Can This 29-Year-Old Couple Retire by 40 With a $2.5M Portfolio?

22:40If we have a property manager, that's$165 at 10 % there. And you have a$250 monthly expense roll for this property. So the next$100,$85 needs to include all your landlord utilities, which I bet is a single line item on its own, all the vacancy, all the CapEx, all the maintenance. And so I think we're actually fairly negative on this property from a cash flow perspective as well as the first one. Yeah. One thing we decided to do when we did this, because it was bought via seller financing, right around$145 ,000 or so. And we had to do a cash out refinance to pay off the note. So we decided since we were already going to get hit with that 6.5 % interest rate when we refinanced this last year, we're like, let's go ahead and take some equity out.

23:22And we took out$30 ,000 knowing that that was going to eat our cash flow monthly. And we decided to put that$30 ,000 into the market. So that was a conscious decision we took because we know at the end of the day, you know, we've got all this equity in these houses. We want to use the equity and not just let it sit. So we decided to take out that money just the way the deal was structured and put it into the market. So that's one decision, right? Like pulling money out to invest in something there. We have the, what do we think we're going to get there? But when we talk about this property, what's the thought process here for what you guys want to do with it here?

23:53And you can tell that we're gearing up, you know, on a, we think this one's a sell too based on these numbers, but what's your thought process on it? I think this one has decent chances of appreciating the area. It's one of the more affordable areas in the suburb that we live in. So I think it's going to continue to appreciate over time, which is why we're pretty hopeful. I think we also like all the equity that we've built in it. We forced, what was it? $120 ,000, $130 ,000 of equity. And so that$30 ,000 that we pulled out for the mortgage when we refinanced, we actually, that was almost pulling out the majority of the funds that we'd used to renovate the house.

24:28So I think in terms of selling it, I mean, what do you think? I mean, maybe I'm foolish on this part, but I do kind of like the long-term play, just building the equity. And really what's important to us is leaving a legacy for our children. So I know it might be, for lack of a better term, shooting us in the foot now. I don't think we really mind as much the minimal cash flow on this one, just because we're playing a different game with this. I know numbers make sense and we could sell it and put that money somewhere else. That's just how we've been thinking, but we're open to thinking differently.

24:58Thinking about where this one is in relation to the other properties that we have, it's nice to diversify to a completely different area that has different changes of appreciation than maybe some of the other areas we own. Before we even get to expenses on these, we look at the asset value here of$289 ,000 and the rent of$1 ,650. And that gives us 0.5 % percent rent to value ratio on this particular property. I bought some properties in the last couple of years. One was a quadplex for about a million with gross rents of$7 ,600 per month, right? Still not like fantastic, but you have a meaningfully different amount of cash generation on that.

25:36And I'm wondering if these single family homes in this area just cannot deliver you with high financing cashflow in this situation. I get the instinct here. We wanna build long-term wealth. Real estate we think is gonna appreciate in line with inflation or a little faster over a long period of time and leveraging against that is a good use of time. I'm all for this approach, right? I spent 10 years talking about this over at BiggerPockets, and I do this personally here. But is this the right asset for you in this environment, in the single-family homes? Or can we be going to multifamily? Or can we be adding value some other way?

26:11These two are not working. And we're going to have the same problem with the next two properties as well if we add leverage to them. I think in the suburb that we live in on the East Coast, it's really difficult to find anything that meets the 1 % rent criteria to the value of the house. I mean, we've been looking for years and it's almost impossible to do that. And that was with an off-market property that we were able to force a lot of equity and it would have cash flowed better had we not pulled out a little bit of money from it. But yes, I think that's definitely something to consider. And we do end up selling it just because it doesn't make sense.

26:42Let's talk about these next two properties here. So let's consider it like totally paid off, right? This is something I like, right? Like that property I just told you about, that's what it is. It's paid off, right? So net of expenses, which I estimate to be about$2 ,500 a month. I'm getting$5 ,000 a month in free cash flow, right? From their 60 grand a year in income. Now that waxes and wanes, right? With tenant turnover and those kinds of things. But that's like a conservative forecast for me for that property. We're not there on those assumptions on your properties here. Maybe you can operate them cheaper, I don't know.

