From $15,000 to Financial Independence Through Real Estate

18:23Grace Gudenkauf:So your total coverage steps down as your actual obligations step down. You only pay for what you actually need when you need it. Ethos is a platform that helps you find life insurance 100 % online. You can get a quote in seconds and apply in minutes. There's no medical exam. You just answer a few health questions online. You can get up to$3 million in coverage. Some policies are as low as$30 a month. That makes building a ladder genuinely fast. Get your free quote at ethos.com slash bpmoney. That's E-T-H-O-S dot com slash bpmoney. Application times may vary and rates may vary.

18:56Mindy Jensen:The investor market has really dropped ever since I think it was June of 2022 when the Fed started raising interest rates. How did that affect your ability to buy houses? Are you paying cash for these? Are you getting mortgages with these? A little bit of both. I am really trying to do BRRRRs where I can cash out, refinance the money and keep it moving. So when the interest rates went up, I really had to slow down and A, pivot to flipping so that I could build up my cash a little bit. And now at the point in my career where I want to decrease my leverage, increase my cash. And secondly, when I did see like a long term rental that would make a perfect burr, it wasn't just I can do a perfect burr.

19:37It was also, is it going to be worth my time to hold and manage this property? So I had to find a little bit better deals. I had to try to negotiate a little bit better with contractors and vendors and just be pickier in general about what properties I wanted to keep.

19:52Mindy Jensen:I find it interesting that you switched to flipping after the interest rates started going up in my market, which is Colorado, the market kind of slammed to a stop as soon as interest rates started with a five, which I think is really funny because now as soon as I've been saying, as soon as interest rates start with a five again, the market is just going to be overwhelmed with people who've been sitting on the sidelines for the last three and a half years. In Iowa, in the Midwest, the market is pretty steady. When other people see these big spikes whether it's up or down especially in Iowa it's just staying the same there's not a lot of crazy action happening so that's a benefit from my risk perspective but at the same time I'm not going to see six figures of appreciation on a property because it's not even worth six figures so I yearn to have great appreciation but I'm thankful for the steadiness and for the flipping I just realized I want to have more cash and how am I going to do that so that's what I did and it was actually more like 23, 24 that I was doing flipping.

20:53Are you still flipping? No, now that I'm building new construction and doing the build to sell, I really want to be done with older houses. I hear that.

21:03Mindy Jensen:Do you consider yourself financially independent? So I would say my short answer is yes. My long answer is no, because I make enough money I could live off of if I didn't have to keep working. All of my income is self-generated. I have two businesses, but I keep working because I want to continue to increase that income. Does that make sense? Yes, but I would say I would argue that you are financially independent because your income covers your expenses. However, does your passive income cover your expenses? Passive-ish. Real estate is not passive. Even if you're a landlord and everything's going great and perfect, it's still passive-ish.

21:41Yeah, it could. I think it could. If I had to, it definitely could. I would prefer that I still work and make income elsewhere. Okay.

21:49Grace Gudenkauf:I really like that answer. I think there's actually something really good to the way you're describing this. You're saying there's a baseline level of wealth that my portfolio generates. And because I'm building housing, I get more money. And that then enables my trip to Belize, which I like, but do not have to do to declare myself financially independent. I don't know wherever your trip is, but is that the right way of articulating what I just heard? Yeah. And I'm still at the point where I don't take that money. That is still getting reinvested. So I'm not living off of it. And I'm able to still have income from other businesses that I've started that allows me to live.

22:26And for the first two years in real estate, all we had was real estate. My husband did not have a job. He accidentally quit his job because he thought we were going to California for my job. We didn't. And so we did DIY and we made it work. So I guess technically we were financially independent for those two years, but we were living like two broke college kids. And that's what allowed us to put in the time to build our portfolio to where now we're able to really see the benefits five years later.

22:54Grace Gudenkauf:Let me take a second attempt at articulating what I'm hearing you say then. We are financially independent today with our portfolio. We want to spend more in a future state, but we will only increase our spending once our portfolio is generating enough passive income to cover that spending. Is that the right way to understand what you just said? Like today, but not tomorrow. I like that answer even better than what I thought I heard the first time. I think that's a wonderful way of approaching it. And I think the FIRE community needs a new acronym to appropriately reflect that. TNT, I'm fired today, not tomorrow.

