Have you ever wondered what your life would look like if debt didn’t hold you back? Or if you could actually live mortgage free? Today’s guest has a financial background that began with the familiar middle class money challenges many of us know all too well. Growing up in a single income household, he saw early on how debt and limited financial flexibility shaped life’s choices. After racking up nearly $100,000 in debt in student loans and car debt right after college, he quickly realized that earning more didn’t always mean having more.
Now he’s saving almost all of his income, living off rental cash flow, and on track to hit FI by age 34. Andrew’s journey highlights the power of keeping your expenses low, investing wisely, taking advantage of opportunities that are presented, and allowing yourself to be okay with a bit of risk. All the things we keep talking about here at BiggerPockets Money.
Mindy: Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and with me as always is my also FI before 34 co-host, Scott Trench.
Scott: Thanks Mindy, great to be here. As always, that intro is a great kindling for an awesome money discussion that’s coming up here. BiggerPockets has a goal of creating 1 million millionaires. You’re in the right place if you want to get your financial house in order because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting. We’ll give you the spark. This episode is brought to you by Connect Invest, real estate investing simplified and within your reach. Now, let’s get into the show. Thanks so much for joining us today, Andrew.
Guest: Yeah, thanks for having me. Been a long time follower of this podcast and and both your journeys in the public space and in BiggerPockets. So, thanks for all all the help that you guys do.
Mindy: Woohoo! Uh, I just want to say, Scott, I saw what you did there right at the beginning. Um, and now to Andrew. Where does your journey with money begin?
Guest: So thanks Mindy. So I would say my money journey leads back to start in middle school. My dad encouraged me to get lawn mowing jobs. When I graduated college, I had probably about 70 grand in student loan debt and a reliably unreliable car. And so that thing finally broke down on me like a month or two post graduation and I decided, screw it, I’m going to buy a brand new truck, you know, I deserve it. I have a I have a good job.
So got up to like $100,000 in debt probably there. And that’s when I was kind of scratching my head, comparing myself to some of my peers and I’m like, wow, I’ve got a boat anchor behind me to to catch up to them, that some of them that just had parents pay for school, stuff like that.
And so I started researching, investing, started aggressively paying off debt, Googling how to pay off debt, how to save money, how to reduce debt, stumbled into Dave Ramsey’s program as many listeners have have probably been through that and thankfully followed that. And it’s you know, it’s relatively straightforward and and it works. And so I was I was able to pay off most of my debt there.
Scott: How long did it take you to so so you graduated college in what, 2013, 2012?
Guest: Yep, ’13.
Scott: Okay, that was the same year as me. Um, great year. Um, and and you accumulated $100,000 in debt in the first year in 2013 to 2014. Is that right?
Guest: Yeah, my my student loans throughout college, plus my truck added up to about 100 grand in debt that I was at 2014 issue.
Scott: Awesome. And when did you discover Dave Ramsey?
Guest: I couldn’t tell you the exact year, but it was within that first year or two of college.
Scott: Okay. And then how long did it take you to pay off your debt?
Guest: It was probably like six years total. Um, because I got, I would say 80% of the way there before I started house hacking. I wanted to kind of do things one step at a time and so I was like, I’m going to pay off my loans before I start saving up for a house. And then once I got my truck debt and student loans down to five to $10,000 each probably, then I started saving up for a house and bought a duplex to start house hacking.
Mindy: And what year was this?
Guest: So I bought the duplex in 2018 after somewhat learning about the the FIRE movement and and rental real estate.
Mindy: And how did you discover the financial independence movement?
Guest: I used to work at a large refinery in Minnesota, and I had a co-worker there who bought one duplex, moved into it, waited for the neighbor to move out, moved next door, remodeled it, bought a new another duplex, another duplex, and he started in his early 20s and I think by his early 30s, he had half a dozen duplexes. And we’d worked these large shutdowns at the refinery. They were one to two months long. You’d work seven days a week, 13 hours a day.
And I remember one of those the bosses were coming around like, hey, Bob, you’re going to do this, Jim, you’re going to do that, Susie, you’re going to do this. And uh, this gentleman was like, oh, actually, I’m going to sit this one out. And they’re like, oh, it’s not really, that’s it wasn’t a question, it was a statement that you’re going to do this. And he was like, well, if you want, I can put the hire contractors and put it on the company credit card. I’m sure you’re not going to go for that, but it is an option to you. The other option is today’s my last day because I don’t need this job anymore. It’s just to buy me more rentals. Um, and I can live off my rental income just fine. Or a third option is I can work 40 hours a week and I’m just not showing up on the weekend so I can do this remodel. And his boss was mid 50s, 60s years old, and this guy’s 32 years old. And it was just like, you know, jaw dropping for me to sit back in the peanut gallery and watch this. So, I was like, there’s something going on with these duplexes. I got to dig into this more.