27:12But you've got these next two properties. You've got$347 ,000 single family home, likely in one of these same areas. You consider it an easy property, low PDA and are optimistic. This is one of the inherited properties that is transferred to you, right? And we have$2 ,000 a month in income for that property with$1 ,500 in monthly cash flow. Now, what's awesome about this property is I believe that that property should have been inherited at a stepped-up basis. So there's no gain or depreciation recapture embedded in this property. And you, Katie, can transact this property immediately with much lower transaction costs.

27:44There are seller and buyer agent closing costs here. So that's a really strong sell case. It's never going to get better to sell the property than it is today. We're going to have that same problem here. If we refinance this property 80%, I actually don't know. I should have run the math ahead of time. But you're going to have a number that's larger than your rent, I can tell you right now, in terms of your total financing costs. So we have a wonderful problem and setup here. And I think we're not giving you what you were hoping to hear from this call about this current portfolio. I'm not saying you can't invest in real estate.

28:15You clearly want to. And you clearly have added value to these properties. You've clearly made money. But the hold is different from the value add. If we buy a property for 200 grand and then spend our nights and weekends adding value to it, and it becomes worth 350, right? And we put 60,$75 ,000 into it. That's a wonderful outcome. That's a real win. But we now have to evaluate the stabilized asset as something we're going to hold. And that's where the next several hundred thousand dollars is made or lost is in that analysis. And I think that's the problem we're running into in this market is you guys have not done anything wrong.

28:49You're not doing anything foolish. You're very wonderfully responsible. You've done a great job with this. But the whole decision about how to allocate the portfolio doesn't seem to me to be working here unless we just say, you know what, we just want a stable paid off portfolio. We're not trying to drive any returns at all. And we just want the cash flow from it from the paid off side of things. And then we have a case for keeping the property here and we can have a really tax advantage income stream here. That's a different answer to a different problem than what you came into today's call stating as your problem.

29:19them. How am I doing? Is this, is this is not, this is not fun, but is it helpful here? Yes, it is helpful. I think to, you know, kind of facing the music that these first two are not doing as well is helpful. I think for the third one, the one that I've inherited, that one is very meaningful. We'll probably never end up selling that one, but that$500 monthly expenses is CapEx vacancy and property management. So the property management is probably about 200 of that, which is pretty high. So we could consider pulling that off. I think what we would consider too is if we were to tap equity in this one, maybe pull out, if it's worth$347 ,000,$350 ,000, maybe we pull out$100 ,000,$150 ,000 to either pay off some of the original properties, pay those loans down and refinance those, or even considering buying another property and kind of balancing out between gaining equity and diversifying through buying other properties, but also having low mortgages to hopefully help with cashflow too.

30:17If you sold those first two properties, you would make$6 ,000 a year more than you do right now and free up$190 ,000 in equity. So instead of pulling money out at a high interest rate on the inherited properties, you could free up that$190 ,000 in equity and take that and buy more rental properties with better numbers. And maybe we do that. Maybe we look into buying just one that has a conservative mortgage that actually cash flows a lot better. And then, you know, our portfolio is smaller and easier to manage, but it also cash flows better, which fits our lifestyle and our goals in the end. So this is illustrative.

30:58I would actually hypothesize you are unlikely to use one of those bullets in the chamber with the cost segregations on the two remaining properties, because property one was a former primary residence, which will be able to exclude a big chunk of that gain or all of the gain. And then the second one is$116 ,000 equity position, maybe a little bit larger of a gain plus or minus, depending on how depreciation recapture works out there. So you may or may not, as a married filing jointly couple, say, I want to use my cost to get diminished, you know, 15 % marginal long-term capital gains taxes on that property.

31:35I would actually probably buy as you, we won't end up doing that. And you'll crush it with 40 sales as an agent or something like that, Katie. Probably next year. Yeah, yeah, perfect. So that would be one way to think about that bullet in the chamber thing there is that would be the strategy at play with the trade-off. You have an art now, art problem about when to fire them. I think that that's fair. Now, if we're going to keep the$347 ,000 single family home, so we have two properties, $347 ,000 and$315 ,000, so about$660 ,000,$670 ,000 in asset value here and equity, all at a stepped-up basis that you can realize.

