Afford Anything - Ask Paula: I’m 33 and Want to Retire at 45 – What Should I Do?

Episode Date: March 29, 2022

#372: Eve has been investing in her brokerage account and the tax liabilities are starting to add up. She wants to retire in 12 years and is wondering if she should invest in after-tax contributions and plan on a Roth conversion. Anonymous has rental properties and wants to start building his kids credit histories. Is it a good idea to add them as co-borrowers on the mortgage? Lily is really excited about investing in real estate, but househacking wasn’t the right fit. She’s looking for advice on investing in opportunity zones through crowdfunding platforms. In today's episode, former financial planner Joe Saul-Sehy and I tackle these tough situations. Enjoy! Do you have a question on business, money, trade-offs, financial independence strategies, travel, or investing? Leave it at https://affordanything.com/voicemail and we’ll answer them in a future episode. Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything, but not everything. Every choice that you make carries a trade-off, and that doesn't just apply to your money. That applies to your time, your energy, your focus, your attention, to any limited resource that you need to manage. And that opens up two questions. First, what matters most? What do you prioritize above all other options? And second, how do you align your decision-making to reflect that? How do you bridge the behavior gap?

Answering these two questions is a lifetime practice, and that's what this podcast is here to explore. My name is Paula Pant. I am the host of the Afford Anything podcast. Every other episode, we answer questions that come from you, the community. And my buddy, Joe Sal Sihae, is joining me today from a hotel room while he's on book tour to answer these questions. What's up, Joe? That's how committed I am, Paula, to the Afford Anything community. Yeah, you and I are both a little sleep deprived right now.

you in particular are living out of a suitcase, don't know what state you're in other than the state of confusion. Yeah. And before we hit record, just so everybody knows, as we record this, it's still early in the tour. And I've only been on the road. And in the morning. Yeah. I've only, I've been on a road a few days. And my suitcases have already gone from neatly arranged to I can't find anything. And I need to before I head for the airport for the next group of fun people to hang out with. I need to redo everything, like reboot, reset. But we're going to help some people reset today. How about that? Wow, look at that segue. Genius. Damn.

It's like you've done this before. I heard it's better when you pointed out, too. So these are the three questions that we're going to tackle today. Eve has been investing in her brokerage account and the tax liabilities are starting to add up. She wants to retire in 12 years and she's got questions about planning on a Roth conversion. Meanwhile, Anonymous has rental properties and wants to start building his kid's credit scores and kids' credit histories. Should the kids become co-borrowers on the mortgage? And finally, Lily is excited about investing in real estate, but house hacking isn't the

right fit. She's looking for advice on crowdfunding platforms. We're going to tackle all of these right now, starting with Eve. Hi, Paula. I'd appreciate your nuance depending on after-tax 401 contributions. My employer just started allowing after-tax contributions on our 401K with in-plan Roth conversions. My plan is through fidelity, it's low-cost, and I have index funds available to me. Currently, I max my 401k, planning for about $15,000 of traditional contributions, 4.5,000 of Roth contributions, and then I also max my Roth IRA. I make about $60,000 and my expenses are about $20,000.

Right now, I invest the difference in my brokerage. I have a fully funded one-year emergency fund, and my brokerage has about $170,000 in it right now. I filed jointly with my spouse who makes about $60,000 right now, but he doesn't have access to a retirement fund through work. He fully funds a Roth IRA and puts the rest in his brokerage. Our total taxable income is now about $100,000 a year. I've been doing small capital gains harvesting transactions to help reduce the tax liability in my brokerage, between our accounts, the dividends are starting to add up, and I know the capital gains will too. I struggle with pulling the trigger on buying in my brokerage, and automatic investments is painless to me,

but I do like the ease of pulling out brokerage money in early retirement. I'm 33 and hope to retire by the time I'm 45. Should I invest in after-tax contributions and do the in-plan Roth conversion or stick with my brokerage? Thanks. Eve, thank you so much for asking that question. Congratulations. You said you're 33. you're hoping to retire in 12 years by the time you're 45, you're doing a great job, you're saving a ton,

you're investing a ton, without crunching the numbers, it seems directionally like you're on track. And that leads to the very first comment that I have when I hear about your age, your timeline, and your goals, which is, I want to know how much money you will need to retire 12 years from now when you're 45. And specifically, I want to know how that divides into two buckets. It's the money that you'll need to get you from age 45 to age 59 and a half versus the money that you'll need to get you from age 59 and a half through the remainder of your life. So I want you to spend some time with a spreadsheet, with some online calculators, crunching those numbers based on assumptions about your lifestyle, and figure out what your goal number is for each of those two buckets of your retirement. I totally agree because a recurring theme that you and I have, Paula, is.

that we need to solve for flexibility here, right? If you're going to retire that much before you can take money out of a lot of these retirement plans, you don't want to end up being short. And then having to use some of the other plans out there that are more restrictive. You can take money out of a qualified plan pre-59.5. But sometimes, depending on your circumstances, there's some fairly complicated IRS rules to get at that money. And so you can, you just don't want to.