23:27Grace Gudenkauf:So what is that plan? Like, I would love to hear how that translates. We've got a great position today. What does that look like? That goal, is it defined or is it just kind of more for now? We're happy now, but we want to be happier. And so we're going to keep working. What does that look like? My goal is 10K a month in cashflow. I have a pretty decent outline of how I can get there. Now that I've tuned into these new build numbers and I'm going to be doing a lot of the same, I know how many I have to get. And then also, since we're doing the build to sell model, I'd like to make another 80 ,000 a year for this year, 2026, selling two of those triplexes.

24:05So for the first time, I have like decent numbers and I've got great bookkeeping. I know exactly what I spend personally in my business. I'm able to answer that. But I'll be honest, the first three, four years, I really was flying by and just making everything work and living below my means. Okay.

24:21Mindy Jensen:You said the goal is$10 ,000 a month in cashflow. Does that mean the goal is$10 ,000 a month from your long-term rentals? Is that where the cashflow is coming from? Yes. Okay. Do you have any short-term rentals or is it all just long-term? Long and midterm. Midterm. Okay. And the midterm is 30 days or longer? Yep. And are those furnished rentals? They're furnished rentals. and then an additional$80 ,000 a year selling triplexes. How many triplexes are you going to be selling every year? How long does it take to build a triplex? My first one I started in March, finished and people moved in in December.

24:58But that was, I will also add, there was like an entire year and a half of me twiddling my thumbs before that. But I actually broke ground in March. Now we're hoping to get closer to five, six months. I think it will be pretty feasible to sell to this year. We are underway on a handful already, although only one is to sell. The rest are to keep.

25:19Mindy Jensen:Are you investing outside of real estate? Do you invest in the stock market or local businesses or anything like that? Not local businesses. I invest in the stock market through my IRA. And I obviously had a 401k when I used to work. And that is something that I wish I had done better of balancing when I first got into real estate. A lot of real estate investors are extremely over leveraged in real estate. and we know that stocks are genuinely 100 % passive. So something that I do is every year when I sell a property, I always make sure I max out my IRA, me and my husband's. And then our goal for this year is to also, since we're again selling a lot of our portfolio and gonna be a bit more liquid, making sure that we start a brokerage account as well.

26:02Mindy Jensen:Do you have any full-time employees outside of your husband? Yes, on Wire we have three. Do you have separate businesses? because I think you could benefit from a conversation with a solo 401k provider. Yes, I agree with that. That has been on the needs to get done and hasn't gotten done list.

26:23Grace Gudenkauf:This is a seriously impressive situation that you just shared with us, Grace. We're still unpacking, right? Like, I mean, this is a real portfolio, real new construction projects here. That's a serious real business that's producing big numbers. And you just told us you have another business with three full-time employees, which I assume is cash flowing itself on top of that and has reasonable prospects. I mean, this is an incredibly impressive position to build by 28. Would you say that portions of this are repeatable for others who start at 23? And have you ever kind of thought about what the counterfactual for you is in the sense that if you'd stayed at your full-time job and just maxed out your 401k, what your position would look like?

27:04Grace Gudenkauf:Because I bet you that it's not just some bleak trajectory. It probably also would have done well in the corporate world in there as well. So two-part question. I'd love to hear you react to that. Yeah, in terms of salary projection, I've kind of tracked that every year. I'll look at my taxable income and say, do I think this was higher than what I would have been making as an engineer? I think it was year four that I was like, definitely this is higher than what I would be making. I think if I was still an engineer, I and I also will say the reason that I quit was because I was supposed to move to California for my job and it was covid and I had just started my first real estate deal and I just had the thought if I move I'll never be able to do this like this is my chance I have no pets I have no kids I have no debt I also paid my way through college I've never had credit card debt none of that like we very much live below our means and that's allowed us to make some of these riskier decisions and so I quit like two rentals in because I had the emergency fund that gave me like a six, seven, eight month landing runway.

