's sometimes slower?
Speaker 1: No, But but there's some like especially with Southwest, there
Speaker 1: are some layovers where you don't even get off the plane,
Speaker 1: where you stay on. I don't care. Yeah, it's they're
Speaker 1: just turning the plane and and they take some passengers
Speaker 1: getting off, new passengers getting on. I've done that before
Speaker 1: and it saves so much money. Was it was well
Speaker 1: worth it? Sadly though, Sadly Frontier emails me like days
Speaker 1: later and they're like, we have completely changed your itinerary
Speaker 1: and now it's like one stop in Florida and it's
Speaker 1: a much longer trip.
Speaker 2: Wait, you're going down to Florida to go to New York.
Speaker 1: Yeah, it's all gotten way worse. It's gotten so much worse.
Speaker 1: So I had to cancel these tickets that were such
Speaker 1: a deal, and I had to book a more expensive
Speaker 1: airline anyway, which was just really annoying to a frugal
Speaker 1: guy like me.
Speaker 2: Well who'd you end up booking Delta? Oh my gosh,
Speaker 2: so primo?
Speaker 1: There no other options, man, I think I don't think
Speaker 1: there was legitimate options.
Speaker 2: So yeah, well what Also?
Speaker 3: The other thing I was going to say is that
Speaker 3: how much how much does it cost to check a
Speaker 3: bag with Frontier?
Speaker 1: Well it depends. There are like packages that you can
Speaker 1: buy ahead of time.
Speaker 3: Ahead of time, like obviously if they do it at
Speaker 3: the gate, they really stuck you. Oh wait, did we
Speaker 3: fly Frontier When we went down to the Dominican we did,
Speaker 3: and the people in front of us it was too big,
Speaker 3: and then they hit them with like was it one
Speaker 3: hundred bucks?
Speaker 2: It was.
Speaker 1: It was at least one hundred dollars. Yeah, it was
Speaker 1: on the way, Yeah it was. So you really got
Speaker 1: to know that your bag's gonna fit, and you could
Speaker 1: check ahead of time, like our Codo Pacsi twenty eight.
Speaker 2: Lead leader outa.
Speaker 1: They're they're perfect because they do fit in there if
Speaker 1: it's not overpacked. But you gotta you gotta know your
Speaker 1: luggage dimension size before you fly fly Frontier and try
Speaker 1: to jump through those hoops.
Speaker 3: I will say one additional factor is the time of
Speaker 3: year that you go, because if it's during the summer
Speaker 3: and you're not wearing a whole lot of layers, guess
Speaker 3: what your ability to pack light easy?
Speaker 2: Right?
Speaker 3: Yeah, But I'm thinking about the trip Kate and I
Speaker 3: would like we outside. We'velown into Denver, which is a
Speaker 3: very affordable flight out of Atlanta, and because of that,
Speaker 3: we've gone there multiple times. Let the deal and dictate
Speaker 3: where it is you travel. But we've gone hiking late
Speaker 3: in the fall where there's like it's snowed right multiple inches,
Speaker 3: which means like we've got specialty gear, We've got lots
Speaker 3: of layers that is more difficult to pull off. With
Speaker 3: the coat of Pacci, you have to really limit your
Speaker 3: footwear and whatever else you're bringing if if it's winter months,
Speaker 3: but if it's uh, yeah, summer months, it's easier to
Speaker 3: pull off the carrier.
Speaker 1: Yeah, we were going to have to wear our coats
Speaker 1: because that's what we're gonna be able to pack them.
Speaker 1: But now we don't have that problem. The only problem
Speaker 1: is I spent too much money. So should we mention
Speaker 1: the beer math that we're having on this episode?
Speaker 2: Let's do it. Let's do it.
Speaker 1: This one is called the Lakeside kolsh By Lake of
Speaker 1: the Woods Brewing Company. Matt's who the beautiful turquoise can?
Speaker 3: It is a pretty it's a pretty can. I just
Speaker 3: decided that from now on, what we'll say is would
Speaker 3: you like to introduce because when you say let's or
Speaker 3: should we first person plural is not specific enough. So
Speaker 3: from now on I shall say, Joel, you want to
Speaker 3: tell listeners how it is that they can send us
Speaker 3: their listener question.
Speaker 1: I'm happy to do that. So if you have a
Speaker 1: money question. We'd love to take it on the next
Speaker 1: ask htm episode. Just go to how to money dot
Speaker 1: com slash ask for the simple directions, or literally just
Speaker 1: record your voice memo on the app on your phone,
Speaker 1: email it over to us how to moneypot at gmail
Speaker 1: dot com. Let's get to a bunch of good ones.
Speaker 2: Matt, Uh. Yeah.
Speaker 1: First one is going to specifically be about hsas. Somebody
Speaker 1: is like, I've heard you talk about them for so long,
Speaker 1: but I still got some questions.
Speaker 2: That's the kind of introduction I was looking for.
Speaker 6: There we go, Hey, Matt and Joel, this is El
Speaker 6: in Minneapolis. I feel like every time I have a
Speaker 6: money question, I reach out to you, So here is
Speaker 6: yet another one. I have a question about HSA's after
Speaker 6: listening to yesterday's episode. I don't have access to an HSA,
Speaker 6: but I'm still curious. Nonetheless, you talk about the benefits
Speaker 6: of HSA and all of the triple tax savings because
Speaker 6: basically the money is never taxed, and I understand all
Speaker 6: those benefits. However, the thing I don't understand is how
Speaker 6: can these accounts be so beneficial if the money in
Speaker 6: there can only be used for medical expenses? So, say,
Speaker 6: if I pay one hundred dollars bill now with cash,
Speaker 6: and I don't use my HSA, But then I use
Speaker 6: that receipt later and get one hundred dollars, That money
Speaker 6: is going to be worth less when I try to
Speaker 6: cash in in twenty years. So I understand that the
Speaker 6: HSA account in general has more money in it because
Speaker 6: that one hundred dollars was able to be in the
Speaker 6: stock market, et cetera. But if I can only get
Speaker 6: the money out for medical expenses, is the benefit that
Speaker 6: my medical expenses when I'm older are going to be
Speaker 6: more and so overall I'm spending less or what is
Speaker 6: the true benefit if it's only from medical expenses. Putting
Speaker 6: aside that if you reach a certain age, you can
Speaker 6: take the money out and treat it like a traditional wrath,
Speaker 6: which why not just put.
Speaker 2: Money into a traditional wroth?
Speaker 6: Okay, if you can convince me, that would be great.
Speaker 2: Bye, Matt.
Speaker 1: Do you're best convincing?
Speaker 3: Well, I'll first say that Elle said in what you
Speaker 3: say in twenty years it will be worth less. She
Speaker 3: didn't say it'd be worthless. It'd be worth less because
Speaker 3: I'm assuming she's talking about inflation. But yeah, well, thank
Speaker 3: you for your question, and we will convince you. I
Speaker 3: generally say too that most people's HSA will be worth
Speaker 3: less in twenty years because most people aren't investing in
Speaker 3: their age.
Speaker 2: They're not investing the dollars.
Speaker 1: Yeah, and when you look at the numbers, I think
Speaker 1: a report just came out, it's somewhare, depending on who
Speaker 1: you believe, fifteen to eight ten percent of people invest
Speaker 1: the money that's in their HSA. So the vast majority
Speaker 1: of people who have in HSAC and are sticking money
Speaker 1: in there, they're not investing that money, and so they
Speaker 1: are not taking full advantage of the account.
Speaker 2: Yeah, okay.
Speaker 3: So on that note, then, so I punched the numbers
Speaker 3: in and the example she gave was one hundred bucks,
Speaker 3: and were you to actually invest those dollars, assuming an
Speaker 3: eight percent rate of return on that one hundred bucks,
Speaker 3: in twenty years, you're not looking at it being worth less.
Speaker 3: I guess we don't know what inflation is going to be,
Speaker 3: but it's gonna be worth more at four hundred and
Speaker 3: sixty six bucks, okay, And so you can easily apply that.
