Podcast Summary: How to Money | Episode #943

Title: Ask HTM - Parlaying Real Estate Equity into Stocks, FIRE Recommendations, & Unloading a Car with a Loan
Release Date: February 10, 2025
Hosts: Joel and Matt from iHeartPodcasts' How to Money

In this episode of "How to Money," hosts Joel and Matt tackle a range of listener questions surrounding real estate investment, early retirement strategies, and managing vehicle loans. Additionally, they delve into personal frugality, discuss portable sauna options, and explore the emotional aspects of pet ownership expenses.

1. Parlaying Real Estate Equity into Stocks

Listener: Alexis from New Jersey
Question Timestamp: [08:24]

Discussion Highlights: Alexis and her husband own two homes, with their first property now serving as a rental. Purchased in 2020 for $262,500, its current appraisal stands at $470,000, with a remaining mortgage of $200,000. They earn a profit of $600 monthly, which they reinvest, but are contemplating whether to continue this strategy or sell the property to invest the accrued equity into stocks.

Notable Insights:

• Locked-In Low Mortgage Rates: Joel emphasizes the advantage of Alexis's low mortgage rate (3.1% in 2020) as a significant hedge against inflation. He advises caution in selling a property with such favorable terms.

  "It's hard to assign a specific value to that locked-in low mortgage rate. I think it's actually one of the best protections you could have against inflation."
  — Joel [12:26]

• Tax Implications: If Alexis meets the "two in five" rule—living in the home for at least two out of the past five years—she can potentially avoid capital gains tax on the appreciated value.

  "If Alexis sold soon, she could save herself roughly $30,000 in tax that she would otherwise owe."
  — Joel [15:50]

• Investment Returns Comparison: While real estate has provided significant returns due to leverage and favorable market conditions, Joel and Matt caution that these returns might not sustain in the future. They compare real estate returns to the stock market's performance, noting that stocks have also historically provided robust growth.

Conclusion: Joel and Matt recommend that Alexis weigh both the financial benefits and lifestyle implications of either continuing to invest in real estate or reallocating her equity into the stock market. They stress the importance of making a swift decision to avoid potential tax burdens in the future.

2. Recommendations for Early Retirement (FIRE)

Listener: Evan Brooks from Omaha, Nebraska
Question Timestamp: [22:23]

Discussion Highlights: Evan seeks book recommendations to educate himself and his wife on early retirement strategies before consulting a financial advisor.

Notable Recommendations:

• "Your Money or Your Life" by Vicki Robin: An inspirational guide that intertwines personal stories with financial advice, emphasizing the relationship between money and life satisfaction.

  "Your Money or Your Life... it's less technical and it has stories that help drive home the point."
  — Joel [26:18]

• "The Simple Path to Wealth" by JL Collins: Focuses on straightforward investment strategies, particularly the merits of index fund investing, presented in an accessible manner.

  "JL's book is really good for people who are saying, 'But isn't that just not diversified enough?'"
  — Matt [27:19]

• "Quit Like a Millionaire" by Kristy Shen and Bryce Leung: Chronicles the authors' journey to financial independence, offering practical advice and motivation.

• "The Psychology of Money" by Morgan Housel: Explores the behavioral aspects of money management, highlighting the importance of mindset in financial success.

Additional Resources:

• Blogs: Matt and Joel recommend bloggers like Mr. Money Mustache and The Mad Fientist for in-depth strategies and personal insights into the FIRE movement.

Strategic Advice: Joel suggests that Evan focus on both the technical and psychological aspects of early retirement, ensuring a well-rounded understanding before making significant financial decisions.

3. Unloading a Car with an Active Loan

Listener: Josh
Question Timestamp: [51:14]

Discussion Highlights: Josh and his wife plan to sell their second car, a 2020 Hyundai Elantra, which still has $1,200 remaining on the loan. They are unsure whether to pay off the loan before selling or to sell the car with the loan active.

Hosts' Recommendations:

• Paying Off the Loan First: Both Joel and Matt advise paying off the remaining loan balance before selling to simplify the transaction and avoid potential complications with the lender.

  "If you only owe $1,200, pay that thing off, make the sales process just a whole lot easier."
  — Joel [52:01]

• Streamlining the Sale: By having a clean title in hand, Josh can present the car as a straightforward sale, making it more attractive to potential buyers.

• Financial Benefits: Eliminating the car reduces ongoing expenses like insurance, taxes, and depreciation. Joel highlights that the money saved from owning fewer vehicles can be invested elsewhere for better returns.

  "If you're selling it and you're not adding a different car into your fleet, this is money in the bank."
  — Matt [51:36]

Conclusion: Joel and Matt conclude that paying off the loan before selling is the most efficient approach, ensuring a smooth transaction and maximizing financial benefits.

