Mindy: Today’s guest Heather and her husband, who are both in their mid forties, have built nearly $1 million in net worth on a median income and a commitment to living intentionally. Together they earn about $115,000 per year working part-time and seasonally, and over the last two decades, they’ve gone from living in a 300 square foot cabin with no running water to building a custom home and a small rental portfolio. But now they’re at a crossroads. Should they pay off a rental property or keep the debt? Should they sell any of their rentals, especially with a refinance coming up in 2026? Their mortgage rate will jump from 4% to 7%, and that’s not small potatoes. Can they afford to take an extended sabbatical in 2027 and spend part of the summer traveling as a family, even though that’s their peak earning time? Let’s help Heather figure out what her options are.
Mindy: Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and with me as always is my love’s Finance Friday co-host, Scott Trench.
Scott: Thanks Mindy. Great to be here. Excited to chat with Heather today about her numbers. And thank, this is the first time we’re going to use Monarch’s dashboard to do a Finance Friday, so I couldn’t be more excited. Heather, welcome to the BiggerPockets Money podcast.
Guest: Hi, thanks so much for having me. I’m very excited. Longtime listener. so.
Mindy: Well, thank you for listening.
Guest: Yes.
Mindy: We are super excited to review your numbers. I am going to just bang right through them and then we’ll look into your Monarch dashboard as well. First off, we have expenses of about $5,000 a month, about $64,000 a year on income of $114,000. So you’re doing great, saving about 50%. Yay. That’s awesome. Congratulations. Like I said, income of 115,000, that does include rental income and self-employment income. What is your self-employment?
Guest: My husband is a fishing guide full-time.
Mindy: Oh, okay. That’s really cool.
Guest: Yes, definitely a lifestyle business.
Mindy: And that’s seasonal, I would imagine.
Guest: Yes, so he’s been doing that about 11 years and he is off in the shoulder season, so he has a few months off in the spring and a few months off in the fall and into early winter and he does ice fishing in the winter and open water in the summer.
Mindy: That’s awesome.
Guest: Yeah, he loves it. It’s a lifestyle.
Mindy: I think your expenses are great at essentially half of what you’re making and they’re really, really reasonable. Why don’t we look at your Monarch dashboard and see what we can see there.
Guest: So as you’ll see, I guess on the Monarch, you know, when you fill out a personal financial statement, you have this idea in your head and then in the Monarch, you’ll see that life is lumpy and our expenses boom and bust because of our seasonal work. So it’ll be fun to share that.
Scott: Well, absolutely. let’s start with the accounts tab here. Can you click on the account section? And let’s take a look at where where your wealth is located right now.
Guest: Okay. And you’ll notice I leave out our personal residence. I hide it in the net worth.
Scott: I do the same thing. I hide my my personal residence. I hide my cars. I hide any personal property, that kind of stuff. I also mark some assets like syndication investments and stuff down to zero to be conservative on there. So I think it’s perfect.
Mindy: Yeah, I include it in my net worth, but I don’t count it in my fi number.
Scott: Yeah, I’m not looking at Monarch to track my home personal homes value. I’m looking at it to grow my financial portfolio and wealth, right? And and maintain that my spending, all that kind of good stuff. So, let’s go through, let’s scroll down the page here. So we have $110,000 in cash here across a couple of different accounts. Excluding your home equity, we have $926,000 in net worth. Of that, we have $110,000 in cash. We’ve got $420,000 in investments and 1.1 million in real estate asset value against $719,000 in real estate, mostly real estate debt, with a little bit of debt across some, I imagine vehicles and a small, a small credit card balance that it looks like you pay off in full every month.
Guest: Yes.
Scott: So let’s go to cash flow next and look at where the how much income and expenses is coming in.
Guest: This is where things get lumpy.
Mindy: Everybody’s got lumpy expenses, even if they think that they don’t, nobody’s spending is the exact same every single month. So Heather, your husband is a fishing guide. What is it that you do?
Guest: I am a labor and delivery nurse. So and I work part-time.
Mindy: Okay. What does part-time mean to you?
Guest: Well, I work about 10 to 11 days a month, and then of those shifts, I sometimes get to be on call at home if we’re not booming or busting there. So then I’m probably only actually at the hospital about eight days a month roughly.
Mindy: That sounds like a sweet gig.
Guest: It’s pretty nice.
Mindy: Plus babies.
Guest: Yes, babies are fun.
Scott: Walk me through something here. So I have $56,000 a year estimated in household income from you, 30,000 from your husband with the fishing gig, and then another 30,000 from rental property equity and we have low expenses. So we have a really good situation here. I’m excited to get into the challenges, but how did we get here? That that type of income profile doesn’t usually result in a million dollars in net worth.
Guest: We started back in 2009. We had worked um seasonal jobs for the Forest Service. And so we were just used to being laid off in the winter and having the boom and bust lifestyle and saving in big seasons and living off of that income in the winter. And then we saved up enough money to buy some land. We built a tiny little home, lived in that, we did it all for cash. And we essentially lived 10 years without a mortgage or rent and that really helped us. And then I went to nursing school which really accelerated and my husband chose to do fishing full-time for his true love. And that just accelerated things. That’s kind of how we got there.
Scott: Can you give us a brief background on how you got the rental properties in particular?