Speaker 3: So instead of one hundred, you're looking at a thousand.
Speaker 3: It's worth four thousand six hundred and sixty dollars even
Speaker 3: more right if you attack on a few extra years
Speaker 3: from twenty to twenty five, maybe even to thirty and so,
Speaker 3: I don't know, I'm not going I'm to me, that's
Speaker 3: an oppressive amount of money, right, it's not like life changing,
Speaker 3: but the power of compounding is still there in Dell,
Speaker 3: I want to make sure that you fully understand that,
Speaker 3: like truly you will see your money grows substantially by
Speaker 3: making sure that you are investing it as opposed to
Speaker 3: it sitting there as cash.
Speaker 1: Yeah, when it adds that first important to mention that
Speaker 1: it's tax free compounding, right, because the money goes in
Speaker 1: and you don't pay tax, the money grows, you don't
Speaker 1: pay tax on that, and you don't pay tax when
Speaker 1: you pull the money out. But Matt, that is that
Speaker 1: is the benefit. But why if you had access to
Speaker 1: an HSA, would you potentially go with the HSA over
Speaker 1: a roth iray like El saying that seems like the
Speaker 1: most straightforward the thing is to stick it in the
Speaker 1: roth ira and just bypass the HSA.
Speaker 3: Well, that's another point that I think there might be
Speaker 3: some lack of clarity.
Speaker 2: I guess which l you can do both.
Speaker 7: Right.
Speaker 3: It sounds like you understand the basics of how the
Speaker 3: HSA works, right, you keep up with your medical expenses
Speaker 3: and essentially you reimburse yourself down the road. But the
Speaker 3: fact is you can do that HSA in addition to
Speaker 3: your roth ira. And so that means for this year,
Speaker 3: you've got a seventy five hundred dollars maximum contribution.
Speaker 2: To your wrath.
Speaker 3: You're the way you're talking, it makes me sound like
Speaker 3: maybe this is just for you, so not NATUSA for
Speaker 3: a family, which means you can contribute an additional forty
Speaker 3: four hundred dollars if you do have a family, and
Speaker 3: I'm just not aware of that. It's eighty seven fifty
Speaker 3: I believe. But that's in addition to the roth ira.
Speaker 3: So yes, not only are we talking about the roth
Speaker 3: ira roth ira contributions, which are great, but the HSA,
Speaker 3: which has the triple tax advantage, which is even better.
Speaker 1: So yeah, yeah, it's it's the bothand approach, right, and
Speaker 1: and that is ideal, right, And that means even on
Speaker 1: top of that, if you're going to actually be able
Speaker 1: to utilize the HSA the way the way we would
Speaker 1: like you to, maybe not the way it's intended, because
Speaker 1: I think, for truly I don't. I don't know that
Speaker 1: the people who created the HSA foresaw that people would
Speaker 1: be investing and using it the way that personal finance
Speaker 1: nerds have turned it. You know, they've turned it into
Speaker 1: this glorious account for retirement. I don't think that's the
Speaker 1: way it was planned at the beginning. But the great
Speaker 1: thing is, yes, you avoid complete taxation the whole way
Speaker 1: through the other thing that she mentioned in here, well,
Speaker 1: what if I don't have enough healthcare expenses? Well, I
Speaker 1: will say this. There is a cap right forty four
Speaker 1: hundred dollars a year, and let's say over twenty five years,
Speaker 1: you were to put in that amount of money mass
Speaker 1: you did an example of one hundred dollars. Well, if
Speaker 1: you put forty four hundred dollars in up to the max,
Speaker 1: you would have something like four hundred thousand dollars after
Speaker 1: twenty five years. And you might say that is so
Speaker 1: much money. I don't know that I'm going to incur
Speaker 1: all the medical costs. That would mean that I could
Speaker 1: redeem it and actually not pay tax. And that might
Speaker 1: be true if you're an incredibly healthy person, but you
Speaker 1: also have to look at what is available, like in
Speaker 1: terms of what qualifies as a deductible expense for an HSA.
Speaker 1: So it's worth digging in to see because there are
Speaker 1: what lasik surgery copays, flu shots, ibuprofen potentially even with
Speaker 1: a doctor's note, like gyms and massage. And then when
Speaker 1: you go down the road when healthcare expenses are getting
Speaker 1: even are becoming even larger in your life, talking about
Speaker 1: long term care, talking about Medicare premiums. I mean, there
Speaker 1: are all sorts of things, ways in which your health
Speaker 1: costs in all likelihood on average, are going to balloon
Speaker 1: in your older age, and you'll be glad that you
Speaker 1: socked away. I think, this big stash of money to
Speaker 1: pay for those health care costs, and you're not worried
Speaker 1: about increasing your tax bill by pulling that money out.
Speaker 1: So yeah, I don't know that it's an either or.
Speaker 1: I think it is a kind of a both, and
Speaker 1: ideally that you use both accounts. But even if let's
Speaker 1: say over the next over the next ten to fifteen years,
Speaker 1: you're only accumulating fifty grand worth of cost in terms
Speaker 1: of medical expenses, I think later on in life you're
Speaker 1: going to see a big uptick and it'll be nice
Speaker 1: to have the stash.
Speaker 2: Yeah, it's nice.
Speaker 3: And like a second ago, you said something about the
Speaker 3: you know, the fact that this is a glorious retirement account.
Speaker 3: And I think the core of what El's getting at
Speaker 3: is that it's just not that much money based on
Speaker 3: the way she's currently spending, right, And that's kind of
Speaker 3: based on the fact that she gave an example of Hey,
Speaker 3: I've got one hundred dollars, Like, okay, what's that going
Speaker 3: to turn into? And I gave example of like fouruner
Speaker 3: and sixty six bucks. It's like big whoop, fourner sixty
Speaker 3: six bucks, right, Like that is not very much money.
Speaker 3: And so all and if she is healthy, and if
Speaker 3: she does continue to be healthy, does not have medical expenses,
Speaker 3: I will, like I agree that it's not going to
Speaker 3: make as big of a difference. And so depending on
Speaker 3: the person, I will readily concede that the benefit is
Speaker 3: more in principle as opposed to how much you're actually
Speaker 3: going to be able to set aside in practice if
Speaker 3: you don't aggressively sock money away within your HSA, and so.
Speaker 1: In that even if you even if you only contribute
Speaker 1: up to fifty percent of the cap. And let's say
Speaker 1: you have two hundred thousand dollars in retirement and you
Speaker 1: can tap those receipts and it's super flexible. That I
Speaker 1: love the flexibility the account. And then what she mentioned
Speaker 1: too is that at age sixty five, you can turn
Speaker 1: the account. I think she said a traditional wrath but
Speaker 1: into essentially what is a traditional IRA that you will
Speaker 1: get taxed on. But that's great, Like that just means
Speaker 1: it's got an even extra added lever of flexibility.
Speaker 2: Ex.
Speaker 1: Yeah, you'll be taxed on it, given if that is
Speaker 1: what happens down the pike for you, But that is
Speaker 1: better than it being It's kind of like the way
Speaker 1: the five twenty nine like has added flexibility. Now this
Speaker 1: is still a flexible account, even if it's not ideal
Speaker 1: to use it under those traditional IRA circumstances. It doesn't
Speaker 1: mean that that's a loss. I think that means.
Speaker 3: It's definitely not a loss. It's just it doesn't quite
Speaker 3: have the appeal or the ring. I think if and
Speaker 3: I'm going to assume that she is this is just
Speaker 3: for herself, you're looking at forty four hundred dollars versus
Speaker 3: I mean, it's all relative, right, if you've got and
Speaker 3: most people have a relatively limited amount of money that
Speaker 3: they can set aside for retirement. You compare a forty
Speaker 3: four hundred dollars cap to employer sponsored for one K.