Scott: That’s awesome. And what year was that conversation? When did that happen?
Guest: That would have likely been 2015, 2016.
Scott: Okay, so that, that was what kicked the fire in. Fire to go after, you know, paying off the rentals. Did did that change the aggression or the pace or the way that you accumulated capital, um, or conducted your financial life in anyway?
Guest: It made me lean into it more. I definitely wanted to pour some gas on the fire there and I was relatively frugal. Some of my friends or family members could could definitely speak to Andrew being frugal in his young 20s. But some of my peers, you know, didn’t care if they paid off their student loans by 40 or 50. I wanted those things gone as soon as possible. I I personally don’t enjoy being in debt at all. Then I was like, okay, I start I really like Paula Pant’s ‘afford anything.’ You can afford anything but not everything. And so I was like, I’m gonna try these little one-month things of no restaurants this month or no new hunting gear or camping gear this month and and try to figure out, can I like suffer through one month of uh mini deprivation in in one category to save another 50 bucks or 100 bucks? Because what I found is I can nickel and dime myself to being poor in a month or to giving away all my money. So I could also nickel and dime myself to paying off student loan debt or nickel and dime myself to saving up a a housing down payment. I don’t, I don’t always save 1,000 bucks at a time. Sometimes I save 50 bucks, 20 bucks, 150 bucks and over time it adds up.
Scott: And then did your, what was your income situation like during this time period? Um, and and I presume that with 13 weeks of 80 hour weeks and you’re full-time on this job, that there’s overtime pay or something like that, no?
Guest: Uh, kind of, but it’s relatively disappointing. So they they sold you on it was good experience for your resume. But we were salary, we’d get $0 an hour overtime. And then assuming zero of the 2,000 contractors on site had safety incidents, you’d get $1,000 per week pre-tax bonus. So after this seven week shutdown, I did the math in front of my boss, I got like a just under a $3,500 bonus and I worked just over 350 hours of overtime. And I was like, I’m pretty sure I’m making less than minimum wage. So with all due respect, I I have my experience full on my resume and I’m good on this.
Mindy: Wow, this is good resume experience working for free. I’m sorry, $1,000 pre-tax. To answer your first question, I was making about 75 to 85,000 at this time.
Mindy: We need to take a quick ad break. And while we’re away, we want to hear from you. Unlike Andrew, were you well capitalized when you bought your first real estate property? Answer in the Spotify or YouTube app. In the meantime, we’ll be right back.
Scott: Welcome back to the show.
Mindy: I want to go back to that gamifying your savings and trying, okay, how can I deprive for lack of a better word? How can I deprive myself in this one category to see if I can save an extra 50 or 100 bucks? Did you take that extra 50 or 100 bucks and put it into your debt or into your savings?
Guest: So really Mindy, the answer is both. At first, I I followed the debt snowball method. So on my student loans, you know, I I had multiple student loans as many of the listeners probably do. I didn’t refinance all mine into consolidation. So I was I was just trying to, you know, pay off the smallest lump sum student loan there. So I was just trying to cross those off one at a time and that was a definitely a big win for me every time I paid off one of those. And then, once they were sub $10,000, I was really interested in getting a duplex. So I started to not put all my extra savings towards student loans, then I started just putting into a house down payment fund afterwards.
After I bought that duplex, to remodel it, I had no more money and it was smoked in, hadn’t been updated in 50 years, pretty rough shape. So I got a 0% credit card for 18 months and I put 25 grand on it. So it was relatively risky. And so I did the math. I was like, well, if I take my old rent payment, my old student loan payment, my old truck payment, and I’m extra frugal and either another 100 or $200 for 18 months, I can save $1,500 a month or whatever to pay off 25 grand in 18 months. So, and I I’m got it done with like one month to spare.
Mindy: So I’m hearing a story of intentionality. You weren’t intentional necessarily with your um, collecting your student loans and then you decided to make it an even 100k by throwing another car on top or a truck on top of that. But then after that, I heard I’m hearing you say, I don’t like debt. I wanted to get this done as soon as possible. I’m playing games like mental games with myself to save this extra money to throw at my debt. I am then taking those same mental games and the extra savings that I’m not paying towards my student loans and my truck anymore, and I’m paying, I’m putting that into fixing up my duplex, which is now a cash flowing asset. Is that, was it a cash flowing asset? I guess I didn’t ask.
Guest: I mean, my the rent is probably $50 more than the mortgage. So, yeah, I would say it’s cash flowing. And if I were to move out, it it would cash flow pretty well.
Mindy: Wait, the rent from the half of it is $50 more than your mortgage?
Guest: Yeah.
Mindy: And you’re living for free then.
Guest: Correct, yeah.
Mindy: Yeah, okay, I’d say that’s cash flow.
