They Turned Real Estate Into Wealth, But Still Feel Stuck | Making a Millionaire

9:45Becca:The rental property number two, the 2.75 is the duplex, and that's actually the one we might be considering selling. And I'm like, ooh, that 2.75 is so nice.

9:55Money Guy Show Hosts:Well, walk us through it because you said you have some questions, right? Because I'm sure for a lot of people out there hearing this, like, holy cow, these two are killing it. Net worth is amazing. They have a duplex. They have a quadplex. They have the primary residence. What possible issue could they have? What could they be worrying about? So walk us through. What are the questions you have?

10:13Becca:Time, Bo. Time is the issue. Time is the issue. So we have pretty tight margins, and Christian could get a little bit more into the numbers there. But we, so for our properties, most of them, we have six units altogether. Five of the units are long-term rentals, and one is a midterm Airbnb. So for the Airbnb, for example, like most of the time, tenants will stay from two months to sometimes six or nine months, but we flip it every time. So if someone's going in cleaning after a tenant, that's us. if a pipe bursts I'm the one helping manage contractors most of the time because I work from home and we screen all of our own tenants we like I'm basically the general contractor managing work that needs to be done Are you good at that

10:56Christian:or have you been burned?

10:58Becca:I think I'm pretty good at it actually but not without help I'm a part of like a women's investor community in St. Louis that's very strong super resourceful so I honestly like if I need a plumber the first thing I do is go onto our shared Facebook page and either ask or like search for if anyone's got recommendations because recommendations go a long way in this industry. You can get burned. And so I've had some mentors to help along the way in that regard. But it's still a lot of time that goes into it. Probably spend, I don't know. It depends on if there's a project happening, but probably five hours a week or something.

11:33Becca:So nothing crazy, but it's never planned. But you both work full time, right?

11:37Money Guy Show Hosts:So you're working full time and this is an additional thing every week. Yeah, so I think we make positive margins on these properties. And so we see that and we see that we're paying off our mortgages diligently, our equity is raising. And we know it's going to help in the end with our financial independence journey to break away from traditional work environments in the future. but how is it compared to our traditional retirement investments? Is it something we should swap focus on or not? And we can give you the numbers, like specifically in the real estate. I'd love to hear a little bit about the numbers and the margins because where my mind is immediately going is like, okay, you have this issue, we don't have enough time, but you have resources.

12:29Money Guy Show Hosts:What was the thought between you guys self-managing this and not having a management company or not outsourcing that?

12:35Becca:So it felt very simple when we started by owning them, right? Like if something happened, I could do it.

12:40Money Guy Show Hosts:You live there. It makes sense. Tons of sense.

12:42Becca:And then there's obviously some tax write-offs, implications to that too. And so that's why we chose to self-manage. I had thought maybe that I could transition from a full-time W-2 to managing property. So for example, we need some renovations on our quadplex. It's got four units and two sides or two units are very outdated. And so we basically have to do probably put$40 ,000 to$50 ,000 into each unit. to bring it up to current market.

13:09Money Guy Show Hosts:Current market, exactly.

13:10Becca:And so it's like, I actually think that would be a fun project to take on, but it sounds horrendous when you think about working a full-time W-2 and doing that. And so, but we like it. Like I work from home, full-time, remote. I manage a team, so I do talk to people, but like I actually love that I know who my tuck pointer is for brickwork. I've got a roofer. I mean, I think for us, he's not from St. Louis originally, but like for me, like we've all had our share of like slummy kind of landlords. And I think we pride ourselves in like being, not being that, being like a service to the community.

13:43Becca:And, you know, in that way too, like if I sold, I mean, obviously money matters, you know, I'm not going to get super undercut, but like, I would love if it was someone who was owner occupying and also lived in that space, you know? So there's a values piece there.

13:54Christian:I would love to know some more numbers because there's a few things that jumped out to me is that first of all, with rental property, Sometimes one rental property is a pain in the rear because you have to deal with it. But y 'all have five to six because you've done. So you start, it's not scale is not the proper word, but you at least got enough coming through.

14:14Money Guy Show Hosts:It's scale to an extent.

14:15Christian:And then I look at what y 'all's barrier, I mean, your price to entry was with the debt and stuff. So I need to know the numbers to know the hassle factor. Why is it taking so much time? Is this something we can buy our way out of? because, and then also, you're kind of talking out of both sides of your mouth a little bit. Okay, let's go there. Well, no, because, and I'm not picking on you, but I want to just give you the feedback.

14:40Becca:That's why we're here.

14:41Christian:Because you're telling me we have no time to do this. But then, out of your breath, you're also like, but I love, let me tell you about my bricklayer that I have in my Rolodex, and that I can reach out to. I mean, you're kind of giving both vibes. So, that's why it makes me immediately wonder, because I have, you know, And what's funny is I have some property down in Florida, and my real estate agent also now kind of helps me manage the property as well. She's fabulous. And that's why – so I'm wondering if you – if there's not an in-between here. But I don't want to jump right there until we know more of your data sets.

15:18Becca:So we'll start. I don't know where you want. So like just going back 30 ,000 feet, I would say we make money on the quadplex, and then we kind of break even on the duplex. And that's a product of scale, right? We've got four units on that side and two on the other. And then also last year was a very expensive year for me for the duplex. Replaced a roof and was actually in the red.

15:39Money Guy Show Hosts:So in a normal year, you break in on the duplex. Last year, you were under.

15:44Christian:But a roof is more of a capital expenditure because you have to get it. I mean, hopefully you'll get 20 years out of it. So, I mean, yes, you're in the red. But if you think about it from an accounting standpoint, you made a big capital investment into it. It's not necessarily just operations.

15:59Becca:See, that's a good way to think about it because anything I spent money on is in there. So like, you'll see, we're pretty conservative. When it's good for us, we're conservative on the low end, right? When it's bad for us, we're conservative on the high end. And so you'll see that in these numbers.

16:13Christian:But it's negative from a cashflow. You're right. Probably from a cashflow is negative, but I'm just thinking in analyzing the venture, that wouldn't necessarily be a bad thing.

