BiggerPockets Money Podcast - 274: Finance Friday: What’s The Best Way to Buy Rentals—Partnerships or Solo?

Episode Date: February 11, 2022

Rental properties can be a phenomenal second source of income for the majority of us who work at regular jobs. One or two rental property purchases every year or so can slowly, but surely, build a strong foundation for financial independence, sometimes within only a few years. Today’s guest Connor has taken this approach to wealth building and now sits on six rental units, splitting some of the profits with his partners. Connor runs a lot of the operation for these rental properties. He has a background in construction management, making him an integral piece of any future BRRRR, flip, or rehab project he and his partners decide to take on. But, could these real estate partnerships be slowing down his personal wealth growth? And if so, how does he mitigate the risk of being an independent investor in a cash-intensive business? Aside from his real estate portfolio, Connor also wants to simplify his personal portfolio, plan for future baby expenses, maximize his retirement, and get a better handle on his financial situation in total. Scott and Mindy leave Connor with some clear action items that may help him achieve financial freedom in his five to seven-year time horizon!  In This Episode We Cover Real estate partnerships and establishing the value that you bring to them Generating more income (and reducing expenses) through live in flips and house hacking Land contracts and seller financing on rental properties that allow you to scale faster Student loan repayment, deferral, and when you should plan on starting up your payments again Shopping for a baby as frugally as you can so you can invest for their future  And So Much More! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 274, Finance Friday edition, where we interview Connor and talk about investing in real estate, structuring partnerships, and babies. Essentially, I want to have the opportunity to quit my W-2 job after five to seven years from now. It seems super aggressive. I just don't want to set it at 10 years because then it will probably end up taking 10 years. So essentially, I want to scale as much as I can. with real estate and passive income and try to have the ability to retire in five to seven years. Well, I actually quit my W-2 job. Probably not, but that's kind of the goal.

Hello, hello, hello. My name is Mindy Jensen. And with me, as always, is my healthy eating co-host, Scott Trench. I just don't know how you keep producing these types of interest, Mindy. Thank you so much. Scott and I are here to make financial independence less scary, less just for somebody else. else to introduce you to every bad pun he can come up with and every money story because we truly believe financial freedom is attainable for everyone no matter when or where you're starting and scott truly believes that puns should be involved in every single sentence he ever utters oh i can't live up to that one but uh whether you want to retire early and travel the world go on to

make big time investments in assets like real estate start your own business or scale your real estate investing portfolio will help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Scott, I am excited to bring in Connor today because he's got a lot on his plate and he has a lot of really interesting opportunities headed his way. He's investing in real estate. He's investing in stocks a little bit. He's investing in crypto, which we don't get into in the show. We kind of glance over that. I don't really like crypto, so I don't really have a lot to say about that. But his real estate investing is kind of interesting. You had a really good point about structuring real estate partnerships and how to evaluate if even partnering

is the right option for you. So I'm super excited to bring in Connor to talk about these things today. Yeah, absolutely. And a sneak preview to that point is just that, look, everyone wants to go faster in their real estate investing journey, but getting 50% of a $200,000 pie is no better than having 100% of $100,000 pie. And in a lot of cases, it can be worse if you're not careful, right? It's just more work. What if you get more than half the work and managing the $200,000 pie, you're actually worse off than if you didn't have a partner at all

and went a little slower, I'm air quoting on that one for those listening to the audio only, that you go a little slower on that by partnering and buying more real estate than if you just wouldn't on your own. So it's important to get those structures right if you are going to partner and begin to scale a real estate business so that the economics actually accrue to you if you're going to do the extra work to go a little faster. Yeah. And another point to make is that sometimes partnerships don't allow you to be the boss of the world. And if you've listened to this show more than once, you know that I really enjoy being the boss of the world. So partnerships are difficult for me. Good thing I have Carl to be my real estate partner. Now my attorney makes me say the contents of this podcast are informational. turn are not legal or tax advice, and neither Scott nor I nor bigger pockets are engaged in the provision of legal, tax, or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal, tax, and financial implications

of any financial decision you contemplate. Okay, now let's bring in Connor. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting,

accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focus on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves in a needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code pockets. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this

more fun, calculating quarterly estimated taxes? But somehow, every small business owner ends up doing it. Your dreams of creating, selling, and growing get replaced by late nights chasing receipts, juggling invoices, and wondering if that bad sushi lunch with Scott counts as a write-off. Change all that with Found. Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season without you doing the heavy lifting. You can set aside money for business goals, control spending with virtual cards and find tax write-offs you didn't even know existed. It saves time, money, and probably a few years of life expectancy. Found has over 30,000 five-star reviews from owners who say,

