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Rich Habits Podcast
Q&A: Big Beautiful Bill Tax Deductions, Buying a House w/ In-Laws, & Saving for an MBA
00:45:21
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- [00:00]
Experian Narrator
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Austin
And breathe.
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Experian Narrator
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- [00:59]
Austin
1-800-contacts. Hey everyone, and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify brought to you by Public.com. these are our Thursday episodes where we answer your questions as if we were in your shoes. You can ask us questions on Instagram at Rich Habits Podcast. You're just a little DM over there. Or you can email us your questions at rich habits podcast gmail.com more than welcome to send us emails. Actually, I think most of this episode comes from our Gmail account email there. So go send us some emails, send us some Instagram dms. Get our attention any which way you possibly can, and we'll try our best to answer it. Give us some grace, though, Robert we're getting thousands of questions every single week across platforms, and we've got six or seven questions in this episode that we're answering. So if we don't answer your question live, please just give us some grace.
- [01:50]
Robert
That's right. There's a lot of ways to find us out there on Instagram and TikTok and LinkedIn and Spotify and Apple. Just get in the game. Get involved with us. There's so many ways to get access to Austin and I, and we'd love to have you guys in the network rocking and rolling with us, especially during these volatile times. So just make sure you understand we're trying to get to all the questions, but we're excited for this episode.
- [02:15]
Austin
That's right. And this episode of the Rich Habits podcast is brought to you by Public, the investing platform for those who take it seriously. Because on Public you can build a multi asset portfolio of stocks, bonds, crypto options and now generated assets which allow you to turn any idea into an investable index using artificial intelligence.
- [02:36]
Robert
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- [02:57]
Austin
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- [03:28]
Robert
Full disclosure in the podcast Description so
- [03:31]
Austin
our first question comes from Nikki via email. Nikki says, I'm 30 years old, living in Chicago. I make 61,000 per year with the ability to work overtime. I'm in the process of switching careers and hoping to land a new job this year with at least an $85,000 salary. But job hunting is hard right now and I'm still learning some new skills to get into this new career field. I'm currently living with my parents and they don't charge me rent. I luckily have no student loans or credit card debt. Last August I trade in an old damaged car for 8, $500 and then I bought a new car and paid $5,000 cash as a down payment. And now I have a $35,500 loan with a 7.7% interest rate that comes out to about a $550 monthly payment for 84 months. That will total $46,200 of total payments, which is about 10,600 in interest. I just received a letter in the mail stating that I qualify for the loan interest deduction, which was passed as part of the One Big Beautiful Bill Act. This deducts up to $10,000 in car loan interest on my federal tax return each year, so I'm currently paying an extra 150amonth in principal toward my car loan to pay it off early. I've Already paid over a thousand dollars in interest since I got this loan. And I have the opportunity to refinance at a lower interest rate. But my question is, if I qualify for this loan deduction, should I stop trying to pay off my car early, just the minimums, knowing that I can take this interest and write it off my federal taxes? Should I then take that maybe extra 150amonth and invest it toward my Roth IRA? Right now I've got 22,000 in a high yield savings, 143,000 in a 401k, 22,000 in my Roth IRA, and 3,200 bucks in my bridge account on public. Thank you guys so much for your help. This is a really interesting question, Robert, what's your initial take?
- [05:30]
Robert
Well, the initial take is if you can get the free money from the big beautiful bill, take it it. You just have to make sure you qualify. Obviously you bought a new car, so you do qualify in most instances. Because for everyone out there that thinks they get this for a used car, make sure you read the fine line, because I don't believe it covers used car purchases. But I think it's a good idea if you can take advantage. We always talk here at the Rich Habits podcast. It's not what you make, it's what you keep. And this is very well thought out, which I appreciate because they're looking for ways to improve an already good situation. So I would take the money if you can qualify and keep rocking and rolling, but I would not be paying the extra 150 per month in the principal towards the loan. I would keep that rocking and rolling in that Roth ira. If you're not already maxing out the Roth IRA or put it in the bridge account. Because I always feel like it's a better idea to do that to keep you investing in compounding over time versus paying down debt like a car loan or. Or a mortgage. That's what I would do.