Guest: Yeah, I would say so. So that’s been pretty nice. And even to gamify it a little more and add more risk to the fire. Um, so I took out that 18-month credit card. I started saving up in a brokerage account. I I can handle a little bit of risk. So I put, I didn’t actually pay off any of the credit card. I put it all in the S&P 500, uh, which I would also probably not recommend on a 18-month timeline with a 20% interest risk if I lose at the back end. So I started saving up.
A year later, my realtor, um, called me one day and he’s like, hey, I found this six-plex for sale. I think it’s really poorly marketed and it’s probably listed for two-thirds of what it should be listed for. Do you want it? Do you have 50 grand? And I was like, yeah, I have 50 grand. Um, and I was like, yeah, let’s go look at it. I was like, should I pay off the credit card or should I go should I go buy another rental property? So I looked at it and that cash flowed right off the get-go, like 1,000 or something. So I was like, okay, yeah, sure, let’s do that. Um, so I went to rid it and made an offer that day, got it.
And then I was like, great. So I, and I had probably $2,000 less than what I needed for a down payment. So I was like, okay, I’ll be super frugal for the next month, you know, Dave Ramsey’s beans and rice. Um, but I can save up two grand by closing date. So yeah, we’ll be good.
Scott: I have to react to a couple things here because what I, you know, like, like there’s the like, what’s the right way to buy real estate? How should you be capitalized? Well, you know, we we’ve gone back and forth on this. The right answer I think looks something like this. You have the down payment, you have uh all of the projected repairs that you know are going to come up immediately that are baked into that. You have um a an emergency reserve of let’s call it 10 to 15,000 for the property or maybe three to six months expenses, you know, whatever is is greater among those two things um, for it. And that’s what you do. Your credit and your um DTI all all work and you’re good to go on that. And yet, very few people seem to meet all of those requirements when they buy their first property uh for this, right? Like I certainly didn’t meet that requirement when I bought my first property, my first duplex house act. You you didn’t come uh close by a long shot. Mindy, how did you do? Did you did you meet those requirements when you bought your first property?
Mindy: No, I borrowed my down payment from my parents.
Scott: Yeah, so what’s the right answer to like how much did you have for buying your property? Well, there it is. I gave you the technical right answer. And the reality is not many people meet that actual set of criteria. And when you’re getting started, you know, it’s an all-in bet. Um, in your case, it was two all in bets. Uh, you put all of it on into the middle of the table and get going. And that’s why real estate’s so hard to break into is because for so many people, it’s either that all in bet or it’s you wait and you’re delaying that purchase by years to get into that well capitalized state. Um, I think for what, for the record, all three of us did it the wrong way. So it kind of conundrum about what’s responsible or not. So, is that, is that bring true with the other people you know in real estate investing, Andrew?
Guest: Yeah, I’m fairly involved in the Montana real estate investor meetup groups and I would say that’s, that’s more normal. That, that’s the rule, it’s not the, the exception is a well capitalized investor. And even some large land developers that I know, they seem to, they’re not betting with 5% of their net worth by any means.
Mindy: I am having heart palpitations listening to your story because that is, I mean, it it turned out great in the end, spoiler alert, it turned out great for you in the end, but like, were you having a a hard time sleeping? I mean, you stopped contributing to your Roth IRA, you took the money that you had set aside for your credit card payment and you put it in the stock market, and then you bought a a six-plex instead of paying off that credit card, incurring more debt, and you had a whopping $500 net worth. That’s not how you do it.
Guest: Yeah, I mean, was I probably anxious or nervous? I’m I’m not a doctor, so I can’t diagnose myself, but do I have significantly less stress with an emergency fund and no credit card debt? Absolutely, by a lot. And uh, it’s hard to articulate that until you’ve been on both sides of the coin there. But yeah, it was an intimidating um and and very committing. I I I was well aware of that. I wasn’t like naive of that. It was it was a calculated risk, but I I knew the the risk and I and I thought the math would work out and yeah.
Scott: All right, we’re going to take one final break, and then we’ll be back with Andrew.
Mindy: Let’s jump back in. I don’t want to say lucky, but yeah, kind of you did. So, uh you said a couple seconds ago, you don’t want to be foolish, but sometimes you just have to try. I look at the statements that you made surrounding your the circumstances with you buying the six-plex, how was that just trying and not being foolish? Was it because it was so low? You said it was like at two-thirds the price it should be. Was it all rented out?
Guest: Yeah, it was all rented out and it was cash flowing like $1,000 and the rents were relatively low. So I was able to increase the rents immediately, get it to cash flowing $1,500 a month. So I thought long term, I’d be really grateful for buying it. And I thought short term, I could handle the the risk of my credit card. I still calculated out that I could pay off the credit card before I paid any interest. And I knew that worst case, I would have to take $10,000 out of my 401k, which had 50 to 100 grand in it at the time. So I was like, I can take out 20 grand out of my 401k. That’s not optimal, but it’s not catastrophic. And if I were to even need another 20 grand to pull out of my 401k to use as a down payment to buy this sixplex, I thought it would be worth it because I thought that the appreciation and the cash flow from that sixplex would be well worth the the 20 grand plus taxes and fees.
