Q&A: Feeling Squeezed, Gambling on Canadian Real Estate, & Off-Market Deals

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0:57Hey everyone, and welcome back to the Rich Habits Podcast, question and answer edition, brought to you by public.com. These are our Thursday episodes where we answer your questions as if we were in your shoes, going through whatever you are going through right now. We've got seven awesome questions teed up for this episode. If you wanna ask us a question like the seven people did for this episode, you can email us at richhabitspodcast at gmail.com, or you can send us a DM on Instagram at richhabitspodcast. Now, before we get started, I think it's really important that we all understand this reality.

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2:18So that old 401k that you haven't touched that's invested incorrectly and is not earning you any money, roll that over into public, get your 1 % match, and get your bag. Fund your account in five minutes or less. Head to public.com front slash rich habits to claim your 1 % match today. Paid for by public investing, full disclosures in the podcast description. So our first question is coming via email from John H. John H. Says, good morning, Austin and Robert. I hope this finds you well. I just have a quick question. I'd like to run by you. I'm not working a nine to five job at the moment, and I'm not really making any good money.

2:53However, I'd want to start doing some side hustles to make extra money. It couldn't hurt, and I'd be happier to have more money. So I'm actually an accountant. I try to be flexible in terms of what I'm willing to do with side hustle wise. So I thought that bookkeeping would be one of them, but I haven't found much demand for that. Unfortunately, only about 10 hours a week. Do you have any suggestions as to what may be feasible when it comes to being a bookkeeper? I'd prefer something I can do remotely. If you could please let me know your thoughts on this matter, I would really appreciate it. Thank you very much and have a nice weekend.

3:22That's a good question, Robert. So it seems like John over here, he's not working a nine to five, but he does want to make some side hustle money, which I'm totally cool with. But here's the deal. I want to make sure we're all on the same page about this reality that I feel like sometimes people forget. Sometimes people forget that, okay, I want to go start a side hustle to earn more money. Therefore, I have to invest all this extra, call it 10, 15, 20 hours of research, of laying the foundation, of learning how to do bookkeeping, of starting an LLC, of like doing all these things that literally take you 10, 15, sometimes 20 hours just to get started before you see any money.

4:00So they make the mistake of thinking they have to do that to start a side hustle. When in actuality, you can just download Uber, download DoorDash, download any of these, Instacart, and you can make your first$15 literally in the next 20 minutes on one of these apps without having to start an LLC, without having to go learn how to code, learn how to make a website, learn how to do bookkeeping, learn how to do Facebook ads. You don't have to start a business to do a side hustle. Sometimes people confuse, oh, side hustle? That means I got to go start a business. Not always, right? Side hustles can mean earning money by working for$15 to$20 an hour.

4:34And sometimes even a side hustle, quote unquote, can be moonlighting, which just means getting another job that you're doing from, let's call it 8 p.m. to midnight, which could mean delivering pizza for Papa John's or bartending at your local pub. A side hustle isn't always this sexy entrepreneurial thing that you've got to go learn how to be a multi-billionaire business owner to do. You can go earn money by doing some of the simplest things, and you can do it today without having to invest all these hours where you're not getting paid to learn or anything like that. So I'll pause there and I'll let Robert chime in.

5:07Yeah, I think that's a great breakdown and very important for people to understand. Just get started. Go out and get the money first, then figure out how to structure it afterwards. You don't have to go spend all this time, like Austin said, setting everything up. And John's actually in a tremendous position because he's an accountant. I can tell you this, John, you could go into Facebook groups, spend$5 a day on next door ads. And I promise you, you could find 20 clients that need help with their bookkeeping because we go through it all the time because I have so many small businesses around the country.

5:40So get out there, spend a little time figuring it out, maybe go to some meetups for real estate, go to some of the Facebook groups for small businesses in your area or next door groups and find a way to get those first two, three, four clients. And you'll be all set because you have a skill that everyone needs. And that is help with their books and help with their money of their businesses, whether they have a big business or a small business. So I love where you're at. I love your thinking. You just got to get out there and get eyeballs to get those first clients. Yeah. Tactically speaking, join your city's Facebook group, right?

