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Rich Habits Podcast
Q&A: Taking Profits (+280%), ETFs for 50 to 60-Year-Olds, & Real Estate Syndications
00:43:54
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- [00:00]
A
Hey everyone, and welcome back to the Rich Habits Podcast question and answer edition. These are our Thursday episodes, our Q and A episodes where every Thursday we're answering your questions as if we were going through whatever you might be going through. You can ask us questions on Instagram at Rich Habits Podcast or via email@richhabitspodcastmail.com
- [00:21]
B
we are a community here and we love these episodes and these questions because we all go through it. Personal finance is personal. And we are here to dig in, answer the questions and bring as much value as we can to help all of you get through whatever it is you're going through in business finance and mindset.
- [00:38]
A
You know what, Robert, that's a good reminder. When you send us a question, do us a favor, don't just send us vague details, right? Hit us with some real details here. But also one, tell us your age. And two, reminder, what should I do in this situation? Or what do you think about my situation? Or what do I do next? You know that's not a question, right? That's like a, hey, here's everything about me. Now be my financial advisor. Come on, that's not a question. Guys, we, you know the types of questions we like to answer here, we got a ton of them coming in. So please hit us with real questions, not just what would you do if you were me? Now, before we jump in, got to give a shout out to public.com the investing platform for those who take it seriously. On public, you can build a multi asset portfolio of stocks, bonds, options, cryptocurrency and now generated assets which allow you to turn any idea into an investable index using AI.
- [01:28]
B
And it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and even lets you back test it against the S&P 500, all with just a few clicks.
- [01:49]
A
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- [02:08]
B
Full disclosure in the podcast description.
- [02:10]
A
You know Robert, I was looking inside the Rich Habits network and someone had talked about how they built a generated assets index around photonics, right? The rise of this photonics technology, which is really Interesting thinking about like data centers in space and stuff like that. So like literally you can come up with anything you want, drop it into generated assets, let it pull together a bunch of different research for you and then you can back test it it against the S&P 500 to see if this is historically speaking a winning strategy. So again, public.com rich habits go get that 1% bonus. Now our first question comes from Angela on Instagram here Angela says, hi Robert Austin. My spouse and I are both 40. We recently sold our home, leaving us with $175,000 in cash that we're trying to allocate wisely. Our monthly take home pay is $8,500 and our only debt is a mortgage balance of 475,000 at about a 5% interest rate. The monthly payment on that mortgage is 3 3,150. The house is worth 750,000. So what is that Robert? About $300,000 of equity? Angela says we currently have 300,000 in our retirement accounts and 30,000 in a taxable brokerage account. We also have a six month emergency fund in our high yield savings plus an additional 30,000 set aside for expected upcoming major home repairs. Our 2026 Roth IRAs are completely maxed out. I contribute enough to receive the full employer match to my Roth 401K. Our lender allows for unlimited mortgage recasts with as $20,000 toward principal with no fees, which would reduce our monthly payment. So here's the question. Does it make sense to take this $175,000, invest it toward our retirement, put a significant portion of it toward our mortgage and reduce that monthly cost, maybe put all of it toward paying off our mortgage. We would greatly appreciate your guidance and we love the show. So Robert, if you were in their situation 300,000 or so into retirement accounts at 40 years old, would you rather see that 175 up the 300k or would you rather see that 175 be paid toward this 5% interest mortgage?
- [04:16]
B
I would definitely not pay down the mortgage at 5%. The market's generally going to perform much better than that over time. You guys are 40 years old, so even if you wanted to retire early, I would rather see you beef up this taxable account that you only have $30,000 in. You could do a hybrid if you wanted, but I would rather see you beef that up because you guys are doing very well at your age and you want to have that ability to have flexibility to retire early with having a larger taxable account, we call it the bridge account. So that would be my take here, because you're doing well, you're earning very well, but I would never want to see you pay down a mortgage at a five and a quarter percent just because there's so much more money to be made elsewhere. So tactically that's what I would do because I don't think it makes sense to take all that and just chunk it down to make your house payment less. The recasting part could work over time if you wanted to do it. Maybe, you know, every three or four or five years. I just think you're better putting it into the traditional brokerage account, letting that grow and having the flexibility if you wanted to retire early by building that account up and beefing that up for the future.