Mindy: Do you still own this six-plex?
Guest: Yeah, I do.
Mindy: And the duplex?
Guest: Yep.
Scott: How are they going?
Guest: They’re going great. I mean, I’ve had knock on wood, no terrible property management stories. I’ve had great renters throughout COVID and I’ve got, I’ve remodeled, I mean, most of the units by now and so, I mean, they’ve probably tripled in value. I don’t know, maybe, yeah, maybe more than that, but probably 300% of of what I bought them for.
Scott: You’ve 20Xed your money.
Guest: Probably, yeah.
Scott: You could have paid the credit card interest.
Guest: So I’ve probably put 100 grand into real estate and probably have, yeah, I don’t know, a million in equity or something.
Mindy: Oh, well, that’s a nice trade off.
Guest: Was it risky? Yeah, but it was still a calculated risk. I wasn’t naive to what I was doing. But I calculated it out like, oh, what happens if the stock market goes down 30%, then I need to take out seven grand from my 401k. I was like, okay, I can do that if I need to.
Scott: You know, the next couple years are not going to be like that, but that’s the beauty of real estate investing over a long time horizon. I’ve put way more money into the stock market in terms of dollars invested than I have into real estate, and the portfolios are about the same size in equity value. And like that’s, that’s a remarkable power of that, right? I put more into real estate than you did, but not a ton more, and you know, and and that’s again, 50% of my portfolio. It’s amazing how how much that appreciation in the last couple of years is power returns in here.
Mindy: Okay, I want to jump in here really quickly and say to anybody listening thinking, oh, I’m going to buy a six-plex with the money that I had saved up for my credit card payment in 18 months. Um, Andrew had other places that he could find money to pay off that credit card, should something happen to the stock market where he was keeping his credit card money. Don’t keep your credit card money in the stock market, but it worked out for Andrew. I can’t say it’s going to work out for you.
Scott: But the other thing that really de-risked your situation, Andrew, is how little you spent. There was a huge gap between your income from your salary and the amount you spent on your life. And so that’s what, like 30 grand a year, 40 grand a year?
Guest: So I looked this up. I I have my budgets back. I could tell you how much I spent on groceries in April of 2017. Um, so my annual spend in ’18 was 10,000, 19 was 10,000, 2020 I lived it up 17 grand, ’21 18 grand. I’ve I’ve since increased my expenses a lot back then, but I remember I have old graphs for when I’m going to become financially independent once I make $833 a month in uh dividends.
Scott: Wow, you got that with one six-plex. But like that’s the real, that’s the real item here, right? Like I I think that if that’s your situation, you make 75 or 80 grand a year and you spend 800 a month, then you can responsibly take a risk like what you took, what you took there. What would be totally inappropriate and probably not even possible for many folks because they wouldn’t have these other options is if you spent 70 grand and made 85 to be able to do what you just did there.
Guest: Because at that time, I was saving 4 or 5,000 a month. So $25,000 is a lot of money to myself or somebody that’s making 75 grand a year. But I also figured it out. I was like, okay, let’s say I refuse to take money out of my 401k, I’ll pay this off in four or five months. I was like, yeah, I’ll I’ll deal with that. That’s fine. So even a 20% interest rate when you’re paying it off over four months, it it reduces the severity of your interest there.
So I think one of the ultimate superpowers of house hacking or even getting into real estate is your expenses get so low or can get so low. And assuming you don’t do lifestyle creep with your rental income creep, then you can save so much money. And I have so many peers who save 50 bucks a month, 100 a month, 250, and with most people can obviously afford a rent payment, student loan payment, car payment when they’re recently graduating college. But once you pay off those debts and you house hack and you no longer have a rent payment, then just that simple math, that’s like $2,000 a month that’s easy to save and so I think if you house hack, a lot of people can start saving two, three, $4,000 a month even on a median salary. And then you’re saving 50 grand a year, 75, $100,000 a year and then your stock portfolio, which is where I put all those savings, sounds like similar to you Scott, then that can start growing very, very fast.
Scott: That’s the magic of this, right? Is is the the if you can keep your expenses low on a median or upper middle class salary, like really low where you’re saving 60, 70, 80% of that income, all these options rack up really rapidly because cash is accumulating, you don’t need the job at that point. You are able to take risks like what you’re talking about. The next house hack feels like a luxury uh and a huge lifestyle upgrade when you go from the $800 a month house hack to the slightly the the the nicer one there. Like it’s just an incredible um I think a like uh uh amplifier of this, right? And and a great analogy here is if you’re saving 250 bucks a month on that 75, 80,000 a year salary, let’s call it um let’s call it 10% of your income. Let’s you’re saving 7,500 to 8,500 a year. You’re saving one year of expenses every nine years, right? If you do if you’re doing that math. You were saving what, four years of expenses every year?