16:21Becca:And we did buy them to buy them and hold onto them for like, we thought like maybe 20 years, When our son goes to school, do we just sell one and have that help pay for his school? Or if we really like diversifying and being – anyway. So do you want to know what's owed on it and the potential equity and all those numbers? We got those two numbers. We have those.

16:40Money Guy Show Hosts:I'd love to know the rents you come in or the net margin you have on these right now.

16:46Becca:So starting with the duplex, the rent we get is about$25 ,000 a year. and mortgage payments, including like principal and interest, tax insurance, all that stuff is like$17 ,700.

16:58Christian:So basically you're getting$1 ,000 a month per unit on the duplex? Yes, a little over.

17:03Money Guy Show Hosts:So that$17 ,000 is mortgage, taxes, insurance, all that kind of stuff.

17:06Becca:And then average operating expenses over the last three years I averaged them was like$11 ,000.

17:12Money Guy Show Hosts:There's another thing you have to do, right? If you just include your whole mortgage payment, you're kind of, you're double counting, right? Because part of your mortgage every month that's paying down some principal. So it's not really a cost. It's kind of like a forced saving. So you want to back that out to figure out, okay, where am I actually? Like, what does my number actually look like?

17:30Christian:And then the capital investment side too, because hopefully you put one roof on, we're not doing it two years in the future.

17:36Becca:And that$11 ,000 does include the roof. The roof is in that average. The other thing is, I don't think we mentioned these, both of these homes are over 100 years old. Oh, wow. So they're old. They're beautiful St. Louis brick. Old but sturdy, we like to say. But so like we've done like tuck pointing and things like that, which again, like -

17:53Christian:You see our building. This is our hundred plus year old building. We like to say it's sturdy as well. All right.

17:59Money Guy Show Hosts:So the duplex is roughly break even. Talk to me about two opportunities. What's the opportunity for rental increase specifically on the duplex? Meaning are you at top of market pricing right now? And then is the St. Louis market from a rental standpoint increasing every year? Like do rents go up three, four, five percent on an annualized basis? Or are they pretty much flat?

18:19Becca:I would say there is an opportunity to move up a little bit. It might be the middle. No, I would say for what the amenities are. So they don't have central AC. So it's window units. They're good. They work great. Radiator heat. Radiator heat. So they're older units in that way. So I feel like I'm at the top end of rent. I would go up every year, and I do go up every year. But I feel like unless I made a significant investment to have central AC, or an HVAC system, then I really probably shouldn't be at the higher end of the market.

18:53Money Guy Show Hosts:Yeah, it's not going to move super quickly.

18:55Christian:And is it the duplexes or the quadplexes that would require 40 grand per unit?

19:00Money Guy Show Hosts:Two on the quadplex side.

19:01Christian:Yeah, okay. Okay, cool.

19:03Money Guy Show Hosts:All right, so on the duplex, we know that the rental increase is not going to be, it's likely going to be cost of living, inflation, maybe a touch below that, something in that ballpark. So then the second question we have, if we're thinking about this from an investment standpoint, is, okay, what's the capital appreciation opportunity, right? So when you bought the duplex, right now you have it listed as worth$260 ,000. How much did you pay for it when you bought it?

19:27Becca:I paid$211 ,000.

19:28Money Guy Show Hosts:So$211 ,000. We bought this like at COVID, like right around that time, right? April 2021. April 2021. And since then, we've seen like a rapid rise in the real estate market. We've seen it go from$211 ,000 to$260 ,000 over that time period. Realistically, what are the outlooks on this property increasing? Is there something happening in the area, the neighborhood, the geography that would cause us to become a much more highly valued property? Or is it likely that, again, it's going to be inflation, cost of living? I think, yeah, they're very stable environments.

20:01Becca:Mine's a little more stable. Yours is a little bit more growing. He's in an area of St. Louis that's very close. It's like our second largest park. But he's on the periphery of that. Still in the neighborhood. But it just keeps going down in terms of development. Like we've both had on our streets, like houses that have been purchased and completely rehabbed and things like that. So signs of positive growth and development.

20:24Money Guy Show Hosts:Yeah. So you think there is a lot of upward potential for the, let's just talk about the duplex. I want to do, let's talk about them individually, just the duplex, a lot of upward potential in terms of what the price could appreciate.

20:36Becca:My realtor thinks that it could go for 300 now. So 260 is conservative. So you've been very conservative.

20:41Money Guy Show Hosts:We're trying to be conservative. Yeah. Okay. Absolutely. Yeah. So it's probably worth more than$260 right now.

20:46Becca:I think it's probably worth like$285.

20:49Money Guy Show Hosts:Realistically, let's assume for this conversation, it's worth$300. Where can it go from here? Does it go from$300 to$350? Does it go from$300 to$400?

20:59Becca:Over time, yes. I don't know in like the next handful of years. I think I would say I would use St. Louis as an average, like in terms of like national growth for real estate and what real estate tends to go up. It's not – it's a pretty stable city in that regard.

21:12Money Guy Show Hosts:If we're looking at national averages of real estate increase, you know, on average, how much real estate increases every year? Sands the past couple of years? Roughly the rate of inflation. It's going to roughly keep up with inflation, somewhere 3%, 4%, depending on what's going on. And so we're thinking about these rental properties as an investment opportunity. Well, generally when people invest in real estate, they want one of two things. They either want cash flow. They want it to create some sort of income for it. then there's a yield to it, or they want some capital appreciation in the future.

21:45Money Guy Show Hosts:Well, what you've laid out for us right now, are the mortgages on these 30-year mortgages? Yes. On these, right? They are. So you've got these 30-year mortgages, so it's not really cash flowing. It's cash breaking even in terms of duplex. And then in terms of growth on the real estate property, what do you think is realistic? Well, probably around the rate of inflation over the long term.

22:03Christian:I want to hear more about the quadplex, but I also don't want to just get bogged down only in the real estate. Because I think that my outside, and Bo and I will do a deep dive after this meeting and kind of come up with some thoughts. We'll probably need to get a little bit more specifics on how much of this is expenses versus capital improvements. But I think because y 'all's income is so strong. Now, I heard a bird whispered in my ear that y 'all might even want to change how your income is structured with both of you working. So we'll want to talk about that too. but its current status income, I don't know that it matters.