32:12Property one, we don't want to sell because of various sentiments attached to the property. Does property two have those same sentiments that we don't want to sell? Yes, but I would think I'd be more likely to sell that one than the first inherited property. This one too is severely under-rented. The tenants have been in there about 10 years. I think they've raised the rent once or twice. So, I mean, that one would probably rent for$2 ,200 fixed up, but I think we viewed it and it probably needs$15 ,000 to$20 ,000 worth of work inside just due to tenants living there for 10 years and smoking in the property.

32:42Okay. So at$2 ,200 a month, that would become your best rental in the portfolio. It still would not meet a cap rate hurdle for a true income property, like a duplex, triplex, quadplex, or small multifamily property. But we could get up to about$20 ,000 in net operating income. Although again, we're using really, really low expense estimates,$2 ,200 minus$369. I don't think you're going to operate a property like this for$369 a month long term. I think it's going to be closer to$600,$700 a month. And at that level, we have an okay income stream here. But between the two of those properties, if we agree with generous assumptions, we could get to$35 ,000,$40 ,000 in annual cash flow on the paid-off portfolio.

33:27It's just, I don't know if that's a retiree's portfolio, right? Two paid-off rentals providing that income. It's great, but it's in conflict with your stated goals. I think part of our goal, too, that we've started to think about in the next couple of years with kids and just frankly, if we want to slow down and take a foot off the gasp of work, is just having that money rolling in and being able to live off part of it and invest the other part of it is really attractive to us. So I think cash flow is probably one of our main priorities, especially just so we can slow down if we decide to. So I think those two properties, or at least something along those lines or properties like that, would be something we'd hope to have or maybe something even better.

34:08Then that works really well with all this, right? Then we sell off the two that are not cash flowing and we keep the two that are cash flowing. We put that in there. We accept that we're not getting a great return. We are banking on appreciation to some degree, but we're doing that in the context with no mortgage. And we're not going to get rich this way, but we might have a higher floor on our situation or optionality when the kids come in future years. If you get rid of those two properties that aren't cash flowing, you're going to have$39 ,000,$40 ,000 a year coming in and you spend 72. Kids are going to make that go up, of course, but that's half of your income doing nothing.

34:46And I'm not doing nothing. Owning rental properties is definitely not doing nothing. But these are both under management, right? Both of these inherited properties? Yes. I would dial in the expenses, make sure that you're really counting the correct expenses. And honestly, whenever this current lease ends, I would increase to actual rents. This is what I did personally, right, is a version of what you're talking about here, right? With a portion of the portfolio paid off producing income and another portion of the portfolio levered thought of thought of separately. You know, some income comes from it, but I don't really I don't really like count on it in there.

35:20I count on the income from the paid off portfolio here. The difference that I want to call out here is these are not income properties. These are houses that are relatively poor performers from an aggregation of properties. It's a wonderful situation. But I think like the textbook play, the numbers would say, sell these ones too and redeploy them if we want to own real estate into higher rent to price ratio properties. There may be sentimental reasons not to do that. But the time to do that, if you're going to do it, is now before you have depreciation recapture and other sale proceeds. I think it's kind of like apples to apples.

35:54I sell this property and I buy the one next door that's a duplex. I don't know if that exactly exists, but that concept applied still gets you your appreciation and prospect scores in the area, just maybe with a different cash flow number. Yeah, I mean, I think you've certainly opened our eyes to – I think we'd be more interested in selling the first two properties we discussed and deploying that money into something else. I don't know. Multifamily properties are a little pricey around here, so we might need to see if we can find one off market or structure a certain deal, but I think you've certainly opened our eyes to something else.

36:24For context to the multifamily properties in our area go for, I mean, minimum 600 to 700 ,000 for a duplex. So it's with rent prices to where they are, it's just tough to make those work as well. But I think I like the idea of pulling out the equity in those first two and deploying it into one property that cash flows better. Walk me through that 600, 700 ,000 for a duplex. What would be the rents on that? I think if we rent each, maybe if it's a two to what would you say 1800 each$700 ,000 mortgage, maybe. Then you'd be worse off. The rent to price ratio is not better on the duplex in your local area based on that math.

36:57I don't have to actually go look, but I would challenge that assumption and go actually look at it because that is the decision you're making here is there's a value to these that is vastly superior to the alternatives. So I would actually go in and state the counterfactual realistically. I'd bet you that your price is a little lower on those duplexes than you're envisioning if those are the rents. But maybe that market is just a little different. Not a ton lower, but lower enough where there's more of a decision. I definitely think we can stand to analyze those rents further and make sure that those numbers are spot on.

