Mindy: Welcome to the BiggerPockets Money podcast, show number 326, Finance Friday edition, where we interview Alexis and Max and talk about horses, high income, taxes, and because we’re Bigger Pockets, real estate.
Guest 1: One reason we’re doing that is because we we do want to continue, you know, we we’d been in this mindset of like, we got to save for the next house. We got to save for the next house. So we’ve been just working so much to be able to just, we got to keep everything steady so that we can continue to save for this passive income. But now we are looking at the numbers and we’re like, okay, we’ve kind of reached our our uh, our FI number or whatever. But, um, we’re still, I guess we’re still just afraid and uh, there’s a lot of things we would do.
Mindy: Hello, hello, hello. My name is Mindy Jensen and with me as always is my so excited about everything all the time co-host Scott Trench.
Scott: Is that me, Mindy or is that you?
Mindy: That’s me. Okay. Uh, with me as always is Scott.
Scott: Thank you, Mindy. That’s much more realistic.
Mindy: Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story because we truly believe financial freedom is attainable for everyone. No matter when or where you’re starting.
Scott: That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like horses, or start your own business, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.
Mindy: Scott, I am super excited about today’s episode because we talk about something I’ve never heard of, well, I’ve heard of, something I’ve never done before, investing in horses with somebody who knows what he’s doing. I will say that if you think this is a fun story, note when Max actually started with his horse ventures. This is a lifelong pursuit, literally, and uh, I think that he’s got a uh a great story. I think he and his wife have a fabulous financial position and this is an interesting uh look into I have money, but I also hate debt and personal finance is personal, I think comes shining through in this particular episode because yes, they could be doing more with their money, but debt is something that Max doesn’t want to have. So don’t go get it, Max.
Scott: Yeah, I think it’s a fascinating, um, situation. It’s a, uh, uh uh a thought exercise rather than really a money problem in this particular episode because they they’ve such a strong financial position, but I think it’s it’s valuable to get a peek into the problems that exist at all uh stages of the wealth building journey.
Mindy: Yes, and stay tuned to Scott’s really amazing announcement when you when you diagnose the problem. That was a lot of fun, Scott. Uh, before we bring in Alexis and Max, I must tell you, the contents of this podcast are informational in nature and are not legal or tax advice. And neither Scott nor I, nor Bigger Pockets is engaged in the provision of legal tax or any other advice. You should seek your own advice from professional advisors including lawyers and accountants and tax professionals regarding the legal, tax and financial implications of any financial decision you contemplate.
Mindy: Alexis and Max have the very fortunate position of generating a lot of income. They also have a very impressive net worth and a large gap between their spending and income. They are extremely averse to debt and looking for ways to increase their real estate holdings to further cushion their position. Alexis and Max, welcome to the Bigger Pockets Money podcast.
Guest 1: Hi guys. Thank you.
Guest 2: Hi.
Mindy: I’m so excited to talk to you today. I am going to jump into your numbers and I’m going to do things a little bit differently. I’m going to read them off today just to give us a really quick look at where you at what’s coming in and where it’s going. So, I’m going to look at your income, which is approximately $8,000 with an additional $4,600 in rental income. And this doesn’t include your horse sales income, which is approximately $8,000 a month, give or take.
Guest 1: Yeah.
Scott: Is there, is there a number of transactions per year that would be a better way to think about it? Like four or five sales per year?
Guest 1: That’s a really good point, Scott, because that that average like the 8,000 is extremely variable that um. Yeah, the income is very variable. Yeah, it could be pro, you know, it could be between like four and eight transactions a year and it kind of levels out to around 80 or 8,000 a month, right?
Scott: So you essentially buy a horse, train it up to perform its its task, whether I and then sell it to somebody who will use it for that that purpose, right? So.
Guest 2: Yes, correct.
Scott: Could you could you just could you describe that that next one one more layer of deep there so folks can understand? Cuz I probably butchered that.
Guest 2: So what I do usually is I’m specialized in young horses in that discipline called raining. And um Which is like Western dressage pretty much. Yeah, pretty much to make it quick and um and so what I do is I train um young horses to be uh good prospects and uh and become also a very valuable um horse in the market and uh and try to either sell it or go show it or send it to uh the top showman that will in the industry that will go and show it. So um yeah, uh the process is pretty simple. I I get young horses in the beginning of January and in about six months to a year, uh depending on their ability and their talent, uh they will become very valuable or not uh piece of property. So.
Guest 1: The thing that Max isn’t saying that I will say for him because he’s much more of an expert than I am in this field is that he from a very young age has studied blood lines like to to the max.
Guest 2: Yeah, blood lines. Yeah, he knows his blood lines very well, his pedigrees really well and so he can really identify um Yeah. he can identify a lot just by papers on a horse and watching a horse. Yeah, you have to watch a horse. The paper will not tell you everything about it. It will just tell you how well the parents done and is that combination of that mom and the sire will be a good one. And also you have to look at the prospect um himself and see if he’s going to be a good mover, a good-minded horse and try to make the best out of it. And uh and then after the the price of those horses is there’s no regulation. So, I mean, it can go, it can go pretty low. You can lose money and we lost some money. Um but um you can make a lot of money, too. And um it’s worth when someone is willing to pay for it.
Guest 2: Yes, exactly like last year, for example, to give you one of the good horses we bought, we bought him for 25,000 and in three months, we turned it and sold them for 100,000. And then what was I mean, we had a few very good sales. So yeah, we got very awesome.