Guest: Yeah, probably 80% for four or five years.
Scott: So when you think about it, it’s not 10 times, it’s not twice as fast or three times as fast. It is 40 times as fast, right? Or something 30 to 40 times as fast the amount of relative wealth you were accumulating and options that you were accumulating. And that just produced um these opportunities and probably I I you know, I’d love to hear more more of the story, but I bet you the opportunities have continued to explode for you uh since making those two investments and will continue to explode for the rest of your life if you can sustain this path.
Guest: Yeah, I think house hacking or side hustles, there’s many ways to skin the cat if I think it’s such an asymmetric bet where if you’re extra frugal or you live less cool than your peers for three to five years, you’ll have 30 to 50 years of of abundance or however you want to define it. Like I recently went to FinCon and and hung out with Mindy and some other folks and that’s probably the most expensive vacation I’ve ever been on, but you know, it’s just not and I’ve recently started a YouTube channel and trying to start an online business, but the ability to buy some camera equipment, lights, mics, all that, go fly to Atlanta to try to learn something, it’s just it’s crazy where now I can I can make these 5, $10,000 bets of I’m going to start a YouTube channel, spend 10 grand on equipment, see if it works and if not, then I’ll try the next thing. Um, but I think that’s just so powerful and I I really like what you say Scott all the time about starting a business. If 10% odds of success, try 10 times, you have 100% odds of success by the end of it. And obviously it’s more complex than that.
Scott: I have to do the math there for the probabilities. I’m curious. There’s some compounding geometric thing that makes it you’re getting very high probability by the 10th bet, but yeah.
Guest: So and I’ve been I don’t have any other like big opportunities that I’m currently working on, but I’m definitely close to financial independence and I’m trying to figure out what is that next step because I don’t feel called necessarily to just have a corporate nine to five job anymore, but I have a good job. I I do, I’m good at it, it pays relatively good. And so I’m like, oh, do I just keep saving very aggressive? I can more or less save my entire salary if I want to. Um, spending money on this YouTube equipment and trips takes out of that a little, but it’s like, do I do that or try business ideas? And because I don’t want to just sit on the beach drinking margaritas for the rest of my life or sit on the couch, like that’s not a way to live, so.
Scott: What did your life look like? Like what did you do for fun when you were spending 10 or 17,000 a year and what does it look like now?
Guest: I still live in Western Montana, so there’s ample outdoor activities, hiking, hunting, skiing, rock climbing, very popular out here as they likely are down in Colorado. A lot of those activities are are relatively cheap. At those times when I wasn’t doing like a remodel project on the weekends, I was rock climbing, skiing. So a lot of those thousand to $2,000 in equipment to get into them and then it’s more or less free unlimited times you go. Maybe maybe not skiing, I would get a season pass, stuff like that, but I was noticeably frugal probably and I still have that same truck from 2013. So I was just house hacking, but a lot of my peers were renting. Some of them definitely bought nicer single family homes, so I don’t live in the coolest house by any means of any of my peers, but I, you know, I drive a 2013 truck with 200,000 miles on it and, you know, hunt and hike as as much as the next guy in Montana.
Mindy: Yeah, and you have the coolest bank balance of all of the people that you know.
Guest: Maybe, yeah, probably.
Scott: Do you just own those two rentals? Like you bought these two ones pretty quick and then you’ve been allowing, so so you have what you have today it sounds like is a lightly levered real estate portfolio and I imagine a lot of cash has piled up over the last couple of years. What have you done with all that other cash?
Guest: It’s just all in the S&P 500. I really haven’t, I I’ve just been investing in that since 2019 when I bought the six-plex. I’ve been wanting to buy a house, but mentally I’m still in 2018 prices to some extent, so I haven’t wanted to buy a $600,000 house because today, starter homes are probably 400 to 500, so I could definitely sell my duplex and get a starter home, but to me a starter home is not that much cooler than a single family starter home. So a nice house is 6, 7, 800 and I just don’t want to get a four or $5,000 mortgage. Um and I don’t, I’ll probably sell the duplex just to for capital gains taxes, but I’m also just kind of just hanging out and saving cash and figuring out what the next step is. I kind of want to, I’m trying to debate, do I sell, do I buy a new family house and then quit my job and then have higher overhead and then try to start a business to dedicate 40 hours a week for that? Or do I stay living in my duplex with rock bottom overhead, arguably financially independent, and then keep my job so that I have access to a mortgage easily, get a business off the ground, wait till it makes a dollar a month or $1,000 a month, then quit my job so I can lay the gas pedal down and give it 40 hours a week, or, or do I just quit my job? I have a, got a cool camper this year to because I was like, I want to live it up a little bit, so I’m going to buy a used camper and road trip the Western this summer and work remote and do some of that. So I was like, do I rent out the duplex and just road trip the West for a while and hit all the national parks, for example, and just live off rental income? I could totally do that. Um, or do I just quit my job and lose the mortgage access, have to do creative financing and then get a business off the ground and and maybe just pay cash for a house next?