- [05:25]
A
So here is the only scenario that I want to push back on that, Robert, because I largely agree, right? I'm like, duh, it's 5% interest. Why would you pay that off early? But here's something that I think is really interesting that might change your perspective. The 3,150 per month mortgage payment is 37% of their take home pay. So now your creep creeping up toward perhaps being house poor at this 3150. So I wonder, Robert, if there's a scenario where they take a chunk of this 175, toss it at the mortgage at this 5% interest, allowing them to bring down their monthly payment from 3,150 to about 2,800, which would then put them at about 33%. Because I feel like a third of your take home pay toward a mortgage payment is a lot more manageable than 38 or 40%. But I don't know, what's your take on that? You think that that's even worth it? I mean, it really comes down to how, how much margin they have in their budget. And to be honest with you, I'm seeing a six month emergency fund. I'm seeing maxed out Roth IRAs, I'm seeing contributions to the Roth 401k. So like it tells me they already have margin in their budget despite this 3150, which means they might not need to have a lower mortgage payment to, you know, find that margin and enjoy their lives and save and invest.
- [06:40]
B
Yeah, the flip side to that is if they took the $175,000 and let's say they make 9% a year, I think they'll do better. But let's say it' percent. If you were to take that 9% that you're making on that $175,000 and you were to break that down monthly, that would be like thirteen hundred fifty dollars a month in income from that hundred and seventy five thousand dollars that's growing that they might not need. But then they could also put that money if they wanted to or a portion of it to bring down their debt to income ratio in that mortgage payment. So that's another way to look at it as well.
- [07:12]
A
Yeah, that's a, that's a really cool perspective. I, I agree. I, it seems to me that y' all doing fine. You guys are not pressed. You, I don't see any high credit card debt. I'm not seeing like you all seem to be living well within your 8,500amonth take home pay here, even including this 38% mortgage. So if that's the case, take all 175, chunk it toward a taxable brokerage account. You said you already have 30. Now you're going to have 205,000 in this taxable brokerage account. Invest it into the index funds and ETFs. We talk about Voo, QQQ, DIA, VGT, you know, all these awesome blue chip index funds and ETFs that are going to grow at 8, 10, 12 over a long period of time and that's going to be a great tool for you guys to build wealth. If you do find yourself in a situation where you're creeping a little bit over into some credit card debt or you might feel squeezed a little bit, maybe take a portion of that 175 so you can bring down that mortgage payment accordingly. And again, I don't, I don't see that here considering the situation. So I agree. Let's toss it all in the markets and let it grow. So our next question comes from Nick on Instagram. Nick says, hey guys, I bought 10 shares of intel stock in August of 2024. I am up 280% on my purchase. Should I sell and realize the gains, I don't currently have another stock I'd want to put the money back into. How should I think about taking these profits? Robert, I think it's a good opportunity for you to maybe lay out for people your profit taking strategy. I'll do the same for mine and then maybe we can give Nick here some perspective on his, his big winning investment.
- [08:45]
B
I love it. Yes Nick, great job. Intel is doing great and it's going to continue to probably do well. But you need to take profits. So my rule of thumb Is this when I'm up 50% on a position like yours, your 10 shares of Intel, I take 25 off the top. When it gets up another 50%, I take another 25% and so on and so on in most instances. So I can take all of my money out and play on the house's money. Because that way I know I'm booking a win. The biggest mistake early investors make is they get greedy. They think they're a genius and they don't take profits along the way. So that's how I do it. And I think you should definitely do the same. Now you say you don't have another stock to put the money into. Guess what? Put it into VOO and qqq, one or the other or both, and you'll be set up and let that ride for life. Because those are good, solid long term investments that everyone should own. So that's my strategy, that's what I would do. And congrats on picking intel at the right time. But I would definitely take some profits.