22:39Christian:It's more of the time is the most valuable thing for you guys is because y 'all should probably have, y 'all have such a strong savings rate. These are multiple assets that are building. So we need to get to the bottom line of how much time is this really taking? And then how profitable is it? And then what are y 'all trying to do as a household? Because that all kind of interconnects.

23:04Becca:And if you, to be honest, we're flexible, I would say it's a blessing or a curse. We obviously built ourselves a lot of optionality here, and it feels a little debilitating sometimes.

23:13Christian:I'd heard, because what's y 'all's primary, if you were trying to put to one word, what are you hoping happens? Is it flexibility? Is it simplicity? Is it, what are y 'all trying to focus on?

23:25Money Guy Show Hosts:I heard it coast-fi a few times. I did hear that too. So I think actually both flexibility and simplicity are something that we're absolutely looking for, especially into the future. As our son gets older, we'd love to be able to spend time with him and build memories of him. Do y 'all feel in the weeds?

23:42Christian:I mean, I know y 'all make plenty of money and stuff, but do y 'all feel like you lay your head down and you're like, there's just not enough hours in the day?

23:47Money Guy Show Hosts:I think we did a few years ago. I think today and last night, not as much. Okay.

23:54Becca:It depends on the season. Like if we are like seasonality of like what's happening. So for example, like this is future looking, but like when something happens with the property, it's pretty all consuming and you have to think about it because you're managing contractors and doing all that. Looking at like, honestly, we normally lay our heads down and are like pretty peaceful at night. For me, my work can be very consuming as well. And so if there is something happening at work that's all consuming, then it's harder to sleep at night. But in general, like we recognize that we're in a really good spot and then we've worked hard to get to where we are.

24:24Becca:And if worse comes to worse, like we sell a property and we'll be fine, you know, like we or we'll make it work because even on one income, we would be OK. It's not necessarily where we want to be. But, yeah.

24:38Christian:Well, that's what that's kind of what I'm getting. When I said it doesn't matter, it's more of I'm trying to get you to choose a side on because, like I said, back to the speaking out of both sides. Do you want to be a real estate investor?

24:52Becca:So I think y 'all got good. Y 'all got good bones.

24:55Christian:I mean, but it's a matter of, because that's the thing. When you're talented at multiple things, you know, it's just, I'm watching some documentary and gosh, I'm horrible with names. But I found out this NBA player who's on, you know, Netflix's five, you know, that they do. He was like an all-star baseball player too. And he's like, I could do, I could have done either one. And he's like, I chose basketball. But I, and I think sometimes when you're gifted, you have to make choices and y 'all have good income, you have good assets, the other things. But do you want to be a real estate investor?

25:28Becca:So I think I'm open to what it looks like because I do like the aspects of like, and work, I'm a project manager and the real estate investing and managing projects, whether that's flips or, you know, in our case, like a rehab for units is very much like that. So I see potential in that. And I had thought about that very deeply, but now that we're like a little closer to where our investments are at, like over 500 ,000, I'm like, do I need to do that? Because to be honest, like if I told you like what my ideal day would be, it is not sitting in front of a computer all day. So real estate investing definitely has that draw of flexibility.

26:00But also like after having my son, I had some health complications or health flare-ups, we'll say.

26:06Becca:And right now I feel like I don't have time to like build in gym time, which sounds so simple. But it's either like before 6.30 in the morning or when I'm feeding my son for dinner, things like that. And so, to be honest, like a little more flexibility in my day, which real estate investing would lend to, but it also can be all-consuming as well.

26:24Money Guy Show Hosts:Tell me a little about your savings. I want to know about your savings rate. Sure. Tell me, outside of the real estate, where's your money going right now when you're building? So we are pretty firmly at 25%. I do 401k match, and I do get 10 % match. So I do that minimum right now. But then we max out IRA, max out my HSA. So we kind of both throw into that bucket effectively. And then we kind of just started. If you look, we just started our brokerage. I saw it on there. Yeah, so it's a little small.

26:55Christian:I was like, man, they had step seven. It sounds like they're thinking about the three buckets.

26:59Money Guy Show Hosts:Yeah, we were kind of like, I think we should do this. We should probably start. And then, go ahead. Your savings are?

27:08Becca:Yeah, I'm at 25%. He runs what I should be putting everywhere. So that's what I do.

27:13Money Guy Show Hosts:Did you max out your 401k? 24.5 for both of you in your 401ks? Right. And then you said you're maxing out the HSA. So that's like what? 87.50 this year or something like that. You wouldn't let me bring my tax cut in.

27:26Becca:No more papers for you. And then I have a 3 % match for work. Awesome.

27:31Money Guy Show Hosts:And then you're doing, you said you're doing IRAs as well? Yes. Just putting money in like traditional IRAs, non-deductible and building that up. Got some ideas there. Yeah, no kidding.

27:41Christian:Well, I do see a big, it's not a huge, but I see a rollover already.

27:46Money Guy Show Hosts:Yeah, well, I'll see some 401ks. Where's each one of your 401ks at?

27:51Christian:Baseball is back, and the first pitch is on Netflix. The New York Yankees, led by seven-time All-Star Aaron Judge, head to the San Francisco Bay to take on Rafael Devers' San Francisco Giants. This season kicks off with one exclusive opening night game. Watch MLB opening night. The New York Yankees versus the San Francisco Giants, live on Netflix. Wednesday, March 25th at 8 p.m. Eastern, 5 p.m. Pacific.

28:18Becca:Kayak gets my flight, hotel, and rental car right, so I can tune out travel advice that's just plain wrong.

28:25Money Guy Show Hosts:Bro, Skycoin, way better than points.

28:28Becca:Never fly during a Scorpio full moon. Just tell the manager you'll sue. Instant room upgrade. Stop taking bad travel advice. Start comparing hundreds of sites with Kayak and get your trip right. Bad advice. You talking to me? Kayak. Got that right. I'm at one nine. No, no. Who's the custodians? Oh, mine is through. Oh, wait, hold on.

