Q&A: Buying Our First Business, Cash Flowing a Triplex, & Teaching Crypto to Kids...?

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0:57hey everyone and welcome back to the rich habits podcast question and answer edition these are our thursday episodes where robert and i take your questions via instagram dms at rich habits podcast or via email at rich habits podcast at gmail.com and we answer them we answer your questions as if we were in your shoes giving you our honest opinion about your situation. These episodes are off the dome. There's really no rhyme or reason as to what questions we pick, but we are excited about them nonetheless. That's right. Personal finance is personal. Everyone's situation is different. Life gets in the way.

1:33Life can be great. Life can be tragic sometimes. And we are here to break it all down and try to give you guys that guidance, that sense of calm to help you figure out what to do in your own current situation. So if you have a question to ask us, again, email us at richhabitspodcast at gmail.com or DM us the question on Instagram at richhabitspodcast. Now, before we jump into our first question, remember these Q &A episodes are brought to you by public.com, which means if you're looking for an online brokerage platform that was actually built during the century, you need to give public.com a try.

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2:49Paid for by public investing. Full disclosures in the podcast description. So our first question comes from James A. via email. James says, hey guys, my name is James and I'm in my mid 40s. I have a 401k and a Roth. I'm looking to purchase cryptocurrency for some portfolio diversification. I currently use Fidelity for my investing and I'm pretty familiar with their platform. I would prefer to keep using their platform for crypto, but is there a benefit to having a separate platform or even a dedicated cryptocurrency wallet that I should be purchasing my cryptocurrency on? I also have two kids.

3:23One is 14 and the other is 16 and I have them both set up on a Fidelity youth investing account so I can teach them how to invest. My older daughter has a job and she's putting in$20 a week into the S &P 500, which means she's learning all about dollar cost averaging and compound interest. But I guess my question really is, should I also be teaching my children about cryptocurrency? Is this something that they should be buying as well? What a great question from James. I'll let Robert kick this one off. Yeah, I love this question. And I think it's two part. Let's talk about teaching the kids first.

3:54You're already teaching them financial literacy. You're getting them started very early on. So they know what VOO in the S &P 500 is. This is critical. What I would do in teaching them, just like you are in traditional finance, get them watching YouTube videos, get them understanding what is the blockchain, what is the future of cryptocurrency, and why is it important? Cryptocurrency, like the internet, is going to change the way we do things over the next 5, 10, 15 years, along with AI and everything else technology-wise. And I think it's important to have your children understanding what that means.

4:31So yes, I totally agree. I would get them started right away. And it can be as simple as finding some good YouTube channels that you like, have them watch some videos. You can select the videos and take a look so you know which ones are gonna lead them down the right path and really show them the importance of blockchain for the future. Secondarily, Fidelity. We like Fidelity. I don't use Fidelity. Millions of people do. I think it's a great platform. Yes, you can buy all your crypto there, but you can also look at opening a public.com account. It is a great platform for buying and selling cryptocurrency.

5:05So you could think of that as well. Or Coinbase is probably one of the largest. So you just have to think about what are you most comfortable with. And if it's Fidelity, stick with Fidelity, do your thing. But always make sure that you're cross-referencing how much is it cost per trade so you understand what is the best way for the level of investing you're doing platform-wise and which ones are best for you. And as it relates to educating your children about cryptocurrency, I like how Robert sort of laid that out. I would go about it in a way where you can sort of build upon their existing education, right?

5:42So you've already taught them a little bit about the stock market. They understand the S &P 500, right? It's a way to invest in the 500 largest, most profitable companies in the United States. They understand that, they know, okay, I should own equity, have some ownership in these companies' profits. And then you say, well, there's other things that go up in value over time. There's real estate that goes up in value. And the reason that goes up in value is because of supply and demand. There are things like precious metals that goes up in value because of perceived value, supply and demand, things like that.