Guest: Well, when we were searching for land to buy in 2009, I became really interested in real estate and we never really had the extra funds, but once I went to nursing school and realized like this is important, I think real estate’s going to be super important for us, I had a little bit extra money saved and so we bought our first rental when I was in actually in nursing school, which was fun to like get a lender to lend to you when you don’t really have any income and your husband’s self-employed for only a year. But we found somebody after a lot of no’s, bought that first rental, we learned some things on cash reserves from that. We just had enough money for the down payment and then the sewer line failed and we needed to replace that immediately. So that was such a bummer, but a lesson in cash reserves. The property was only worth like $40,000, so the down payment was very low. We had an interesting loan. It was a small bank that just did a, I was like a five-year refinance loan or something. I can’t even remember. But yeah, and then once we got that rental, I realized, oh wow, this is this is something. We got some great tenants in there. They were there five years. And then once I started actually working as a nurse, then we lived off of my husband’s income for a couple years, maybe three years, and we just saved and invested all of my nursing income. And I did work a little bit full-time when I first started, and that really accelerated our path. We actually bought a few more rentals. At one point, I think we had five rentals in this college town south of us. That helped us get the rental properties and also in the meantime, I was investing heavily into my 401k and saving money on the side and saving money to build a much bigger home since we lived in this 300 square ft little cabin in the woods. So we were ready to build a bigger home too.
Mindy: How many rentals do you own right now?
Guest: So we currently have three long-term rentals um in this college town a few hours away from us. And then we have one short-term rental that is neighboring the land next to us that we bought in interest of privacy. We didn’t want anyone else to buy the property and develop it. So we bought it. And neighbors did a contract for deed for us and so we rent that out as a short-term rental. And then we have the original little home that we used to live in. We currently rent to a friend. We don’t intend on renting that often, it’s just she was in need and we had the space and so we rent that to her. So yeah, we have the three college rentals, the one short-term rental and the one kind of rental on our property.
Mindy: Do you plan to buy any more rentals?
Guest: That’s a good question. I’m not opposed to it. I constantly monitor the market where we have our college rentals and I don’t see something that works for me now, but I am always keeping my eye on it. I’m not opposed to it, but I’m also not sure, we’re sort of at a pivot point where do I want to simplify and just pay things down and stay where we’re at or do I want to have more?
Mindy: Do you like being a landlord?
Guest: Well, I am a landlord, sort of. I do have a property manager for our three college rentals and he is absolutely amazing. I don’t deal to the day-to-day, which is really great.
Mindy: And that’s great. I mean, I can understand why somebody would want a property manager so that they can enjoy being a landlord. You’re still a landlord, even if you’re not doing all the work.
Guest: Yeah, thanks.
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Scott: Heather, I look at the situation, I see, wow, this this things seem like they’re great. You you work part-time, your husband has the coolest job I’ve ever heard of and makes pretty good pretty good money there and and presumably that’s a passion of his and he spends the time he’s not making money teaching other people to fish, fishing for himself. You’ve got clearly got a major surplus here, ability to flex up and flex down. It just seems awesome. What what is is day-to-day like this? Like is is are, you know, most weekdays, you’re able to kind of just do what you guys want for the most part with a hand little bit of work sprinkled in. Is that is that the reality of your life right now? And if so, how can we help you? What what’s the, what’s next?
Guest: We do get to do what we want a lot of the time. I feel lucky that we’ve made these choices early on in life that we’ve both been able to whittle away our actually working hours and spend a lot of time doing whatever we want, spending time with our our son and, yeah, just being outside, it’s it’s really great. I’m wondering what the next step is for us. We have this rental in this college town that is coming up for a refinance because it was under a business loan. I don’t know what to do about that and because the interest rate is jumping, we got in at 4% and it’s likely going to go to 7 and a half or eight. I’m not sure if we should sell or if we should keep and yeah, I I think we’ve done a really good job up until this point and now our life, we just don’t want to mess up what we have and so trying to figure out like questions like that, what should we do with that rental?
Mindy: How much is your mortgage payment going to go up with that rental?
Guest: I’m not exactly sure exactly. It’s a 30-year amortization and it can readjust every five years and there’s no ceiling. It was a business loan. I was not able to qualify for any more personal loans under my name because I dropped my income.
Scott: Let’s tackle the problem here. We’re going to figure out how much $182,000 mortgage balance is going to increase from a payment perspective with an interest rate jump from 4 to 7 and a half or 8%. We’re going to use AI, so it may be, you know, it’ll be an estimate for that, but it will it will go from somewhere in the 900s probably to like 13, 1400 bucks, I bet. The second part is, I believe that you will have a chance to refinance that mortgage with a 30-year fixed rate mortgage and that you should talk to a few lenders to shop that around. Your rate’s not going to be great. It’s going to be 6 and a half, 7% probably, but it will be maybe better than what you’re going to get from this DSCR jump. And I think that you will have a good shot at qualifying because you’ll be able to use the rental income across your whole portfolio in addition to the income from your nursing job to help qualify for that debt. So that would be like the first thing I would do from a homework perspective, that will give you another option. That’s still not going to be super pretty, I don’t think. I think it will be about a $400 to $450 a month jump in your monthly payment with the DSCR loan a little bit lower, but that’s going to eliminate all the cash flow for this property effectively when you refinance it. So that’s that’s the issue, right?
Guest: Yeah. It is a a great performing property. Really we’ve had no trouble with it. It’s very popular and it’s a it’s a lovely location. It just came up on the question board for me because of this refinance and thought, well, maybe we could just sell it and be done with it and redeploy some of that equity into the short-term rental that is on a much higher payment loan and gives me a lot more headache and maybe offload some of that work that I do into the short-term rental.
Scott: So this is the crux of it is you have a real estate portfolio and this this is forcing a set of decisions here, and it sounds like your ideal scenario is status quo is maintained, but you can’t do that because of the the interest rate challenge and that’s that’s the whole that’s cascading through all these other decisions here. For context, I see the short-term rental is at a 5.5% interest rate. Your primary mortgage is at what? 2 and a half%?
Guest: Yes.
Scott: So, Scott, I threw it through Claude and I’m getting a new mortgage payment of 1348.
