539: Finance Friday: Can I Comfortably Retire by 50 with My Current Portfolio?

26:49With thousands of five-star reviews and hundreds of thousands of families already using it, Trust & Will makes peace of mind one less thing on your to-do list. Add some peace of mind to your future with Trust & Will. Go to trustandwill.com slash bpmoney for 20 % off. That's 20 % off at trustandwill.com slash bpmoney. Trust & Will is an online estate planning service and is not a law firm. See trustandwill.com for details. All right, welcome back to the show. So our goal here is to reach FIRE in about seven years. And to do that, we would need to generate approximately another$40 ,000. Let's see what we can optimize to cut retirement down from 24 years to seven.

27:31Derek, you posted in our Facebook group that you wanted to get to early retirement and $80 ,000 in cash flow a lot sooner than traditional retirement age. What is it that's driving you to do this? I guess seeing my kids grow up and time's kind of flying by and they're not getting any smaller and I'm getting older. So I'd rather like to see myself in a place where I can retire if I want to earlier, or at least be financially independent, where I can decide on my own terms if I can pay work or decide to travel with them or try and enjoy things a little more. And you have a small amount of your net worth in a 401k.

28:11You've got a little bit in a Roth IRA, some cash, which is awesome. But the bulk of your retirement plan or your assets is in real estate. And we have brought on my best friend, David Green, from the BiggerPockets Real Estate Podcast to talk specifically about your portfolio. So, David, thank you for joining me today. It is my pleasure. Thanks for calling me in. So let's start off, Derek. Your first question was, what are my best options to get to$80 ,000 a year in passive income by age 50 or sooner? So my first thought is, well, buy more rental properties. But we are in a market where prices have gone up, interest rates have gone up, and finding a great cash flowing deal can be difficult.

29:00And with cash flow being your primary driver, I want to go in and look at your portfolio itself to see if there's anything that maybe not be the best use of your money. David, what do you think about his portfolio? He has six properties with 13 total units, including one short-term rental. First question, Derek. Well, actually, my first question before my first question. I see you have a family of six. We could tackle these expenses first. Are you willing to auction off any of these children because they're expensive. Ooh, at times, yes, but I think I'll hold on to them. That's going to make things a little tougher, but that's okay.

29:44That's why you got Mindy here. All right. Your short-term rental, do you enjoy managing it? Do you hate managing it? Are you willing to have more of those? I'm still getting into that process. We rushed to get it up and running for the eclipse because it was right in line for the eclipse of a popular weekend, very in demand. But now it's the slow season in Vermont, So I'm kind of waiting to see how things pick up once ski season starts here for Vermont. Okay. The reason I ask is you can increase cash flow by moving equity from traditional rentals to short-term rentals in most cases, but you're increasing workload also.

30:18So if the goal is to have zero work, we don't want to take that road. If the goal is to have more flexible work where you don't want to be committing to an office, you want to be able to stay home, you can manage a short-term rental from your house. So first, when we tackle it from that perspective, are you open to managing short-term rentals or hiring an assistant who could help you manage short-term rentals? Yeah, I think that's something that I'm open to. I mean, I'm not looking to retire and do nothing, but some more flexibility in my life is kind of what I'm getting at. And I'm thinking that more cash flow would be the obvious answer.

30:52But yeah, another STR could be another option. Okay, but the STR you have now, it's newer, so you don't have a lot of experience with it, right? Right. Yeah. It's new to me. I'm used to long-term rentals for small multifamilies. And are you managing those yourself as well? Managing the one in Vermont where we used to live there. It has an in-law apartment. So I managed that one myself using Hem Lane, which has been great so far. And then I've got four rental properties in Connecticut that I grew that portfolio when I used to live there. And I put that under property management. Here's what we're looking to do.

31:25We want to take your property that has the most equity or the properties that have the most equity and look at your return on equity and compare that to a return on investment. Have you done that yet? Not specifically, but I have been looking at possibly getting a HELOC on the STR that I recently bought since we bought that with cash. So that has no mortgage on it right now. But you are familiar with the concept of return on equity. Right. Yeah. Definitely. Okay. So for the audience, when we want to figure out how efficient an investment opportunity looks like, we calculate the return on investment.