6:11And there's other asset classes that continue to trend higher over time, right? Making sure they understand the difference between something that goes up in value, like an investment, and then something that goes down in value, like a depreciating asset, like a car or a camper or something like that, a lawnmower. And then you can begin to say, okay, there's another asset class out there called cryptocurrency that goes up in value over time, specifically Bitcoin. It's been around for well over a decade now, 15 years or something. This Bitcoin uses a technology called blockchain. Here's why it's important.

6:45Here's why it was invented. Here's how it's used in different types of scenarios. And people perceive it to be valuable. And so this asset class, specifically Bitcoin, has gone up in value X amount of percentage points over the last several years and is perceived and assumed to continue to go up in value as well. If you want your kids to be invested in cryptocurrency and partake in that, I think that's fine. The only worry or concern I have is that cryptocurrency experiences very dramatic drawdowns, right? Bitcoin has drawn down by 50, 60, 70, 80 % in a short period of time, several times in the past.

7:21And I would be worried that it would cause them to be jaded toward investing where they say, oh, I invested once and I lost all my money and I don't want to do this anymore. And then they have that as a bad experience they take with them for the rest of their life. Whereas the S &P has pullbacks or the NASDAQ has pullbacks, but it's never a 60, 70, the 80 % pullback, right? So that's my only concern is that, you know, make sure they have the right mentality going into this if they are investing in cryptocurrency. But I think at the end of the day, what's most important is that your children are investing into the S &P 500, dollar cost averaging, compound interest, doing all that fun stuff, and setting aside 10, 15, 20 % of your older daughter's monthly income from her job and getting that invested on a habitual basis as well.

8:04And I think the best way to look at all of this, and that was a great breakdown, is to understand that if you would have talked about 10 years ago, even, that you would be getting into a stranger's car to get a ride somewhere, or you'd have a stranger delivering your food to your home from a restaurant nearby, because then you've got someone you don't know touching and handling your food. As we progress more and more in the financial world, you're going to find that blockchain is incredibly critical for the future because we are becoming a more globalized economy. Having blockchain involved in this and cryptocurrency is very important.

8:41We also will see a lot less friction with our money and costs associated with doing wires or doing transfers and all of this. So there's a lot to be learned about the importance of cryptocurrency in the blockchain. And so I think it's great that you're considering getting your kids involved and anyone out there that has children that are listening, getting them to understand why it's important, where it's going because it will be part of school curriculum sooner than later. So it's important for everyone to get ahead of it. And the last point here, and this goes beyond cryptocurrency, this can be anything, literally just go to chat GPT and say, explain to my 14 year old daughter, how ABC XYZ works and, you know, give examples and explain it to them as if they were younger.

9:26And like, they're not as technical as, you know, adults might be like use artificial intelligence to your advantage. Again, beyond cryptocurrency to try and learn anything, learn a new language, learn a new skill, learn anything. These things are free resources. Our next question comes from Yosellan P. Yosellan says, Hi, Rich Habits team. I'll start by saying off, I really love your show. Since discovering the financial independent retire early world, your platform has been incredibly informative in discussing the nitty gritty. So here's my question. I own a Triplex in Kentucky. I purchased it in 2021 for$340 ,000 with a 30-year FHA loan at a 2.9 % interest rate.

10:03It cash flows$700 a month after my mortgage and most of my expenses. I've lived there for two and a half years, but then I recently moved into my partner's home. We're not married, and this took place in March of 2024. I'm now relocating completely to San Francisco, and I've considered selling the triplex within the next couple of years, possibly for around$400 ,000 to$425 ,000. I'd of course invest the proceeds in the stock market, likely the S &P 500. I'm drawn to the simplicity of passive investing and feel pretty uneasy about relying on a property manager from so far away. Do you think that selling is the right move for me?

