Q&A: $120K Farming Side Hustle, When To Take Profits, & Income Versus Growth Investing

22:19Robert Croak:I would not cash out of these retirement accounts and use that to get the land. You're saving 20 ,000 a year right now. You said you're pretty good at this. I'd wait around probably a year and a half to three years and just move at the speed of cash. I would just move at the speed of cash. That doesn't mean you're going to get all four acres done immediately. It means one acre is going to get done the next year, another acre is going to get done. What's going to be cool though, is by the time your fourth acre is finished, because you're moving at the speed of cash, the first acre is going to start spitting off, you know, 20 to 30 ,000.

22:51Robert Croak:So, you know, a couple of years are going to go by here, but that's, that's my perspective. I wouldn't go into high interest debt on this. I wouldn't cash out retirement, but what would you do, Robert?

22:58Austin Hankwitz:Yeah, this is a wonderful question, but a scary question. And you did really well at covering it from a tactical perspective, but John, I've been doing this a very long time, decades and decades. And I have seen so many people that have the drive and the entrepreneurial want to be able to go into their expertise and go out on their own too soon. And they end up going backwards. So my biggest fear here is you said that these acres are going to take a couple of years to mature to where they're really profitable. So that means you've got a couple of years of carry cost. You've got to water these, you've got to till, You've got to keep the grass.

23:36Austin Hankwitz:Whatever you have to do for maintenance is going to be an additional cost that I don't think you're set up for financially to be able to do without completely depleting all of your cash. So you have to ask yourself this one question if you're not going to follow Austin's blueprint. If I do all four acres immediately, if I buy everything to do this and set it up and I run out of cash, will my uncle provide me more cash? because in the beginning, what I would do is say, hey, Uncle Bill, or whatever his name is, you're helping me with the down payment. Can you also give me a low interest loan of$25 ,000 to get me to year three, something like that?

24:14Austin Hankwitz:So I would look at that. Or if you're not sure what other options you have, I would go out and look and see what low interest loans are out there. I did a little bit of research and there is a down payment program where you can get these really low interest loans for new and beginning farmers with smaller farms. There's a farm ownership program that has some loans that it looks like they're around 5 % interest rate. So I would check all options rather than just depleting all your cash because here's what happens. So many people, whether it's farmland, buying their first restaurant, buying the food truck or buying a duplex, they deplete all of their cash, then they run up all of their credit cards and it takes longer and costs more, then they end up going back to zero and a lot of times failing.

25:02Austin Hankwitz:Now, I love that you want to do this. And I really hope you figure out how to do it because it's awesome and everyone should own land. But I just don't want you to go broke in the process. So I hope this helps.

25:13Robert Croak:Yeah, I think the biggest takeaway from both of us here, Robert, is our friend John should be moving into the next chapter of his life from a place of strength, right? He's got the money saved. He's got the line of credit if he needs it. He's got, you know, the support of his uncle, he's, you know, he's moving at the speed of cash or whatever makes sense for him in his situation. He's not doing it from a place of scarcity of, I got to run up my credit cards. I got to borrow against this. I got to ask this person for money. I like, don't do that. Right. That's, that's just a recipe for disaster.

25:45Robert Croak:John, we're rooting for you, man. This is a really cool situation. I'd love to know what you're planting. That's netting 30 ,000 per acre. Cause I feel like a lot of people are curious, but really cool stuff, man. And that's, that's awesome. So our next question comes from Steph G. Steph says, long time listener, first time writing in. I just started a new job and my company offers a 401k and a Roth 401k trying to decide which option to go with. My husband and I are both high earners. We're both making above a hundred thousand. Specifically, I make 185 and he makes 132. We max out our Roth IRAs every year and know that soon we'll likely have to do a backdoor a Roth IRA because our combined income will be over the income limits for the Roth IRA.