28:54Money Guy Show Hosts:Mine's through Fidelity. Okay.

28:56Becca:Yeah, I know. I love that. Mine's through a census right now. Okay.

29:00Christian:So, Christian, you could roll that IRA rollover over to your Fidelity 401k, and then you would be magically delicious available for doing backdoor Roth contributions.

29:13Money Guy Show Hosts:Right. Is that the lucky charm? Who doesn't want to be magically delicious? This episode brought to you by lucky charms. That's hilarious. So that is something that I'm aware of, but I'm not too familiar actually how to do that. It's something that I've kind of told myself that I'd like to learn and understand more. because I think it's something, yeah, it's like, are we at that point even? You know, I'm not sure. And I know in the future, absolutely, this is something I need to do before, you know, before, you know, 40, 50, something at that age.

29:48Christian:Well, it's just an easy thing. Y 'all have enough income and it would just be another thing in the financial world of operations that allow you to boost that tax-free bucket because y 'all are still so young that the compounding growth on that, it would be incredible. I mean, it would make you think like a leprechaun. Keeping it on the theme. Sorry, Bo.

30:08Money Guy Show Hosts:We're running a real serious financial show here. Okay, so duplex is breaking. We've talked about that. Let's talk about the quadplex a little bit. What are the numbers in the quadplex in terms of net margin? So, yeah, you can see what I value it now is 270. And I think that's conservative. Is that real or are we doing the Beckett game? That is conservative. You know, it's a good trend here. and again, potentially up to$300 ,000 today. Would you pay for it when you bought it? So I bought it at 205, April of 2020. And honestly, it was literally as everything was shutting down, I thought this was either the worst or the best idea I've ever had.

30:46Money Guy Show Hosts:I have no idea. Let's go with it. Roll the dice. But I knew I wanted to do it. So I was like, it's now or never. I can do it.

30:55Christian:Y 'all made the most out of the pandemic. You bought real estate. You found love. You found love. Oh, really? Okay. Keep it going. I didn't mean to interrupt. No, okay.

31:05Money Guy Show Hosts:So I think I'm right about$40 ,000 rent for the year. And again, one of the units is an Airbnb, so it's a little more variable, but it's pretty average. And then I think it's mortgage annually with – taking in mortgage and insurance taxes is$25 ,000 a year. And then it operates about$10 ,000 a year, utilities and everything that we put into it, average. So it's netting you about$5 ,000 a year?

31:43Christian:And then, like you said, if we took out the actual principal payments on that, I bet it's even better.

31:48Money Guy Show Hosts:So this one seems pretty sweet. These two do not seem the same to me. No, it does require.

31:54Christian:It sounds like it's going to have an$80 ,000 capital expenditure if they have to rehab it.

31:58Money Guy Show Hosts:We would really like to. If we kept it long term, we would really like to do that.

32:01Becca:Absolutely, yeah. Because I think the rents would probably double on that side. Yeah. It's possible. Up to. Yeah.

32:07Christian:Oh, man. We're getting somewhere.

32:09Becca:Yeah, I know.

32:12Christian:it's almost like you could and i don't know i mean we'll have to crunch numbers but it's almost like you could take the proceeds from the duplex roll it into rehabbing double your rent there's some magical things that could happen here oftentimes we'll sit down with folks and they'll

32:28Money Guy Show Hosts:they'll be doing real estate and we'll be like hey you're you're kind of missing the mark you're you're focusing all your effort and all your attention over here when you're missing some stuff over here. With you guys, it's really tough because you're not missing the stuff over here. You're doing the 25%. You are building for the future. And that's what Brian was diving into. What is it that you want?

32:46Christian:Exactly.

32:47Money Guy Show Hosts:Do you want to be doing? Because like, yes, we could objectively look at the duplex and we can objectively look at the quad and we can provide some analytics around the best cost of capital. And I could likely say for the duplex, if rents are going to be dead break even, so there's no cash flow and capital appreciation is only going to be at the rate of inflation, there's a really good chance that a brokerage account will outperform that over the long term if you're just buying low-cost indices. So that's like a use of capital conversation. But you're already saving really, really aggressively.

33:16Money Guy Show Hosts:And so if real estate is something that you enjoy, that you find fulfillment in, that you want to have, you're kind of in that step seven of the financial order of operations where you get to do what you want to do because you want to, not because you have to. So that's where, we don't know what you, Like if you're thinking about maximization and optimization, we can talk through that. But I don't know. What do you want? I think we're at that crossroads really where it's just like, you know, we like your take on like how can we build more flexibility into our lifestyle? I mean, maybe a little bit more today, but certainly more and more as we age, as our son grows up.

33:53Becca:Yeah. So for me, we're both very risk averse too. So like, for example, if you ask him, when would you? He's like, 55 is the latest that I'll work the full time. For me, I would love to transition out of a W-2, full-time W-2, like ideally, like in the next five years, which would be great for me. And I do see real estate as part of our futures. Obviously, we bought it. We're not going to be like, I don't know, commercial developers by any means. But if we had a few more units, like we would love that. That would be great. Down the line, maybe. How's the income differential between you two?

34:23Money Guy Show Hosts:We're fairly close. Fairly close. So like if you went hard stop, no W-2 to real estate, there's a big chasm to make up, right? It's like almost$150 ,000 you'd have to figure out how to make up or budgetarily live off of one income.

34:38Christian:I do. You just said something. I'm slowly getting information, and I love it because it helps me paint the picture. Because you laid out that – because one of the things I don't want – I threw out the suggestion. You could potentially sell the duplex, take the proceeds. But y 'all's income is so strong. Now, I would challenge you. We still want to do a lot of the basics on the financial order of operations with your 401K, with your Roth funding once we get the backdoor structure set up. But if you all could fund, because I hate for you to sell a duplex. Now you're telling me we might want more real estate.