Speaker 3: That's a tremendous amount of money, right, Like it makes
Speaker 3: me think about it's like minitoring, and it's majoring in
Speaker 3: the minors, you know, and kind of being overly fixated
Speaker 3: on some of the smaller details, like if you if
Speaker 3: somebody's if somebody says, hey, oh, yesterday, I was able
Speaker 3: to get a fifty percent discount when I filled up
Speaker 3: at the gas station, I'm like, all right, hook me up,
Speaker 3: like tell me where to go. That's a great deal.
Speaker 3: But there's a big difference between that and someone saying, hey,
Speaker 3: I just got a five percent discount when I bought
Speaker 3: my car yesterday. Okay, Well, on paper, the fifty percent
Speaker 3: is a bigger discount, but we're talking about a smaller
Speaker 3: sum of money as opposed to a five percent discount
Speaker 3: on a larger purchase, which is going to be much
Speaker 3: more significant. So in practice, that's I guess that's that's
Speaker 3: kind of what I'm getting at that on paper and principle,
Speaker 3: you look at that triple tax advantage, quadruple tax advantage.
Speaker 3: If you're talking about this coming straight out of your
Speaker 3: paycheck where it's not even getting hit with payroll tax,
Speaker 3: you cannot beat it. Yes, And I'm not gonna let
Speaker 3: that one go, like there is nothing else that is
Speaker 3: treated that favorably. But I think it comes down to
Speaker 3: how individuals are going to use it, how much they're
Speaker 3: willing to set aside, and the additional work right, like
Speaker 3: the additional keeping up with the expenses, keeping the Excel
Speaker 3: file on hand, or the Google sheet keeping that updated.
Speaker 3: It's just another step that I think is a barrier
Speaker 3: for some folks. It's absolutely the most tax efficient, optimized
Speaker 3: way to go about doing it, but depending on your
Speaker 3: medical spending and how much you're prioritizing your other accounts.
Speaker 3: I can understand if in practice some folks are less
Speaker 3: excited about it, that's all. Yeah, Yeah, and I get
Speaker 3: that too. I guess I think Elle has just she
Speaker 3: seemed to really understand how the account works by the
Speaker 3: way she praised her question, and then still there was
Speaker 3: a disconnect between does this account make sense? And it
Speaker 3: sounded like I think she said she doesn't even have one.
Speaker 3: She's just kind of theorizing, what if I do have,
Speaker 3: actis to one at some point. And I think the
Speaker 3: kind of person that she is, based on her depth
Speaker 3: of knowledge of this account and the way she thinks
Speaker 3: about her money, it probably is an account you want
Speaker 3: to take advantage of if you're the kind of person
Speaker 3: who's like I can't max out my ROTH yet I'm
Speaker 3: barely getting the match in my four O one K. Well,
Speaker 3: the HSA is a can to kick down the road
Speaker 3: for another day, and it's a great goal to have
Speaker 3: for years down the road, for you to be able
Speaker 3: to contribute at least something to it. But even though
Speaker 3: I get what you're saying, and I think it makes
Speaker 3: total sense, even if you have access to the HSA,
Speaker 3: it doesn't mean it's the first place to go, even
Speaker 3: though it has the best tax benefits. That's right, all right,
Speaker 3: we got more to get to. We're gonna hear from
Speaker 3: a listener who is interested in rehabbing her home. We'll
Speaker 3: get to that question in more right after this.
Speaker 1: All right, we're back, Matt. We're taking a listener questions
Speaker 1: and this is a great one. I'm looking forward to
Speaker 1: taking this one. It is specifically out. What if I've
Speaker 1: invested in a single position and I'm underwater.
Speaker 7: Hey, Matt and Joel, this is Alex and I've been
Speaker 7: a listener since twenty eighteen, and my craft beer equivalent
Speaker 7: is craft beer. Although I don't trick as much these days.
Speaker 7: Stuff is expensive. I'm trying to save and invest more
Speaker 7: these days so I can be more financially stable when
Speaker 7: I moved to the Philippines whenever, that is any who.
Speaker 7: My question is that I'm kind of locked in with
Speaker 7: a rate stock, specifically A G and C for the
Speaker 7: past few years. I bought more and more shares in
Speaker 7: the early twenty twenties. Stock was going up and up
Speaker 7: in those years, but has since decreased to pre COVID days,
Speaker 7: but I still collect the monthly dividends as reats do.
Speaker 7: My current plan with the stock is keep it until
Speaker 7: it goes up to the break given point and sell
Speaker 7: some day. Meantime, I bought more shares when the market
Speaker 7: dipped after the tariff announcements last year, so you know,
Speaker 7: buy low, sell high. So I'm still buying lower than
Speaker 7: the average price with the dividends I receive from that rout.
Speaker 7: Should I stick to this plan or is there a
Speaker 7: bear way out? Thanks for all you guys do. If
Speaker 7: you guys ever find yourselves in your neighborhood to the
Speaker 7: north in Chattanooga, I'll buy you guys a few beers
Speaker 7: from the bruise here cheers.
Speaker 1: That was the Joe Suburb, a suburb of Atlanta, right,
Speaker 1: try to Nigga.
Speaker 3: Basically, you were up there all the time, Joel, I
Speaker 3: feel like you might be able to take Alex.
Speaker 2: Up on his offer.
Speaker 1: True. Now, I am My sister lives there, so I
Speaker 1: try to make it up there a couple times a
Speaker 1: year at least, and I love that little town.
Speaker 2: Hit up.
Speaker 3: What's the bakery? Need Love's Bakery Place is awesome? Sell
Speaker 3: They also do coffee really well there. You know what
Speaker 3: we need to do is get up to Cloudland Canyon
Speaker 3: and do like a double digit run.
Speaker 1: There's fifty k in December.
Speaker 3: Come on, we don't need to do that. We just
Speaker 3: need all to do which ye do. Let's just let's
Speaker 3: just do like a cool fifteen miles, you and me
Speaker 3: and anybody else who wants to join. Uh for any
Speaker 3: question of it, how about that, maybe.
Speaker 2: We can cut it down.
Speaker 1: I'm down for that, Uh, well, actually, by the way,
Speaker 1: I'm random. Speaking of Chattaningga. My sister said, there's a
Speaker 1: new French bakery that is off the chain, super good.
Speaker 2: Another one like a new one, what about Yeah, I think.
Speaker 1: It's on the same stretch as need Loves, like another
Speaker 1: French baker. Yeah, so Chattanoo firt it out punches its
Speaker 1: size in terms of kind of culture and food, music
Speaker 1: outdoors compared to a lot of other cities its size.
Speaker 1: So yeah, well, Alex, let's let's.
Speaker 2: Kick it off.
Speaker 3: I appreciate you sharing what it is that you've been
Speaker 3: doing with your money, how you've been investing. And the
Speaker 3: first thing that I want to say is it depends
Speaker 3: I think our response or our response is maybe the same,
Speaker 3: I guess, but the seriousness in which you take our
Speaker 3: advice depends a lot on how much of this you own.
Speaker 3: And I don't think did he say how much of
Speaker 3: it he owns Joel.
Speaker 1: Or how much his port?
Speaker 3: Okay, So that being said, you know that magnitude it
Speaker 3: makes a big difference, because if we're talking about five
Speaker 3: percent or less, I.
Speaker 2: Don't really care. Alex is not a big deal.
Speaker 3: Like I own some stupid stocks and they don't make
Speaker 3: up more than five percent of my overall portfolio.
Speaker 2: I think have I shared on the schedule that I
Speaker 2: bought some Fox stock.
Speaker 1: I don't know if he did.
Speaker 3: Fox Entertainment basically, And this is the kind of dumb
Speaker 3: stuff that people do and they call it investing. I
Speaker 3: do it, and I think it's just fun. Right, this
Speaker 3: isn't a part of my retirement. But I'm sitting there
Speaker 3: watching the World Cup and I'm like, oh my gosh, Yeah,
Speaker 3: there are so many ads because of the new FIFA
Speaker 3: hydration breaks and they're like tripling their ad revenue, and
Speaker 3: I thought, oh my gosh, I bet Fox is going to.