Scott: So so you are a cowboy, a French cowboy living in Texas, is that correct?
Guest 2: Yes Yes,.
Guest 1: Yes.
Scott: Perfect, all right. You got a you got a Yeah. I I horse flipping cowboy, perfect. This is a this is a new experience for Mindy and I this podcast here. So, thank you. Okay, and so so so that is variable income. And then you said $8,000 in or Mindy said $8,000 in income, where does that come from on a monthly basis? Is that is that an additional source of income or is that just the average rate of these sales?
Guest 2: No, uh so my company trained horses for also the public, not just me and Lexus or other partners. So, if you guys buy a horse and decide to send it to me, you’re going to pay me a a fee every month to train and take care of your horse. And part of it, there’s a lot of expense in that that I have to pay to take care of your horse just for keep him alive, but there’s a part of that fee that is going to come to me to get paid. And so, um, part of the 8,000 is simply a salary that my company pay me.
Guest 1: The total of both of our salaries is eight. Yes, and then on top of that, we have rental income, and then on top of that, we have the variable income of the horse transactions, the buying and selling. And in competition too. So we separate out Max’s salary from the variable distribution. So you can think about it as just like an owner distribution. Like so if we have a great month of sales, we can do a $12,000 owner distribution and um it our company set up as an escort entity. So we can do the the the distribution that month, for example. So for the sake of example, we put 8,000 here um for you guys.
Scott: Great. Well, let’s keep going with the financial snapshot. I think we got a good understanding of the business and income um or as good as we’re going to get in the uh in the early stages here with a unique business or new new to us business. Um well, let’s keep going with the financial snapshot, Mindy.
Mindy: Okay. So where that money is going is $150 in gas, $200 in eating out, $100 for date night, $50 for fun money, $50 for clothes, $200 for travel, $150 for animals. I’m assuming that is not horse feed, $600 for groceries. No. $720 for child care, $50 for a person’s name here, I’m assuming that is the child that you have. Yes. $150 miscellaneous, $95 for Verizon. I see an opportunity to transfer to uh Mint Mobile for $10 a month or $15 a month. Um but still that’s like a drop in the bucket. $160 for car insurance, $250 for personal capX, which I love this concept. Doctor, dentist, random personal capital expenditures. I love that. $400 for giving, $100 for random household, $300 for taxes, and then you have separated out, which I think is very important for people who may not be in your same financial position, auto debits. Audible, Spotify, Xander, Naked Wine, Kira, Amazon Prime, Amazon Prime Video, health insurance. Those are all like $100 and then health insurance is $688. Um, for a grand total of spending $4,500, but let’s circle back to the uh income is $12,605. And you’re spending 4,500. So you have a monthly savings of $8,106.55. Which is, you know, that’s not bad. Or amazing, depending on who you want to who you want to talk to. I think everybody that you would talk to would say, holy canoli, that’s fantastic. So I see that you are sending those savings to a brokerage account at $1,000, reinvesting in your houses $2,600 and $4,500 in just savings which isn’t uh explained here, so I would like to get into that a little bit. But um let’s look at your debt scenario. I’m guessing that your debts are pretty low.
Guest 1: Yeah, our debt is zero.
Guest 2: We have no debt.
Guest 1: No debt. Or what?
Guest 2: Yeah, no debt.
Mindy: You have no debt. Okay, that by itself is a really impressive statement. However, let’s go look at your assets because they include one, two, three, four, five, six houses. And with zero debt. That includes mortgages. You have $0 on mortgages in $920,000 worth of real estate.
Guest 1: Mhm. Yes. Yes. Yes.
Mindy: That’s that’s, you know, you guys are you guys are okay. Why did you call it? We’re afraid. But we’ve been listening for three years.
Guest 2: So we uh yeah, we want to bump it up. We want to get better at this. So.
Mindy: You won. You’ve already won.
Guest 1: I would just say, we’re really lazy. We just like just plug it all in and we don’t get through any of the work of, you know, figuring out leveraging.
Guest 2: Yes.
Mindy: Okay. So, hold on. monthly spending is 4,500. Real estate income is 4,600 after that’s your net real estate income. You won. The end. Now you can just go sell horses for fun.
Scott: But let’s look at the rest of their assets just for fun then. Yes.
Mindy: Yeah, just for fun. That’s not all they have. Yes. This is, so we have, I’m just going to say various Vanguard holdings in the total of $371,000. There are some Roth IRAs, there are some brokerage accounts, there are some money market accounts that are emergency funds. Um, and the bulk of that is in a Vanguard brokerage account. So that is an after tax brokerage account. Do you have anything in a 401k or a pre-tax account?
Guest 1: No.
Mindy: Okay. Um, you own a brewery or part of a brewery?
Guest 1: Yeah, that’s Alexis. She, yeah. Yeah, we we own shares in a brewery out of Atlanta. I bet actually a lot of your, I some of the listeners probably know of Monday night brewing, but um they were friends of my brother like when I was in college, and they started brewing beer in their garage, and my brother called me one day and he’s like, you should give some money to these guys. And I had some cash on the side and I gave it to them and they’ve made us a ton of, I mean, yeah, clearly it’s worth a lot now. So, it’s pretty cool. So it’s just shares.