- [09:50]
A
Yeah. I also think it's important for us to make sure people understand, Nick. Put $200 into intel and now it's worth 850 or so, right? Or like, you know, whatever bought it 20 bucks a share. Now it's at 85 a share. We're talking about less than a thousand dollars of like actual money here at play when it comes to taking profits and things like that. Nick, if you want to keep the stock and let your $850 ride, go for it. But I largely agree that when it comes to any time, you are up 280% on any investment, right? Taking profits is always a wonderful idea. The phrase goes something like, no one ever lost money taking profits, right? So when you take profits, you're up, you're, you're locking in those gains, making sure you're setting some money aside for some taxes, things of that nature. And yeah, to your point, Robert, not having a place to redeploy some of this capital, drop it in the s and P500. I mean, you're intel, maybe you really like semiconductors. Drop it into the SMH ETF, which is the VanEck Semiconductor ETF. Year to date, it's up 32%, which everyone should have semiconductors in their portfolios. Duh. It's AI. The whole thing here, Robert, is like for people to understand the only reason we invest into single stocks is because we have a deep conviction that that specific company is going to outperform the S&P 500 or the NASDAQ 100 over a specified period of because of some specific investment thesis that we have as investors. For me, you guys probably remember over the last maybe two months now, I made a whole thing going on about Amazon below 200 a share made absolutely no sense. And I hammered it. I put like $150,000 into Amazon stock at or around $200 a share. Now it's 250, 260. I took some profits a little bit like whatever. But like what I'm saying here is I had an investment thesis and I believed Amazon was going to continue to do well with the rise of automation, AI, robotics market, you know, their advertising business, aws. Like I understood that intimately and it has dramatically outperformed the underlying indices. And so our friend Nick here maybe intimately understood Intel's business and had a deep conviction in it. But the thing is, every dollar you invest into a single stock is a dollar you're not investing into an index fund. And so as you think about taking those profits, we want to one, take profits and two, reinvest it back into the index funds those dollars essentially would have gone to anyway because index fund over a long period of time go up into the right S&P 500 average, I think about 12% since the mid-1930s. Right. So it's like if we know over a long period of time we can get 12% on our money, of course we're going to want to put more money into that. And if the opportunity cost is to then put it into Amazon instead of voo, well, as I take profits from Amazon, I'm going to put it back into VO because that's where it was going to go anyway. And so I think people make the mistake and hopefully Nick's not going to make this mistake now of saying I made a bunch of money in intel, time to go flip it into another single stock that I think is going to go up and flip it into a another one. And then that's where day trading comes in. And then what's the stat? Robert? 85% of day traders lose money within the first year, 97% over the course of three years. Like day trading is not a long term profitable wealth building strategy. And so as we think about being opportunistic investors, it's okay to have a sliver of your portfolio in single stocks, but to do it from a place of understanding that that money should have been or could have been rather in an index fund that goes up into the right over a long period of time and always Keeping that as the North Star.
- [13:23]
B
Yeah, I love that call out. And it's really all about people get lucky sometimes and they pick out a stock or a couple stocks and they think I'm a genius and I'm better than everybody else. Then the next two or three stocks they pick are completely the opposite and generally go down because they chose wrong. So you just have to make sure that when you're making all this money, take some profits, put it somewhere a little safer, and keep building that way rather than trying to yolo every gain into another gain just like it. Because that's not how investing works.
- [13:53]
A
It is so hard to do that. And it's, it may be what sucks, too. Robert and I've, I've done this. I'm sure you have, too. It's like sometimes it works for a little bit. You know, he got his intel and maybe he's going to drop into something else and it's going to go up another 50, 80% or something because he got lucky. And it'll do it again maybe a little bit, but you're going to put it in something and it's going to go down by 46%, and then you're going to be. So then you're going to sell that and it's going to go into something else that goes down by 18. And, oh, my gosh. And then you end up lower and lower, and then you're like, if I just put this money in the S&P 500, it'd be worth more than if I tried to play this, this trading game. So, Nick, heed our advice as people who've tried to do that. And it's, it's very, very, very hard to do that successfully repeatedly over a long period of time. So our next question comes from Sandra on Instagram. Sandra says, hey, y', all love the podcast. You talk about having four or five ETFs in your 30s, but what four or five ETFs do you recommend for people that are a little bit older, people in their 50s, 60s, or maybe 70s, who are planning for wealth preservation rather than accumulation?
- [14:59]
B
ROBERT I would say for me, it's a little different, but not that much different. I would probably go with voo, qqq, vti, schd. And then I would either probably do VNQ to get some real estate, and then a pro tip in there. If you wanted to have a little bit of risk and a little bit of volatility, maybe, but some decent growth. Growth, I would pick between AIQ and smh, Austin. Alluded to the semiconductor sector a little bit ago. I think that's going to be a good long term play, but that's what I would do. So you get a little bit of dividend income, you get a little bit of growth, you get some real estate exposure, but you also cover all of the main indices. So you're pretty well blanketed throughout.
