Q&A: Big Beautiful Bill Tax Deductions, Buying a House w/ In-Laws, & Saving for an MBA

20:45Robert Croak:Let's say you took that$120 ,000, figured out a blend between SPYI, QQQI, maybe IYRI, those three ETFs here, some real estate, some NASDAQ and some S &P, and your blend is now 12.5%. You are now receiving$1 ,250 a month in NEOS fund distributions by putting that equity, right, the after-tax equity that you would have had, that's twice as much money as you're getting right now. And there's no broken pipes. There's no I'm late on rent. There's no, you know, whatever. Now, what there is, though, on the flip side is, whoa, stock market went down 20%. Whoa, NASDAQ went down 35 % in 2022, right? That's going to pull back those monthly distributions in proportionate, right?

21:27Robert Croak:But at the end of the day, if you believe like we do that the U.S. stock market and U.S. capitalism goes up over a long period of time, and you think that having some S &P, some NASDAQ, maybe some IYRI real estate exposure is a good idea, then this call at$1 ,250 per month is going to be pretty consistent over a long period of time as well.

21:46Austin Hankwitz:Yeah. And I always feel like anyone that's interested in real estate has to look at it at scale. If you're going to own one apartment and you're just going to hold it because it makes you$650 a month, if you enjoy that, great. But in most instances, if you're getting into real estate, the more real estate you own, the more economies of scale work in your favor. Because if you have four or five properties, you can hire an in-house manager and maintenance guy and all of these things. It's just like being in the restaurant business. When you own one restaurant, it's hard. If you own five restaurants, because you have these economies of scale, everything gets easier.

22:21Austin Hankwitz:So keep that in mind for any of you considering getting in the real estate business. You want to try and build it up and scale it and have a portfolio because everything gets less expensive and more profitable.

22:33Robert Croak:100%. Our next question comes from Seva. Seva says, Hello, Rich Habits podcast team. I'm a listener from Canada, and I'd really appreciate your advice on student loan payoff strategies. I'm 30 years old. I've got 12 ,000 CAD in student loan debt, and my main goal is to have it paid off completely before I start a family. I want to approach this in the smartest and most efficient way possible. I'm considering investing in low-cost index funds to grow my money and then use those returns to help eliminate the debt faster, but I'm unsure whether that's the best approach versus aggressively paying it down directly.

23:07Robert Croak:What do you guys recommend for your student loan payoff approach strategy? All the good stuff here. Robert, let's talk about it. So what we encourage people to do is first off, no one should have student loans forever, right? The goal is to not go into your retirement years with student loans and a mortgage and like all this debt up to your eyeballs. You want to be retired or work optional or whatever you want to do with as little debt as possible, especially high interest debt. Now, some people want to hang on to some debt at a mortgage of 2.75 % or maybe some student loans at 3%, whatever, like figure it out, personal finances, personal, make your own decisions.

23:45Robert Croak:But what we like to see people do specifically as it relates to the student loan debt is have at least an equal amount of money invested in the markets. This could be in your retirement account. This could be in a bridge account. This can be, you know, whatever, but have that equal amount or more invested into the S &P 500, the NASDAQ, the Dow Jones, all the things we talk about, the index funds and ETFs before you begin to pay off your student loans aggressively. Now at this 12 ,000 figure, it's like kind of not a big deal if you don't do that, But more specifically, this advice goes for people who have 100, 200, 300 ,000 of student loans.

24:28Robert Croak:I mean, geez Louise, I'm not going to name names, but there's a very prominent online personality who talks about personal finance and investing a lot that paid off like$400 ,000 of student loans. And that's great. That's really cool. They did that. But student loans can only go to zero. Money invested in the markets can go up into infinity, right? It compounds over time. It's simple interest versus compound interest. And so if you have$400 ,000 in the market, seven years go by, it's now doubled to$800 ,000. Seven years beyond that, it's now$1.6 million. So your$400 ,000 has doubled twice to$800 ,000 and then to$1.6 million, where that same$400 ,000, seven years later, you go pay it off, it's zero.

25:09Robert Croak:Seven years after that, it's still zero. Right? So whenever you have a large amount of student loans, we always like to tell people before you go pay it off aggressively because we want you to pay them off. We do. But before you do that, go get an equal amount of money invested in the markets growing for you over the next several decades. So you don't make the mistake of spending 10 years paying off your 200 ,000 of student loans, wherever that same 10 year period of time, you could have invested in the markets and it would have grown and doubled and it would have worked much more favorably at the end of the day for your net worth than just paying it off just straight up how it is there.