Sound makes everything easier, expenses, income, profits, taxes, invoices even. So reclaim your time and your sanity. Open a found account for free at found.com. That's fowundd.com. Found is a financial technology company, not a bank. Banking services are provided by lead bank member FDIC. Don't put this one off. Join thousands of small business owners who have streamlined their finances with Found.

Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leen or Stronger for Fitness, the Anxious Generation for Parenting Perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful is its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app.

If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. Connor is 30 years old with a baby on the way. Yay, babies! And like everyone else on the face of the planet, he has more stuff to do in a day. than hours of the day to do that stuff in.

So Connor, welcome to that club. He's looking for advice on his general FI trajectory. Connor, welcome to the Bigger Pockets Money podcast. Thank you. Thank you for having me. I'm super excited to jump into your numbers because we have a lot to discuss, including student loans, financial independence, babies, babies, student loans, lots of investments, lots of real estate.

So let's jump right in. What is your income? Where does it go? All right. So before tax income is combined between me and Sydney is 185,000, that includes vehicle allowance, bonuses, and my W-2 salary. So the breakdown would be about $4,800 for the vehicle allowance, about $35,000 in bonuses annually. And then the W-2 salary is about 147,000 combined. And what do you guys both do?

So Sydney is a dental assistant, pediatric dental assistant. And I'm a construction project manager for a company that does development and construction, obviously. Awesome. So your job is the one that has the vehicle allowance. Correct. Yep. Okay. Awesome.

And any other income besides those sources? Yeah. So I have some real estate that I. I'm trying to track separately for income and kind of keep it within the company or real estate accounts. So last year I did a wholesale deal for $2,000. I send out some direct mail every once in a while, see if I can pull in some deals. I have a duplex that I'm currently house hacking, but I'm moving out of in a month to essentially a live-in flip. I have another rental duplex on a land contract.

and I have a tiny home in the works, and then I have another duplex that I'm essentially getting under contract this week. So all those together, I'm hoping in a 12-month period would bring in about $34,000 annually. Some of them aren't completed yet, but that's kind of where I think things are heading. So that brings us to, what, 220,000 in annual income? Yeah. Okay, awesome. And then where does it go? How much do you spend?

So getting into expenses, again, I'm in a really transitional phase right now because I'm currently house hacking, remodeling for a live and flip, going to move into there. So my mortgage will be going up, but it's kind of a equity play for a living flip. So expenses, broken down come March 1st would be, my mortgage would be about 1845, 250 for electric, 80 for water. We have a car that we own and a lease that will be ending soon, but the total car principal payments are 538 a month. Car insurance, 115, gas, 136. Cell phone and internet is about, cell phones 139, internet's 70. Netflix, 20 bucks a month.

Student loans, $212 a month, and we can get into that more later. I'm just paying the minimum on that right now. And I have been since they've been in forbearance. That's kind of one of the topics I want to go over today. And then rolling into some of my variable expenses. Groceries, about $600 a month. Dining, takeout, another $600 a month. Dog, $80 a month.

Personal care, haircuts, $40 a month. Entertainment, $400. Miscellaneous house items, $250. And last one at least, just some home renovation. and the duplex I'm living in is about 500 bucks a month right now. Obviously, that'll go away from March 1st. Okay, awesome. So in total, how much are you able to accumulate in cash per month?

And what are you doing from an investment standpoint? So as far as W-2 savings, I stock away about $2,000. I put $1,000 in a capital investment account, and then $1,000 I put in the like crypto and aftermarket or after tax stocks. So that's the W2 leftover. But as far as real estate, I'm kind of just keeping it in those accounts because I want to essentially one of the topics I want to go over today is how to scale fastest. So I'm trying to just keep it in there and just put it back in and look for properties or whatever comes my way and use that essentially for buying more real estate. Awesome. So where are these assets going and what is your net worth right now?