6:16I'm in my neighborhood Facebook group. I'm in a next door group. I'm also in the Franklin, Tennessee Facebook group, despite living not exactly in Franklin. but like I'm in all these groups because I want to see what other people are doing, what they're talking about and like how I can get involved. And so John, if I were in your shoes, I would join as many of these groups as you can and not to say, Hey, give me money, right? Not advertising yourself, but just looking and seeing where you can provide value. Maybe someone mentions, Hey, I'm looking for a bookkeeper. Hey, I just started this lawn care business.

6:45Hey, I just like, Oh, cool. Congrats on the lawn care business. I'm really excited for you. Do you have a bookkeeper yet? How much are you doing in monthly revenue? 7 ,000? Can I please help you? I'd love to be a bookkeeper making$50 an hour on your behalf with a minimum of 10 hours a month or whatever that might turn into. So that's how you do this. It's not always a give me money, come look at me. I'm John. I've got this bookkeeping business. You got to provide value. It's not as transactional as you might think. Yeah, it's just all about getting out there and getting eyeballs. Get in the groups.

7:15Get the eyeballs. The work is out there. I promise. Our next question comes from AG. AG says, Austin and Robert, I love the podcast. It's my favorite to listen to when I rip through some spreadsheets at work. My question is, why do I still feel squeezed? For context, my wife and I are 28. We make$140 ,000 together and have no debt other than our mortgage at 3.5 % interest. For the past year or two, we've been doing everything you guys talk about. We have built a healthy savings account of three to six months of expenses. We contribute to the match in our 401ks. We max out our Roth IRAs and we invest every single month.

7:50I feel like we live comfortably without overspending, but we still feel squeezed when it comes to the things we want. Overall, I feel like we can't move because of our interest rate. I don't want to look for a new job because the job market kind of sucks. And I feel like I can't upgrade the car because I'd rather invest than have a car payment. So is this just lifestyle creep talking? And if so, how do you combat this feeling of being stuck? And if not, then what is it? Your insight is always appreciated. Thank you for all you do. AG, really excited for you. Congrats on making so much money with your wife.

8:18You guys are crushing it. I think you guys are crushing it a little too much, which is why you might feel squeezed. So let's say, you know, you're making$140 ,000 a year pre-tax, I'm assuming. So this$140 ,000 a year post-tax between you and your wife is about$105 ,000 a year, okay? Now, let's say you and your wife both max out your Roth IRA. That's$7 ,000 a year times two. That's$14 ,000 a year divided by$105 ,000. 13 % of what you're taking home is already getting invested, right? That is really close to the 15 % to 20 % that we encourage people to do. right? So you're already right there. And then when you throw on the match of the 401k and the invest every month, you're probably investing 25, maybe up to 30 % of your take home pay, which like, don't get me wrong, that's incredible.

9:01You guys are going to be multimillionaires at that pace, but give yourself some grace, right? Maybe it's not investing this extra$600 a month because for whatever reason we want to, you know, whatever, maybe that$600 a month goes toward the new car fund that you're going to buy in two years. Maybe it goes toward the vacation that your wife very much deserves. Or maybe it goes toward, you know what I'm saying? It's like, you don't have to be so black and white and like, oh, I have to do this and I have to do that. I have to do that at the expense of my comfortability and my mental health because I feel like I'm being squeezed so bad.

9:33So I guess what I'm trying to say is you're already doing so well, right? You're probably investing 25 to 30 % of your take home pay. Consider dialing that back maybe to just the match and the Roth IRA. That's probably close to 16, 17, 18, 20 % as is, right? Because think about it. Let's say you're making$140 ,000, your match is at 3%. That's$4 ,000 right there. And that's just in the match, right? So you guys are investing probably close to$20 ,000 a year in your 20s. You guys are crushing it. So consider dialing it back a little bit, being a little bit more intentional with where you're putting this money for the future.

