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Rich Habits Podcast
Q&A: Starting a Franchise, Balance Transfer Credit Cards, & What NOT To Do In Real Estate
00:48:01
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- [00:01]
A
You're about to make a trade. Which u do you listen to? Is it get optioning those options or let's do a little research. Learn more@finra.org TradeSmart I'm NFL linebacker TJ.
- [00:16]
B
Watt and this is my personal best. YPB by Abercrombie is the activewear I'm always wearing. That's why I reached out to co design their latest drop. I worked with designers to create high performance activewear that holds up to my toughest workout shop YPB by Abercrombie in store, online and in the app. Because your personal best is greater than anything.
- [00:43]
A
Hey everyone, and welcome back to the Rich Habits Podcast question and answer edition. These are our Thursday episodes where Robert and I answer your questions in real time, off the dome, no matter what they are. We've got some crazy questions in the past. Today's episode I feel like is a lot more normal. So some normal questions to get answered here. And actually all the questions we're answering today come from Instagram. So if you have a question to ask us for these Thursday Q and A episodes, DM us on Instagram at Rich Habits podcast or email us at rich habits podcastmail.com I almost forgot it there for a second. How could I forget that? Robert, are you excited? I'm pumped.
- [01:21]
B
I'm pumped. I love these episodes. They keep getting better and better and today is kind of a little bit of a breath of fresh air. I feel like we've got some good evergreen questions from our listeners and our audience. And I'm just excited to answer these questions because not only are we answering someone's individual pain point, but there's so many other people that go through those same issues because personal finance is personal. But a lot of us, life gets in the way, things happen and we don't know what to do about it. And that is why I love these episodes because we can take it right from the dome, help people out. Because it gets difficult sometimes when life gets in the way. And, and we're here to help you Oosa, calm down and really figure out what to do with your money, your problems, your mindset, whatever it might be.
- [02:06]
A
Well, let's not forget Friday episodes. We're rocking and rolling. We're having a good time. These are the biggest headlines and happenings that are impacting you and your money. Tune in to our new Friday episodes. All you gotta do is just click it on your iPhone or your Android or click it on your laptop, whatever you listen to us on, Maybe it's on YouTube just listen to the new episodes. We think you guys are gonna like them a ton. Now, that being said, I have to remind our audience about Public.com. public.com is an investing platform for people who take it seriously. No gambling, no day trading, none of that nonsense. It's about serious investing towards your financial future. So if that sounds like you, it's time to learn more about public.com on public. You can build a multi asset portfolio of stocks, bonds, options, crypto and more. And Public's artificial intelligence isn't just a feature that's built into the platform. It's actually woven into the entire experience. From portfolio insights to earnings call recaps. Public gives you smarter context at every touch point of your investing journey.
- [03:07]
B
And for a limited time, you can earn a 1% match on all IRA deposits, IRA transfers and 401k rollovers. Let me say that again. A 1% match on all IRA deposits or transfers and 401k rollovers. Fund your account in 5 minutes or less only at public.com rich habits paid for by Public Investing. Full disclosure in the podcast description.
- [03:30]
A
There was someone actually in the Rich Habits network that told me they rolled over like $700,000 out of an old IRA or whatever on a different brokerage account onto Public and they got that $7,000 1% match. It's like, it's legit. It's kind of crazy how you just get free money by moving money into the. It's awesome. We're excited if you're using Public. Kudos to you. And we always get this, oh my gosh, like, what if I don't want to use Public? It's like, that's fine, that's cool. Just like, go invest your money regardless. That's what's most important. But we think Public is the easiest way for people to start investing for the first time. And now that they've really have this robust desktop platform, it's, it's, it's got all the bells and whistles. So you guys are going to be just fine. So our first question comes from Brian K. On Instagram. Brian says, thank you guys for hosting the show. It has really helped me properly allocate my income to the proper places over the past couple of years. I have $200,000 invested in half of that is in an IRA. In the ETFs you talk about 15% is in Bitcoin and the rest is in Robinhood, mostly in vo. But I do have some single stocks. I also have a condo that's worth about $420,000. I'm 35 years old and I was laid off a couple months ago. I was working in the tech industry with income around 150,000. Now since being laid off, I've been looking into alternative income streams. What are your thoughts on me getting into a franchise opportunity that has a $75,000 upfront cost and could potentially, potentially break even after a year? I'm still trying to get back into a W2 job, but I could maybe even use this as a side hustle to fund it. Would I be using a personal loan? Should I use my stocks? Do I do an SBA loan? What do you guys think about this situation? If it helps at all, I'm in the Seattle area. This is a good question by Brian Robert, you want to kick this one off?