Mindy: I got somewhere in that same range, right? 1272 to 1330. It just it’s guessing based on context, but I think that that’s right. I think there’s about a $400 increase that she’s looking at per month from the interest, the refinance, which isn’t killer, but it it moves this property from cash flowing modestly to being break even at best for the foreseeable future.
Guest: We’re very conservative. We have healthy reserves and we rarely have to spend them surprisingly, but that’s what they’re there for. And so I’d say my like reserves expense line is pretty heavy, but you just never know when you need those. So.
Mindy: Right. No, I like heavy reserves because if you don’t need them and they just continue building, eventually you can pull some out of there if you just don’t need all those reserves. But when you don’t have reserves is, like you discovered, when you buy a house, something always breaks and the cost of that repair is inversely proportionate to how much money you have in the bank. So if you have no money in the bank, you need a new sewer line. How much was that sewer line when you when you bought that house?
Guest: Oh, we were so lucky. I think it was only a $3,000, but
Mindy: Yeah, you were really lucky.
Guest: But we actually didn’t have the money at that time. Like I said, we had just enough to buy the rental and we did have to save up and then the people didn’t bill us for months on end, so we got lucky because the bill came three months later and we had saved the money.
Mindy: So with this property, does it make sense? Is it still a good rental when it’s barely breaking even?
Guest: I don’t like that. I don’t like the barely break even part.
Mindy: Yeah, I’m not a big fan either. So what would you do if you sold this rental? Could you make money off of this rental if you sold it?
Guest: We would definitely walk away with some money in our pocket from this rental. We bought it at a good time. It’s appreciated in value. Our market has cooled a little bit, but I still think it’s a very solid market, a very solid rental. We could sell it and and walk away with some money. And the thought was maybe I would deploy some of that cash into almost paying off the short-term rental that we have to help us feel a little more stable and maybe take this time off next summer, summer of 2027.
Scott: Let’s talk about this. You’re thinking about paying off a five and a half% mortgage. Do you like the short-term rental better than the long, the college rental?
Guest: I manage the short-term rental and so I don’t like it as much because it is a part-time job and it was something that I had been wanting to try, the short-term rental, and I’m not the biggest fan. It takes up a lot of mental bandwidth from me, that’s for sure. I have a cleaner, I don’t clean it, but I have to manage all of the little pieces. And it’s also a very emotional property because it’s connected to our land and we don’t want to sell it. It’s only on a 10-year loan, so the payment’s really high.
Scott: If you sold the the rental that’s going to have the refinancing problem, what kind of return would you want to get on that? Like if if I could guarantee you a return of X, what would you be happy with?
Guest: I guess I hadn’t thought that. I haven’t really put that into thought. I was thinking if it sold for 300,000, I would be happy. We bought it at 250. And I think it’s not unrealistic that it could sell for a little bit more than that.
Scott: We’ve got this property, we have 115,000 bucks in equity here. Okay, that does change things on this. But my my question was, if we paid off that rental, right? You you’re going to you’re going to be forced to refinance this into a 7% mortgage, give or take, or 7 and a half to 8% if you just let if you just keep the DSCR loan, that’s a 7 and a half% to 8% return right there, just paying that off at that point. As a bad option because it’s forced on you, but that’s a better deal paying that mortgage off than paying off your 5 and a half% mortgage if that was the present reality in there. You could also sell the property as well. But I’m wondering how you’d feel if that property was totally paid off and producing, you know, it’s now you remove this mortgage payment of like what like 1500 bucks a month currently, now you have $2,000 bucks a month coming in from that property per your projections for rent and expenses. Does that sound appealing? That would it looks like that would take you about a year or two if you use some of your cash position and your accumulation rate.
Guest: I like that you threw that in there because I haven’t even considered that. I just don’t see where the funds come from to pay that off.
Scott: Like you’re just saying from what we save from our incomes?
Guest: Yeah.
Scott: Yeah, well, we’ve got 100 grand in cash right now, right? 100 grand in cash is great, it’s a very conservative position. But do we need 100 grand if we have a seven and a half or 8% debt that we’re sitting on at the same time. So we’re just negatively arbitraging that interest versus our cash in a pretty extreme way at that point, plus all that interest is taxable as well. Not not that that will be a major deal in your situation with your your income profile, which is very tax advantage. So that that’s one part of it. And then you have, I’m I’m seeing that you’re going you’re you’re going to accumulate $40,000 plus dollars a year. So if we go all out on this $183,000 remaining mortgage balance, we’re looking at two years or so if we use up much of our cash position now and that savings rate. I don’t know how conservative your savings position is right now, but that might solve the problem in a pretty big way. And on the other side of that, you’re sitting in a really nice position with a paid off rental.
Guest: Yeah. I’m not I’m not saying that’s something we should do. I’m just I’m just floating it as one one potential solution for you.
Scott: No, yeah, that is something.
Mindy: Then your estimated monthly cash flow is almost $2,500 a month. That’s about half of what you’re spending. Then you only need to find another $2,500 a month, which you could easily do picking up a couple of shifts. You want to take this sabbatical. Are you going away for the sabbatical or would it just be like a staycation?
Guest: We’re hoping to do some traveling in Alaska. And I’m not sure, I haven’t really pitched it to work yet. I’m not sure what they’re going to say. So, I do have the ability to take a whole month off though without leaving work. So, but my husband will definitely take time off and that will impact our finances for sure because his big season is in the summer.
Mindy: Yeah. So what I’m wondering is, could you kind of game the system? You work the last two days in May and the first two days in June, covering your time in a month and then you take off June and July, but then you work the last like week of July. So you’re still generating income. You’re still keeping your job, but you’ve got almost, you know, like six, seven, eight weeks off in a row. Because I love the idea of a sabbatical, that could be a sabbatical without actually leaving work because I don’t see the numbers at this moment to take an extended time off, although you’re so close.