25:43Robert Croak:Now with the $12 ,000, you know, you're 30, you make great money, I'm sure, like pay it off and then go invest, like invest, pay it off. Doesn't really matter. It's such a small amount of money here. But that's the general approach we like to tell people when it comes to student loans.

25:55Austin Hankwitz:There is no words I can say to improve on that answer. So let's keep moving on.

25:59Robert Croak:But before I move on, Robert, got to give a shout out to public.com. If you all have not yet checked out Generated Assets, what are you waiting for? Log into your public.com account right now, click on the Generated Assets button, and then literally come up with anything you want. I want to invest in companies that sell GLP ones. I want to invest in companies that advertised at the Super Bowl. I want to invest in companies that are growing their free cash flow by 10 % year over year, have paid a dividend and are growing their free cash flow and revenue. Who knows? Figure it out. Come up with some crazy ideas.

26:34Robert Croak:Inside the Rich Habits Network, I think, Robert, we came up with 13 or 15 different generated asset strategies that outperformed over a long period of time. I think it was CROIC. I think there was like founder led companies. There's a couple of things out there that we came up with. So be sure to check that out if you haven't already, if you're inside the network. But at the end of the day, generated assets makes it really easy for anyone that has a little bit of a hunch, a little bit of, you know what? I've noticed that people that do this or companies that have this or what I want to invest in that.

27:03Robert Croak:Or maybe it's the flip side. Maybe you're like, listen, I hate it when companies do this. I don't want to own companies that do this. And you can do that too. Give me companies, invest in companies that do not do these things, but also are in the S &P 500 or do not do these things, but are also larger than a hundred billion market cap, whatever. It'll figure it out. You can take your ideas and make a generated asset strategy out of it. Go check out public.com slash rich habits. Get that uncapped 1 % bonus. Go check them out. It's awesome.

27:31Austin Hankwitz:Well, you guys all know that we love Public and this tool is one of the coolest they've ever created. We love it. We use it. Like Austin said, there's a bunch of really cool strategies in the Rich Habits Network. So if you haven't joined yet, make sure you check out the seven day free trial in the show notes below and go check out generated assets at public.com.

27:51Robert Croak:So our next question comes from an anonymous listener. Our anonymous listener says, Hi, Austin and Robert. I'm a longtime listener to the show and thank you for all you do and provide. I'm way more financially literate now than I was two years ago because I started listening to your show. My wife and I are in our late 20s and we're evaluating a potential home purchase in San Diego. It's about five minutes from the coast. My father-in-law is willing to invest alongside of us and we're considering a 50-50 ownership structure in this home via an LLC. The home is valued at$975 ,000, but it has an assumable VA loan at a 2.7 % interest rate with$527 ,000 left on the loan.

28:38Robert Croak:The all-in monthly payment would be only$3 ,500. Our goal is to live in the home for several years and then eventually, in the long term, rent it out for$4 ,500 a month or more. As you guys probably have already done from the math, we will have to put down about$450 ,000. Split between us and our father-in-law, that's$225 ,000-ish a piece. We plan to also pay for closing costs of$20 ,000 and then split any major expenses. My household income is about$200 ,000 a year. We have half a million invested across our retirement accounts, our bridge accounts, our HSA, all the fun stuff, and$30 ,000 in a high-yield savings.

29:16Robert Croak:This would put roughly 45 % of our invested assets now into this property. I'm looking for your perspective on whether that level of concentration makes sense given our age, single income household status, and desire to maintain long-term flexibility. Thanks for all you do. Robert, I'll let you kick this off.

29:34Austin Hankwitz:Yeah, this is a tough one because if you look at it from an investment perspective, I'm sure in this area in San Diego, there's good capital appreciation year over year. Let's say it's 6 % or 8%, maybe 10%. So that part of it I like, but the cash flow part of it is not going to be great, assuming that the payment on this, I think they said would be around$3 ,500. And you state that in a few years down the road, you could rent it, you believe, for$4 ,500. So there's not a lot of cash flow out of the property. So I would have to really consider, is it worth tying up that much money, like you alluded to, a big percentage of your net worth into this one property as a rental.

30:15Austin Hankwitz:Now, I get it. You want to enjoy it for a few years. You're okay. $3 ,500 a month is probably a steal because of the loan terms, but you're still coming out of pocket$225 ,000 plus your pro rata share of the expenses for the down payment, closing costs, and all of that. So for me, I think it's got to be more about what is your desired outcome versus do the numbers make sense? Because we all want everyone to have home ownership, but we also don't want you to be house broke. And in this situation, I feel like you're kind of putting yourself right on that fence where it could be great. If the house goes up in value over the next 10 years by, let's say,$500 ,000, then it could be a really good outcome for you.

