Mindy Jensen: Today’s Finance Friday guest is looking to hit financial independence in 7 years at the age of 40. But could his timeline be fast-tracked to retire even earlier with some slight changes to his investment strategy? Let’s see what’s possible today. Before we get into Travis’s finances, we want to thank our sponsor. This episode is brought to you by Connect Invest— real estate investing simplified and within your reach. Now back to the show. Hello, hello, hello, and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen, and with me as always is my blueberry-loving co-host, Scott Trench.
Scott Trench: Mindy, I don’t know how you always produce such great intros 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. Today we’re going to discuss if Travis is on track to reach FI by 40, What to do when you’re at a crossroads with investing, what could fast-track Travis’s financial journey, and how can we generate more income? Travis, super excited to welcome you to BiggerPockets Money today. Thank you so much for being here.
Travis: Thanks for having me. I’m really excited to be here.
Mindy Jensen: So Travis, let’s jump into your money story really quick. What does your journey with money look like?
Travis: I really have BiggerPockets to thank for my money journey, because it all started just before I went to buy my first house. I stumbled upon the First-Time Homebuyer book, from BiggerPockets. And I, it just opened so many doors for me, opened my eyes. I learned a ton. And that was really where my money story started. Because it wasn’t until I read that book that I actually was able to learn what I had and where I could go. So that, that was really only maybe 2 and a half years ago that I picked that up and read that.
Scott Trench: So awesome. Yeah, I love that book. But I can never remember what it’s about.
Mindy Jensen: Who wrote that book, Scott? Do we know?
Scott Trench: Oh, that Mindy and I co-wrote that book. So thank you for the plug, Travis. Well, Travis, could you give us a little bit of background on how you kind of got, you know, you know, after you kind of read that book, and how have things gone the last 2 and a half years? And, you know, to get us to this point?
Travis: Yeah, things have gone really well. So after reading the book, my wife and I had a better plan for the house we wanted to buy and what we want to do with it. And then we also, after that, learned so much more about index funds, retirement accounts, It just kind of ran with all of it. So the last 2 and a half years, things have been really well for us. We really focusing on financial independence. We bought that first house, we’re doing the house hack, and things are going really well. Yay, I love it.
Mindy Jensen: What is your retirement goal?
Travis: Yeah, so right now my retirement goal is to be work optional by age 40. So I know financial independence oftentimes is, you know, truly not working at all. And that’s not really what my wife and I want. Um, so we chose the age of 40 because it was a nice round number, I think, um, to get there. Uh, and it was really only then that we would kind of decide what work optional actually looked like for us.
Mindy Jensen: And let’s remind our listeners, how old are you right now?
Speaker 4: 33.
Mindy Jensen: 33. Okay, let’s take a quick peek at your numbers. I see income of $208,000. Nice. That’s both you and your partner. Expenses of $8,336 a month. The income was annual, not monthly, although boy, I’d like to talk to you about changing jobs if it was. Debts of $7,000. And then your investments, I see $20,000 in cash, $196,000 in a 401, $18,000 in an HSA, $45,000 in a Roth, $80,000 in a brokerage, negative $7,000 in credit cards, which means you have a credit card debt. But since that matches your Debt load, we’re going to talk about that in a minute, and a primary mortgage of $380,000. What is that interest rate that you have on that mortgage?
Travis: Uh, 6.3%.
Mindy Jensen: So, that was a purchase after June of 2022. Um, that stinks, but that’s also like, that’s not horrible considering how high it did get up to. Um, and your retirement goals are work optional. I love that phrasing, work optional in 7 years. Do you like your job?
Travis: Not really, no. Uh, I, I, uh, it’s, it’s hard to say that, but it is the truth. Um, I don’t really have a lot of passion for my work, um, and I don’t feel that it makes a whole lot of difference or helps a lot of people. Um, so I like my coworkers, um, and I obviously like my salary, but, uh, the actual work itself, uh, is not, not that great.
Mindy Jensen: Okay. Is there something else you want to do? Because you said work optional instead of early retirement?
Travis: Yeah. So for me personally, 2 of my biggest hobbies are mountain biking and gardening. And so a work-optional setup for me could be teaching or guiding mountain biking, and maybe doing something with gardening as a side business or a small business or working at a farm here in the local area, maybe part-time. So doing both of those things part-time, that would be work that I definitely would enjoy more than what I currently am doing.
