Q&A: Spending $8K On Fun, Forming LLC For Rental, & Turning Basement Into Airbnb

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1:54from our audience. We have 100 ,000 of you that come back every single week to listen and tune in and interact with us. We're so grateful for that. And so these episodes are a cool opportunity for us to see what's really going on in your own money lives. Yeah, I definitely love these episodes and they've grown to be so huge over the last few years. And just remember for all of you that are avid listeners that are here every week, it's in your schedule, share these episodes with a friend because everyone is going through something financially from the top to the bottom. It doesn't matter what someone's net worth is.

2:27Everyone has issues and blind spots in their financial journey. So make sure you share with a friend. We'd love that. Show the support because you're here every week and we want to see more people get this education that we provide. So our first question comes from Arturo C. Arturo says, Hi Austin and Robert. Thank you for your continuous guidance and knowledge bombs that you drop on a weekly basis. Recently, I heard Austin say something along the lines of, I saw NVIDIA was cheap, so I had to hit pause and go buy$10 ,000 worth of it, which made me wonder, where does this random spare cash come from?

3:02High yield savings, checking account through a quick bank transfer, sell something else in the brokerage account, trying to capitalize on stocks trading at lower valuations, and I want to be ready with my capital and make sure it's in the right place. Thank you all for the help. Good question. Yeah. In this specific instance, what happened was, what was it, Robert? Like, I don't know, maybe like two or three months ago, NVIDIA was at like a buck 90, a buck 80, a buck 95, something like that. And you look at its like historical valuation from a priced earnings perspective, they just had a killer earnings results.

3:34And I was like, this makes no sense. I got to own some more NVIDIA here. So yeah, I bought$10 ,000 worth. What I did in that specific instance was I looked elsewhere in my brokerage account portfolio. And this was in one of my retirement accounts. And I was like, I should probably get rid of that. I could see myself trimming this one a little bit, take some profits over here. And all of that trading, quote unquote, added up to about$10 ,000. I then took that cash in that retirement account, not a taxable event. And I invested it into Nvidia in that instance. That's how I played that. If you are someone who's like, trying to figure out, you know, how to do this, in my humble opinion, I think the best way to like think about monthly cash flow and investing and things of that nature right after you've built your base so after you've got the index funds and ETFs and you're actively thinking about oh do I want to buy a little bit more Bitcoin and have diversification into that do I want to have this single stock or this thematic ETF in my portfolio I like to think about it as a monthly calendar so at the beginning of the month I say okay great I'm going to put two thousand dollars or you know in this instance for you Arturo who knows what your number is let's call it$2 ,000 a month.

4:40I invest$2 ,000 a month. So I'm going to put$2 ,000 in this specific brokerage account. It's sitting in cash. I kind of scan. I'm looking around. Okay. The thing, Robert, that people make a mistake on is they get too active. They're looking every day, every moment, every trading hour. They're trying to figure out everything. It's not that deep, right? So I'm scanning. I'm looking. Okay, let's dollar cost average. Do I want to buy more index funds and ETFs? Or maybe this month, do I want to opportunistically deploy this capital into a thematic ETF or a single stock or something of that nature? And so I'm saying, okay, great.

5:07Let's call it$500 a week is what actually gets deployed. Because over the course of that month, I want to make sure that if something happens in week three, right, I've got a little bit of capital set aside to ensure that I can act upon that information. So I'm saying, okay, 500 bucks is this first week, I'm going to DCA into these things. 500 bucks week two, buy these things. Oh, wait, week three, I'm glad I've got some capital set aside here. Because turns out Oracle just had a great earnings call. And I want to buy the stock or you know, something happened with Bitcoin, I want to buy some more of that.

5:34So you have the liquidity from the first of the month all the way through until the end of the month in that account because you kept the$2 ,000 total divided into$500 a week. Did I explain that right, Robert? Does that make sense? I think you did a great job. And the only thing I want to click back on is making sure because Arturo here says spare cash or cash that's sitting around. There is no such thing. In Austin's illustration and how I do things, you have to understand the difference between spare cash and earmarked cash. Because the difference is people that have spare cash sitting around, a lot of times that cash sits there for months and months and then turns into a year or two because they don't know what to do with it.