- [15:42]
A
Yeah. So when it comes to capital appreciation, your goal as an investor is to grow your wealth. And the again, easiest way to really do that consistently over a long period of time is to just own equity in American capitalism. Right. These S&P 500, the 500 largest companies in the United States that are consistently growing their profits year over year. Easy way to do that is just buying shares of voo. Shares of V will go up over time as the underlying earnings per share of The S&P 500 index also goes up over time, which just means profits go up and to the right value of your investment goes up into the right as well. That has been the strategy for decades now. When it comes to switching from capital appreciation to capital preservation, it's a little bit different. So for example, I'm 30, Robert's 60. I have 30 more years of appreciation until I get into my 60s where I'm like, wait a second, that capital appreciation came with a Trump tariff tantrum in April of 2025. It came with a Iran invasion in April of 20, again carry trade unwind in August of 2024, a pandemic in 2020, a bear market in 2022 where my portfolio went down by 15, 20, 25, 35%. And because I have a long time horizon, I'm willing to ride the wave down knowing that over time it will ride back up. But if you're in your 60s and you might not have such a long time horizon before you want to start selling your portfolio and tapping into this nest egg that you've built over the last 20, 30, 40 years, then you need to say, okay, what can I put my money into that will be much more stable that isn't going to have a 20, 30% drawdown if we experience, you know, turmoil in the Middle east or a global pandemic or, you know, whatever, Right? So like, how can I protect and preserve my money versus encourage my money to grow and accumulate over time? And so, so if you are something we talk about a lot, here is the Trinity study, which is the 6040 portfolio that, you know, was studied very deeply at Trinity University. Essentially it's the 4% rule which says, hey, if you've got 60% of your portfolio, your retirement portfolio in equities, which are U.S. stocks, international stocks, ETFs, things like that. But just think S&P 500, international, whatever. So equities, right? You own equity in businesses and then 40% of your portfolio is in in bonds. Think Treasuries and things that are much more stable in value. Historically speaking. 60, 40 portfolio, you can withdraw 4% per year and generally speaking, be able to continue to do that over the course of 25 or 30 years without running out of money. Much more stable approach. Right to capital preservation versus accumulation. Now, if you are like me and you've observed and you had Ron Santella on the show to talk about this a couple weeks ago, you observed and saw that in 2022 the bond market also had a bear market alongside of the stock market. Which means if you had 40% of your portfolio in bonds in 2022, your portfolio got smacked because bonds sold off almost as much as stocks did. Where's the durability there? What happened to the capital preservation of that 40% of the portfolio? All that to say, I think you should have a similar perspective 60, 40 portfolio when it comes to how you're capital preservation. But of the 40%, think more of T bills. So like Cshi H E D G maybe despite not being a T bill, but more of these like hedged products that are going to provide downside protection insurance right in your portfolio. Whereas a agg which is just the aggregate bond index, will not. And then the other, you know, 40, 50, 60% of your portfolio, depending on how risk on you want to be. B can be in things in like the S and P can be in things in like, you know, the, the total stock market or the Dow Jones and things like that. And yeah, if you want to diversify into REITs with real estate or precious metals or fine artwork or you know, things of that nature that allow you to be disconnected from the stock market. Because capital preservation is about uncorrelated asset classes, you can do that as well. VNQ is Vanguard's real estate index fund. Masterworks does fine art work Prec Metals. You can do stuff like GLD or SLV for gold and silver. But building a durable portfolio around capital preservation is not as intimidating as it might feel. And I hope that this sort of framework, as I think about over time doing that for myself, can help you.
- [20:36]
B
I think that was incredible. And I just want to add one more quick thing. Remember, with modern medicine and AI and new surgical practices, people are going to start living longer. You mentioned longevity. So just make sure everyone watching this episode understand, understands that if truly we are going to live longer, say all of this medicine and technology extends our lives by another 5, 10, 15 years. We have to prepare for that. So make sure you understand personal finances. Personal. And build the portfolio for your future according to your risk tolerance, not somebody else's.
- [21:10]
A
Well, I also think too, we should talk about the purpose of this capital preservation. We mentioned that 4% rule, but the reason we talk about the 4% rule is because when you stop having earned income, you stop going into work every day, you stop earning a paycheck from your employer. Sure, you'll have Social Security, but who knows? But that's going to be like in 20, 30, 40 years. But you'll have this investment portfolio that over time you'll be able to take money out of and live off of. Right? That's how you will be able to live. And that, that'll, that'll supply your livelihood. Four percent of $2 million is $80,000 a year. So that 80,000 comes down to a, about what, $7,000 a month or so. And so you can live off of 7,000amonth. Austin, that's so hard to do. How do I live off of 7,000? Well, when you don't have a mortgage payment and you don't have high interest debt and you don't have all these different things that are pulling you down, $7,000 can go a long way. I mean, that's, that's a lot of money, right? That's how to think about capital appreciation versus preservation and where it means for you, depending on your age. Because it all comes down to your age. So our next question comes from Rithika on Instagram. Instagram. Rathika says, I know you guys cover all the basic finance nuances, but I'd like you guys to expand a little bit further and talk about real estate syndications, like how to find deals and what to look out for, as well as small business ownership. I know Robert talks about having small businesses across the country. Would love to have him explain one, what businesses he owns, two, how he finds deals, and three, what to look out for when evaluating small businesses for myself, myself. Looking forward to you guys making podcasts about these advanced topics.