- [05:15]
B
Yeah, I love this question and where Brian's head is at on this franchises. Be careful for any of you considering it. I love franchises. I've made millions of dollars in franchising through pizza. But it is not all. They're not all built the same. So just be careful. Make sure you do really, really good due diligence to figure out if the specific franchise you're looking at is a good fit. What is the success rate of their franchisees, what is their closure rate of new stores and how long you really want to dig deeper? Because the person that's going to try and sell you that franchise, they're going to make it all rainbows and unicorns and it's not always going to be the case, even in pizza. I had a situation where I had, I think we had up to seven stores and the stores that I was involved with were very, very profitable. But then I had other partners that were involved in different stores that weren't profitable at all and they ended up losing money. So make sure you do the due diligence. How to pay for it. I love that idea of using some of your money. I just wouldn't put up too much money because you're right, an SBA loan could be a really good fit for you if you qualify and can use it for this franchise. And then I would say the last caveat of you asking Austin and I this question in the Rich Habits podcast is that one of my dearest friends is a franchise analyst. You don't pay him a dime. He talks you through all of the paperwork, everything, and works with you through every step of the way. So I can link you up with him if you email me at the Rich Habits email that'll be linked in the show Notes But I love this idea because franchising can be not fully passive, but can be a great way to add additional income streams without having to buy a job. Especially if you're buying a franchise that isn't super labor heavy or like a pizza store. So love the question. I think you're on the right track. Let me help you out and I'll make that introduction for you.
- [07:13]
A
I think it's a good question too. If I were in his shoes, though, I don't know if I would want to do this complete 180, essentially, with my career so fast. I feel like you might be a little discouraged right now with the job market. You were laid off a couple months ago, you're working in tech, you're making great money in Seattle, and now you're over here, like, man, maybe I haven't been able to find a job in the last couple months. Like, what's a different way that I can make money in this world? And maybe that's why you're thinking about franchising. Franchising is great, but I think about franchising more as an encore career or a supplemental income type career versus, like, what I want to do with my life on day one. I think if you can go, I mean, listen, go shake some bushes, go shake some, you know, trees, whatever you can do here to go find that next opportunity, paying you 100, 12150, $180,000 a year. And then, I mean, you have this great base, right? You've got a condo worth 400,000, you've got $200,000 invested. Like, you're doing a really good job in my opinion. I think you should go find a job that's going to allow you to make six figures or more just like you were doing, because you're absolutely capable of it. I would then continue to invest, continue to build up my wealth in these investments, my real estate, the bitcoin, the, you know, ETFs, things like that. And then let's say fast forward two, three, four years in the future. You're like, listen, I'm ready to go do this franchise. Maybe it's a crumble cookie or ice cream or a pizza, or, you know, maybe it's a, whatever else exists out there that you're excited about here and I've got the opportunity now to afford it. I might not have to go into this high interest debt with an SBA loan. Like, whatever's out there. That to me sounds like the plan. I have a weird feeling that you're just a Little discouraged right now with the job market, and you're trying to look at other ways to make money, and you want to go into $75,000 of debt. And something else that threw me off here you said could potentially break even in about a year. I don't know. That doesn't look fun to me. I mean, sure, if you can afford to not pay yourself and you can afford to not be breaking even for a whole year's time, but as someone who's unemployed, I would argue you can't right now. Again, I think this is a great idea, but it's not where you are right now in this season of your life. I think that you should go find that job that pays 1201-501802-00000. I don't know, maybe you're just absolutely capable of making so much money in this world in Seattle and go do that for a couple of years. And then as this sort of excitement of owning a franchise festers up inside of you, that's when you go, pull the trigger and you go jump into the franchise world.
- [09:47]
B
And I want to click back at something you said, Austin, that is very, very important that I forgot to mention. Many, many people that I've come across over the last 20 years of being involved in franchising is exactly what you said. They do it as an encore career. They were a retired fireman, a school teacher or something else. They want to create this additional income stream into retirement. And what happens is a lot of them go financially, they put up the $150,000, they get the SBA loan, they open it up, it doesn't work out. They're spending 50, 60 hours a week there trying to fix the problems. They've never run their own business before. And then all of a sudden, all of that nest egg starts to get eaten up because they don't want to just close the doors and give up. So they're pulling money from their retirement to keep it afloat. So make sure everyone watching understands that franchising can be fantastic, but you have to be very selective in which type of franchise and what market you go in. I could talk about this for hours. And if any of you need any help, please DM me. Please email me at the email provided, and I will guide you in the right direction of who to talk to and what to look for.