I would solve for flexibility first, which brings me when he first asked the question, I thought, well, she has a Roth 401k option already available. Why wouldn't she just be stuffing money in there? Like, why the aftertax part? And then I realized something that Eve has probably already considered, which is the fact that you can only put up to X amount depending on your plan, but a maximum of $26,000, depending on how much you earn. With the aftertax, you can put up to $64,500 this year.

And that number changes, by the way, if you're listening to this later on. So I would still do the Google search, depending on when you listen to this, and what those numbers really are. But the point is this, there's a much bigger number for the aftertax 401K that you could then transfer using the backdoor method into a Roth IRA later. You could actually do a much, much bigger number. So there is that. Here's the thing about the after tax.

If you don't do the Roth, because a lot of 401Ks have an after tax option where you can save, where it's not pre-tax and it's not a Roth, it's just after-tax tax-deferred. If you don't change it over to the Roth that year, do not do the after-tax contribution. after tax contributions are a nightmare for your taxes later on. And it's a nightmare for one reason, Paula. A lot of people when they retire, they take their money and they roll it over to an IRA for a lot of reasons. But one of the main ones are flexibility, more options available, sometimes a lot lower cost options available, right?

So it could be more choice. It could be a lot of things. But IRAs give you much more flexibility. What people do is they move their. that money into one pot and part of it was after tax tax deferred and part of it was pre-tax part was Roth and now you have this now you have to think about how much interest did my after-tax money make because that's going to be tax different than the interest that your Roth made or the interest that your pre-text and they're all boiling together in the same stew.

It's it is hell if you don't get it. So don't do it. Just don't do it. I've been a part of that back when I was a financial planner and it was a flipping nightmare. So if you are going to use the after tax, make sure you do the Roth option. But I think, so if we talk about order of operations, order of operation number one is do what Paula said, which is find out how much money that you want. Paula's like, that should be first every time. I love hearing that, Joe. Just do what I say. There it is. Worth the early morning wake up just for that one. There's nothing else. But that's number one, is to solve for flexibility. How much money do I need to make sure I make it to the time that I can get at these monies that are in tax shelters without having to go through all kind of gyrations to get them?

And then the second thing is once I know that, then feel free if you need more money to use that after tax option, but only use it if you make sure. And Eve sounds like she's great at this, right? I mean, she already makes 60 and she's saving 40 of the 60, right? if I have that number right, like that's fantastic. So she already has a very good budget. She already knows how to put money away and how to save it. She's already doing tax lost harvesting on her brokerage account. So she knows how to optimize these things.

So this is less for even more for everybody else out there. If you do the after tax IRA set like 15 calendar, calendar notices that you got to make sure you flip that money out into the Roth. We should take a moment to acknowledge. Actually, I didn't say this up front, but you're right, Joe. Eve makes 60. Her expenses are around 20, her personal expenses are around 20, and she saves the other 40. That is a heck of a savings rate. There are so many questions I want to ask her about optimization, because she clearly has this down. Right. Exactly. Exactly. And she mentioned she and her spouse combined make about 100. I mean, wow, like that combined something. savings rate that they have also is just absolutely spectacular. I have no doubt in my mind that if they are able to sustain this level of savings, they're going to hit that early retirement goal. No problem. Yeah. Agreed. Well, yes. It depends on how much they want to live on. Like if she's going to go from 20 to 220 a year, which I don't think would happen. But if she was, depending on lifestyle,

Yeah, I mean, if her lifestyle stays anywhere close to what it probably is today or at least her expenses, man. Yeah. And assuming no black swan events, right? Assuming no black swan like medical events or big macro events outside of our control. You know, assuming that nothing crazy or catastrophic happens at the rate that they're going to the best of our ability to make reasonable plans for the future. Wow. What a great track. Absolutely.

So thank you, Eif, for asking that question. congratulations on everything that you're building. We'll come back to this episode after this word from our sponsors. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for businesses of any size. But they also have the FinTech hustle that got them named one of America's most innovative companies by Fortune Magazine. That's what being a fifth-third better is all about. It's about

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talk about moving back to India. He's been in the United States and he's from India and he's done a wonderful job, it sounds like, of savings. And as you'll hear, doing some early education with his kids and kind of really setting up a nice foundation, Paula. So when I think of India, I think of, I've never been to India, but my wife was in Mumbai and did part of her training in Mumbai. My son was in Hyderabad with Broadcom on an internship when he was at the University of Texas. And it's a place I really want to go. My favorite thoughts about India come from the movie Slumdog Millionaire, right? The Danny Boyle movie.