Scott: I disagree. I think you’re in a great position to take a sabbatical here. Let’s engineer this for for to get Heather exactly what she wants. I I think we can do this. This is not somebody who’s broker in a bad position. You spend very little and you’re clearly able to do this. I’m going to give you some hypotheses and you’re going to reject it one by one because I’m going to be wrong. That’s but that’s how I think, right? I hypothesize and then and then we iterate. This college rental is the crux of the problem here. Forget about the mortgage. If we just look at this thing un-levered, we’ve got a good property here from what I can see. $300,000 value, 2650 a month in rent, and you estimate presumably you have good reason to do this, 600 bucks a month in all in expenses, which includes capex, vacancy, maintenance, and property management for the third property manager. So that’s excellent um if those numbers are real. That’s $2,000 bucks a month in cash flow, 2,050, and then that translates to about $24,000 a year in free cash flow. So it’s an 8% return right there, plus any appreciation. We’re looking at a solid return here that’s better than that interest rate on that on that mortgage in a in a pretty meaningful way or maybe better than other alternatives that you will feel comfortable with in your in your life. So we’ve got a good property. That biases me to if that mortgage spikes very high, simply paying it off as a pretty good investment since you since you like it. So that would be the first hypothesis point I’d have in here is that’s a pretty good use of cash. It may be not the best, but it’s a reasonable one. The second challenge here is that you want to take a sabbatical one year from now, and you can’t pay off that mortgage entirely by the time you want to take the sabbatical and you probably feel pretty uncomfortable using all of your cash in order to pay off that mortgage and then go on sabbatical. That’s an incompatible with what I’m saying here. Let’s problem solve here. You said that this sabbatical is going to take place during the busy season for your husband.
Guest: Yes.
Scott: I presume that busy season for your husband means that there’s demand for rentals in this market. And that’s the highest cash flowing months for your short-term rental next door and perhaps your house as well, your main house as well. Can we merge those two thoughts and have can you rent out your main house and your short-term rental during the sabbatical to to cash flow your situation or at least greatly reduce those expenses and then come back to it after the sabbatical and resume your wealth building process. It seems achievable to me as a as an initial hypothesis, but what’s your reaction to that?
Guest: I’m open to the idea of renting our primary home. Of course, it’s very personal to you. So I’m not the biggest fan of that idea, but it’s something that if it would allow us to go, then I would take it. And it would just be a lot of prep work to get the place ready.
Scott: I guess if I if I look out, let’s forget the the primary residence. If you do not rent out your primary residence and you just took you said, can I go on a sabbatical today? We’ve got 100 grand in cash. We’ve got 30 grand in rental income. and that that’s going to go down by about 5, $6,000 a year after the the the interest rate spikes. So you could do the sabbatical right now, presumably you could return at the end of it to work. I’m trying to find ways to feel better about the sabbatical because I think that’s really what the problem here is. You’re not feeling great about it even though the numbers clearly suggest that you can take it. What’s your thoughts there?
Guest: Well, some of the money that I have there are our reserves, so I feel nervous about counting those, you know, in the $100,000, you know, there’s reserves for rental properties and for life and I was raised very middle class with a frugal mindset, and so I have more of a scarcity mindset than an abundance. I feel like that number could be 200,000 and I might say the same thing. Also, like with paying off the college rental that we’ve been talking about, would I take all my reserves to pay that off?
Mindy: So you’ve said that you have a lot of reserves. What is, and I don’t need this answer right now, this is more of a think for yourself, but what is the lowest amount in reserves that you could still sleep at night? If you went from 100,000 to 50,000, is that too much? And, you know, think about your rental properties. What’s the condition of the roof on each of the rental properties, and the furnace and the air conditioner, and the appliances and the water heater. If everything is super old and needs to be replaced very soon, then maybe that 100,000 is exactly what you need. But if everything is brand new and got replaced last year, then maybe the 100,000 is unnecessary. So start to think about the condition of the house and, you know, do you know of any repairs that are coming up and, you know, subtract those. I don’t know the cost of a roof in your area, but the cost of a roof in my area is 15 to $20,000 if you’re paying it yourself and like $30 or $40,000 if you’re going through insurance. Thank you roofing companies for having the two prices. But a water heater is like $600. I can find somebody to install it to you for a cool 3,000, but you could also DIY it. So there’s it sounds like your husband could be handy, you could be handy. These are things that you could do yourself, but back to the original question, how much of these reserves could you throw at that house or could you put towards your sabbatical?
Guest: That’s definitely something I need to sit down and think about some more. The houses are older and we’ve slowly been replacing little pieces, but I do anticipate some bigger expenses like some heating units in the next five-ish years, which could be pretty big.
Mindy: Yeah, get lots of quotes. Talk to people that you know in the area and see who they’re using. You can get a quote for $5,000, you can get a quote for $25,000. Don’t go with the $25,000 guy.
Scott: Heather, tell me about what these reserves mean. We see on your your assets tab, 124,000 in cash. Does that include your reserves or your reserves tracked separately from that cash position?
Guest: That does include my reserves.
Scott: Okay. And is the is a hundred grand roughly the number that makes you feel pretty comfortable with uh your position for your household and your rentals in a general sense?
Guest: Yeah, it could probably be less. I mean, we have some like frugality muscles that we can flex if we need to. We might not want to, but we definitely could. But yeah, I I it could be a little bit less than that probably. I like to keep at least 15-ish thousand per property.
Mindy: And that’s a great amount, but 15-ish thousand per property is 45,000, leaving you with an extra, there’s no such thing as extra money, but leaving you with an extra 55,000. If you paid off the rental, your annual cash flow would be about 30,000 from the rentals and you’re spending 64. If your sabbaticals in Alaska, Alaska’s not cheap.