Mindy Jensen: So is your goal in 7 years to be financially independent or another flavor of FI like Coast FI or Lean FI?
Travis: I think the goal really is true financial independence to where if, um, if the money from the, uh, kind of part-time jobs was almost zero, that, uh, we could fall back on just true financial independence. So financially, that is the goal. Um, but as far as continuing to work, having no job at all is not the goal.
Mindy Jensen: Okay. So how can Scott and I help you today?
Travis: I’m here to really to ask for, you know, if you think I am on track or if there are any things I can do that I am not seeing that would help me for sure reach my goal or maybe even speed up my goal, um, to get to that financially independent, that work optional stage. I spent so much time getting where we are now and learning so much and making some money moves to get where we are, that I am sort of like stuck in what I see. And I think a fresh set of eyes or some experienced opinion would really help kind of give me some ideas, or at least reassure me that we’re on the right path.
Scott Trench: Just a couple of observations that I have here is, you know, one, you’re in a great income, you’re saving and investing a lot, $91,000 a year, but your expenses are also fairly high relative to your current net worth in terms of retirement. So if I just do some simple math, I see $8,300 in monthly spend. $8,300 times 12 times 25 gets you $2.5 million. You need $2.5 million in assets in order to retire on the 4% rule with your current numbers. Have you done that math before? Have you ever boiled it up to that level?
Travis: Yeah. And the actual expenses per year of living expenses, part of that number is more like $72,000 a year.
Scott Trench: year.
Travis: So what is included in some of my expenses are investments to or contributions to a Roth account, contributions to the brokerage account. So if I were to roll, stop those and roll that down, truly living expenses is more like $72,000 a year. And I think that comes out to about $1.8 million for the 25x or the 4% rule.
Scott Trench: And then, you know, I think there’s something to boil down in Mindy’s question there that I want to you know, just push a little harder on here because the fact that you don’t like your job, and it’s a good job, it’s a very good job, it earns about $100,000 a year, but it’s not an incredible job. That is, you know, from an income perspective at this point. I think that for me, you know, that makes me question or want to start the discussion around, is there something active that you can begin doing in real estate? or in business to some degree outside of that in the near term that can provide some of those benefits a little earlier and give you that optionality sooner than what you’re doing. Because, and another observation that I’m seeing in your overall profile here is that that $91,000 in investments is heavily coming from tax-advantaged accounts like the 401 and HSA, which can be done around that. But if you’re gonna go that route, you’re gonna have very little liquidity until you start setting up some sort of withdrawal mechanism from those 401s. And I worry that you’re on a path into a trap over the next 7, 10 years where you’ll become a millionaire, but it’ll be hard to access that with that career. Like, how’s that sound? Is that any reaction to that observation or that thought process?
Travis: Yeah, that is something I have thought about. Most of our investments are in the 401s or the Roth IRAs and they’re tied up in those. And I have done some research on like the SEP 72 or the Roth conversion ladders. It’s something I’ve thought about. And that’s kind of why I’m here as well, is to find a way to maybe increase the taxable account, the brokerage account, so we don’t have to be locked into some strategic tax-advantaged withdrawal strategy. But I guess I’ll follow up with that and say it’s hard to get away from the 401 investing, the Roth investing, HSA investing, because the tax advantages right now are so good. And it’s so easy to just park the money there. That I— that’s where I’m at kind of this crossroads of like, do we pull back for any particular reason? And do I give up those tax advantages now to have more flexibility in the future?
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Scott Trench: That’s going to be the multimillion-dollar question here, I think, as we go through this. And I think, you know, it comes down to how much belief do you have in your job and career? Because if you like— and the reason I think that that’s a crux question or the first place I want to probe is If you think your career has big upside on that front, then, and that income’s gonna go up, then that makes a lot of sense to do, to, to continue doing the strategy that you’re doing right now. But if you’re not passionate about it, don’t like it, and are feeling stuck, you know you won’t get to where you want to be in 7 years with this approach, right? Because I can just do the math right now. You’re investing $91,000 a year. That’s $637,000. How did I do? How did I, how, where am I? What am I doing with my math here? 91 times 7 is going to be $637,000 in aggregate contributions to this on top of your $400,000 net current net worth. You’re not going to get quite to where you want to be at age 40 unless you get a lot of help from your investment portfolio and the market booms on that front. So, and that’s all going to be in those, those retirement accounts. But if you think that income is going to go up and the career is going to accelerate pretty dramatically for you, then that becomes the kicker, and that number is much higher.