- [10:56]
A
So our next question comes from Nellie B. Nelly says, I have a mortgage with a 2.6% interest rate. Should I only be paying the minimum amount on that mortgage and using the Extra cash to earn interest in a high yield savings account, or should I make extra payments on the mortgage? Nelly, what a cool situation you're in, right? Your mortgage interest is 2.6%. I am so jealous of you. The house I'm sitting in right now, I think the interest rate is 6.6. The Other House that I have, the interest rates at like, 3.2, 3.3. So it's a world of difference about how much money you're saving here with this interest. And there's so many people out there that are so jealous of your situation. So congrats on being smart about buying a home. So what Robert and I teach is that we want to have arbitrage with our money, right? We want to be earning as much money as possible. Now, let's take two situations here. Situation one is you owe $300,000 on this mortgage at 2.6%, and you are now making extra payments month after month, year after year, and you eventually pay off this mortgage at a 2.6% interest rate. Fast and furious. By paying off an extra $300,000 ahead of time, right? Awesome. What does that mean for you? That means that you are no longer paying 2.6% interest on your $300,000 debt. Now, to make sure that we're on the same page about those numbers, that is $7,800 a year that you are saving in interest. Nice. Very cool. Okay, so what's the alternative? The alternative is we make the minimum payments on the mortgage and we take that extra cash and we invest it in the stock market. Now, just to give you guys some real numbers here, the NASDAQ 100, defined as QQQ Total Performance Year to date, right now, as we film this at the end of July, is up 10.83%. So let's assume you had that $300,000 and you invested it at that 10.83%. Well, you would now be up $32,490, which is materially more than the $7,800. So in my opinion, I would much rather have my money invested for me in the markets and working than saving me 7, 8, 9, $10,000 a year in interest. I would much rather have 30,000 than 7,000. So that's how my math checks out. That's what the arbitrage is that we're trying to explain to you guys, right? You pay 7,000 to make 30,000, right? That's how you guys should be thinking about it. But, Robert, I'll let you fill in the gaps. That I'm sure I missed.
- [13:32]
B
Yeah, I think you just absolutely crushed it. And it's this simple. You have to ask yourself, if I can make 10% with my money if I invest it, but I can pay out 2.6%, then you're going to keep that 7.3, 7.4% in your pocket rather than paying off this low interest debt. Number one. That is it. That is the basics. If you can make more with your money than what you can pay on borrowing money, you always borrow money. That's where the positive arbitrage comes from. That goes into your pocket, whether it's short term or long term. Austin. I think it was a great breakdown giving the actual numbers, but that's the simple, easy way to calculate if I can make more over here with my money than what I can borrow for. You always borrow. So please don't make extra payments. Don't try to pay it off early. You are in an incredible, incredible spot. And by doing so, you have all this extra money growing and compounding in your accounts. And rather than you taking all your money to pay off this low interest.
- [14:34]
A
Debt, and I want to just linger on this a little bit longer because there's a big difference between simple interest and compound interest. Whenever you have a debt like a mortgage, it's paid for in simple interest. Let's say, for example, this $300,000 that you owe at 2.6%, $7,800 of interest that you pay that first year of having it. But you'll be making payments and maybe your principal goes down to a $290,000, 295, whatever it might be, right. Let's call it $295,000 that you now owe the next year on your mortgage because you're making these mortgage payments. Instead of $7,800 of interest you owed, now you owe 7,670. And the year after that, the interest you pay is 7430. And then after that it's 7200. So it goes down in a linear fashion. Now, there might be a different amortization schedule where the interest might go down faster, slower, whatever else. Like, we understand that. But what people forget about is that interest and debt can only go to zero. Investments theoretically could go up forever. And The Rule of 72 tells us that stocks double every seven years. The stock market doubles every seven years. That's history, and that's mathematics. And so, you know, in this situation, yeah, that $30,000 difference that you are making with your money at that 10% we fast forward seven years from now. The 300,000 that you had invested originally is now worth 600,000 and then that's now worth 1.2 million and then that's now worth 2.4 million. But you are just saving $7,000 a year in interest. So it's like would you rather have, you know, 7,000 of savings or potentially millions of dollars throughout your life? Right. That's how you should be thinking about investing. We made a whole episode about this, Talking about how to 70x your money, understanding the opportunity cost of not investing early and often, and just all the fun stuff about compound interest and really trying to think about that. So if you've not yet listene that episode, please listen to it. It is a banger of an episode. But compound interest telling you once. What, what's that quote, Robert? Those that understand it earn it. Those that don't pay it.
- [16:40]
B
Yes, 100%. And it's just really important for everyone to understand the point you just made. Because so many people think that debt is bad and debt is not bad. The wealthiest people on this planet use debt, but they use it to their advantage. They use it for leverage. They borrow money in an inexpensive fashion with low interest rates and then they use it to make more money. So when you're in a situation like this person is right here, it is just so incredible. And you have to understand, keep making the minimum payments. You're going to crush it and keep building your portfolio and you will have a great retirement down the road.
- [17:20]
A
So our next question comes from James L. James says hey guys, love the show. Great info for people looking to gain more knowledge and making money. Curious on your thoughts of delay delaying paying off credit card debt by transferring balances to credit cards offering a 0% intro interest rate for the first 18 months. I currently have 0% on a card until October, but I'm thinking of delaying by transferring the balance now to another card. The transfer fee is 3% and I think at that low percentage I might be able to take the money I already have set aside to pay off the balance, go invest it, earn higher interest with an SPYI or a qqqi, maybe even collect monthly dividends with the intention of paying it off at the 18 month mark. What are yalls thoughts on my wealth building strategy? Oh my goodness. James. Oh my goodness. Robert, I'll let you kick this one off. This is a fun.