10:38As background, I'm 30 years old. I have$40 ,000 invested across all my other accounts. My job pays$120 ,000 a year. Robert, you want to kick this one off? I would love to. I think it's a bad time to sell it. Whenever I see someone that has equity and a low interest rate and assuming there is a decent capital appreciation on this property, I just think it is a great addition to your wealth building arsenal. I personally wouldn't sell it right now. The markets are a little bit suppressed. We don't know what area of Kentucky it's in. But assuming like most markets, it's going to be a little bit down because it is a buyer's market.

11:14There is a lot of inventory out there right now and people are not buying and people are not running up the prices like we've seen in the past. So personally, I'd love to see you hold the property, keep it, hire a property manager, find somebody locally that can help you. Because with being only one property, I think it's pretty easy to manage from afar. I do it all the time. And I think you could even find someone that you know, maybe it's a local handyman or a friend of yours and say, hey, I'll give you$200 a month if you just collect the rent, do this, do that, keep the grass mowed, whatever.

11:47So personally, I would keep it. I think it's a great move. You've done well with this property. You've got a very low mortgage rate. And I think it's great to hold it for the long term and at least for the next couple of years if you can. Couldn't agree more, Robert. I just did the math behind the scenes here. If I did my math correctly, your monthly mortgage payment is between$1 ,500 and$1 ,700 a month on this triplex. which means now that you are in San Francisco, you could probably, depending on the condition, when it was built, the location, things like that, rent out each unit of this triplex for maybe $1 ,200,$1 ,300,$1 ,500 a month, which means you are cash flowing much more than just$700 a month after mortgages and most expenses.

12:31Just assuming$1 ,200 a month on all three of these units is $3 ,600 in total rent collected, then let's say your monthly mortgage is$1 ,700, you now have $1 ,900 left, and then you start setting some money aside for occupancy, repairs, things of that nature, you should be cash flowing well over$1 ,000, maybe$1 ,500, depending on the types of expenses you're saving for on a monthly basis. And just so we're on the same page too, right? $1 ,500 a month times 12 is$18 ,000 a year of cash flow. That is awesome, right? That money can get reinvested into maybe some, you know, this$40 ,000 that you have across your different accounts, like that can really help you move in the right direction.

13:11If it were me and I were in your situation, I would try to work with a property manager that I trusted, that was not too expensive, that was able to ensure that I'm now cash flowing this thousand plus dollars a month. Now, if you do begin to run into issues and it is literally just the worst thing being a long distance landlord and you don't want this$18 ,000 a year of potential cashflow and you wanna sell it, you could probably sell it for, again, let's say you sold it for this 425 ,000, which means that after closing costs and other types of fees associated with selling a home, you would take about 400 ,000 for yourself.

13:45You might owe about 320 on this home. You bought it in 2021 for 340. So I'm assuming about 20 ,000 of the principal has been paid down. So you'll net about$80 ,000, which is pretty cool. But again, I think you should really reconsider this cash flowing aspect just because this interest rate is so low and your monthly payment is so low compared to what it would be if you were to go buy something like that. today. And for everyone else out there that's considering buying real estate or maybe considering selling some real estate right now, keep in mind owning real estate and building wealth with real estate as part of your portfolio, your diversity is not just about cash flow.

14:22You have to understand the totality of the numbers. It's the cash flow. It's the tax benefits. If there are some, it is the capital appreciation. In many markets, you'll find that let's say your cash flow is 6 % return and the capital appreciation is 5 % return in that market, you're at 11 % cash on cash return. So keep that in mind. Don't just always look at the cash flow. Look at all the other benefits, especially when you have a low-cost mortgage like in this instance. So our next question comes from Ryan S. Ryan says, Hi Austin and Robert. First off, I want to say thank you so much and I appreciate your show.

14:59I have a one-hour commute to and from work and I genuinely look forward to Monday and Thursday mornings just to listen and learn. I'm a big fan of you both. Thank you so much. My name is Ryan. My wife and I are in our early 30s and we're happy to say that we have no debt or student loans. Both of us are W-2 employees. I earn approximately$200 ,000 a year. My wife earns around$100 ,000 a year, which means annually we make about$300 ,000 a year. We have a low interest mortgage on our starter home and our living expenses are quite minimal. We each invest 30 % of our income into our 401ks, our Roth IRAs, cryptocurrency, ETFs, and some individual stocks.