37:27I know the prices of the multifamilies are pretty spot on for the fair market value, but definitely need to look into those rentals a little more. Well, we always joke, too, that we get a multifamily before 30. So maybe this is our call to action to sell these properties and do that. That would be the analysis because you're making a really big decision here that the numbers are saying are not there. And I think that's where you should just stare at. That's fine, right? Just know the cost, right? What's this going to cost us? That's how you can put that out there. This is, again, a real win in the portfolio.

37:56You guys have created value and made money in real estate here. And now the question is, what do we do now that we've stabilized and added value toward these two properties that we've held? and what do we do with these properties that are not really, they're retirees rentals, right? Somebody bought these a long time ago, paid them off, right? And lived off the income, right? And had tenants that they knew in them and now they're yours. That's the challenge that you're fundamentally facing. I think a lot of people face this problem. People don't like to talk about it because it's uncomfortable in the context of inheritance, but it's a tough, there's a whole bunch of things going on.

38:27What is your opinion on it with the two properties that we've inherited? if we get those closer to market rent and everything, what if we pulled a little bit of cash out of those to buy another property that cash flows as well? Like if they were lightly levered. I would rather see you sell the two that you owned and pay no tax on that 73 ,000 that you lived in and free up that total of$190 ,000 and use that money instead of taking out a loan on these properties at the current rates. Okay. Again, we have conflicting goals, right? This is why it's so hard, right? And you should have conflicting goals.

39:05You're 29. You're not 59, right? Like here, this is not 30 years in the future. You're not sure if you want cashflow or appreciation right now, and you have to pick across the portfolio or you have to segregate the portfolio and think this is my cashflow portion. And this is my appreciation portion over here because we just kind of were waffling back and forth between like, like, and so like, that's kind of how I think about it, right? It's like, okay, there's a portion here that I want to just spend. And then the portion that's going to be the appreciation play. And there's a little bit of circularity there too, because I locked in a lot of those mortgages at low interest rates on there.

39:41And you're not going to have that option here with these ones here for the cashflow. But I think fundamentally the problem with this portfolio for the cashflow play is the low rent to price ratios that make everything downstream harder as you attach financing. So you can attach financing to the properties, but you're going to find you're going to get to a relatively low loan to value ratio before you break even on a cash flow basis with honest expense assumptions. And that's going to make it very challenging for you to pull out as much as you'd like and still get the aggregate returns on the portfolio.

40:15So that's why you have a hard decision here in the context of a good situation. This is a difficult analysis. I think a lot of people are going to struggle with. And again, I think that one answer to it is leave them paid off and enjoy the cash flow as a high floor. That's a real win for the portfolio. Another one is design a fictional perfect portfolio that is realistic in your area. That's mostly attached to income properties. I would assume that your rent to price ratio on the income properties is going to be better than the single family homes. It should be better by a meaningful amount. I think that you will find that to be the case when you go shopping in the current environment and say, that's the counterfactual here.

40:51And we could take this and put it in there. And now you have your analysis and you can make a decision there. Not an unreasonable one to just sit with the paid off properties and enjoy the cashflow here. Maybe that's, maybe that, that's, that's, you know, what, whoever gifted these to you would have wanted for the properties. That's a great outcome. The goal of our conversation here is just to make the smartest choice possible while preserving wealth and also maybe preserving some of that optionality. So do you mind if I ask about the investments too, that I inherited? Let's do it. I inherited about $185 ,000 in investments.

41:21And it was held with a financial advisor who charged 1.25 % and had, it was a moderately conservative portfolio. So it was returning about maybe five or 6 % annually. So my first step was firing them. Removed all my assets because I figure we can do index funds, but I've just put that in my taxable brokerage since I wasn't sure what was the best place to put it, especially considering if we're going to fire in about 11 years or so. So just want to get your take on that too. What's the other option you were considering? I mean, putting it into the after-tax brokerage account, sticking it in the long-term investment portfolio seems like a very obviously correct answer to me, but I don't know.

