45 Rentals and $0 Debt: The Money Mindset Shift That Made Me Financially Free

0:00If you've ever told yourself, I'm just not good with money, today's episode might completely change that story. Our guest Liz Carroll once believed the same thing, but she did the hard work to rewrite her money mindset, and it helped her and her husband build a completely debt-free real estate portfolio of 45 rental properties. Yeah, and Liz didn't come from a finance background. She worked in IT sales. She's proof that you can create financial independence by shifting how you think about money first and then how you use it. Whether you're buying your first property or you're trying to get control of your spending before you invest, this episode is going to help you bridge the gap between mindset and math.

0:45Liz, welcome to the show. Thank you so much for joining us today. Thank you, Ashley. Thank you, Tony, for having me. I'm very excited to be here. And it's fun to think back of the rookie days because it's been a while. Well, Liz, I want to start at the very beginning. You've said you used to think that you were bad with money. What did that look like in your life at that time? Well, for me, it looked like I had been bailed out on some credit card debt from my mom while I got in a little credit card trouble in college, which today doesn't sound like a whole lot of money. But back then,$1 ,000 with a maxed out credit card felt like a lot.

1:24and I'm talking about 1989. So this was a long time ago. And then when I got married, you know, I had heard I wasn't good with money. I had heard that a lot growing up from what started when I was 12 and had some money stolen out of the ice rink locker, which I don't know why a 12 year old at that time was bringing$40 to the ice rink, but I had all of it stolen. I just felt like I wasn't good with money. I had made some money mistakes in losing money and or having it stolen from me. And I just had heard you're not good with it. So I started to believe that I started to believe that I wasn't good with money.

2:08And I then proved it because I got into some more credit card debt. And then I had some car trouble. And at that time, my fiance now husband, this is, you know, we've been together 38 years now, paid for all my car repairs. And I just was like, I don't want to be in this situation. I don't want to be the one who doesn't understand money. So when was that moment in time where you decided to take action and actually change things for yourself? And what were those first action steps you did? Well, it really happened a little later in my life. So it was about when I was 30 years old that I just was like, I can't do this anymore.

2:48So we had already been real estate investors at that time. And I still felt like I wasn't good with money. And we had actually even built a big home. We had done so many, we had made many money moves at that time. And I we got a little ahead of ourselves. So I felt like I was on a treadmill that was on number five. And the speed, I just couldn't keep up anymore. And we had two little kids. And so at that time is when I read the book, financial piece by Dave Ramsey. And a coworker had suggested it to me. I had a great career. I was making good money. I just didn't feel like I was getting ahead.

3:31I felt like I was drowning. And that speed, I couldn't keep up anymore. So I needed to have some relief. Liz, let me ask, because when we talk about being bad with money or being good with money, smart financially, I think it can kind of take a different meaning for different people. So for you, How would you define the difference between someone who is good at money and someone who's quote unquote bad with money? Oh, I love that question. And it really comes down to your own personal thoughts of what you think. If you're feeling like you're getting ahead, meaning you've got money in the bank, you have the opportunity to make money moves, or that as soon as the bill comes in, you feel like you can easily pay it.

4:19The other thing is that you're investing for the future. I mean, I grew up in a time that it was very important for us to put money aside for our future. Not that it isn't now. It's just that it was a little bit more ingrained at that time. And I think to add to that, and Asha, I want to get your take on this as well, but when I think about that for myself, I think there's like three buckets, right? It's your ability to cover all of your day-to-day expenses, your ability to have some money saved, whatever that number may be, for bigger expenses in the short term, right? your emergency funds, saving for your first house, buying a car, whatever it may be, but those things that aren't necessarily day-to-day expenses, and also having assets that build for your future, right?

5:03So day-to-day living, bigger short-term expenses, and then long-term thinking. And if you're kind of checking all of those boxes, and to me, you're in a good spot. Ashton, I'm curious for you, how do you define being good with money? Is it different from what Liz or what I've said? Yeah. I mean, the biggest thing for me is just financial security. and when that moment in time happens or an expense comes up where you're not panicking and feeling like the world is ending. And I think the first time that I really ever experienced like not having that feeling when I finally felt like, you know what, I have a sense of security.

5:37I've been so good with my money. I was in Florida and I had changed like our plane tickets somehow. And the way that I changed them, it ended up our flight home got canceled. And I didn't realize it. And I went to check in 24 hours before our flight and we did not have tickets. And I called and it was going to be very expensive to fly our family home. And in that point in time, I realized like, okay, I have savings. I don't want to spend the money on this, but it is okay. it is not the end of the world. And that right there was like what I realized why I wanted to be financially secure and why I was doing certain money habits to actually implement that, to have that security was for moments like that.