Scott: How how expensive is Alaska? How how how much is this sabbatical going to cost you?
Guest: Well, I don’t exactly know that yet. We’re definitely thinking about flying there and then renting a camper, you know, going out into the bush and doing kind of some camping and whatnot. But I don’t know, I’ve said of in my head thought like maybe 10 grand.
Scott: Okay, I I don’t think that’s nearly as expensive as what Mindy was thinking.
Guest: Maybe it’ll be more.
Scott: Yeah, so I think I think you should price out the the travel for that. But a $10,000 sabbatical is not going to be a challenge for you in this situation, the issue is going to be how long do you want to do that for and how much income are you going to give up in the meantime?
Guest: Yeah, that a lot of it will be dependent on what my work decides if they let me take more than a month or not.
Scott: Yes, you can do your sabbatical. You’re going to miss one month of income. Certainly you can do one month, certainly you can do two months. If you were going to take a year off, then we maybe have to just be a little smart about our position, but you could you could even do that based on what you’re talking about here. Your expenses may be lower on the sabbatical with what you just described this than your your current life aside from the plane ride out there and maybe that that that rental in there, and you could offset a big chunk of that if you decided to rent out your primary. I was thinking sabbatical meant six months. At six months, now we’re now we’re having a big income offset and that’s where I would consider renting the house. But for a month, you can do that right now if you wanted because your position is so strong, even if you have that interest rate jack up. Let’s unpack that position because it’s not a financial problem that we’re we’re running into. I can tell that immediately from the numbers here. It’s something else that’s that’s giving you some some challenges about taking the sabbatical. What do you think is underneath that?
Guest: Like I said, I think I just have a scarcity mindset even though on paper it looks good, I still feel like we don’t have enough. I’m not quite sure where it’s coming from, to be honest.
Scott: I think it’s really hard in in personal finance. And I find this problem with myself too. I I do this podcast all the time and talk to people about their money and I can look at the numbers and find patterns all day and then I have the same problem you’re having with my own personal wealth and personal spending and portfolio. It’s just so personal and there’s so many ways to doomsday it, how things could go wrong or how things could go poorly. Maybe a way to flip this problem for you is to say, how will I feel in 10 years if I don’t go on this sabbatical for the way that I want during that period? And how will I feel if I do and and our wealth drops 50 grand or whatever it is, but it sounds like you really want to do this. And like everything points to, of course, you can do this and it’s no problem. And regardless of what you do with this interest rate on this property, there’s nothing really stopping you. You could do it this summer and next summer if you wanted because you’re only going to miss a month a month of income. I would imagine and and look these are things to talk with your employer, but if with your part-time work, I have a hard time believing that there wouldn’t be more shifts or opportunities for you upon returning from that. Your husband seems like he controls his time and his business almost entirely with with great flexibility. And I imagine that even in a worse case scenario where you need to build it up, there’s an opportunity to do more hours for a month before or after to make up big chunks of that income. But like those, there’s so many levers here for this that makes me feel really confident that you guys can be able to do this. I don’t know. Are you seeing the same thing, Mindy, um from your view or am I being too optimistic?
Mindy: Well, I think it’s funny that the tables have flipped. I’m usually the one that’s more optimistic. I just really think that Alaska is very expensive. But yeah, I like what you’re saying, Scott about if you’re taking off the month of June, work a little bit more in May and work a little bit more in July to kind of make that up. I mean, I’m not talking smack about your work life, you’re doing awesome with it, but you’re only making up 8 to 10 days. It’s not like you’ve got to make up, you know, 30 days in two months when there’s only 30 days in a month, you know? Especially if you were willing to kind of buffer it on either side. I mean, you’re only adding four or five days per month on either side of a month-long sabbatical. I did run a really quick, how much does it cost to rent an RV in Alaska and it looks like it’s $270 a night, or about $10,000 a month. If you’re going like for an entire month. So I would start shopping around. I just grabbed the first site that came up and ran the numbers really quickly, but you know, where are you going to stay? if uh RV isn’t going to be the right choice, like do you have an RV? Could you drive up there? I don’t know how long it takes to drive up there. I I’m not outdoorsy anymore, but food is expensive up in Alaska because everything has to be shipped in. You know, I just I want to make sure that you do enough research so you don’t get up there and be like, oh, we can only stay two weeks now. Get the whole experience that you want. I do think that it’s possible, especially if you’re going to add some time before and after you come back. like if you could do this without losing any income from your job, how awesome would that be?
Scott: Here’s I think the homework order of operations I would I would suggest for you. Since this seems like the big goal. Is this the big goal? Is this what you wanted to just to go over today is can we do the sabbatical and and be fine despite this rental property balloon coming to?
Guest: Yeah, I think I’m wondering like what I should do about this rental property and looking for some reassurance that maybe we can take a sabbatical or I don’t know, should I sell this rental and do something else with the money?