31:00Austin Hankwitz:but if it doesn't and you turn it into a long-term rental, you have a lot of cash tied up in something that is not going to produce you much income.

31:09Robert Croak:I think that's a wonderful breakdown. It's funny as you, as you walk through this, I'm on Zillow right now trying to find the actual home because I'd imagine someone would call it out that it is an assumable. I've not yet found it though. Anyway, it's just my, my curiosity got, got ahead of me here. You mentioned a couple terms that stood out to me at the end here. This would put roughly 45 % of our investable assets into the property. I'm looking for your perspective on whether that level of concentration makes sense given our age, single income household status, and desire to maintain long-term flexibility.

31:42Robert Croak:That last bit there is really interesting because at the end of the day, owning a home is the opposite of flexibility, right? Owning a home means the only way that this actually turns out in your favor historically speaking is you live there for five seven ten years right you you live in a home long enough where it appreciates so much that it offsets the interest you've paid while you live there and that is like a positive you know outcome for for owning a home but on the flip side if you live there for two years or three years then like and you try and sell it it doesn't make sense but you mentioned which i thought was really interesting it could rent for 4500 so maybe you do have a little bit of flexibility if you do want to move around and have a little bit more autonomy over your living situation and at$3 ,500 a month, I mean, that is a decent monthly payment, but for a million dollar property, that's peanuts because you're essentially, right, you only have a mortgage on half a million.

32:34Robert Croak:So goodness gracious, what would I do? This is a really, really cool situation to find yourself in. My head goes a couple places. The first one is like, you know, there's a book called Die With Zero. As someone who's not read this book, but I've heard some cool snippets and I want to make sure I give credit where it's due, right? Die With Zero is the book I'm thinking about here to come up with this ideology and strategy. It's like, give your children your money while you're still alive and while they can really use it to upgrade their lifestyle. And so it seems like your father-in-law is doing that.

33:04Robert Croak:You guys are in your late 20s. Your father-in-law has got so much money that he's able here to come in with nearly a quarter million dollars and really, you know, maybe this would have been, you know, your inheritance here, but he's taken that and given it to you now so you can really enjoy it while you guys are young and still alive and everyone can enjoy this home. I would just think about a couple of things. And Robert, I'm going to actually let you expouse upon this with like the structure of the LLC and stuff like that. So I'll let you talk more about that. But as it relates to doing that as a whole, just make sure that you now at Thanksgiving dinner, it's not weird, right?

33:37Robert Croak:Oh my gosh, my father-in-law, I haven't paid him the mortgage this or hasn't done this or I owe him this much money. Like whatever you guys end up doing here, just make sure it's kosher. And I'll let Robert, I guess, dive into the details. I do not think having 45%, so$225 ,000 of your total investable assets into something like this would be detrimental. I'm just looking through because you mentioned total invested assets at 515, taxable brokerage at 350, retirement accounts at 120, HSA at 25. Are you planning to sell your taxable brokerage? It seems like you are. Sell your taxable brokerage, use 225 from the 350 and use that for that's the thing i think it's fine your retirement accounts are great you've got great income you're going to bring up that taxable brokerage account again in the future like robert has helped me understand this more over the last like 12 to 18 months if you are about to make a decision that's going to allow you to be so much happier in your day-to-day life it's okay for the perfect numbers to not perfectly fit together right so like for example you're over here saying to yourself, oh my gosh, half my net worth is in this property.

34:45Robert Croak:Like maybe, but given your income and given your ability to be prudent with money, that 45 % is going to shrink to 25 % by the end of the decade. And at that point, it doesn't matter, right? Now, if you said 80 % of your net worth was in this property, I'd tell you not to do it. But 45, it's like, that's going to shrink a lot. Robert says it all the time in personal finance is personal. At the end of the day, is this property going to give you the biggest just level up? You're going to be five minute walk to the coast. You're going to be closer, maybe do some friends. Maybe like is your lifestyle, is your day-to-day happiness just going to explode where you guys are in the best marriage possible and now everything is wonderful.

35:22Robert Croak:Like you feel really, really incredible. If that's the case, dude, who cares about the 45 %? Go be happy. That's how you should be thinking about this. And that's why I'm like the biggest believer with real estate. It all comes down to the specific situation more in my opinion than it does with the numbers right now of course you want to make sure people aren't house broke but like if things don't perfectly fit together in this puzzle piece at that exact moment when you buy this house but you do have a plan for the next three four five years to make it come into that that sort of framework as it should right 45 turns into 25 so now it's a nothing burger and congrats you now live in this awesome home that's i think how people should be thinking about real estate versus it has to be this perfect this and perfect that and my money is going to do this.