6:28And since then there's been a ton of other times, like, you know, like a$30 ,000 tax bill one year, you know, like there's all these things that will happen and I don't want to have to stress about them. So that's like what motivates me to be mindful about money and making sure that I have my reserves in place that I'm spending within my means, but I'm also creating, you know, different income streams to support income coming in. So I think those are like the three big buckets for me is diversifying my income, you know, being good, you know, living within my means and then just like having savings.

7:04Yeah. And as you mentioned this on the podcast before, but it's like, if you have the money to solve the problem that it's not really a problem. And I love when you phrase it that way, because it's like, if the money's there, just spend the money to get it fixed, right? And you can move on with your life. So Liz, going back to your story, you talk about this point in your life, you got some young kids, you guys are making some progress, but I guess what actual steps did you take to convert yourself from that person that, hey, I don't feel like I'm good with money. So like, okay, now I actually feel like I've got a good handle on like, what were some of the tactical things you focused on to make that transition?

7:34Well, we sat down and we created a plan, Really, it came down to that. Now, I don't want you to think that it was some elaborate plan. At that time, it was a yellow pad of paper when we wrote down three things that we really wanted to do. One, we wanted to live completely debt free. So that was number one. Number two, we wanted to college educate our children. We had two children. Our parents educated us and we felt that it was our duty to do that for our children. And then three, we wanted to create enough passive income to be able to make work optional by the time we were 50. So when I was 30 years old, our youngest was two at the time.

8:18And so that would coincide with, on a standard track, her graduating college at that time too. So my husband and I would then be able to decide what we wanted to do or maybe not be so pedal to the metal and we could lower the speed on that treadmill we were on. And so that's what it was for us. It was the three things. That became our guide, guiding our guardrails, right? That became our destination of where we were going. and then every little decision we were making going forward from that time, was it getting us closer to the goal? And again, those goals were simple. There were just three things that we wrote down that we wanted.

9:01We didn't really know how we would do it. We had already been real estate investors and so it made a lot of sense that real estate would be part of that journey for us. Well, Liz, we're going to take a short break, but when we come back, I want to hear about that first rookie deal that sparked it all. We'll be right back. You ever head out on a trip, lock your door and think, cool, my most valuable asset is now doing absolutely nothing. Because while you're off traveling, your home is just sitting there, quiet, empty, not contributing, which feels like a missed opportunity considering it has solid Wi-Fi and a very comfy bed.

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11:44Check it out at rentready.com slash biggerpockets. That's rent, R-E-D-I dot com slash biggerpockets. Okay, we are back with Liz, and we talked about Liz's money story, but now we're going to go into Liz's rookie deal. So you started investing just three months after you got married. Tell us about that first deal. I had we got married in 1990. I was 22 at the time and we moved states. So we moved away from California, moved up to Spokane, Washington. And my husband and I at that time, I had already taken a little real estate course at the community college after college. But the we were interested in real estate and we got up there and we were like kids in a candy store because things were so inexpensive comparatively to where we had moved from.

12:39And so my husband, they had these like throwaway newspapers that were called like the little magazine called like the Nickel Nick or something like that. And it was, he found an opportunity for us. And we were like, what, how could that house even be? How could there even be a house for less than you could buy a car for? So we ended up buying a house where we identified it. It was$13 ,625. And the owner was willing to carry the contract because that was the other thing. So the owner was willing to carry the contract and he needed$1 ,500 down. And we were like, we don't have$1 ,500. I'm 22. I just that like previous week had turned 23.

13:26and so I called my dad and I said dad I I we figured out how we can pay you back within this minute time so it was like three months we could get him paid back and so my dad sent us the money for us to put the down and then we rented that house out I I can't remember the exact amount of rent but it was like a one bedroom one bath house it was tiny and it was white with a pepto bismol pink trim. It was a cutest little house. It was tiny. And so anyway, the tenant stayed in there. This is one of the first, the only houses that we've ever bought where the tenant actually stayed. And so he rented from us for 18 months or so.

14:11And then we put$900 into the whole property. That's it. And then we ended up selling it about 18 months later for$18 ,000. So we thought we would done so, it was like amazing deal, right? Liz, we talked about your personal finance foundation a lot, but as you go into this first deal, you mentioned like, hey, we didn't have 1 ,500 bucks to cover the down payment. As you've grown your portfolio, looking back, do you think it was a smart move to jump into that first deal, given that you guys maybe didn't have a whole lot of discretionary cash at the time, but obviously it worked out for you guys?