15:36All strategies that we've learned from your show. Thank you for the guidance. However, we're now interested in purchasing an existing business. It seems like every day I'm browsing BizBuySell and LoopNet, but I'm not confident enough in identifying a good deal from a bad deal. While we have strong management and people skills, we lack specific trade skills, so I'm unsure what type of business would best suit us. My wife could leave her current job to manage the business full-time. So my questions are, do you have any connections or recommendations for people or companies to help in the business buying process?

16:07And then two, do you think we're in a position to make this move or should we just continue with our current strategy? Ryan and Ryan's wife, so excited for you guys. You guys are crushing it. You're in your early 30s. You're making$200 ,000. She's making$100 ,000. You guys are investing 30 % of your income. So let's call it$100 ,000 a year, if not close to it. You all will be multi-millionaires within the next 10 years tops. I mean, you guys are crushing it. So here's what I would do. I would not change anything. I would be in my early 30s. I would be making 300 ,000 a year as a unit. I would be investing up to, you know, again, that 100 ,000 that you're doing right now.

16:45I would continue to do that for the next 5, 10, 15 years, and you're gonna have millions of dollars to your name. See, here's the thing. The reason why Robert, for example, is so good at going out and buying a business or someone else, it makes sense for them is because they have a unique experience, a unique perspective, a unique skillset that they could take and in a very specified period of time, 9, 12, 18, 24 months, be able to find a business, introduce what these skills are and turn that business around and really ramp it up if it's with marketing, if it's with processes, if it's with strategies, if it's locations, whatever, and then sell it for multiples more than what they bought it for, making a business venture very profitable.

17:30If you're someone who doesn't have that skill set, you're essentially just buying a cash-flowing asset that pays you money on a monthly, quarterly, or annualized basis. And you have to figure out what numbers make the most sense for you versus your opportunity cost just investing in the markets as well as the time and your wife's$100 ,000 salary that she'd be giving up. So that's the thing. If it were me and you guys were semi-retired and you wanted to go buy a business to go have fun with and you and your wife go make core memories. Like I'm cool with that. But in my opinion, it doesn't seem like it's gonna be a way for you to build wealth faster, right?

18:01I think the opportunity cost would be more by leaving your wife's 100 ,000 a year job. And she's now working 40, 60, 80 hours a week on this business. And you're working on the weekends because you're trying to figure out what the heck's going on. Why did this customer leave me? Or what's going on with this specific supplier? Or it just seems to me like an unnecessary headache, unnecessary stress. And you guys are just rocking and rolling and you're gonna be just fine. I really agree with everything Austin said. I'm going to take a little bit of a different take here. And that is you guys are crushing it.

18:30You're making a lot of money. You guys are doing well. And there's an old saying that says something like entrepreneurs will quit a 40 hour a week job making great money to go out and work 80 hours a week for no money for years. And it happens all the time. So I would do this. Like in real estate, I would start small. Go find a business that you feel you can value add. You can put your processes in place to make it more valuable and make it more profitable. But instead of going all in and having the wife quit her job, buying the business and doing all of that, I would have both of you keep your jobs, making that money, stockpiling away for your retirement.

19:06And I would look to buy a business or partner in a business where you buy it with an operational partner, maybe a current employee, maybe someone that you know that knows that field well. And then that way you can get your toes wet. You can learn what it's like to run a business and be able to get involved and hopefully profit and have another source of income without going all in and going backwards. I see it every day where someone's like, I'm going to be an entrepreneur. They've never done it before. They don't know what it's like. They go all in. They give up the cushy job. And then they go for two, three, four years where they go backwards financially because they can't quite figure it out.