- [06:32]
Austin
Nikki, let's talk through this. You've got my brain rattling because this is obviously a new. A new thing, right? The one big beautiful bill is new. And being able to write off the interest on your passenger vehicle is a new thing. And so let's just be clear as to, like, what that actually means. You say that since you've got this loan, you've paid about $1,000 of interest, which means you can now write off $1,000 against your taxable income as it relates to your federal Inc. Knowing you make about 65, 75, 85,000 a year, somewhere in that range we're talking about a 10% effective tax rate. So if you're able to take this interest, write it off your taxes here, you're saving about 10% or about $100 in effective taxes that will be paid to the government. At the end of the day, I don't believe that $100 is going to materially change your wealth building journey. If I were in your shoes, I would refinance my car at this lower, call it five point interest rate coming in at about $600 a month. So about 50 bucks or more extra here. So I would refinance my car at a lower interest rate. Five and a half, 6%. I would continue to max out my Roth IRA. Like that's like a non negotiable. You've already got 22,000 in your Roth IRA. Let's get that maxed out every single year if we can. And if you have money left over, then sure, use that money to pay your car loan down a little bit more aggressively. But I don't think a 5 and a half or 6% interest rate on your car at about 600 bucks a month is a reason to not invest into your Roth ira. Because that's essentially what you asked. You said, hey, do I stop paying these extra payments and instead use that money to invest in my Roth ira? Yes, I would stop paying extra at a five and a half percent interest rate. Knowing now that you can max out this Roth ira. I think five and a half is okay. And I don't think though that like the interest saving arbitrage from the one big beautiful bill of like 100 or $200 is going to be the needle mover for you. I think having the Roth IRA maxed out is going to be the needle mover for your wealth building journey. I hope that makes sense that I explain that. Okay.
- [08:38]
Robert
Yeah, I think you explained it really well. And I want to just really talk about this just a little bit longer. And that is we always want all of you to max out the Roth IRA before you even think about starting to pay down other debts and pay extra payments. Unless it's high interest. And this is on that border at 7% where you could say it's high interest. Especially with the markets where they are right now. If this was 23 or 2024, even earlier in 2025 when the S&P was making 20% or greater, it's a little bit more of a broad spectrum of that positive arbitrage that could go into your bank account. But right now it still is close. So I would always make sure you're maxing out the raw first and then pay any extra payments like Austin alluded to. Once those things are all and done, then you can add the extra payments to pay down the car a little faster. But I think your breakdown was perfect. I even understood the situation better through your breakdown.
- [09:38]
Austin
Yeah, I think at the end of the day here the most important thing to remember is you can't out invest high interest debt. And I'm not calling, you know, if they, if, if our friend here actually does refinance their, their auto loan at this five and a half, six percent interest rate. Like that's not high interest debt. My opinion, right, you're calling it five, six, like that's fine. Now if it was seven and a half, eight and a half, nine and a half. Right? Double digits. Getting really close to that, then yeah, that's a different conversation. But call it 5 and a half 6% if you can afford that monthly payment for your car. Rock and roll. Just know that you are someone that maxes out your Roth IRA and that's a non negotiable. So our next question comes from an anonymous listener. Our anonymous listener says hi, Robert Nosten. Please keep me anonymous. Thank you for your show. I'm a new listener and I've really enjoyed your advice around career and future planning. I'm 24 years old. I'd love your perspective on how you'd approach my situation in my shoes. Right Now I make $100,000 a year pre tax working full time. I've got $70,000 invested across my Roth IRA and a taxable bridge account. And I currently invest 35% of my after tax paycheck. I also have an emergency fund with four months of expenses set aside and a high yield savings account. My goal is to start a full time MBA program in the fall of 2027. I'm extremely fortunate that my parents plan to cover tuition, but I know I'll still need to fund my own living expenses. I do intend to work part time to 20 hours a week while I'm in school. But I don't want to be forced into making a bad decision because I under saved for my monthly expenses. My question is, how would you plan for this if you were me? Would you continue aggressively investing in the market between now and 2027 or perhaps start redirecting a chunk, if not all of that 35% into a dedicated MBA living expenses buckets? Any guidance on how you'd think through this would be super helpful. Our Anonymous listener is you are good with money. You're 24 years old, you make a lot of money. And I think you answered your own question here. That's what I would do if I were you. Because it's like, well, what's the alternative, right? Let's say it's fall of 2027. Your parents are so kind and generous that they want to pay for your tuition. But you've got to pay your rent, you've got to buy your food, you've got to do different types of activities that might come with purchasing different books or software, whatever is, you know, MBA related expenses here. That is now thousands of dollars per month. Month. Are you going to go into student loan debt? Are you going to swipe the credit card? Are you going to cash out on your retirement accounts? No to all of that. What are you going to do? You are going to use a savings account bucket. You just mentioned it here. Think of it, it's like a sinking fund for this specific experience. I would personally knowing how much money you have, right? You've got $70,000 already in your Roth IRA in your bridge account. You are so good to go. So if I did my math right, that 35% of your after tax paycheck, when you realize that number, it's about $28,000 a year, so call it 2300 bucks a month. I think that you should set aside $625 of that 2,300 bucks a month to continue to max out your Roth ira. And the Delta is then set aside in a sinking fund high yield Savings account earning 3 or 4% which between now and the fall of 2027 should make up about 30 to $40,000 which in my opinion is going to be a good amount of money here for you to cover your expenses, your rent, your food. Just like got to be frugal about it, get some roommates, right? But I absolutely think you should try and pay for this in cash versus swiping the credit card or going into student loan debt or cashing out your Roth IRA to pay for this. Like I don't think that's the solution. I think you continue to invest in your Roth and this is now a I'm investing in my future type sinking fund bucket that you know you're going to spend this money on living expenses and things you need for your mba.