26:25Robert Croak:So I've got two questions. My first question is, should I do the Roth 401k or the traditional 401k? Quick answer to that, I would do the Roth 401k. So you have after tax dollars growing for you indefinitely into retirement. Who knows what the tax rates are going to be like when we're all in retirement. So having some nice tax free money waiting on us is a great idea. So answer the first question, Roth 401k. Here's my second question. If I do the Roth 401k, will that have any impact on doing a backdoor Roth IRA in the future? No, it will not. So 401k is completely separate from IRA. IRA stands for individual retirement account.

27:02Robert Croak:401k is an employer-sponsored retirement account. Now, the only thing that will have an impact on your ability to do a backdoor Roth IRA in the future is having pre-tax dollars sitting somewhere. So think SEP IRA, think traditional IRA, think something of that nature. If you have all of your money in a Roth IRA and all of your money in a Roth 401k, you can do a backdoor Roth IRA all the time, all day. Super simple. I do mine on kerry.com. Super simple platform to do it on. Literally, you just, like they do it all for you. It's awesome. You just contribute and they click a couple buttons. Boom, boom, bam, they do it.

27:40Robert Croak:It's great. It's very, very simple. Big fan of them. But regardless, you're going to be just fine to do the backdoor Roth IRA, assuming you do not trigger that pro rata rule, which gets triggered when you have pre-tax dollars sitting in an IRA somewhere, specifically a traditional IRA. Me personally, I had a SEP IRA from like 2021 that I had created with Vanguard. I rolled it over into a pre-tax solo 401k. And then I began doing those backdoor Roth IRA contributions because I no longer had that SEP IRA, those pre-tax dollars, right? I moved it into a 401k. So you can have a traditional 401k. You can have a Roth 401k.

28:19Robert Croak:It doesn't matter from the 401k perspective, the employer-sponsored retirement account perspective. The only pro rata rule impact for pre-tax dollars comes from the IRA perspective, right? So no traditional IRA if you want to do a backdoor Roth IRA. A lot of IRAs and 401ks and a lot of things in that explanation, but I hope that helped.

28:40Austin Hankwitz:Yeah, and I think the only thing I'll add to this is just understand that there's different tax implications. and we just always are of the ilk that we don't like to kick the tax man down the road because we never know what's gonna happen 10, 20, 30 years from now. So just make sure you do the research, understand the difference, but Austin, what a great breakdown and I hope this helps a lot of people out there who are confused over the best way to implement these Roth and traditional 401k variants.

29:12Robert Croak:Now, before we jump to that next question, reminding y 'all, generated assets, It's a really cool new product from Public. It is ETFs with infinite possibilities. You literally type in, I want to invest into, I don't know, Robert, give me something cool. Give me a cool example of things that people can invest in right now. What's an idea that's been on your mind for a while?

29:30Austin Hankwitz:I want to invest in companies where the CEOs or founders are known to work out a lot or be some sort of athlete.

29:41Robert Croak:There we go. You can type that in to Generated Assets, and Generated Assets will screen thousands of stocks, find the founders and CEOs that run those marathons that tend to work out and are very active, and then it will find what those specific names are, put it in a portfolio for you, and allow you to invest into that portfolio. It is, it's the coolest tech I've ever seen. It's really, really, really, really, really awesome. So if you've not yet checked out generated assets, go to public.com slash rich habits, go sign up for generated assets, come up with your own ideas. And any ideas that you do come up with that are really winning strategies when you back test them against the S &P, be sure to share them with us.

30:22Robert Croak:We want to know what y 'all are working on and cooking on over there. But again, that's public.com slash rich habits, and you get an uncapped 1 % bonus when you transfer your portfolio. using that referral link.

30:33Austin Hankwitz:You guys all know we love public.com and it's mostly because they're creating the coolest tools out there to make it easier and level the playing field for each and every one of you that follows the podcast.