Mindy: How much time would you be spending getting the business off the ground? Because I can see if we’re talking about a YouTube channel, I can see once you figure out what you’re going to talk about and you get all of your editing processes down, I can see that being a pretty low hourly lift. So then you’ve got all this extra time. Um, I love the W2 for the ability to get you a mortgage. Do you like what you do or are you still working those 13-hour days for an extra $50?
Guest: No, I don’t work a lot of overtime anymore, but I don’t love my job. It’s fairly corporate and I just feel more called to be like an entrepreneur. So that’s what I, that’s what I want to do long term. And one of my questions is, let’s just say I’m 80% FI. Is let’s if I save up for another year or five years and I’m 110% FI or 150% FI, at that date, I’m still going to want to go and start my business. I’m not going to want to just sit on the couch and and be FI and twiddle my thumbs for the rest of my life. So I’m just kind of in my mind, I’m like, the best day to buy to start house hacking was five years ago or today and not five years in the future. So it’s like the best time to start a business is is today, not five years in the future. And when I look back on buying a real estate, it’s not like, oh, thankfully I waited till 2018. I’m like, oh, I wish I would have started in 2014.
Mindy: So, starting a business, you will either succeed or fail. Let’s succeed quickly, or let’s fail quickly so you could move on to the next thing. So start your business now.
Guest: And that’s what I’m trying to do on the side. And I totally agree that once all your systems are in place, I think you can have a YouTube channel with 5, 10, 15, 20 hours a week, probably less than 40. But right now that that startup phase is a little more learning, so that takes a little more time. And so I’m commonly working on Saturdays and maybe one or two evenings to get a video out. And I don’t want to, so let’s just say for made up numbers, it takes 1,000 hours to get a business off the ground. Maybe it’s a YouTube channel, maybe it’s a digital marketing agency. I’ve got a couple ideas, but I can either do 10 hours a week for 100 weeks or work every Saturday for two years, or I can do that in six months or three months working full-time at it, and then, you know, fail quickly and then on to the next thing or also just like the compounding of the skill development and the learning versus waiting a week to refigure out how to make a a thumbnail or something.
Scott: I would bet on the full-time effort for a reward all day every time, right? The reason, the reason that most people can’t do that is because they need to spend 60, 70,000 a year to maintain their lifestyle and the job is a requirement in order to meet that work. And so the other effort has to be done on the side. But I mean, you there’s there’s no, almost no world. It is possible, but it is so unlikely that someone in your situation will get richer faster by staying at a job. So unless you intend to buy another rental property, like you said, like that’s the, that’s the, that that’s the rub here is is if your expenses are still in that 20, $30,000 range and you have the cash piled up for a couple of years, like the entrepreneurial route makes so much more sense than trying to to compete a entrepreneurily in your free time on the side, I think. What do you think, Mindy?
Mindy: I really like creating a business like this where you can do it part-time. You can do it a couple nights and on the weekends and then if your friend calls you up and’s like, “Hey, let’s, I have this really awesome, uh, experience available.” You could be like, “Oh, I’m just going to do that instead.” I like starting that with the safety net of a job underneath you. So if it doesn’t pan out, and nine out of 10 won’t, then you can, you’re still generating income. The rentals throw a bit of a monkey wrench into it. Um, are you, are you actively looking for new rentals or are you just if something comes up that is intriguing?
Guest: I would say I’m inactively looking. I’m still open to buying, but and I have a couple hundred grand in my taxable account. So it’s in my mind, I’m like, I have likely years and years of living expenses, assuming no rental income, or I could probably live off my rental income just fine, um, and take nothing out of my savings. So, I hear what you’re saying and clearly it seems like I’m willing to take on more risk than the average bear, but in my mind, it’s like, I would argue I’ll get a business off the ground faster, obviously, doing it full-time. And I can do it Saturdays and evenings, but it also like, I’m, I’m not energetic and creative at 8:00 p.m. on a Thursday after working, you know, Monday through Thursday, same with even Saturday morning.
Scott: What’s your, um, annual spending now?
Guest: It’s probably, now I donate to my church a lot more, so I probably spend $4,500 a month.
Scott: So 50 grand a year?
Guest: 50 grand a year, yeah.