28:11And I thought that at this age, I can be super risky because no one's counting on me. So anybody else listening in their 20s, if you're able to really get your personal finances together, I think you can take some of those risks because you're young enough, you can go get a job if you have to, you still have your degree to fall back on. You don't have people depending on your salary or people that you have to feed every day or take care of. So I do think that it's repeatable. And I think I got really lucky starting so young, but I was brave enough to make a lot of scary decisions. And I remember I wrote out in a journal, like, what is the worst thing that happens if I quit my job?

28:48And it was like, okay, I got a waitress and pay my mortgage, or I got to move back home with my parents, or I got to ask for my job back. Can I handle all of those situations. And I was like, yeah, that's the worst thing that happens. This is a risk I'm willing to take.

29:02Grace Gudenkauf:Grace, before you bought your first property, how much cash did you have? Not in your 401k or anything else. Just what was your cash position that you plunked down on that first guy? Maybe for me, maybe like 15 ,000. And for my, for Brent, it was like 30 ,000. And we put 20 % down on that house and then really had to figure out how to cashflow our way into completing that reno. And on our second one, I remember I needed a$9 ,000 down payment and I had to count out how many paychecks away I was. I'm like, okay, I'm 10 paychecks away. This is exactly how much I have to put into my high yield savings account to tuck it away so I can make that$9 ,000 check when I get to the closing table.

29:45Grace Gudenkauf:What I want to observe here as well, another classic pattern across success stories over time is cash came into your life at an early age. And it came in as you expected it to, maybe even perhaps outpacing it in some instances in there. And that's just a huge signal, in my view, that you're ready for entrepreneurship. If after-tax cash is actually piling up in your bank account, especially in your 20s, in a material way that you're actually then able to deploy on one investment after another. And I think it's like the number one signal for me that there's a high probability of success. You can still fail, of course, in there.

30:21Grace Gudenkauf:But when several years go by and cash is not accumulating, those folks are going to really find pain when it comes time to start that business. And the folks that are actually able to accumulate cash have a really good shot at surpassing the opportunities in the W-2 world. And how does that cash build up? It's super easy math. You live below your means. It is so simple and so hard for so many people to do. Anybody listening, I lived below my means for so long. I drove my mom's old 200 ,000 mile minivan around buying real estate at 24 because I did not care. And I wanted to put my money into real estate.

30:57I had a super simple house. I had two roommates.

31:00Grace Gudenkauf:Should have rode a bike. Yeah, exactly. Too bad I lived in the country. But I really lived below our means. I still do. I have a seven figure net worth. And I live in a very basic average house here in Tucson. that is 1 ,200 square feet in the biggest house I've ever lived in. And so I think that is the pattern of people who are really successful. And if you're listening, any time you see somebody and you think they have it all and they're doing all this crazy stuff, every time I think that, I somehow see below the surface and there's a facade, whether it's credit card debt or something else. So don't ever compare yourself and live below your means and your life will be easier for it.

31:40Grace Gudenkauf:So I have a question. I'm not sure whether to be jealous or not of your life right now. do you have a lemon tree in the backyard? No, I don't. Oh, I tried. It died. Oh, okay. Fair enough. Yeah. That was my favorite thing. I went to visit Scottsdale. We did a little weekend with our little one and the house had a lemon tree. And I just remember pulling lemons off the tree and making lemonade for my daughter and being like, this is the coolest thing ever. I didn't realize this was a thing in Arizona. Yes. Very common. Okay. That's life goals next. The next phase here will be regrowing the lemon tree.

32:11Mindy Jensen:Scott, I have a lemon tree in my front room and I get one lemon every year. One lemon.

32:18Grace Gudenkauf:That seems like one of the worst investments I've ever heard of.

32:21Mindy Jensen:Oh, that's great. I think it was$25 plant. And so far,$12 lemons.

32:27Grace Gudenkauf:All right. Fair enough. Let's zoom in. I want to zoom in on another piece of this conversation here. So we just talked about the frameworks that set you up to be successful here and the actual action that that's resulted in to get you the position. But one particular moment in time I I think is really interesting is the actual act of leaving a job. Can you give us the story of that situation? What was your situation like? What was the conversation like? And what was the aftermath? It took a few months of me trying to be like, am I going to move to California? Am I going to do this? And my job was kind of really keeping me in a limbo state.