10:04And I promise I do not think you'll feel squeezed after that. Yeah, I love this takeaway, but I'm going to go a little bit of a route on the kind of delayed gratification and lifestyle creep. I think lifestyle creep is always looked at by people as, oh, they're living beyond their means by buying the new car and buying the new really expensive thing, maybe upgrading the house or whatever it may be. And I think lifestyle creep eats people alive in a different way. And I challenge everyone listening to this episode, go open the cabinet door in your kitchen. And if you have 13 Stanley mugs in there of every different color for every season and every release, That's lifestyle creep.

10:46Go to your closet, and if you have 14 pair of Nike running shoes, but you haven't run a marathon or even a 5K in the last two years, that's lifestyle creep. A lot of people drain their bank accounts month in and month out by the little things, and little leaks sink ships. I don't care what other financial people say and educators say that don't worry about the coffee and the Nikes and those things. That's bull crap. Because at the end of the day, when you're spending all of that money constantly because of boredom or whatever, I consider that lifestyle creep as well. So if you do what Austin says and then also be very intentional with your spending and not buy all of these things over and over again, I feel like that squeeze will go away because you guys are crushing it.

11:34You've already figured out the hardest part. You know how to make money. You know how to invest money. Now you just need to learn how to not waste money. And I think you guys are going to keep crushing it. Yeah. The only thing that I'd want to add beyond that too now is, and I'm not saying go get a car payment. I'm not saying go do these things like whatever, but just remember that it's okay to spend money, right? It is okay to spend money. It is okay. Sometimes it's like a muscle. Some people have to exercise. Sometimes people save and invest in that. That's the muscle that they, which is a hard muscle to train, right?

12:09But that's the muscle they really train in. They're like, yeah, I've got all these millions of dollars. My investing rate on the monthly basis is 39%. I'm going to be like, that's great. Heck yeah. I hope that makes you so happy. But also it's like life is more than just numbers on a computer screen going up. Also remember that we are investing and we're living and we're doing these things and intentionally trying to build wealth so that later on we can really enjoy our lives. If that means driving our dream car, if that means having a boat, having the lake house, going to the beach three times a year, whatever that thing is that you just absolutely love to do, like, that's what all this is for.

12:45And so, A, G, if you feel like, you know, you're only 28, like, you guys probably are doing incredibly better than you think you're doing. But also remember, like, you're doing this so that later you can really, really enjoy what's going on. And sometimes, depending on how much you've accomplished at a young age, that later can come sooner than you think. So our next question comes from P.L. PL says,

13:33empty since 2023 because our current home is in a better location for our kids. The reason we didn't bother with renters is because we've heard too many horror stories of tenants and squatters. Now you might be wondering why we even bought the home in the first place. Well, the plan was to move into it, but for some reason we chose not to, and we always thought we could sell it since the market has always been so hot here in Canada. I don't like to think it was speculation, but maybe there was a little bit of speculation. The cost to keep the new home empty is$20 ,000 a year, And as far as our financial situation goes, we do not have a mortgage on either our house or the new spec house here of$1.3 million.

14:09Our family home is worth about$2.4 million. I could probably sell it right now for$1.7 million in the current markets. We have half a million dollars invested. These are invested into the ETFs you guys talk about. I'm 50. My husband's 52. We have two kids that are in university. And so my question is, do we keep this$1.3 million house that we paid cash for, hoping that it appreciates over time? Do we sell the$1.3 million house and invest the proceeds where they can hopefully grow? Or maybe you guys have a different idea. I really appreciate your perspective on what we should do. The realtor is obviously trying to convince us to take the loss and invest where our money can grow.

14:46Thank you so much. You guys rock. Robert, this is a really tricky situation for PL. I feel terrible that they're going through this, but I'll let you kick us off. Yeah, I think you have to sell the house. I look at it this way. When I break down the numbers, if you can sell it for 1.3 million, yes, you're going to lose some money, a little bit of money, but you also have to look at it from this perspective. If you invest that money, even if it's a million dollars after everything, closing costs, whatever you have to do, that million dollars a year at 10 % is going to make you$100 ,000 a year, plus you lose the carry cost of the$20 ,000 a year that you have by holding the house.