36:05Robert Croak:If you play your cards right and you've got consistency and a little bit of predictability with your income, you guys are going to be just fine.

36:12Austin Hankwitz:I think that's a great takeaway. And when you really think about the situation, because real estate and personal finance is always situational, a million dollar home, 2.75 % interest rate on the mortgage,$3 ,500 a month, all in is what they stated. So I'm assuming that includes property taxes and everything they need to pay if there's an HOA or whatever. That is an incredible scenario to build a high quality of life. But to get to the structure, as Austin alluded to, for Thanksgiving dinner, make sure everything is spelled out in the operating agreement. Make sure you have all of it dialed in so it's never weird when you're at Christmas dinner.

36:52Austin Hankwitz:So have that LLC. Make sure you're both listed on it. Make sure you spell out every detail of how this is supposed to work. Who is in charge of maintenance? Is everything pro rata split down the road for if you have to replace a hot water tank or something goes bad? Or is the father-in-law only on the hook for the 225? He gets back XYZ. Are the profits down the road when you split and sell the property split 50-50? Or do you get a higher proportional amount because you've maintained the house, You've lived in the house and done all that. A lot to think about, but make sure this is all spelled out in your agreement.

37:30Austin Hankwitz:So that way it's smooth and cooler than the other side of the pillow. And you never have to get in a fight about money with the father-in-law. And lastly, I did a quick look up. It appears that most of San Diego has around an 8 % capital appreciation year over year, even with the most recent downturn. So that's pretty strong as well. So if you think about that five years down the road, if you decided to sell it, You still made 45 % on your money. Everyone wins and you got to live in an awesome house with an awesome situation relative to your budget.

38:02Robert Croak:Yeah. I wouldn't sell it though. Not, no, no way. No way. 3 ,500 bucks for a million dollar home. Like that is nuts. I'm for perspective. I'm building a home in 2026 and I'll be borrowing about a million dollars and my monthly payment's like 7 ,200. So like you're half of that. It's, it's pretty cool. So rock and roll, you got this. But to Robert's point, I just want to make sure that you understand the structure, right? It doesn't matter how you structure it, but there's a lot of things to consider and make sure that everyone's on the same page about that, right? When the home eventually does sell, like how does that get split out?

38:37Robert Croak:When the water heater does need to be replaced or the roof, like who does that? Who pays for that? Is it you? Is it the dad? Is it fit? Who knows? Y 'all can choose whatever you want to choose. It doesn't matter what you choose. It's just the fact that you chose something and it's written down and everyone's on the same page about it. So our final question comes from Tyson. Tyson says, what's up, Austin and Robert? I've been listening to y 'all for about a month now, and I'm trying to wrap my head around finances and building rich habits. I figured I'd ask some knowledgeable people in the finance world.

39:03Robert Croak:Well, Tyson, we are at your service, my friend. Thanks for tuning into the show. Tyson says, I'm 19. I just got my first job as a machinist apprentice. Say that 10 times fast. Making about$31 ,000 a year. Before this, I was making and selling knives to friends for about$200 per knife. and I was profiting about$120, give or take. I've been doing the knife thing since 2022 and I have a good craft for it. Now I'm considering some content creation with a knife gig on the side with a goal of mine to buy my own house in the next few years if it's feasible. How would you guys play your cards if you were in the position I'm in now?

39:41Robert Croak:I've got$1 ,500 total to my name. Robert, what advice do you have Tyson here? He's 19, he's got 1 ,500 bucks in his bank account and he wants to buy a house probably in his early to mid 20s if possible. He's making$31 ,000 a year right now as a machinist apprentice and he's got a side gig of selling knives for$120 per profit per knife.

40:03Austin Hankwitz:This question makes me giddy because it's so incredible. He went out, he got it figured out how to get this machinist job, making good money. It's going to keep going up because this kind of field is not going to be taken over by AI. he's got this side hustle that he's thinking about taking more seriously. I think he has spelled it out perfectly that I would, yes, do the social media. Yes, solidify this side hustle as a real business. Get that LLC up and running so that way you can have some write-offs. You've got it all dialed in. You've got a business bank account. I would do all of that. And it's okay that you only have$1 ,500 in your bank account at the moment because you've already proven that you can make money on these knives with like a 40 % return on each knife.