32:59So finally, I think I hit a breaking point where I was like, I can't even plan two months out because I don't know if I'm going to be living across the country. Like I said, I did the worst case scenario. I made sure I had a$15 ,000 emergency fund, which for me at the time was more than enough for four or five, six months of living. And I wrote out how I thought that I could make money. I did a little bit of wholesaling to make money after I quit. And I remember I told my parents and they were super supportive, but I remember being so scared because I went and got a great degree, worked really hard, got a great job.

33:34And then I was basically just being like, nevermind, I'm going this way. And I remember when I told my boss, he was like, well, I really wish you luck selling houses. And I was like, I'm not a realtor, but thank you. And I just thought of like, what am I leaving on the table? What are all the things that I could do if I had this time back and this energy back?

33:53Grace Gudenkauf:It's just like a huge, a huge leap that I think is very hard for especially engineers. Like I think that engineers in particular have this, you know, they want to engineer their money, their situation, their life. And there's a, there's a natural appeal to this. And the income is just over that hurdle rate where it's really hard to justify stepping away from it. But I think you got off that train to your benefit very early in your career before the compounding of the salary at the engineering work actually worked against you in your particular situation as an entrepreneur. Is that, is that right?

34:28Grace Gudenkauf:Or does this play through your mind? I didn't have to have the golden handcuffs. So many people do where they're like, I make$160 ,000 a year and I don't work that hard. I don't want to leave my job. But I think it's just such a fascinating observation because these folks, like in the engineering world in particular, who are frugal, would also potentially make excellent entrepreneurs. And they're also the ones that have such a good, clear path from the income perspective there. And I often wonder if the population of entrepreneurs is underserved or maybe undercompetitive because people of very high caliber have great jobs and they stay in those tracks for a very long period of time.

35:05Grace Gudenkauf:I think it's one of those things that I wonder about sometimes in the journey to financial independence. It's just cool to talk to somebody with the counterfactual there.

35:13Mindy Jensen:I have a counter question. Did you ever consider staying because it's easier to get a mortgage when you have a job? Great question. I tried to go part time and they were like, no. But I learned creative financing and I struck a few of my first deals were seller finance deals. I think it's a lot easier to do that when you're in a smaller area where you really know the people that you're working with. So that was kind of my answer to that. I'm going to figure out how to do seller financing and I'm going to pursue those deals. Okay. Because I see you quit your job at 24 and my first thought is, oh, how are you going to get a mortgage?

35:51Mindy Jensen:I was the community manager at BiggerPockets for six or seven years and I would see people announcing in the forums, I quit my job. I'm going to start investing in real estate. And my first thought was, no, go back and get your job. You're never going to get a mortgage to buy a property unless you're, you know, just sitting on a pile of cash. The seller financing is a great option to get around the whole I can't qualify for a mortgage thing. But again, in a smaller community, that's going to be a lot easier to do. Have you hit up any issues with financing at all since you left? No, I had a great relationship with a small local bank from the get go.

36:29and they pretty much did all our information once. And now when I want to refi, they give it to me like that. I did a draw request last week for like$60 ,000 for one of my new constructions. They approved it and funded it in eight minutes. So I have a great relationship with my local bank and I highly recommend you get that in place before you quit your job.

36:49Mindy Jensen:Your local bank is not the big bank chain that has a local location. Yes, I'm not naming names, but you feel free to. too. Your local bank is the tiny little bank that might have another location in the next town over, and that's it. That's a local bank. Your credit unions, your small one-offs, two-offs, tiny little chains around, that's the place you want to have, especially if you are getting rid of your quote-unquote source of income, because they don't really care how much money you have sitting in the bank. They want to know that you can pay that loan back. So when you have this local relationship, A lot of times they do care how much money you have in the bank.