If you've never seen the movie Slumdog Millionaire, talk about a movie about hope and about just this idea of putting your life together. It's so great. There's some phenomenal moments, some horrible moments, like any good movie has. But that's a long way of saying, Paula, that Dev Patel is the lead actor in that movie. And he, of course, always gives fantastic performances. So I think about what he's about to tell us. And I think we should call him Dev. Nice.

Excellent. I would pronounce it, Dave. Of course you would. I'm an American from the Midwest. Dave. It actually should be, now that I'm in Texas, it should be Dave. All right. So our, and for the listeners who are tuning in for the first time, I'm Nepali.

So we share a lot of the same names. In fact, actually, my grandfather's middle name is Dave. Govinda Dave. Ah, Dave. Like Dave. Yes. So our next question comes from Dave. Hi, Paula and Joe.

Thanks for taking my question. I am a very faithful listener of offered everything. I really enjoy listening to it and Offord Anything is the only podcast that I listen to right after it's released and I never miss it. So you both have the right blend of humor and info. So I look forward to it every other week

and Paula, you bring in great knowledgeable guests and your background in journalism is clearly evident in the way you ask your questions. First of all, a happy 11th birthday to afford anything and the entire team and I wish for several decades of success in future. First of all, a little background. My wife and I are here on H-1B visa and planning to quit our job and move back to India.

Our original plan was to reach FI by May 22 when I'll turn 40. We reached our FI numbers in 2020 itself, but due to pandemic and lockdowns and school closures, we delayed it for a couple of years and we are still on target to quit her jobs and move back to India by our original plan. We have at least five years of expenses saved in cash in savings and CDs in India. But other than that, all our assets are in the U.S. And we don't want to liquidate them and take them to India right away. We have rental properties in LLC, 401k, Roth IRA and taxable brokerage accounts. We have umbrella insurance for the rental properties and term life insurance.

We have two kids, four years and seven years old. Both are U.S. citizens. Here are my questions. do we need a will or a trust? My kids might want to come back to US later, either for college education or job or otherwise. Is there a way to give our kids a head start in building their credit history while we are still in India?

I understand the drawbacks of adding minor children to the deeds of the properties, but will it be okay to add them as co-borrowers in the mortgage without adding them to the deed? If at all possible, at what age can we add children as co-borrowers? do I need to do that while I'm still in the U.S. or can I do it after moving back to India? Anything else that we need to take care of before we leave the country? Because there's no guarantee that we might get a visa and get back here physically.

Thanks again for taking my questions. And Joe, I already registered for the book event and I'm looking forward to meeting you there. Thanks a lot. Bye. Dave, first of all, thank you so much for the kindness and sincerity of your your question. Wow. Like, wow. I'm flattered. I'm honored. I want to wake up early every morning and put in the work to be the type of podcaster who deserves the type of praise that you've just given. So thank you so much. But let's talk about all of the things that you're doing, right? You've got five years of expenses saved in cash in India in the form of savings accounts and CDs. So you know

that when you get back to India, you've got a long runway to live on and to stabilize yourself. and your family for five years while you make that transition. That's incredible. I love that you're keeping other assets in the U.S. that's going to give you a lot of options. And particularly if your kids, the oldest of whom is seven, might want to come back to the U.S., presumably in as little as 11 years, possibly, when that child turns 18, I think there's a lot to be said for having assets kept in the U.S. In terms of helping your kids build a credit score, I would not add them as co-borrowers on the mortgage for a couple of reasons.

The most obvious being the complexity of going to a bank, going to your original lender and trying to facilitate that move. There are many lenders that might flat out say no to that or who might force you to refinance that loan, there are a lot of headaches and troubles that can come from trying to add them as co-borrowers on the mortgage. So let's take a step back. Because oftentimes, it's tempting to presuppose the answer to the problem. And rather than do that, rather than presuppose the answer, let's look at the original intent. The intention is, how do I help my children build a credit score given that I will not be in the United States.

Can I even pull a derail that for just a second? Sure. Because I think we also have to talk about efficacy, which is one of my favorite concepts, which is if I'm going to take the time and mental space that it takes to create an action, what's it worth? Is it really worth the time? And I think with kids as young as his kids are, the efficacy of that move today, a developing credit that early is incredibly low.

