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Rich Habits Podcast
Q&A: Buying Our First Business, Cash Flowing a Triplex & Teaching Crypto to Kids...?
00:45:42
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- [00:02]
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- [00:55]
Austin
Hey everyone, and welcome back to the Rich Habits Podcast Question and Answer Edition. These are our Thursday episodes where Robert and I take your questions vi Instagram dms@rich habits Podcast or via email at rich habits podcastmail.com and we answer that. We answer your questions as if we were in your shoes, giving you our honest opinion about your situation. These episodes are off the dome. There's really no rhyme or reason as to what questions we pick, but we are excited about them nonetheless.
- [01:24]
Robert
That's right, personal finance is personal. Everyone's situation is different. Life gets in the way. Life can be great. Life can be tragic sometimes. And we are here to break it all down and try to give you guys that guidance, that sense of calm to help you figure out what to do in your own current situation.
- [01:43]
Austin
So if you have a question to ask us again, email us at rich habits podcastmail.com or DM US the question on Instagram at Rich Habits Podcast. Now, before we jump into our first question, remember these Q and A episodes are brought to you by public.com, which means if you're looking for an online brokerage platform that was actually built during the century, you need to give public.com a try on Public. You can invest in almost anything stocks, bonds, options, cryptocurrencies and more. And if you're like us and you keep an emergency fund, you should be taking advantage of that 4.1% APY offered by their High Yield Cash account right now.
- [02:20]
Robert
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- [02:50]
Austin
Our first question comes from James A. Via email. James says hey guys, my name is James and I'm in my mid-40s. I have a 401k and a rock. I'm looking to purchase cryptocurrency for some portfolio diversification. I currently use Fidelity for my investing and I'm pretty familiar with their platform. I would prefer to keep using their platform for crypto, but is there a benefit to having a separate platform or even a dedicated cryptocurrency wallet that I should be purchasing my cryptocurrency on? I also have two kids. One is 14 and the other is 16 and I have them both set up on a Fidelity Youth Investing account so I can teach them how to invest. My older daughter has a job and she's putting in $20 a week into the S&P 500, which means she's learning all about dollar cost averaging in compound interest. But I guess my question really is, should I also be teaching my children about cryptocurrency? Is this something that they should be buying as well? What a great question from James. I'll let Robert kick this one off.
- [03:46]
Robert
Yeah, I love this question and I think it's two part let's talk about teaching the kids first. You're already teaching them financial literacy. You're getting them started very early on so they know what Voo in the S&P 500 is. This is critical. What I would do in teaching them, just like you are in traditional finance, get them watching YouTube videos. Get get them understanding what is the blockchain. What is the future of cryptocurrency and why is it important? Cryptocurrency, like the Internet, is going to change the way we do things over the next five, 10, 15 years, along with AI and everything else, technology wise. And I think it's important to have your children understanding what that means. So yes, I totally agree. I would get them started right away. And it can be as simple as finding some good YouTube channels that you like, have them watch some videos. You can select the videos and take a look so you know which ones are going to lead them down the right path and really show them the importance of blockchain for the future. Secondarily, Fidelity. We like Fidelity. I don't use Fidelity. Millions of people do. I think it's a great platform. Yes, you can Buy all your crypto there. But you could also look at opening a public.com account. It is a great platform for buying and selling cryptocurrency, so you could think of that as well. Or Coinbase is probably one of the largest. So you just have to think about what are you most comfortable with. And if it's Fidelity, stick with Fidelity. Do your thing. But always make sure that you're cross referencing how much does it cost per trade so you understand what is the best way for the level of investing you're doing platform wise and which ones are best for you.
- [05:26]
Austin
And as it relates to educating your children about cryptocurrency, I like how Robert sort of laid that out. I would go about it in a way where you can sort of build upon their existing education. Right. So you've already taught them a little bit about the stock market. They understand the s and P500. Right. It's a way to invest in the 500 largest, most profitable companies in the United States. They understand that. They know, okay, I should own equity, I have some ownership in these companies profits. And then you say, well, there's other things that go up in value over time. There's real estate that goes up in value, and the reason that goes up in value is because of supply and demand. There are things like precious metals that goes up in value because of perceived value, supply and demand, things like that. And there's other asset classes that continue to trend higher over time. Right. Making sure they understand the difference between something that goes up in value, like an investment, and then something that goes down in value like a depreciating asset, like a car or a camper or something like that, a lawnmower. And then you can begin to say, okay, there's another asset class out there called cryptocurrency that goes up in value over time. Specifically bitcoin. It's been around for well over a decade now, 15 years or something. This bitcoin uses a technology called blockchain. Here's why it's important, here's why it was invented, here's how it's used in different types of scenarios. And people perceive it to be valuable. And so this asset class, specifically Bitcoin, has gone up in value x amount of percentage points over the last several years and is perceived and assumed to continue to grow up in value as well. If you want your kids to be invested in cryptocurrency and partake in that, I think that's fine. The only worry or concern I have is that cryptocurrency experiences very dramatic drawdowns. Right. Bitcoin has drawn down by 50, 60, 70, 80% in a short period of time several times in the past. And I would be worried that it would cause them to be jaded toward investing where they say, oh, I invested once and I lost all my money and I don't want to do this anymore. And then they have that as a bad experience they take with them for the rest of their life. Whereas the S and P has pullbacks or the Nasdaq has pullbacks, but it's never a 60, 70, 80% pullback. Right. So that's my only concern is that, you know, make sure they have the right mentality going into this if they are investing in cryptocurrency. But I think at the end of the day, what's most important is that your children are investing into the s and P500 dollar cost averaging, compound interest, doing all that fun stuff and setting aside 10, 15, 20% of your old, your daughter's monthly income from her job and getting that invested on a habitual basis as well.