41:58What were the other alternatives that had you worried about it? Like investing in real estate, for example? I think we're happy to kind of hedge our risk in terms of half real estate, half stocks, half index funds kind of thing. So I think with that, we're more so considering, should we use it to max out Roths? You know, should we just let it ride in taxable brokerage? Like what is the way to balance flexibility while also minimizing taxes too? So let me reframe this here. So where do I put this? You add this to your after-tax brokerage position because that's all you can do mechanically with the cash instantaneously, right?

42:31Now we have a separate question, which is what ought our order of operations to be from an investment standpoint here, right? So for example, the money guy's FU, financial order of operations is, I think, really gold standard item here. And you flow with that as your starting point and you deviate from it based on your specific goals and interests where they apply, right? We would say a standard order of operations in a situation like this might be take the 401k match from your employer. Katie, I don't think you give yourself a 401k match yet. That'll be for you, Ian, on that end. Working on setting that up.

43:03Then I think, you know, the employer stock purchase plan, if it's particularly advantageous or you move it down the stack if it's less advantageous or eliminate entirely if it doesn't exist, right? Then we've got the HSA, which is arguably one of those first ones to max. That'll probably be available through your work, Ian, I'd imagine. Then in your situation, your federal effective tax rate is, I think, the 12 % bracket right now. I think so. I think we estimate about 22 % just to be sure, like just to be conservative again, because my income fluctuates. So in case we get pushed over the edge.

43:33This is an interesting one because you have variable income. So you're not sure you're going to be at the 12 or 22 % bracket. So either way, in your situation, I personally bias toward the Roth because I think you guys are going to make more money and be in higher income tax brackets later on in the 12 or 22. But let's say you were pushing to the 32 % bracket, 22 versus 32, or your income fluctuated wildly, Katie, with real estate sales and that kind of stuff. And some years you're in the 12%, some years you're in the 32 % bracket, right? If that were there, then we have an easy one because we'd say, okay, in the 32 % years, we're going to max the 401k, then do a backdoor Roth.

44:05And in the 12 % years, we're going to do the Roth first and then the 401k. So in this case, I think this year, based on the income you stated, you're going to be in the 12 % bracket, but you should, at the end of the year, you can true that up. And I think in many cases, it will be wise for you to try to time this a little bit later in the year to make these decisions as your income is variable, because the arbitrage will matter in terms of the order of operations in some of these situations. So I think in this case, if we go with my hypothesis for this year, we'd have 401k match, HSA, Roth, remainder of the 401k as your building blocks there.

44:37When you add kids in, you can do the 529 or the Trump accounts as part of that. But that would be the general stack in a simplified way. Does that make sense? Yes, it does. This cash is 185 grand. It's more than would be available to go through the entire stack. You would just move through your stack normally and don't bring in the brokerage into long-term investments is perfectly fine play. Cool. I guess thinking about years to come to what we just, if we wanted to just max out the Roths with this cash and the investments, would we just kind of transfer those assets into our Roth IRAs at that point?

45:08Why are you conceptually bucketing this 185k into Roth investments rather than just this goes into the after tax and every year we're going to have income and we're going to move through the, I'm just curious. It's not, that's not wrong. It's just not, it's just, I've never thought about it that way. I always think about it as, you know, with the income I'm going to generate this year, here's my order investment stack, basically. Yes, I understand that. I think I'm bucketing it like that in my head since we've been so focused on Roth IRAs, traditional IRAs, and making sure we get our 401k matches and doing as much as we can in our 401ks.

45:40So I think the after tax, that's just the last on the totem pole for me since we've been kind of trying to hit all the other boxes first. So it just feels like we're skipping a lot. So I just want to make sure we aren't skipping any major steps there. I would write out the order of operations, make a judgment call about Roth versus 401k or traditional IRA, the deferred account first, and then map to that. But your financial statement reflects really sound judgment on this because you've got a much larger Roth balance than traditional, which is exactly what it should look like for someone with your income and your age, in my view, in this situation.

46:14And you have a large after-tax position that's been bolstered by this recent inheritance. So it's textbook. Whatever you're doing, you've clearly got this answered correctly. And then when your income goes into higher brackets, you'll naturally shift to the deferred portion. And you're also completely circumventing a problem we see all the time where people who are too aggressive with the deferred and not enough on the Roth have all this in deferred and then wake up in their mid-30s or early 40s and have all their wealth pre-tax. You're not going to have that problem at all. You've crushed it.