- [22:52]
B
Yeah, I think this is a great question and I'll do my best to keep it succinct, but give some value. What I look for, because I've been doing this for a long, long time, is where can I add the most value? And is It a business type that I understand or a partner or someone on my team understands. So like right now you mentioned real estate syndication Nation. I've been in real estate for over 30 years, so we're actually launching a reg, a real estate platform as we speak. It'll be live in the next week or so called Vest Funder. Awesome, awesome, awesome. Because what that does and why real estate syndication is so important for smaller investors is you can invest in bigger deals. You know, big developments, hotels, apartment complexes, shopping malls, whatever it is you want to invest in in alongside of people that have a track record of success in those deals. So that's one of the things the real estate syndication. I think it's great for newer real estate investors to piggyback with people that have done it already and have had a track record of success. As far as how we find deals, I'm going to tell you this. There's a lot of technology out there, but it's really just all about understanding your buy box. And for me, me driving for dollars. Here's a prime example. Right now we're working on and we're in due diligence of buying a hotel. That all started from one statement to my partner Ron. I said, hey, I want to own one of these beachfront hotels. We have to find a really good one that we can value, add, renovate and get up and running. And within two weeks, he found a tremendous property by Driving for Dollars. I know it sounds old school. School. I promise you it's the best way to find things because what you can do, whether you're buying a storage unit complex, a single family home, a rental, whatever it is, is you drive to the areas that you desire and you think are blowing up, where they're really starting to build or rebuild in that instance. And you go and you drive for dollars. And you'd be shocked at what you found. Most of the best real estate deals in small businesses I have purchased over the last 30 years all came from this. But then the other thing when it comes to real estate and small businesses is pocket deals. This happens a lot. As you do more and more deal flow, people are going to come to you first rather than listing it on Biz Buy, Sell or Zillow or somewhere else because they want to make the most money for their seller and themselves. And when they know you're a buyer of these assets, a lot of times you can get ahead of the masses by getting these pocket deals. In all pocket deal means, means for anyone that's never heard that term is you're getting it from someone out of their pocket that hasn't hit the Internet yet. And you might only have a 48 hour shot clock to be able to make a move on a deal like this, but it definitely is very helpful. So let me go to the next part of the question. Owning small businesses across the country, what do I look for? I look for value add. Is it in my wheelhouse and is it a good buy? And we live in an era right now. Now for anyone interested, where all of the baby boomers out there, because they don't have succession plans, are sitting on these businesses that might do 500,000, 5 million, $10 million a year, but they've never prepared to sell them. And again, driving for dollars, you might see a Craigslist ad, you might see a sign out front, go talk to them. I promise you this is one of the best ways to find deals. But also go to real estate meetups, go to small business meetups, go to your local government when they have meetings, sit in and see what's happening. All of these things are very old school, but they are tried and true and help you get ahead of the market. Because if something's been sitting on biz by sell for three months or a house is on Zillow for three months, guess what? Every smart buyer and every company has already passed on it. So it's going to be the sucker bet if you look to buy it then because generally if it was a good deal or the right deal, somebody else would have already gotten it. So. So that's what we do. That's how I do things and my company does things and that's how we've been doing it for 30 years.
- [27:00]
A
So I know you guys bought a pizza company, a pizza store in Florida I think was December of 2023. So you've had about two and a half years. I know you've got a bunch of other businesses across the country. Maybe take some time to, to walk through some of those.