Mindy: I should probably, I should probably have some market research on this before I could really comment on that. So Monday night brewery, you can send me some beer. There you go. I like the dark beard. Okay. Uh and in addition to $920,000 worth of real estate and $371,000 in Vanguard holdings, you have $114,000 worth of a brewery that you, that’s passive income, like 100% passive. They never call you for anything or they just send you money every once in a while.
Guest 1: No, we just hold the shares right now. We’re not like we’re not we had a decision a couple months ago to get a payout, and we decided to reinvest. Um so we’re just constant, we’re just leaving the money there, letting it reinvest, and letting them continue to build. We’re just keeping building our equity.
Guest 2: Yeah, and it’s uh a company that we love and we just uh.
Guest 1: Yeah, great guys.
Guest 2: We want to support them as much as we can and we don’t need the money right now, so we just act like we don’t have it, you know, we just ignore it kind of. And it’s great.
Mindy: And then you own five horses that are $330,000 total, which is I think a bit of a misnomer because people who are not looking at your numbers will be like, wow, that’s like whatever 330 divided by five is. You have four horses that are worth like 20,000 and one horse that’s worth 250,000. So is that like four horses that are one gender and one horse that’s a different gender? Cuz clearly I’m not a horse expert. I know I’m hiding that really well.
Guest 2: Yeah, so um yeah, there’s I’m looking at the paper right now and uh yeah, there’s uh different genders, different age, uh and also, uh so the age will give you uh an idea of the level where they’re at in their training. Um so the value, uh that we put on, uh is only what we spend on them and as far as purchase the horse or if we raise the horse, how much we spend on it until now. Um the value of the horses might not be those numbers. It actually probably way higher than 348,000. Um but it’s what we spend on them pretty much. Yes.
Guest 1: The $250,000 horse though, that is his insured value. So that horse in particular um performed really, really well the past year and a half. Yeah, and uh so we’ve just consistently upped his insurance and so now we bought him originally for 25,000 with a partner. Yeah, and um and now he’s performed really well. We’ve received a lot of paychecks from him and so we’ve just continued to boost up his insurance. So if he. He’s a very valuable horse as far he can go on and still win a lot of money. He’s very competitive in in the industry that we are in and also he uh he uh he’s now a sire, which means that uh we sell his semen uh because he was super he was very successful. Uh people are interested to breed to him. And so we did have the the balance sheet of his work as far as a Sire this year yet, uh but he bred around 70 mayors and each semen are sold for 2,500. Uh and so, and we have a partner on it. So basically each baby is 2,500. If you buy a breeding. if you buy a breeding, you pay 2500, a part of it, 500 bucks going to the breeding station who’s taking care of that horse and handling the semen and shipping the semen and the rest is between us and our partners.
Scott: Great. Do you guys own your house?
Guest 1: We we actually live for free because I manage a ranch um that’s a breeding facility and um I have housing in my job, so we don’t pay utilities or anything. We have everything for free.
Guest 2: And also what we realize is we were very lucky. It’s very popular in the industry that we are in, uh that if you work to train houses, uh a few time, uh since we’re married, we’re married since seven years now. Um and uh since we’re married, we never pay for housing. We’ve been some interesting places for sure. And so um but the gift is, yes, we live in. but it’s always been free. So we’ve always taken it. Yes, we were very grateful.
Scott: phenomenal. Okay. So, we we got to spend uh three to five minutes here and get a condensed version of your money story here in order to get in to get a picture of this because your position’s phenomenal. We have a $1.8 million net worth and you’re telling us that that’s way undervaluing uh your horses, uh with that, you live for free. We’ve got a we got a phenomenal financial situation overall. um really unique jobs um and and living situations. So, could you give us the five-minute overview of how your money story has transpired?
Guest 1: Uh, yeah. Um I to do it really briefly, I grew up in a family that was in manufacturing. My grandfather uh after the war after World War II, he took over a corrugated box manufacturing business. My whole family was in that for years. Uh so I grew up with a lot of comfort, with debt, with um we there was always it seemed like there was always money. I didn’t really know whether there was or not, but it just seemed like there was. And um I had like zero financial education. Um my parents were much more worried about um kind of my my moral status, me being a good person rather than teaching me about finances, which I appreciate, but you know, when you get out out of the house, it gets more complicated. Um so, anyway, uh that business though, sold when I was 16 years old. My um and we all as, you know, family members, we did receive a chunk of that company, a little piece. There was a lot of debt that had to be paid, but I did receive a small piece and um that went towards uh it went into managed funds. I had no idea about it. Nobody told me what to do with it. It went into managed mutual funds. I took money out of there to pay for college, to build a house because my brother’s an amazing woodworker, and I paid for it all in cash. It’s ridiculous, uh thinking back. And then also um I started a business, a small business um with uh one of my brothers. Anyway, all that to say, that was kind of my story. really little education. I got a big chunk of cash and I didn’t really know what to do with it. And so I did things that I thought were good and then I kind of panicked when I started figuring out that that was a really bad idea. So I just left it all in the managed funds and um and then Max at, well, anyway, and then after that, you know, kind of fast forward to when we got married, um that’s when we started. I I didn’t tell Max anything about my financial status until like a week before we got married.
Guest 2: Yeah, I have no idea.