46:42You'll then appropriately want to max out the deferred accounts at that point in time, likely because your income will be high. So I think you guys have crushed it on this one. And as a self-employed real estate agent, you have the ability to open up a self-directed 401k, a solo 401k, which allows you to put in the same amount that everybody gets per year. What is it, like$23 ,000? And your company can match your contributions, up to 25 % of your income, up to like$70 ,000. So in these 37 % tax bracket years or 32 % tax bracket years, you can decide, okay, this year we're going to put everything in the deferred accounts and bring our taxable income down.

47:27And in the less years, the less successful years, you can decide to do Roth money or you can do a combination of both. But I like the self-directed solo 401k for A, the self-directed part means that I could invest in real estate if I chose to. Scott has thoughts on that and that's a story for another show. But having the ability to put all that extra money into the 401k can be really powerful. In a year or two, let's say your career takes off, Katie and Ann, you continue to crush it in your profession here. Your income gets fairly high. You're starting to convert a lot into the 401k. But then let's say that year four, you have a bad year.

48:08Katie, just you don't have a lot of sales and the rental property gives you some pain in the rear, that might be a day to do some of those cost sags or buy that extra rental property and then do your big conversion event because you're a real estate professional. That's just the pieces to have in the back of your mind about when am I going to fire these bullets? Probably makes sense to offset, to bring your income from a 32 % bracket down to something much lower in a specific year rather than to use them quickly in lower tax bracket years. But yeah, I think that's right. I think, Ian, you're going to be able to, with this cash and your income situation at a high level, it's going to allow you, if you want to, to go down the whole stack.

48:43The HSA, the Roth backdoor, mega backdoor, the 401k traditional contribution, or the Roth 401k. Roth 401k would probably be my bet, honestly, if that's available through your work in. Yeah, I was going to say that is exactly what we're doing now. We're pretty much maxing out my 401k around that$23 ,000 mark. The Roth 401k or the traditional? Roth 401k. And then HSA is getting maxed out. And then I also do get employee stock purchase program, which is 15 % off. So I'm maximizing that too. I probably, I'm bullish on my company stock, but I need to probably just sell it and then put it into an index fund and just diversify.

49:22But yeah, we're taking advantage of everything we can. And also in your situation, the problem we see with all of that is like people are all in on their company and you don't even have that problem here. So that would be more of like a side bet here. So on the company stock. So yes, that's probably a textbook and it's not really as big an issue for you guys as it would be for other people who are too concentrated in their one employer. Yes. And I have set up that self-employed 401k to kind of direct funds there. I actually moved everything out of my traditional IRA into my self-employed 401k to do a backdoor Roth because we were kind of locked out of that for a little bit without doing the pro rata rule.

49:54So just knowing that we have that set up and working to figure out the contributions on the employer side, which it's weird when you're the employer and the employee, but that's an S corp for me. So. Well, you guys are asking questions, but you already know the answer. You got, you got this perfect. This is, this is, this is textbook and your financial statement reflects that, you know, the textbook and are executing the textbook. You're doing it. You're crushing it here. It's an income question with each year for how you want to allocate these funds. I think you should, you should be more precise.

50:21You don't want to be conservative. You want to be right on your tax bracket for any given year. You're not going to know at the beginning of the year with your situation. That's very normal. So at the end of the year, you're going to want to do that. And you may want to defer some of those decisions until later in the year, if you're on the bubble between a low income tax bracket and a higher one, that's a very fine tuned adjustment here. And your cash position will allow you, your after tax brokerage position, your cash position will allow you, if you so choose to, in some years, go further through the stack than your income and your spending would otherwise allow.

50:51That's all that, that the after tax brokerage position does. And that's how I'd frame it. But you guys are perfect on this front. The only deviations you're making our art form guesses. And I think I agree with you down the entire stack that you just shared here. Thank you. We've listened to a lot of bigger pockets to figure all that out. So glad to hear we're doing it right. It's like, oh, the scoreboard reflects it too at the highest level. You guys are easily top 1 % wealth position for your age bracket, if not a top 1 % household for your income bracket yet. Yes, we've been very fortunate and we've made a lot of good choices and had a lot of lucky strikes too.