14:51or looking back, would you have waited to maybe buy that first deal? And to give some context here, the reason that I ask that is because sometimes we do have folks who are in the rookie community who are looking to get started where there is a good deal that presents itself, but taking that deal down would maybe stretch them a little bit more financially than what they're comfortable with. And I think they're asking themselves that same question, like, do we pull the trigger or do we wait until we've kind of built up this strong financial foundation? So looking back, would you have done it again?

15:19Did you feel like it was the right move? Well, I would say yes. I think it was the right move for us for sure. It was a little risky. In fact, our accountant, because we ended up doing a couple more deals after that, our accountant set us down and was like, listen, kids, he was, at that time, he was a middle-aged man, and we're in our 20s, and the accountant's like, okay, kids, I think you guys are getting a little far out there. You might want to settle down. And so, but we were living very lean, I will tell you. Now, that was a long time ago. Our incomes were very different at that time. I think Dan was making somewhere around$36 ,000,$40 ,000, and I was making$22 ,000 or something like that.

16:03I mean, it was ridiculous. So the dollar amounts are really different that we're dealing with. Now we're adding zeros, but it was just a good thing for us to learn from. We cut our teeth. the actual risk was pretty low. Does that? And I think that's the key part of it is the risk associated because I mean, we're talking about, you know, less than$14 ,000. Like you said, it's a car payment. So the risk associated with that specific deal was low. But I think it's an important question because I think there are a lot of people who are listening that want to get started but feel like their current financial situation may be holding them back.

16:40And there is some truth to that. Like if you're, you know, if you're super upside down on every single bill you've ever had, then probably not. But if you're in a similar position to Liz, then maybe it makes sense. I think one follow-up question to me, because we're going to get into how you scaled your portfolio, but something you mentioned earlier in the show was that you and your husband made the decision to build your portfolio with no debt. And Ash and I talk a lot about Dave Ramsey, and we agree with everything that he says on the personal finance side. We tend to disagree with him when it comes to debt on real estate.

17:09So why did you and your husband decide to follow Dave Ramsey, not only for the personal finance, but also for the real estate investing side? Yeah. Well, thank you for that. Because it wasn't that way initially, I want you to know. So we were following the personal for a long time and really wanted to live debt-free. However, that didn't mean our real estate portfolio was debt-free. So there was a time when we became debt-free, meaning our mortgage-free, meaning no car payments, all those kinds of things. However, we kept debt in the real estate side. And there was a time about a four-year lag to where we made the decision that once we became personally debt-free, we were also going to switch the real estate portfolio to being completely debt-free.

18:02So there was a time that it wasn't like that. So, however, we sat down and decided very strategically that it's time for us to be debt-free real estate investors because we were getting to that time in our careers where we were going to be stepping out of them. So we wanted to have that security of having a debt-free portfolio since we were leaving our W-2 jobs. When you made that decision, did you look at this as more an emotional decision? Or did you actually sit down and kind of run the numbers? So when I think of paying off a property, I'm outweighing, am I going to, could I take this money and pay off this mortgage?

18:49I'll get more cash flow on this property. Or could I leave this mortgage on the property and go and take that money and go invest into another one? What was the reasoning, the thinking behind all of that? What did you actually ask yourself and what questions should a rookie ask themselves when they're deciding if they should pay off the properties or not? Well, for us, it became flexibility too. It was emotional for sure. We didn't want to owe anyone anything. And I would say it was more me than Dan. I really wanted to have a debt-free portfolio. And there were some deals that were coming along in this window of time, back a few think about from 2010 to 2000.

19:31So there's a few things I kick myself on about that. However, I wouldn't change it for anything now to being a debt-free real estate investor. So we did do math, but we also talked about the emotional energy associated with being debt-free real estate investors. And there's another component also. It offers so much more flexibility when you don't have the debt on the properties. And that has been really important to us also as being great and grateful landlords. That's important to us to have that flexibility. I think one thing too is you have less properties, so you have less to actually manage.

20:18So if you would have kept those properties, kept debt on them, went and bought more properties, that in a sense is just more work for you. Because now instead of 45 properties, you have maybe 100 properties. And it's more time, more energy having to put into your portfolio. Even if you were to get a property manager, that's still asset management. Where in reality, if you are looking to pay off your properties, you could look at, maybe it makes sense just to pay off the properties I have now. And I'd actually have close to the same amount of cash flow if I went and doubled my portfolio because I paid off all of these mortgages.