So I love his noble intention of making sure that his kids are going to have choices later on. I personally think that even if he were staying in the United States, he could start that as late as 15 or 16. I mean, he could start it later, but if he's really looking for optimization, if his kids were 15, I think we could have a long conversation. I think doing it pre 15 is maybe marginally good and people can write me about, you know, seven years of credit and all this stuff, but I just don't, I just don't think so. Plus, I didn't mind the fact, you know, my kids are 26. I think it was good for them to have good credit that we helped them build. However, they had low amounts of money they could mess up with from creditors. Like they, I think my daughter had $250 through Discover and my son's visa was $400. Right. But imagine his kids,

So he and his wife are going to be in India. Dave and his wife are going to be in India. If his kids want to come to the United States and rent an apartment, for example, at the age of 18, it would be helpful for them to have a credit history at that point, particularly if that apartment complex isn't going to allow for an overseas co-signer, which they may or may not. That's a great point that I hadn't thought of. And I have, I just have no idea how to. So here's what I would do. So again, so we look at the original intent, which is he wants to help his kids build a credit history. And he wants to do so, I think he wants to take action now because of the fact that he

knows that he and his wife are leaving. Yeah. And so he wants to do whatever he can while he's still here. My suggestion would be twofold. Number one, that he open a couple of credit cards that he lists his kids on. So they are co-named on that credit card. He keep it active by putting some very small amount, a Netflix subscription, for example, some very small. small monthly recurring amount on that credit card that he pays automatically in full every month. That way the credit card is active. It's pinging both of their credit histories and it's helping his kids build a good credit score. I think that will solve the problem slash answer the question of how can I help my kids build a good credit history. It'll achieve that goal without the

complexity of adding them to the mortgage. And so long as he maintains that open credit card, But he himself and his wife, if his wife does the same, will also maintain their credit histories in the U.S. Once they go back to India, there's no reason for them to close out those credit cards. If they're not using the card on a regular basis, if they're just keeping a monthly Netflix subscription on it, there's no reason for them to close that card down. And they themselves can also maintain their own credit histories so that if they ever do need to be a co-signer, again, we'll go back to the example of helping the kids lease an apartment at the age of 18. If they ever do need to be a co-signer, they themselves will have maintained their U.S. credit histories.

Yeah, and the cool thing is, and by the way, credit for young kids is not my forte, but something that I recently learned, I didn't realize that you can add babies as an authorized user. You have to be 18 years old. These are the rules. You have to be 18 years old to be able to get your own credit card, and then it's going to have many restrictions. on it, but to be an authorized user doesn't have a minimum age. So you can be a newborn and be an authorized user. And so, Dave, for the purpose of helping your kids build a credit score, that's the route that I would take.

It's going to be a lot simpler. And it's going to allow you and your wife, assuming both of you do it, to maintain your own credit histories while simultaneously building out those credit histories for your kids. Obviously, just make sure that you pay the card in full every month. that's the key component of it. Another area that I'm not an expert in is estate planning in other countries. But I do know that while you're here, you definitely should have a will or a trust because Paul, the bad things don't happen at the end of the story like we think.

They happen in the middle of the story. And so it's always good for anybody to get that done right now. Now, especially for Dave, because he's only going to be here a short time. I often don't like, I respect what they do, and I like their mission to get people to have a will. But what I really think is that you're often pre, your family's going to need help possibly when you pass away, which is why I like having an attorney do it. And I really, I like the online options where you can get it done for free. I think they're noble. They do a great job.

But I will often prefer, if you're staying. here in the U.S. to have an attorney to do it. You're going to pay more today, but you're going to give your family a lot more peace of mind because they're going to have this person that sat down with you, helped you create the will. They know you. They knew what your intentions were when you were doing it. It makes it far easier. That said, there are a couple of fintech companies that do a great job of doing free wills. And I would, for the short term, knowing that you're going to be here for the short term, I would definitely use one of those fintech options. It'll save you a lot of money. It'll cover getting that handled and done while you're here. When you get

to India, then, I would have it redone based on local laws. I agree. I think that having a will or a trust is incredibly, and this isn't just for you. This is for everyone listening, particularly if you have children or dependents or any substantial amount of assets that you want. And want to have any level of directionality over, having an estate plan is incredibly important. Now, the thing I don't know is how, as you said, Joe, I don't know how moving outside of the U.S. impacts that, if or how. That would be a question for an estate planning expert. We talk often, Paula, though, about how we think about these questions. Let me tell you the thought process I had when you may need to get it done. Even moving state to state, you generally

have to have it done. So my, my conclusion, which I think is a pretty logical conclusion, if when you move from state A to state B, you should check with local laws because estate laws are handled on a state by state cases. I would imagine cases basis. Yeah, case by state. I like that case basis. I'm just, I'm just making up my own words. Talk about efficiency. I solve, I solve that sentence to be more efficient. Awesome. Cases. Yes. So I think. I think, think on the basis of that logic, I would think that moving internationally means that the rules are going to be different and there may be a chance that your estate plan might not be optimally created. That said, given that he knows that he's about to move to India or that he will

be doing so fairly soon, there's no reason, as I see it, Joe, there's no reason for him to use a fintech app as a stopgap measure. If he is sure that he's moving to India, why not set up an estate plan from the perspective of him living in India, why not start setting that up right away by working with an estate planning expert who has specialty in working with foreign residents with assets in the U.S. Boy, that could be, I mean, that could be great, great too. I wonder, I think some of that's going to be based on if he already knows exactly where in India he's going.