- [27:16]
B
Yeah. So right now, Austin brought up the pizza store that's here in Florida. We bought it. The owners made a, a pretty terrible mistake in the early part of just discussing why it was for sale. And so we were able to get a really, really good deal on the property. It did very well the first year, year and a half. Then unfortunately we got wiped out by the hurricane. So it took quite some time for that area to rebuild and us rebuild the restaurant. Now it's setting sales records and it's doing very well again. But I also have like the sushi shop that I've had for years, we just recently sold it and we had two stores in Colorado. Very, very good brand, we did well with that. But then I also have the consumer products brands, those are operated out of Ohio. And then I have other small businesses where I own part of a warehousing or records and VHS tapes. And then I have all these other investments throughout the country in various types of small businesses. But I generally try to stay in my wheelhouse. So then I know can I bring value and can I increase all the things that are necessary, whether it's sales process, profit or efficiencies to be able to make sure that it is a good buy for me, my partners and sometimes investors when we bring those in.
- [28:31]
A
What type of small business right now do you think people should stop ignoring and take seriously? For example, I've seen discount tires or I think it's called Midas and like some of these other like tire discounter type places where if you, if you can run them efficiently, you're making a ton of money. Is that an example, like what's an example of a small business that you think is, is interesting right now should pay more attention to if they're interested in this type of like small, small, you know, 1, 2, 3 million dollars a year local businesses.
- [29:01]
B
I love this question. I think you need to stop listening to the fake gurus out there that tell you all the rich people are buying laundromats and they're buying these things because guess what? Laundromats are not passive. Yes, you can have a manager, yes you can have a partner and that would help, but they're not as passive. And where everything is going now, all the new apartment buildings and every, all the condos, condos, they all have in room or in building laundry services. But the things that are exciting for me right now is I would look at anything where you can fix a bigger problem and it takes dirty work and not necessarily always dirty work, but those types of businesses are easier to get up and running, less expensive to purchase, and they're not going to be upended by AI and robotics anytime soon. So you could think roofing, electrical, drywall, nobody wants to do drywall and it's so incredibly profitable. Junk removal, you could do demo work. There's just so many things you could do. Pressure washing. One of the most profitable businesses I ever owned, and I owned it for a long time, was commercial pressure washing for not only people, sometimes with their residences, but a lot of restaurants and businesses that have to keep things Clean. But these are dirty jobs and they're also labor intensive jobs. So many times they're more profitable. But you can control what happens because AI is not going to come over and start just automatically drywalling and taping and doing the finish or painting the insides of house. That will happen somewhat, but it's not going to take over anytime soon. So I look for those types of businesses that I can go in added modern processes and modern marketing to build the business up maybe from 800,000 to 2 million and really, really expand those profit margins.
- [30:49]
A
Could you imagine a humanoid robot just coming up to your house one day, ringing the doorbell, hey, you want me to pressure wash your driveway? That'd be too funny. A little Tesla bot walking around, that'd be great.
- [30:59]
B
There's going to be some of that where you know, there's going to be robots that are already happening that are going to be able to go up and down a ladder and bring the roofing materials up to the roof, some of that. But that's just all about efficiencies. It doesn't mean it. That's going to wipe out that trade. And that's why for years and years we told everyone that was younger, learn how to program. Now everyone's backtracking and saying, don't learn how to program. Learn how to do things in electrical and all the trades. Because that's where the new millionaires are going to come from. Unless you design a product or a service around AI.
- [31:34]
A
Here's my business. I've gotten absolutely no data around this. This is just a weird hunch. If I was getting into small business ownership, I would own sprinkler installation and repair businesses. Because I'm building a house right now and I look at all of the houses that are inside this neighborhood that I'm, you know, building in as well, and they all have sprinkler systems. And guess what happens? Sprinkler systems go broke and you gotta, gotta repair them. So I, I think sprinkler installation and dude, you're not gonna have a Tesla robot on its hands and knees trying to dig a hole to put a sprinkler in. It just doesn't make sense. Sense. So I think that one's pretty interesting. Now before we jump to our next question, got to give a shout out to public.com, the platform for those that take investing as seriously as we do here on the Rich Habits podcast. Investing is something all of you need to take seriously. So I don't care if you're using a schwab a Robin Hood, a Fidelity, any of that stuff, please consider not just for the 1% bonus, but for the actual products that are offered to these investors on public we got AI agents now. Just had a great conversation with Yannick Malling. We've got generated assets, an easy way for anyone to take an idea, turn it into their own ETF completely for free. This is all free stuff that is offered to public users. And now direct indexing. You can directly index the S and P, the Nasdaq, things of that nature on public.com all completely for free. You know they do that. It's you don't have to pay some sort of membership fee. You don't have to have a quarter million dollars like you do on Vanguard. It's like it's so simple, it's so great. I don't know why everyone doesn't use this platform. So if you're not yet on public, go to public.com rich habits move that portfolio over. You're going to thank yourself later. So our next question comes from Sophia on Instagram. Sophia says hi Austin and Robert. I've been listening to the Rich Habits podcast for two years now and I love the show. I especially love your Q and A episodes because hearing how you walk through real life situations has helped me out a lot. I'm going into my senior year at the University of Pittsburgh and I'm starting to map out the next steps with grad school while also trying to build a strong financial foundation. My long term goal is to own multiple rental properties and I think house hacking would be the best way for me to get started in doing that. Just to give you some context of where I am financially, I have $69,000 in a 529 plan for grad school, so I should be able to graduate with little to no debt. I've also started Investing. I've got 7,300 in the S&P, 525,000 in a high yield savings account earning about 3 1/2 percent, a 780 credit score and $2,500 in my checking. Where I'm stuck is figuring out the smartest next move from here. Should I prioritize house hacking right after graduation? Should I focus more on investing and building my base before I buy? If house hacking is the move, how would you approach choosing a good market and first property without overcomplicating it or needing a mentor right away? Realistically, is this something you can learn on your own? Or if you is it worth finding someone experienced to guide you through your first deal. Robert, I feel like this is another great question for you.