- [08:01]
Robert
And I think the best way to look at all of this, and that was a great breakdown, is to understand that if you would have talked about 10 years ago even that you would be getting into a stranger's car to get a ride somewhere, or you'd have a stranger delivering your food to your home from a restaurant nearby, because then you've got someone you don't know touching and handling your food. As we progress more and more in the financial world, you're going to find that blockchain is incredibly critical for the future because we are becoming a more globalized economy. Having blockchain involved in this and cryptocurrency is very important. We also will see a lot less friction with our money and costs associated with doing wires or doing transfers and all of this. So there's a lot to be learned about the importance of cryptocurrency in the blockchain. And so I think it's great that you're considering getting your kids involved and anyone out there that has children that are listening, getting them to understand why it's important where it's going because it will be part of school curriculum sooner than later. So it's important for everyone to get ahead of it.
- [09:07]
Austin
And the last point here, and this goes beyond cryptocurrency, this can be anything, literally. Just go to ChatGPT and say, Explain to my 14 year old daughter how ABC X Y Z works and you know, give examples and explain it to them as if they were younger and like they're not as technical as you know, adults might be. Like use artificial intelligence to your advantage. Again, beyond cryptocurrency to try and learn anything. Learn a new language, learn a new skill, learn anything. These things are free Resources Our next question comes from Yoselan P. Yoselan says hi Rich Habits Team. I'll start by saying off I really love your show. Since discovering the financial independent Retire early world, your platform has been incredibly informative in discussing the nitty gritty. So here's my question. I own a triplex in Kentucky. I purchased it in 2021 for $340,000 with a 30 year FHA loan at a 2.9% interest rate. It cash flows $700 a month after my mortgage and most of my expenses. I've lived there for two and a half years, but then I recently moved into my partner's home. We're not married and this took place in March of 2024. I'm now relocating completely to San Francisco and I've considered selling the triplex within the next couple of years, possibly for around 400 to $425,000 I proceeds in the stock market, likely the s and P500. I'm drawn to the simplicity of passive investing and feel pretty uneasy about relying on a property manager from so far away. Do you think that selling is the right move for me as background? I'm 30 years old. I have $40,000 invested across all my other accounts. My job pays $120,000 a year. Robert, you want to kick this one off?
- [10:44]
Robert
I would love to. I think it's a bad time to sell it. Whenever I see someone that has equity and a low interest rate and assuming there is a decent capital appreciation on this, I just think it is a great addition to your wealth building arsenal. I personally wouldn't sell it right now. The markets are a little bit suppressed. We don't know what area of Kentucky it's in, but assuming like most markets, it's going to be a little bit down because it is a buyer's market. There is a lot of inventory out there right now and people are not buying and people are not running up the prices like we've seen in the past. So personally I'd love to see you hold the property, keep it, hire a property manager, find somebody locally that can help you because with being only one property I think it's pretty easy to manage from afar. I do it all the time and I think you could even find Someone that you know, maybe it's a local handyman or a friend of yours and say, hey, I'll give you 200 bucks a month if you just collect the rent. Do this, do that, keep the grass mode, whatever. So personally I would keep it. I think it's a great move. You've done well with this property. You've got a very low mortgage rate and I think it's great to hold it for the long term and at least for next couple of years if you can.