- [13:34]
Robert
And there was one more part of the question that I want to read and I want to address that as well. And it is one idea I've had is to buy a house or small property near my future school and have two to three roommates to help me cover the cost of the mortgage so I can avoid paying rent. Is that something you'd seriously consider in my situation or would you rather keep it simple and just rent and stack cash? I think you should keep it simple. You're on a good path right now. My fear is this. You buy the house, there's some unknowns, you get caught up in repairs and more things that you have to pay for. All of a sudden you're putting it on credit cards. Like Austin said. We don't want you taking from the Roth or the bridge account. And then all of a sudden you're focused on being a landlord instead of focusing on getting your money right. You've already done a tremendous job, you're getting the mba which is going to really help you at the next state of things. So I would focus on that. I don't mind the renting part. You can have roommates to keep it cheap, but I would not buy a house right now because there's all of the unknowns that come with it. And unless you're in an area where the capital appreciation is 15% or greater, I think it would be more of a distraction and less of a good financial move to buy a small property at this time.
- [14:50]
Austin
Yeah, I mean, at the end of the day, Robert, it's like our anonymous listener here. You're going to go, you're going to school to study and get a degree. You're not going there to be like a ad hoc landlord or, you know, like that's not the end goal. The end goal is not to be a real estate mogul and like start investing in real estate. The end goal is to live as cheaply as you can. Thank your parents for paying for your tuition and working a part time job and living cheaply and relying on your savings here to not go into credit card debt or to cash out your retirement fund with the goal of having this piece of paper that's hopefully going to allow you to earn 140, 160, 180 because you have this MBA. Not. Oh, I like kind of slid by because I was working on the landlord stuff, but I got this cool rental property. But like, I didn't really make the best grades because I was spending my weekends fixing up the kitchen. Like, don't worry about that stuff. I do it. Robert said rent cheaply, live frugally, get your education and don't go into high interest debt doing it. Our next question comes from Laura. Laura says, my husband and I make $180,000 a year pre tax and I've already enrolled into my company's 401k, which offers a 4% match. I also opened up a high yield savings account on public. I'm 42 years old, no kids, no debt, no loans whatsoever, and I'm trying to save and invest as much as I can so I can retire early. My question is I have an apartment in the country where I previously lived. It's tax exempt because it is in a tourism developing area. It's totally paid for. There's no mortgage on it. Right now it is being rented, but I'm starting to wonder if it makes more sense to sell it and invest the money into the US Stock market or even just put it in a high yield savings account. I think right now I could sell it for $150,000. The rent is making me about $650 a month. What would you do in my shoes, Robert how about you walk our friend Laura through what it means to have cash on cash returns and just, you know, talk about real estate and her returns right now versus what could happen if it was a high yield savings or in the stock market?
- [16:50]
Robert
Yeah, I look at it this way. If you could sell it and get that 150k and let's say after everything, you netted 120k, 110k, and then we put it into just the simple S&P 500 of the NASDAQ generally over time, and we're going to make 10% on that 120,000 doll. We're going to make $12,000 a year. We don't have to worry about a broken pipe. We don't have to worry about vacancy rates. We don't have to worry about any of that stuff. It's just money in our pockets. Instead, right now you said you're making around $650 monthly. So with that in mind, and let's say that that 650 is, whatever that is, $8,000 a year in income and you made that same 10%, then you can see the difference. There's a huge disparity here between what you'd be making with the 120,000 versus the 8,000 you'd be getting yearly in income from the apartment. So personally, I would probably sell it. Make sure you understand all the tax implications between whatever Caribbean country it's in versus the United States, because long term, at 42 years old, you have a long investing time horizon. You'd be way better off with that money than having the property. Now, a lot of people, and I'm not saying don't buy property, I want everyone to own real estate. But you have to look at the returns. Like Austin alluded to that cash on cash return of where is the better opportunity long term for your money to get you to that place where you desire financially for retirement? So that would be my take in this particular situation. At 42 years old, that's what I would do.