Travis: I don’t really see a huge acceleration in the career or in the salary over, let’s say, the next 7 years. It’s not nonexistent, it’s going to stay stagnant. But to say that I can stay in my current career with my current company and maybe, you know, double my income to something that’s really substantial, I don’t really have a belief in that. But I could see staying and having it rise a bit, but nothing groundbreaking.
Mindy Jensen: Is there any opportunity for additional education without a huge expense that can help you get to the next level at your company, or going into a contractor role, or even taking like a part-time additional job in this same field or similar field?
Travis: Um, it could be a possibility. I think maybe with some certifications, sort of like, uh, non-traditional college schooling, teaching, and certifications. There could be a possibility to get that and then maybe career hop. It’s one thing I’ve thought about in the past is doing something like that to really up the salary. It’s not something I’ve really dove into, but I think that there is a possibility to get a larger increase in salary from something like that versus just going for a promotion in my current career or my current company.
Mindy Jensen: Yeah, we’ve spoken with several people who have, uh, job hopped their way to doubling their salary. And the bottom line is companies have more, uh, new hire budget than they do retention budgets. So that could be something to look into. That doesn’t, uh, it doesn’t necessarily mean you’re going to double your salary, but if you can get a nice bump and kind of do the same thing, That, that could be something that could help propel you further closer to financial independence.
Scott Trench: I misspoke earlier. So I actually ran the numbers just now on this. I apologize that you, you starting with a $400,000 current net worth, you’re adding $91,000 a year. And if you average 7% returns over the next 7 years, you will get to $1.5 $5 million by the end of that time period. So you’re pretty darn close with that. Now we got to adjust for inflation. There’s probably puts and takes. You’re not quite there, but you’re pretty darn— you’re much closer than my initial incorrect math suggested on that front. So maybe even modest career growth would actually help get you there. Sorry to interrupt there, Mindy. I just was obsessing over the numbers for a second.
Mindy Jensen: I’m glad you did because I like those numbers better. And remember, he’s still going to work He’s just not going to work at this career. He’s going to go do mountain biking. I have no idea what that pays, but even if it brings in half or a quarter of your annual spending, then that changes how much you need. And your partner has a job. Does she also, uh, does she enjoy her job? Does she want to continue that or is she looking for 7 years and out as well?
Scott Trench: Oh yeah, you can definitely Wi-Fi. At, uh, based on this, it seems that, that seems very high probability.
Travis: Yeah. Uh, my wife, uh, she does enjoy her job. She’s a physical therapist and she really enjoys her current role, her current company, and her career in general. Um, and that is really kind of a saving grace for both of us in terms of reaching FI, because we do, we are on board together to reach this goal. Um, and that actually might be the perfect segue to, um, Kind of answering this whole career hopping, slightly increasing the salary to meet the 7-year goal, is that my wife does have the opportunity to start traveling in her role rather than working at a clinic in our hometown. And traveling would increase her salary by about $20,000 to $30,000 a year. And come with a few other benefits. And so that’s one thing we’re actually weighing right now is that do we do that as sort of a salary boost and a way to kind of pursue FI on the road, doing some more traveling and travel hacking while working at the same time? So that it’s not something we’ve decided on yet, but how far away would she be from you? We would most likely be traveling together so I can work remotely.
Mindy Jensen: Oh, okay.
Travis: Yeah, I work remotely, so it would be kind of all around the country that we’d be 12 weeks for each, each job, and then you take another contract for another 12 weeks.
Scott Trench: So, and you would Airbnb your house, right?
Travis: Yeah. So we currently house hack 2 out of the 3 rooms in the house, 3-bed, 2-bath house. And we would, we would find a tenant for our current room, that third room. And then we would, you know, obviously be renting a place on the road.
Scott Trench: Okay. And that would increase your savings and your income, which would continue to accelerate this. Do you want to do that? Does that sound fun to do?
Travis: It does. There are some downsides, though. So we are—being in Asheville, North Carolina, we just survived Hurricane Helene. And I could only imagine the stress level if I was not home when the hurricane hit. So there’s some downside to traveling in that now you’re a remote landlord of the house hack. You’re not here at the house to kind of maintain or deal with things. There’s a lot of logistics in moving, traveling. There’s a lot of logistics in the taxes for a traveling physical therapist. So it really is something we’re on the fence about because there’s so many ups and downs to it. But I think we’re leaning towards doing it, just maybe not immediately.