51:22So it's a combination of all the above. And you know, The inheritance, too, is an unfortunate situation to be in, but I just want to make sure we use it in the best way possible and don't squander it because I think a lot of people don't know what to do. And I think I didn't feel comfortable turning to a financial advisor who's going to charge me a 1.25 % rate for managing money. And I just felt more comfortable asking you guys, the professionals that I've listened to for so long. Well, this is entertainment only here. I think if you want a professional advice, then that's where the hourly or advice only section comes in.

51:50And I do think, I think that there are really some really good CFPs out there who charge the AUM or whatever. But I think that it's a little harder in the real estate world in particular, because those don't necessarily intersect with the assets under management. And so I think that that's where a lot of real estate investors feel like, I don't know if it's true, but feel like they can't get the inputs there. But I think like, you know, there's plenty of places to go get an hourly or advice only consultation. We are partnered with Domain Money, for example. And then we're also partnered with Nectarine.

52:21So Domain Money is like the firm, if you want the comprehensive financial planning. And then Nectarine, Hello Nectarine, has the flat fee or advice only section where you can get more of those hourly engagements. Both of those are on the website at bickrepocketsmoney.com. But those are the places to go to get that next round of it. This is just instant reactions in an hour on this, but hopefully it was helpful in the sense that it gave you some questions to think about and challenge some things. Yeah, I think we're certainly going to think about those two initial properties. That wasn't even something we had considered.

52:47So thank you for your inputs. Yes, I think we're going to be eyeing the spring market pretty heavily next year for both of those. So I think that, you know, the numbers make sense. And it's nice to have that reassurance, too, that, you know, they served a purpose at one time, but that purpose is no longer serving us. I think before you go to the financial planner, you know, I think that what's fundamentally missing in all of this is it's a huge win. it's literally top 1 % outcome in almost every category that we can quantify here. It's just, what do we want? That's not a question that the CFP is going to answer for you or the CPA.

53:20It's, do I have a written, what do I want statement here? We can also help with that on biggerpocketsmoney.com with biggerpocketsmoney.com slash resources. You can see what I want, an example of what a goal-setting process and vision with the trench families, kind of what we want vision statement there. But maybe that would help you to some degree if you spelled out exactly what you think you want. And you don't have to settle on it. You can just make it a hypothesis for now and let it evolve for two years. But that should answer some of these questions. So you're not flip-flopping between, I want cash flow and I want appreciation.

53:52I want cash flow and appreciation with the portfolio. You can make a decision that's at least grounded in a written hypothesis for what you want. I like that idea. We're definitely going to check that out after this. I think, too, that'd be nice to revisit kind of annually as life changes and circumstances change and just kind of always keep an eye on where your goals are and where you stand in comparison to what you want at that time. Yep. You can find that at biggerpocketsmoney.com slash resources. It's the second item in the resource library. We also have the personal finance statement, which is what you guys filled out for the show.

54:25And we have the investor policy statement template. I created this in conjunction with Bob Haynes, who came on the show a few weeks ago, to walk through the investor policy statement and the investor philosophy, your investment philosophy. And it's just another tool to help you kind of figure out exactly what you want. Once you know what you want, you know what your portfolio looks like, then you're not second guessing yourself. You're just going back to your statements all the time. Oh, that's right. We did want to buy five more rental properties, and this one fits what we're looking for. Or, hey, we've decided we don't want any more, even though this is an awesome property, we've decided we're good.

55:05I love that you mentioned that because we sat down about three weeks ago and did our investment policy statement. And we've got sizable equity positions in certain stocks. And as things go up and down, especially in the AI space, it's like, what percentage of our portfolio do we want to be allocated to some sectors or some stocks? So love that you guys have that. Thank you for that. We are already using it. All right. Katie, Ian, thank you for sharing your situation with us and sharing your numbers with us. This is always really helpful for Scott and I, and also really helpful for people out in the world who have similar situations.

55:38So we appreciate your transparency. Thank you for having us. It was wonderful. Very insightful and got some homework, but we're excited about what we heard. Yeah. Thanks for your time. Yeah. I would love to hear what you decide on those two properties. Yes. We'll update you guys for sure. Perfect. All right. Well, we will talk to you soon. Thank you so much for your time. Thanks, y 'all. Thanks. Bye. All right, Scott, that was Katie and Ian, and that was a really interesting situation. They have done a lot of things, right? And had a little boost with a bit of an inheritance. I am kind of excited to see what they do with those two rental properties that they originally owned, because like you and I said, we think that money would be deployed better in a different location.