So net worth is coming in around $280,000. Breakdown, I'll go through the assets first. Everyday checkings about 3,100. One of the duplex accounts, I got 4,500. My house hack duplex account I got 2,700. My investment capital account for just sitting there whenever I find a deal is 24,000. We have a three-month cash reserve at 10,000. We keep it kind of low because I have cash other places in that investment capital account or something were to happen. We feel like our jobs are pretty stable, so we just keep a three-month cash reserve. Discretionary, we're saving up for a car down payment once the lease ends or purchase a car outright. We got 800 bucks in there right now.

Roth IRA opened up, I don't know, 10 years ago, I haven't put much into there, which I know you guys might tell me otherwise, but that's 1,700. We have about $47,000 in Roth 401K combined. I have a duplex. The duplex is one of them is worth 315, one's worth 355. My single family home live in Flip is worth 315.

75. I won't go into the one I got under contract yet because that's not quite closed. I got a car worth 23,000 tiny home worth 7,500. I kind of put an estimate to it for what we just have into it because it's like it's our it's a construction trailer we remodeled and I don't know exactly what I could even sell it for. We have 7,500 into it so that's what I got to work that. I got 8,300 and crypto and an HSA with 3,500. And that's what I have for assets. I have an ESOP listed on here that's getting rolled out in my company, but I don't have anything at night.

So going into the, sorry, go ahead. How much cash do you have? Because you listed like seven accounts there. Yeah. General organization I'm still working on. I try to keep every duplex or every property with a separate account, but cash-wise, I have about 45,000. Okay, great. And you're about to, I'm sorry, I interrupted you, you're about to go into debts, I think?

Yep. The first, the duplex that's worth $3.15 is, I owe $2.27 on it. That's a land contract at 3.75%. The duplex, that's worth $355, I owe $305 on. And the single family home that we're moving into, I will owe $304 on that. The car, I owe $15,000 on that one at 3.2%. And then I have $47,000 in student loans. So that pretty much sums up the debts.

Okay. And you said your goal is to scale faster. Can you get in more detail or give us any other goals that you might have with your finances. Yeah, so the main goal is essentially I want to have the opportunity to quit my W2 job after five to seven years from now. It seems super aggressive. I just don't want to set it at 10 years because then it will probably end up taking 10 years. So essentially I want to scale as much as I can with real estate and passive income and try to have the ability to retire in five to seven years. Well, I actually put my W-2 job.

Probably not, but that's kind of the goal. Depends how many hours I'm putting it? Okay, great. And you want to do this through real estate? That is the goal, yeah. Okay. Awesome. So can you walk us through kind of in more detail, the numbers on your current properties?

Sure. So, again, this is kind of analyzed after I move out. I've got to make some assumptions for what I'm going to get rent for my unit currently. So after all expenses, mortgage, taxes, insurance, utilities, water, internet cable, CAPEX vacancy, my current duplex will bring in 886 a month. I'm doing it on Furnish Finder as a contract nurse rental. that's currently the tenant upstairs. That's how she got in here.

When I bought the duplex, she was already here. So I do have a tenant that's doing it, but I haven't quite done it myself yet. So one, the next duplex is a land contract. I'm going to do the same thing with that. That's going to bring in about $760 a month after all income, or after all expenses, vacancy, all that. A tiny home, that'll be an Airbnb.

I'm hoping that'll bring in about $600 a month. And then I do have a rental listed on here that I didn't close on yet. Then I'm hoping to bring in $400 a month. It's essentially, we're closing March first. Okay. And how much are you putting down on the one that you're under contract on right now? That'll be 20%. And so what's the purchase price?

185. But I did bring in some partners. So it's going to be split three ways. Okay. Okay. I see. Well, great. And so when you say you want to scale faster towards this, what does that mean to you?

Do you want to buy more properties and bring on more partners? Do you want to just accumulate more personally? Like, what are you envisioning this looks like in a couple years? Ideally, I think in order to scale as fast as I would like to and still be comfortable. with not making a big mistake. It'd be nice to keep more going with these partners that I'm currently bringing in. But obviously, we got to do a deal together and see how we work. The previous properties I've purchased have been on my own, the land contract and the current house hack, and then they'll live and flip.