6:17When you have earmarked cash every single month to invest in, then you're prepared to make those investments. And I remember vividly, Austin, we were sitting there like, holy crap, NVIDIA is so cheap. We paused the podcast filming and literally both invested more in NVIDIA right at that moment. And we had the cash available. I feel like when people say spare cash, it's just sitting in a checking account. Please don't ever do that. Every dollar has to have a job. And you should at least have that earmarked cash either in your brokerage account, in a high yield cash account or high yield savings account.

6:52So it's making money while you wait to deploy it unless your dollar cost averaging into the same stocks pretty much every single month. So I hope that covers the entirety of the question, but I think you covered it perfectly. The last thing I'll end here with is that there's never more than a month that goes by where I've got money that has been earmarked for investments where that money sits before it actually gets invested. Right. Like that's the whole point of saying, OK, 2000 here, but let's go 500 a week. So I'm not like all 2000 on day one. And then, you know, September 28th rolls around or September 14th, the day we're filming this rolls around.

7:30I'm like, Oh, I wish I had some money because Oracle this or Amazon that or, you know, NASDAQ this or thematic ETF that I wish I could dollar cost average into these opportunistic price action things there. So it's like you do it in such a way where you have the money available throughout the month, but not past that. It's a one month to a one month thing there. The first to the 31st, make sure all of it's deployed. And then at the beginning of the next month, boom, you've got that next cash infusion and you can follow that same playbook. There's never a time, Robert, where I've got$2 ,000,$4 ,000,$6 ,000 in my brokerage account for nine months.

8:05And it's just sitting there weathering away to inflation, which, by the way, is running at three and a half percent right now. So quite literally, if you have cash in a checking account or a savings account and it's not sitting in a public high yield cash account earning three and a half percent interest, your cash is withering away to inflation because you have to be keeping up with inflation or you're buying power. It's just going to go further and further lower. And I want to add one more thing to this. Every dollar has to have a job. And make sure you understand the amount you do every month for this earmarked cash for your dollar cost averaging and your investing, it can range greatly.

8:43Some people do$10 ,000. Some people do$100 ,000. But if you only have$100 a week, still do the same thing because the goal here is to invest and automate it as much as possible, but always be investing. because too many people, they sit on the sidelines. They're trying to let it build up to 20 grand. Don't do that. Invest consistently and you will win and build wealth. So our next question comes from an anonymous listener. They say, hi, Austin and Robert. I always hear you talk about how you reward yourselves after each$100 ,000 milestone with a splurge purchase. My wife and I are 28 and 27 years old respectively and are approaching a$400 ,000 net worth across a couple of Roth TSPs, Roth IRAs, and a taxable brokerage account, as well as a high yield savings.

9:30All of which are invested into the index funds and ETFs you talk about, of course, except for the high yield savings account. We've saved aggressively the past three years, and I want to get something nice once we both cross that$400 ,000 net worth. So my question is, what are the mechanics of actually doing this? How much is okay to spend? Personally, I'm thinking we spend between$5 ,000 and$8 ,000. When you do this, do you sell shares in your brokerage account? Do you instead save up cash? I don't want to take on margin loans. I love the podcast. I've been listening for the last three years after I made a bad financial decision with a truck.

10:03And since then, we've sold the truck, ramped up our investing, bought and sold a house. And I think in 2031 or 2032, we will be millionaires. Thank you all so much. Robert, I love this question. What do you think? I'll let you start. Yeah, I think they're on the right track here for our anonymous listener. $5 ,000 to$8 ,000 is, you know,$8 ,000 puts them at a 2 % of their total net worth. And I think that's totally fine because, you know, when we work hard, we save hard, we do good with our investments and we're doing all this stuff, we still have to reward ourselves. So I don't know what they're interested in buying, but $5 ,000 to$8 ,000, maybe it's a used boat or a jet ski, or they want to, you know, get something cool and fun for the backyard, I think it's totally fine to do that one or 2 % of your total net worth, as long as you understand you're not doing it all the time.