Scott: Still, like, that’s, like, you keep saying I have a higher risk tolerance. You do not have a higher risk tolerance. You’re so conservative on the spending front that you can, that these, these other plays that are more long-term focused from an investment perspective that don’t require liquidity in the near term or don’t require income generation are very reasonable. You have 400 grand in a taxable brokerage account or whatever, and you spend 50k a year, even if the market crashes, you got four years of living, even if the market crashes 50%, you got four years of living expenses. So I, I think that that’s the whole trump card. Like everything else in your strategy that you’ve pursued here is reasonable because of that that one variable that’s ultra conservative that nobody else or very few people will will replicate and the options is going to provide you are just going to be incredible.
Guest: Another option is I have enough in my taxable to pay off my six-plex and I’d have 50 grand left owed on my duplex. So I could either go frugal for another six months or just take 50 out of my 401k. I’m not arguing that’s optimized perfectly, but I could just then pay off my six-plex duplex and probably cash flow, I don’t know, $6,000 a month and I need 4,500 to live off of. So that’s another option is pay off everything and then start a business and save $1,000 a month while doing that. It’s like not a bad option. I don’t know. I like having cash because I’ve I’ve been broke so many times before. I’m kind of like over that. So I I kind of don’t even want to pay off the six-plex and uh just keep the cash and if I need to pull a thousand or two out here and there then so be it.
Mindy: Andrew, if you did decide to leave your job, there’s a couple of things that you’re going to have to consider. Let’s say you quit, your last day is today and then tomorrow your agent calls you up and says, “I’ve got this amazing property that’s going to cash flow just like your six-plex. It’s so fantastic, but you got to jump on it right now.” How would you fund that?
Guest: I know of creative financing strategies, but I don’t have a private money lender. I don’t know the the easy button there. Obviously you can get pre-qualified, but you have to verify employment commonly at closing. So, so really the answer is I don’t know how I would do that. I have enough in my taxable plus my retirement to likely pay cash for a nice family house. So I could maybe play a game there, but I don’t want to liquidate my 401k to buy a house and then pay taxes and fees and then refinance. That sounds like I’d lose a lot in taxes. So that’s kind of why I’m still working because I I’m not comfortable with creative financial strategies. Uh I know they exist, but I don’t know how to do them.
Mindy: They do exist. Um, but yeah, I have the ability to get a mortgage, so I don’t, uh, I haven’t dived into creative strategies. I would encourage you to also go into the BiggerPockets forums, biggerpockets.com/forums, where there is a creative financing forum and lots of, uh, discussion about creative financing simply because we find ourselves in this kind of, uh, unpleasant interest rate environment right now. Um, so there’s, there’s definitely opportunities and now is a really great time to start looking for those. So when your agent calls you the day after you quit your job and says, “I’ve got this awesome property,” you’re not starting your creative financing education then and trying to like cram it all in. Um, another thing that pops up frequently is health insurance. So how are you paying for your health insurance if you don’t have a job?
Guest: Yeah, I’d have to buy it on the open market. I’ve shopped around a little bit. In my mind, it’s not crazy unaffordable. It’s like 500 to 750 for an individual. So I think I could stomach that.
Mindy: In my experience, it is not unaffordable to buy on the healthcare exchange through the ACA. Um, I would encourage you and anybody who is listening to reach out to an insurance broker in your state who can give you more information. They did not make the ACA easy to understand. In fact, I think they made it difficult to understand on purpose, uh, because it’s a government thing and that’s what they do. But it was, it was very difficult. I consider myself to be rather knowledgeable about health insurance in general and I went on to the exchange and I was like, I do not understand any part of this. And I had a really great chat with a broker and it was kind of life-changing. Um, because I didn’t need nearly as much as I thought I would need for my health insurance. So I’m glad you have already thought of that as well. Scott, what are some other things people talk about when they are early retired? Oh, I’m going to be bored. That’s not it with you. I mean, you’re, you’re there. Financially, it isn’t a question of, oh, can I do it? Can I not do it? I think you’re, you’re doing really well. You’ve got your income or your expenses covered by your rental. Uh, I would maybe save a couple more months and get a a fatter emergency reserve just because you won’t have another bucket to pull from, the income bucket to pull from. But other than that,
Scott: At FinCon, I was asking, you know, how much would be an appropriate emergency fund in, you know, per se timeline? And people were telling me six to 12 months. But so if I have five years, is six years better than five years?
Mindy: No, six years is not.
Scott: Like it’s the same. It’s like, and I I’m literally transitioning into trying to start a business with the intention of making income. I’m not transitioning into sipping margaritas on the beach. So I’m like, I think I will become bored if I’m doing something that’s so unproductive after 12 months straight, after 2,000 hours of it, I’ll transition. And I’m like, within a thousand days, I can make a dollar, or I’ll just start my middle school lawnmowing lawn mowing business again, or, you know, crazy idea, go back to engineering.