31:56So we take the cash flow that it would make in a year. we divide that by the money we'd have to put into it, which is usually the down payment, the closing costs and rehab or furniture or whatever you're going to do. And the number that you get is a percentage of the total number you put in. And obviously, the higher that percentage is, the better. So if you get a 10 % cash on cash return, we use that metric to compare this investment versus another one that might produce a 14 % cash on cash return. So we know the money will be more efficiently used with the higher number from a cashflow perspective.

32:26Well, one thing investors don't do once they've owned a property for five, six, seven, eight years is they don't think about the fact that the equity might have grown at a faster rate than what the cashflow did. So rents go up, but they may not be going up at the same speed or pace that the equity in the property is. So you buy a property for$200 ,000, it gets you a 10 % cash on cash return. Five years of rent increases later, you're at a 20 % cash on cash return and you think you're crushing it, but the property went from$200 ,000 to$500 ,000, you've got$300 ,000 of equity. If you divided that same amount of cash flow you make in a year by the equity in the property, not by your initial investment, you often find you're sitting at a 1%, 2%, 3 % return on the equity, which means your current equity is lazy.

33:10It's not working very hard for you. And Mindy, I know you like it too. The Richest Band of Babylon, one of our favorite books, talks all the time. You want those little soldiers of yours working hard. You don't want lazy equity that's just sitting on your couch, eating your Cheetos and drinking your Mountain Dew without getting out there and putting in a solid 8 hours of work. So if we looked at your portfolio right now, do you have an idea which of your assets have the most equity in the least return? Yeah, I have a general idea. I know some of them currently have rents that are below market, which some raising rents might get a better return, but I'm not sure if it'll bring me all the way there to having an adequate return on equity.

33:48But it's definitely a great point that you're mentioning and it's something to reevaluate. Yeah. And it will also change the way that you look at your portfolio. So we all have our favorites. Okay. I don't have any kids. I'm sure parents, maybe they have that favorite kid, right? This one gives me the least headache. But when you start to look at the return on equity, you start to get an idea of what property was your favorite. Now, maybe it's not. You're like, oh, I love this charming little bungalow, mid-century modern property. And you have these memories that you made in that house. And then you're like, this little lazy son of a gun isn't doing anything, right?

34:19Like, I need to sell this one and move that$300 ,000 into other properties. Now, we do traditionally talk on this podcast about increasing cash flow by increasing the properties. However, in practical terms, sometimes that does the opposite for your cash flow. And here's why I say that. When you first buy a property, you tend to also be buying a lot of deferred maintenance. Okay? Nobody sells their car when it's running amazing and it's giving them no problems. Think about every time that you've ever had the thought, I want to sell this car. Okay? Taking out the fact, maybe you had a kid, you need a bigger one.

34:53When's the time that we think, hey, I think I need to sell this car? Mindy? Oh, I am not the right person to ask because I have the same car since 2003. Your car is awesome, by the way. You gave me a ride at that car. And it's super bitching. I really liked it. All right, Derek, have you ever had the thought, I need to sell this car? What was going on? I think it was just getting too much maintenance and the cost was just too high. It's a natural human response. Homes can work the same way. So when you first buy a house, you are often buying all the previous owner's deferred maintenance. And then there's some weird rule of real estate where that air conditioner that was on its last legs that they were barely hanging on, you get in the house, you start using it more than it was used to being used and boom, the thing craps out.

35:35or that roof leak becomes a bigger problem. And now two, three years of cashflow is gone as you have to dump it into stabilizing the asset. This is even worse if you buy a property that has tenants in it. So I just made it a rule in my own investing. The first year I own a property, if I break even, I'm happy. That's a win. I expect I'm going to lose money the first year that I own a property because you're just going to see all the stuff that slipped through the cracks of your due diligence. Even the best due diligence, you can't account for everything that can go wrong with a property. So scaling your portfolio in the short term will usually make you less cash flow.

36:09But in the long term, it will make you more cash flow and it will make you more equity, which is why it's going to build you well. So part of what we're also going to talk about is what's your timeline like? So are we talking about trying to get you out of not working in the next year, the next 5 years, the next 10 years? What's your thoughts? Well, my thoughts, conservatively, I think 7 years, 50 sounds like a good number to reach for. I'm 43 right now, but I'm sure my wife would say now, but I'd rather try and find somewhere in the middle. Okay. If you could find a way... And what's the current job you have right now?