and if like in the United States, it varies from state to state. Right. So if he knows he's going to India, but he's not sure of the region, that might be an issue. Right. Which state in India, yeah. Yeah, which is why in this case, and I do, I do like them. And I think that they do a nice job, these fintech apps that will do your will for free. I don't recommend them for the reason I said earlier, only for that one reason, because I really like, I've seen families after people die and they're lost.

And even if you have the free will, you still, you're taking it to an attorney. And if you already know the attorney and you know that somebody who created it did all this legwork ahead of time to choose that person, it makes it so much easier later on. It saves you so much, even though it's going to be costly up front. So I like where you're going, but I think that depends on if he knows what region he's in and then he can dive in. To the last part of his question, what else should he be taking care of before he leaves? I think if he's going to leave money in the United States, brokerages now have know-your-customer rules. So when people move overseas, you will have, or just to different countries, frankly, a lot of times if you're working with specific people, those relationships go away. Companies in the United States, companies in a lot of countries are worried about money laundering, right?

And they have very strict money laundering rules. And even though that's clearly not going to be the case here, getting around those rules to keep money in the United States. States when you move to India, which by the way, I think is a great idea having money in two different countries that you're familiar with. I don't like it as much if you're not like, I wouldn't have money in India. I know nothing about how things work in India. But if he's been here and he has money in two countries, I super like that. And that's a message for the broader audience.

If there's somebody who's listening to this who is thinking, oh, should I diversify by putting some money in Croatia? But they have absolutely no ties to it. the answer is no. But given they have a situation where he has strong ties in both India and the U.S., absolutely. And, you know, my family's the same way. We've got, we've got Nepalese rupees sitting in a Nepalese bank, and of course we've got American dollars. Yeah. What I would do then is I would make sure that he has set up. In many cases, you have to find a United States address that you're going to keep on the account. Then you'll have to be able to figure out

how to monitor the account. Of course, you can do that on the internet now, right? So you can monitor it that way. But if there's statements or paper stuff that needs to come to you, how is that going to come to you? So you need to get all that worked out. How am I going to be able to monitor this money in the United States from afar? So I would ask your brokerage people in any place where you have money, what are there no your customer rules, anybody that you feel comfortable telling them that you're leaving or when you feel comfortable that you're telling them that you're leaving so that you have time to make sure that you have a system of monitoring these accounts from India when you move. So thank you, Dave, for asking that question and for being such a long time fan, supporter, member of the community of Afford Anything and of stacking Benjamin's.

I'm excited for you and Joe to meet on Joe's book tour. I can't wait. And make sure if you've heard this, just tell me that you're the star from Slumdog Millionaire. And I'll know exactly from one of my favorite movies. Just tell me that. And we're off. And for anybody else that wants to join us, stacking benjamins.com slash stacked has all the cities. We have all the cities listed. There's hyperlinks if we know where we're going to be in that town. We do have the dates.

The dates are in stone. But in some of the later cities, we don't yet have partners where we're going to be. So just keep checking it. And you'll see every day we have more dates becoming active. And Joe, I'm going to be joining you in five cities. I'll be joining. I'm going to make it official by just announcing it now. I'll be joining you in Boston, New York, Baltimore, Philadelphia, and D.C. Well, what we're calling the Amtrak Tour. The Amtrak Tour. The Amtrak tour. Most of those are locked in as we record.

This will be at the Meb for Public Library in Boston. New York City, we are finalizing as we record this today. So by the time you hear it, that will be active. You can check that at stackybenjamins.com slash stack. But then in Washington, D.C., we're at Hooray for Books in Alexandria. In Philadelphia, we're at Hilltop. books, which is a line with the Chestnut Hill Library. So it's in that part of Philly. And in Baltimore, we are paired up with the Baltimore County Library System, and we're in one of their libraries.

So, but anyway, check for times and everything at stacking benjamins.com slash stacked. We'll return to the show in just a moment. Workday knows there are two kinds of people in business, backward thinkers and forward thinkers. And when you're a forward thinker, you need an AI platform that thinks like you do. Built to evolve with your organization, Workday reimagines how you manage your people, money, and agents for long-term success. Bringing all your most valuable resources onto one powerful platform so you can add value even faster. Workday, moving business forever forward. This final question today comes from Lily. Hi, Paula. I hope you're doing well. I took the your first rental property course and I really liked it. I've been house hacking.

a duplex for a couple of years now. And for a variety of reasons, I'm deciding to let duplex go, mostly for just mental health and peace of mind. So I actually have a two-part question. My first is, have you ever changed your investing strategy and how did you work through that change? Honestly, I'm feeling a little bit like a failure that I couldn't make this work, but I'm trying to see this as an opportunity to reset. My second question is I'm still excited about investing in real estate, and I'd like to defer the capital gains from the sale of the duplex into an opportunity zone probably via crowdfunding. So I'm just wondering what questions you would ask yourself before investing in an opportunity zone and also what you would consider before a crowdfunding investment.