- [34:37]
B
Yeah, I love the situation and congrats because you have put yourself in just a really, really great spot. Sophia. So let me break it down of what I would do at your age and where you're at. I would build the base a little bit further because right now you've got that $7,300 in the S&P 525,000 in the high yield savings account. I would make sure to get the Roth IRA so set up right away. If you don't have that, you didn't mention it. And I would get some money moving into the Roth because we want to see everyone that's younger and through middle ages to get that Roth maxed out every single year. So what would I do about the real estate? I would get your base built. I know you're in a hurry to get into the real estate game. You want to own multiple properties and I do love that you're on to the house hacking game. But if you're going to rush yourself and you're not going to get that $100,000 base, I would ask you get a $50,000 base set up and ready and then you look at the Fannie Mae 5% down mortgage. Because if you're not going to wait till you get the 100,000, that's the loan I would use. Because then you can house hack. You can get 2, 3, 4 units, up to 4 units and up to $1.3 million. Please don't buy that much. Buy something that works for you. So when you have that tenant in the there, it keeps your cost of living really low. Remember, anyone out there that's thinking about house hacking, don't buy what they'll let you borrow. Buy what works within your budget. So you're not housebroke. But I love this for you in thinking about house hacking first. So many people rush into buying their first property and they want it to be their magical home so they can set everything up. Guess what? Do it with house hacking. And then when you move into the next property and it's your primary home, then those two tenants will likely pay for most of the primary home that could be your starter dream home. Because too many people want to jump the gun and get too early in real estate. Get the base built whether it's 50 or 100,000. Do the 5% Fannie Mae down loan to do the house hacking and you will be dialed in so well.
- [36:39]
A
Great advice, Robert. Some advice I could give to Sophia is. I remember when I bought my first house, and I'm sure Robert does to it feels so much more intimidating and daunting than what it really is. If you simply understand that I have to come up with X amount of dollars every single month to pay my mortgage, which includes property taxes, insurance, stuff like that, escrow. And I also need to be setting aside X amount of dollars every month from my tenant for vacancy and repairs. If you just understand that and the math checks out in your situation, that's it. That's it. And if you find a great tenant, maybe it's someone that you went to grad school with, maybe it's someone of your friend, brother who just moved to Pittsburgh. Like, I don't know. But like, finding a good tenant is half the battle. That's honestly 80 of the battle, in my humble opinion. Because if you have a good tenant that's going to pay you on time, that's not going to cause a ruckus, it's going to be respectful of your property, all that stuff. And be picky. Like, you don't have to just take the first person that applies. Like, be picky. It's your property. You can figure out who is going to live in your property. I mean, you're. It's essentially the same home as you're living in, right? It's a duplex, quadplex, whatever. Right. So, like be as picky as you want. But once you figure out that I think that is half the battle, if not more important, and then what to consider too is you mentioned the mentorship. I think the only value a mentor can help you figure out here is if the numbers work and what does it look like from a lease agreement perspective. Perspective, which in my opinion, Claude, Chat, GPT, Gemini can do both of those things. So if I were in your shoes, I would share all of your dreams when it comes to house hacking, your aspirations, all the stuff as it relates to that with Chat, GPT, Gemini or Claude, hey, here's my situation. Here's what I think I can afford. Here's how much I need to be able to pay every month. Here's what I'm going to be able to make. Like, be as very specific and transparent as you can. And then just like you'd share it with a mentor. And then I think Claude is going to come in and say, hey, I think you can afford up to this much. Here's what you can expect in property taxes, here's what you can expect in rent, here's what you might be on the hook for. Here's what you should set aside for vacancies and repairs. Here's exactly the type of lease agreement that you need to get signed and the specific things to call out because of the area you might live in or whatever. Right. Like mentorship. Sure. But like, if you can lean on AI a little bit here, I don't think you'll need a mentor. But really, Robert, a follow up to this is what part of the country right now, in your opinion is a good place to consider house hacking? Is it in Florida? Is it parts of Indiana? Is it parts of Ohio? Like it's not here in Nashville because it's very expensive. Right. So like where should she think about house hacking? Where the numbers begin to make much more sense?