But as far as cash accumulation, I think it would make the most sense to keep going with some partners. and we're looking, we did talk about some long-term goals getting into some multifamily, larger stuff down the road. Okay, great. Let's unpack the partnership structure here because I want to understand how that helps you get to your goal of financial freedom faster. So when you bring on a partner, how do you structure it with the partners? So right now, I have an LLC and they have an LLC, and it's two of them in their LLC. It's just me and mine. So we created a series LLC.

and so we actually have another LLC over the top of those two that we use to get a commercial loan and purchase this next rental property. That's the actual organization structure right now. As far as roles and responsibilities, that's to be determined, I guess. How do the economics work for you? As far as income, you're saying? Well, here's what I'm trying to understand, right? When you raise money from a partner, right, often,

then you get some sort of carried interest or ability to accelerate your position faster as a little of managing more money. But what we want to make sure is you're not just bringing in partners. And so instead of getting 100% of a $180,000 pie, you know, you're getting 20% or 50% of a $360,000 pie, which means you're just managing other people's money but not getting actually rich any faster with that. So that's what I'm trying to figure out is what is the economic advantage that you're creating that by pooling money together from a partnership.

That's a good question. I guess originally my train of thought was that obviously pooling money together, a 20% down payment between three people is a lot less impactful. If something didn't work out then going all in by yourself. So that was my original train of thought. It just kind of happened to work out where these people were, you know, looking for something as well. And so to answer your question, I don't know that I thought about it too much. Well, great, so here's a great, here's a great discussion points. I think a lot of people are probably

struggling with what you're struggling with here, right? This concept that will, I think, hopefully sound commonsensical when I, when I explain it, but is kind of hard to conceptualize here, right? So if I buy 10 properties and bring on a partner for each of them, I'm no better off financially than if I bought five properties and didn't bring on any partners unless I structure the deal such that I'm getting some sort of economic interest. So when you hear these syndicators on the Bigger Pockets Real Estate podcast pooling together money to scale their property, their portfolios faster, what they're doing is they're raising, you know, a million, hundreds of thousands, millions, or tens of millions of dollars, and they're buying a

property. And they're saying, okay, among other things, one, I get the transaction fee when I buy the property. So I'm the agent. I get the commission. That's my paycheck. Two, I'm going to charge a management fee for some percentage of the assets here, one, one, two percent of the capital I've raised. And these might be high fees, right? So the other than I'm just guys here. Third, when, if the property performs as expected, and, you know, let's say, let's say the property, I'm going to promise you a preferred return of 10%. So you get 10%. Anything over a 10% IRA, we're going to split 80-20 on that. And so that's a way to get really to get wealthy very quickly by pooling together capital in real estate. And you can imagine that the more funds you accumulate and you manage,

the more wealth you have the potential to generate, as long as you can perform in excess of that hurdle rate that you've determined with your investors there. But if you're just pulling together, if you're just bringing on partners and managing the property for that, now you're doing more work, that's a sweet deal for your partners if you're the one finding the deal and doing the work, and you're not really building wealth any faster. You might get into the property sooner by a matter of months or maybe a year or so. But I actually think that it's probably not an efficient mechanism to scale your wealth unless you're able to say, no, partners, I'm going to get the brokerage commission for closing this deal.

and I'm going to charge a management fee, and I get a certain amount of the profits over the long term in excess of your return capital or something like that. Now, there are numerous structures there. This is a real good one to talk to a lawyer, and I have not set this up from a real estate perspective personally. But I'll let you react to what I'm saying there. Yeah. What are your thoughts on this? Those are all things I guess I didn't really think of. I was trying to, I guess my thoughts were just trying to keep it simple.

Like I essentially have $24,000 in my cash reserve for investments. The property needed 20% down. I'm like, well, I can't do 20% down. Let's see, we can group some people together. I'd rather take 33% of a deal than 0% of a deal, I guess. So that was my original thought. But yes, I mean, the stuff you're bringing up is, It's super valid.

And I mean, that's stuff I got to keep in mind going forward as I try to tackle. And back into your five or seven year goal, right? So it's, you want to be financially independent in five to seven years with this. It doesn't matter if you have, again, 20% of 30 properties or 100% of seven properties that are cash flowing to solve that goal. It's the same economics. One, to me, one of those options to me sounds like a much. much simpler life that is actually financially free. And the other sense seems like a lot of work.