Mindy Jensen: Yeah, I would try it out.
Scott Trench: Yeah, I think that sounds super reasonable. And you know, for what it’s worth, I think those are very reasonable puts and takes. There’s no right answer on this. But I don’t think you should overweight the managing remotely piece. Managing remotely can get you into trouble if you’re buying out of state in Ohio and don’t know what you’re doing from someplace. But if this is your house, and you’re setting things up and finding the tenants, then yeah, you’ll have the occasional pain in the rear, but it’s one property that you know super well. And I think you’ll be reasonably successful with it with a couple of pains in the rear that will probably be well worth it, would be my guess. So you can come back on in a year or two and tell me how very wrong that is on that. But I wouldn’t be that worried about managing one property that you house hacked.
Mindy Jensen: The two rooms that you’re renting out right now, are those long-term rentals? Or are those Airbnb rentals?
Travis: They are long-term rentals, so we currently have a tenant in each room that’s on a one-year lease.
Mindy Jensen: Would either of them wish to do a little bit of property management for you, like turning over the Airbnb or managing and making sure that the cleaner comes to turn over the Airbnb part of it for you?
Travis: Potentially. I haven’t proposed it yet, but that is something we thought about as well, of maybe them making a little bit of side income or reducing the rent for a little bit of work in kind of doing some of that management. So yeah, that is an option for sure.
Scott Trench: I would probably not pay either of the tenants to do any management work. I would probably find the tenant myself, place them, and then manage the property remotely. This is not a—you know, if there’s a turnover event or a major problem, you fly back, you work remote anyways, and go deal with the problem. But what’s most likely going to happen is there’s going to be minor maintenance issues. You call the plumber, they come out and fix it. So are you really going to give one of the tenants the job of managing that? I would just do it myself. In this particular instance, especially since these are 12-week stints—and if it’s not working out, you just end the 12-week stint, and you have paid for three months and come back. I don’t think you’re going to have a major management issue. If you had a portfolio of 10 properties, then I would hire a property manager or figure something else out. But this is one property with three roommates in it. Very, very standard management practice there.
Travis: Yeah, totally. I totally understand.
Mindy Jensen: And that extra income could go into your after-tax brokerage account as opposed to, you know, the 401(k) or whatever. Now, would your wife have a 401(k) through the travel company, or does that go away?
Travis: She would. Yeah, that would still exist, and we would still—she would still be maxing out her 401(k).
Mindy Jensen: Okay. Well, I think we discovered—I think we answered the question of should your wife change her job. Yeah, I would. Because if she doesn’t like it, she could always go and get a position again. I mean, as I recall correctly, physical therapists are in demand.
Travis: Yeah, absolutely. That is something we’ve talked about, that she has a good position right now, but they’re really a dime a dozen out here ’cause it’s a really in-demand career field.
Mindy Jensen: Stay tuned after one final break to hear what investment vehicles might be a good fit for Travis’s goals and financial timeline, right after this.
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Scott Trench: All right, let’s jump back in with Travis.
Mindy Jensen: What other questions do you have for us?
Travis: Besides the questions around slightly increasing the salary or pursuing a different job, is there anything else with money moves or investing that we could make to speed things up, or to get away from the 401(k) investing? As I mentioned earlier, it’s so easy, and the tax advantages are so nice of the 401(k), that I always gravitate toward that. But I fear that we’re not seeing an opportunity, either in real estate or in investing in the taxable account first, that we’re not taking.
Scott Trench: That’s the hard question, right? I mean, it’s so textbook to go down the stack like you’re doing, right? I’m looking at your statement here, and it says 401(k), $46,000; 401(k) match, $4,000; HSA, $8,300; Roth IRA, $14,000. Then we have the ESPP, which I imagine is a purchase at a discount—10 to 15% off the market value of the company stock. Is that right?
Travis: Yeah, it’s 15%.