Speaker 2: Have a good quarter.
Speaker 3: Maybe they've already even released their earnings. I'm less good
Speaker 3: about checking in on it after the fact I goes,
Speaker 3: but I was just like, let me buy a few
Speaker 3: shares of that? Why not just as like a point
Speaker 3: of interest. That's totally fine, Alex. If you're talking about
Speaker 3: if you've got a little bit, you know, not too
Speaker 3: much of that rate, then I'm fine with that. But
Speaker 3: if not, if you've got more than that, then you
Speaker 3: definitely need to make some changes I think to your portfolio.
Speaker 1: Well, and that is Matt, you just described. I think
Speaker 1: one of the reasons that single stock investing can be
Speaker 1: perilous is because you buy because you have an expectation
Speaker 1: or you see maybe an opportunity, and then keeping up
Speaker 1: with the company and knowing when selling makes sense is harder. Right,
Speaker 1: It's easier to find the see the opportunity on the
Speaker 1: front end, and even that is not easy. But I
Speaker 1: think the best question for Alex is if he had
Speaker 1: the current cash value of this rut today in hand,
Speaker 1: would he still put money in that direction? Would he
Speaker 1: buy the same amount that he holds now? And I
Speaker 1: think there.
Speaker 2: Is sunk cost fallacy, right, Yeah?
Speaker 1: And I think there is this. A lot of investors
Speaker 1: have it if they're underwater in a position, they just
Speaker 1: at least wanted to get back to the price at
Speaker 1: which they purchased it. And I understand where that comes
Speaker 1: from mentally, but I think you have to push back
Speaker 1: against that because if then you're falling prey to sun
Speaker 1: cost fallacy, or you're saying, once it gets back there,
Speaker 1: then I'll then I'll sell. Well, why not once it's
Speaker 1: up ten percent or up twenty percent? And the truth is,
Speaker 1: maybe it gets there, maybe it doesn't. Are you looking
Speaker 1: at the right metrics, and I think for a lot
Speaker 1: of people, the best thing to do, it's not hey,
Speaker 1: is this the should I keep it until it gets
Speaker 1: back to zero? It's is there a better place for
Speaker 1: my money to be right now than than continuing to
Speaker 1: exist inside of the street one percent?
Speaker 2: Man?
Speaker 3: And uh, that was a perfect segue for the direction
Speaker 3: I wanted to go in, because specifically, I think what
Speaker 3: Alex got sucked in by or where the dividends? And
Speaker 3: he mentioned the dividends specifically, and I I forget even that.
Speaker 3: Oh I would have done a GNC and I was like, Okay,
Speaker 3: who is this AGENC? And I looked it up and
Speaker 3: this like the subheading like when you pull up search
Speaker 3: them up on pull them up on Google is now?
Speaker 3: I wrote it down here where is it? We are
Speaker 3: an internally managed mortgage rate built to generate favorable long
Speaker 3: term stalkholder returns with a substantial yield components. It's literally
Speaker 3: written there in on the description. The fact that I
Speaker 3: think Alex has been very attracted to that dividend, and
Speaker 3: I think because of that, it's it's got him not
Speaker 3: looking at the overall price. And you got to you
Speaker 3: gotta look at look at both aspects of it. But
Speaker 3: at the end of the day, man, you look at
Speaker 3: the performance of that versus the S and P five hundred,
Speaker 3: and I ran the numbers not surprising. You look at
Speaker 3: the past decade, the past ten years of performance of
Speaker 3: A G and C versus VU the S and P
Speaker 3: five hundred. Over the past ten years, you're looking at
Speaker 3: annualized growth of six point three percent with a G
Speaker 3: and C. And you're like, Okay, it's not bad. That's
Speaker 3: not bad versus fifteen point four percent.
Speaker 6: Wow.
Speaker 3: So that's had you taken ten thousand dollars and invested it,
Speaker 3: invested it back in twenty sixteen, on one hand, you'd
Speaker 3: have eighteen thousand dollars, and again you're like, okay, not
Speaker 3: bad versus forty two thousand dollars eighteen versus forty two. Man,
Speaker 3: And here's the deal.
Speaker 1: I didn't even look to see what the cost the
Speaker 1: price is on this either.
Speaker 2: Dude.
Speaker 3: Yeah, yeah, you're you're kind of basing it more on principle.
Speaker 3: But I was just like, there's no way that the
Speaker 3: principle isn't going to deliver real life results. And this
Speaker 3: is also with the dividends reinvested and so someone might say, well, no, no, no,
Speaker 3: that's paying a higher that's paying a higher dividend yield.
Speaker 3: At the top of the episode, it's thirteen percent versus
Speaker 3: vus is something like one point something percent, And you're like,
Speaker 3: oh my gosh, well, why wouldn't you want to do that,
Speaker 3: just because you haven't seen price appreciation. So you take
Speaker 3: both of those stocks, you look at ten years of
Speaker 3: sticker price performance plus dividends, and that's the difference you're
Speaker 3: looking at. So that's a big difference. And this isn't
Speaker 3: to guarantee that things are going to continue the way
Speaker 3: that they've been, but you got to let history inform
Speaker 3: the decisions that you make today.
Speaker 1: Yeah, and I just like the idea of saying one
Speaker 1: not being overexposed. So, like you mentioned in the beginning,
Speaker 1: if you have too much, too high a percentage of
Speaker 1: your overall assets in this one real estate investment trust
Speaker 1: versus the overall stock market, then you need to sell
Speaker 1: just for that reason alone, even if you haven't gotten
Speaker 1: back to parody from where you bought it. So that's
Speaker 1: one thing for sure, But also, hey, do I think
Speaker 1: that this rate is going to produce creator returns over
Speaker 1: the next decade or do I care? Is this just
Speaker 1: fun money?
Speaker 2: Right?
Speaker 1: Is this just that kind of speculative five percent where
Speaker 1: I allow myself to invest in fun stuff that I
Speaker 1: enjoy and this rate was just attractive to me for
Speaker 1: other reasons. In that case, don't worry about it. Like
Speaker 1: if this is one to two percent of your overall
Speaker 1: investment portfolio and it's the goof a round side, who cares.
Speaker 1: But otherwise I would say, if you're serious about this
Speaker 1: and you want to maximize returns and minimize costs, I
Speaker 1: would be selling this position and redeploying that capital into
Speaker 1: an investing position. I felt more confident.
Speaker 2: About one hundred percent.
Speaker 3: Man, Yeah, if it was me, same sort of thing,
Speaker 3: I would be taking the information the past performance and
Speaker 3: help allowing that to inform what I do now, which is,
Speaker 3: if it was me, I think I would be cutting bait,
Speaker 3: looking to redeploy those dollars towards something else, unless I
Speaker 3: will say, if it's a smaller let's say he's at
Speaker 3: like ten percent of his overall portfolio, is an AG
Speaker 3: and C and maybe there's a soft you got a
Speaker 3: little sautpart in your heart for it, Like whatever reason
Speaker 3: you chose to buy in the first place. Maybe it
Speaker 3: was a friend who's a part of the company, or
Speaker 3: I don't know, maybe it was recommended maintain those positions.
Speaker 3: And if you can contribute to a low cost, widely
Speaker 3: diversified index fund or voo whatever it is, the entire
Speaker 3: stock market, and if you can essentially right size your
Speaker 3: portfolio by investing more in some of the avenues that
Speaker 3: we would typically recommend, I'm fine with that. Yeah, I
Speaker 3: think that.
Speaker 1: Just find a way to diminish the size of this
Speaker 1: in your work phone exactly, whether that's through selling, cutting bait, redeploying,
Speaker 1: or by you saying, looking ahead, oh man, I'm about
Speaker 1: to get a bonus at work.
Speaker 3: Oh man, I'm about to get Mary. We're going to
Speaker 3: combine our incomes cut expenses because now we only have
Speaker 3: one rent to pay. If there could be a number
Speaker 3: of factors that could lead you to realize I'm about
Speaker 3: to have the ability to invest so many more dollars,
Speaker 3: and if you're able to funnel those towards something like view,
Speaker 3: then yeah, I think that.