37:30Grace Gudenkauf:One other thing, someone who has trouble getting financing has a weak financial position. Their portfolio is not conducive to getting financing here. So when you say that it's not really never been an issue, it just means to me implicitly that there's really not a leverage problem here. There's not an undue amount of leverage. You're probably much more conservative than your portfolio would otherwise allow for. And you are creating a tremendous amount of cash relative to the cash outflows in your life and business. Is that generally true? Could you paint that picture for me in your portfolio today?

38:01Yeah. When you have a small local bank relationship, they do want to have a little bit of insight as that relationship builds to the bigger picture of your portfolio and everything going on in your business. So if you're able to prove to them that you're a savvy operator who gets things done, you're a great communicator. You're organized when you send them docs or budgets and it looks nice and it's easy to read. They're so much more likely to want to lend and work with you, especially like you said, and you can show on paper that you're under leveraged, you're in a great cash position, and you have income coming from your rental properties and maybe elsewhere.

38:38Grace Gudenkauf:Tell us about what a Tuesday looks like for Grace. Tuesday is actually my real estate CEO CFO day. So with new construction, I send out an email to my partner of like, this is exactly what we've spent. This is our projection. Here's how much we have to spend. Here is our estimated date of completion. I like systems and processes, as you can see, and like repeatable things. I pay all my bills. I work on usually outstanding bookkeeping tasks. And I'm also looking at deals and replying to my email. So like all of the really real estate heavy stuff. Right now I'm in a lot of different acquisitions and dispositions.

39:18So coordinating all of that is really what a Tuesday looks like for me. And then if I get all that done, I try to go hike in sunny Arizona.

39:27Grace Gudenkauf:Well, Grace, this has been a fascinating conversation. Congratulations on your immense success and huge portfolio that you've built here. And where can people find out more about you and wire easiest places on Instagram at grace.investing or wire.community with two I's. And thank you for having me, Scott and Mindy.

39:45Mindy Jensen:Thank you so much for your time today, Grace. And we will talk to you soon. Thank you. All right, Scott, that was Grace Goodenkoff. What did you think of her journey to financial independence through real estate?

39:55Grace Gudenkauf:Love it. I mean, this is just classic example of a success story related to BiggerPockets real estate. And I hope that as the years have gone on and we've learned more and more and observed booms and busts in markets and those types of things that we covered. A major reason for this was Iowa being a great market throughout all of that time period, seeing steady demand growth, low supply, and providing a huge tailwind for grace. And then also coupling that with good execution in the context of that market. I love this mental challenge that I think a lot of BiggerPockets money listeners and a lot of BiggerPockets members have over the years of, Should I quit my really good job or not?

40:32Grace Gudenkauf:It's a really hard choice. And what tilts the odds and what actually causes people to take the leap? And then what doesn't? Who wins? Who loses? We often talk to the winners, Grace being a clear winner of that decision. There's going to be losers or counterparts that were just as talented, just as smart in Austin, Texas, who just could not overcome the headwinds of that particular market over the same time period. But who, if they started three or four years prior, maybe even doing better on net, net, net. It's just a really fascinating concept here. And there's there's a great deal of skill and wonderful frameworks.

41:04Grace Gudenkauf:The fact that she spent so much less than she earned meant that one way or another, she was going to win over a long period of time in the end. And I think it's just a really impressive and wonderful story. And I think, you know, it's just cool to observe that with the benefit of hindsight of this market's particular performance.

41:20Mindy Jensen:She said something that I thought was so important, and I don't think we highlighted it enough. She said, I really understood my local market. And I think that is one of the biggest differences between people who succeed and people who do not, is that they have a good, truly good understanding of the market that they're investing in. And that is not something that you're going to get looking at real estate listings for five minutes. That's something you're going to get by living there, by investing. She jumped in with both feet with one property, not 15 properties. Jump in and discover that it's always going to take more time.

41:58Mindy Jensen:It's always going to cost more than you think it's going to cost. But if you get to the end of that journey and you're like, oh, I want to do that again. Great. If you get to the end of that journey and you're like, I never want to do that again. Then you tried it and you move on to something else. But the underlying factor in her success is that she knew her market really, really well.

42:18Grace Gudenkauf:Yeah. And her market performed really well.