30:46Robert Croak:Yeah, the recent tool of AI agents that just became the world's first agentic broker. We had an awesome conversation with Yannick Malling, the co-CEO. I think it was published last Saturday morning. So go check out that interview if you've not yet checked it out. their agentic brokerages should be live now. We're filming this on Monday, but this comes out on Thursday, April 2nd. So it's definitely live. Go check out all the fun stuff that Publix doing. So our next question comes from Nick on Instagram. Nick says, what's up, Austin and Robert? I've been listening for a few months and I want to know your thoughts on where I should put my money for buying a house either next year or the year after.

31:22Robert Croak:I'm thinking about buying a duplex, living on one side and renting out the other. I'm 21 years old. I don't have any debt. I make about$80 ,000 a year. My expenses are only$1 ,400 a month and I've got$25 ,000 in a high yield savings,$8 ,000 in a Roth IRA,$9 ,000 in my taxable brokerage account, and$7 ,000 in crypto. I have so much in my high yield savings because I want to use it for the down payment. However, I don't know if it's smart to put it in the market until I'm ready to buy. I want to have at least$100 ,000 saved and invested before buying a property. You guys talk about building my base.

31:58Robert Croak:So thank you all for your wisdom. I just need to know what my next steps are. Robert, what advice do you have for Nick here? He's got$25 ,000 in the high-yield savings account. He's 21 years old. He wants to do some house hacking, right? But he also knows he needs to build that base.

32:11Austin Hankwitz:Yeah, I mean, I just love these questions. Nick, thank you so much. 21 years old, already has a high-yield savings, making great money, has money put aside in a Roth IRA, traditional brokerage, and crypto. I mean, this is like the blueprint of what all 21 year olds should do. Now, here's the stickler. I didn't listen to this advice because I didn't know yet. But when I was 23, I bought my first fourplex and I was all in. I still had money set aside and I had a little bit, but I definitely didn't have that 100K base. And it worked out fine for me. But it usually doesn't work out for people if they don't have the backup cash working for them in case they needed it for an emergency.

32:54Austin Hankwitz:because you never know what's going to happen with a property. But I love that you're thinking about house hacking to keep your expenses low. However, I would wait another one, two, three years, get to that$100 ,000 saved and invested. So that way you are rock solid. You're 24 years old, buy that first property, house hack and just keep rocking and rolling and do what you're doing right now because of the fact that I just don't want to see you get in there, get in a pinch, have to run up the credit cards for a renovation, or let's say a pipe breaks in the middle of the renovation, or you find that the roof gables are weak and you have to replace a roof that you didn't account for that was$10 ,000.

33:35Austin Hankwitz:All of these things happen and are real and get lost in inspections and walkthroughs and properties all the time. So I would wait a little bit longer, but don't get discouraged because I love the plan you have and you are crushing it.

33:48Robert Croak:Yeah. So if I were in your shoes, tactically speaking here, what I would do is I'd put$12 ,000 in a high yield savings account and treat that as my emergency fund. If you want to just do 10 ,000, you can probably get away with that. But what I did was$2 ,000 a month, because let's be real, you're not just only spending$1 ,400, you're going to have some months and things like that. So 2 ,000 times six, six months, that's$12 ,000. And then above that$12 ,000, so let's call it that$13 ,000 between$25 ,000 and$12 ,000, right? That's$13 ,000 there. I would take the$13 ,000. I would use it to max out my Roth IRA for 2025 and 2026 if I've not yet done that.

34:27Robert Croak:That in itself is$14 ,500, so you're going to use all of it. Or if you've done some of that or for whatever reason you can't do 2025 because maybe you're not listening to this episode in time, What you can just do is max out the Roth IRA for this year,$7 ,500, and then use the remainder to invest into your traditional brokerage account. And then do what Robert said, continue this process, rock and roll. And now you've got, fast forward, maybe two, three, four, five years into the future. You're making great money, so it's not going to take you that long. You now have$100 ,000 saved and invested between your Roth IRA, your crypto, your taxable brokerage account, and maybe even your high yield savings.