Speaker 2: Would be okay as well.
Speaker 1: All right, speaking of real estate, let's get to a
Speaker 1: listener in New York who wants to kind of start
Speaker 1: her real estate journey with physical real estate, not in
Speaker 1: reats that you trade publicly.
Speaker 4: Hey guys, this is Katie calling from It area in
Speaker 4: New York State.
Speaker 5: I've been listening to your podcast for about a year
Speaker 5: and a half, somewhat active in the Facebook group as well.
Speaker 4: Love everything that you do. I've learned a ton, so
Speaker 4: thank you.
Speaker 5: My question today, or questions rather, are regarding real estate investing.
Speaker 5: My husband and I own our home currently. We will
Speaker 5: be done paying off our mortgage in eight years in
Speaker 5: year twenty thirty four. The plan is to start with
Speaker 5: this house, do some renovations, learn a little bit, move
Speaker 5: from this place, rent it out to a single family,
Speaker 5: and then sort of do the same thing with a
Speaker 5: second property and sort of go from there. We're talking
Speaker 5: pretty small scale, but I want to do it right
Speaker 5: and specific questions I have one, how do I determine
Speaker 5: whether an area is a good place to buy a property.
Speaker 5: I'm wondering if there are any resources I can find
Speaker 5: regarding quality of life rating scals regarding growth of a
Speaker 5: specific specific area. Second question, what should I expect in
Speaker 5: terms of monthly profit? How does this get determined? Which
Speaker 5: is reasonable? Third question? I hear a lot about tax
Speaker 5: advantages of real estate investing.
Speaker 4: Can you talk about this for a little bit.
Speaker 5: And fourth question, I think I know what the answer
Speaker 5: is going to be about this. But you know, we
Speaker 5: have a good amount of equity built up in our
Speaker 5: current home. What are your thoughts on using some of
Speaker 5: that equity to pay for a down payment for a
Speaker 5: second home? That sort of thing? And should we repeat
Speaker 5: that process? You know, please tell me about that. Any
Speaker 5: of the resources you guys have or any other ideas,
Speaker 5: please share them.
Speaker 4: Thanks so much. Really love this community.
Speaker 2: Basically, please don't keep them to yourself, Joel.
Speaker 1: There are so many, so many questions to hear, Matt.
Speaker 1: We better get to share, share the wealth, share the well.
Speaker 3: But yes, men, Sorry, I hit the voice the voice
Speaker 3: memo before you finished the introduction there.
Speaker 2: I know you're a rabbit cut off.
Speaker 1: I'm an idiot.
Speaker 3: So it takes a second before you hit click play
Speaker 3: and it actually plays you know this, and so you
Speaker 3: kind of like lead into it slightly, and then you're like,
Speaker 3: oh crap, he said some more words.
Speaker 1: So I apologize, my friend. The how to Money Facebook group,
Speaker 1: by the way, is an excellent place to go for
Speaker 1: with your money questions. And we'll get to a Facebook
Speaker 1: question here and just a bit. The first thing I
Speaker 1: wanted to say to Katie is that real estate can
Speaker 1: be intimidating, and I love that her goal is to
Speaker 1: start small. I think that is the best way to go.
Speaker 1: That's the best way to start. And there are a
Speaker 1: lot of real estate influencers out there who talk about
Speaker 1: how much size matters and if you don't have eighty
Speaker 1: two units, then you're just not doing it right. And
Speaker 1: a lot of those people are I've seen it firsthand,
Speaker 1: people who are who are really smart, who have big followings,
Speaker 1: who make investments, and behind the scenes, they're sweating bullets
Speaker 1: because they they had too rosia prediction about and they
Speaker 1: were over leveraged, and they find themselves in a tight
Speaker 1: spot when the market doesn't do what they were hoping
Speaker 1: or expecting. That has happened a lot in the past
Speaker 1: few years for real estate investors who bought at the
Speaker 1: top higher interest rates, projecting rent increases that didn't materialize,
Speaker 1: and so follow a guy like like Chad Carson is
Speaker 1: one of my pieces of advice because he's all about
Speaker 1: helping small time real estate investors, and that's what she
Speaker 1: want to be so pick a person that you admire
Speaker 1: in the space, who offers really good, credible information and
Speaker 1: who's doing what you want to do. Don't tune out
Speaker 1: all of the other real estate people that don't have
Speaker 1: that same kind of motto, mindset and mentality that you have.
Speaker 2: Katie.
Speaker 3: Yeah, I'll see if I can seguey from that, because
Speaker 3: her first actual question was asking about determining good areas
Speaker 3: to buy, like determining quality of life, that kind of stuff.
Speaker 3: And one of the things that's interesting about Chad Carson
Speaker 3: is that he is in a part of the country
Speaker 3: where you are seeing a.
Speaker 2: Lot of growth.
Speaker 3: And so Katie, she's up in York, and I don't
Speaker 3: know specifically where she is in New York, but I
Speaker 3: think she generally.
Speaker 2: Poughkeepsie is alway, she said, Poughkeepsie.
Speaker 3: I think so generally speaking, I mean, folks are moving
Speaker 3: from the northern cities right like we're seeing massive population
Speaker 3: declines in Baltimore, Philadelphia, Detroit, and so you got to
Speaker 3: look at some of these bigger macro trends as opposed
Speaker 3: to what like the cities that are seeing massive amounts
Speaker 3: of growth, they're all in the South, They're on the
Speaker 3: sun Belt, you're like Joel, you syndicate invest Like, where
Speaker 3: where are those syndication deals? A lot of them are
Speaker 3: in the sun belt states you're looking at. You look
Speaker 3: at what's happened with some of those sunbelts. Some of
Speaker 3: those have imploded as well, some of those have done.
Speaker 3: Really look at Austin. Everyone's like, Austin's the hot place.
Speaker 3: Everyone's moving to Austin, and then guess what happens? It
Speaker 3: gets overbuilt.
Speaker 1: So that's another one of those things you have to consider,
Speaker 1: is like does everyone else think the same thing? Are
Speaker 1: people building in outrageous amounts because everyone sees the opportunity
Speaker 1: in Austin.
Speaker 2: There's also a.
Speaker 3: Difference between multi massive, multi family apartments and single family,
Speaker 3: which is what she's looking at. But you are seeing
Speaker 3: tons of people multiple towns in Texas, Tennessee, Atlanta is
Speaker 3: seeing a lot of growth, North Carolina, Florida, even and
Speaker 3: so I think that's really important keeping that in mind
Speaker 3: a little bit. It can be difficult, I think, to
Speaker 3: get into real estate, especially the rental game, if you
Speaker 3: are looking at managing properties in an area where there
Speaker 3: are folks departing, where we're seeing more people move out
Speaker 3: than move in. That can make it difficult, right, you're
Speaker 3: just fighting this ongoing headwind. But then beyond that, I mean,
Speaker 3: you can look at some of the different scorecards out there,
Speaker 3: but I think it comes down to if you're saying, well,
Speaker 3: this is something we want to pursue, and she mentioned
Speaker 3: that she's very interested in doing this, it comes down
Speaker 3: to knowing not just the neighborhood, but even the street
Speaker 3: and even specific houses. Any deal Joel that you got
Speaker 3: a great deal on, why was it because you looked
Speaker 3: at some overall general scorecard or was it because you
Speaker 3: spend a lot of time walking, driving the streets, visiting
Speaker 3: the parks even that are in the neighborhood that you're
Speaker 3: thinking about purchasing in. That's a little disc off, shout out, but.