36:41Right now, I do SEO work. So SEO specialist. All right. So I don't know if you're open to this advice, but the advice I give a lot of people in your situation is sometimes when we say, I don't want to work, what we're actually saying is, I don't want to work this job. I don't want to work under these circumstances. I don't want to commute. I don't like this boss. This is mind numbing, soul draining work. But we're not saying I don't want to labor. I don't want to spend energy. It's more just I would rather do it with something else. Okay. And I say this for you and everybody who's listening. I am not a proponent of get a couple of rentals and quit your W-2 and just throw a middle finger to the world and say, look at me.

37:21I am a proponent of get a couple of rentals, get some stability, get a little bit of a buffer and move your energy, just like we're talking about moving your equity from a job you hate to a career, a job, a business, a something that you would enjoy. Or at least doesn't suck super bad. And then maybe you do it again into something else. So for real estate investors that love real estate, I'm frequently telling them, do you love people? Get your real estate agent sales license. We need better agents in the world. There's not very many. Do you like numbers? Become a CPA. Do you like solving problems?

37:55Become a loan officer. Do you like design? Do you like construction? Do you like bookkeeping? There are so many things within the world of real estate that you can get a 1099 position, start your own business, work for a real estate investor. It's not full-blown W-2, I'm a slave to someone else, but it's also not complete lack of any stability at all. It's a more happy medium that exposes you to the things that you enjoy doing, which I'm assuming is real estate if we're talking on BiggerPockets. So that's another thing that doesn't have anything to do with moving your equity around that I'd like for you to think about?

38:25What if you started your own business and did SEO work for other people once we got you to that$80 ,000 a year? Now, if it fails, that's okay. You've still got money coming in. But if you enjoy it, it could actually turn into where you make an$80 ,000 a year in your business and $80 ,000 a year from your rentals. And now we're having better, cooler conversations. But again, going to your portfolio, what we're really looking at is what's your laziest equity? So if you were to call out a couple properties, which ones do you think have the most equity that's making you the least cash flow? Let's say the property number two, perhaps.

38:58And that's a two family. And let's see what else. And property number four. Okay. So property two has about$110 ,000 in equity. Property four,$186 ,000. Is that right? Right. Yep. Okay. And so we could sell those. That would give you around$250 ,000 of equity to redeploy. I'm trying to see what the cashflow is on those combined right now. Those are the ones that are below market. So I could probably get another 500, 700 a month for each one of those if that changes anything. Do you have a market that you like where you could buy a fourplex or a small multifamily? The place where I bought those first four properties in Connecticut has been pretty good.

39:43I mean, I'm comfortable with it, but I just don't know what the way things are with the market and rates, how to approach things any differently than what it was like. Have you been looking at listings? Not really in that area, no. Not lately anyways. If you have a real estate agent that you like in that area, I would reach out to them and just ask them to send you listings, broad spectrum. Give them the very bare minimum requirements so you get the most listings in your inbox. And then just start looking and seeing, oh, I didn't know properties were now$4 million, never mind. Or hey, properties are still$70 ,000, I can get in on this.

40:22Or something in between, obviously, I'm making those numbers up. But having an idea of that market and then you can say, yes, I want to sell these properties where my equity is just sitting there kind of doing nothing. or have you considered raising the rent and why are they so far below market? You said you could get another five or 700 for each of these properties. There's two units in each of these properties. So is it raising the rent 250 on each tenant? Is that realistic? Yeah, that's kind of the route. I'm going with one of the properties, maybe not as high as that, but I'm gonna see if I can raise rents.

40:59And if it forces some tenants to leave, then maybe I'll do a turnover and get potentially more. But what's the reason they fell so low, Derek? Because you have a property manager in Connecticut, right? Just a long-term tenant that I have. Yeah. I don't think they've been raising rents every year. Bro, I just found out in Arizona, I have five properties being managed by one person. I thought they were great because I never hear about it. He hasn't raised the rent in five years. Right. And it's been a lot in Arizona of rents going up. So I found that out. He's now fired. I hired a person to work for me to manage my own properties.

41:30She's going to be managing those now, and we're going to make sure that that doesn't happen again. But what I was just thinking with you is if you fired your property managers, hired an in-house person to help oversee those and potential short-term rentals that you could be taking on, have you looked at the management fees that you'd be saving and if that would offset a virtual assistant or a part-time assistant that you could hire to help you manage your properties? And then you could also take on more short-term rentals with this additional help? Yeah, that's something like someone else mentioned in the comments in the forum.