35:07Robert Croak:And then it's time to say, okay, how much do I want to set aside for a down payment on this duplex, triplex, or quadplex? I know Robert talks about the 5 % down Fannie Mae mortgage, or maybe Robert, you can talk about that a little bit. But generally what that comes out to is a 5 % down payment here on a duplex. Maybe you want to buy a duplex in Knoxville, Tennessee for$400 ,000. That means all you have to do is come up with$20 ,000 down, borrow the other$380 ,000 from the loan that Robert's going to describe here, and live in one side, rent out the other. And just to make sure we're on the same page, because I think that's a trick people fall for, house hacking doesn't always mean you're living for free.

35:49Robert Croak:It just means you're living in a way that is much cheaper than if you went and bought a single family home. It's okay, Nick, if you do this, and of that$380 ,000 you borrow, your monthly payments, let's call it$3 ,000 or so, and you're sharing this duplex with someone and their monthly rent is$2 ,000 and you're picking up the other$1 ,000. That's better than paying$1 ,800 a month living in an apartment by yourself or whatever, right? And you're building equity, right? So I guess what I'm trying to get at here is don't beat yourself up if it's not a perfect, oh, but I can't live for free. This stuff doesn't work.

36:26Robert Croak:I can't do it. I think it's a great strategy. A lot of people have seen success with it. But Robert, maybe spend some time talking about that 5 % down loan option.

36:32Austin Hankwitz:Yeah, I love this. Anyone listening that's looking to buy your first multi-unit up to four units, the Fannie Mae 5 % down mortgage is incredible. It's exactly that. You only have to, you're required for 5 % down. You have to have some credit ratings that are above 620 credit score, which is pretty good for most of you guys. I'm sure you'll be able to meet that. And you can buy up to$1.4 million with this loan. I love this loan for people that are looking to get in their first property, especially if you're house hacking, because it gets you in the door with only 5 % down with some closing costs.

37:07Austin Hankwitz:Maybe you're going to have a few other fees, commissions. But what it does is it prevents people that are first-time homebuyers or first-time investment property buyers from draining all of the money they've saved. This is a vicious cycle. So many people save for years and years and years, buy their first property, then they're back to zero again. And these types of mortgages really help you keep your money invested, use 5 % of it like Austin talked about with a$400 ,000,$500 ,000 duplex. You're up and running and off to the races. You're saving yourself a ton of money each month because you're going to have that other tenant paying a big portion of the mortgage.

37:44Austin Hankwitz:And that way you can keep your money rocking and rolling into the future, making you money while you sleep.

37:50Robert Croak:So our next question comes from Henry on Instagram. Henry says, I listen to your podcast and have a couple questions. I'm 22. I'm a senior in college where I'm getting my bachelor's in data engineering. I'm engaged and currently have an eight-year contract with the U.S. Army. I have$63 ,000 invested into ETFs and$1 ,000 in REITs. I've been doing Uber EITs as a side hustle, bringing in around$100 a week, and I invest that money. My questions are, number one, I'm thinking about investing in gold and silver, but I don't know if it's smart to do that or instead just start my Roth IRA. and two, thinking about buying a property at my first duty station, but I'm not sure if that's a good idea financially.

38:27Robert Croak:I'll be making only$65 ,000 per year and an additional$1 ,300 a month for housing. Is this a good idea? And if so, what kind of property should I invest in? Henry, first off, I have no idea how you have your$63 ,000 in ETFs invested if you don't have a Roth IRA. Maybe it's just in a taxable brokerage account you opened up, but if that's the case, I would 100 % figure out how to transfer the 63 ,000 into a Roth IRA, right? You don't want to just be rocking in this taxable. You want to do tax advantage retirement accounts, aka the Roth IRA there. So I would figure out how to move 14 ,500, 2025, and 2026 contributions from the 63 into the Roth IRA.

39:07Robert Croak:Robert, what's your take on this? I'm kind of confused.