40:52Austin Hankwitz:And then once you get the social media up and running and you start reaching a larger audience, you're one or two cool videos away of going viral, of having a thriving knife business, which then you might have to get a little shop, fix up your garage, do all of that. I love this situation for you, and I would definitely do it and keep going because you can have the job by day as the machinist and on nights and weekends, really rock out the social media and build up this knife business, which is your passion, but could be a really large moneymaker.

41:27Robert Croak:I love that. Yeah, I just looked up the career path for the machinist apprentice and it seems like your apprenticeship is gonna last about four years. So you're making, call it 30, 32,$35 ,000 for the first couple of years there, but then you're a journeyman machinist, which is now making 60 to 65 ,000 a year. So let's call it by 23, 24 years old, you're now making essentially the same amount of money I made out of college, right? 62 ,000 a year, which is pretty cool. And then you can continue to do this. And they've got other sort of, you know, career master machinist, 10 years experience, 85 ,000 a year, like whatever, right?

42:03Robert Croak:So this is a good career. You're well on your way to high five figures, perhaps low six figures in your 20s and 30s, depending on how long you do this and how good you get. So keep doing that. Rock and roll, emergency fund, no credit card debt, max out your Roth IRA, anything above that, go put some money aside. Give yourself a five-year shot clock to save up, let's call it$30 ,000, hopefully for a down payment on a home. Do the 3.5 % FHA loan, depending on the type of home you get. Maybe you end up doing something with a quadplex or a triplex or something. There's different loans for that as well.

42:34Robert Croak:But I love what Robert said about kind of doing both, right? Go be a machinist, apprentice, go make your 30,$35 ,000 over here. But then with the knife stuff, go make content about it on TikTok. I've talked about this in the past, but there's a guy that makes leather belts. I forget his name, but he's sold over one and a half million dollars of leather belts because he's made videos about them on his TikTok account. And he makes them in his garage. He just makes these leather belts, sells them for 80, 90,$110 a belt. And they're all leather. They're whatever. Like you can do the exact same thing.

43:05Robert Croak:And I'm not saying you're going to make a million dollars from this, but you might make 4 ,212 between now and the end of the year. And that's$4 ,212 you didn't have, right? And that's only going to build on itself. And the last component, don't forget about live shopping. Maybe there's a world where you've got so many of these different designs, different lengths, or whatever else you got going on, and you start selling them on whatnot, or TikTok shop live or whatever is going on. And now you're really, you know, grinding out during the day with your job. You're making some content here. And now maybe there's a world where you're selling so many of these that the profit from the knife business offsets the take-home pay from the machinist apprenticeship.

43:48Robert Croak:And now all in, you're making 60 ,000 in 2027, 30 something over here and 30 something over there. There's a lot of different ways to play this. The last piece of advice I'd give you at 19 years old, do not ignore artificial intelligence. I need you to spend 10 hours this weekend. Type in chatgpt.com, type in Google Gemini, type in Claude AI, and just brain dump. Ask it, what are you capable of? Here's what I do every day. How can you help me? How have you helped other people? How do people use you? How can I use you? Just understand this technology. I know it's a little different. You're making knives.

44:29Robert Croak:You're a machinist. You're in the trade. You're probably not one of these tech nerds that's 18 that's trying to go build a billion dollar startup. So I understand it might not feel so easy for you, maybe, depending on how much you actually care about this stuff. It seems like you like to work with your hands, which is the opposite of technology. So that's totally fine. Both can be rocking and rolling. But I think it's really important for you to understand this type of tech, especially at 19 years old, and how other 19 and 20-something-year-olds are using it to build and optimize their own businesses.

44:57Austin Hankwitz:Wow, what a great episode. Such a wide array of incredible questions. Really loved the last one as well. So just a great episode. And we appreciate each and every one of you that stops by every week, gets the questions in the DMs, email us, send us something on Spotify. Remember, we have followers on Spotify as well. You can reach out to us there and just really send us these awesome questions so we can make episodes that is all about you because personal finance is personal. And we'd love to answer your questions.

45:26Robert Croak:Yeah, all of our followers are on Spotify. We're coming in on about a quarter million here, which is really exciting. Thank you guys so much. And be sure to leave us a comment, vote in the poll below. If you've not yet subscribed on Spotify, please click that subscribe button. You will know whenever we post episodes. We're up to three episodes a week now, which is awesome. And of course, don't forget seven day free trial for the Rich Habits Network. All the details for that in the show notes below. Thanks everyone. And we'll see you tomorrow for our Friday episode of the Rich Habits Radar.

45:59Thank you.