- [11:57]
Austin
Couldn't agree more, Robert. I just did the math behind the scenes here. If I did my math correctly, your monthly mortgage payment is between 1500 and $1700 a month on this triplex, which means now that you are in San Francisco, you could probably just depending on, you know, the condition, when it was built, the location, things like that, rent out each unit of this Triplex for maybe 1200 13, $1500 a month, which means you are cash flowing much more than just $700 a month after mortgages and most expenses. Just assuming $1,200 a month on all three of these units is $3,600 in total rent collected, then let's say your monthly mortgage is 1700. You now have $1900 left. And then you start setting some money aside for occupancy, repairs, things of that nature. You should be cash flowing well over a thousand, maybe $1,500, depending on the types of expenses you're saving for on a monthly basis. And just so we're on the same PA, $1,500 a month times 12 is $18,000 a year of cash flow. That is awesome, right? That money can get reinvested into maybe some, you know, this $40,000 that you have across your different accounts, like that can really help you move in the right direction. If it were me and I were in your situation, I would try to work with a property manager that I trusted that was not too expensive, that was able to ensure that I'm now cash flowing this thousand plus dollars a month. Now if you do begin to run into issues and it is literally just the worst thing being a long distance landlord and you don't want this $18,000 a year of potential cash flow and you want to sell it, you could probably sell it for, again, let's say you sold it for this 425,000, which means that after closing costs and other types of fees associated with selling a home, you would take about 400,000 for yourself. You might owe about 320 on this home, you bought it in 2021 for 340, so I'm assuming about 20,000 of the principal has been paid down, so you'll net about 80,000 do thousand dollars, which is pretty cool. But again, I think you should really reconsider this cash flowing aspect just because this interest rate is so low and your monthly payment is so low compared to what it would be if you were to go buy something like that today.
- [14:05]
Robert
And for everyone else out there that's considering buying real estate or maybe considering selling some real estate right now, keep in mind owning real estate and building wealth with real estate as part of your portfolio. Your diversity is not just about cash flow. You have to understand the totality of the numbers. It's the cash fl, it's the tax benefits. If there are some, it is the capital appreciation. In many markets you'll find that, let's say your cash flow is 6% return and the capital appreciation is 5% return. In that market, you're at 11% cash on cash return. So keep that in mind. Don't just always look at the cash flow, look at all the other benefits, especially when you have a low cost mortgage like in this instance.
- [14:49]
Austin
So our next question comes from Ryan S. Ryan says hi Austin and Robert. First off, I want to say thank you so much and I appreciate your show. I have a one hour commute to and from work and I genuinely look forward to Monday and Thursday mornings just to listen and learn. I'm a big fan of you both. Thank you so much. My name is Ryan. My wife and I are in our early 30s and we're happy to say that we have no debt or student loans. Both of us are W2 employees. I earn approximately 200,000 a year. My wife earns around 100,000 a year, which means annually we make about 300,000 a year. We have a low income interest mortgage on our starter home and our living expenses are quite minimal. We each invest 30% of our income into our 401ks, our Roth IRAs, cryptocurrency, ETFs, and some individual stocks. All strategies that we've learned from your show. Thank you for the guidance. However, we're now interested in purchasing an existing business. It seems like every day I'm browsing Biz, Buy, Sell and LoopNet, but I'm not confident enough in identifying a good deal from a bad deal. While we have strong management and people skills, we lack specific trade skills, so I'm unsure what type of business would best suit us. My wife could leave her current job to manage the business full time. So my questions are, do you have any connections or recommendations for people or companies to help in the business buying process? And then two, do you think we're in a position to make this move or should we just continue with our current strategy? Ryan and Ryan's wife, so excited for you guys. You guys are crushing it. You're in your early 30s, you're making 200,000, she's making a hundred thousand. You guys are investing 30% of your income. So let's call it $100,000 a year. If not close to it, you all will be multi millionaires within the next 10 years tops. I mean, you guys are crushing it. So here's what I would do. I would not change anything. I would be in my early 30s, I would be making 300,000 a year as a unit. I would be investing up to, you know, again, that 100,000 that you're doing right now, I would continue to do that for the next five, 10, 15 years. And you're going to have millions of dollars to your name. See, here's the thing. The reason why Robert, for example, is so good at going out and buying a business or someone else, you know, it makes sense for them, is because they have a unique experience, a unique perspective, a unique skill set that they could take and in a very specified period of time, 9, 12, 18, 24 months, be able to find a business, introduce you know what these skills are and turn that business around and really ramp it up. If it's with marketing, if it's with processes, if it's with strategy, if it's locations, whatever, and then sell it for multiples more than what they bought it for. Making a business venture very profitable. If you're someone who doesn't have that skill set, you're essentially just buying a cash flowing asset that pays you money on a monthly, quarterly or annualized basis. And you have to figure out what numbers make the most sense for you versus your opportunity cost. Just investing in the markets as well as the time and you know, your, your wife's $100,000 salary that she'd be giving up. So that's the thing. If it were me and you guys were like semi retired and you wanted to go buy a business to go have fun with and you and your wife go make core memories, like I'm cool with that, but in my opinion, it doesn't seem like it's going to be a way for you to build wealth faster. Right? I think the opportunity cost would be more by leaving your wife's a hundred thousand a year job and she's now working 40, 60, 80 hours a week on this business, and you're working on the weekends because you're trying to figure out what the heck's going on, why did this customer leave me, or what's going on with this specific supplier, or it just seems to me like an unnecessary headache, unnecessary stress, and you guys are just rocking and rolling and you're going to be just fine.