35:15Christian:You see how you're kind of sharing different visions? And I don't want to tell you to take away something that you won't be able to reproduce because you bought something for$211 ,000 that now is over$300 ,000. So that's why part of our job as financial advisors is because it depends is a word that carries a lot of weight is because you guys, and you're quickly realizing you've made such good decisions at a young age. There's not just one path to success and victory. There's actually thousands, if not even multiple thousands. And because y 'all have made such good. Now, the problem with people who defer and procrastinate, the thousands turn into one, into zero.

35:59Christian:Y 'all are the opposite. You're like my favorite books as a kid, the choose-your-own-adventure. And we just have to help you figure out what gets you the intersection of both the mathematics but also the mindset as well as the happiness that when you lay your head down at night, you go, So I spend my mornings and my days doing exactly what I want to do.

36:18Becca:And I think for me, it does mean like eventually going away from a nine to five job. Okay. Like I'm a very tech and computer focused in my day to day work. And I'd love more flexibility throughout my day to like, I mean, I have nephews and going to their stuff. If real, whenever our son has field trips, doing that. Like now it's like, okay, I have to like, I could find time to do that. And I have a remote job, so I could. but it's just like, anytime I do something like that, I feel like I'm taking away from the work that I'm doing. And so building in a little more flexibility, but the Choose Your Own Adventure book, like my problem was I read every adventure.

36:51Becca:She just did them all. She just got to go to page 48

36:54Money Guy Show Hosts:and then she went right back to page 27. Having a thousand chats is hard for me

36:57Becca:because I like them all. Yeah.

37:00Money Guy Show Hosts:How, with the Duplex specifically, how recently was it your primary residence?

37:06Becca:We moved in 2023. Yeah. So up until fall of 2023.

37:10Money Guy Show Hosts:So is your primary residence in 22 and 21 and 22?

37:14Christian:Two of the last five years.

37:16Money Guy Show Hosts:You're picking up one. Yeah.

37:18Becca:Okay. We've thought about that too.

37:20Money Guy Show Hosts:Because again, okay, if you're going to do real estate, similar as you do any investments, like not all real estate is created equal. Some opportunities are more attractive. Some opportunities are less attractive. Some opportunities are a better use of capital. Some opportunities are a worse use of capital. With the duplex, one of the things that I'm seeing is you bought it for$211. It's worth$300 now. So you saw roughly a 50 % run up in price over a very short amount of time. And you've already said not a whole lot is going to improve on this duplex over the near term because of just the way it's structured.

37:51Money Guy Show Hosts:So you kind of like – you know, Warren Buffett always uses the analogy. He used to walk around looking for cigarette butts that had one puff on it, one puff on it, one puff on it.

38:01Christian:Cigars. I can't remember if it was cigarettes or cigars.

38:04Money Guy Show Hosts:Nasty. Your duplex, right, had a really good puff on it, and you got that puff from 2021 to 2025. The question is, does it make sense to continue holding that, or might that capital better use somewhere else? Because you just said, if we were to have some sort of capital infusion into the quad and improve it, we could roughly double rent on that one. And it's also one that was bought for$205 ,000 and turned into$300 ,000, a 50 % rate of return, and yet it does have upward mobility. So if you're going to turn into real estate investors and folks that want to invest in real estate, you have to figure out, okay, well, how do I analyze each property in that sort of way?

38:42Money Guy Show Hosts:And you also have to recognize when opportunities exist, like, okay, if I'm going to do something with a duplex, man, I might need to do it pretty quickly because there's a clock ticking on me to be able to take advantage of this huge experience.

38:54Christian:Because it was your primary residence, so there's a chance we could exclude a portion of the game. The other thing, now look, you also, even if the timer ran out on us, you could do a like-kind exchange potentially too, where you have 45 days to designate and then 180 days to close on properties. And by the way, when you do those like-kind exchanges, don't choose one property because real estate is so shaky. You need to go find three to five potential properties to name in that 45-day period is what I always recommend to people. But you have options on this. because you really, it does intrigue me, Beau, in some ways.

39:28Christian:I know we'll kind of talk about plan of actions later and share that, but we've already heard from Eka that they want to do more real estate. So now it's like where's the most bang for the buck and what's the biggest opportunity in this moment?

39:43Becca:I think, I mean, quadplex tend to outperform duplexes anyway, and we have to upgrade the one that he has. And so we see ourselves having more real estate in the future, but I think before we were to buy another property, we would fix up

39:55Christian:let me ask you a lifestyle thing you'll have one child, any more kids? so that's something we've talked about

40:02Becca:that we don't know the answer to yet

40:04Christian:the reason I ask that is because also I noticed on your cash flow, y 'all spend $1 ,500 a month on so that goes into the cash flow analysis on how much income we have to replace, it's not necessarily $130 ,000 or$140 ,000 $20 ,000 of that might come off and if you have another child you're quickly realizing now there's even maybe this thing gets below six figures. Now, how do we maybe build that up somewhere else? Or if it's even necessary, because y 'all are, you're not, you're not spending every dime you make. Y 'all are very disciplined with your savings rate already.

40:38Money Guy Show Hosts:You've mentioned Coast Fire a few times. Walk us through some numbers. If, if you were to, if you were to actually be able to coast, have you done any of the number? Like, Hey, if we could save this much by this age. I'll be a Christian on this one. So I think, yeah, I've tried to look at it from a lot of different ways. Listening to advice from yourselves and from others that I can find. We've read several books as well. And I really think, especially as we age and as we pay off our primary mortgage and reduce daycare, I mean, if you look at what our spend rate is now, I mean, I think we could reduce it to like$4 ,000 a month, right?

41:20Money Guy Show Hosts:four to five would be fairly comfortable and I think even looking at retiring as early as 50 if I were to see I think the number of 2 or 2.5 million that would be to me an indicator like I think we're here, we hit our number but that's also something that I feel like is a little speculative, I feel like the horizon, our time horizon is still a little further out that things could change We might have another child. I don't know. And so it just feels like there's too many variables to like firmly say. But I think that at least is a good base for us to start with.

41:59Becca:Got it. Yeah. And Coast Fire for me doesn't mean like not having an income at all on my side. Like I could do a part-time job. Like also very flexible there, which is helping and hurting this conversation, I guess.