If you need, I guess, financial background for me, I'm 32. I don't have any dependence at this point. I make about $145,000. I have $150,000 in my investment accounts, my retirement accounts. And yeah, I'm just looking forward to growing my real estate portfolio. So I appreciate anything you'd have for me to consider. Thanks. Lily, thank you so much for calling in. I'm so happy that you are a student in your first rental property, that you've learned from it, that you are excited about investing in real estate, and that you are figuring out how to make it work for you.

So to your first question, which is, have I ever changed strategies, a million times, a million times. This is a lifelong journey. This is a lifelong process. You've learned how to house hack. You've learned how to buy a duplex. You've learned what you like and dislike about it. And you've learned how to iterate, tweak, modify so that you can stay in real estate but do so in a way that's a good fit for you. That is success.

Success is not doggedly clinging to the first tactic or strategy. or niche that you stumble upon, success is starting, starting somewhere, which you've done, and you did two years ago when you enrolled in your first rental property and then you house hacked into your first duplex. Success is starting, learning, and iterating. When I look at my own career and business, I was a print newspaper reporter who then became a freelance writer, who then became the owner of a content management and marketing agency, who then killed that business so that I could go full-time into Afford Anything. Back when Afford Anything was primarily a website with a newsletter, who then transitioned into podcasting. So

iteration after iteration after iteration. I mean, you can trace the line from newspaper reporter to podcaster, but there are a lot of iterations in between. And in each one, I'm not beating myself up over the idea that the previous iteration wasn't quite right for me, that it felt too stressful or that it wasn't, for whatever reason, a good fit. Rather than beat myself up over the non-fit of the previous iteration, I instead celebrate the better fit of the next iteration. And that's, I think, how every career works. It's how every business works. And it's how every wise, long-term approach to investing has to work because you change over time. Your goals, your priorities, your values change, your understanding

of that particular strategy or niche changes, and the broader world changes around you. So the name of the game is adaptation and iteration. And that's exactly what you're doing. So celebrate it. Now, to your specific questions, you've asked about two concepts that I want to talk about separately. One is opportunity zones. The other is crowdfunding. And just, Joe, you and I were chatting behind the scenes. I know you've got some thoughts on crowdfunding websites, as do I. And I very much echo what Joe is about to say. Well, and I think some of these, you know, these fintech solutions are fantastic.

The fact that so many people can invest in different ways than they thought before. But especially in the area of real estate, I think people undersell themselves, like your ability to do this yourself and to gain knowledge from doing this yourself. I think we think, okay, I'm going to press the easy button, right? Remember the one of those office depot commercials or whatever with the easy button? Paula has no idea. I have no idea what you're talking about. She's no idea. Pop culture reference, he lost me, Joe.

I know it's gone. I got halfway through that and Paula just so people know, she's giving me this completely blank look. Like, I have no idea what's good. This is a horrible idea. But anyway, but people think it is pressing the easy button. And I think even Paula knows that reference. It is not as easy as you think it is.

And by the way, the other side's not as hard. And I think the lessons that you learn are good. But there's also more risk than you think that there may be in some of these crowdfunding real estate solutions, meaning I think they make it sound easier than it's going to be. Also, a frustration that I've had in the past in the area of real estate specifically is that there are just some horrible marketing techniques, Paula, that they use to get you to think that you're going to get something that you won't get in other areas of real estate. I'll give me an example. And we started complaining about this a few years ago. Miraculously, it disappeared on this one website that I hear people ask about all the time in forums and talk about, and I think we'll leave the name out of it. But this company had a chart on the front of their website, Paula.

First of all, the description said, engineered for superior results. who's in real estate that's engineering for subpar results? Right. Is there anybody who's engineering for worse? And real estate, people have been talking about real estate longer than they've been talking about stocks and bonds. The concept of real estate and property has been around way, way, way, way longer than securities.

So over all that time, there's nobody else who could pick the lock on superior results. These are the first people. So that phrase alone set me off. Then they had a forward-looking graph. Oh, the forward-looking graph. Oh, my goodness, yeah. The SEC, if they were regulated by the SEC, would say that's a no, a hard no. And they get a super big fine.