- [18:20]
Robert
I really agree with everything Austin said. I'm going to take a little bit of a different take here. And that is you guys are crushing it. You're making a lot of money, you guys are doing well. And there's an old saying that says something like, entrepreneurs will quit a 40 hour a week job making great money to go out and work 80 hours a week for no money for years. And it happens all the time. So I would do this like in real estate. I would start small, go find a business that you feel you can value add. You can put your processes in place to make it more valuable and make it more profitable. But instead of going all in and having the wife quit her job, buying the business and doing all of that, I would have both of you keep your jobs, making that money, stockpiling away for your retirement. And I would look to buy a business or partner in a business where you buy it with an operational partner, maybe a current employee, maybe someone that you know that knows that field well. And then that way you can get your toes wet, that you can learn what it's like to run a business and be able to get involved and hopefully profit and have another source of income without going all in and going backwards. I see it every day where someone's like, I'm going to be an entrepreneur. They've never done it before. They don't know what it's like. They go all in, they give up the cushy job, and then they go for two, three, four years where they go backwards financially because they can't quite figure it out. So if you're going to buy a small business, keep looking, keep researching. Start small, find an operational partner. And when the small business starts making you guys more than your wife's salary of a hundred thousand, then consider quitting the job. But I wouldn't do it right out of the gate.
- [19:59]
Austin
I love that perspective, Robert. I think a lot of people make that mistake where they're like, oh my gosh, I've got this really cool thing. I'm gonna go make a ton of Money with it. I'm quitting my job, I'm selling the house, I'm gonna put the kids and the dogs on ebay. I'm going all in on this idea that I have have and then that doesn't work, unfortunately, because 80% of small businesses fail within the first five years and you become a statistic. And now you've got nothing to fall back on. And so that's what we want to avoid, especially Ryan, as you and your wife are making $300,000 a year. Seriously, you guys are crushing it. You just do exactly what you're doing right now and you will have more money than you could ever imagine in the coming five, 10, 15 years. And if then you want to say, I want to go, you know, maybe you have a passion about furniture, or maybe you're super passionate about baking, or maybe really passionate about pressure washing. I have no idea what your passions are, Ryan, but if you're really passionate about something and you want to go start a business or buy a business that's already in your passion, that would make sense. But don't do it until you've got a ton of money squirreled away and you can sacrifice that hundred thousand a year salary that your wife earns. So our next question comes from Nick A. Nick says, hey, Austin and Robert, my name's Nick and I've been listening to your podcast religiously for the last last two years. You guys have made such a huge impact on my financial education. I'm 34, I make $120,000 per year. I started my Roth IRA and I've been maxing it out for the last couple years. I also have a 401k that has about $30,000 in it and a bridge account with 15,000. I've been using strategies like strict budgeting and 0% interest rate credit cards to pay off high interest debt over the last year. And I've paid off $10,000 of high interest debt over the last 12 months now. Nick, that's awesome. Love to hear it, man. We always tell people you can't out invest high interest debt and Nick is paying it off. Nick says we still have about $30,000 of car debt across our two cars and $20,000 in student loans with some of those student loans above 6% interest. However, we have a plan to pay off this high interest debt quickly while leaving our low interest debt around so we can stay invested and grow our wealth. Here's the real question I have. We bought a house in 2021 at a 2.7.5% interest rate. Our family grew much f we expected. And to us, a good school district is very important. Currently, we live in a very bad school district in Nashville. We want to move to a different area and a bigger house in the next few years before our kids start school, while maximizing all aspects of this move. What strategies do you have for us for making sure that we make the best decision possible given our 2.75% mortgage on our house? Robert, you want to kick this one off?
- [22:37]
Robert
Yes. I think it's a great situation that Nick is in. Families growing, that's awesome. Upscaling the house is is great as well. The only thing I would consider, and the key part of the question was in a few years, I feel like what happens a lot of times when people say we're going to buy a new house in a few years, they take their foot completely off the gas for all other strategies of investing for retirement and building wealth because they're solely focused on having money set aside for buying this bigger house. And I think that's a huge mistake. And a lot of people make it. So in my opinion, and in this instance, I would really stay super focused because where a lot of people get things wrong is let's say you're putting away for this new house and it's going to be more expensive and you think you need a hundred thousand dollars or $50,000 to go towards the down payment for said new house. It doesn't mean you can't still be investing that money over a time horizon of 2, 3, 4 years to maximize the gains you would make on that money. Because you and I see this every day, Austin, where people are like, I have this money for the house in five years in this high yield savings or this CD that's barely making any money. That is a mistake. So I think as long as Nick and company make sure that they understand and have that time horizon figured out that they can make the right play. Because the other part of this is the 2.75% mortgage on the current house that is really, really low. We might not see those rates again for many years or if so, we have to take into consideration that as well. I know the school district is important, but don't plan so far ahead that you're giving up gains and growth in your financial situation right now.