Scott Trench: Yep, awesome. So you’ve got to take that from a free money perspective. You’ve got to take your match, you’ve got to take your ESPP, right? Those are the no-brainers in this stack. You’re just never going to get a better deal than those two things and almost anything else. And then the question is, how much further down this list do you go? Do you continue to max out the HSA? Do you continue to max out the 401(k)? That will free up $25,000, $30,000 a year after tax to go into your savings account. And I think that that’s just really hard in your situation, because you’re doing the textbook play here. You’ve got to have really high conviction that you’ll actually use it for something that will give you freedom in that in a much earlier fashion. So if you wanted to go and flip houses or build a portfolio in Asheville, for example, I’d say that’s the time to make that change. But I’m not hearing that from you. I’m not hearing a business idea or an itch to become an entrepreneur, or to kind of go into the small business world, or just get out of that job way earlier. I’m hearing I kind of like the situation, I want to travel, I’m thinking about actually traveling 12 weeks of the year to different locations, and want to enjoy that. And if that’s the route you want to go, I think what you’re doing is great. You are, to your point, missing opportunities that you’re probably not even thinking about right now, because the cash liquidity in the after-tax bucket is not going to—is not growing very meaningfully right now, and won’t with this approach. But that’s okay. It’s just a matter of knowing that and making that a conscious decision.
Mindy Jensen: Yeah, if I was in your position with your numbers and your goals, I would continue to max out the HSA, assuming that you are in generally good health and that you are keeping all of the receipts for all of the expenses that you are incurring. And then when you do retire in seven years, your HSA account is going to be significantly larger, and you can start cashing in those receipts, and that can supplement your income, which reduces the amount that you need—the total amount that you need to retire. And the same with the Roth IRA. You pay taxes now, and then it grows tax-free. The HSA, you don’t pay taxes now, it grows tax-free, and then you pull it out without paying taxes, which is my favorite kind of account. I wish that limit for contribution was 1 billion percent, but it’s not. It’s like $7,400 a year or something if you have a family, and it’s less if you don’t. And I don’t know what those numbers are off the top of my head. You’ve got $46,000 that’s going to the 401(k). Have you put any of that into a Roth 401(k), that gets rid of the—
Speaker 4: No.
Mindy Jensen: —the tax advantage, but then it grows tax-free?
Travis: I have not. We’ve really just kind of started with the 401(k) and then followed up with the Roth IRA afterwards.
Mindy Jensen: I wonder, Scott—he wants to retire in seven years. There’s the Roth conversion ladder. The Roth money has to be in there for five years before you can start withdrawing it. But then if you’re putting money in, you’re paying taxes on it before it can—I’m thinking out loud, I’m sure nobody’s following along—but could you start that in a couple of years so that it’s there for you?
Scott Trench: I like the 401(k) for Travis, right? I put my money into the Roth because I have different goals and different pursuits there. Travis, I think, is right to go the tax-deferred route first. Once that’s exhausted, then move into the Roth situation, because your income’s high right now and it’s going to be lower—that’s your plan. You seem very convicted in that plan after the age of 40. If that’s the case, take the tax deferral now and shift it over at that point in time. Yeah, there’s a risk that tax brackets go up or whatever around that, and you’re missing some opportunity in the Roth, but I think that based on the information we have today, that’s the logical choice in this route. Once you get to that retirement bracket, you’re going to have to do the math. Your net worth is going to be heavily concentrated in your 401(k) at that point, and you’re going to have to think through one of several options, including the substantially equal periodic payments route or the Roth conversion ladder. But I think that you’re going to have—and you’re going to need some sort of extra oomph over the next seven years in order to actually finish the play with a good margin of safety to retirement. So something on top of this approach has to be done. And that could be something in the physical therapy world, that could be something in the mountain biking space, although I’m very curious to see how you’re going to make money from mountain biking—I would love to hear that one more time on that front. But there’s going to be something extra that you’re going to have to do in order to finish this play, unless you get lucky with returns over that. And that will probably—whatever that ends up being—that will be your bridge to accessing the money in the 401(k), would be my guess. Can you share how you make money in mountain biking real quick, and then onto that overall thought process?
Travis: Yeah, so the idea was actually to either be coaching or guiding, either just on my own through my own small business or working for a guiding company. Mountain bike tourism is really big here in Asheville. We have lots of trails, so it’s an industry that does exist out here. So that’s the way to make money through that—not just riding, but coaching and guiding other people. And then to answer—well, I’ll go back and answer Mindy’s question on the Roth conversions. Part of our plan—so you’re right, it is like a 5-year window, as you mentioned, on the Roth conversions—but part of our plan was to start those conversions once we had reached financial independence and that we had really stepped down to our kind of part-time jobs or those work-optional jobs, and that our income was much, much lower before we started making those conversions, and then living on that part-time money, that much lower income, while we let those conversions bake. And then, Scott, to answer your question, the greatest opportunity we have right now, I think, is maybe that traveling kind of physical therapy job, ’cause it’s the quickest way to get us kind of that bump in income, that small bump that we need to really give us that margin of error in the next seven years—that coverage over the next seven years.