- [18:30]
Austin
Yeah. So I'll jump in and explain some numbers here for you. So what does cash on cash return mean? So cash on cash return is essentially how much cash left your bank account to acquire the property and how much cash flow is now coming into your bank account as you rent the property. And what's the sort of the ratio there? So I'm going to pretend that you, I mean this whole thing is paid off. I have no idea how much you actually paid for it. What was the total cost, how it has appreciated, whatever. So if we just use $150,000, let's say many years ago, you came in with 150 grand, you bought this apartment in the country you used to live in. So $150,000 to Robert's point at the moment at 10%. Well, let's call it 150,000, then maybe you pay some capital gains. Let's call it 120. That $120,000 to Robert's point at 10% invested in the S and P is earning about, about $12,000 a year. And you don't have to worry about the broken pipes and things like that. So that's a 10 return. Right. On that hypothetical 120. The, the 10 is also hypothetical, but we know over a long period of time it tends to go up. Now 650amonth over 12 months is 7, $800. If you divide now that $7,800 into the $120,000 that you plan to receive if you did sell this and pay your capital gains or whatever. That's a six and a half percent return. Right. So 7, 800 per year out of this 120 is six and a half percent return on your investment. Now that six and a half percent is paid to you in cash, as you know, because you're getting that as monthly rent. Six and a half is lower than 10, but also the 10 is not guaranteed where maybe the six and a half is also not guaranteed because maybe you've got some fixes, you got some things you got to pay here. So the 7800 actually maybe only turns into 4000. So I think Robert's answer here is correct. Where you're probably better off taking the $120,000 after you pay your capital gains and things like that. And if you still want to have some exposure to real estate, consider NEOS funds. Put yourself into an IYRI etf, or maybe you want to put yourself into, you know, maybe their S and P or their, you know, Nasdaq or one of these other ETFs from NEOs funds that's going to pay you 10, 12, 14% annually on your money. So you're actually still getting those monthly payments, those monthly distributions every single month. Let's say you've took that $120,000, figured out a blend between spyi, QQ, maybe Iyri, those three ETFs here, some real estate, some Nasdaq and some S P, and your blend is now 12 and a half percent. You are now receiving 1250amonth in NEOS fund distributions by putting that equity right, the after tax equity that you would have had. That's twice as much money as you're getting right now. And there's no broken pipes, there's no I'm late on rent. There's no, you know, whatever. Now what there is though, on the flip side is, whoa, stock market went down 20%. Whoa. Nasdaq went down 35% in 2022. Right. That's going to pull back those monthly distributions in proportionate. Right. But at the end of the day, if you believe like we do, that the US Stock market and US Capitalism goes up over a long period of time and you think that having some S, P, some nasdaq, maybe some Iyri real estate exposure is a good idea, then this, call it 12.50 per month is going to be pretty consistent over a long period of time as well.
- [21:49]
Robert
Yeah. And I always feel like anyone that's interested in real estate has to look at it at scale. If you're going to own apartment and you're just going to hold it because it makes you $650 a month. If you enjoy that, great. But in most instances, if you're getting into real estate, the more real estate you own, the more economies of scale work in your favor. Because if you have four or five properties, you can hire an in house manager and maintenance guy and all of these things. It's just like being in the restaurant business when you own one restaurant. It's hard if you own five restaurants because you have these economies of Scale, scale, everything gets easier. So keep that in mind for any of you considering getting in the real estate business. You want to try and build it up and scale it and have a portfolio because everything gets less expensive and more profitable.