- [24:21]
Austin
I love this perspective. Robert, here's my thing. You have an asset with this 2.75% mortgage rate. I mean, my goodness gracious, your monthly payment on that is probably less than $2,000 I mean we literally just talked about this in a previous question where you know, they, they've got this triplex and the monthly payment on it was probably fifteen hundred dollars. So Nick, I don't know what your monthly payment is. Obviously don't know what kind of house you're living in here. I would do everything I can to keep the house, use it as a rental, cash flow somehow, some way from that specific house, and then spend the next 2, 3, 4 years saving for a reasonably sized down payment to go buy a single family home in Franklin, Tennessee which is Williamson county voted number one school district in Nashville. I'm on in Zillow right now looking at a four bedroom, three bathroom house that is 2,400 square feet sitting on a 6,000 square foot lot that's listed for $600,000. I'm pretty positive that $600,000 again, I live in Nashville too. So that $600,000 is probably pretty close to the value of your own house right now. So like if you were to sell your home, I'm sure you could use the Section 121 exclusion to roll some profits into a down payment for the next one. But I'd hate to see you sell it. But just know that you can buy for plus bedroom homes in Franklin, Tennessee for 500, 600, $700,000, which again, you live in Nashville, you've got money like that, you can definitely figure this out. I think there's a world where you can do both. You can keep it as a rental and you can go buy a home in the next two, three, four, five years. Just make sure to Robert's point, you're not forgetting about investing into the Roth up to the match with the 401k. Like don't turn off your investing to go focus on this. Do them simultaneously.
- [26:05]
Robert
This really brings up a video I did. I think it was a TikTok three years ago where I told people it was a bad investment to make their first real estate purchase, a primary home. People came for me, but this really illustrates why I said it. So many people will save up for years to buy the primary home while not investing in their future and then take all that money, dump it into the home. Home. That money is tied up in that home till the day you sell it. And even if you do have capital appreciation and you love the home, you still have to consider you can't be house broke and you shouldn't be house broke because you have to plan for the future. So just want to make sure everyone understands that we love real estate. Austin and I both own real estate. I will always own real estate and buy more, but we just don't want people to sit on the sidelines because of a home purchase. I think it's a terrible strategy for building wealth wealth. So listen up folks. Time could be running out to lock in your 6% or higher yield@public.com today's episode sponsor. You can lock in that 6% or higher yield with a bond account. But remember, your yield isn't locked in until the time of purchase, so you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds only at public.com forward/rich habits so our next question.
- [27:27]
Austin
Comes from Connor J. Connor says, hey guys, I'm wondering what to do next. I'm about to turn 26 and I'm not sure about a few things. I have $56,000 in my 401k. I have a Roth 401k that I've maxed out for the last two years that has $17,000 in it, 35, 000 in my emergency fund, 90, 000 in a money market account, and 30, 000 in personal investments, which I must pat myself on the back because I've experienced a 96 return because of your podcast. Happy to hear it, Connor. That's amazing. Connor says, I have no debt and I live in an apartment. Should I be looking to buy a duplex or a triplex so I can own some property, do some house hacking and things of that nature, considering my aid? Or do I wait on that? Considering the high interest rates, how do I know if I buy a property that it will actually produce good cash flow? I live in Utah, so I'm thinking about $750,000 or so is going to be my price for a duplex or a triplex. Should I be instead looking to buy a business? I just don't know what to do with this $90,000 sitting in a money market account. Robert, I'll let you kick this one off.
- [28:30]
Robert
Connor, I love the way you're thinking. You've got a lot of your bases covered and here is my take on your situation. I think you should go buy a triplex. I don't know if it needs to be 750,000. You didn't tell us what part of Utah, so it's hard for us to really flush that out out. But you have to look at it this way and make sure you understand the numbers. What is the total ownership cost of that property going to be. Write that down for everyone that's considering buying property. Total ownership cost. So many people look at a property and go, oh, my payments xyz. I've got homeowners insurance, I might have an hoa, a little bit of PMI and taxes. That's not total ownership cost. You have to think about, you know, lawn care. You have to think about pool care. If there's a pool. You have to think about driveway maintenance. If you have an hoa. There's a lot more that goes into ownership and what people talk about. So once you do that math and you understand the total ownership amount, then you can start doing the math backwards. If you get a triplex, what is the average rent? You can look that up on Zillow in that area. If the average rent, let's say, is fifteen hundred dollars per month and you're going to live in one unit and collect 3,000 from the other two units, that means you're going to be left with around $2,300 in payment for the unit you live in. So this math could be favorable unless right now your rent is substantially lower. So you want to consider, because what you don't want to do. We love the ownership side and we like that you're trying to get into the real estate game. We want you to do that, but we want to make sure you're not jumping from fifteen hundred dollars in rent in a little tiny apartment to a triplex where all of a sudden you're going to be on the hook for maybe $3,500, because that's a big jump. And again, we don't want real estate ownership to prevent you from also doing the monthly investing and dollar cost averaging and staying consistent. That's how I would approach it. So you can figure out not how much you can buy, but how much you should buy based on the comparables, the total ownership cost and what your current expenses are.