42:19Mindy Jensen:Her market performed really well. That's also a factor. But she would have had this same success in any other market.

42:26Grace Gudenkauf:I think that's the fun part of it. I think that her knowing her market was great. But I bet a lot of real estate investors say that they know their market. And it's like, which one actually did? Which one didn't? I think the two things that really propelled her story forward were, one, the foundations of personal finance. This is a person who spent way less than they earned, period. And they applied that cash to one good bet after another in what I imagine to be a fairly low stakes, high effort, high hands-on approach, and made sure that each one won and could not ruin her and apply that consistently over time.

42:58Grace Gudenkauf:I think that's the number one ingredient. And the second, and the reason we're talking to her today, not her counterpart from Austin, Texas, is her market worked out. We would have been talking to her, and we'll talk to the Austin, Texas counterpart in three years as that market reemerges. But there's a big part of that as well. And that's something I find that really stimulating as a thought exercise about how all these success stories emerge over time. Grace is undeniably incredibly talented in there. But if I had started my investment journey in Denver in 2022, it'd be a very different timeline for the outcomes that I achieved as a real estate investor, for example.

43:33Mindy Jensen:Absolutely. It's a completely different market?

43:34Grace Gudenkauf:Fun things to noodle on. And I think, you know, hopefully we'll hopefully we're getting a little better at really just kind of digging into the success stories here. And we don't talk to a lot of the folks who didn't win over time who also played really good hands. And that's always fun for me to think about.

43:48Mindy Jensen:Would you like to talk to somebody who didn't win, Scott?

43:50Grace Gudenkauf:Absolutely. If you know somebody who has played a hand in real estate investing or stocks or across many of the best practices that we think are common across BiggerPockets money and just didn't, it didn't work, not because of lack of skill, not because of lack of hustle, not because of lack of ability to sustain cash flow, but because it just was bad timing. We'd love to hear it. I think that's an important part of the story that we don't cover enough.

44:15Mindy Jensen:Yep. Email Mindy at BiggerPocketsMoney.com or Scott at BiggerPocketsMoney.com. All right, Scott, should we get out of here?

44:21Grace Gudenkauf:Let's do it.

44:22Mindy Jensen:For free resources or to sign up for our newsletter, go visit us at BiggerPocketsMoney.com. And you can always follow us on YouTube, Facebook, and Instagram at BiggerPocketsMoney. All right, that wraps up this episode of the BiggerPocketsMoney podcast. He is Scott Trench. I am Indy Jensen saying see you, cheetah.

44:40Grace Gudenkauf:If you've been putting off life insurance, I get it. The old process was miserable. Phone calls with an agent, a nurse coming to your house for a blood draw, then waiting weeks to find out what you'd pay for. That friction is exactly why so many people who should have coverage don't. Here's what I believe. Most BP money listeners need term life, and the right move is to build a ladder. A few term policies of different lengths stack together so your coverage steps down as your mortgage shrinks and your kids get closer to being financially independent or you get closer to hitting your financial independence number.

45:09Grace Gudenkauf:The thing that makes that practical now is Ethos, a platform that helps you find life insurance all 100 % online. Same day coverage, no medical exam, you just answer a few health questions online. Up to$3 million in coverage, some policies as low as$30 a month. So building a two or three layer ladder that used to take a month of appointments is something you can knock out before your coffee gets cold. Get your free quote at ethos.com slash bpmoney. That is E-T-H-O-S dot com slash bpmoney. Application times may vary and rates may vary. The further you get along financially, the more you realize how rare it is to find people who are both at your level and asking the right questions.

45:47Grace Gudenkauf:Dan and his son Adam noticed something unique about Long Angle. The people here all seem to be curious and interested in others. That's hard to find in people who are successful. I started for the financial angle, but the non-financial pieces, whether it's relationships, trips, family, wellness, that's brought me a lot of value. Long Angle is a vetted community of 8 ,000 or more entrepreneurs, executives, and investors who came for the financial conversations and stayed for everything else. Membership is free for those who qualify. Apply at longangle.com slash money. That's longangle.com slash money.