19:45So if you're going to buy a small business, keep looking, keep researching, start small, find an operational partner. And when the small business starts making you guys more than your wife's salary of$100 ,000, then consider quitting the job. But I wouldn't do it right out of the gate. I love that perspective, Robert. I think a lot of people make that mistake where they're like, oh, my gosh, I've got this really cool thing. I'm going to go make a ton of money with it. I'm quitting my job. I'm selling the house. I'm going to put the kids and the dogs on eBay. I'm going all in on this idea that I have.

20:17And then that doesn't work, unfortunately, because 80 % of small businesses fail within the first five years and you become a statistic and now you've got nothing to fall back on. And so that's what we want to avoid, especially Ryan, as you and your wife are making$300 ,000 a year. Seriously, you guys are crushing it. You just do exactly what you're doing right now and you will have more money than you could ever imagine in the coming 5, 10, 15 years. And if then you want to say, I want to go, you know, maybe you have a passion about furniture, or maybe you're super passionate about baking, or maybe really passionate about pressure washing.

20:50I have no idea what your passions are, Ryan. But if you're really passionate about something and you want to go start a business or buy a business that's already in your passion, that would make sense. But don't do it until you've got a ton of money squirreled away and you can sacrifice that$100 ,000 a year salary that your wife earns. So our next question comes from Nick A. Nick says, hey Austin and Robert, my name's Nick and I've been listening to your podcast religiously for the last two years. You guys have made such a huge impact on my financial education. I'm 34. I make$120 ,000 per year.

21:21I started my Roth IRA and I've been maxing it out for the last couple of years. I also have a 401k that has about $30 ,000 in it and a bridge account with$15 ,000. I've been using strategies like strict budgeting and 0 % interest rate credit cards to pay off high interest debt over the last year. and I've paid off$10 ,000 of high interest debt over the last 12 months. Nick, that's awesome. Love to hear it, man. We always tell people you can't outinvest high interest debt and Nick is paying it off. Nick says we still have about$30 ,000 of car debt across our two cars and$20 ,000 in student loans with some of those student loans above 6 % interest.

21:58However, we have a plan to pay off this high interest debt quickly while leaving our low interest debt around so we can stay invested and grow our wealth. Here's the real question I have. We bought a house in 2021 at a 2.75 % interest rate. Our family grew much faster than we expected, and to us, a good school district is very important. Currently, we live in a very bad school district in Nashville. We want to move to a different area and a bigger house in the next few years before our kids start school while maximizing all aspects of this move. What strategies do you have for us for making sure that we make the best decision possible given our 2.75 % mortgage on our house?

22:39Robert, you want to kick this one off? Yes. I think it's a great situation that Nick is in. Family's growing. That's awesome. Upscaling the house is great as well. The only thing I would consider and the key part of the question was in a few years. I feel like what happens a lot of times when people say we're going to buy a new house in a few years, they take their foot completely off the gas for all other strategies of investing for retirement and building wealth because they're solely focused on having money set aside for buying this bigger house. And I think that's a huge mistake and a lot of people make it.

23:12So in my opinion, and in this instance, I would really stay super focused because where a lot of people get things wrong is, let's say you're putting away for this new house and it's going to be more expensive. And you think you need$100 ,000 or$50 ,000 to go towards the down payment for said new house. It doesn't mean you can't still be investing that money over a time horizon of two, three, four years to maximize the gains you would make on that money. Because you and I see this every day, Austin, where people are like, I have this money for the house in five years in this high yield savings or this CD that's barely making any money.

23:49That is a mistake. So I think as long as Nick and company make sure that they understand and have that time horizon figured out, that they can make the right play. Because the other part of this is the 2.75 % mortgage on the current house. That is really, really low. We might not see those rates again for many years or if ever. So we have to take into consideration that as well. I know the school district is important, but don't plan so far ahead that you're giving up gains and growth in your financial situation right now. I love this perspective, Robert. Here's my thing. You have an asset with this 2.75 % mortgage rate.