Q&A: Taking Profits (+280%), ETFs for 50 to 60-Year-Olds, & Real Estate Syndications

21:49Robert Croak:So that 80 ,000 comes down to about what$7 ,000 a month or so. And so you can live off of 7 ,000 a month. Awesome. That's so hard to do. How do I live off of 7 ,000? Well, when you don't have a mortgage payment and you don't have high interest debt and you don't have all these different things that are pulling you down,$7 ,000 can go a long way. I mean, that's a lot of money, right? That's how to think about capital appreciation versus preservation and where it means for you depending on your age because it all comes down to your age. So our next question comes from Rithika on Instagram. Rithika says, I know you guys cover all the basic finance nuances, but I'd like you guys to expand a little bit further and talk about real estate syndications, like how to find deals and what to look out for, as well as small business ownership.

22:33Robert Croak:I know Robert talks about having small businesses across the country. Would love to have him explain, one, what businesses he owns, two, how he finds deals, and three, what to look out for when evaluating small businesses for myself. Looking forward to you guys making podcasts about these advanced topics.

22:52Austin Hankwitz:Yeah, I think this is a great question, and I'll do my best to keep it succinct but give some value. What I look for, because I've been doing this for a long, long time, is where can I add the most value? And is it a business type that I understand or a partner or someone on my team understands? So like right now, you mentioned real estate syndication. I've been in real estate for over 30 years. So we're actually launching a Reg A real estate platform. As we speak, it'll be live in the next week or so called VestFunder. Awesome, awesome, awesome. because what that does and why real estate syndication is so important for smaller investors is you can invest in bigger deals, you know, big developments, hotels, apartment complexes, shopping malls, whatever it is you want to invest in alongside of people that have a track record of success in those deals.

23:44Austin Hankwitz:So that's one of the things, the real estate syndication, I think it's great for newer real estate investors to piggyback with people that have done it already and have had a track record of success. As far as how we find deals, I'm going to tell you this. There's a lot of technology out there, but it's really just all about understanding your buy box. And for me, driving for dollars. Here's a prime example. Right now we're working on and we're in due diligence of buying a hotel. That all started from one statement to my partner, Ron. I said, Hey, I want to own one of these beachfront hotels. We have to find a really good one that we We can value add, renovate, and get up and running.

24:25Austin Hankwitz:And within two weeks, he found a tremendous property by driving for dollars. I know it sounds old school. I promise you it's the best way to find things. Because what you can do, whether you're buying a storage unit complex, a single family home, a rental, whatever it is, is you drive to the areas that you desire and you think are blowing up, where they're really starting to build or rebuild in that instance. and you go and you drive for dollars and you'd be shocked at what you found. Most of the best real estate deals in small businesses I have purchased over the last 30 years all came from this.

25:01Austin Hankwitz:But then the other thing when it comes to real estate and small businesses is pocket deals. This happens a lot as you do more and more deal flow. People are gonna come to you first rather than listing it on BizBuySell or Zillow or somewhere else because they wanna make the most money for their seller and themselves. And when they know you're a buyer of these assets, a lot of times you can get ahead of the masses by getting these pocket deals. And all pocket deal means, for anyone that's never heard that term, is you're getting it from someone out of their pocket that hasn't hit the internet yet.

25:34Austin Hankwitz:And you might only have a 48-hour shot clock to be able to make a move on a deal like this, but it definitely is very helpful. So let me go to the next part of the question. Owning small businesses across the country what do I look for? I look for value add. Is it in my wheelhouse? And is it a good buy? And we live in an era right now for anyone interested where all of the baby boomers out there, because they don't have succession plans are sitting on these businesses that might do 500 ,000, 5 million, 10 million dollars a year, but they've never prepared to sell them. And again, driving for dollars.

26:10Austin Hankwitz:You might see a Craigslist ad. You might see a sign out front. Go talk to them. I promise you this is one of the best ways to find deals, but also go to real estate meetups, go to small business meetups, go to your local government when they have these development meetings, sit in and see what's happening. All of these things are very old school, but they are tried and true and help you get ahead of the market. Because if something's been sitting on biz buy sell for three months or a house is on Zillow for three months, guess what? Every smart buyer and every company has already passed on it. So it's going to be the sucker bet if you look to buy it then, because generally if it was a good deal or the right deal, somebody else would have already gotten it.

26:53Austin Hankwitz:So that's what we do. That's how I do things. And my company does things. And that's how we've been doing it for 30 years.

27:00Robert Croak:So I know you guys bought a pizza company, a pizza store in Florida, I think it was December of 2023. So you've had about two and a half years. I know you've got a bunch of other businesses across the country. Maybe it takes some time to walk through some of those.