Scott: So the hypothesis I’m now settling on for the for the two of these and subject to to yours and Mindy’s input is for the sabbatical, define what the ideal trip looks like, price it out, see if there’s tweaks you can make to the schedule or the shopping of that to bring that price down, and then you’ll know how much it costs. Then, talk to your employer and say, what does this look like? Can I take on extra shifts in the months before and after from other folks or whatever to to ramp up to this? Will this be okay? What what’s the situation going to look like on my return? How can I do that? And get a get a realistic answer for that. That’s a totally normal thing for someone to want to take a big trip like this and your employer hopefully give you a straight answer. You know, hopefully it’s the one you want. Um, yeah, go ahead, take two months. No problem. We’ll we’ll be here when you get back. You want a couple extra shifts, so and so will will want him at that point, maybe they’ll take a vacation two weeks before and so and so will take him two weeks. I don’t know. like there’s a there’s a best case scenario where that works out pretty well. and then you’ll know those two numbers. On the rental property, I think it’s it’s what would you do with the proceeds? If there’s another investment you can make with this $115,000 in equity. Let’s call it 95,000 after transaction costs and, you know, some depreciation recapture. You’re in a relatively low tax bracket. so that hopefully won’t be too big of a deal. But what would you do with that 90 grand that you’d you’d clear on sale on selling the property. And if you have a good use case for that, then you should sell it. But if you don’t have a good use case for that, then you can make it a two or three-year project to pay off the mortgage. You don’t have to use all your reserves in the near term, but you can begin applying those proceeds in there if you feel like that’s the highest and best use of your money to pay off a seven and a half or 8% mortgage, which I think is very defensible. Some people will argue with it. There’s going to be camps on both sides, but it’s not an irresponsible decision, in my view, to pay off a mortgage at that rate after it it gets in there. I’d try to refinance it if I can get a 100 basis points lower than that than the rate it will jump to. But those would be my two hypotheses for you for this. Do any of those register or how are you feeling about them?
Guest: Going back to the paying off the rental property, it’s just not something that I’ve even considered. So it’s an interesting path that I’m going down. Obviously, I still have to refinance it this coming up this summer. And so would it be worth it to look into a 30-year fixed, dropping a point or whatever, and refinancing it and then still paying it off with the cost of that or should I just let it in the DSCR kind of go through that process because there won’t be the extra fees and let it go to the seven or 8% and then start paying it off if that’s the thought.
Scott: I think it’s a shopping process. I imagine you’re going to get a rate that’s very close to 6.75%ish, if you have excellent credit for a rental loan of this type, which is modestly better. And to your point, you’re going to have a hard decision I believe as I it might be it might be fairly close alone of this size, whether you should just keep the DSCR loan in place at the higher interest rate or refinance because of the cost to refinance. My guess is it will be slightly favorable over 30 years to refinance to the 30 year, but if you decide to pay it off quickly either way, the fees of refinancing may eat into some of that. So that’ll be like a pretty close call, reasonably close, you have to you have to turn on your brain and do some number crunching to figure that one out. But I think I think your your instincts are right there. But I also think you should shop it. There’s no there’s no reason not to to see what that could look like. Maybe it’s much better. Maybe it’s a clear win for you and it changes the math on on paying it off early.
Mindy: Do you have a relationship with a local bank, not a big chain, but like a little small bank or a small chain in your area? And if you don’t, I would start one. They will frequently keep a loan in house or they have different loan properties, different loan products that they can work with you on and, you know, every little bank is different, but we’re talking about $180,000 that you can refinance into something else. Maybe if you bring all of your mortgages to them or you bring in, you know, all of your bank accounts with them, maybe they have a different product. I would start talking to local banks first. You don’t have to refinance until fall of 2026 or that’s when the loan changes. I would start talking to everybody right now. Don’t wait until fall and then start talking. Talk to people and see what the options are. Maybe there is nothing and maybe seven and a half, 8% is the best you’re going to get, but you won’t know until you talk to people. So I would start shopping around frequently and see what it would cost, like what is my all-in cost to refinance this loan, like, you know, do I have to buy down points and, you know, all of this other stuff. But if you could get a 30-year fixed, that’s way better.
Scott: Here’s my problem with your short-term rental here. The college town rental is worth $300,000 has $2,600 in long-term monthly rent and $600 in expenses that you estimate for $2,000 a month in cash flow or $24,000 a year. The short-term rental, if I remove the mortgage entirely, brings in $3,300, which I assume is seasonal and lumpy in the first place, and then has $2,100 in monthly expenses for a total of $14,000. So this is a much, much poorer investment than your long-term rental. What would you get for long-term rents if you were to do this as a traditional rental to a neighbor that you liked if you were cautious and careful about it?
Guest: I think not enough, I don’t think. I don’t know, maybe 2000, maybe. It’s not really set up for long-term living either. We would have to do quite a few upgrades. It’s a bit of a cabin in the woods, so there’s no washer and dryer, yeah.
Scott: Okay, but let’s say we got $2,000 a month. Your expenses would presumably go much lower, like 3, 400, 500 bucks a month because you’re going to be self-managing this thing because it’s right next door. If you got $2,000 bucks a month for this property and then your expenses dropped from 2100 to 500 or 600 bucks a month. Now all of a sudden, we’re much closer to your college town rental and you actually increase your cash flow because your expenses in the short-term rental are killing you and you might have a more pleasant existence as well because you’re not having to have folks coming in and losing the key or getting lost in the dark, checking in. I don’t know if that ever happens to you at this place. But you should run that analysis I think and and do that work because maybe this is is just not really meant to be a short-term rental and you can make more money with less stress.
Guest: Yeah, it’s a thought. Someone would be living there all the time. so we kind of bought the place in interest of privacy, but maybe for the right tenant, I should look into that.
Mindy: This property says it’s a cabin on 40 acres. Is there a way to kind of carve off some of those acres that are like on the other side of your house so that you maybe you could sell a little bit of it and keep the part that’s close to you to offset some of this expense. And since this is a contract for deed or like seller financing, does your seller allow you to pay down the mortgage early?
Guest: They do allow us to pay it off early and we’re in good relations with them. But I wouldn’t be able to sell off a part of it until we paid it off. We don’t technically, it’s a contract for deed. So we don’t technically have it in our, we don’t have the deed to sell. It’s something that we’ve thought about before. We do really like the land. Like we have trails on there and my husband goes hunting and my son trumps around in there. We’ve sort of thought about that and also set that aside like eh, I don’t think that works.