- [30:37]
Austin
I love that breakdown, Robert. I really want to encourage Conor to get his base built. I'm looking at this money pile, right? So 56, 000 in the 401k, another 17, 000 sitting in a other Roth 401k he has. So let's call it 75, 000 there. 35, 000 in an emergency fund, which is a little too big. So let's trim that down to maybe 20 so that 15000 can get invested. Now we're at about 90 and then 30, 000 in personal investment. So yeah, I guess he's got the base built. 120000 invested here. Think that at the moment I would much rather see that 90,000 added to the existing 120. So you now have 200,000 that let's say now you're 30 years old and that 200,000 invested correctly over the next four, five, six years turns into 400, 500,000. Now just think about the type of flexibility you'll have when it comes to finally buying that duplex or the triplex. You'll be able to either put a little bit more down. Maybe you can do something that's maybe that was out of your price range before, or maybe take a deal that cash flows even more. I guess what I'm trying to say is I really like the foundation you've built for yourself. But people make the mistake of going all in on real estate too quickly at a too young of age, thinking that there's some sort of shot clock that you have to own a home or you have to have real estate to be an adult or anything like that. Right now it is cheaper to rent than it is to buy. Mortgage rates are insanely high. 7%, 8%, 9% depending on your credit. So just make sure that you're going about this in a responsible manner, knowing that you don't need to have a Property in your 20s to be happy and to build wealth over your life. Now, do we want people to own property? Absolutely. But we want them to do it in a responsible way.
- [32:21]
Robert
Bravo. I think who knows what the math is, but probably 60 to 70% of households making over a hundred thousand dollars a year are house broke and living paycheck to paycheck because they buy too much house. House with too many expenses. Because at the end of the day, you want to be in the right neighborhood for your kids, you want to be in the right school district. But you don't have to always buy the house based on what you can buy. You should base it on what is comfortable for you so you can continue to invest. Because so many people forget about that in the house buying process. They will go, this is the house we're buying and that's going to wipe out all of our extra money. So now we're not going to be investing anytime soon. Terrible recipe be for building wealth. That is why I'm always telling people it's okay to rent. It's okay to lose the mindset of needing the big fancy home in the big fancy cars. Because at the end of the day you want to make sure you're consistent in your wealth building journey through your 20s and 30s, more importantly than your 40s and 50s, because you have to set yourself up better now so you can let compounding do the work. Because a lot of what people don't understand, the toughest years of your career financially are not when you're in your 20s and 30s. It is when you're in your 40s and 50s, because then you have kids, you have parents, you have older siblings that might need care. All of that is a drain on your finances. And that is why you need to set yourself up as early as possible. And it starts with not being house broke.
- [33:52]
Austin
So our next question comes from Alicia D. On Instagram. Alicia says, good evening. I feel like I'm on the opposite side of the spectrum from a lot of the situations that you guys read on these Q A episodes. I was financially successful, but I had an unfortunate series of events that took place over the last couple years and I've lost a lot of money. At the moment, I'm working two jobs, bringing in roughly 450 a week. I have three children. I have $2,100 in my savings, 150 invested on Robinhood, 120 invested on fundrise, and my current bills are $600 a month for rent, $90 for weekly babysitting, $90 a month for my phone, $75 for weekly groceries, and my credit score is about 500. I would really like to not only increase my credit score, but be able to live on my own again. Any advice you guys can share for me to start building wealth would be very much appreciated. Alicia, I am so sorry to hear about your situation. But if you did it in the past and you were able to get yourself into an awesome situation before, I'm determined and hopeful. You can do it again. Again, right? There is nothing that you are not capable of. You just have to have some people you know hold your hand along the way. And we're here to provide as much guidance that we possibly can. So you, you're 27 years old. You mentioned that you're working two jobs, bringing in roughly $450 a week. That is not enough. So, Alicia, two jobs, $450 a week. I don't know how many hours you're working, but you need to be working 50, 60, 70 hour weeks. The math here tells me you might be working 25 to 35 hours a week. And maybe there's a situation with the kids that is, you know, causing that to happen. But if you are going to get out of this, your income is going to be the tool that helps you having a big income. Let's call it a thousand or twelve hundred dollars a week. Fifteen hundred dollars a week. Right. By working crazy like a mad person, that's what's going to allow you now to buffer up your savings, get a deposit for an apartment, maybe pay off some lingering bills, maybe get in a better situation when it comes to your monthly expenses and your groceries. And finally, you mentioned moving out from. So there's a lot that can happen by getting your monthly income back up. And again, $450 a week working two jobs. I don't know your specific situation because you didn't tell us more, but if I'm working two jobs, I'm working 30 to 40 hours a week at each job, which means at 15 bucks an hour, let's say 70 hours get worked, it's $1,050, top line. Call it $800 a week after taxes. That doubles your income immediately, which could really help push you in the right direction. Direction. The next thing I would want you to do is you do not need to be investing. You are in crisis mode. This is not investing