Right. But because of the fact that they're not, they were able to get away. They took it down, I think, after public backlash. Yeah. Yes, including us. They showed one line showing average real estate and what they, quote, planned to do. Now, people that own this real estate, this real estate crown funding platform, they have reported results. And guess what the results are?

Exactly what you get everywhere else. Very, very similar results. And their forward-looking graph, not becoming true at all. So, man, beware charts and graphs. Beware solutions that make it sound magical and easy. It's so frustrating, Paula. I think, Joe, to summarize what you're saying is, number one, One, crowdfunding has less regulation because it's newer and therefore can be a little bit of a

wild west landscape with an even higher level of buyer beware. Number two, oftentimes people look to crowdfunding because they believe it's a get out of due diligence free card. And Lily, I'm not saying that that's what you're doing, but speaking broadly, oftentimes people believe that by virtue of joining into an investment, that is managed by quote-unquote professionals who quote-unquote know what they're doing, people often believe that they can abdicate good judgment to those who are running it and simply put in their money and make it passive.

But if you're doing it right, then that's not the case. If you're doing it right, then you are doing deep due diligence on both the management and the selection of the property. The people who are managing it and the property that they're selecting and the place that they're selecting it, you're doing deep due diligence on all of that. You're also doing due diligence on the order of operations for the payout should the whole thing collapse. What is your position in line? Well, the cool thing that you're also doing is that every time that you're working on this yourself, if you're doing it right, you're building a better machine. And if you think about it, you know, I'm thinking about my son, Nick, who you know, he now owns 11 houses.

And he made huge mistakes with his first house. But guess what he did? He took all of those. And he not only trusted his brain to do it. He wrote it down into his system. Like good investors have an investment policy statement. He has a real estate statement of how he invest in real estate. And he realized he wasn't asking team members the right questions.

He didn't have things in writing that he should have from contractors. He learned. And it's funny because the first house was a flipping nightmare. the second house was easier. The third house was easier. And guess what? Houses 5 through 11 now have become much more like clockwork. And I think that's where the power is, is in creating that machine that will make it like your own crowdfunding platform.

You're hitting the easy button for yourself by doing a little bit more legwork up front. Right. And I understand if house hacking is not the approach, because certainly there are emotional costs to house hacking. When you're physically living in the property that you're also renting out and your tenants are right there literally under the same roof, there is a psychological and emotional drag to that. So I totally get that house hacking is not for everyone. And also that it's an easy way to get started, putting easy in air quotes, because of the fact that you can get a primary residence mortgage, you can learn and get that practice on your first house from the comfort of your own home. It's like remote work. In the way that remote work has its pros and cons working from home, the great part is the convenience of working from home. The terrible part is that if you work from home, you live at your office. So house hacking, absolutely. It has its pros and cons. But if that's not the approach that you want to take, I'd urge you to at least consider buying an investment property, something that is purely an investment property and not a house hack. And you can buy one in an opportunity zone, which we'll talk about. in just a second, but I would urge you to consider buying and directly holding your own property

in an opportunity zone so that you can exercise direct control over that property. The management decisions, the renovation decisions, the operation of that property, all of that will stay inside of your locus of control. And to Joe's point, you begin to build that machine. So I'd urge you to consider that if you decide. you definitely don't want to do that and you do want to go the crowdfunding route, then my biggest piece of advice is do not think of crowdfunding as a get out of due diligence free card. Crowdfunding is a world with a lot of hype. It's a world with, like any industry,

some management that's great, some that's terrible and some that's mediocre, and it's up to you to separate the wheat from the chaff. And overall, it's a world in which you're, you're money is tied up into a project over which you have very little control. So when you are analyzing any given crowdfunding deal, ask yourself, what would happen if this deal collapses? What's the worst case scenario? Where do I fall in line if there end up being a line of people who are all looking to get their money back? What is my relative ranking or position within that? Ask yourself those questions before you go into any crowdfunding platform. Now, let's talk about opportunity zones. So, Lily, you mentioned that your objective is to defer capital gains tax on the sale of your

duplex. And the good news is that you can do that by executing a 1031 strategy. So you don't necessarily need to invest in an opportunity zone in order to defer those capital gains. But if you are interested in an opportunity zone anyway, then there are certainly many positive qualities that these hold. So opportunity zones are a new federal incentive created by the Tax Cuts and Jobs Act that is meant to incentivize investment in communities that historically have lacked capital. It's meant to drive capital allocation to the places that need it. And it does so through tax incentives. So if you invest in an opportunity zone, you can temporarily defer taxes on previously earned capital gains. You get a step-up basis of previously earned capital gains invested.