- [18:14]
B
I knew you were gonna make me go first. Ah. Because I know what side of the fence you're on here. Okay. I had this conversation recently with one of our Rich Habits members and it was this exact scenario. So here's my take. If we get rid of the phrase my wealth building strategy, then I can answer this without smiling so much because this really isn't a wealth building strategy. It is a very dangerous hack. Can you pull it off and does it probably make sense given the criteria that you outlined? Yes, you could do that, but you have to make sure you're not putting yourself in harm's way because you're basically taking borrowed money that could be at a high interest rate and then you are trying to arbitrage it with these money making, dividend producing ETFs, which I love, because. Yes. Should it work out in your favor? Absolutely. But I wouldn't consider it a wealth building strategy. I would consider it a intelligently planned, potentially great hack to get you out of the credit card debt. But that doesn't mean it's right. I think the math is there for you and I think if the timing goes well of the markets, it could be great for you. But it's still a little bit of a slippery slope, in my opinion, to do this. I've told people in the past, if you need to do a zero interest credit card balance transfer, go for it, because you need to do anything you can to be able to get out of that high interest debt, especially if you're able to get it to zero and then be able to chunk away at it very quickly through that 18 month period to get you out of that situation. That would be my take on this particular set of criteria with this question.
- [20:01]
A
Yeah, I think, James, the math 100% is there. You are absolutely correct in the way that you're thinking about this. If I can pay 3% to go earn 12, 14, 15% more right over here, then I'm good. Like that's exactly what we just explained in the prior question. So yes, your math checks out. However, with all stuff like this comes risk. What is the risk? The risk is your investments do not pan out. Let's say you owe $20,000 on these credit cards and you put $20,000 into QQQI. Well, we all remember the Trump tariff tantrum that happened in April. The NASDAQ fell, I think it was 22%, 23%. So now not only are you in the negative, but you now don't have enough to pay off the cards anyway. And so now you're scrambling to say, oh my gosh, how am I going to even pay these cards off anymore? I thought I was Going to make money now I'm losing it. There's risk that comes with doing things like this. And the risk is the unpredictability that is the stock market in the short term. And I would argue 18 month period of time is a short period of time. I do not know where the stock market's going to be in 18 months from now. I would imagine it's higher, but it could be lower. We have no IDEA now in 18 years from now, yeah, of course it's going to be higher. Right? Long term investing, no brainer. But in 18 months it's definitely risky. So here's the deal. Let's do some math. I think that's like facts are your friends. Math is fun here and I think it helps put put things in perspective. Let's say you had this $20,000 and you put it in QQQI and it paid you a 15% return in the first 12 months. So that's $3,000. And then another 15% in the next 12 months cut in half because it's 18 months. Right. So now you're at $4,500 total. So this would have profited you 4, 500 before that 3% fee which would have been 600. So now your net profit, perfectly, if everything goes perfectly perfect, is $3,900. That's a lot of money. Don't get me wrong. In this situation with $20,000, 3900 is a lot of money. And if you extrapolate that upon 18 months, it's about $200 a month of passive income. I guess that you could be earning in this situation because you have the money set aside already to pay off this debt. But is it worth the risk? And that is only a question that you can answer. We are over here explaining to you the total upside potential of the 3900, the $200 a month. And we also want to make sure you understand the downside of markets could go down by 20% and you don't have enough now to pay this off. And now you got to actually be carrying credit card debt which turns into a mess and it's just this whole thing. So I'm going to go with I don't have the perfect answer for on this one, but I'm going to give you the tools and resources to make that decision for yourself. Would I do it if I was in his shoes? No, I would just pay it off and I'd be done with credit card debt because there's so many debts out there that I'm not mad at but credit card debt is the one type of debt where it just gives me the heebie jeebies. I don't like it at all.
- [22:56]
B
Yeah, I think another way to look at this, and we see this all the time in the rich habits network is people that will go do a heloc, pull out money from the equity of their home at 8 and a half percent and go buy bitcoin with it. Now the math says it's a pretty smart play. Bitcoin on average is probably going to outperform the 8%. So you're good to go. You're arbitraging this profit in your your favor. But the problem is what if it doesn't? What happens if bitcoin has a bitcoin winter and goes down 40% for a year and a half and then all of a sudden you're having to make these higher payments to cover the HELOC and you're having to find that money because it's just one of those things where all of this sounds good until it doesn't. That is why we like to teach everyone to be long term investors and not have so much gamble in them. I'm not going to say in the past I didn't do some of these things, but now I look at it that I would rather be building my wealth in a way where maybe I leave a little money on the table from time to time, but I never go backwards. And I think that's the key for me is always moving in the right direction, always with proper trajectory to get towards the financial goals I'm looking to get to.
- [24:04]
A
I couldn't have said that better myself. Did I do crazy stuff like this growing up? Of course I did. But that's how people learn. And that's why we're here to share our perspectives.
- [24:12]
B
That's right, we are. So listen up folks. You can lock in a 6% or higher yield with a bond account on public. 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@public.com rich habits.