4. Saving on Expensive Pet Surgery Costs

Listener: Sarah from South of Boston
Question Timestamp: [32:11]

Discussion Highlights: Sarah seeks advice on reducing the costs of a potential heart surgery for her 4-year-old Australian Shepherd, Maggie. Despite attending a teaching animal hospital and facing limited insurance coverage due to a pre-existing condition, she is exploring additional avenues to mitigate the $7,000 to $10,000 expense.

Hosts' Recommendations:

• Shop Around: Matt advises contacting multiple vets to obtain quotes, ensuring that Sarah is getting the best possible deal for the surgery.

  "Call around to a few other vets to see what some other well-reviewed vets might charge you."
  — Matt [35:39]

• Utilize Pet Discount Resources: Joel suggests using websites like pethelpfinder.org to find local vets offering discounted services.

• Avoid High-Interest Financing: They caution against using payment plans or credit services like CareCredit, which can impose exorbitant interest rates.

  "CareCredit... they charge rates north of 30%... maybe it's better to pay cash in full when the time comes."
  — Joel [39:15]

• Explore Financial Tools: Matt recommends using the podcast's credit card tool to find cards that offer rewards on large purchases, allowing Sarah to maximize benefits while managing expenses.

Conclusion: Joel and Matt encourage Sarah to thoroughly research and compare veterinary costs, utilize available discount resources, and consider smart financial tools to alleviate the burden of Maggie's surgery costs.

5. Frugal vs. Cheap: Personal Preferences and Practices

Timestamp: [02:55] - [07:48]

Discussion Highlights: Joel and Matt engage in a light-hearted debate on the terms "frugal" versus "cheap," ultimately expressing a preference for being frugal. They segue into a discussion about sauna options, highlighting Joel's interest in portable saunas as a cost-effective alternative to traditional models.

Notable Quote:

"I love frugal. Cheap."
— Joel [02:55]

Portable Sauna Discussion: Joel considers purchasing a $120 portable sauna from Costco, which is significantly cheaper than traditional wooden barrel saunas costing upwards of $3,000. They discuss the practicality, quality, and usability of the portable option versus the more expensive models.

Conclusion: The hosts advocate for cost-effective solutions that align with personal lifestyles and financial goals, demonstrating how frugality can lead to meaningful savings without compromising on desired experiences.

6. Crowdsourced Real Estate Investing

Listener: Celeste
Question Timestamp: [45:45]

Discussion Highlights: Celeste inquires about investing with Arrived, a platform for crowdsourced real estate investing. Joel and Matt critically evaluate the viability of such investment avenues.

Hosts' Recommendations:

• Avoid Crowdfunded Real Estate Platforms: Both hosts advise against using platforms like Arrived due to high fees, multiple layers of bureaucracy, and minimal liquidity.

  "Real estate always comes with fees, but the fees are even bigger when other people are sourcing the properties for you."
  — Matt [45:57]

• Compare Returns: Matt highlights that the average annualized return on Arrived is approximately 3.3%, which pales in comparison to the stock market's performance over the past decade.

  "Average annualized returns are not going to blow you away... compared to the S&P's 14.2% over the past decade."
  — Matt [48:33]

• Alternative Investment Options: They suggest traditional real estate investments or Real Estate Investment Trusts (REITs) like Vanguard's VNQ as more efficient and lucrative alternatives.

Conclusion: Joel and Matt conclude that while crowdfunded real estate investing may seem attractive, the high fees and lower returns make it a less favorable option compared to direct real estate investments or stock market investments.

7. Personal Reflections and Lifestyle Choices

Additional Insights: Throughout the episode, Joel and Matt share personal anecdotes and reflections on financial decisions, emphasizing the importance of aligning financial strategies with lifestyle choices. They discuss the emotional aspects of pet ownership costs and the challenges of balancing frugality with quality of life.

Notable Quote:

"Are you 100% sure you're doing all the smartest things for your money?"
— Joel [41:15]

Beer Discussion: Towards the end, Joel and Matt share their thoughts on a bourbon barrel-aged scotch ale by Monday Night Brewing, highlighting the sensory experiences and personal connections tied to their beverage choices.

Conclusion: Episode #943 of How to Money offers listeners thoughtful analysis and actionable advice on navigating complex financial decisions related to real estate, retirement planning, vehicle management, and pet care expenses. Joel and Matt’s balanced approach combines financial wisdom with personal experiences, providing valuable insights for anyone seeking to optimize their financial well-being.

Resources Mentioned:

• PetHelpFinder.org
• Vanguard VNQ
• Arrived
• How to Money Credit Card Tool
• Recommended Books:
  • Your Money or Your Life by Vicki Robin
  • The Simple Path to Wealth by JL Collins
  • Quit Like a Millionaire by Kristy Shen and Bryce Leung
  • The Psychology of Money by Morgan Housel

For more details and additional resources, visit howtomoney.com.