10:51So make sure you do that. When you have these milestones, they're using the$400 ,000 milestone. That's great. When they get to 500 ,000 or 600 ,000, they could do it again with that 1%. But just want to make sure that you're not prohibiting yourself from building the wealth you're trying to build, because you're constantly taking these wins and these milestones and buying something that's fun and likely a depreciating asset. Yeah, I agree. I think$5 ,000 to$8 ,000 is great. Do you sell off shares in a brokerage account? The answer is no. What you're doing to find that$5 ,000 to$8 ,000 is instead of investing into a taxable brokerage account, that$700,$900,$1 ,200 a month that you've been investing to build your net worth up to where it is right now, instead of continually really investing aggressively, you pause the aggressive investing, you build up that cash savings of money that would have been invested.

11:46And then you say, okay, great. We hit this$400 ,000 milestone. Normally we invest$1 ,000 a month into our taxable public account. We are going to pause on that thousand a month for the next eight months so that we can have this$8 ,000 nest egg because we're going to go on the best all-inclusive resort vacation that Mexico can offer. And you're having a good time, right? That's a cool way to think about it. What we don't want to do is sell shares of VOO or sell shares of, you know, Amazon or whatever our investments are doing. We want our investments to continue to compound for us over a long period of time.

12:18And if we sell those, they can't do that, right? So what I do is I say, okay, great. I have saved and invested so much in the last, you know, six months, whatever it is. This month, call it the seventh month or whatever, it's just an example. I'm going to hit pause on that. I'm going to carve out that 5 ,000 that I plan to invest this month. And instead, I'm going to go spend that$5 ,000 on a jet ski, or I'm going to go spend that$5 ,000 on a something I'm trying to figure out right now, Robert is upgrading my wake surfing situation for my boats. Maybe that's different, you know, fat sacks, or maybe a different surfboard, or maybe a different, you know, bimini on whatever, right, we'll figure that out.

12:52But it's like, that's something that you could think through is like, okay, instead of this month of investing aggressively, I have been investing aggressively, I have been sacrificing, I have been doing the right things for so long now. I've accomplished this$400 ,000 net worth. I'm going to hit the chill pill. I'm going to relax a little bit for a month, maybe two if you want to, right? But I'm going to relax a little bit here, save up some cash instead of investing it and spend that delta that saved cash on something that makes me happy because you can't just be this hamster going hard, hard, hard for years and years and years.

13:25You have to think about investing as running in sprints. You sprint for a season and then you take a deep breath. You You sprint for a season and then you take a deep breath. That's what's worked for me. And that's how I like to approach it myself. Speaking of jet skis, Robert, our next question comes from Michelle Z. Michelle says, hi, thank you for the podcast. I listen to every episode. I'm trying to buy a jet ski and I need some advice. Should I buy a new one? Should I buy a pre-owned one? What are the factors to consider when buying a watercraft of this nature? Can you give me some insight on what is involved as far as maintenance and winterizing?

13:58I live in New York. any information would be greatly appreciated. Robert, go for it, dude. I have a general rule here that everyone should implement. If you've never owned a Boater Rajetsky, buy one that's three years old so you can get into the game, see if you like it, see if you actually use it. And then because most of the bad depreciation has already happened in that first two or three years of ownership, you're gonna buy it right and not have it depreciate as badly as if you bought a new one. because here's the problem. So many people go, I want a jet ski this year. I want to get out on the water.

14:33It looks fun. They go plunk down$20 ,000. They buy a brand new one and they use it three times that year, two times the next year. Then it's in their garage or in their backyard. They don't use it and they lose a ton of money. So in this instance, if you've never owned a jet ski or for anyone else out there, I used because that way you don't get beat up so much on the price and you're going to be fine. Now, if you're somebody that's done it for years and you've owned jet skis in the past, you just bought a lake house, then I would say buy new, keep it for 10 years because then you get the warranty and you get all the good stuff.

15:06You don't have all the wear and tear. That would be my scenario for best case when looking at this option. I love that. It's exactly what I did. I think it was two years ago. I bought myself a birthday present of a$9 ,000 2019 Yamaha VX Cruiser three seater jet ski. I love the Yamaha VX Cruiser. It was a 2019. So I bought it in 2024. So it was five years old, had about 75, 80 hours on it. I think now it's probably closer to double that, right? 150 or something because I've used it. But a couple of things to keep an eye on. One, when it comes to winterizing, just know that you got to pay a couple hundred bucks at the end of every season to have someone winterize it.