- [24:35]
A
So our next question comes from Madeline. Madeline says, I have a question for your show. My husband and I are both 28 years old. We combined our finances when we got married last year and we now own a home with 20% equity in it. We currently rent out that home. It collects $9,000 a year in cash flow. We have 180,000 in the stock market. 70% of that is invested in index funds and ETFs. 30% in blue chip single stocks. I have 30,000 in my 401k. He has 70,000 in his. And we also have $15,000 sitting in Robinhood Gold, earning a 4% interest rate as our emergency fund. We have another 15,000 in our Chase bank account that we use on a monthly basis to pay our bills and run our household. We're also contributing a thousand dollars a month to that $180,000 stock market portfolio. We'd like to buy our second property before 30, so in the next two years here with the intentions to live in it for the next five to 10 while we start our family. Then once we're ready to move on, we'll convert it into our next rental property and buy our third home. Should we be building our down payment by investing the savings in the stock market, or should we be parking that in a high yield savings account? I know you guys have answered this question in the past, but our situation is a little different. And let me explain. We're Both earning about $100,000 a year post tax, so we want to make sure that we're maxing out our Roth IRA regardless of the place that we park this money. I also just purchased a travel agency franchise and I plan to start earning 10 to $15,000 a year passively through that. But I guess we're just trying to figure out the best place to save for this house down payment while not missing out on investing toward our Roth IRA because of our incomes. Thank you so much. I know this question's a lot, but I really appreciate your answers. So, Madeline, love this question. I think you're bugging out for no reason. You guys are both making a hundred thousand a year. You're married. The modified adjusted gross income Roth IRA contributions is $236,000 or less. So you should be good to contribute to the Roth ira. But let's pretend you don't want to and you want to, you know, do something else. You could do the backdoor Roth ira. That's what Robert and I do. We make way over the income limits and we, we do the backdoor Roth IRA. Very simple. Google how to do that. YouTube the step by step, whatever. Super easy to figure out that one. Additionally, because you have this business, if you wanted to do a solo 401k assessment, Depp Ira Omega, BackDoor Roth, solo 401k, there's a lot of different shoots and ladders that you could go through here to, to get a lot of money invested toward retirement. But I think you're fine from that perspective. To answer your question about where you should be saving for the next two years, personally I think putting, let's call it 75% of it in a high yield savings account and the other 25% of it in the markets would make sense. I don't want to see all of it in the markets because again, I don't know what the stock market's going to be like in two years. I don't know Trump and Jerome Powell are going to be fussing at each other, going to cause the markets to do this or if you know, some sort of whatever happens. And I don't know and because of that, I don't want you to now say we can't afford the house of our dreams because the markets went down by 24% wiping out $19,000 of our down payment and now we have to save for another six months. Right. Like I don't want that to be your situation. So by having a little bit of exposure to the markets makes sense. But 75% of it, I would continue to just earn interest in your Robinhood Gold account or if you want to earn 4.1%, you can go open up a public.com high yield cash account.
- [28:09]
B
Yeah, I agree 100% with that breakdown and strategy. And here's why you stated that you wanted to own this next property by 30, which is that two year window. And for Austin and I, we both believe that window is a little bit too tight to be able to really flex your muscle in the stock market completely. Because if there is a downturn in the market, normally they're going to last under two years. But we would hate to see you put it all in the market to try and really arbitrage it and then have the markets go down 10, 20, 30% for months and months and you find yourself being put in harm's way for the down payment on that second property. So I love what Austin said and I couldn't agree more. Keep 75% in the high yield savings, 25% in the things we talk about in the market because then that way no matter what, you're still growing the money and you're not going to be in that situation where you're too over leveraged in the market and too risk on. Love the question, love the situation that you guys are in and what you've created at 28 years old and just keep doing what you're doing. And we wish you all the best.