Guest 1: And we actually talked about just giving away um everything and just starting from zero, but we really didn’t even know what to do with where we stood and. For two years in your marriage too. We never touched that money. Yeah, we didn’t touch any of that and it was around, I think it was around $200,000 at that point. So we just left it in managed mutual funds. Um so, and then Max’s kind of his history with money, you can tell a briefly. Yeah, it’s very different. Um my parents, I grew up in South of France. Um my parents, uh my mom was selling insurance. Um, was working in a big company uh for insurance and uh my dad was a banker. Uh they didn’t have a lot of money, but they saw the they quit their job and took my brother and my sister and buy a a piece of property and a building that was going down and they rebuild it. Um they were they had huge huge that that um I felt it through my childhood. Uh it was a big stress in the family. It was a vineyard. I don’t know if you said that it was a vineyard that my dad my dad went back to school. It was just we lived very little and uh debt was very present in our life. Um and so that’s what also I think to fast forward, um that’s why we don’t have that now also, um with my combination of being afraid of debt and Alexis had a little bit of cash that pushed us forward, uh we figured out how to stay out of that. Um but we had both zero uh money education. My only money, uh that I had uh in high school or around high school and all this, was me working horses uh for other people and buying horses and selling. Actually there’s a story that we should tell right now because Max always forgets this story. When Max was I don’t know. Oh yeah, to buy my first horse. 10 years old? were you 10?
Guest 2: I know a little younger. To I I about um I had different jobs. Um but one one of my first um my first uh business that I built was uh I love rats and so I uh built a breeding uh rat company. A breeding program for an that was pretty much. Yes, so I bred rats like crazy and they sell really good. So I made really good money doing this. And then uh dad gave me enough cash to buy a saddle, a bridle, a pad and a horse and some fencing. And so when I was 10 year old, I figured I no, I asked my parents I because they had some land. I asked my parents if I could buy a horse and uh they, no, first I wanted a horse and my parents approached me and say that’s a great idea, how are you going to get it done? And uh we’re not going to help you. We can’t help you. So I got it done with the rats and then slowly, um, I quit the rats, buy my first horse and then I actually buy a second horse six months later and then I start flipping horses. And then he like networked himself with all these pony clubs that wanted horses and so Max would buy these cheap horses and train them, ride them and then like just sell them to the pony club to these kids who wanted a horse that was broke.
Guest 2: Yes, which which kind of pushed me forward when I was 15, I wanted to come work for this trainer in US and I didn’t speak English. Uh but my English teacher uh write an email for me and I I sold the credit card of my parents, buy a an airplane ticket and I paid my parents back obviously but uh I told I I didn’t have a credit card so I had to steal it and I wanted to get it done before arguing with them. Um so uh I flew to US just on all the money I made on horses in South of France and then after high school, I kept on going doing this. uh and then uh after high school, I got offered a job with this fake horse strainer and uh I had probably $15,000 uh coming to US. Yes. So, that’s where I started and then I had a job, but I don’t know if I can say that on the podcast, but I had a job that was not paid, totally illegal for three years. I had a legal visa, but I was um, I was not paid and working.
Scott: That’s awesome. And what year did you guys get married?
Guest 1: 2016.
Guest 2: Yeah.
Scott: Awesome. And so most of the the wealth beyond that $200,000 in cash you had has been accumulated in the last six years by flipping horses with your salary, living frugally, investing, and then um buying cash-free real estate, or debt-free real estate.
Guest 1: Yes. Yes.
Scott: Phenomenal. That’s awesome. All right. So how can we help you here today? So uh for me, one of the biggest my biggest question is um is I’m starting
Guest 1: One of the biggest arguments in our house and the biggest question we have is about that. Yes, it’s about that. I I do not like that, but now that we build some kind of uh, you know, portfolio.
Guest 2: Like enough that produce enough money. Uh I feel more comfortable to use that and if that will help us to push us to maybe we’ll like to in two to to five years, we’ll like to have um 10 houses, maybe more, uh and 500,000 in in uh brokerage account. Um that’s our big goal right now. And so. And we’re we’re also dealing with like we, um, we’re paying a lot of taxes, um for for high income and we’re trying to figure out how to like, you know, how we can incorporate some good debt into our lives so that we can mitigate that a little bit.
Scott: Let me ask you this, what would you do with the 10 houses and and from a lifestyle perspective, the 10 houses and the uh 500,000 in the brokerage account?
Guest 2: Uh personally, I will keep doing what I do, probably at a at a smaller pace. Uh I have a, you know, a pretty intense pace at work. Um and uh and also maybe investing more into our own horses. Um right now we have five horses, but I would love to have 10, 15, 15. Basically, ride more for yourself, run your own stream. Yeah, with I have a very good partner that I would love to keep working with, uh and uh also just investing harder maybe in horses uh with me and Alexis because the horses is great, but it’s high cost and it is uh very risky. Extremely risky. I mean, the horse can die. I have one right now that is sick and I don’t know how I mean, I’m going to take care of it, do all we can, but But we easily we might lose 20,000 right now.
Guest 1: Yeah, he could lose it tonight. like it could be gone. And does insurance pay anything if a horse dies?
Guest 2: Yes, yes, they do, but you, I mean, you do answer a horse, I mean, you do whatever you want to do. You can ensure a horse that cost you 500 bucks. But you usually, my perspective is they need to show you that they have a lot of talent. Uh they have to, yeah, show you that is a good prospect before I put insurance on them, which is a little bit risky. Yeah, so they kind of have to earn it. So the only horse doesn’t have an insure. Yes. Yes, so he should right now. He should. He’s very great. especially today. Yeah, but that’s always how it goes. Always how it goes.