15:24And on top of that, I don't know what the capital appreciation is in that market, but if we assume it's pretty standard four, five, 6 % a year, there just isn't enough appreciation in that market for you to sit and wait and play catch up in this situation. So for me, I'd sell it. I'd move on. I would look at it as a learning experience, not as a loss and keep doing what you're doing. You guys are in great shape financially, but you have to make your money work as hard for you as you work to get it. And by holding onto it, hoping it's going to appreciate, you're not doing that. Couldn't agree more.

15:59You guys are worth well over$4 million. You can take a hundred thousand dollar hit. It's not going to be detrimental to your financial well-being. It's not going to, you know, push you guys off of retirement. And I think you only mentioned you have$500 ,000 invested and you're 1552. Now that's going to be millions of dollars in retirement. Don't get me wrong, but having an extra 1.3 million or even call it, I don't know, 1.1 million invested plus this 500. Now you guys have 1.6, 1.7. That's really going to be able to turbocharge your retirement goals, you guys are going to be just fine. So sell the house.

16:34I'm sorry it didn't work out. Everyone makes mistakes. Don't feel bad about it. This is a learning opportunity. Like what Robert said, maybe the only piece of advice that I could give you, and Robert, maybe you can chime in on this as well, is to shop real estate agents, shop some of these fees. Maybe, you know, you mentioned 5 % fee on this. Maybe someone wants to charge you three. Maybe someone's going to charge you four. Whatever you can do here to save a little bit of money here and there to kind of offset that$20 ,000 a year that you're paying. Yeah, I definitely agree with you, Austin. Find a good agent.

17:03See what you can do because on a more expensive home, one or 2 % in agent fees adds up to a lot of money and you're already losing money. Or go to the agent you have and say, hey, you're quoting us retail prices. Is there any way you could come down one or 2 % to help us out here? We're really trying to work with you because there is someone out there that will do it at a discounted rate. And guess what? They're going to try and make you feel bad. I have friends that do it every single time I buy a property. I'm like, look, do you want to sell this property and make money or do you want to sit on the sidelines?

17:36So I love what Austin brought up about that because you have to figure out what is the best way for you to get the most money out of this as you can, because you're already taking a haircut. So our next question comes from Amy V. Amy says, hi, Austin and Robert. I've gone through all your episodes and I can't find anything about investing in the stock market for those of us who are fully self-employed, both husband and wife. So can you please give us an overview for those of us who don't have access to the traditional employer options for investing? I'd love to, Amy. Very simple. Three things.

18:08First one, you've got the Roth IRA or the traditional IRA, depending on your age. We always encourage people to check out the Roth IRA. It is a after tax. Your money grows tax-free. You don't have to worry about what the tax rates are going to be like in 10, 15, 20, 30, 40 years. You can go to public.com and you can fund your Roth IRA very easily up to$7 ,000 a year. You can contribute both you and your husband can contribute that much. And then after you contribute the money, make sure you actually invest it. You've got VOO, QQQ, VTI, Moat, SPYI. There's a ton of incredible ETFs out there that we always recommend.

18:46The second thing to check out is the Solo 401k. Since you both are self-employed and I'm assuming you're an employee of your company, like not just like the owner, but you're an actual employee on payroll as is might your husband be or vice versa. You can absolutely do a solo 401k. We recommend using carry.com. That's what I use. It's what Robert uses. Very simple. I do the mega backdoor Roth solo 401k, which means I can turbocharge my retirement investing up to$70 ,000 a year, which is insane. So definitely go check that one out. Yes, there's fees, but there's no AUM and management fees. It's just a flat annual fee that you pay to have access to the brokerage.