Speaker 1: Knowing knowing, knowing what businesses are are coming into that
Speaker 1: neighborhood and how much likely they're gonna they're gonna raise
Speaker 1: just kind of the expectations and the cool factor right
Speaker 1: of that community. I agree. The other great thing about
Speaker 1: knowing a place street to street and buying where you live, Matt,
Speaker 1: as you know, is you get to self manage and
Speaker 1: and that has just such a huge impact versus you
Speaker 1: could say, oh, the best market to buy in right
Speaker 1: now is Cincinnati, and so I'm going to hire a
Speaker 1: property manager and I'm going to figure out how to
Speaker 1: buy properties in Cincinnati, Ohio. But there are a lot
Speaker 1: of additional costs that come with buying in even if
Speaker 1: it even if the numbers look better on some of
Speaker 1: those homes, those numbers are going to not look nearly
Speaker 1: as good when you factor in property management in the
Speaker 1: fact that you don't know that place nearly as well.
Speaker 1: So is Poughkeepsie as great of a place to invest
Speaker 1: right now as maybe a dozen other cities that I
Speaker 1: could mention to you. Maybe not, but Poughkeepsie has some
Speaker 1: great things going for it, and it's still find a deal,
Speaker 1: they'll want it, And you can always you can find
Speaker 1: a deal in any market, in any place if you
Speaker 1: take the time to really get to know that area
Speaker 1: and you know what you're looking for. But I think
Speaker 1: that the fact that you could self manage and it
Speaker 1: sounds like too one of the things she's intent on
Speaker 1: doing that paying off her mortgage and renting out the
Speaker 1: home they currently live in and buying something else, which
Speaker 1: makes me think that she's going to stay local, be
Speaker 1: able to have this paid off rental property that now
Speaker 1: she is renting out that she knows incredibly well, and
Speaker 1: we have said it doesn't even have to be paid off.
Speaker 1: But like that is the best way for most people
Speaker 1: to get into the rental property game is to own
Speaker 1: a single family home. You've got better financing on that
Speaker 1: property already, You're going to get better financing on the
Speaker 1: next property you buy by renting that puppy out. So
Speaker 1: I think that is investing where you live. That is
Speaker 1: at least a future bar check marks in those boxes
Speaker 1: for going in that direction.
Speaker 3: I will say I'll push back slightly on that and
Speaker 3: say that I want what's Katie. I want Katie to
Speaker 3: consider not just renovating and then renting these properties, Like, Katie,
Speaker 3: I want you to consider renovating and then selling the properties.
Speaker 3: Because in this kind of segues into one of your questions,
Speaker 3: you're asking about, like the tax advantages of owning real estate,
Speaker 3: and there definitely are some right depreciation writing off expenses.
Speaker 3: Even becoming a full time real estate professional, there's a
Speaker 3: high hurdle as far as the number of hours that
Speaker 3: are required in order for you to actually qualify for that.
Speaker 3: In the eyes of the irs. But in my opinion,
Speaker 3: I think the biggest superpower is that when you sell
Speaker 3: your primary home, which means that you've lived in it
Speaker 3: for at least two years as and you mentioned your husband,
Speaker 3: that you two combined can exclude up to five hundred
Speaker 3: thousand dollars in capital gains. There are very few people
Speaker 3: who are willing to do this. But you even mentioned
Speaker 3: you said that you want to move out of the
Speaker 3: house that you're currently in, like you are wanting to
Speaker 3: do this sort of this rinse and repeat sort of method,
Speaker 3: and most people aren't willing to do that.
Speaker 2: And so the fact that you have this desire to like.
Speaker 3: Oh, we want to move in, we want to get
Speaker 3: it looking nice, I think your real superpower is going
Speaker 3: to be the ability to then sell those properties at
Speaker 3: a premium, focusing on neighborhoods that are seeing appreciation their
Speaker 3: up and coming. They're not they're not at the top
Speaker 3: of the market, but they're also not properties where you
Speaker 3: might have to wait a full decade in order to
Speaker 3: see some appreciation there. And as opposed to seeing those
Speaker 3: recurring revenues at cash flow monthly, man, I think you
Speaker 3: have a tremendous ability here, especially if you're leaning into
Speaker 3: doing this with your husband and you're like, oh no,
Speaker 3: we're we like doing stuff around the house. We want
Speaker 3: it to make we want to to make it look.
Speaker 2: A certain way. It's tough to do.
Speaker 3: All that backbreaking work and then start to rent it
Speaker 3: and then see a renter move in who's not going
Speaker 3: to take care that nearly as much as as you did,
Speaker 3: as opposed to listing it and earning all of that
Speaker 3: money tax free. In my opinion, I want you too
Speaker 3: seriously consider doing that as opposed to renting. And maybe
Speaker 3: you're not considering because you didn't know about it. So
Speaker 3: hopefully this at least puts it on your radar.
Speaker 1: Yeah, and the Live and Flip, it's something we've talked
Speaker 1: about when we had Carl, our friend mister fifteen hundred
Speaker 1: on the show Jensen, probably a couple of years ago
Speaker 1: at this point, but this is the pattern that he
Speaker 1: lives by, and I think it's a great way to invest,
Speaker 1: especially given kind of the way Katie's talking about this.
Speaker 1: Maybe maybe she doesn't want to manage tenants, but she
Speaker 1: likes to live in the place. They like to diy
Speaker 1: some of these fixes, which means it reduces the cost
Speaker 1: instead of hiring people to come in and do it,
Speaker 1: and you have a longer timeline, which means that you're
Speaker 1: letting the market. General market appreciation is when to you're back,
Speaker 1: along with the fact that you're spending less to do
Speaker 1: a bunch of this renovation work because you've got plenty
Speaker 1: of time to do it. You're doing over the course
Speaker 1: of years, and it's putting a roof over your head
Speaker 1: at the same time. So I think the living flip
Speaker 1: is so underrated, and you're right, Matt. It gives one
Speaker 1: of the best tax advantages that most people don't really
Speaker 1: think about.
Speaker 2: You got a five hundreds or two thousand dollars man, Yeah.
Speaker 1: Like that is just the other best tax benefit incredible
Speaker 1: that doesn't get talked about as much as it should
Speaker 1: is when you die, you get to you get to
Speaker 1: pass on that house tax free if you still if
Speaker 1: you own it. So that's if you have a long
Speaker 1: term rental property where you have tenants in it. The
Speaker 1: step up basis to your airs is a big tax
Speaker 1: benefit of real estate.
Speaker 3: Yeah, and then she asked about the equity aspect of it,
Speaker 3: and obviously, if you you know she's talking about hanging
Speaker 3: onto properties, pulling pulling equity out of homes like that
Speaker 3: just comes down to personal risk. It comes down to
Speaker 3: what your financing looks like on this properties, because a
Speaker 3: lot of times you're not going to get nearly as
Speaker 3: good of.
Speaker 2: A rates if you have to pull some of that equity.
Speaker 3: She seems pretty conservative, and so I doubt she's gonna
Speaker 3: put herself in a position to where they're in massively
Speaker 3: disadvantaged sort of loan in order to pull that equity
Speaker 3: equity out to gain the next piece of property. But ultimately,
Speaker 3: I mean, if you think about it, even if you're
Speaker 3: doing the renovate and sell sort of approach, like I
Speaker 3: don't know, like what are you doing with that equity?
Speaker 3: A lot of times you're taking some of those earnings
Speaker 3: and rolling that into the next purchase. Right, maybe it's
Speaker 3: another property that's oh, this one's oh, it's going to
Speaker 3: require a bigger down payment. It's a one hundred two
Speaker 3: hundred thousand dollars more more house, which could also lead
Speaker 3: to even larger amounts of appreciation. So I don't know
Speaker 3: that that was my big on Once I realized that
Speaker 3: they were willing to move every two years, like my
Speaker 3: mind immediately went to the Carl Jensen Live and Flip
Speaker 3: Mister fifteen hundred method, and we'll link to conversations that
Speaker 3: we've had with Carl and the show notes for this episode.
Speaker 2: Katie.
Speaker 1: But it's an underrated thing. I think most people that's
Speaker 1: not kind of the way their mind thinks about. We'll
Speaker 1: do that, but it sure sounds like based on your
Speaker 1: right like to identify that that the way Katie and
Speaker 1: her partner are thinking about the real estate investing future,
Speaker 1: that really could be right up their alley.