Mindy: Exactly. There’s, there’s uh, always a demand for engineers.
Guest: And that’s kind of why I’m leaning towards starting an agency instead of a YouTube channel. Like, learn the skills and then do video editing and and hire and lead a company doing that or audio editing or making YouTube videos for realtors and and posting all the short stuff like that. So then it’s, it’s likely a faster timeline to generating income because really I, I love working, I enjoy it. I just don’t want to work for others anymore and I want a scalable career. So it’s like, if I want a raise, I don’t want to ask my boss for a raise. I just want to work harder and then I want to get a raise.
Mindy: Okay, that right there is the answer. I like working, I just don’t want to work for somebody else anymore.
Guest: We’ll see. Yeah, we’ll see what next year brings. It’s like one more Roth, a little more savings, another camera, and let’s play ball.
Mindy: Okay, Andrew, I am super excited for what next year holds, and I demand that you check back in with us and let us know what you decided and how your, uh, how you came to that decision. So we’ll circle back in, uh, three to six months and see exactly what’s going on with your story. See how many of those 10 businesses you started so far.
Guest: Sounds good. Yeah, really appreciate, uh, all your encouragement, Mindy and Scott and uh, all the education you’ve done to to everyone over the years and and you’ve definitely helped me and and many others become millionaires through BiggerPockets. So it’s a, it’s a great, great tool, great forum, and uh, yeah, huge thanks. So keep up the good work.
Scott: Thanks for the kind words. Congratulations on all your success. Before we go, what is the name of your YouTube channel if people want to check it out?
Guest: Yeah, it’s Andrew Jax.
Mindy: J A X?
Guest: Uh, C K S.
Mindy: J A C K S. Okay, and we will include those links in our show notes. And Andrew, thank you so much for your time today. This has been super fun and I’m not kidding, three to six months, I want you to, to send me a note.
Guest: Yeah, I’ll do that. And if I’m, uh, pulling my camper through Denver, Longmont area, I’ll I’ll hit you guys up and and buy you a coffee or a beer. So, thanks.
Mindy: I’ve got an awesome place to sleep if your camper, you want to take a break from the camper.
Guest: Sounds good. Thanks.
Mindy: Okay, Andrew, thank you so much for your time and we will talk to you soon.
Guest: Yeah, looking forward to it.
Mindy: Okay, Scott, that was a fun set of circumstances that Andrew finds himself in, and I, I like when we’re talking to somebody and they’re like, “Well, which one of these options would work?” You know what? You’ve got a lot of really great choices, but I do think we need to address the elephant in the room. Andrew bought his rental properties at a different time. He bought them in 2018 and 2019 when interest rates were lower. So that part of his story, I don’t think is going to be so repeatable right now. However, we are still able to take advantage of keeping your expenses low, investing wisely in other ways, taking advantage of opportunities that are presented. There’s still real estate opportunities available right now, just not for a 2% interest rate or whatever ridiculous rate he has. Um, and allowing yourself to be okay with a little bit of risk.
I think those are all points that people need to keep in mind when they are exploring their own financial journey and trying to take advantage of the opportunities that are presented. I mean that right there, anybody can be presented with an opportunity, but how many people are going to say yes to it? You, Scott, had a good job at a corporate company and you left to go take advantage of an opportunity that presented itself, this little internet startup. How’d that work out for you, Scott?
Scott: It’s a, it’s been a, been a fun ride here, um, for that. But I think, I think it comes down to um, the the quality of a bet, your execution of it and separating that from the outcome. And Andrew made good bets, executed them well, and the outcome was great. It was very possible that if you follow that playbook at random intervals over the last 30, 40 years, that you’re executing that playbook in 2006 or 2007, right? And seeing that portfolio crash and it taking a year or a decade to unwind the the the the pain or you know, or 100 grand more specifically to unwind the pain of buying those properties at the wrong time. On average, his set of bets is probably going to win and it’s probably going to result really well. The timing of a 2018 purchase and really going all in at that point in time was particularly fortunate for him. Um so we want to be respectful of the role that luck plays and acknowledge that that bet on average is a good one, especially the way that he put put it together with in the context of an extremely frugal um lifestyle and the and the ability to accumulate a lot of cash, even if he had bought in a 2006, 2007, you know, kind of at that peak right before a crash uh timing, I think that he would have been fine because he would have been able to cash flow and frugal his way through that transition, but it obviously would have been very painful for him as well.
Mindy: Yeah, absolutely. I think that’s a good point, timing and I just, I want to to hammer home the point when you have an opportunity, taking action is the what separates people being retired at 34 and being retired at 64.
Mindy: All right, Scott, should we get out of here?
Scott: Let’s do it.
Mindy: That wraps up this episode of the BiggerPockets Money podcast. He is the Scott Trench and I am Mindy Jensen saying, off we go, leprechaun.