27:16Austin Hankwitz:Yeah. So right now, Austin brought up the pizza store that's here in Florida. We bought it. The owners made a pretty terrible mistake in the early part of just discussing why it was for sale. And so we were able to get a really, really good deal on the property. It did very well the first year, year and a half. Then unfortunately we got wiped out by the hurricane. So it took quite some time for that area to rebuild and us rebuild the restaurant. Now it's setting sales records and it's doing very well again. But I also have like the sushi shop that I've had for years. We just recently sold it and we had two stores in Colorado.

27:51Austin Hankwitz:Very, very good brand. We did well with that. But then I also have the consumer products brands. Those are operated out of Ohio. And then I have other small businesses where I own part of a warehousing or records and VHS tapes. And then I have all these other investments throughout the country in various types of small businesses. But I generally try to stay in my wheelhouse. So then I know, can I bring value and can I increase all the things that are necessary, whether it's sales, profit or efficiencies to be able to make sure that it is a good buy for me, my partners, and sometimes investors when we bring those in.

28:31Robert Croak:What type of small business right now do you think people should stop ignoring and take seriously? For example, I've seen discount tires or I think it's called Midas and like some of these other like tire discounter type places where if you can run them efficiently, you're making a ton of money. Is that an example? What's an example of a small business that you think is interesting right now that people should pay more attention to if they're interested in this type of like small small you know one two three million dollar a

29:00Austin Hankwitz:year local businesses i love this question i think you need to stop listening to the fake gurus out there that tell you all the rich people are buying laundromats and they're buying these things because guess what laundromats are not passive yes you can have a manager yes you can have a partner and that would help but they're not as passive and where everything is going now all the new apartment buildings and every all the condos, they all have in room or in building laundry services. But the things that are exciting for me right now is I would look at anything where you can fix a bigger problem and it takes dirty work and not necessarily always dirty work, but those types of businesses are easier to get up and running, less expensive to purchase, and they're not going to be upended by AI and robotics anytime soon.

29:47Austin Hankwitz:So you could think roofing, electrical, drywall. Nobody wants to do drywall and it's so incredibly profitable. Junk removal. You could do demo work. There's just so many things. You could do pressure washing. One of the most profitable businesses I ever owned, and I owned it for a long time, was commercial pressure washing for not only people, sometimes with their residences, but a lot of restaurants and businesses that have to keep things clean. But these are dirty jobs and they're also labor intensive jobs. So many times they're more profitable, but you can control what happens because AI is not going to come over and start just automatically drywalling and taping and doing the finish or painting the insides of house.

30:31Austin Hankwitz:That will happen somewhat, but it's not going to take over anytime soon. So I look for those types of businesses that I can go in, add modern processes and modern marketing to build the business up maybe from 800 ,000 to 2 million and really expand those profit margins.

30:48Robert Croak:Could you imagine a humanoid robot just coming up to your house one day, ringing the doorbell? Hey, do you want me to pressure wash your driveway?

30:55Austin Hankwitz:That'd be too funny.

30:56Robert Croak:A little Tesla bot walking around, that'd be great.

30:59Austin Hankwitz:There's going to be some of that where, you know, there's going to be robots that are already happening that are going to be able to go up and down a ladder and bring the roofing materials up to the roof. Some of that, but that's just all about efficiencies. It doesn't mean it's going to wipe out that trade. And that's why for years and years, we told everyone that was younger, learn how to program. Now everyone's backtracking and saying, don't learn how to program, learn how to do things in electrical and all the trades, because that's where the new millionaires are going to come from unless you design a product or a service around AI.

31:34Robert Croak:Here's my business. I've got absolutely no data around this. This is just a weird hunch. If I was getting into small business ownership, I would own sprinkler installation and repair businesses because I'm building a house right now. And I look at all of the houses that are inside this neighborhood that I'm, you know, building in as well. And they all have sprinkler systems. And guess what happens? Sprinkler systems go broke and you got to got to repair them. So I think sprinkler installation and dude, I'm not going to have a Tesla robot on its hands and knees trying to dig a hole to put a sprinkler in.

32:07Robert Croak:It just doesn't make sense. So I think that one's pretty interesting. Now, before we jump to our next question, got to give a shout out to public.com, the platform for those that take investing as seriously as we do here on the Rich Habits podcast. Investing is something all of you need to take seriously. So I don't care if you're using a Schwab, a Robin Hood, a Fidelity, any of that stuff. Please consider not just for the 1 % bonus, but for the actual products that are offered to these investors on public. We got AI agents now just had a great conversation with Yannick Malling. We've got generated assets and the easy way for anyone to take an idea, turn it into their own ETF completely for free.