However, again, the 30 properties can be a way to more overall wealth if you're able to structure a partnership that's advantageous for management there. Because if you're going to do all of the work and just split the profits, please call me up. And I'd be interested in investing there. So. Yeah, me too. So I've got a couple of comments to add to Scott. I heard you say I want to keep it simple. And the best way to keep it simple is to keep all those cooks out of the kitchen and have

you be the one making the decision. Because Scott and I have done your episode 276. Scott and I have done a lot of these shows. And we still have differences of opinion on a lot of things. and we have like similar goals. You being in a partnership with somebody, you could have similar goals and very different opinions. And when you're the only person with the money in there

and you're the only person with your name on the deed, you're the only one whose opinion matters. And you can still go out and ask people, hey, what would you do in this situation? Hey, Scott, this is a great place to plug the BiggerPockets forums, biggerpockets.com slash forums, where you can ask more than two million investors, their opinion of what you're about to do or the options that you're considering.

Sometimes they'll throw out a third option that makes even more sense. But I digress. When your name is on the deed and that's it, you're the only one that has to make the decision. I saw a bit of a pink flag when you said something about to be determined with the partnership. And we're recording this in January. You still have time to hash out all of this stuff about the partnership. but you need to come to a decision about everything before you buy the property with your partners because now you're all still friends.

Now you can decide, oh, wow, you want to do that? I really, we have way different opinions. Let's break the contract and lose our $1,000 of earnest money instead of having some horrible, acrimonious relationship for years because we have very different opinions that we didn't discuss going into the partnership. Now, I want to say, I have a partner on many of my deal. So I don't want to, I don't want to like, but it's not a, I do all of the work and get all of the, and, and he's a silent partner. It's, we're both 50, 50, and we've been partners for years.

And we, we believe that as good, like, this is a person that I have, I lived with as a roommate for many years is what is my best friend. Or is, is someone I trust implicitly from a competence and integrity standpoint. Right. And so that, that is, that allows, we, you know, over the years, we both, we both. waxed and waned in terms of contributions, you know, and some of that. But I feel it's been a very close to 50-50 contribution over the years for the building the business with that. That, to me, is helpful, right? And then it is, it is wonderfully simple in that case. But if you're looking to scale, I think your partner, if you're going to go 50-50 with a partner, there needs

to be true operational advantage that you're accruing from that, or you're getting economics, economic interest. A silent partner that is splitting the economics with you close to 50-50 is not going to help you actually meaningfully move towards your goal, in my opinion. And, Connor, you have construction experience. And because you work for a big company, I'm assuming that that's more commercial construction experience than specifically residential. But electrical is electrical and plumbing is plumbing. And the codes might be different. but the construction basics are all the same. And you have a lot of knowledge to bring to the table that could be more beneficial than your dollars coming to the table.

Like you could get paid for your construction knowledge. Perhaps you could partner on commercial deals to help you grow because you've got the commercial construction experience. And now I'm getting outside of my area of expertise because I have done zero commercial. But if I needed some commercial, I'd call you up. Hey, Connor, come partner with me on this giant renovation that I don't know anything about because I've never done commercial. In fact, you should see if you can talk to the person who owns the project that you're, the projects that your construction firm is working on at some point to kind of understand how how they structure the deals with their limited partners, right?

I bet you they'd be fascinated to have that discussion. You know, maybe they might blow you off. I don't know on that one. I don't know. But that would be, but I bet you that they'll echo some of the things that I just described there about carried interest and management fee on invested capital, limited partners, you know, those types of things. And the way they're going to make money on the deal and not go broke based on the way

they structured their, I'm going to charge a certain amount of assets under management to pay the staff and my salary. but they're going to make their hundreds of thousands or millions on any of these projects based on the success of that project and carried interest. Sure. Does the term carried interest, are you following that term? Yeah, I understand carried interest. Not in full detail, but I do, the term gets tossed around at my day job.

So I do kind of understand it. Okay, great. For those listening who may not understand that, right? There's a bunch of, there's various terms that will describe this concept. but essentially, let's say that we're buying a $100 million property, right? And there's $25 million in equity raised from limited partners, right? These are private syndicator investors like myself. I invest in a couple of these from time to time.