42:02But I think, yeah, I mean, it's like a lot of 11 or 12 ,000, maybe 10 ,000 potentially. And that's not including leasing fees and that sort of thing. So that's something I should definitely look at. Let's say that you go at like... With leasing fees, those are expensive. Let's say you're at like$15 ,000 for management and you bring someone on part-time that you could pay like$35 ,000, $40 ,000 or something. Half their salary almost is covered just by that. Now, if you move that$250 ,000 in equity that we talked about into two or three short-term rentals, and you have this person screening calls from tenants before they get to you, you have this person helping to coordinate with the cleaners, you're not taking on a ton of the work.

42:44We were just talking about this on Seeing Green the other day. It's not necessarily the time spent that I think makes people not like work. It's the type of work you make them do. I've noticed this. My employees that really like to do deep work on complicated problems, if you ask them to take phone calls from a person that can't find the TV control in a short term rental, they lose their mind. But then there's other people that only want to help them find TV controls. If you're like, can you put something in a spreadsheet? Then they lose their mind. If we find the thing that we like doing, you often can find that work is enjoyable and you like doing it.

43:19So for you, I'm assuming if you're working in SEO, you're a deep work person. You like to look at complicated problems. You like to see the big picture and you like to really drill down on like what's going to make this whole thing move. Do you need to hire somebody that does shallow stuff? Like you go a inch wide and a mile deep. You need to find someone that goes a mile wide and an inch deep. They can handle all kinds of stuff going on. They're answering emails. They're taking phone calls. They're shielding you from the little paper cuts that make you bothered. And then twice a day, you check in with them and say, hey, what's going on?

43:49Here's what I want you to do. they go back to work, they do it. You could probably move this equity and get three or four more short-term rentals, triple your cashflow from what they're making right now. And you might find that you really enjoy doing short-term rentals as long as you're doing it with leverage. Right. Yeah. That's definitely a good point. I want to see how this short-term rental business goes and see if I can find a way to leverage it and earn more money without without having to take up all of my time. But like you said, maybe hiring someone might be a good idea. Because you don't need a full-time hire.

44:24I don't think you have enough to need a full-time person. No, definitely not. So the main ways that you increase cash flow is going to be moving inefficient equity. So we've already talked about that. Where's your return on equity the lowest and what could you buy? Moving from an inefficient asset class like long-term rentals, where again, it's only inefficient for cash flow. Long-term rentals may make you more money in the long-term if you buy in the right market. But in the short term, they're going to make less cash flow than a short-term rental. So you want to move into a more efficient way there.

44:52And then paying off debt. That's the other way you can increase cash flow. So another option we just haven't talked about was what if you sold and you bought something in all cash? The reason I didn't go there first is you're going to have capital gains hits if you do that. And that is an inefficient way. You're going to actually be losing some of the equity that we've talked about that you can't redeploy into more real estate. And since they are long-term rentals, you have a depreciation recapture on top of your capital gains, and you've made a lot of money on these properties. But I also agree that property number two and property number four are my least favorite of your portfolio just by looking at these numbers.

45:32So David is a fan of the short-term rental. Looking at the numbers, you've got a fourplex, four units kicking off approximately the same cash as one unit that's a short-term rental. So I'm going to send you this book by Avery Carl, short-term rental genius. It's called Short-Term Rental, Long-Term Wealth. It's by BiggerPockets Publishing. And we're going to send a copy of this so you can read through this book and get some tips on how you can make your short-term rental even better. I'm also going to encourage you to go into the BiggerPockets forums, biggerpockets.com, slash forums to talk to other short-term rental operators and see what's working for them.

46:13Another option could be midterm rentals, medium-term rentals. I unfortunately don't have that book at my fingertips to just show you, but it was written by Zianna McIntyre and Sarah Weaver, and it talks about the 30-day stays. A midterm rental can help you get around the short-term rental laws that some cities are starting to enforce more and more, as well as generate more income than a long-term rental. So perhaps property two and property four could be reviewed to see if you could make more money as a midterm rental. Is there any opportunity for midterm rental? Is there any desire for midterm rental?

46:55So these are digital nomads. These are people who are traveling around but staying in a long time. Travel nurses was a big one for a while. Corporate rentals. Some people really like to be in a house instead of in a hotel room. If there's no market for them in where property two and property four are, I really like the idea of potentially finding another property and 1031 exchanging into that one. So you're kicking the tax can down the road. With the 1031, David, do you still have depreciation recapture? No. If you do the 1031, you basically just take what you would have had to pay back and move it into the next property and it rolls over.