15:47If you're not handy, I'm not handy. So I'd be happy to pay someone to do that. Two, insurance. You got to make sure that you have the right insurances in place there because you know something happens on your jet ski someone falls off so you know you run into something like jet ski accidents happen all the time please make sure you have the right insurance and I guess the last thing to consider is where you store it for me I stored it in my garage which was like kind of tacky and not all that fun because I couldn't have a car in that garage right well when I was storing it there so like if you store it in a garage if you store it somewhere like at a marina are you going to pay for the slip.

16:22There's the hidden costs, I feel like, when it comes to owning watercrafts like this. The insurance, the potential storage and slip. Maybe if you do put it in the garage, you got to tow it every single time to the boat ramp, and then you have to do all that stuff. There's a lot of little things like that. But I love Robert's rule here of buying something that's three, four, five years old. Winterizing it shouldn't be too complex. Having the right tools around charging the battery and things like that, that's not too complex either. Make sure you got a little budget for some life jackets, a little budget for some other little trinkets that you want to put on it.

16:52I put speakers on mine, which was pretty cool. They were aftermarket, a couple hundred bucks there. But at the end of the day, I think jet skis are a really fun way to like go spend$10 ,000 because Robert, what's the phrase? I've never seen someone unhappy on a jet ski. Like I love jet skis. They're awesome. Yeah. The phrase is people say money don't buy happiness, but you've never seen anyone frown on a jet ski. And that is 100%. We went out on a little tiki boat. This guy, it's a franchise. I'm like, I got to check this out. it is literally the size of a picnic table it holds like six people it was so fun and i'm like man i gotta get jet skis again so i myself i love this question today because i've had jet skis my whole life and it's time for me to go find two jet skis right now so before we jump to our next question gotta give a shout out to public.com the investing platform for those who take investing as seriously as we do here on the rich habits podcast on public you can build a multi-asset portfolio of stocks, bonds, options, cryptocurrency, and now generated assets, which allow you to turn any invested idea you can ever come up with into an actual index that you can invest in powered by artificial intelligence.

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18:40Proudly paid for by public investing. Full disclosure in the podcast description. So our next question comes from Cody. Cody says, hey guys, my name's Cody. What's up, Cody? Cody says, thanks for what you do. I joined the Rich Habits Network about a month ago. It's been a great level up on my financial journey. Let's go, Cody. Thanks so much for being a part of the Rich Habits Network. Good reminder, join us. Rich Habits Network, seven day free trial. You get to join us, join for a live stream, watch the video coursework, learn about some investments we're making. and it's all free for the first week.

19:13First week's on us. We'll pay for it for you, right? Seven day free trial. Link in the show notes below. Type in Google Rich Habits Network. It's gonna pop right up. Join us in the Rich Habits Network to see if it's a good fit for you. 203 people joined it in August. 57 people so far in September have joined us. We've got nearly now 1 ,100 people inside the Rich Habits Network. We are so grateful. Rich Habits Network seven day free trial. Go check it out. Cody says, my wife and I, 40 and 35, with a combined income of$240 ,000, have three kids, and we need more outdoor space. So we're going to buy a new house in the next one to two years.

19:51Here's our current situation. $700 ,000 combined in our 401ks,$250 ,000 combined in our Roth IRAs,$100 ,000 in a taxable brokerage account, a$20 ,000 emergency fund, and we're currently investing$3 ,000 a month. Our plan is to keep our current home and use it as a rental as we only have$33 ,000 left on the mortgage and$450 ,000 of equity. I'm a veteran, so I qualify for a$0 down VA loan on the new house. Cody, thank you for your service. So my two questions are, with a$0 down VA loan on the table, does it make sense to keep investing at our current pace or should we redirect some of that$3 ,000 to$4 ,000 a month into a house fund or a higher liquidity fund so when we do buy this in the next two years, we have that money set aside?