And that $25 million is looking for a return on capital. If the equity in the deal, that $25 million, if the value goes to $150 because they improve the operating, you know, the net operating income or, increase rents or reduce costs, then they might sell it and there might be a $75 million gain over or $75 million in equity at the end. That's a three times invested capital, right? That excess $50 million might be split 80% to the original investors and 20% to the management team or the general partner managing that deal. So in that case, the manager makes $10 million in addition to the fees to buy and sell the property and any management fees

on the $25 million and invest the capital over the hold period. That's very simplistic, a better overall understanding of the structure. It can be found when we had Jay Scott on the Bigger Pockets Money podcast to describe this in a two-hour comprehensive session on syndication investing. But again, that's the framework that I think a lot of these guys are using is something to that effect that would be advantageous to you. Now, With all this said, Connor, could you walk us through the structure of your partnership as you currently understand it? So that's kind of where we're going. That's kind of what we're trying to dial in in the next three weeks is actually roles and responsibilities.

We want there to be an operational benefit to each of us. I manage subs daily. I don't know that I want to do it outside of work. So they're really good at it and they got a system down, the two partners. And so I don't really want to wedge in and kind of try to figure it. something that's not broken because I know they've done some bird eels already that are working out. So I brought the deal. I was going to essentially let them kind of manage, manage that to finish.

We had to talk about some of the details and stuff. So that's kind of where I was originally thinking. Again, we got to sit down and go through all that and create our operating agreement. Okay. Well, look, that can work from that structure. But I think it might be wise to sit down privately on your own. on your own and figure out a business plan to get to where you want to get to. And a couple of options that would move you there faster, right?

Property manager, like I have a property manager, maybe I have a partner of a property manager on this. And that property manager manages the subcontractors. And we pay the property manager a 10% management fee for these things. And sometimes we'll pay him an additional fee to GC, certain of our projects with that. Right. And that is, that works for us. and it allows us to continue buying properties and managing them relatively passively, including the projects.

But it is, you know, is it faster than having a dedicated equity partner? I don't know with that. But those are the kinds of questions, I think, to think through. Sure. Absolutely. This really is the biggest, I think, item in your financial story here. You've got great control over your expenses. You earn really good income.

You've got plenty of cash. Your debts are all very low interest and don't make sense to prepay early, in my opinion, given what you're doing here. So I think, you know, it seems like if you weren't saying scale faster, it would be keep accumulating this cash and keep buying another property every year or two, maybe more frequently. and within five years, you'll loan five to seven more properties and probably be very close to your goals, you know, with a lot of this stuff. But I think it's great to you're exploring these other forms of scale. I wonder if you're live in flip and buying another rental property isn't going to generate hundreds, $100,000, $150,000 in additional wealth over the next two years. which is a pretty good chunk out of this. And, you know, increasing your net worth by 50% in two years by saving,

live and flipping, and buying another rental property is a pretty good, pretty good aggressive, aggressive approach there with that. So I like the mindset of even more aggressive, but I love the fact that you're all out, in my opinion, on what you're doing here. When you say scale faster, does that mean generate more income for you or own more properties for you? That would mean generate more income. In general. So whether that's real estate or some form of side hustle, at one point I tried doing wholesale dealing and bringing in some income that way. And I'm kind of just trying to try what I can when it comes my way. But

obviously trying to still be safe and not make big mistakes. I want to make sure that I'm limiting my exposure and my risk in certain areas. With your background running subs during the day, I see flipping or live in flipping as a really great way to generate some income and maybe flipping because you've got a baby on the way and live in flipping is a big mess. And you've already done that once and you probably, lots of people are one and done live in flippers. This one's actually, sorry to catch you off.

actually, I guess it wouldn't be considered a live and flip. It's a Fannie Mae home style. So essentially, 70% of it's going to be done by the time we move in. And then we just got to wrap up the 30%. Okay. So, yeah, when I say live in flip, I mean live in the construction zone the whole time. But that doesn't mean that's the only way to do it. Yeah, getting it all, like getting the big stuff out of the way.

That's the smarter way to do it. That's just not the way that I do. Why do it smart when you can wash your dishes in the bathtub for a month? Okay, so like I said before, electric is electric. The electrician at the job site could come to your house and do home electrical. I've seen it done. My father-in-law is an electrician. He's done it.