47:38Awesome. Okay. So now that is like the best of all worlds. You have rules around your 1031. First, get a qualified intermediary. That's the official name of the person who does the 1031 for you and talk to them and follow every rule. There's, what is it, 45 days to identify three properties and 180 days to buy, close on one of those three properties within that timeframe. And if you don't, then your whole 1031 is blown. So you definitely want to be confident in your ability to close before you sell your other property. But I think that's a really great option for you because cash flow is what you are looking for.

48:17You could wrap both of these strategies in, take these two properties, 1031 into a small multifamily or even a medium-sized multifamily, and then turn that whole thing into a short-term rental property that, of course, it's got to be near something where people want to go. But that could be a really interesting option as well. But that's the reason I didn't immediately go into, yeah, pay off some debt because those taxes can be so painful that it eliminates a lot of the benefit of paying off your debt. Another thing I thought of that I didn't mention was some of the money that you have that's not in real estate.

48:53So you've got some money in your 401k. I would look into seeing if you can take that money and buy discounted notes with it without getting a tax penalty. Now, you're not going to be able to touch that money. is probably going to go back into the 401k. I'm guessing you can pull that out at like, what's the age, Mindy, you would know? You can pull it out at any time, but you can pay no taxes. If your plan allows you to pull out at age 55, you could roll it all over to an IRA and then kind of do whatever you want with it. The self-directed IRA does allow you to invest in rental properties, although I do believe you're subject to UBIT.

49:30And this is where I fall out of my area of expertise and I'm just remembering random little bits. You bitcha. You bitcha. But if you have self-employment income, you could take your 401k and roll it into a self-directed solo 401k. And then you can invest in real estate. It's not subject to UBIT. But again, all of the money that you invest out, the money that comes back goes into the 401k. So that's something to keep in mind. So if you could get your 401k into a self-directed IRA, that's ideal. But even if you can't, you might be able to still do it as long as the money stays in the IRA. I would look at the return I was getting on whatever you're using it for.

50:13And if it's less than double digits, I'd look into buying discounted notes. This was something I did a couple of years ago. So basically what you're doing is you're buying usually a second position lien, sometimes their first position lien that at one point was underperforming. Somebody else bought the right to collect the payment from a bank or a lender because the person wasn't paying on it. So in a sense, the bank didn't necessarily foreclose on the property. They just sold the right to foreclose on the property to somebody else. That person steps in and they get the person paying again. They renegotiate the terms of the note.

50:48They find out what was going on. If the person doesn't repay, then they would just foreclose on the property. But in this case, these are the people that did repay. You then buy the note from them. So they get their capital back that they spent on the note, but you're buying the note for less than what the principal balance owed is. So I did this with Dave Van Horn's company, PPR Note Co. I believe he wrote a book for bigger pockets as well. So for instance, I think I bought a note that was worth$90 ,000 and I paid around like$65 ,000 for it. I can't remember the exact numbers, but it was about that.

51:19And then the person makes a payment to me every single month. If they ever stop making the payment, there's state laws regarding when you can foreclose, but you would just foreclose and you would take the asset that was worth even more than the value of the note was. So the note was worth 90 something thousand. The property was worth 120 ,000. Eight years of time later, it appreciates to be in worth$250 ,000. There's a lot of equity in that property. Well, I just found out the person who owns a property that pays me the money is selling the house. So they've paid down what they owed me, a degree.

51:52It was like 95 ,000. Maybe they paid it down to 80 ,000 or something. But I bought it for 65 and I've been getting years of payments on this. When they pay it off, they have to pay me the full amount that they owe. So I'm going to get... It's like equity in a sense from the note. You could do the money in your 401k is probably not working as hard as you could get if you bought notes with it. So you do that. You put it to work harder. You let the money from the notes go back into the self-directed IRA or the 401k, whatever it is. You're getting a better return. when those properties do sell off or refinance or whatever the case would be.

52:26It's like the jack in the box pops. You get yourself a nice bump in equity. You use that to go buy more discounted notes and you just rolled over. We don't talk about this on the podcast as often because I already know people are saying, why did nobody tell me about this? That sounds great. Because you have less control over the money. When you buy a rental property, you can improve the property. You can choose when to sell it. You can do a 1031. You can refinance out of it. You can improve the performance. the rents are going up. When you buy a note like this, you're actually exposed to inflation because that monthly payment I was getting was worth more seven or eight years ago when I bought it than it's worth today.