- [29:17]
A
So our next question comes from Dylan. Dylan says, what's up, Austin? And Robert, exclamation point. Dylan is excited to be here. And we're excited for Dylan to be here too. Dylan says, my name is Dylan and I'm aspiring to be a college basketball coach. A little bit of background on me. I'm 24 years old. I just have over $2,000 in my IRA, 9,000 in my bridge account, and I was very fortunate to have a basketball scholarship. So I graduated college with zero debt and a finance degree. For the first time in my life, I'll be making a small but steady income from this upcoming school year. As a coach at a prep school, I make 600 a week. I get free housing and free food. My question is this. I know I have a small base, but I'd love to get started investing in physical real estate. I'm just unsure how to do it in my situation. The problem with being a young basketball coach is it's very common to get moved to different schools every couple of years. So how can I effectively build my base this year so I can maybe start looking into real estate next year? Also, what would real estate investing look like in my situation? Thanks for everything. You guys are the goats. Dylan, you're the goat. Thank you for teaching the youth. It's something I can like. I just, I really appreciate when people are out there teaching the, the next generation. And it's, it's awesome you're doing that. I did not mean to laugh. I'm just thinking like, hey man, you got a long way ahead of you before you get into some real estate investing. So let's break it down. Let's give you a game plan. Dylan, 24 years old, you have 9,000 in your bridge account, 2,000 in your IRA. It's $11,000 invested. At 24, you are doing wonderful for yourself. That's awesome. Awesome. $11,000. To give you some clarity, you know, we talked about the 70x on that. So theoretically, this is already going to be $770,000 in retirement for you. So keep at it. Now, how would I get into investing in real estate at that age? And in your situation, I don't think I would. Robert and I always talk about how important it is to build your financial base before you begin to diversify into other asset classes. And, and the reason why is again, because the hundred thousand dollars that you have saved and invested will continue to double every seven years and grow throughout your life versus maybe your real estate might not cash flow A couple months. Maybe you have to do some reinvestments. Maybe the appreciation isn't there in the, in the beginning. So like we really encourage people to have their base built before they get into real estate. Now in your situation, you can't really live in a duplex, you're living at a, a prep school. Because we always want people to house hack with real estate. So I guess in your situation there's a couple things to do. The first one is the fundrise flagship fund. This is a way to invest into tons of different types of real estate. Robert and I are both invested with Fundrise. They do a wonderful job. There's also public real estate investment trusts such as Vici Properties and Realty Income Corporation and vnq, that's a etf, that's Vanguard's real estate etf. And then finally, you know, join the Rich Habits Network and participate in some of our real estate syndications and investments that we're doing. But again, don't do that until you have your base built, right? You always want to make sure you have your base built before you begin to diversify into different asset classes beyond the tried and true index funds and ETFs we talk about.
- [32:26]
B
So, Dylan, I'm going to take a little bit slightly different approach here because there's a big gap in time that I don't understand. If you're going to be this prep school coach and live on site, but you have a finance degree and you wanted to get into real estate, I don't understand why you don't have another job. Because the coaching is only going to be a couple hours a day, what are you doing with the rest of your time? Are you a student? Because if you're not a student and you're going to be graduating soon and be the coach I would be looking at, how can I get a remote job in finance? Because that's what you have a degree in. Start building up there. Or I would go look for a job in real estate. Find a local developer, find a local flipper like me that has all these projects. Go work 4, 5, 6 hours a day for them around your basketball schedule. Because everyone needs help, Everyone needs active employment bodies, people that are willing to work and get dirty. So you have two opportunities right there where you could build your, your base really, really quickly while still being able to live the dream of being the basketball coach. That's what I would do if I were you, is find a way to make all this other additional money and stockpile that into your investing and you would be so much better off, so much more quickly. I used to be a high school basketball coach, and I unfortunately got fired because I had the best record that the JV team had ever seen. And we beat another high school that they hadn't beaten in over 30 years. And I treated all of the players in their family to pizza night, and I got fired because you're not allowed to do that. But I loved being a high school coach and working with all these high school students and being able to help them not only financially, but mindset and really be part of it. So keep doing what you're doing. I love that you're giving back, but I still think you're missing something by not looking for a remote position or getting dirty. Get into real estate and help somebody else so you can learn along the way.
- [34:27]
A
I didn't know that about you with the. The basketball coach. When was that? That was pre Silly Bands. I'm assum.
- [34:32]
B
Pre Silly Bands. A friend of mine was the baseball coach, and he was like, hey, we need a JV coach. You've been playing basketball forever. You're really good at it. And I loved it. I never thought. Because, like he said, there's very little money. I think I was getting like 500amonth. It was the most rewarding time I could spend because you got all these kids that are impressionable and they just want to look up to somebody, you know? And I was crushing it financially back then, before Silly Bands. And it was amazing. But the athletic director, I think, was just pissed that I was doing so well, and he ended up firing me for. For treating everyone to pizza, which really bummed me out, and I just never followed up and went anywhere else with it.
- [35:13]
A
Damn. I didn't know that. All right. Learn something every day. So our next question comes from Natalie B. Natalie says, hey, Austin and Robert. I'm new to the stock market investing. I'm still in high school, and I want to know what can I do to make good financial moves in the stock market for only working four to five hours a week and making close to minimum wage? I'm working on opening a custodial brokerage account, and I want to be able to expand my portfolio. But if y' all can give me the play by play, that would be very much appreciated. All right, Natalie, so here's the. The reality. You are under the age of 18, which means that you have to do all of this with the permission of your parents, right? You have to have a parent or guardian open up a brokerage account. With their name and your name and they must be supervising you and making sure that they approve of all the things that you are doing here with your money. Now we would hope that they would approve of you investing towards future. So just make sure you have those conversations with them. Maybe send them this podcast episode. So Natalie, here's what I would do in your situation. You said that you are working four to five hours a week, making close to minimum wage. I'm always of the belief that when you are a kid, you should be a kid, you should spend your money on kids stuff. You should go out, get ice cream with your friends, go to the movies, go on those trips to the amusement park, go swimming at the swimming pool, whatever. Go be a kid. I love that. Highly, highly, highly recommend doing that. But if you are so inclined where you want to start investing some portion, maybe 10, 15, 25% of your take home pay. These paychecks that you get from working four to five hours a week, that's cool too. Just make sure that it's a small percentage, right? It's going to grow very, very well over time. The easiest way to do that is to open up a custodial brokerage account, preferably a Roth ira. You can do this on, I think Schwab or Fidelity or Vanguard. I don't know if public has custodial accounts yet, but open up one of these custodial Roth IRAs, contribute, I don't know, 50 bucks to it, and then put that $50 into the Voo ETF, which is the 500 largest, most profitable companies on the stock market in the United States, and you're off into the races.