And as long as you hold the investment for at least 10 years, you pay no taxes on any capital gains produced through your Opportunity Fund investment. And I think that final piece is perhaps the most exciting one, a permanent lifetime tax exemption so long as you hold that investment for at least 10 years. In addition to that, you might be interested in opportunity fund zones for moral, ethical, social, prosocial reasons. On top of the tax benefits, I know a lot of investors who are interested in opportunity zones because of the legacy and the impact that they hope to create by virtue of making these investments, by virtue of putting your money where your values are. So certainly, if that's something that appeals to you, I would work with a real estate agent,

work with a real estate team that specializes in locating properties that are in designated opportunity zones. And that way, when you start your search, you'll be able to see what's out there. You'll be able to see deal flow. You'll see the volume of choices that are available to you. you'll be able to see costs in the particular area that you've chosen, the geographic area that you've chosen. You'll be conducting something that's similar to any long-distance real estate search. You choose your niche. You choose your geographic location. And then you go deep into scouting out what's there so that you'll be able to pick a good property and make a move.

That's one way of doing it. The other way of doing it, like you suggested, would be doing it through a crowdfunding, platform. As you can tell, I've got many more hesitations about crowdfunding platforms. And to that topic, the last thing that I would say is if you do choose to go the crowdfunding route, start with a small amount. So thank you, Lily, for asking that question. And best of luck with whatever you decide. Joe, we did it. It was so fun as usual, especially getting to talk about my favorite movies. Well, not my favorite movie, but one of my top five, Slumdog Millionaire.

And Paul, I know you don't watch a lot of movies, but it's so worth your time. It is such, such a great, great, great movie. Dually noted, Joe. And answering questions, I think a lot of people wonder about crowdfunding. I think a lot of people wonder if I should have assets in different countries, if I should be investing in different currencies. I think a lot of people look at that after tax 401k option in their 401K and go,

what's that all about? Should I do it? So the fact that we could answer those, especially I think, was big. Absolutely. Well, Joe, enjoy the rest of your ongoing book tour. Enjoy is a strong word, Paula. Let's put it this way. I really enjoy meeting our friends, you know, our friends from the internet that we get to meet with in real life.

I really, really like that. And to know there's people that listen to people like you and I when we're really just sitting here, the two of us every other week doing this and doing our own shows, just to know there's real people out there is really, really fun. parts are fun, the travel getting to those places. Like if everybody, we just said that everybody come to Texarkana. The travel is wearying. It is. But the payoff is worth it. Absolutely.

It is fun the first day. But I'll tell you, the longer it goes on, the more that airports are not my favorite place. Well, I'll join you for five of those cities, five out of your 40s. cities. You'll see it. Yes. And I can't wait. That's going to be a blast. Yeah, it's going to be great. Well, thank you so much, Joe, for spending this time with us. Thanks, everybody. Thank you so much for tuning in. If you want to learn more about real estate, we have a free email series where we talk about real estate investing in detail. You can get this delivered to you

by going to afford anything.com slash VIP list. That's afford anything.com slash VIP list. That's affordanything.com VIP list. And if you're on the VIP list, you will be the first to know when we open the doors to our course, your first rental property. It's our premium flagship course. So afford anything.com slash VIP list to get loads of information about real estate investing and to find out when we open the doors for our course. We also have a free ebook, seven mistakes that real estate investors make. You can download it for free at afford anything.com slash mistake. Thank you so much for tuning in. My name is Paula Pant. This is the Afford Anything podcast. If you enjoyed today's episode, please share it with a friend or a family member. Make sure that you are following this podcast and whatever app you're using to listen to it. And while you are in that app, please leave us a review. These reviews are incredibly helpful in allowing us to book amazing guests to come on to the show. Thanks again for tuning in. Thanks for being part of this community. And I will catch you in the next episode. There's a distinction between financial media and financial advice.

Financial media includes everything that you read on the internet, hear on a podcast, see on social media that relates to finance. All of this is financial media. That includes the Afford Anything podcast, this podcast, as well as everything Afford Anything produces. And financial media is not a regulated industry. There are no licensure requirements. There are no mandatory credentials. there's no oversight board or review board. The financial media, including this show, is fundamentally part of the media.

And the media is never a substitute for professional advice. That means any time you make a financial decision or a tax decision or a business decision, any time you make any type of decision, you should be consulting with licensed credential experts, including but not limited to attorneys, tax professionals, certified financial planners or certified financial advisors, always, always, always consult with them before you make any decision. Never use anything in the financial media, and that includes this show, and that includes everything that I say and do, never use the financial media as a substitute for actual professional advice. All right, there's your disclaimer. Have a great day.

I want to wake up early every morning and put in the work to be the type of podcaster who deserves the type of praise that you've just given. So thank you so much. May you remember, Dave, next time you're at the bar, close the bar at 2 a.m. 3.30 a.m. Get it right. Work hard, play hard, baby. All right. Anyway, sorry. Didn't mean to derail us.