Speaker 2: Yeah, all right, kick us to the brake jewel.
Speaker 1: Yeah, let's do it. Okay, we got another question specifically,
Speaker 1: we don't talk about this very often, but the bucket
Speaker 1: approach for retirement and how you amass the cash that
Speaker 1: you need. We'll get to questions, more questions, your listener
Speaker 1: questions right after this. All right, buddy, we are.
Speaker 3: Back from the break and it is now time for
Speaker 3: the Facebook Question of the Week and the scene they
Speaker 3: pull it up here. This is from Joe, who writes,
Speaker 3: I often read that when you retire, you should aim
Speaker 3: to hold a significant amount of cash for annual expenses
Speaker 3: between one and three years of expenses to minimize sequence
Speaker 3: of returns risk and avoid rating your retirement accounts in
Speaker 3: a possible market downturn. What I haven't seen explained is
Speaker 3: how to get these cash reserves. Is it something you
Speaker 3: should be building up across a few years before you retire,
Speaker 3: presumably by scaling back investments in favor of holding cash.
Speaker 3: Or are you supposed to make a significant sale of
Speaker 3: mutual funds ets from the accounts you're already able to
Speaker 3: tap right when you retire.
Speaker 2: Right out of the gates.
Speaker 3: I'll just say, Joe, don't wait until you retire, because
Speaker 3: if you do that, you haven't eliminated the sequence of
Speaker 3: returns resk. You've essentially what like, waited until it's retirement time,
Speaker 3: and then all of a sudden you're supposed to sell
Speaker 3: and move to cash. Well, what if the market's down,
Speaker 3: so I would say to gradually ramp it up.
Speaker 1: Yeah, you're still creating a legitimate point in time where
Speaker 1: you're freaking out about where the market is and whether
Speaker 1: or not you're going to have the have to sell
Speaker 1: right when stocks are down, which is what you want
Speaker 1: to avoid ultimately retirement, And that is what there's a
Speaker 1: two bucket there's a three bucket system that different people
Speaker 1: have discussed. Christine Benz from morning Star has written specifically
Speaker 1: a lot about the bucket approach to funding retirement, and
Speaker 1: it's worth looking into because it at least kind of
Speaker 1: helps you understand how best to allocate certain your money
Speaker 1: in terms of these like, well, there's cash, there's medium
Speaker 1: termament that there's long term. You still want to have
Speaker 1: a good bit of money allocated towards stocks in order
Speaker 1: to fund the rest of your retirement. You want to
Speaker 1: go all conservative all at once. But Joe is specifically
Speaker 1: asking about that first bucket, the cash approach, and I
Speaker 1: think you're right, man. I think increasing cash exposure the
Speaker 1: closer you get to retirement it matters.
Speaker 2: And so.
Speaker 1: You want to have that money, and it depends on
Speaker 1: your risk tolerance. It depends on your overall financial situation,
Speaker 1: Like how many years worth of expenses do you want
Speaker 1: to have on hand in cash, Just like when it
Speaker 1: comes to an emergency fund, three months is kind of right,
Speaker 1: the bare bones of expenses you want to have. Some
Speaker 1: people say I want nine to twelve months. That's what
Speaker 1: makes me feel secure. So you want to think about
Speaker 1: what that looks like you and what's going to make
Speaker 1: retirement not feel like this frightening reality that you've just entered,
Speaker 1: but you do want to be building up that cash
Speaker 1: bucket years potentially in all likelihood before you get there,
Speaker 1: instead of feeling like you have to make a buy
Speaker 1: or sell decision kind of bright when you hit that point.
Speaker 2: That's right. Yeah, the profession is out there will also.
Speaker 3: Say that it doesn't have to be fully in cash,
Speaker 3: because what essentially you want is that you want to
Speaker 3: diversify away from away from stocks, away from securities, so
Speaker 3: that if the market tanks, you've got something else to
Speaker 3: draw on, right, And so bonds, t bills, those are
Speaker 3: that's the other option. Personally, I mean, I'm not retired.
Speaker 3: I haven't gotten to the point to where, you know,
Speaker 3: I'm having to deal with the emotions of what this
Speaker 3: feels like. But I love the idea of staying very aggressive,
Speaker 3: staying very aggressive with securities, staying invested in stocks, not
Speaker 3: having bonds or any T bills or anything like that,
Speaker 3: and only having the cash on hand, maybe having a
Speaker 3: slightly larger cash cushion to be able to offset any
Speaker 3: potential downturns and to allow for the market to be
Speaker 3: able to rebound to at most maybe three years before
Speaker 3: you see the market recover. But what you're giving up
Speaker 3: there is the comfort of having something that's less aggressively
Speaker 3: because on one end you got very aggressively invested. On
Speaker 3: the other hand, you have something that's completely cash, that's
Speaker 3: very liquid, very accessible, and then you've got the in between,
Speaker 3: and there's something about the two buckets, like all stocks
Speaker 3: and then all cash. I like the simplicity of that.
Speaker 3: We'll see if and when or when I get to retirement,
Speaker 3: if that's something that I'm comfortable with, I might change
Speaker 3: my tune.
Speaker 2: But I don't know. Personally, I like that.
Speaker 1: I think one of the things that's worth maybe doing
Speaker 1: is going through an exercise with the amount of money
Speaker 1: that you have on hand. You can even use an
Speaker 1: AI model to kind of help you help you look
Speaker 1: at this. But if you were to say, live through
Speaker 1: the Great Recession of two thousand and nine, what would
Speaker 1: happen to your portfolio if you were one hundred percent
Speaker 1: stocks in two years worth of cash on hand, and
Speaker 1: how would you feel about that? How would you feel
Speaker 1: about a fifty three percent decline that's probably roughly what
Speaker 1: you would have experienced four years right where the market
Speaker 1: would not have gotten back to two two thousand and
Speaker 1: seven levels until I don't know, twenty fourteen. So I
Speaker 1: think it's worth running through those experiments to see, okay,
Speaker 1: based on if I were to go through that exact
Speaker 1: same scenario, because it's really easy to look at the
Speaker 1: last six years and say or the last fifteen kind
Speaker 1: of and say, well, we had that you know, one
Speaker 1: or two down years, but for the most part, it's
Speaker 1: been up into the right. Well, what if we do
Speaker 1: go through some sort of extended downturn, how would you
Speaker 1: feel selling stocks when they're down thirty forty percent? And
Speaker 1: if that would be untenable and you would quickly run
Speaker 1: out of money because you did encounter that sequence of
Speaker 1: returns risk and you ate into a lot of that
Speaker 1: capital that has long term consequences. So you have to understand,
Speaker 1: like what you're comfortable with and Matt's level of comfort
Speaker 1: with more risk on it might not be where you're at.
Speaker 1: And that's where something else to Matt. And actually I'm
Speaker 1: going to talk about this with Gene Chatsky soon on
Speaker 1: the show. She talks about a portion of the money
Speaker 1: that you have allocated for retirement keeping a big a
Speaker 1: bunch of it in stocks, taking Social Security obviously, but
Speaker 1: then annuititizing a portion of it. And she talks about
Speaker 1: how the paying a little bit more money and limiting
Speaker 1: your upside will create this steady paycheck that allows you
Speaker 1: to continue spending no matter what, and it allows you
Speaker 1: to kind of stay risk on with that big stock
Speaker 1: section of your assets. And I think there's some wisdom
Speaker 1: there too. It's not for everyone, but I do think
Speaker 1: it's for some people.
Speaker 2: Totally. Yeah.
Speaker 3: I mean we've touched on this last Friday, the pensonification
Speaker 3: of four ks, and.
Speaker 2: But oh, I wanted to also say.
Speaker 3: It comes down to so I as I was thinking
Speaker 3: about myself and imagining what I would feel like, I
Speaker 3: realized that I was I'm also picturing myself the age
Speaker 3: I am, which is Joel. I still feel like a
Speaker 3: young buck and I know you do too, but your
Speaker 3: ability to generate income if you need to, right, So
Speaker 3: I think about Okay, let's Joel, Joe, let's say the iHeart.