56:18I just want to call out that what's so fun about finance in general is you take this portfolio and what they did before the inheritance, and you give them an A plus, right? Across a lot of these decisions, right? House hack, rental property that they added a value in. They took a$145 ,000 property and made it to$289 ,000 in value. Her primary, they added value to. They've invested according to a very defensible order of operations. They've got a very clean, clear picture, top 1 % net worth. I mean, it's it. And then yet there's so much more that they can do to get their philosophy to be completely coherent, to make a grounded set of written decisions from a discussion standpoint.

56:55I think it's really hard in personal finance. And this is what elite looks like relative to their age. I think it's fantastic. I think they're doing a great job. And I think there's just ever more to think about. I agree, Scott. I think the goal setting template would go really far for helping them decide truly what they want. And you can find that at biggerpocketsmoney.com slash goals. We're trying to make these resources available to help with these frameworks, right? The goal setting template does not give you any answers. It just helps you set what you want on paper, which then helps derive a lot of these, right?

57:27Because like half the questions in personal finance, what should I do with my money? Well, what do you want with your life, right? If you want this with your life, then you're going to do this with your money. And if you want that with your life, you're going to do that with your money. And it really changes the entire cascade downstream as you saw today, right? If we want maximum wealth in 10 years, maybe we buy a bunch of levered rental properties. We probably reposition the portfolio and lever it up to the point where we're about break even and drive those returns with a lot of value add. If we want a stable, easy, you know, decade raising our kids with less terminal wealth, we do something different.

57:56And that's what makes this so hard and so fun. It can be really hard to figure out exactly what it is you want. And filling out the goal setting worksheet doesn't mean that that's what you're at forever. You're stuck with that goal. You can tweak it every single year. I liked what Katie said about changing and revisiting every year to make sure that they're still going in the direction that they want to be going in. Scott, you have been quite busy on the BiggerPocketsMoney website creating all of these resources. So thank you so much for sharing all of this with our audience. I keep getting so many emails from people.

58:30Oh, this was so great. This helped me really, really focus what I wanted to do. There's a lot in there. These are all open source. So you can check them, read them, provide feedback. I'm going fast. So there's going to be the occasional spreadsheet error or data source needs to be fine-tuned. Email me at scottatbiggerpocketsmoney.com. If you find any of those, I'm constantly shipping iterations to these. But hopefully they're useful in helping kind of make directional understandings about how how to frame big choices in life and kind of get that, that a great rough draft ready to go for your finances.

58:59I think it's like the, like that's, that's the ambition, right? How do we help produce the best rough drafts on the internet for these things? And the fine tuning definitely belongs with the professional and the line by line specific work. But you can take all of these resources that we have on our website and take them to your professional. That just gives them a better understanding of you as well. You've done all the work ahead of time. Yeah. Like the personal financial statement is meant to be printed, right? You can see your assets, net worth, your income inspectors, your rental schedule, your debt schedule, alternative assets, pensions, you know, questions, those kinds of things.

59:33It's meant to be like that. So we can do a better finance Friday, for example. Hopefully that translates to many applications to what you'd be working with, with, with other folks on there. And then all of it is also designed to be uploaded to AI, which I think belongs in the conversation. It's not the only part of the conversation, but I absolutely believe that AI belongs in the conversation for many folks who are comfortable with that in beating up assumptions and all that kind of stuff. So you can download, fill it up, and then use that as a way to ground a discussion project or incognito, depending on your preference, chat with AI.

1:00:02And Scott, we're having a sale on these items. Right now, they're free, just like before. And in the future, they will always be free. So go check it out. BiggerPocketsMoney.com slash resources is the hub for all that. And yeah, give me any feedback, especially from folks who are particularly nerdy and tax savvy. If you find stuff you can debate or need to be framed or the outright error, which has been have been found occasionally in these, please email me at scottatbiggerpocketsmoney.com. And while you're at biggerpocketsmoney.com, sign up for our newsletter. I send that out every Wednesday and we talk about some pretty interesting things in the newsletter and on our blog.

1:00:33All right. That's enough of that. Scott, we should get out of here. Let's do it. That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Minnie Jensen saying, gotta go, Dodo.