Speaker 4: Yeah.
Scott Trench: I mean, maybe that’s it. Maybe it’s as simple as, go travel around the country for 12 weeks at a time—you’ll love some, you’ll hate some—but that’s the missing link that gets you that last kind of $300K to that $1.8 million mark that you’re looking for on it. But yeah, I think your plan is great, and what you’re doing is a very reasonable way to go about it. And it seems like you understand the consequences and what you’ll have to do from a planning perspective to actually use that to fuel retirement at 40.
Mindy Jensen: Travis, do you and your wife have children?
Travis: We do not, and nope, no plans to have any in the future.
Mindy Jensen: No plans to, okay. That could also impact the number that you would need. Yeah, I really like a lot of these ideas. The only issue I’m thinking is if you look into potentially job hopping, you could get a job that says you need to be in the office, there’s no more remote work, and that would hinder you traveling with your travel PT wife job. I’m wondering if you could, like, read that Mad Fientist article, “How to Access Retirement Funds Early.” He talks about the Roth conversion ladder, and since you have so much time, you can plan ahead. You know that the Roth conversion ladder takes five years. Could you save up money during these next seven years that you could live off of during those five years, so that you could do the Roth conversion ladder when your income is much lower and you don’t have to pay all of those crazy income taxes? So I just—I love the opportunities that you have, because you have seven years. And, you know, listeners, listen up—if you are thinking, “Oh, I have seven more years before I can retire”—no, you have seven years to plan your perfect retirement. You don’t need to wait, Travis, until you are retired to find a mountain biking job or to look into starting a mountain biking tour company. You can start looking into that now. You can start doing that on the weekends. You know, build up your company now so that when you retire, you’re not starting from scratch—you’ve already got a big, loyal following, because you’re the most awesome mountain biker in all of Asheville. But yeah, you’ve got all of this time to plan. And like Scott said, running the numbers that you’re doing right now, you’re going to be weighted heavily into your 401(k), but you have a lot of options, and you can start thinking and running numbers. Have you run any of your numbers on the cFIREsim calculator?
Travis: I have not.
Mindy Jensen: Okay, that’s another homework assignment. It’s the letter C, F-I-R-E, S as in Sam, I like simulator—cfiresim.com. Check that out. That has a lot of different opportunities to run all sorts of numbers and see how it’s going to work for you.
Scott Trench: I want to address one last question it seems you had. You mentioned in the notes here that you were interested in live-in flipping as a strategy. Could you share that interest here and let us know how that factors into what we’re talking about? Because that was one of the things I was thinking about when I was talking about extra oomph to get over the finish line.
Travis: Something I’ve kind of been doing at the current house and sort of been on the fence about for a while. Obviously, Mindy, I know you are like the queen of the live-in flip and that strategy. And I love it. It is something I do. So I am handy at the house here. We’ve already been doing a lot of remodeling. So it is kind of a skill set I have to pursue sort of live-in flip. But at the same time, there’s a lot of cons that come with kind of the stress of, you know, remodeling or renovating a house. And I’m not 100% sure if I want to be on board for more of that in my future. There’s already been quite a bit at the current— the house hack house. But it is another strategy that we’re interested in. Just again, not maybe 100% sold on it, ready to jump in tomorrow on another house.