mode. Right. You invest after you've got your financial foundation built and you're in a good routine. Right now, it seems like you're really struggling to make ends meet. So if I were you, I would get out of the Robin Hood, I'd get out of the fundrise and any other investments you have and use that money to care for your family. You mentioned you have $2,100 in savings. Maybe that $2,100 needs to be used to pay off old credit cards that have caused your credit score to be at 500. You mentioned you want to increase your cred or figure out why it's that low. If it's unpaid bills or expenses or credit cards, whatever's going on there. And then of course, either settle them, make sure you get that settlement in writing, or pay them off or figure out whatever has to go on behind the scenes to ensure that that, you know, black eye of sorts is off your credit report. Then you start building your credit. You got a good credit score. Now you're making three, four, five thousand dollars a month in income. And now we're back to a place where we're moving in the right direction. Robert, what did I miss? And what advice do you have for Alicia?
- [37:27]
Robert
Yeah, I mean, this is a tough. Three kids living with the family, I get it. But at the end of the day, she has two things Going for her age, young, so she can work around the clock if need be to get out of this situation. A family for support to help her to keep the child care costs down. But I would say two things are what I would add. Number one, I would take, like Austin said, the money out of Robinhood and Fundrise. I would go to the bank with 200 or 300 and I would open a guaranteed credit card. That is the fastest way you can get your credit built back up. And that's what I would do. Because if you get that guaranteed credit card, it's going to start reporting right away. Because right now with a 500 credit score, you're not going to qualify for a traditional credit card. Secondarily, I would look online for someone that has a service. You can buy a service very inexpensively to help you get all of the bad credit items that you can removed from your credit report as soon as possible. That would help. And then number three, something that could help you along the way to get that income up. Look for an online side hustle. If you're any good online and you're good around a computer, find a side hustle where you can make a hundred dollars, $200, $300 extra a week from home so you can spend time with your children, but also get the income up. Something Austin and I have been saying for years is for people that are struggling, you either have an income problem, a spending problem problem, or both. And you're in this scenario right now. You're living frugally somewhat, but you're not making nearly enough money and that needs to get changed right away.
- [39:06]
Austin
And Alicia, we've been talking about Chipotle as a place for people to work for a while now. Research tells me, and again, I, I don't know the specifics here, so please take this with a grain of salt. Research, though, says you can make about 14 an hour. Starting out as just a crew member, you must be at least 16 years old, old, have a friendly, enthusiastic attitude, passion for helping people. They have tuition assistance. So if you want to go back to school or go to school, they have a hundred percent coverage for select degrees, up to $5,250 a year. You get free food. They have medical, dental and vision insurance. They also have 401k matching Chipotle. They're doing pretty good for their service members, their crew members here. And you can work your way up to become a service manager, making 20 to 25 an hour. I really, really firmly believe there's a world where you can make between 14 and 18 doll, go work 30, 40, 50 hours a week on that specific job. And then because Robert called out your age, being 27, you have nothing but green grass and blue skies ahead of you. It just comes down to again, leaning on the family to watch over the kids as often as possible while you are away at working and being in a season of your life, realizing that this isn't going to be your reality forever. You are not going to be working 80 hours a week, two jobs for the rest of your life. This might be a 6 month or a 9 month or a 12 month season where you're trying to claw your way out of some of this debt, pay off some of these old bills, beef up a savings account to from 2,000 to 10,000 to 20,000, right? But get yourself in a situation where you see light at the end of the tunnel, you have a plan and you have a clear goal to achieve, right? That's all you have to do. And then go lock in on that for the next six, nine, 12 months. And we promise there's going to be a world where you fast forward one year, two years, three years from now, and your reality is completely different. You are going to have a ton in your emergency fund. You're going to be investing, your kids are going to be successful in school, they're going to have every everything they need. Like you are going to be an awesome mom. And we know you're doing that already. You're working so hard. So we're rooting for you, Alicia. And thank you so much for listening to the show. So our last question comes from Kanathi M. On Instagram. Kanathi says, I'm 31 years old. I'm a woman earning about 120,000 a year. I have saved up $102,000 and I recently started investing in the S&P 500 and in gold. I have a Roth IRA. I'm planning to buy a house, but I'm conflicted if I should buy a condo or a townhome. The condo I want to buy is 200,000 doll. Means I would put probably $40,000 of my savings down on the down payment and then invest the rest in stocks. However, I realized that condos appreciate very differently than other types of real estate. If I bought a townhome, I would have to put all of my savings down as a down payment. But I do also recognize that they would appreciate more than condos. I'm really conflicted between the two of these. Please give me your advice, Robert. What's Your perspective on buying a townhome versus a condo and then the appreciation related. And then also of course, of course, take into account the down payment difference.