- [22:35]
Austin
100%. Our next question comes from Seva. Seva says hello Rich Habits Podcast team. I'm a listener from Canada, and I'd really appreciate your advice on student loan payoff strategies. I'm 30 years old, I've got 12,000 CAD in student loan debt and my main goal is to have it paid off completely before I start a family. I want to approach this in the smartest and most efficient way possible. I'm considering investing in low cost index funds to grow my money and then use those returns to help eliminate the debt faster. But I'm unsure whether that's the best approach versus aggressively paying it down directly. What do you guys recommend for your student loan payoff approach strategy? All the good stuff here, Robert. Let's talk about it. So what we encourage people to do is first off, no one should have have student loans forever, right? The goal is to not go into your retirement years with student loans and a mortgage and like all this debt up to your eyeballs. You want to be retired or work optional or whatever you want to do with as little debt as possible, especially high interest debt. Now, some people want to hang on to some debt at a mortgage of 2.75% or maybe some student loans at, you know, 3%, whatever, like figure it out. Personal finances, personal, make your own decisions. But what we like to see people do specifically as it relates to the student loan debt is have at least an equal amount of money invested in the markets. This could be in your retirement account, this could be in a bridge account, this can be, you know, whatever. But have that, that equal amount or more invested into the s and P500, the NASDAQ, the Dow Jones, all the things we talk about, the index funds in ETFs before you begin to pay off your student loans aggressively. Now, at this 12,000 figure, it's, it's like kind of not a big deal if you don't do that. But more specifically, this advice goes for people who have a hundred, two hundred, three hundred thousand of student loans. I mean, geez Louise, I'm not going to name names, but there's a very prominent online personality who talks about personal finance and investing a lot that paid off like $400,000 of student loans. And that's great. That's really cool. They did that. But student loans can Only go to zero. Money invested in the markets can go to go up into infinity. Right? It compounds over time. It's simple interest versus compound interest. And so if you have $400,000 in the market, seven years go by, it's now doubled to 800,000. Seven years beyond that, it's now 1.6 million. Right. So your 400,000 has doubled twice, right, to 800 and then to 1.6 million where that same 400,000 seven years later you go pay it off, it's zero. Seven years after that it's still 00. Right. So whenever you have a large amount of student loans, we always like to tell people before you go pay it off aggressively because we want you to pay them off. We do. But before you do that, go get an equal amount of money invested in the markets growing for you over the next several decades so you don't make the mistake of spending 10 years paying off your 200,000 of student loans wherever that same 10 year period of time you could have invested in the markets and it would have grown and doubled and it would have worked much more favorably at the end of the day for your net worth than just paying it off off just straight up how it is there now with the 12,000. You know, you're 30, you make great money, I'm sure. Like pay it off, then go invest, like invest, pay it off. Doesn't really matter. It's such a small amount of money here. But that's the general approach we like to tell people when it comes to student loans.
- [25:58]
Robert
There is no words I can say to improve on that answer. So let's keep moving on.
- [26:02]
Austin
But before we move on, Robert got to give a shout out to public.com if you all have not yet checked out generated assets, what are you waiting for? Log into your public.com account right now, click on the generated assets button and then literally come up with anything you want. I want to invest in companies that sell GLP1s. I want to invest in companies that advertised at the Super Bowl. I want to invest in companies that are growing their free cash flow by 10% year over year, have paid a dividend and are growing their free cash flow and revenue. Like who knows, figure it out. Come up with some crazy ideas inside the rich habits network. I think Robert, we came up with like 13 or 15 different generated asset strategies that outperformed over a long period of time. I think it was croic. I think there was like founder led companies. There's a couple, couple things out there that we came up with. So be sure to check that out if you haven't already if you're inside the network. But at the end of the day, generated Assets makes it really easy for anyone that has a little bit of a hunch, a little bit of. You know what I've noticed that people that do this or companies that have this or what I want to invest in that. Or maybe it's the flip side. Maybe you're like listen, I hate it when companies do this. I don't want to own companies that do this. And you can do that too. Give me companies invest in companies that do not do these things but also are in the s and P500 or do not do these things but are also larger than 100 billion market cap. Whatever. It'll figure it out. You can take your ideas and make a generated asset strategy out of it. Go check out public.com rich habits get that uncapped 1% bonus. Go check them out. It's awesome.
- [27:34]
Robert
Well, you guys all know that we love Public and this tool is one of the coolest they've ever created. We love it, we use it. Like Austin said, there's a bunch of really cool strategies in the Rich Habits network. So if you haven't joined yet, make sure you check out the seven day free trial in the show notes below below. And go check out generated assets@public.com so
- [27:54]
Austin
our next question comes from an anonymous listener. Our anonymous listener says, hi Austin and Robert. I'm a longtime listener of the show and thank you for all you do and provide. I'm way more financially literate now than it was two years ago because I started listening to your show. My wife and I are in our late 20s and we're evaluating a potential home purchase in San Diego. It's about five minutes from the coast. My father in law is willing to Invest alongside of us us and we're considering a 5050 ownership structure in this home via an LLC. The home is valued at $975,000 but it has an assumable VA loan at a 2.7% interest rate with $527,000 left on the loan. The all in monthly payment would be only $3,500. Our goal is to live in the home for several years and then eventually in the long it out for $4,500 a month or more. As you guys probably have already done from the math, we will have to put down about $450,000 split between us and our father in law. That's 225ish thousand dollars a piece. We plan to also pay for closing costs of $20,000 and then split any major expenses. My household income is about 200,000 a year. We have half a million invested across our retirement accounts, our bridge accounts, our HSA, all the fun stuff, stuff, and 30,000 in a high yield savings. This would put roughly 45% of our invested assets now into this property. I'm looking for your perspective on whether that level of concentration makes sense given our age, single income, household status and desire to maintain long term flexibility. Thanks for all you do, Robert. I'll let you kick this off.