Residential electrician work is the same. And they probably know the codes. They're real easy to look up. I can look them up. Plumbing, the plumber at the job. website can do plumbing at your space. And that is one of the most difficult things to do right now is, I mean, after you find the deal, is to find somebody to actually work on the deal. So if you want to own rentals, finding these properties that are subpar and fixing them up

and then renting them out, which is a strategy that we have coined called Burr, Buy, Rehab, rent, refinance, repeat is a way to kind of recycle your cap. If you do it right, you can, if you do it optimized, I don't want to say do it right. If you do it optimized to the highest degree, you can pull out all the money that you have in there and still have a cash flowing asset and then take that money and use it again. Even if you have to leave some money in the deal, you're still able to, in many cases, pull some money out and use it again. So you're not parking all of your money in there.

So that with your skills, I think that's a best. better way to go about this than partnering with people, then you've got a cash flowing asset that you own all by yourself and make all the decisions by yourself. That's my opinion. That's what I would do if I had a lot of access to contractors because I've got, I can find the properties. I just can't find anybody to work on them. Or I can find people to work on them.

Everybody I know is already retired and they don't want any more work. Tax season is one of the only times all year when most people actually. actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting,

accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code Pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves in Eel. Achieve your financial goals for good with Monarch, the all in one tool that makes money management simple. Use the code pockets at monarch.com for half off your first year. That's 50% off at Monarch.com code pockets. You just realized your business needed to hire someone yesterday.

How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed's sponsored jobs helps you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored posts.

The best part? No monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash bigger pockets. Just go to Indeed.com slash bigger pockets right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash bigger pockets. Terms and conditions apply. Hiring, Indeed is all you need. When you want more, start your business with Northwest Registered Agent and get access to

thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest today. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They're the largest registered agent and LLC service in the U.S. with over 1,500 corporate guides who are real people who know your local laws and can help you and your business every step of the way. Northwest makes life easy for business owners. help you form your business. They give you the free tools you need after you form it, like operating agreements, meeting minutes, and thousands of how-to guides that explain the complicated

ins and outs of running a business. And with Northwest, privacy is automatic. They never sell your data, and all services are handled in-house because privacy by default is their pledge to all customers. Visit Northwest Registeredagent.com slash money-free and start building something amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money-free. weather cools down. Golden Nugget online casino turns up the heat. This winter, make any moment golden and play thousands of games like her new slot Wolf It Up and all the fan-favorite huff and puff and puff games. Whether you're curled up on the couch or taking five between snow shovels, play winner's hottest collection of slots from brand new games to the classics you know

and love. You can also pull up your favorite table games like blackjack, roulette, and craps, or go for even more excitement with our library of live dealer games. Download the Golden Nugget Online Casino app, and you've got everything you need to layer on the fun this winter. In partnership with Golden Nugget Online Casino. Gambling problem, call ConX Ontario at 1-866-531-2,600. 19 and over. Physically President Ontario.

Eligibility restrictions apply. See Golden Nuggett Casino.com for details. Please play responsibly. One thing I noticed about your kind of overall financial position is you're very clear on your expenses. That seems beautifully simple on this. But your assets are very complicated, especially relative to your current net worth right now. You have seven different bank accounts with that kind of stuff. And this partnership, what I'm reading in, is it's kind of an experiment is what I'm gathering.

right you're kind of you're kind of learning this you're you're you're you're you're you're you're partnering with you think it will help you buy faster but you haven't really worked out the full economics um economic impact of the partnership and how that's going to map into your your your long term with that i'd encourage you to think about simplifying a lot of this um let me ask you a couple questions about your cash do you have a separate entity for each property I have a separate entity for one land contract duplex. The duplex I'm in now, there's not a separate entity because I currently live there and I'm house hacking it.

So to answer your question, I just have one entity right now for a land contract and then we created a series LLC for the one that's closing March one. Okay. There's always a debate about asset protection and that kind of stuff. If you're going to be investing with partners, you've got to go with the wishes of the partnership on that. And if you have an LLC, you need to have a separate bank account for that LLC and treat it as an independent entity entirely with that. But for the rest of it, you know, I had a number of these different bank accounts and all this kind of stuff a while back, and I just consolidated it all. all into one checking and one savings account. And then the rental property business has a single checking account with that.