Mindy: Okay.
Scott: Okay. I I do think there’s something here. We have a non-financial reason for buying this. And this is your situation. so I’m just I’m still trying to process it. But to me, being a long-term landlord to somebody that you like and set clear rules about the use of those 40 acres with beats having a smattering of seasonal short-term guests every day of the week and the numbers may justify it because your expenses may come down substantially. There’s no cleaning fees for a long-term tenant except for when they move in and move out. To me that seems like something to consider, but I’m not in your position and it seems like there’s something else underneath there that in the realities of this situation are are not congruent with with what the numbers seem to say.
Guest: I definitely am interested in looking into the long-term tenant thought. If I could get 2,000, then the expenses are less, just a lot less mental load on me would be great. The short-term rental is just a lot to deal with.
Scott: The next question I’d have is you have a $139,000 contract with the seller here that’s basically a 10-year mortgage, right? A 10-year loan on this property. You can pay this off at any time, it sounds like. So if you were to refinance it, let’s go back to our our refinancing question here and get a six or 7% mortgage, your payment would come down considerably even as your interest rate comes up or you could even do a 15-year mortgage and still come out way ahead. So a 15-year I’m seeing 5-8-5 for interest rates right now at 760 for a primary residence. So that might that might come up a little bit, you know, to 6%, but going from 5 and a half to 6% and moving from a 10-year to a 15-year mortgage might change the calculus a little bit. So something else to look around with is is what can I get for mortgage rates for this property if I wanted to refinance it and how would that change my cash flow situation at 15, 20 or 30 years? That’s another consideration for you to to think through.
Mindy: I like that Scott and also if you got this as a primary residence loan, you’d have to move into the cabin for a year, but then you could rent out your current house while you’re living in the cabin for a year and then move back to your current house and either rent out the cabin or not. You’ve satisfied the primary residence requirement of living there for a year.
Scott: All options, then you got to change addresses there. So that’s a real, that’s another, all your mail goes there. Change it back. So you got to really like your neighbor uh that you select on the long-term rent side if you want to do it. But I think you’ve got really good options and I think at the highest level, I would just zoom out and say, man, you guys have a wonder what seems to me from my my suburban home in in near Denver, just an awesome, unique, wonderful life situation. You guys are millionaires. You have multiple properties. You’ve got multiple cash flow streams. You’ve got work that can flex up and down. Your worst case scenario is something goes wrong and you have to get like a full-time job. One of you, one of you has to, you know, in there. You can you definitely can take this this sabbatical. I think that a lot of the the problems are stemming from homework that you just need to do. When you when you do your homework, you’re going to feel way better because you’re going to have your you’re going to have your Alaska trip priced out. Maybe you can get credit card points to get those flights, you know, over the next year and bring that that cost or maybe that actually funds your RV as well. Or maybe there’s some something you can do there for the camper. You got refinancing options that you just haven’t explored yet. So you don’t know what those options are. They may be way less scary than what we’ve talked about today when you actually go and and and do that homework. And I think you’ve got the cash flow if you take your 100 to 1 to $125,000 in cash that you got right now. I know it’s moving from day-to-day. And then you’ve got your $45 to $50,000 you accumulate when you’re not on sabbatical. That’s a serious amount of cash over the next three years that you can deploy to solve some of these problems here. And if you think about that 250 grand, you know, the next three years of cash flow plus what you’ve got now. If you think about it in that lens, at the strategic level, that will help you I think really decide how to deploy it and will make a lot of these problems less scary. That’s my one overarching thought process on your situation and I think the the punch line is, you can absolutely do this sabbatical assuming that your employer will take you back once you get back from it. That’s the big big question mark. I can’t imagine that’s the answer’s no for a reasonably length one. Four weeks of PTO is the the short end of it and that’s still a probably a really nice trip. I imagine you can get longer with the with the way you got this set up.
Mindy: So, I think it’s homework. I think you’ve got a checklist of homework to do and designing that experience. I won’t repeat myself, but I think it’s a checklist of homework and I think you’ve got all these options and it’s just a reframing to an abundant mindset. Which is hard to do when you have lived a frugal life. I can attest to this. I’m trying. As we go through it more, I think there’s just a lot of different options. Talk to local lenders and see what sort of refinancing you could do. If you could get out of that 10-year term. I really like that Scott. I didn’t even think about changing that out. Like it’s easy to get locked into that, oh, well, I’ve got a five and a half% rate. Therefore, this is the only option for me and a higher rate for a much longer term is still going to bring your price down to the point that maybe you don’t have to rent it out all the time. Maybe you can rent it out once a month or an average of once a month and that would still generate enough that you’re okay with the hassle because it’s not so much hassle. It’s not all these people all the time. Scott brought up a lot of different ideas that you might not have thought about. So now you have to go think about those.
Guest: Yeah, I definitely have some homework to do and like you said, just contacting and finding these about refinancing and just getting the numbers on paper so that it doesn’t feel as scary. I absolutely know that I can take a month off from work already right now and just trying to convince them to give me a little bit more would be nice. And having the actual numbers for the Alaska trip written down would be helpful.
Mindy: Because I mean, you’ve got a year essentially till your Alaska trip, you could pick up a couple of extra days every single month from now until then and completely cover all of the missing money without really making your life that much different.
Guest: Yeah, that’s true.
Scott: Yeah, I think you got multiple ways to go about it. I I don’t know your employer and your relationship there, you do, but I imagine that you can work that out with your employer directly. That might be the easiest answer. It might be sure. You you might as well have that conversation. It might be sure but, you know, and then maybe there’s a conversation with co-workers and you you plan that out with, you know, folks you like and say, hey, can I cover some shifts for you at various points? You know, I want to do this. This is really special. Could I? I I I imagine that that’s going to be something that’s a possible conversation to some degree as part of that. Another one is, is there competition? Can you get another job in the worst case scenario? like is there an alternative?