Mindy: Okay.
Guest 1: Um, but I I think also Scott, um I have a I have a really great position right now and um we would love like we we Max and I both just work a lot of hours all the time. We have a six month old kid and um we’re trying to figure out how to like chill a little bit, how to become a little bit more um like we always talk about, you know, quitting our jobs and moving somewhere. and the thing we haven’t tried is just moderation, you know? Uh, we haven’t tried moderating things, like the level of work that we’re doing cuz our work is also very physical. Um we both just have to like be out in the elements, like pretty much all year, and it’s it’s a lot. And it’s it’s horses, so at like on Sunday at 8 o’clock, we got a call and we have to go check a horse and move for an hour, we have to figure out how we’re going to do with the kid and go check the horse and take care of it. Um so it’s figuring out like how we can, yeah, but one reason but one reason we’re doing that is because we we do want to continue, you know, we we’d been in this mindset of like, we got to save for the next house. We got to save for the next house. So we’ve been just working so much to be able to just, we got to keep everything steady so that we can continue to save for this passive income. But now we are looking at the numbers and we’re like, okay, we’ve kind of reached our our uh, our FI number or whatever. But um, we’re still, I guess we’re still just afraid and uh, there’s a lot of things we would do but, you know, Max is from France, we always talk about opening a bakery. We always talk about doing different different things outside of the horse business. We do love the horse business a lot. Yeah, and we want to stay and involved and keep doing what we do maybe different different. But anyway, I don’t know if that answered your question a little bit, but you know, we basically just want to like double what we’ve done already with the houses and so that we feel really safe to make any kind of a gentle transition. Not necessarily quitting our jobs because we both really value work, and we want to model that for our children. But um but we do want to also do other things.
Scott: Here’s how I I would instinctively react and you can let me know to that first. I I don’t think twice as many houses is going to help your situation because it’s I think you have a mental problem, not a financial problem here. You’re you’re houses paying for your expenses. I’m sorry to paying for this. Yeah, sorry. But like but like I think I think you have like, hey, I’m why am I so worried about money. I got nine paid off rentals. I got a brewery paying me passive income on top of that. My expenses are $4,500 a month. I live for free and yeah, like if you wanted to just chill out now, you could do that, right? That’s that’s totally an option with your current situation. Adding debt to the equation is going to hurt that temporarily, not help it because you’re going to refinance your mortgage, your current properties and you’re going to you pull out, you know, let’s call it 4 or 500 grand, you’re almost certainly going to get 300, 3,000-ish in expenses on top of that, you have to buy more properties and it’ll be actually it’ll actually almost feel even more tight in the short run, right? A lot of people’s long-term goal is to get to six paid off rental properties on a million dollar portfolio and chill on 4,500 in passive income per month. So like like it’s almost backwards to go the other way unless you want to get very, very wealthy, which is not what I’m hearing you say. I’m not hearing you say, I want to build a huge net worth. You’re saying I want to feel secure. So, my my next reaction to that is I don’t think, I think it’s a cash, I think there’s a little bit of a cash issue here. You have plenty of cash. Your financial position is rock solid. But wouldn’t, you know, in the case where you have a horse that could go, you know, get sick and die and lose 20 grand or you have all these rental properties and this stuff, I would feel more comfortable if I was sitting on like 100 grand in cash that I could just, you know, feel very good about that I I don’t have to worry about that to cover my business and personal expenses at a high level. And then after that, you guys are going to stock pile, you know, hundreds of thousands of dollars per year. I think you’re very underestimating the potential in your, um, horse flipping business here with that, right? You’re you’re told me you’re underestimating that. You have you have assets that are worth 500 half a million dollars at least in the current horses you have. Um, there there’s some there’s something there where you could just do that business full time right now if you wanted to or part time or whatever. and it seems like you love it. I it seem like you’re world class at this uh at at this activity and that this is not something that you’re just going to give up on next year. So it’s not really a financial freedom thing. like you’re going to be dealing with horses at 8:00 p.m. in the evening uh under any circumstances that is real is realistic based on my take talking to you for 30 minutes. So, how how does that feel as an initial diagnosis of your situation?
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Guest 2: I yeah, I agree. Uh I agree on the fact that yes, I will keep riding horses. Um I want to. Um but I also feel like uh Alexis and I decided to, you know, for example, uh homeschool our kids. Um we have one but we’ll like to have more. um and so that will maybe take away uh the potential of Alexis to have a job uh full time. Maybe she will work more with me in my business. um but um so that means we need to if she quit her job, that means we need to move out of this house, we live for free. Uh so we need to go buy a house. which we’ve never had housing costs, so we’re really afraid of that, which sounds very funny. I know, but we we’re like we we feel like little kids, you know, it’s like we do look at our numbers and we’re like, wow, it does look good, but you know, we’ve never had to buy a personal residence. And so we we feel like that’s kind of scary. Um, so anyway, maybe this is more of a. blessed in in in a region right now in Dallas, it’s really hard to buy houses. I mean, we’ve been looking at a bunch of houses and I mean, for two years you have six. Where where are they located?
Guest 1: Too far from here. Yeah.
Scott: Okay.