42:11Money Guy Show Hosts:Yeah. She said, I don't have to do – I could do these other things. I got all these – I can do anything. I can do all these things. I love it. I've already got some homework for you.

42:20Christian:That's what I've already, I've got ideas too, because it's one of those things where you're already saving 25%. You could, if we backed into the numbers, a lot of people think Coast Fire has to mean, and maybe technically it does if you're going to follow it to the definition, you go from saving 30, 40 % of your income down to zero. I always say, but somebody like you guys, you could go from 25 % to your changing lifestyle where you go off of one income. Because none of it says that you can't just save 10 % to 15 % to maximize the employer match and other things and still get some growth in there but still fulfill your goals of being financially independent between 50 and 55.

42:59Money Guy Show Hosts:What other questions do you guys have for us? I mean, my mind's already kind of racing on that. Because here's what's going to be – I already know what we're going to do. We're going to be like, well, they could do this or they could do this or they could do this. And she does really good with options. If we give her a bunch of options, odds are she's not going to do all of them. We'll be amenable to all those options.

43:16Becca:Yeah, I guess not necessarily a question, but things to factor in and prep for the show. They're like, what are some expenses that you anticipate? So the house that we're in now, its interest rate is more on par with where interest rates are today. We may, like buying another house may be an option. So in St. Louis, we may buy to like be in a better school district for our son.

43:38Money Guy Show Hosts:Which we have a few years to determine that. but it's something on the back of our mind for sure.

43:42Becca:We wouldn't really do a major, like I don't think a major upgrade. We just really want a second full bathroom because we host family for like multiple times a week. It's like seven people in one bathroom. And you would sell the existing home because it's not really, it's not rental type property. Yeah, yeah. Okay. Yeah, we've thought about it

43:58Money Guy Show Hosts:but we decided I think.

43:59Becca:Yeah, we would sell that one and then in the next five years we do anticipate we'll need another new to us car. I drive a lovely Ford Fiesta that wasn't made to go forever.

44:09Money Guy Show Hosts:Well, we both have 10-year-old vehicles paid off. I drive a Tacoma. It's also 10 years old. But her Ford Fiesta, putting the baby in the baby seat in the back, it's pretty tight. Especially facing backwards. He's really upset now. Is there a reason why you say new car in the next five years as opposed to like in the next five months? Well, we still have the mentality of we like to run them to the ground. Basically. You heard the part where you said your son's like crying when you put him in the bag. Did y 'all hear that? But rewind the tape real quick so they can. He'll face forward eventually.

44:42Christian:But by the way, I love, because I don't think this is public. Bo won't mind me sharing. I found out that Bo was putting on, he was telling me, you know, my child's diapers keep getting.

44:53Money Guy Show Hosts:Had blowouts every day. They're blowing out. And I'm like, Bo, you realize.

44:56Christian:And look, this is years ago. He's now a veteran. He has three children. This was on the first one. This was on the first one. So we all love to mentor each other. And I was like, you realize that is indicator one that you're putting on two small diapers. I was like, nah, man, I got a whole box. I got to burn it through. That's exactly right. The tightwad side of him is, and that's what I would tell you guys, I can already feel from you, y 'all aren't going to die broke. You're not going to die penniless. So you have to, we both, by the way, we were card carrying tightwads ourselves for the very beginning part as we're growing.

45:27Christian:But there was a time that I was like, my income's at a point in the way I'm living my life now. I'm still very good with money, but I'm definitely not a tightwad anymore. And I think you guys are probably in that transition phase right now. And when I meet tightwads that are financial mutants that are kind of trying to figure out what money cannot do for them, I would challenge you from a safety standpoint, from a quality of life, if your child is crying because the car is, you know, this is an exercise and not good for the family, you know, let's figure it out. You can buy a nice used car and probably solve that problem sooner than five years.

46:08Becca:I do think there's definitely a mental mindset shift in that regard to being less frugal. You're still good with money.

46:19Christian:I'm telling you, it's just that I've seen so many relationships where a lot of those, there's a fine line between financial mutant and financial miser, and you just have to navigate that. And a lot of those good behaviors that you're rewarded when you're younger of being a miser, it's great because it builds this awesome foundation. But as a couple, as y 'all are making these big decisions on who stops working, when do we buy a new car, do we go deeper into the whole real estate investor? You're going to quickly realize that all of this also has this umbrella of quality of life. And it's who do we want to be and what gives us fulfillment and happiness from this tool of money.

46:55Christian:Because that's all it is. It's just a tool. You're going to find out when you reach 3 million, 5 million. It doesn't feel any different than it did when we were getting our first million. We just got to now shape our life to understand our why and be the people we want to be.

47:09Becca:It's very helpful to hear from you because I feel like we feel that, but we're still getting around to it. You're doing great.

47:16Christian:I feel like I'm a coach here just chiseling barely around the edges because y 'all do so much stuff naturally good. Now, y 'all are a financial planner's dream. I will tell you. I mean, after this is because I see so many opportunities for you guys to fine tune this. And you also, and what's cool is it's not just a one-off, come on, making a millionaire. You guys have every year you're going to have, hey, but we wanted to do, we're thinking about doing this. Let's go run the numbers. That's why I love what we get to do for a living is because we get to work with our successful clients and kind of build this together.

47:51Christian:It's not just a one-off thing.

47:54Money Guy Show Hosts:And so what we're going to do is we're going to come up with some of the quantitative stuff. We're going to come up with some options. We're going to crunch some numbers. And hey, here's some stuff that you ought to think about that you should look at. But I've got some homework for you guys, and it's more on the qualitative side. I was just kind of jotting down some notes. If I were you guys, between now and the time that we kind of send you some of our thoughts, I'd do some research on both of your 401ks. You said yours is a fidelity. Yours is a dissensus. How good are the investment options inside the 401k?

48:20Money Guy Show Hosts:Are they robust? Are they diverse? because there might be a strategy where it makes sense to roll your IRAs into your 401k, zero them out, and open up a backdoor Roth opportunity. So now, all of a sudden, instead of y 'all just doing 7 ,500 into regular IRAs every year, you get to do 7 ,500 into Roth IRAs every year, and you can start growing some tax-free money. That's a boom shakalaka. That's a boom shakalaka is the technical financial term for that. The other thing is you guys really need to sit down and talk about what is it that we want. You're now at the place where you get to make financial decisions, not so much because you have to, but because you get to or because you want to, but you have to define that.