Speaker 3: They're tired of us, they're tired of the banter. They
Speaker 3: don't like us helping folks out when it comes to
Speaker 3: personal finances, and they want to cut us free. We
Speaker 3: can't work out a deal Okay, I don't know. We're
Speaker 3: you and I were kind of coast fire. We're kind
Speaker 3: of we're kind of fully fire to a certain extent.
Speaker 3: Depending on what our future expenses are going to look like,
Speaker 3: right like, there are changes we can make and modifications
Speaker 3: to where we can just be like, all right, we're done.
Speaker 3: But let's say the market tanks and we're like, oh, shoot,
Speaker 3: I wasn't counting on that.
Speaker 2: I don't have my.
Speaker 3: Three years of cash on hand even that. Well, my
Speaker 3: ability to get back out into the market and find
Speaker 3: a way to generate income in order to offset some
Speaker 3: of those sequence of returns risk, that's really important too.
Speaker 3: And you can't overly rely on that, because right like,
Speaker 3: you're fully relying on your human capital and your ability
Speaker 3: to get out their work. But that's another consideration. And
Speaker 3: for someone like Joe who maybe is a little bit
Speaker 3: younger like us and still has ten twenty year maybe
Speaker 3: more of decades two three decades worth of his career left, gosh,
Speaker 3: you know, you can start to move it in that
Speaker 3: direction of moving towards cash, or you could also continue
Speaker 3: to stay aggressively invested and say, oh, right, sure do
Speaker 3: I even if I'm not making the optimal top dollar amount.
Speaker 3: Do I still have a way to cover some of
Speaker 3: the basic expenses? And I think a lot of folks
Speaker 3: would say, oh yeah, I think I could. I think
Speaker 3: I could do that. That actually sounds desirable as opposed to
Speaker 3: flipping the switch and going all in on retirement, right
Speaker 3: retirement maxing, We're not going to do that. Instead, let's like,
Speaker 3: let's ease into it.
Speaker 1: Right's the one I think the operation is key inhering
Speaker 1: in this question is like, as I'm getting closer to retirement,
Speaker 1: and the truth is, your value in the marketplace is different,
Speaker 1: looks different when you're sixty five or than it does
Speaker 1: when you're forty, and your confidence level that you can
Speaker 1: go out there and earn the income you used to
Speaker 1: if you were to say, lose your job, or just
Speaker 1: the kind of level of gumption you have to go
Speaker 1: out there and slay like you used to. Like it
Speaker 1: just goes it just goes down, I think later on
Speaker 1: in life for a lot of people. And so that's
Speaker 1: why you have to kind of at least plan and
Speaker 1: incorporate worst case scenarios or tough scenarios into the way
Speaker 1: that you plan, because yeah, you're not guaranteed to find
Speaker 1: the job that pays as much as you had if
Speaker 1: you were to lose one in your late fifties early sixties.
Speaker 1: And so there is a certain amount of kind of
Speaker 1: flexibility you have to have, I think in your approach
Speaker 1: to bucket planning and how you think about retirement and
Speaker 1: the flexibility you want versus the returns you want to see.
Speaker 1: But so I think there is no like one simple
Speaker 1: easy answer, but these are all things worth considering as
Speaker 1: you're making your own plan.
Speaker 3: Totally agree, all right, dude, should we wrap this up
Speaker 3: and get to the beer that you and I enjoyed
Speaker 3: during this episode. This is a lakeside coolsh by Lake
Speaker 3: of the Woods Brewing Company. And again this was a
Speaker 3: beer that was sent to us by David S in Keswick, Ontario. David,
Speaker 3: are you trying to get us canceled? Because Joel, what
Speaker 3: we didn't talk about was last week because the name
Speaker 3: of the beer was borderline profane. We never said it,
Speaker 3: but I stupidly perhaps included the name of the beer
Speaker 3: in the show notes because I just didn't That's just
Speaker 3: what I always do. Should have done a with two
Speaker 3: dollars signs, Matt, Well, I know that now or like
Speaker 3: the two asterisks, but that episode got flagged. We had
Speaker 3: the E next to it, like straight out of Compton,
Speaker 3: you know, so, and that limits our reach and so
Speaker 3: we're absolutely I don't know. We can have fun conversation,
Speaker 3: colorful conversations more, we're not rolling, but I don't want
Speaker 3: to do anything to jeopardize our ability to help people. David,
Speaker 3: did Apple ever or take that off the episode?
Speaker 2: Or no, I don't. I didn't check. We should probably
Speaker 2: care more.
Speaker 3: I think I think it's fine, maybe because I changed
Speaker 3: it because once I saw that that morning, I changed
Speaker 3: it immediately to I took off the S S and
Speaker 3: left the A.
Speaker 1: It's so funny. Yeah, we're trying to anyway create an
Speaker 1: explicit podcast mostly mass Mom will be disappointed, and we
Speaker 1: don't want to do that to hert.
Speaker 3: We need all the help we can get. We need
Speaker 3: all the viewers, all the listeners. So what do you
Speaker 3: think about this beer?
Speaker 5: Though?
Speaker 1: I man, it was light. We had like a juicy
Speaker 1: quality to it that I wasn't expecting. It was crisp,
Speaker 1: but it also had this kind of lemone juiciness underbelly,
Speaker 1: so very wet. Yeah, I was kind of not expecting
Speaker 1: that from a coolsh This had more flavor than I
Speaker 1: was anticipating.
Speaker 3: I I loved it, very delicious. They had they got
Speaker 3: like a little like outboard boat motor on the on
Speaker 3: the cannart. That's what that is, by the way, if
Speaker 3: you didn't recognize that. But this is totally kind of
Speaker 3: beer that you would enjoy lakeside, sitting on the dock
Speaker 3: out cruising with your friends, even though I haven't done
Speaker 3: that in like fifteen years. Do you ever do y'all
Speaker 3: ever go out on the boat, like rent a boat
Speaker 3: or have friends?
Speaker 2: I have a boat.
Speaker 1: No, I did when I was a kid, and I
Speaker 1: remember having the best time. My wife's fund similarly had
Speaker 1: the best memories from that. But it's it's.
Speaker 3: Just not tafe. Yeah, it's not part of all life either.
Speaker 3: I take it back that we went out with some
Speaker 3: friends end of the school year, like two years ago
Speaker 3: or something like that. But it's not, Yes, it's not.
Speaker 3: We're not like a boat family, so extended family. They
Speaker 3: are a boat family.
Speaker 1: But because you're trying not to be poor, that's why,
Speaker 1: because I want sitting boats makes you want to get
Speaker 1: fully retired before I start just pure fully hemorrhaging money,
Speaker 1: which is what happens.
Speaker 3: When you get a boat and then have to pay
Speaker 3: for the slip, and then your entire day is dedicated
Speaker 3: to taking care of the book. Actually, if anyone's got
Speaker 3: any good boat stories out there, once you send them
Speaker 3: away at how to Money Pod at gmail dot com.
Speaker 3: That's also how you can send us your voice memo
Speaker 3: if you want us to answer your question here on
Speaker 3: the show, also here on YouTube for all the viewers
Speaker 3: out there as well, head over to the how to
Speaker 3: Money Pod channel at YouTube or slowly but surely getting
Speaker 3: this thing dialed in. Even though we kind of had
Speaker 3: a rough start for this one, I would say, Joel,
Speaker 3: but we'd love it if you joined us over there.
Speaker 2: And is that it?
Speaker 1: That's it, man a Right until next time? Best friends out.
Speaker 2: Best friends out? Oh shoot the music? Where is it?
Speaker 2: Here we go?
Speaker 1: We're so good at this.
Speaker 3: I was just bragging about how like we've gotten better,
Speaker 3: and then I just totally botch it there at.
Speaker 1: The end of you can't be perfect, can't be perfect?
Speaker 2: All right, Later