Guest 2: Yeah, they’re they’re located in in Kansas. So um Kansas with and Kansas City. So there’s anybody in DFW who wants to find us a great duplex, we’d love that. Yes. um but yes, so buying a house here is very expensive and we probably right now because I didn’t sell horses and we have like what 25,000 in our saving in the bank, um we probably going to have to use that to go buy one if we find something that we like and feel comfortable to purchase. Um maybe in two months, no. Maybe we’ll have plenty cash to go buy one, but um so there’s a part of us that, okay, if we want to uh maybe do home school and Alexis maybe want to win herself out of her job, um because it is a very stressful job, especially with the person she’s working with.
Mindy: Okay, I have a lot of things to say. My first thing that I’m going to say is your current six paid off properties, rental income is $4,600. Your current expenses are $4,500. $4,600 minus 4,500 is $100 extra. So both of you quit your jobs right now. No. Number two, Scott is very harsh, but I’m not going to completely disagree with him. Um You’re not harsh, but I think you can say it nicely. I love it but yeah. No, we love it. I mean that’s what we want your feedback. I mean that’s what we have to call.
Mindy: Third question is you are currently saving $4,500, $1,000 on your rent and $3,500 from Max’s salary. What are you doing with this money? Where does the $1,000 for rent go and where does the $3,500 from Max’s salary go?
Guest 1: Right now, that’s going towards like what we do in our, we’ve set up our personal banking um so that, you know, we have like a, I don’t know, a bunch of different accounts in there, but we separate it out and we have say just general savings that typically goes towards um, you know, like a a down payment on or not a down payment, but it goes towards paying for a house. So we just let that savings bank account grow, grow, grow and then we also have a separate bank account that is the it’s for the houses and here, yeah, so the reinvestment amount, that just continues to grow as well. So those two in random grow. So that 4,500, like that’ll just go into our savings um and then we’ll transfer out $1,000 to invest in our Vanguard brokerage, which is exclusively VTX. We don’t even think about it. We just do it. trying to do it on a monthly basis. Um, and then we let those the rental house account and then also our savings account grow until we have enough to buy another house. The thing that it does strap us for, I mean, the thing that is tricky about this tactic, uh, is that we will have opportunities that will we we can’t reach. So, for example, I’m always looking, like, I’m always, I have a, we invest in Wichita, Kansas, which is where I’m from, um because I know the market really well or the neighborhoods, I’ll say that. I know the neighborhoods really well. The other reason we invest in Wichita is that our property management company is incredible there. We love them. So we’ve invested all of it there. I’ll be watching which shot’s market, we’ll see a house come up or something, but then we look at our savings, we look at our bank account and we’re like, we only have $50,000 in cash right now, so we can’t go buy that house because we haven’t allowed ourselves to buy on debt. So, anyway, that’s Mindy to answer your question, the long way, though that savings goes just into a bank account and just sits there until we have enough to buy another house.
Mindy: Okay, did you tell us, did you tell us how much is in that bank account? Um right now 25,000. That’s good. And then um why doesn’t your company buy a horse property for you to live on? Because then your corporation can buy this and I and Scott, correct me if my I’m wrong, CPAs, tax pros, tax correct me if I’m wrong, but if your corporation buys this house and provides you free housing, which is a thing in horse, yes, business industry, in the horse community. So that’s totally valid in my mind, but definitely check with somebody who knows what they’re talking about. Then their corporate income that you have so much of that you’re paying all these taxes on, has now purchased this asset. Scott, is that how assets work with corporations?
Scott: Yeah, I I’m I’m a little more rusty on this, so I don’t want to say anything that I’m not sure on. Um I think you could either buy it as a business and then have the business pay for that or you could buy it in your personal name and have the or on a different entity name and have the one business own one thing, the the the actual business of buying and selling horses and the other business owned the real estate and land on that, but that would be a good thing to do some homework on with your CPA. With your tax professional, yes, who knows what they’re talking about. Um yes, um but I personally don’t want to go through the headache of owning a uh owning a ranch. Um there’s so many ranches built in North Texas uh that are amazing and I just rent stalls out of it. And uh actually my partner built an amazing facility uh and I just rent sold. But maybe the company could buy a house. Yes, that that’s something we’re kind of thinking is to buy a house because my employee uh could live in that house instead of I’m renting a room for him. Or possibly we could buy a house that has like another option for another room and he could live there, we could live in the main house or something like that. Yes, or or buying a big enough house that uh there’s so many people working around horses and we know so many people working in the business that we could probably uh rent those extra rooms um to other people that that are involved.
Mindy: I also think that you should consult with a tax pro about your tax situation. and you can find CFPs, fee only financial advisors and uh tax professionals at the XYplanningnetwork.com. This is run by Michael Kitts, who is brilliant and walks on water and knows everything there is to know about money and tax and all the things. and you can find somebody who specializes in your thing. So they specialize in small business or they specialize in self-employment or they specialize in real estate, or there’s a bunch of different options to choose from and you can really help narrow it down. Um uh a couple of episodes that we have are episode I think 41 or 44 with Kyle Mast, episode 81 with Kyle Mast, and episode 200 with Kyle Mast. I don’t know if you’re sensing a pattern here. I love Kyle Mast. Um he gives a lot of really great information about how to find a CFP, questions to ask and just like things your CFP should be doing, how much it costs. Like they will go over your financial situation similar to this, but they will actually have tax knowledge and I think somebody who can help guide you with some some tax preparation could help you cut down on the excess taxes that you’re paying now.