- [37:15]
B
I, I love this and I'm going to take a slightly different approach because I remember when I first got started, I was putting $20 a week into my account and there were people back then saying, oh, that's dumb. Why are you doing that? 20 bucks a week isn't going to do any good. But then a few years later, let's call it when I 21 or 22, I had already accumulated like 15 or $20,000 in the account and it was growing and it was really a cool time for me because, you know, I grew up pretty poor and I didn't have a lot of support and thankfully my cousin Tim had already been in the financial world. But what I would do also is I would go to your parents because you've already won most of the battle to build wealth and be financially free because your mindset is already thinking about money and how to invest in high school. Most people in high school haven't even given it a thought of how to invest and get started. You're in here in the Rich Habits podcast asking questions that's incredible to me. Where you start and how much you invest. Like Austin said, go have fun. Even if you only put $25 a month or 50amonth into that account, you'll be shocked at how much it grows over time, especially if you're consistent. And if you want to go one step further, I would go impress your parents. Hey, I asked this question on the Rich Habits podcast. This is what they said I should do. I'd love to open this custodial account right now. Based on what I'm making for my four or five hours a week, I can take home XYZ amount of money. I want to put $25 a week into this, $10, whatever it is, and ask your parents, would you be willing to match this with me, me so I can help build towards my financial future. And I think most parents will be like, this is amazing that my high school child is actually taking the steps on their own to do this. And then you could double up that investment if your parents agreed to match whatever you put in. And I think it'd be a great strategy.
- [39:18]
A
I entirely agree with that. And I only want to add one additional piece of advice, which is once this money gets contributed and invested, forget about it. This is not Natalie's house down payment money whenever she's 10 years older than she is right now. This is not Natalie wants a new car in college money. This is once the money goes in there, the only way it's going to change your life is if it stays in there. And so once it gets contributed, forget about it. Do not think about this. This is delayed gratification to the nth degree. You will not see this money for 50 more years. Right. This is money that is going to grow for you and is going to be absolutely incredible in retirement. 65 year old Natalie is going to be just so happy you did this. But please do not take this money out once it's in there because then you're not investing, you're not investing. So good job, Natalie. We are super excited for you.
- [40:06]
B
I want to click back one more time because you're, you're unveiling all these things. Don't tell anyone it's there because as it's growing and you're in your 20s and you're having fun and you know you're in a relationship or whatever's happening don't let them know because when you're younger and you're building towards your future future, you don't ever want to be in a situation where everyone knows what money you have and then all of a sudden has to cry on your shoulder to get help. Don't tell people it's for your future. And just I love this question so, so much.
- [40:39]
A
So our final question comes from Sydney. Sydney says hi, Austin. Robert, I love your podcast. I've learned so much from listening. My husband and I are in our early 20s and we're trying to get into real estate. We really want to work for ourselves and work on getting away from the W2s. We've looked at fix and flips, rental properties, AirB arbitrage, but we don't know what is best to start with. We're about to come into a six month period of time that we'll be living with our family, so we will be paying very little on a monthly basis when it comes to bills. What would you recommend for us as we're looking into starting this journey? Is there any advice that you would give us? More specifically, anything you would encourage us not to do? Thank you so much, Robert. I'll kick this one off.
- [41:18]
B
Well, you've heard us say it many, many times, everyone listening. And Sid, if you haven't and you're new to this channel, we would say don't get into real estate just yet. You didn't allude to the fact that if your husband, if the two of you have your base built for us, we never want to see anyone save up that first 5, 10, 15, $20,000 and plunk it all into a piece of real estate right out of the gate. Because if you're wrong or you lose money or it just doesn't perform well, or let's say the renovation costs are dramatically higher because you're new to the game, we don't want to see you go back to zero. So in my opinion, in this situation, I would get that base built to a hundred thousand dollars and above making you money while you sleep. And keep learning about real estate, keep reading about it. You know, go out, buy books, watch podcasts, watch our podcast about real estate, join the Rich Habits Network. So you're always learning because as you build more and more of your net worth worth, then you can start to diversify into real estate. Now if you're not going to listen to that, the only thing I would say you do for you and your husband would be to look at house hacking. If you're going to buy the first property and not wait. I would go look for a 2, 3 or a fourplex because it's still residential. You can get a Fannie Mae 5% down mortgage, which is the cheapest way to get you started. You can live in one unit, rent the other, and then you could self manage the property to be able to keep your bills low and build some wealth and some equity in the property. But I would say put that off for another couple years before you do it. But keep learning, I think is the key.