39:09Austin Hankwitz:Yeah, it's a little confusing where the 63K came from in these ETFs, but you're spot on. Get the Roth IRA. Let me make this clear to everyone watching this podcast or listening. If you're over 18 or you're parents of someone that's about to be 18 years old, get the Roth IRA set up day one. Everyone above 18 years old should have a Roth IRA and contribute as much as they can to it every single year. So in this case, Henry, we don't know where the 63k is held, but you need to go get the Roth IRA set up right away. And I would not start thinking about buying a property just yet. If you want to earmark some money for a property and put away a few hundred dollars a month that's in a high yield savings account to buy a property in a couple of years, great.

39:55Austin Hankwitz:But we still want to see you get to that hundred K base saved and invested, especially because you have a good housing situation right now, keeping your costs low. But I think it's a little premature to be thinking about investing in a property now prior to getting everything else dialed in. You mentioned you're just starting to diversify. Keep doing that. If you have the traditional brokerage, get the Roth maxed out, get the emergency fund set aside. All of those things come first before you risk it all on one property.

40:28Robert Croak:I also think when it comes to property, I understand you have an eight-year contract with the U.S. Army, but I'm not positive if that means you're going to be in the same location for eight years. And it's kind of a rule of thumb. You don't really want to buy property unless you're going to be there for at least five years. Seven years is more preferable. If I were in your shoes, Henry, I probably wouldn't go out and just buy property at your first duty station. I would rent. I would enjoy that$1 ,300 a month housing allowance. And I would save and invest, max out that Roth IRA every year like Robert was alluding to, have yourself a high yield savings account, and then use your bridge account as a way to invest more money if you already are doing that.

41:04Robert Croak:Maybe some other cool investments you can do with the arm rates were those retirement accounts, those pensions, things of that nature. But I'm not sure that I would go out and buy property. And by the way, thank you for your service. That's awesome, Henry. And our final question comes from Bryson. Bryson T. Bryson says, you both are the bee's knees. Love listening. Thanks so much, Bryson. Bryson says, I'm 34 years old, married without kids, and I contribute enough to qualify for my 401k employer match, max out my Roth IRA and my wife's IRA, mostly in the index funds and ETFs you talk about. I make about$200 ,000 a year and my trophy wife takes care of the horses.

41:39Robert Croak:I know, it's a horrible investment, but we love having a hobby to share together. That's cool. Horses are fun. Just don't be allergic to them. I've got friends that are allergic to horses and it's very bad. I like horses though. They're pretty cool. They are expensive. I will give you that. Bryson says, I have$20 ,000 in a high yield savings at 4.5%. I hear you guys talk a lot about NEO's funds ETFs like SPYI and QQQI and most recently their new ETF MLPI. But if my long-term goal is to grow my portfolio as aggressively as possible, from what I understand, NEOS Fund's ETFs aren't going to help me do that.

42:12Robert Croak:Would it make sense to wait until I'm 60 or so and then sell shares in a bull market and use the proceeds to buy shares of SPYI and QQQI to then start generating passive income in my portfolio? Or is there a benefit to having them as a major percentage in my portfolio now? Bryson, what a great question. Major percentage, aggressive growth. You used these words that are opposite of NEO's funds. I've got about$120 ,000 right now invested into NEO's funds. It makes up 7 % to 10 % of my total investments right now. And when I think about it like that, I've got high single digits, low double digits in these NEOs funds.

42:55Robert Croak:The reason why I do it is because one, they are the best covered call ETFs that you can purchase. They're very tax efficient, very consistent payments, all that fun stuff. But for me, it's about the diversification. For me, it's about having that monthly income that I can always depend on if I want to reinvest it back into the ETF, if I want to use it to go on a vacation to Mexico, like I'm going to go later this year, I can use that any which way I want. I also have very aggressive growth ETFs and blue chip single stocks in my own portfolio. I've got hundreds of shares of Tesla and Amazon and Google and Apple and Microsoft.