20:56So I think this is a great example and something we don't talk often enough about on the podcast, too. Ash, it's a really smart point, right? Because as you're talking, I'm thinking about this. It's like say that you went out and you built over the course of two decades. Say you build a portfolio that's, I don't know,$2 million, but it's fully paid off, right? You put everything on like 15-year notes. You paid it down aggressively. took all your extra cash, paid it down. Now you have$2 million worth of fully paid for real estate. Even if you went out and say maybe you refinanced and, or maybe even got like lines of credit for 50 % of that, a million bucks, you took that million bucks.

21:32And even instead of going out and buying more real estate, if you just lent that money to other real estate investors, you still have your portfolio, still the same management, but now you're still earning some money on that equity. Like there's so many different options you have when you've got all that real estate paid for. And we just interviewed Devon Canard, who's a professional private money lender. And he was saying, this is probably the best return you can get in real estate is just lending money to other people. So if you can combine both of those, paid off real estate, taking some of that equity and using it to go out there and lend to other people, you get the best of both worlds.

22:03Now, Liz, I want to transition to actually the mindset piece of this. And you do a lot of mindset stuff and help other people get motivated with their money and change how they think about money. So what do you see for maybe even yourself or, you know, rookie investors that are getting started? How should they plan for the future and kind of change their money mindset that way? Well, there's part of it is just the belief and being able to shift from believing like where I did was that I was not good with money and being able, I'm amazing with money now. I like, and it's not that hard. That's the other part that I think we all have to come together and notice how it's intentionally difficult.

22:50Does that make sense? Like the marketing and things that we hear out there make it so that money is so complicated. And I think that money mindset and the money, the things that we do and as real estate investors, I mean, it's not that much more than a fifth grade math education. So I think that's the part is so many people think I can't do that because I'm not good at it. Well, we weren't good at it either when we first started and we still make mistakes today. I think that's important to know also is that we took a break for a few years with our raising our children. And then we've come back.

23:25We've tried all kinds of different things when the mindset is like, what's the worst that could happen? and what is, am I willing to take that risk for the upside? So that's where it's like, make sure you know your math, but also where is that, where, where is that inside you? Like, what's the worst that could happen? And would you still be okay? Like I've coached many people that have had bankruptcies, but then come back to do really amazing things. And so with money, and that's where I think that that's where it's the, it's the knowing what to believe in yourself. And that's the mindset part.

24:10Yeah. For a rookie investor that's getting started now, what are some like maybe action items or different ways they should be planning for the future, whether it's just with their personal finances or with investing journey, what are things they could be doing to actually plan out what they want their future to look like? Well, I think it's important to pause and really get intentional. I mean, I think that's probably been the secret sauce for us is that we were intentional all along and very mindful with how we were going to do this. And also, we allowed ourselves to make some mistakes. And we've made definitely mistakes along the way.

24:47The other thing to plan, though, is that we have always lived below our means. Ever since we've made that shift in 1997 when we created our plan, since then, we have always lived below our means. And the other thing that we didn't do is we didn't take any money out of the real estate business. So that is, we stayed in our W-2s long enough until that real estate portfolio was kicking out enough cash for us to step out of our IT sales careers. So we didn't try to get out too early. Does that make sense? So we kept the money in the business and let that money grow. And that's what helped us pay down properties as well.

25:31So that's the setup. Yep. There are so many advantages to keeping your W-2 job or still running your small business rather than just quitting and going full-time real estate investor. First of all, you can get better financing on deals. You also have a better sense of security because you still have a W-2 to pay for your expenses and you're not relying on that next deal coming in to actually feed your family. And I think a couple of years ago, the real estate, there was a lot of hype, a lot of people talking about like, it is possible to quit your job and become a real estate investor. And the deals were a lot better, a lot juicier, a lot more meat on the bone at that time.

26:16And now I'm seeing the shift of more it becoming harder and harder to actually leave your job. Even some people going back to jobs just to have that sense of security after those few years of really great deals coming in and people making a lot of money in the real estate world. And now it's just more difficult to do. And I think that has to be rephrased, that it is so much harder to leave your job. And even if you do find a way to leave your job and to live off your real estate income, that you really don't have that security blanket anymore. And I think that's something you need to think about is not only, okay, I have X amount of cash flow.