53:01And I can't do anything to fix that. You're at the mercy of the person who owns the property choosing to pay the note off or choosing to refinance the property or sell their property. What are your thoughts on ways to get equity out of my portfolio? I know you said have some lazy equity sitting there besides doing a 1031. I know my rates are really low right now, but I've seen the rates lately and they just seem so high. So how would you approach that? Yeah. The problem is when you try to get equity out, you basically can... A 1031 is the most efficient way. A sale without a 1031 is another way.

53:35A cash out refinance is a third way and a HELOC is a fourth. Those are your main four ways to get into the equity you have. The problem with rates being high, like you just said, is that whatever you buy is going to cash flow less. And if you buy it with the equity from the property, you just took on additional debt at those same higher rates. That becomes a problem, right? And so the reason I didn't bring this up is I don't see very many investors in most markets that are able to pull equity out of a property through a HELOC and use it as a down payment on another property. That worked when values were going up and rents were going up and interest rates were low.

54:10You had the perfect trifecta that allowed you to just get a property, build equity, take the equity out, get the next one, the snowball that we talked about. It's like a hill full of snow, very steep, easy to make that work. That hill ain't going down at the degree that it was before. It is a straight shot in a lot of ways. And so you kind of already have to have some snow to be able to play the game that we were before. And I see a lot of people just butting their head into the brick wall, trying to use that strategy and complaining it doesn't work. Well, it's because you didn't actually create new wealth.

54:37You're just trying to recycle wealth that you had previously. And that's why I don't know. The only way I can see that possibly working is if you took the money out of an inefficient asset like a long-term rental through a HELOC and put it into a short-term rental. And I don't love you taking on the risk of doing that until you have a proven track record of managing short-term rentals and knowing that you do it well. Yeah. That's a great point. I mean, it sounds like the easiest way to... Well, easy, but to try and get an additional cash flow versus is a traditional long-term rental, like you said.

55:06Yeah, that's why I just said selling and redeploying is going to be your better option. And you're gonna wanna start with the houses that have the lowest return on equity because you're probably going from a low interest rate to a higher one. So to balance that out, you need to make sure that you have the laziest equity possible that you're moving. Derek, what did you think about that note investing? Does that hold any interest for you? Well, it's something I need to, I guess, learn more about and wrap my head around to see how that would work. And I've heard some of the benefits of it before and investing in notes.

55:36And yeah, it definitely sounds interesting. It's not something I'd considered though in the past. Okay. Well, I am also going to send you a copy of Dave Van Horn's book. It's called Real Estate Note Investing Using Mortgage Notes to Passively and Massively Increase Your Income, which is something you're looking at passively and massively increasing your income, as well as you've got$100 ,000 in cash. Is that your emergency fund or is that your I don't quite know where to put this yet fund? It sounds like the latter for the most part. I mean, we're going to put some of that into education accounts for the kids, but that's only a portion of it.

56:12But the rest of it's kind of just sitting around for, I guess, emergencies. Have you ever considered lending that out? I do some private lending and I think I'm charging like 12 % right now. I'm only lending to people that I know, that I know are going to pay me back, who are doing super fun things with real estate on the East Coast because it actually exists, David. And 12 % comes into my bank account. They pay it off and then they borrow it again. And because I know them, I don't feel like I am putting my money at risk. Because they then pay me back and want to borrow it again, I know that I now have a proven track record with them and I can do it again with more confidence.

57:00Finding somebody to borrow money from you that you know may be a little more difficult than I just blasély recommend it. Is that a word? Blasély? Anyway, but once you make it known that you potentially have money to lend, people come and start asking you. Oh, David Green wants to borrow money. I'm going to lend it to him because I know him and I know he'll pay me back. But Rob Abasola wants to borrow money. Forget it, dude. Just kidding, Rob. I would lend to you too. But it can be a really great way to generate more income. And Bigger Pockets also has a book about that. It's called Lend to Live, Earn Hassle-Free, Passive Income in Real Estate with Private Money Lending by Alexandria Breshears and Beth Pinkley Johnson.