Mindy Jensen: Okay, so live-in flipping is awesome and awful, simultaneously, for all the reasons that you said. You’ve got this potential to make a lot of tax-free money, but you’re living in a construction zone. The good news is you can vary how much you’re going to be doing in any particular type of flip. You can just paint walls. I mean, I have walked into some houses and been like, “What were you thinking painting the walls these colors?” But everything else is okay. I mean, there’s various levels of live-in flip. I’ve also popped the top. Don’t do that. That stinks. That is a horrible experience. Both times I did it were horrible experiences. I’m never doing it again. And if I ever say that I want to, please come punch me in the face because it’s the worst experience ever. But if you’re in construction, maybe that’s your jam. You can control a lot more if you own a construction company and, you know, popping the top. We’re in a property now that is hideously ugly. Every wall, every floor needed to be touched. We’re not done yet because COVID—thanks—really derailed our timeline. But painting isn’t that hard. Installing flooring isn’t that hard. Moving walls is a little more work. And remodeling a kitchen isn’t that hard. So when you start looking at potential live-in flips, look at what it’s really going to take. Take a—you know, go to an open house or have a real estate agent schedule a really long timeline—and take a notebook in there and just write down, in every single room, it needs this much work, it needs that much work, these are the projects I’m going to have to do. We have replaced electric and plumbing and we have done roofs and new windows. And there’s a lot of things that you can either do yourself or hire out inexpensively. There’s a lot of things you can’t hire out inexpensively, and it’s going to cost you a lot of money. So just—be really honest with yourself. What is it that you like to do? What are your strengths? If painting is really the only thing that you’re handy at, then a live-in flip might not be the right choice for you. But the reason that Carl and I make so much money with our live-in flips is we do almost all of the work ourselves. We hire out very little. We hired out two people to pop the top. It’s hard to find good contractors, which is why we do everything ourselves. But it also takes longer because we’re doing it ourselves after work, before the kids get home from school, before bed, over the weekends. I mean, there’s a lot of things that I’m missing out on with my friends because I’m choosing to work on my house. So if I can talk you out of a live-in flip, great—that means live-in flipping is not for you. But if you have a series of things that you like to do—maybe you love laying tile, my husband loves laying tile—that’s like a large part of the bathroom remodel is putting down a new floor. Anybody can—well, not anybody—those toilets are really hard. I was about to say anybody can install a toilet by themselves. I actually can’t. They’re so awkward and I’m not strong enough to do it. But you can paint a bathtub so that pink bathtub can very easily be turned white. Don’t believe what the box says, that it only takes two coats. It takes like 26 coats. But all of these little things are maybe time-consuming, but if you have the time to do it, a live-in flip, you do it over the course of two years. If you’re going to be traveling, I wouldn’t live-in flip then. But if you decide that you want to come back to Asheville, or you decide that traveling isn’t for you, a live-in flip with a moderate amount of work could be a great way to boost your income or your bottom line.
Scott Trench: I’ll just chime in on some of the things that Mindy said and frame it where a live-in flip—again, I use that word “extra oomph”—that can really get you through to your goals much faster and provide a lot of optionality. The live-in flip is not scalable. You can only do it once every two years if you want to take full advantage of the tax benefits. I don’t know Asheville, but many cities around the country are putting laws in place with rules around short-term rentals that don’t allow you to—that only allow owner-occupants to do that. Something is bubbling up from a thought process perspective around: is there an opportunity to purchase a live-in flip, turn it into a short-term rental, and combine that with these 12-week traveling stints? Is that owner-occupant? Is that your house? And you’re Airbnb-ing it for 12 weeks around there at a time, coming back, taking a look or whatever, spending enough time in Asheville as your primary to make sure that everything is above board, and getting some really good benefits that are not scalable, but that a single investment could put you over the finish line? Is your high income going to be a really nice asset in that world as well, allowing you to do something that’s going to be a nice quality short-term rental for that area? So I don’t know where that leads, but those are the types of questions that start to come up for me. And I think there might be something there. It will not be as fun as not living in a live-in flip. You’ll have to decide if it’s $200,000, $300,000, $500,000 in more money at the end of seven years from that decision. Is that worth it? Maybe?
Mindy Jensen: Yeah, cashing those big checks is super fun.
Scott Trench: After tax.
Travis: Mindy, do you—it kind of sounds like you were saying that live-in flips can be all variety of levels and flavors. So I would have asked you what makes a candidate for a great live-in flip. But it sounds like the answer is up to the buyer and the amount of work they want to put in.