- [29:37]
Robert
Yeah, this is a tough one because if you look at it from an investment perspective, I'm sure in this area in San Diego, there's good capital appreciation year over year year. Let's say it's 6 or 8%, maybe 10%. So that part of it I like, but the cash flow part of it is not going to be great. Assuming that the payment on this, I think they said would be around 3,500. And you state that in a few years down the road you could rent it, you believe, for 4,500. So there's not a lot of cash flow out of the property. So I would have to really consider is it worth tying up that much money, like you alluded to a big percentage of your net worth worth into this one property as a rental. Now I get it, you want to enjoy it for a few years. You're okay. $3,500 a month is probably a steal because of the loan terms, but you're still coming out of pocket $225,000 plus your pro rata share of the expenses for the down payment, closing costs and all of that. So for me, I think it's got to be more about what is your desired outcome versus do the numbers make sense? Because we all want everyone to have home ownership, but we also don't want you to be housebroke. And in this situation, I feel like you're kind of putting yourself right on that fence where it could be great. If the house goes up in value over the next 10 years by let's say, $500,000, then it could be a really good outcome for you. But if it doesn't and you turn it into a long term rental, you have a lot of cash tied up up in something that is not going to produce you much income.
- [31:12]
Austin
I think that's a wonderful breakdown. It's funny as you, as you walk through this, I'm on Zillow right now trying to find the actual home. Because I'd imagine someone would call it out that it is an assumable. I've not yet found it though. Anyway, it's my, my curiosity got, got ahead of me here. You mentioned a couple terms that stood out to me at the end here. This would put roughly 45% of our investable assets into the property. I'm looking for your perspective on whether that level of concentration makes sense given our age, single income, household status and desire to maintain long term flexibility. That last bit there is really interesting because at the end of the day, owning a home is the opposite of flexibility, right? Owning a home means the only way that this actually turns out in your favor, historically speaking, is you live there for five, seven, ten years, right? You, you live in a home long enough where it appreciates so much that it offsets the interest you've paid while you live there. And that is like a positive, you know, outcome for, for own home. But on the flip side, if you live there for two years or three years, then like, and you try and sell it, it doesn't make sense. But you mentioned, which I thought was really interesting, it could rent for 4,500. So maybe you do have a little bit of flexibility if you do want to move around and have a little bit more autonomy over your living situation. And at 3, 500amonth, I mean that is a decent monthly payment. But for a million dollar property, that's, that's peanuts because you're essentially right. Only you only have a mortgage on half a million. So goodness gracious, what would I do? This is a really, really cool situation to find yourself in. My, my head goes a couple places. The first one is like, you know, there's a book called Die with Zero. As someone who's not read this book but have heard some cool snippets and I want to make sure I give credit where it's due, right? Die with Zero is the book I'm thinking about here to, to come up with this ideology and strategy. It's like give your children your money while you're still alive and while they can really use it to upgrade their lifestyle. And so it seems like your father in law law is doing that. You guys are in your late 20s, your father in law's got so much money that, that he's able here to, to come in with nearly a quarter million dollars and really, you know, maybe this would have been, you know, your, your inheritance here, but he's taken that and given it to you now so you can really enjoy it. While you guys are young and, and still alive and everyone can enjoy this home. I would just think about a couple things and Robert, I'm going to actually let you expose upon this with like the structure of the LLC and stuff like that. So I'll let you talk more about that. But as it relates to, to doing that as a whole, just make sure that you now at Thanksgiving dinner, it's not weird, right? Oh my gosh. My father in law, I haven't paid him the mortgage this or hasn't done this or I owe him this much money. Like whatever you guys end up doing here, just make sure it's kosher and I'll let Robert I guess dive into the details. I do not think having 45% so $225,000 of your total investable assets into something like this would be detrimental. I'm just looking through because you mentioned total Invested assets at 515, taxable brokerage at 350, retirement accounts at 120, HSA at 25. Are you planning to sell your taxable brokerage? It seems like you are sell your taxable brokerage. Use 225 from the 350 and use that for. That's the thing. I think it's fine. Your retirement accounts are great. You've got great income. You're going to bring up that taxable brokerage account again in the future. Like Robert has helped me understand this much more over the last like 12 to 18 months. If you are about to make a decision that's going to allow you to be so much happier in your day to day life, it's okay for the perfect numbers to not perfectly fit together, right? So like for example you're over here saying to yourself, oh my gosh, half my net worth is in this property. Like maybe, but given your income and given your ability to be prudent with money, that 45% is going to shrink to 25% by the end of the decade. And at that point it doesn't matter matter right now if you said 80% of your net worth was in this property, I'd tell you not to do it. But 45, it's like that's going to shrink a lot. Robert says it all the time in personal finance is personal. At the end of the day is this property going to give you the biggest just level up. You're going to be five minute walk to the coast. You're going to be closer maybe to some friends, maybe like is your lifestyle, is your day to day happiness just going to Explode where you guys are in the best marriage possible. And now everything is wonderful. Like you feel really, really incredible. If that's the case, dude, who cares about the 35%? Go be happy. That's how you should be thinking about this. And that's why I'm like the biggest believer with real estate. It all comes down to the specific situation more in my opinion than it does with the numbers right now. Of course you want to make sure people aren't house broke, but like, if things don't perfectly fit together in this puzzle piece at that exact moment when you buy this house. But you do have a plan for the next three, four, five years to make it come into that, that sort of framework, as it should.