43:29Robert Croak:I've got so much money invested into aggressive growth ETFs and index funds because I realize I'm 30 years old. I should grow my money aggressively over the next one, two, three, four decades. But I think balance is key. I really enjoy having both. To your point though, when you are ready to retire and completely optimize for income in your portfolio, it does make a lot of sense to sell those aggressive growth ETFs, whatever the ones that you're buying, and use those proceeds to purchase NEOS funds so that you have that predictable high income. That is, again, caveated with when you're ready to optimize for income.

44:06Robert Croak:Right now, in your own words, you're optimizing for aggressive growth, and NEOS funds are not aggressive growth. They did just come out with their boosted ETFs, which are absolutely much more aggressive. For example, XSPI is the NEOS boosted S &P 500 high income ETF. So a little bit of a sprinkling of leverage, I think is what they use to really get you moving with the markets. But it's not as aggressive, I'm sure, as what you might be implementing in your own portfolio. But no, I like the strategy. I think that's how a lot of people are approaching NEOS funds. And in my opinion, again, I like to have a sprinkle of it.

44:40Robert Croak:High single digits makes sense for my situation. It could be different for you, different for everyone else listening, but having the information to make an educated decision with your money is what we try and do here on the show. And I hope this helps.

44:51Austin Hankwitz:I think that's a great breakdown. And at 37 years old, in all of these buzzwords, portfolio, aggressively, all of this high income, I think you should continue diversifying, have that small percentage in the NEOS funds, and then just make sure for everyone out there that understands, and Austin, you did a great job of breaking it down. Don't take your foot off the gas too soon. A lot of people, they get into these target date funds or these, you know, dividend funds or bond funds and all of this, and they're just leaving so much growth on the table. Don't do it at such a young age that you're leaving a lot of growth on the table.

45:26Austin Hankwitz:So I really like that breakdown. And Bryson, I would keep doing what you're doing, but I would not go heavy into the NEOS funds just yet. I would get further diversified. And if you want to be a little more aggressive, you could look at maybe adding some AIQ to the mix, some XLE, get a little bit more diversification balance with these index funds and ETFs that you're talking about and keep rocking and rolling and doing what you're doing.

45:50Robert Croak:Everybody, thanks so much for tuning into this week's episode of the Rich Habits podcast question and answer edition. Please consider subscribing to the Rich Habits newsletter, completely free. I think about 60 ,000 of you come back and read it every Thursday morning, which means it probably came out right around this episode was released. So if you're not yet subscribed, there's going to be a link in the show notes below, or you can just Google Rich Habits newsletter. It should just pop right up there. And don't forget, we've got the Rich Habits Retreat. We literally only have a couple tickets left.

46:17Robert Croak:So if you've not yet checked out the Rich Habits Retreat, there's going to be a link in the show notes for that as well.

46:23Austin Hankwitz:That's right. Don't forget to mention, Austin, though, that it is in Austin, Texas. So if any of you guys are in the area and want to come see us, this is going to be an incredible, incredible weekend. We have great speakers, cool, cool event space at Capital Factory. Lots of stuff happening, but there are only a few tickets left. And don't forget, for all of you that are in the mix here in our ecosystem, you have to go back and check out wallstreetfavorites.com. We have a 2.0 version that is just incredible. Austin keeps building out more and more tools for all of you guys to enjoy. and it really does take a lot of the stress and legwork out of figuring out your own portfolio or stocks that you're considering.

47:04Austin Hankwitz:So make sure you go check out wallstreetfavorites.com.

47:07Robert Croak:Thanks, everyone. And we'll see you tomorrow for our Friday episode, The Rich Habits Radar.

47:26Thank you.

47:56Robert Croak:your pocket. Start speaking with Babbel today. Get up to 55 % off your Babbel subscription right now at babbel.com slash Spotify, spelled B-A-B-B-E-L.com slash Spotify. Rules and restrictions may apply.

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