Scott: I I I think you’re going to have a hard time with the taxes because you’re flipping property, right? And and so you’re making a lot of money, which is why you’re paying a lot of taxes. Um so that’s a good problem with that. But there probably are games where if you’re if you’re going to have a big loss one year, you know, don’t sell your other, you know, or or maybe make make a big sale that year for example to to keep stay in that that that major bracket or can you time certain transactions with a buyer to happen before or after January 1st um to make sure that that those go into the the years that make more sense, you know, and if you have a big if you have a big one you don’t want to get into another tax bracket, can you defer payment um for a few months to put it into the next calendar year? Those would be games that your tax pro might be able to help you play a little bit better on that front. Yeah. Very good. but. I think I think the fundamental challenge is not going to go away. You have you have a lot of tax, you pay a lot of tax because you make a lot of income because you’re good at what you do. Um so that’s great, great problem. Yeah, be thankful for that problem. Yes, yeah.
Mindy: I have um one one more item here that I’ll go back to. I I think that you’re not clear on the game you want to play and that’s your fundamental problem. That’s the mental that’s the mental problem I was talking about first. So you’re not sure if you want to maximize your wealth creation or you want to play it safe um or whatever. And the grass is always greener because you can you can have anything you want at this point, but you can’t have all the things that you want, which is always the problem with money uh including when you’re a billionaire. Um so I think I think what I like when I look at your situation from the outside, I see a phenomenal situation that I’m envious of, right? with no with no debt, an awesome unique career that’s going on there and the ability to do all these other things. Um and so I would say don’t it’s tempting to play the game of of building that wealth, but you guys are already rich, you’re likely to get richer. And if that leg did break or you had a problem like that, you’d be fine. You’d sell off those horses and you and you’d find another way to make make money with your mind uh instead of your body and you still you’re still working and you’re going to be in good shape. That might not be true if you went too far in over your skis in in certain directions with that. So I would say the grass is not always greener in these other cases would be be be a little bit of a a warning there. And I would also just encourage you, yeah, you know, hey, the next in two years, you could make enough from flipping horses to buy the house of your dreams, live in it, um right next to where where you want to be, paid off as another rental property and and be chilling with your complete debt-free scenario and more more wealth there with that. So all of this is within reach, it’s just a matter of what you want and I would just warn you that the grass may not be greener on the leverage side of the real estate investing equation. Um you’ve certainly won according to a lot of rule books. Yes. A.
Guest 2: I yeah, I agree. I agree on the fact that yes, I will keep riding horses. Um, I want to. um, but I also feel like um Alexis and I decided to, you know, for example, homeschool our kids. um, we have one, but we’d like to have more. um, and so that will maybe take away uh, the potential of Alexis to have a job uh, full time, maybe she will work more with me in my business. um, but um, so that means we need to, if she quit her job, that means we need to move out of this house, we live for free. so we need to go buy a house which we’ve never had housing costs, so we’re really afraid of that, which sounds very funny. I know, but we, we’re like, we we feel like little kids, you know, it’s like we do look at our numbers and we’re like, wow, it does look good, but you know, we’ve never had to buy a personal residence and so we we feel like that’s kind of scary. Um, so, anyway, maybe this is more of a. less in in in the region right now in Dallas is really hard to buy houses. I mean, we’ve been looking at a bunch of houses and I mean, for two. we have six. Where where are they located? Too far from here. Yeah. Okay. Yeah, they’re they’re located in in Kansas, so um, Kansas with the and so there’s anybody in DFW who wants to find us a great duplex, we’d love that. Yes. um, but yes, so buying a house here is very expensive and we probably right now because I didn’t sell horses and we have like what 25,000 in a saving in the bank. Um, we probably going to have to use that to go buy one if we find something that we like and feel comfortable to purchase. Um, maybe in two months, no. Maybe we’ll have plenty cash to go buy one, but um, so there’s a part of us that, okay, if we want to, uh, maybe do home school and Alexis maybe want to win herself out of her job, um, because it is a very stressful job, especially with the person she’s working with.
Mindy: Okay, I also think that you should consult with a tax pro about your tax situation and you can find CFPs, fee- only financial advisors and uh tax professionals at the xyplanningnetwork.com. This is run by Michael KITTS who is brilliant and walks on water and knows everything there is to know about money and tax and all the things, and you can find somebody who specializes in your thing. So they specialize in small business or they specialize in self-employment or they specialize in real estate or there’s a bunch of different options to choose from and you can really help narrow it down. Um uh a couple of episodes that we have are episode I think 41 or 44 with Kyle Mast, episode 81 with Kyle Mast and episode 200 with Kyle Mast. I don’t know if you’re sensing a pattern here. I love Kyle Mast. Um he gives a lot of really great information about how to find a CFP, questions to ask and just like things your CFP should be doing, how much it costs. Like they will go over your financial situation similar to this, but they will actually have tax knowledge and I think somebody who can help guide you with some some tax preparation could help you cut down on the taxes that you’re paying now.
Scott: I think that’s that’s great. You’re you’ll it will create stress and more work um in that, but you’ll also build wealth and and um yeah. So I I think it’s interesting that we got to that’s the goal. It was less about pursuing the lifestyle outcome and more about um playing the game of of building wealth.
Guest 1: Yeah, I think so. Yeah.