- [35:54]
Robert
Right?
- [35:54]
Austin
Right. 45% turns into 25%. So now it's a nothing burger. And congrats. You now live in this awesome home. That's, I think, how people should be thinking about real estate versus it has to be this perfect this and perfect that my money is going to do this. Like, if you play your cards right and you've got consistency and a little bit of predictability with your income, you guys are going to be just fine.
- [36:15]
Robert
I think that's a great takeaway. And when you really think about the situation, because real estate and personal finance is always situational. $1 million home, 2.75% interest rate on the mortgage, $3,500 a month all in is what they stated. So I'm assuming that includes property taxes and everything they need to pay if there's an HOA or whatever. That is an incredible scenario to build a high quality of life. But to get to the structure, as Austin alluded to, for Thanksgiving dinner, make sure everything is spelled out in the operating agreement. Make sure you have all of it dialed in so it's never weird when you're at Christmas time dinner. So have that LLC make sure you're both listed on it. Make sure you spell out every detail of how this is supposed to work. Who is in charge of maintenance? Is everything pro rata split down the road for if you have to replace a hot water tank or something goes bad? Or is the father in law only on the hook for the 225 he gets back? XYZ? Are the profits down the road when you split and sell the Property? Property split 50 50. Or do you get a higher proportional amount because you've maintained the house, you've lived in the house and done all that? A lot to think about. But make sure this is all spelled out in your agreement. So that way it's smooth and cooler than the other side of the pillow and you never have to get in a fight about money with the father in law. And lastly, I did a quick lookup. It appears that most of San Diego has around an 8% capital appreciation year over year, even with the most recent downtrend turn. So that's pretty strong as well. So if you think about that five years down the road, if you decided to sell it, you still made 45% on your money. Everyone wins, and you got to live in an awesome house with an awesome situation relative to your budget.
- [38:05]
Austin
Yeah, I wouldn't sell it though. Not no. No way. No way. 3,500 bucks for a million dollar home like that is nuts. I'm for perspective. I'm building a home in 2026 and I'll be borrowing about a million dollars and my monthly payment's like 7200. So, like, you're half of that. It's, it's pre. So rock and roll, you got this. But to Robert's point, I just want to make sure that you understand the, the structure, right? It doesn't matter how you structure it, but there's a lot of things to consider and make sure that everyone's on the same page about that. Right? When the home eventually does sell, like, how does that get split out when the water heater does need to be replaced or the roof? Like, who does that? Who pays for that? Is it you? Is it the dad? Is it fit? Who knows? Y' all can choose whatever you want to choose. Doesn't matter what you choose choose. It's just the fact that you chose something and it's written down and everyone's on the same page about it. So our final question comes from Tyson. Tyson says, what's up, Austin and Robert? I've been listening to y' all for about a month now, and I'm trying to wrap my head around finances and building rich habits. I figured I'd ask some knowledgeable people in the finance world. Well, Tyson, we are at your service, my friend. Thanks for tuning into the show. Tyson says, I'm 19. I just got my first job as a machinist Apprentice. Say that 10 times fast. Making about $31,000 a year. A year before this, I was making and selling knives to friends for about $200 per knife. And I was profiting about 120, give or take. I've been doing the knife thing since 2022, and I have a good craft for it now. I'm considering some Content creation with a knife gig on the side with a goal of mine to buy my own house in the next few years, if it's feasible. How would you guys play your cards if you were in the position I'm in now? I've got $1,500 total to my name. Robert, what advice do you have? Tyson here, he's 19, he 1500 bucks in his bank account and he wants to buy a house probably in his early to mid-20s, if possible. He's making 31,000 a year right now as a machinist apprentice and he's got a side gig of selling knives for $120 per profit per knife.