32:49Robert Croak:This is all free stuff that is offered to public users. And now direct indexing, you can directly index the S &P, the NASDAQ, things of that nature on public.com, all completely for free. You don't have to pay some sort of membership fee. You don't have to have a quarter million dollars like you do on Vanguard. It's like, it's so simple. It's so great. I don't know why everyone doesn't use this platform. So if you're not yet on public, go to public.com slash rich habits, move that portfolio over. You're going to thank yourself later. So our next question comes from Sophia on Instagram. Sophia says, hi, Austin and Robert.

33:21Robert Croak:I've been listening to the rich habits podcast for two years now, and I love the show. I especially love your Q &A episodes because hearing how you walk through real life situations has helped me out a lot. I'm going into my senior year at the University of Pittsburgh and I'm starting to map out the next steps with grad school while also trying to build a strong financial foundation. My long-term goal is to own multiple rental properties and I think house hacking would be the best way for me to get started in doing that. Just to give you some context of where I am financially, I have$69 ,000 in a 529 plan for grad school so I should be able to graduate with little to no debt.

33:55Robert Croak:I've also started investing. I've got 7 ,300 in the S &P 500, 25 ,000 in a high yield savings account, earning about three and a half percent, a 780 credit score and$2 ,500 in my checking. Where I'm stuck is figuring out the smartest next move from here. Should I prioritize house hacking right after graduation? Should I focus more on investing and building my base before I buy? If house hacking is the move, how would you approach choosing a good market and first property without overcomplicating it or needing a mentor right away. Realistically, is this something you can learn on your own or is it worth finding someone experienced to guide you through your first deal?

34:35Robert Croak:Robert, I feel like this is another great question for you.

34:37Austin Hankwitz:Yeah, I love the situation and congrats because you have put yourself in just a really, really great spot, Sophia. So let me break it down of what I would do at your age and where you're at. I would build the base a little bit further because right now you've got that$7 ,300 in the S &P 500, 25 ,000 in the high yield savings account. I would make sure to get the Roth IRA set up right away. If you don't have that, you didn't mention it. And I would get some money moving into the Roth because we wanna see everyone that's younger and through middle ages to get that Roth maxed out every single year.

35:11Austin Hankwitz:So what would I do about the real estate? I would get your base built. I know you're in a hurry to get into the real estate game. You wanna own multiple properties. And I do love that you're onto the house hacking game. But if you're going to rush yourself and you're not going to get that$100 ,000 base, I would ask you get a$50 ,000 base set up and ready. And then you look at the Fannie Mae 5 % down mortgage. Because if you're not going to wait until you get the$100 ,000, that's the loan I would use. Because then you can house hack. You can get two, three, four units, up to four units and up to$1.3 million.

35:46Austin Hankwitz:Please don't buy that much. Buy something that works for you. So when you have that tenant in there, it keeps your cost of living really low. Remember, anyone out there that's thinking about house hacking, don't buy what they'll let you borrow. Buy what works within your budget so you're not house broke. But I love this for you in thinking about house hacking first. So many people rush into buying their first property and they want it to be their magical home so they can set everything up. Guess what? do it with house hacking. And then when you move into the next property and it's your primary home, then those two tenants will likely pay for most of the primary home that could be your starter dream home because too many people want to jump the gun and get too early in real estate.

36:29Austin Hankwitz:Get the base built, whether it's 50 or a hundred thousand, do the 5 % Fannie Mae down loan to do the house hacking and you will be dialed in so well.

36:38Robert Croak:Great advice, Robert. Some advice I could give to Sophia is I remember when I bought my first house and I'm sure Robert does too. It feels so much more intimidating and daunting than what it really is. If you simply understand that I have to come up with X amount of dollars every single month to pay my mortgage, which includes property taxes, insurance, stuff like that, escrow. And I also need to be setting aside X amount of dollars every month from my tenant for vacancy and repairs. If you just understand that and the math checks out in your situation, that's it. That's it. And if you find a great tenant, maybe it's someone that you went to grad school with.

37:16Robert Croak:Maybe it's someone of your friend, brother who just moved to Pittsburgh. Like, I don't know. But like finding a good tenant is half the battle. That's honestly 80 % of the battle in my humble opinion, because if you have a good tenant, that's going to pay you on time. That's not going to cause a ruckus. It's going to be respectful of your property, all that stuff. And be picky. Like you don't have to just take the first person that applies, like be picky. it's your property you can figure out who is going to live in your property i mean you're it's essentially the same home as you're living in right it's a duplex quadplex whatever right so like be as picky as you want but once you figure out that i think that is half the battle if not more important and then what to consider too is you mentioned the mentorship i think the only value a mentor can help you figure out here is if the numbers work and what does it look like from a lease agreement perspective, which in my opinion, Claude, ChatGPT, Gemini can do both of those things.