57:49And I'm going to send you a copy of that book too. Awesome. Thanks. Another question I had for you, Dave. I mean, I like the idea of a simple paid off portfolio when I retire. What are your thoughts on those people talk about maybe trying to pay it off with like a snowball type of plan? What are your thoughts on that versus redeploying lazy equity? I'd love to see you start a business like we talked about, doing SEO work for other small businesses or something that you like. figure out a way to make that profitable and put that profit directly towards paying off your debt so that you don't have to pay taxes.

58:23Yeah, that's a good point. And I mean, one of these properties, property number two, you paid$70 ,000 for. I don't even know what your mortgage... Oh, your mortgage balance. You've obviously refinanced that. Yeah, I did a cash refinance on all my properties right before the mortgages climbed. So I was lucky for that. But yes, that's why. And I think that's the only way to tap into some of that equity is to cash out refi when rates are low, which isn't an option right now. Hey, David, can you write a mortgage for 3 % for me? As soon as Derek here builds a time machine, we'll go back a couple of years and I will absolutely do that.

58:58All right, Derek, what do you think of what David has been sharing with the debt equity and potentially 1031ing or getting more short terms or things like that? Yeah, I think the idea of redeploying some of that equity and maybe get another short term once I have some more experience with that. Sounds like a good strategy for getting more cash flow. But as you mentioned, I think starting or working on another business that I could use that cash to help pay off rentals is another way that sounds appealing to me. I love that, especially because SEO is your jam right now. And starting an SEO company is not that cash intensive.

59:41You can probably do it with everything you have now. You need to buy a URL, like derricksseo.com or whatever, buy a URL and then just reach out to... I'm not even going to tell you how to get business because you're the SEO guy, so you'll figure it out your own self. Use those SEO skills to generate some business. But it's such a low cash intensive process for you because you don't really have to learn anything. You already know it. And you don't really need to buy anything because you already have it. It's a computer and your brain. And I'm not trying to downplay what you have. I'm just saying like it's so easy to start this because if it like if it doesn't go anywhere, what is it like$8 on GoDaddy for a URL?

1:00:23I guess what other thoughts do you guys have on side hustle ideas that maybe could be done remotely or things that you've seen that can be successful in generating cash that I can use towards rentals or paying off debt? Well, I have a friend named Jay Money from Budgets Are Sexy, and he's got a list of, I think, more than 80 different side hustles. That is going to be something that's specific to you. What do you know? What do you like to do? What skills do you have? What can you teach somebody else? Or what generates a lot of cash that you can just do quickly? So I will link to it in the show notes.

1:01:01The Budgets Are Sexy blog post. We also have a friend of the show, Nick Loper from Side Hustle Nation. He has an entire podcast where every week he interviews another person about their specific side hustle. But hey, do you know anything about SEO? Does anybody else like maybe look to take a course? Could you create an SEO course? How to do SEO? So selling courses, I can't tell you how much money can be generated from selling courses that are engaging. I mean, you have to put a lot of work into the course, but then once it's done, you've put 40 or 100, I don't know, I've never made a course, but like 40 or 100 hours into this course, then you're done.

1:01:44And people just keep buying it over and over again. So it's passive-ish, meaning that you have the work up front, but then it just keeps going and going forever. We were talking to Amanda Wolf earlier, and she has a course that she has created, and then she hosts a webinar that drives people to the course. Every week, she's hosting a webinar for new people. But then she went back and looked at all these people that have been in her funnel and have never, ever purchased anything. And she rebranded the same course and was able to generate more interest. So what do you know besides SEO? What can you teach a course on?

1:02:21I mean, including SEO, I don't know anything about SEO. So having somebody teach it in a way that like speaks to somebody who doesn't know what they're doing, or even, you know, two courses, here's the beginner SEO, here's the next step SEO course. You know, there's a lot of opportunity out there just in what you already know. And it's not limited to you. I'm assuming that you have a wife. Yeah, yeah, yeah, I do. Okay. What does she know how to do? She does photography and video production. We both do that. So there's something there, potentially. Look at that. You guys can have a collaborative event.

1:02:59Yeah, Derek. Fingers crossed for you, man. It was good meeting you. Thanks. David, thank you so much. This was awesome. My pleasure. Thanks, guys. I'll see you in Cancun. Bigger Pockets Money was created by Mindy Jensen and Scott Trench. This episode was produced by Eric Knudsen. Copywriting by Calico Content. Post-production by Exodus Media and Chris Mickin. Thanks for listening.

1:03:35We'll see you next time.

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