- [40:06]
Robert
This question makes me giddy because it's so incredible. He went out, he got it figured out how to get this machinist job making good money. It's going to keep going up because you know this kind of field is not going to be taken over by AI AI. He's got this side hustle that he's thinking about taking more seriously. I think he has spelled it out perfectly that I would, yes, do the social media. Yes. Solidify this side hustle as a real business. Get that LLC up and running so that way you can have some write offs. You've got it all dialed in. You've got a business bank account. I would do all of that. And it's okay that you only have $1,500 in your bank account at the moment. Moment. Because you've already proven that you can make money on these knives with like a 40% return on each knife. And then once you get the social media up and running and you start reaching a larger audience, you're one or two cool videos away of going viral, of having a thriving knife business, which then you might have to get a little shop, fix up your garage, do all of that. I love the situation for you and I would definitely, definitely do it and keep going because you can have the job by day as the machinist and on nights and weekends. Really rock out the social media and build up this knife business, which is your passion, but could be a really large money maker.
- [41:30]
Austin
I love that. Yeah. I just looked up the career path for the machinist apprentice and it seems like your apprenticeship is going to last about four years. So you're making, call it 30, 32, $35,000 for the first couple years there, but then you're a journeyman machinist which making 60 to 65,000 a year. So let's call it by 23, 24 years. Old, you're now making essentially the same amount of money I made out of college, right? 62,000 a year, which is pretty cool. And then you can continue to do this. And they've got other sort of, you know, career master machinist, 10 years experience, 85,000 a year, like whatever, right? So this is a good career. You're well on your way to high five figures, perhaps low six figures in your 20s and 30s, depending on how long you do this and how good you get. So keep doing, doing that. Rock and roll emergency fund, no credit card debt, max out your Roth ira, anything above that, go put some money aside, give yourself a five year shot clock to save up. Let's call it $30,000. Hopefully for a down payment on a home, do the 3 1/2% FHA loan. Depending on the type of home you get, maybe you end up doing something with a quadplex or a triplex or something. There's different loans for that as well. But I love what Robert said about kind of doing both, right? Go be a machine cleanest apprentice. Go make your 30, $35,000 over here. But then with the knife stuff, go make content about it on Tick Tock. I've talked about this in the past, but there's a guy that makes leather belts, I forget his name, but he's sold over one and a half million dollars of leather belts because he's made videos about them on his TikTok account and he makes them in his garage. He just makes these leather belts, sells them for 80, 90, $110 a belt. And they're all leather, they're whatever, like you can do the exact same same thing. And I'm not saying you're going to make a million dollars from this, but you might make 4212 between now and the end of the year. And that's $4,212 you didn't have. Right. And that's only going to build on itself. And the last component, don't forget about live shopping. Maybe there's a world where you've got so many of these different designs, different lengths or whatever else you got going on and you start selling them on whatnot or TikTok, shop live or whatever is going on. And now you're, you're really, you know, grinding out during the day with your daily job. You're making some content here and now maybe there's a world where you're selling so many of these that the profit from the knife business offsets the take home pay from the Machinist, apprenticeship and now all in. You're making 60,000 in 20, 27, 30 something over here and 30 something over there. There's a lot of different ways to play this. The last piece of advice I'd give you at 19 years old, do not ignore artificial intelligence. I need you to you to spend 10 hours this weekend. Type in chat GPT.com Type in Google Gemini, type in Claude AI and just brain dump. Ask it, what are you capable of? Here's what I do every day. How can you help me? How have you helped other people? How do people use you? How can I use you? Like just understand this technology. I know it's, it's a little different. I, you know, you're making knives, you're a machinist, you're in the trade. You're probably not one of these tech nerds that's 18 that's trying to go build a billion dollar startup, right? So I, it might not feel so easy for you, maybe depending on how much you actually care about this stuff. It seems like you like to work with your hands, which is the opposite of technology. So that's totally fine. Both can be rocking and rolling. But I think it's really important for you to understand this type of tech, especially at 19 years old and how other 19 and 20 something year olds are using it to build and optimize their own businesses.
- [45:00]
Robert
Wow, what a great episode. Such a wide array of incredible questions. Really love the last one. Well, as, as well. So just a great episode and we appreciate each and every one of you that stops by every week, gets the questions in the dms. Email us, send us something on Spotify. Remember we have followers on Spotify as well. You can reach out to us there and just really send us these awesome questions so we can make episodes that is all about you because personal finance is personal and we'd love to answer your questions.
- [45:30]
Austin
Yeah, all of our followers are on Spotify. We're coming in on about a quarter million here, which is really exciting. Thank you guys so much and be sure to leave us a comment vote in the poll below. If you've not yet subscribed on Spotify, please click that subscribe button. You will know whenever we post episodes. We're up to three episodes a week now, which is awesome. And of course, don't forget 7 day free trial for the Rich Habits Network. All the details for that in the show notes below. Thanks everyone and we'll see you tomorrow for our Friday episode of the Rich Habits Radar. Sam.