Scott: Okay. Well, if if that’s the case, you can certainly do that and then you know where to go. You’ve got $920,000 in equity. You can leverage it probably at a 75 LTV. So you could get, you know, close to $700,000 in in cash out of that. You’re going to get that at a seven-ish percent interest rate. So it’s going to be high. So you’re going to have to be creative with how you use that. I’d start smaller uh and and take out only a chunk of that in the first place when you buy the next, the the the first or next thing. But yeah, I mean, try it. Buy your $25,000 horse equivalent, the $125,000 house or something like that or the $300,000 duplex or the small multi-family properties. uh start start doing that and then begin accelerating the game like you would in your in your horse business. Mhm or I imagine I imagine it went for your horse business. But yeah, I think that’s I think that’s great. You’re.
Mindy: Okay. Alexis and Max, this was a lot of fun. I learned a lot about horses. I didn’t know anything about horses before. So I appreciate your time today. Thank you so much for joining us.
Guest 1: Thank you guys so much.
Mindy: It will talk to you soon.
Guest 1: Bye bye.
Mindy: Scott, that was Max and Alexis and they have a fabulous story of buying horses from age 10. You know what I bought when I was 10? I bought a candy bar. Do you buy horses when you were 10, Scott?
Scott: Nope. I didn’t buy anything at age 10. Soccer cleats.
Mindy: Soccer cleats, rugby pads or whatever. I don’t know, rugby balls. I don’t know how to play rugby.
Scott: football. I guess yeah.
Mindy: Holy cow. Um I do think you hit the nail on the head when you so eloquently posted, this is a mental problem.
Scott: Yeah.
Mindy: It is. It but but I mean, that’s a really valid point. This is something that I have tried to like verbalize so many different times. Personal finance is a personal journey and if you don’t like debt, then don’t go get debt. It doesn’t matter that you could be making more with your money. It doesn’t matter that you could be optimizing your finances in a different way. If you can’t sleep at night, what does it matter?
Scott: Yeah, I mean at some point like and you know, it’s hard to find a couple that is in better financial shape, right? I mean maybe you’ve got you know, entrepreneurs or rock stars uh that that are that are doing and have, you know, a more stable financial position. But I mean this is this is as good as good gets, right? in terms of what what what what we see on this show, uh what you know, a $1.7 million portfolio. You know every asset is conservatively underwritten. You know all they’re underestimating the value of all their real estate, they’re underestimating the value of all their horses. Uh they’re underestimating all the value of their other accounts. So it’s a really conservative position. They spend $4,500 a month. You know that’s an overstatement uh and they’ve got buckets for capx and appropriately categorized with that and they’re still uh what do I do next? Am I ready to take this plunge? am I ready to do these things? right? And so that’s I think it’s like a good perspective shift to say, no, no, no, I’ve won. The grass is always greener. I can always be optimizing for ROI. I can take my 1.7 or whatever, two, two and a half million dollar net worth, somewhere between those two numbers is what the real net worth is, and I can redeploy it into something that’s likely to generate more returns, but is going to require me to watch it much more carefully, is going to have uh much more leverage on it and may give me less freedom, or I can be very happy with the current situation. I think it’s all about what you want. And in post-recording, um we talked we talked to them a little bit uh privately and it came out, you know, one of the the the things that I think would be really helpful for them is that exercise of the money date and the vision setting, right? They need to go somewhere with a beautiful view, nice weather, have their cup of coffee around 10:00 a.m. when they’re feeling at their peak energy, just say, what do we want to do? Like, do we want to start investing all, you know, uh leveraging up our real estate and building a big thing here? Do we want to buy a nice house and set up for up for that? Do we want to just keep doing what we’re doing? Like what does good look like in terms of our life and how does that inform the decisions about what we want to do with our money down street? because they can do anything they want uh right now and have that luxury and they just need to pick what it is that they want to do. They can’t do all the things, right? Pala Pan says, afford anything but not everything. Uh they can they can do anything they want. Say can kind of afford everything. Yeah. but yes, they’re in a great position and I think that the exercises and homework that you gave them to do are going to be hugely beneficial to them and to anybody listening who’s in the same position. Oh, I’m stuck, what do I do next? Well, go back to the basics. What is it that you want, what do you want in five years? what do you want in 10 years and you know, map out a plan to get there or work backwards. You want this, how do you get there? And I think that’s a really great advice, Scott, the money date. I love that. I still love that advice every single time you give it. And I’ll ran further here, you know, Max, in particular, is the kind of guy who’s like, I when I was eight years old, I bought a bunch of rats and bred them so I could buy a horse and then I never stopped doing that. I did a thousand horses that I’ve broken in my in my in my life, starting from age 10 and going when I was 15, I flew across the Atlantic Ocean to go and and work for somebody who probably knew their stuff in that field to pursue my passion. like like it’ll never get easy. I I don’t think we’ll find another person on this show uh who is like more certain of their passion in life than Max uh from that. and there’s still a what am I do next with my money and my portfolio with that. So the problem never ends um even even at these extreme edge ends where we’ve got a a debt-free finalized future state portfolio capable of fully capable of sustaining FI forever and a clear passion that we want to go after, it’s still hard for Max and Alexis. It’s going to be hard for you too, it’s going to be hard for everybody, which is why um I think it’s helpful to talk about it and hear those perspectives.
Mindy: Absolutely. Okay, Scott, should we get out of here?
Scott: Let’s do it.
Mindy: From episode 326 of the Bigger Pockets Money podcast, he is Scott Trench and I am Mindy Jensen saying, get on the bus, octopus.
Mindy: “
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