Guest: Yeah, I mean worst case scenario, I for sure am very employable, but I have such a great setup with my part-time work and working in a wonderful unit, labor and delivery. So.
Scott: Well, yeah, those are all questions to explore and I think that as you do your homework, a reasonable solution is extremely likely to emerge here that gives you very close to what you what you want here. And I think you’re going to stay rich and get richer um either way because you’ve, you know, designed something very very effective here with your portfolio, your spending, your overall life and just congratulations on that. There’s not not going to be a lot of millionaires in the country that have your day-to-day lifestyle, the week you just described in terms of from a workload perspective is really smart strategy that you’ve brought to your life to to get to this point and have this wealth and this optionality without one of you guys working a six figure job. So congratulations on that and it’s really impressive and admirable.
Guest: Thank you.
Mindy: All right, Heather, thank you so much for your time today. This was a lot of fun. I appreciate you sharing all of your numbers with us and I want to hear what your homework says, so don’t forget to check back in.
Guest: I definitely will.
Mindy: Okay, Heather, thank you so much and we will talk to you soon.
Guest: Thank you.
Mindy: All right, Scott, that was Heather and that was a really interesting situation. I really loved how you gave her some ideas that she clearly wasn’t thinking about. Oh, you’ve got this seller finance loan. Why don’t you see if you can refinance that into a 30 year? You might go up in interest payments, but you’re still going to have a lower payment monthly. So that’s less cash coming out of her pocket and maybe even making that a break even or positive cash flow property than the one that’s currently losing money. I really like how you think outside of the box and now Heather has a lot of homework to do.
Scott: Yeah, I mean like a longer term mortgage reduces your risk, right? Because the the the payment is lower than the short-term mortgage. So every single person who has ever taken out a 30-year fixed rate mortgage has made that same decision. It’s just harder when you already have a mortgage in place, do the mental gymnastics to go up in interest rate from that current rate to the longer duration, but it’s the same thing as if you were buying a property with a 30-year fixed instead of the 15-year fixed, right? I mean it’s these are these are the decisions that real estate investor think all the time. And I think it’s what what reduces my risk? What drives my returns? How am I going to balance those two things? And in this case, it’s pretty tough to have a big fixed expense hitting monthly that is the biggest line item in your budget when you can refinance out of that or potentially pay it off. And so I find this endlessly fascinating. There’s the mathematically pure and optimal approach to building wealth and then there’s what actually makes you feel good about living a a lifestyle that involves a little bit of part-time work in a job that you enjoy with people you like, and most days of the week hanging out doing exactly what you want in the woods. That I mean there’s a difference between those two things and that’s what I think is so endlessly fascinating and why I love doing this at BiggerPockets Money so much.
Mindy: Yeah, Heather and her husband have set themselves up in a really great position. They’re living intentionally. They’re essentially doing what they want to do. And I think that they just needed a separate set of eyes on the situation which you provided. I really like your solution, Scott. I am super curious to hear what she comes up with.
Scott: Love it.
Mindy: Okay. If you want Scott and my eyes on your finances, we are always looking for Finance Friday guests. You can email mindy@biggerpocketsmoney.com, you can email scott@biggerpocketsmoney.com, or you can email our producer Blake at blake@biggerpocketsmoney.com. And we have even more financial independence information on our website. Visit us at biggerpocketsmoney.com. Scott has been frantically creating new spreadsheets and new resources for you. He’s got a couple of new calculators out. Scott, you’re really quite the busy little bee over there.
Scott: I’m having so much fun. The the the AI just gets so much better. so it allows me to to vibe code these apps. I built this uh income tax projection. You can go there in the resources tab at Bigger Pockets Money. You go to 2026 tax projection app and you’ll be able to enter in all your different types of income and get a full calculation showing how it all stacks, long-term capital gain stack, whether you go over the ACA subsidy cliff, all that kind of stuff. So, please give me feedback on there. If there’s an error, you know, I try I show all the work, so there there could still be errors there, but if you find one, let me know and I can easily make a make an update to it. But that’s free, no login or anything required. There’s no ads or anything on it. There’s no data stored. It’s just all local. That’s how crazy AI is right now. Oh, and another thing that we’re working on is we brought on two bigger interns this summer and they’re building some cool stuff. So in the next couple of days, maybe already by the time this episode drops, expect two new things that they’re working on to go live. One is a mobile app. You can download, it’ll have the podcast and those kinds of things. We’ll have playlists that we think are good for, you know, if you want to go and and learn about a certain topic, we’ll begin creating those over the course of the summer and I’m happy to get feedback and, you know, uh update those uh from listeners if we have if we have any suggestions. And the second thing that’s going to be pretty cool is we’re going to introduce a little forum. This is going to be a closed forum. You can ask a question anonymously in the forum, but only real people will be able to answer you starting with me and Mindy. So, I don’t know when, you know, this will be live in the next couple weeks and um I think that’ll be pretty fun. That way you can, we can actually post some real numbers or real situations, but also know that we’re not getting trolls responding to you unless you view Mindy and I uh and the people that that uh join the community with their real names as trolls. So I think that’ll be fun and and helpful um and uh we’ll have some good discussions there. So feel free to do that. That’s at biggerpocketmoney.com/forums, will be the URL for that.
Mindy: I am so excited for that Scott. That is going to be a lot of fun. If anybody has any suggestions for things you would like to see on our website, again, mindy@biggerpocketsmoney.com, scott@biggerpocketsmoney.com. We love to hear from you. All right, Scott, should we get out of here?
Scott: Let’s do it.
Mindy: That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen saying hop hop, pork chop.
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