48:58Money Guy Show Hosts:Do we want to do real estate? Do we want to manage this? Do we both want to work? Do we? So you need to have some conversations around that. And in those conversations, you figure out how deep you want to go into real estate. Is real estate a job for you? Or is it, hey, part of our financial life is that we have some real estate properties? Because those are two very different things. How do you want to approach it and how do you want to attack that? And then I just put the last thing here. I think it'd be worthwhile for you guys to sit down and calculate the cost of frugality. At your income, at your savings, at your assets, you could go buy a new car tomorrow, right?

49:37Money Guy Show Hosts:You're at the place where you could do that. But you have this like mentality that we want to drive it all the way until the wheels fall off. And that's okay. Again, money is nothing more than a tool that allows you to accomplish the goals that you have. But are you doing that because it's what you want? Or are you doing that just because something's hardwired in you guys? Because if there are things, would being in a newer automobile give you more peace of mind, make family road trips more fun? Whatever the thing is, is there a cost that you are paying unnecessarily, needlessly, to be as frugal as you are?

50:11Money Guy Show Hosts:Because it's okay to graduate and grow out of that. So a lot of conversations for y 'all to have and a lot of calculations for us to do.

50:19Christian:Yeah, the big thing is because I love, immediately, I mean, kudos to y 'all, y 'all superpower. I was in love with y 'all the first five minutes. I mean, when I heard the way y 'all met and then the conversations of what y 'all own, I'm like, this is the coolest couple out here. So you guys are crushing it.

50:36Becca:Thank you. Also, the like is mutual. So thank you. You guys are great. We can delete that. We're happy to delete that. Great.

50:44Money Guy Show Hosts:Awesome. Thank you, guys. Thank you. Thank you. Brian, what a great conversation we had with Becca and Christian. For two folks in their mid-30s, they're kind of crushing it.

50:55Christian:Well, I didn't even hide the fact that I thought I loved these people. I mean, the fact that the way they met, and then they started talking about personal finance, and they both had rental properties. These are my folks right here. It kind of all went together nicely. I will tell you what I think is amazing about them is not only did they have a personal finance focus, but they got into real estate. And sometimes it's better to be lucky than good. Because, man, oh, man, did things go a little different once you and I crunched the numbers than what we even kind of laid out in the show for them about their rental property.

51:28Money Guy Show Hosts:Yeah, it was interesting. As we were recording, I was kind of, I don't want to say like soured on them, but there was not like an incredibly compelling story to both those rental properties. But then we began to peel the curtain back a little bit and actually run the numbers. And what we found was absolutely fascinating. So what we did is we took the information they shared with us. We kind of went back to the drawing board. And if you remember, they told us total rents coming in. For the duplex, it was just a hair under$26 ,000,$25 ,800. And for the quadplex, it was just a hair under$40 ,000,$39 ,900.

52:00Money Guy Show Hosts:And they said that realistically, they were kind of just about breaking even. And while that may have been true from a cash flow perspective, I would not describe either one of them as break-even investments.

52:13Christian:Yeah, I mean, what I think is interesting, if you were to ask me while we were recording in real time with them, I was like, we're going to tell them to sell the duplex. I kind of knew that they need to invest more into the quadplex. If we can double the rent, let's make some magic happen here. But also, we couldn't definitively say that because there was a lot of cloudy or muddy water there. Because they didn't know how much was their mortgage payment that was just paying back the mortgage. They didn't know how much were capital improvements, like when they put roof on or any of the repairs that were going to, in the long term, be better for the investment.

52:47Christian:They weren't getting a clear reflection on what the actual cost or operating expenses were or what the return on their equity really was. But when we kind of looked at this, it was like, oof. I mean, it kind of blew my mind on how good, not only— because remember, let's focus on this is unique. Where they live, there's actually duplexes and quadplexes. When they brought this during around the COVID era, they got super low interest rates. They've gotten really good rents compared to what their initial low-cost purchase. This stuff is kind of amazing when you actually peel back the numbers.

53:24Money Guy Show Hosts:Yeah, when we stripped it back and looked at the numbers, this is what we found. When you pay a mortgage, part of your payment goes to principal and part goes to interest. When you're thinking about the cost, it's really just the interest cost you want to factor in. Because principal payments are sort of like a forced saving mechanism. You're saving it inside of the equity of the property. So when we just look at the interest expense on the duplex, remember the rate was 2.75%. They were spending about$5 ,600 in interest. And for the quadplex at a rate of 3.625%, they were spending just a hair under$6 ,500 in interest.

54:01Money Guy Show Hosts:So the money going towards the principal was sort of like this forced saving. So even though they weren't necessarily having a ton of cash flow come their way because the mortgage payment and the rental payments were roughly equal, it was looking pretty good. So from there, we said, okay, well, let's look at what the average operating expenses are. Let's take the capital expenditures out and only look at the operating expenses. And what we found was for the duplex, it was operating on a year-over-year basis with about$11 ,000 of expenses. And for the quadplex, it had about$16 ,500 of non-capital expenses.

54:37Money Guy Show Hosts:So when you continue following that down and you look at how the numbers played out, the actual net profit on the duplex came into just under$9 ,000 a year. and then the quadplex came in at$16 ,900. And so when you look at these properties, now we know what the actual dollar figure of return is. We have to compare that to the actual capital investment or the equity they have in the properties. And if we adjust the values of the properties closer to market value, because look, me and you love being conservative. We do it all the time. But I would argue in the world that they were living, they were perhaps even a little overly conservative.

55:18Money Guy Show Hosts:Agree? Disagree? For sure.

55:20Christian:I mean, I already see the numbers here, but being a math nerd, I mean, we're going to do this off of return on their equity, not their initial investment. The number would be even bigger if we base this off of just what the down payment was on their initial property because this was levered debt. But they have$100 ,000, like the duplex,$100 ,000 of equity right now. And by showing right here, they're making profit of close to$9 ,000.