20:43And at what point does it make sense to set up an LLC when we actually do turn our current residence into a rental? Do we set it up before we convert it to a rental, when we convert it to a rental, or is it more so about hitting a certain amount of equity or a threshold inside of that or a cash flow thing? Please let me know. Great questions here, Robert. I'll let you kick us off. Yes, I love this situation. And yes, on the LLC, I'm going to tackle number two first. I think it's really smart because at the end of the day, as you're building wealth, which you guys are doing a great job of, by the way, you want to make sure that you control everything and own nothing.

21:18Everyone out there, remember that. Control everything and own nothing. Because you don't want to have personal liability along the way. Someone in the rental slips or falls off the porch because they have a party and sues you. You want to have that rental property in the LLC. You already have equity in it. So I don't think of the equity amount as a determining factor of when to do it. I would do it before you put anyone in there as a rental after you buy the other home and you moved in. Now to go to number one. Yes, yes, yes. I love this. I would trim back, even though you have qualifications for the zero down loan, I would trim back your investing amount and build up your emergency fund or start another fund for the house.

22:02But it could be just combined with the emergency fund because you're going to have furniture, moving costs, closing costs, all of these other things that are coming to play. And we don't want to see you taking money out of brokerage or taking money from credit cards to be able to make the move seamless. And also, I assume you're going to need to furnish the rental house, which is probably, depending on the size, going to cost you$6 ,000,$7 ,000,$8 ,000. To get that dialed in, you might want to do some new floors. I don't know if you have to change out some carpets. So yes, I love this idea. And because the window is one to two years, I wouldn't say investing it makes sense because then you're going to have to sell it, have a taxable event.

22:42I love it. Just earmark it, get it into the high yield savings, get that ready. So you're built up and ready to rock and roll when you're ready to buy the new house. So Robert, let's have a discussion about this because I'm thinking about something that they didn't mention. They talked about keeping the current residence as a rental property, right? Whenever they move into this new place. Why not sell it, take the$450 ,000 of equity and earn$36 ,000 a year, 8 % in the stock market? I mean, yeah, I think it's a great idea. It just comes down to two things. You know, we had this earlier in a conversation in the Rich Habits Network.

23:15Someone said, well, I want to buy more rentals, but does it make sense? Or should I just put that cash in the stock market? Personal finance is personal. And I question myself every day because I own a lot of real estate. Is it worth it to have rentals? But you have to think of it this way. You have cash flow. You have appreciation. You have the mortgage buy down. So there are multiple ways to make money. But what you have to calculate is what is your all in blended return, that cash on cash return, if you keep this as a rental versus simply taking it and putting it into VOO or QQQM. And that is the billion dollar question for everyone out there that wants to have diversification through real estate, but also doesn't want to leave too much money on the table.

23:59And I don't have the mathematical answer because I don't know the zip code or what the rental rate is in this area. But it's definitely something everyone needs to question because owning rentals always sounds fun, but it is work. It's not fully passive until you get to five or 10 rentals and you can hire a team. but in the beginning with one rental, you're going to have to either go mow the lawn or hire a lawn guy. You're going to have to keep up on the roof and all those things. So Austin, I think it's a great, great question. I'm probably the wrong person because I love real estate because I can touch it, feel it, and see it appreciate.

24:34But you're right as well on the math when it comes to just putting it in the stock market, letting it ride, and not have the hassles of a rental property. Yeah, I think what's so important is people realize that 2026 and 2025, like, you know, real estate this year, last year, like probably next year too, is very different than real estate from like 2018, 2019, 2020, where interest rates were reasonable, prices on homes were reasonable. The 1 % rule still very much applied to a lot of real estate where I feel like now, I mean, we're talking about a home that has$450 ,000 of equity and they owe$35 ,000 on it, 33.

25:12So it's a$485 ,000 home-ish. I don't know, but like, let's call it half a million dollars. So we're talking about a half a million dollar home here. How much could you reasonably rent out a half a million dollar home to somebody? Maybe$2 ,500,$3 ,500 a month, I'd assume is probably like what you could probably get for that. So now it's like, okay, let's call it$3 ,500 a month. Well, you still have a mortgage on it. So you have to pay your mortgage out of the$3 ,500. You still have, I'm sure, different types of insurances. You're going to be running an LLC, which now you have to think about the annual tax return.