19:24I think it's super reasonable for what they do. And the last thing, you got your bridge account. Go to public.com, open up a normal taxable brokerage account, put some money in there, put it in some index funds and ETFs and let that grow over a long period of time. Robert, do you have anything to add? Yeah, I would add join the Rich Habits Network. We have a seven day free trial. So I'm going to do a selfless plug here because in the network, we cover all of this each and every week for our hundreds of private members. And I think you guys would learn so much on what stocks, how to diversify, what platforms to use like Austin just alluded to.

20:00But I think that would be the best move because you don't have an employee program like a 401k, but that doesn't mean you can't utilize the same types of tools and even better tools like Austin mentioned, like the Roth IRA, the Solo 401k, maybe it's a SEP IRA for you. So that's what I would do because you need to be diversified, you need to be protected, and you need to be thinking ahead for retirement. So listen up, folks, you can lock in a 6 % or higher yield with a bond account on public right now. But remember, your yield isn't locked in until the time of purchase. So you might want to act fast.

20:37Lock in a 6 % or higher yield with a diversified portfolio of high yield and investment grade corporate bonds only at public.com forward slash rich habits. All right. So our next question is coming from Miguel on Instagram. Miguel says, I found an off-market deal in Metro Detroit. It would be my first multifamily property. It's a four unit fully stabilized for$350 ,000. Each unit is bringing in a thousand dollars a month in rent. The property is well-maintained and wouldn't need any improvement on day one. I've been hunting for deals for a while and spend a heck of a time trying to score anything in this market.

21:12It's going to take$77 ,000 to get this deal done. I've got$90 ,000 in cash and another$70 ,000 in my retirement investments. I currently work for General Motors and I'm definitely looking to escape the rat race. My ultimate question is, is my money better served in this deal or in the markets investing in the index funds that we love? I have a passion for real estate, but I'm kind of on the fence about this one. Let me know what you guys think. Robert, I love this deal and we talked about this beforehand. We ran some numbers and here's why we like it. So we did all the math, right? $1 ,000 per unit.

21:43It's got four units. So it's$4 ,000 that you're going to be collecting in rent. Of that 4 ,000, you're going to pay about$2 ,200 a month on the mortgage. With this information you shared, it was like a seven or 8 % interest rate on a DCR financing. Very cool. So now you've got$1 ,800 of cashflow. Let's say 600 of that goes to expenses and all the other fun stuff that come with being a landlord. Now you've got$1 ,200 a month in cash flow pre-tax. You multiply that by 12, that's$14 ,400 a year. Now how to figure out if a deal is a good idea or a bad idea is to figure out the cash on cash returns because that's what really matters here.

22:21So the cash you're spending to earn$14 ,400 a year is$77 ,000. So$14 ,400 divided by$77 ,000 is a cash-on-cash return of 18.7%. So you are getting an 18.7 % yield on your$77 ,000 per year, which means after five years, you will recoup all of your$77 ,000 initial cash outlay, which means everything on top of that's going to truly be gravy. Now, the cool thing about this is this 18.7 % is just the cash-on-cash returns. Now you think about the tax savings you'll get by doing some depreciation, maybe some write-offs, maybe some other different things that you can creatively figure out with some tax professionals.

23:09And that 18.7 % yield starts to increase to 20, 22, 25%, depending on what you can figure out there. So yeah, getting a 20 or 25 % return on an investment, is that a good idea? Abso-freaking-lutely. The S &P 500 does about 8.5 % to 10.5%, depending on inflation on any given year. That's the long-term average there. So you're going to be pretty much doing twice as good as the market does. Plus, I love how you've already got some money invested, right? You've got this$70 ,000 invested in your retirement account. You're going to have about the same amount invested in real estate. I think that's totally fine.

23:42You're pretty much close to that$100 ,000 base that we talk about. This deal just seems to be a really good one, and I'm here for it. Now, the real question is, and I want Robert to answer this, what should he do with is$14 ,400 a year of free cash flow. Yeah, you covered the numbers incredibly well. So everyone, please make sure you're taking notes. And I just want to add a couple things to that. Before you sign on the dotted line, make sure that you understand that the rental process, you need to use the right apps. You need to make sure that you do proper screening. Don't just take the word for it of anybody that's out there in your area that's going to help you.