- [43:00]
A
That's exactly what I was going to encourage Sydney to do with her husband. Here is, you know, I understand that you want to get into rentals and fix and flips and Airbnb arbitrage and all the sexy things that you know are like, oh yeah, retire early and get into real estate. You're going to be a billionaire. That could absolutely be in your future future. And we are not saying it is not, but we think that the easiest way to start is by house hacking. So think about it like this. Let's say you and your husband, you're living at home for the next six months. You can save $5,000 a month, that is $30,000. And with that $30,000, you can use that to buy a 5% down duplex or triplex or something. So a $600,000 multi family unit and you have the other two, let's say it's a triplex, you know, now have three units. You guys live in one unit, you rent out the other two, and now the cash flow entirely pays for that monthly mortgage. So now you guys are essentially living for free. You're taking that what would have been a 1800-2500 dollars a month housing payment. You're now squirreling that away maybe for your next property or you're using it to invest even more or whatever is going on. But now you just opened up, let's call it 18,000, 24,000, $30,000 a year of extra money in your monthly budget because you're living for free, doing this house hacking. And then fast forward now five years, you guys want to actually go get a single family home, have some children, move in the right direction as a family here. And now you've got three units that you can rent out with this multifamily. That's how people get into this without going into too much risk, too much debt, too much uncertainty. Yes, you could absolutely do some fix and flips maybe. Your husband is very awesome with his hands and he's very Handy. And he has a of ton team of people that can help them like do that. Robert's great at that as well. Airbnb Arbitrage, I think that's just hokey pokey. I don't think it works very well. I think that's too much risk. I wouldn't worry about that one. But if you want to get started. Yeah, do the house hacking stuff. Duplex, triplex. Again, $30,000 can help you buy a 500, $600,000 multif family. And then you can begin to run some numbers and figure out how much you have to rent the other units for. What's the market price? How does it all come together here? And it's a wonderful way to start to get into real estate without getting overwhelmed.
- [45:09]
B
Yeah. I think the biggest m most people make is they think that they have a little bit of money and they can start with a fix and flip. And that's okay, as long as you have some insight or you have somebody that you know, maybe an uncle is a contractor, maybe you have a friend that's been doing it for 10 years. It's going to help you along the way. But if you're going at this with no prior knowledge, no experience with your only money, I think it's a big mistake. And here's what I see a lot with people is they'll save up $25,000 dollars, they'll try real estate, they'll lose money, they'll get out of it okay because they still have an asset. Then they'll have a couple bad years where they're saving again, saving again, saving again. Then they go invest in Uncle Billy's restaurant. That doesn't work out, then they start over again. That is why we want you to always build your base. If you have your base knowing that you're never going to go broke, that money is making money while you're asleep. Then as you diversify, at least we know you're saving safe. That is why we never want to see people robbing from their future to invest in the now. We always want to see that base that's set aside that you don't touch because investments don't always go as planned. And we want to make sure everyone is going in the right direction so they can live a financially free life, not just in retirement, but as soon as possible. So I hope this helps everyone listening and I think it's a great breakdown and just keep going, going. But I hope you take this advice and really consider it when thinking about getting into real estate right out of.
- [46:42]
A
The gate, everyone, thank you so much for tuning into this week's episode of the Rich Habits podcast, Question and answer edition. We are having so much fun with this. We are having a blast. I mean, we're just Monday episodes, Thursday episodes, Friday episodes, Rich Habits Newsletter, Rich Habits Network. I mean, this whole thing we've built is just so, so inspiring, so exciting, and I'm so grateful to be a part of it. Thank you guys for your continued support. If you learned something in this episode, please consider sharing it with a friend or leaving us a five star review on Spotify, Apple. Subscribe to us on YouTube. Give us a thumbs up over there, whatever you can do to show us your support. We very, very much appreciate it.
- [47:21]
B
Yes, everyone, thank you so much for joining, following along, giving us those five star reviews and engaging with us. It means the world to us that you guys are willing to open up publicly, share your pain points, share your desires and let us have help kind of mold our information into you so you have more options to be able to choose from. So we really appreciate that from each and every one of you every single week.
- [47:47]
A
And it's also mindboggling. We're up to almost 35,000 followers right now on Instagram, which, like, I remember when we made this Instagram account, it had like 22 followers. And we're like, let's go, people. Door show.
- [47:59]
B
It is fantastic. We love it. Thank you guys so much, so much.
- [48:02]
A
Thanks everyone. And also, you know, Thursday nights, Robert and I, we went, we went live on Instagram on Thursday night at like 9pm Eastern time. So if you follow us on Instagram, you want to ask us some questions live, we'll try to keep that cadence, you know, es and flows of life. Yeah, follow us on Instagram. Maybe you'll catch us live. Super excited about that. Thanks everyone and have a great rest of your week. Sam.