- [42:03]
Robert
You're on the right track buying the condo. I'm not a fan of condos unless you want to be in a condo on a beach somewhere. And even that's difficult because hoas and the fees associated can be very, very high. Townhouse I'm okay with, but I would rather just love to see at 31 years old, go house hack, buy a duplex, buy a triplex, use the Fannie Mae 5% down mortgage, you're obviously serious about your investment. So if you were to buy a duplex or a Triplex, live in one unit for one to two years, take that 5% down so the rest of your money stays invested, you would be in a much better place in my opinion, financially because then you actually own the property outright. It's your property, you have the, the upside appreciation, you have the 5% down with the Fannie Mae mortgage. So there's just a lot of advantages to buying that and not having the HOAs and all of the condo association fees. And it's your property to do what you wish and you don't have to paint certain colors or do any of the things that some of these associations require. That's what I would do.
- [43:06]
Austin
I think that's a great perspective. If I were to choose between a condo and a townhome, I would choose the townhome. I've heard horror stories about condos, especially to Robert's point. Right. If you're at a beach or you know, you're somewhere where, hey guys, we have to now go replace this. And because you're a condo, you have to now pay for this. So it's a one time fee of $2,000. Like give us your money or we're going to sue you. Or it's, you know, ways that go up every year or insurance that goes up every year. Right. It just condos to me aren't that attractive. And to your point, they do appreciate much differently than townhomes. I'll also say townhomes tend to be inside of neighborhoods where condos can be really anywhere. And I would much rather be in a neighborhood than just, just like anywhere. But again, condos might have a nice view somewhere. Like, you know, there's a reason a condo's there. But yeah, in my opinion, I would do the townhome if I had to choose between the two of them. However, Robert's advice as it relates to house hacking is always preferred. If you can house hack, which you definitely have enough money set aside to do, you can find a duplex, a triplex or a quadplex. You can use the 5% Fannie Mae down payment mortgage which allows you to borrow up to $1.3 million to buy some sort of multifamily at a again that 5% down range assuming you have decent credit and a good debt to income ratio. We always encourage people to do that. With that being said, everyone, thank you so much for tuning in to this week's episode of the Rich Habits Podcast Question and Answer Edition. If you're new around here, couple things to call out. The first thing is we have a newsletter. 60,000 people read it every Thursday morning, which means it probably was published before this episode even went live. It is called the Rich Habits Newsletter. Robert Nye Talk about all the big market moving headlines and try and give you some perspective as to what we think is going on behind the scenes. We also have the Rich Habits Network. This is our community for our biggest fans. We have well over 650 people that are a part of the Rich Habits Network and this is an opportunity for Robert and I to connect with them on a weekly basis via two hour long weekly live streams that take place every Tuesday night. We also present pre IPO investment opportunities. We've had a couple actually and just in the last month that we've I think we raised like north of 700 something thousand dollars that was invested into a couple of these opportunities through the Rich Habits Network community. So we're so thrilled to be able to unlock this private investment startup pre IPO asset class to the masses. And then of course, as always, we have tons of free resources in the show notes. If it's the Rich Habits real Estate hacks, if it's the Honest budget, If it's the 2025 Financial Planning Workbook, all of it is downloadable for free in the show notes below.
- [45:44]
Robert
And for all of you that find value in our podcast podcasts, the easiest way you can support us and it's completely free. Give us that five star review. Share with a friend. Everyone knows someone who needs to up the game in their financial literacy, maybe help with their mindset. Maybe they're a business owner that's struggling a little bit. So share with a friend. It doesn't cost you anything. It helps us grow and it's just really good for everyone and we appreciate all of you coming back each and every week supporting the podcast Podcast keeping us at the top of the charts and hopefully we're providing a ton of value for each and every one of you.
- [46:19]
Austin
We're so Thrilled to have over 200, 000 people subscribe to us now on Spotify. Over a hundred thousand weekly listeners. We are just incredibly humbled and excited that all of you come back every single week to listen to our show. And with that being said, thank you so much for tuning into this week's episode, and we will see you on Monday.