38:10Robert Croak:So if I were in your shoes, I would share all of your dreams when it comes to house hacking, your aspirations, all the stuff as it relates to that with ChatGPT, Gemini or Claude. Hey, here's my situation. Here's what I think I can afford. Here's how much I need to be able to pay every month. Here's what I'm going to be able to make. Like be as very specific and transparent as you can. And then just like you'd share it with a mentor And then I think Claude is going to come in and say, hey, I think you can afford up to this much. Here's what you can expect in property taxes. Here's what you can expect in rent.

38:41Robert Croak:Here's what you might be on the hook for. Here's what you should set aside for vacancies and repairs. Here's exactly the type of lease agreement that you need to get signed and the specific things to call out because of the area you might live in or whatever, right? Like mentorship, sure. But like if you can lean on AI a little bit here, I don't think you'll need a mentor. But Robert, a follow up to this is what part of the country right now, in your opinion, is a good place to consider house hacking? Is it in Florida? Is it parts of Indiana? Is it parts of Ohio? Like it's not here in Nashville because it's very expensive, right?

39:15Robert Croak:So like where should she think about house hacking where the numbers begin to make much more sense?

39:19Austin Hankwitz:Yeah, that is a great question. It's the number one thing everyone needs to understand is find these tertiary markets that are up and coming, that are gentrifying, but you're not late to the party. So when you talk about Florida, there's a lot of great markets in Florida that are these offshoot markets outside of these big capital markets. But also, yes, Ohio. Last fall, Toledo, Ohio, where I'm from, was voted as the number one best investment town in real estate in the country by the Wall Street Journal. I was shocked. Everyone was like, why didn't you share this with us? Even though I've been sharing it in the Rich Habits Network for many years now that you have to find these tertiary markets.

40:02Austin Hankwitz:Gary, Indiana is great. Some parts of the suburbs of Detroit. These markets are all over the country. You just have to get outside of the really expensive markets like Nashville and like, you know, Miami or San Francisco, because those markets are very hard to find real profits and growth in those markets because they're so oversaturated. saturated. So just look outside of the big markets, find these cool up and coming neighborhoods and markets and start there.

40:33Robert Croak:Our last question comes from Vincent on Instagram. Vincent says, Austin, Robert, I want to get your advice on my current financial allocation and the next steps I'm considering. At the moment, I've got 900 ,000 in retirement accounts, 7 ,000 in taxable brokerage accounts and 16 ,000 in an emergency fund that I'm still contributing$1 ,000 a month to, which at the moment only covers two months of expenses. Given this setup, would you recommend that we shift more focus toward building our brokerage slash bridge account or continue prioritizing retirement account contributions? I'll kick this one off.

41:08Robert Croak:I think that having 900 ,000 in retirement accounts, I don't know Vincent's age, but I'm assuming he's probably in his maybe 40s or 50s having nearly a million dollars in these retirement accounts. I think now's a great time to rock and roll over to that bridge account. You've got 900 ,000, which will double every seven years. That's 1.8 million in seven years from now, 3.6 million in 14 years from now, right? And that's assuming you don't contribute anything. So at the end of the day, I think having a healthy retirement account is very important. You certainly have that, Vincent. And I also believe that if you want to retire early and you want to really have that flexibility, Austin, Robert, you guys talk about why bridge accounts are so important.

41:51Robert Croak:Did you know you can also have these other ways to get money out of your retirement accounts? Why do you guys ever talk about that? We have talked about it and they're very rigid. You have no control over it. The IRS tells you how much you can take out of it. It's not a good strategy. We want people to have flexibility. We want people to be able to choose how much they need on a monthly basis or an annualized basis and how much to take out of their bridge accounts because they built it up and spent years doing that. So Vincent, I would continue to fully fund that emergency fund, and then I would start contributing to a taxable brokerage account.

42:23Robert Croak:I'd grow it up until a couple hundred thousand, if that's what you're rocking and rolling with here. Maybe less. I don't know how much you're going to need. Flip it over to some income-producing NEOS funds and be good to go.

42:33Austin Hankwitz:I love that take. And anyone listening that hasn't tried the Rich Habits Network seven-day free trial, because I feel like right now with Vincent and Sophia and some of these other people, you're asking all the right questions. But inside of our network, you can get all of that information, not just from Austin and I, but our entire team and all of the other really smart people in there. So make sure you check that out. There is a link in the show notes below.

42:57Robert Croak:Hi, everyone. Thanks so much for joining us on this week's episode of the Rich Habits Podcast question and answer edition. We are having so much fun with these episodes. Don't forget, Robert just called it out, the Rich Habits Network. We're having so much fun over there as well. We've got the weekly live streams. We've got questions. We've got answers. We've got seven hours of video coursework. So much going on. Over 900 people are over there with us every week, hanging out, getting their questions answered, and we're having a blast. Be sure to go check out the Rich Habits Network using the link in the show notes below.

43:27Robert Croak:And we'll see you tomorrow for our episode of the Rich Habits Radar.

43:54Thank you.