- [39:19]
B
Yeah, that is a great question. It's the number one thing everyone needs to understand is find these tertiary markets, markets that are up and coming, that are gentrifying but you're not late to the party. So when you talk about Florida, there's a lot of great markets in Florida that are these offshoot markets outside of these big capital markets. But also, yes, Ohio. Last fall, Toledo, Ohio, where I'm from, was voted as the number one best investment town in real estate in the country by the Wall Street Journal Journal. I was shocked. Everyone was like, why didn't you share this with us? Even though I've been sharing in the rich habits network for many years now that you have to find these tertiary markets. Gary, Indiana is great. Some parts of the suburbs of Detroit, these markets are all over the country. You just have to get outside of the really expensive markets like Nashville and like, you know, Miami or San Francisco because the those markets are very hard to find real profits and growth in those markets because they're so oversaturated. So just look outside of the big markets, find these cool up and cominging neighborhoods and markets and start there.
- [40:33]
A
Our last question comes from Vincent on Instagram. Vincent says Austin. Robert, I want to get your advice on my current financial allocation and the next steps I'm considering at the moment. I've got 900,000 in retirement accounts, 7,000 in taxable brokerage accounts, and 16,000 thousand in an emergency fund that I'm still contributing a thousand dollars a month to, which at the moment only covers two months of expenses. Given this setup, would you recommend that we shift more focus toward building our brokerage slash bridge account or continue prioritizing retirement account contributions? I'll kick this one off. I think that having 900,000 in retirement accounts, I don't know Vincent's age, but I'm assuming he's probably in his maybe 40s or 50s. Having nearly a million million in these retirement accounts, I think now's a great time to rock and roll. Over to that bridge account. You've got 900,000 which will double every seven years. That's 1.8 million in seven years from now, 3.6 million in 14 years from now. Right. And that's assuming you don't contribute anything. So at the end of the day, I think having a healthy retirement account is very important. You certainly have that, Vincent and I also believe that if you want to retire early and you want to really, really have that flexibility. Austin, Robert, you guys talk about why bridge accounts are so important. Did you know you can also, you know, have these other ways to get money out of your retirement accounts? Why do you guys ever talk about that? We have talked about it and they're very rigid. You have no control over it. The IRS tells you how much you can take out of it. It's not a good strategy. Right. We want people to have flexibility. We want people to be able to choose how much they need on a monthly basis or an annualized basis and how much to take out of their bridge accounts because they built it up and spent years doing that. So Vincent, I would continue to fully fund that emergency fund and then I would start contributing to a taxable brokerage account. I'd grow it up until, you know, a couple hundred thousand if that's what you're rocking and rolling with here. Maybe less. I don't know how much you're going to need. Flip it over to some income producing neos funds and be good to go.
- [42:33]
B
I love that take. And anyone listening that hasn't tried the Rich Habits Network 7 day free trial because I feel like right now with Vincent and Sophia and some of these other people, you're asking all the right questions. But inside of our network you can get all of that information, not just from Austin and I, but our entire team and all of the other really smart people in there. So make sure you check that out. There is a link in the show notes below.
- [42:58]
A
Everyone, thanks so much for joining us on this week's episode of the Rich Habits podcast, Question and Answer edition. We are having so much fun with these episodes. Don't forget, Robert just called it out. The Rich Habits Network. We're having so much fun over there as well. Well, we've got the weekly live streams, we've got questions, we got answers. We've got seven hours of video coursework. So much going on, over 900 people are over there with us every week, hanging out, getting their questions answered, and we're having a blast. Be sure to go check out the Rich Habits Network using the link in the show notes below, and we'll see you tomorrow for our episode of the Rich Habits Radar. Sa.