Mindy Jensen: That’s one factor. Another factor is the neighborhood itself. It doesn’t matter if you take this garbage house and make it amazing if it’s surrounded by other garbage houses. I live in a neighborhood where the price point now is starting around $600,000, but there’s a golf course that borders one edge of the neighborhood, and the houses on the golf course are far more expensive. I think there’s like a $1.7 million house in my neighborhood. But the thing is, my neighborhood isn’t a $1.7 million neighborhood. So in the middle of the neighborhood, that would be a terrible house to make a $1.7 million house. On the golf course, it’s a little different. People like living on a golf course. So make sure that the house that you’re buying is much less expensive than the other houses in the neighborhood, but that you could make it to the same level as the houses in the neighborhood. If you’re buying a $500,000 house and you turn it into a million-dollar house, but you bought it in a $500,000 neighborhood, people who want to live in a million-dollar neighborhood aren’t going to buy your $1 million house in your $500,000 neighborhood. So the house has to have enough of an upside that you can still make money when you sell it, but also, when you sell it, that price point is in line with the rest of the neighborhood, in an area that people want to live in. Nobody wants to live in a house that backs up to a busy street or a train track or a school. You think it’s great because it’s all, you know, open space, but it’s not. It’s loud. Kids are loud. But yeah, choose the kind of house that you want to do the work in. I don’t touch broken foundation houses. I don’t touch houses that have been contaminated with meth. I don’t know anything about that, and I don’t want to live in a house that has meth in it. So call me picky, but you want a house that you can live in too. Now, you have 60 days to move in after you purchase the house if you buy it with a mortgage. So you can do all of the heavy lifting, the stinky work, in that 60 days if you have that opportunity. That could be another way to do a live-in flip without living in a construction zone. There’s lots of different ways to do a successful live-in flip, but don’t take on more than you can chew. Don’t tackle a house that isn’t in line with other houses in the neighborhood. And don’t ever buy on a busy street or backing up to train tracks.
Travis: Okay, noted. Thanks for the tips.
Mindy Jensen: You’re welcome.
Scott Trench: Travis, anything else that you want us to cover? I think we’ve gotten through some of the questions that you came in today with. Have any new ones emerged? Or are there any other areas of your situation that you’d like us to take a look at?
Travis: No, I think you guys have answered the questions and looked at the numbers. And I’ve already learned a lot. I’m super grateful and happy to be on, just to have the time to chat and get you guys’ take on everything is motivating and really helpful. So no other questions, and I’m really thankful right now.
Scott Trench: Awesome. Well, I mean, you’re in great shape because you save and invest so much every year. So you’re going to win, whether it’s in 7 years or 10 years or 6 years. It’s just a matter of fine-tuning a couple of things and how much activity you’re willing to layer on top of the current really strong base that you’ve got here. So congratulations on a great position, and look forward to seeing you retire and live that dream life mountain biking in a couple of years.
Travis: Thank you.
Mindy Jensen: Yeah, I think you are really on the right track. Like Scott said, you’ve got your numbers almost there. A few more things will help get you all the way there within about 7 years. And don’t do what I did and just beeline right for it. Make sure you enjoy the journey on the way there, because if it takes you 7 hard years or 8 fun years, 8 fun years is better.
Travis: Definitely.
Mindy Jensen: I mean, I wouldn’t know from experience. All right, Travis, thank you so much for your time today, and we’ll talk to you soon.
Travis: Thanks, guys. Bye.
Mindy Jensen: All right, Scott, that was Travis, and that was a really good set of circumstances. I have some homework assignments for him, but I want to know what you thought of the show.
Scott Trench: I think this is a guy who’s well on track for early retirement. This Travis is right up the alley of the average BiggerPockets Money listener. BiggerPockets Money listeners, as we all know, earn more from a household income perspective than the average American. That’s why they’re on track to FIRE, to achieve financial independence, retire early, as we’ve discussed in other topics there. He saves a good amount of his income, no kids, he’ll get there. Just a matter of speed and degree is taking that formula that he has got. He’s going right down the Money Guy or Dave Ramsey or whatever—all these different stacks for which retirement account bucket to fill up first—he’s doing it right and making sure to take advantage of the free money and the tax advantages that are coming in there. If he wants to get there a few years earlier, layer in a couple of real estate plays, or a house hack, or a live-in flip on top of the house hack that he’s already got. But he’ll get there, no problem, I think, to financial independence, as long as he gets some help, or anything close to the historical average from a returns perspective in the stock market. So obviously, that can throw everything off. But I think the guy’s well on track and controlling what he can control, and a couple of fine fiddles with his plan.
Mindy Jensen: And, you know, I like that you made a point of noting that he does not have kids. We get a lot of people with all different scenarios. So if you’ve got a scenario that you haven’t heard before, let us know. Mindy@biggerpockets.com, Scott@biggerpockets.com, you can drop us a line. We’re also looking for people on the single path to financial independence. So if you’re single and would love to share your numbers, we would love to talk to you. All right, Scott, should we get out of here?
Scott Trench: Let’s do it.
Mindy Jensen: That wraps up this episode of the BiggerPockets Money Podcast. He is Scott Trench, and I am Mindy Jensen, saying farewell, Snowbell.
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