55:45Money Guy Show Hosts:9 % yield on their cash.

55:46Christian:9 % yield on that. That's pretty incredible once you strip out what's capital investments, you strip out all the principal payment on the mortgage, and you look at the quadplex. I mean, they've got$125 ,000 of equity. You can quickly see that they've got profit of$17 ,000. Yeah, that's like a 13.5%. And here's what's even so wild for me. As I already alluded to, I would have told you we were going to say sell the duplex. But after seeing these numbers, we can't do that.

56:15Money Guy Show Hosts:You can't.

56:16Christian:It's too good. But they told us, because there's something that we need to at least address, is that they said, hey, if we invest in this quadplex and we put approximately$80 ,000 into this, we could double our rent. So I want you to kind of internalize what that means is that this thing that already is at 13.5%, if we could just put a little bit more money into it, we could double the rent, which would easily put their rate of return on equity over 20 % a year.

56:51Money Guy Show Hosts:$16 ,000 into an$80 ,000 investment. That's unbelievable. It's a 21 % rate of return on that. They're like a credit card company. They have to do it, right? It's too compelling. They have to do it. And so the question that the homework that I would give for them is they need to have a conversation. Okay, what do we want? Obviously, we were wondering if there was a lot of merit to either one of these properties. We have now discovered that when we actually look at the numbers, they are both incredibly compelling investment opportunities.

57:18Christian:So don't sell either one of them.

57:18Money Guy Show Hosts:So it doesn't make sense to sell them. They need to figure out, okay, well, what do we want our lives to look like? Do we want to add on to our real estate? Do we want to be real estate managers? Do we want to hire some sort of management company? Because I would argue at the numbers that they have, they kind of have the freedom to choose. They can pick and choose how they want to interact with this and what they ultimately want their wealth building journey to look like.

57:39Christian:Well, and also, they ought to go ahead and try to figure out if they can come up with a plan to do the improvements. That's right. But I think the good news is they have a big shovel. They have a really good income coming in. They have a lot of margin separation from what their living expenses are, from what they bring in. I think that within less than a year, they could pay for those improvements on the property, on that quadplex in the first year, and then get all the fruit, all the yield off of those improvements. So super powerful stuff. I thought it was valuable. I think there was another question, Beau, and I want to know what we put together on this.

58:13Christian:What does their retirement look like?

58:15Money Guy Show Hosts:Well, so again, one of the things we say that makes a lot of sense is they ought to figure out how did they come up with a capital to improve the quadplex. Like that makes sense. And one of the ways they had talked about potentially doing that was backing down their savings, kind of doing like a little bit of Coast Fi thing and saying, okay, what if all we do is just the 401k? And there's a, if I put in 10%, I get a 10 % match. What does that look like? How does that play out? Well, what we found is if they do that and they only save up to that 10 % and then they get a 10 % match, that's going to be a total of about$22 ,000 a year going into the 401k.

58:48Money Guy Show Hosts:Well, they already have$527 ,000 of liquid investment assets saved up. Just saving that, and if we assume an 8.5 % rate of return from now until they get to retirement, by age 55, they'd have almost a$4 million portfolio, not including the real estate, not including those assets. If they did this all the way out until age 60, it's over$6.2 million with just Christian saving that 10%. So again, they've done a lot of the heavy lifting early on that gives them tons of flexibility and margin to figure out how their future should look.

59:24Christian:Well, if you look, even for my inflation trolls, that's still for 55 present value of about$89 ,000 a year, or it's 60 years age, the equivalent of today's dollars of close to$120 ,000 a year. That's$10 ,000 a month. I love it. I mean, they have, talking about poster child for why if you get in early and do it often on saving and investment. You get lots of flexibility, lots of opportunities. So they are going to be a good definition of good decisions on real estate, good decisions on investing early is gonna allow them to have this coast opportunity and still check all the boxes on what they wanna do financially.

1:00:03Money Guy Show Hosts:So a few pieces of homework items I have for them. Number one, figure out how we come up with the capital for the$80 ,000 to improve the quadplex. Number two, figure out when it comes to real estate, what do we want our life to look like? how actively involved we want to be, how much do we want to expand, how much we want to add to it. And then number three, I think that would really be helpful for them to think about is they're going to have options earlier on in life. We've already said the way that they're going to be saving from a liquid standpoint is in their 401k. So if they leave the workforce before age 55 or before age 59 and a half, they are going to have to figure out how do we bridge that gap, right?

1:00:38Money Guy Show Hosts:If we're saving all in qualified assets and we want to leave at 50, we might need something to get us from 50 out to 59 and a half. Maybe that's real estate income. Maybe that's some sort of other passive income. But I think they are so far ahead of the curve at this point, they ought to begin thinking about what that looks like.

1:00:54Christian:Yeah, those taxable brokerage accounts is going to probably be able to create a nice bridge account in there too. But what an awesome couple. I mean, I think I led with it. I quickly knew I loved this couple just from hearing how they met and so forth. And I just can't wait to see what the future builds for them. If somebody else wants to come on Making a Millionaire, where do they apply?

1:01:14Money Guy Show Hosts:Yeah, if you'd like to be a guest on Making a Millionaire, you can go to moneyguide.com slash apply. Or if you want to check out any of our tools and calculators, you can go to moneyguide.com slash resources. Becca, Christian, thank you.

1:01:26Christian:This was an absolute pleasure. We loved creating this content for you, and hopefully many out there in our financial mutant universe are going to get a lot of benefit of this. I'm your host, Brian, joined by Mr. Bo, Money Guy team, out.

1:01:42Money Guy Show Hosts:Making a Millionaire is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners at Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice.

1:02:12Money Guy Show Hosts:All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of Abound Wealth Management. Thought Sweetgreen was just salads? Think again. There's a new way to do Sweetgreen. Wrapped and ready. These handheld wraps pack bold flavor and 40-plus grams of protein into something hearty, satisfying, and built for life on the go. From craveable sauces to satisfying textures, they're designed to keep you going without slowing you down.

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