And does that make it a little harder, you know, does that make it a little harder to parse out what pieces of cash are for which property or whatever? Yes. But it's also just pretty freeing to be like, okay, I've got one big pile to handle the roof on any one of the properties that might have it at this point with that. And I got one for my personal and one for my next investment, right? Checking savings?

rental in a business account um and you might consider that at some point because all these separate accounts may be complicating the situation and that's going to magnify and multiply if you begin forming more partnerships over time um to buy more of these properties with that absolutely yeah i i hate going to the store and trying to pull in my wallet i pull like three different credit cards i can't remember which one's for which property and so it would be nice to simplify consolidate the problem is It's one of them is an LLC and one of them's not right now. So maybe when I'm out of here, I don't, I guess I don't know how that would look to be able to get this into the same LLC. Yeah.

So at that point, you could just, you know, you'd have to talk to an attorney about this, but you could, you, you would have the option to quick claim the property into the LLC. And then that would allow you to merge all the properties into one LLC interest with that. There will be puts and takes, there's always puts and takes around complications in your life. and management of the business and asset protection in general with this. So you need to talk to an attorney and CPA and it might be a couple hundred or maybe even a thousand bucks to figure out what moves you want to make with all this kind of stuff and why you want to make them over time. But I really like the idea of with a portfolio of your size, having them manage in a single asset with that. If you become a multi-millionaire

over time, then it makes sense to potentially begin potentially begin putting in the series LLCs, not in the sense of a partnership, but in the sense of equity, you know, that will protect your equity interest in some of these properties a little bit more over time. But, you know, with $280,000 in net worth, it may not be, it may be more complicating than it actually is providing risk mitigation for you. Yes, and I am going to reiterate that you should speak to an attorney because neither Scott nor I are attorneys, and they may have some different advice and take their advice over hours. I think you should talk to investors and attorneys with that because sometimes attorneys will just tell you this is what absolutely

you got to do this crazy level of protection and they're going to charge you $1,800 for the privilege of doing that and give you four more credit cards to put in your wallet with that, which often doesn't make any sense. So I think that the combination of a good attorney and good investor peers to listen to and get those opinions from is valuable because the attorney's going to, you know, often going to, you know, often going to bias towards reducing risk to the point, in my opinion, sometimes of absurdity with some of these things. So talk to the attorney, yes, but make your own decision and maybe maybe maybe talk to some investors as well. Yes. And in the meantime, with your card, your wallet full of credit cards,

take a Sharpie and write on the credit card. This is this duplex. This is this duplex. just put the street number of the address or the name of the street that the duplex is on, however you can delineate it. So then it's easy for you because, yeah, you can get confused and then cross mingling of funds or co-mingling of funds gets you into a lot of trouble. You have mentioned the phrase land contract multiple times. And I know there are people listening who don't know what that means because I don't know what that means.

So please explain what a. land contract is for those of us who are listening and have no idea what you're talking about. Well, I'm sure you guys could better explain it, but general terms, essentially I found a seller that had 100% equity in his property and he was willing to finance it to me at a agreed upon amortization and balloon payment with interest rate. So that got executed and essentially, I'm making the payments to him. And then after five years, I'll have to make a balloon payment to them via refinance or sale, whatever it may be. Oh, interesting. Do you have to have it for five years or can you refinance sooner? The reason that I ask is because rates are about to go up.

I can refinance sooner. So I've actually, I've been kind of pondering that. I guess I'd like to hear your guys' thoughts on it. How long have you owned this property? Only a year. So. Okay. If you have owned it for at least six months, you can read, well, since it's a seller, You could probably refinance any time. I would suggest talking to a lender as soon as possible because the Fed has indicated that they will raise rates. I think they indicated it three times. But of course, as soon as I say this and we record this, then they're going to change

their mind. But as soon as March, they are considering increasing interest rates. So I'm already seeing interest rates going up. They did something with second home mortgages where you could have, and I don't think this applies this, I'm just sharing this with everybody in case they haven't heard, if you have a rental property or a property that you want to buy with a second home mortgage, which is kind of like a vacation property for you to use, the rates are going up or there's an extra fee or something starting April 1st. So get yourself into that house now.

What's the rate on your bank contract? It's at 3.75, which is pretty good for landcon. Yeah, that's awesome for a land contract. It's funny because we say we talk about can't time the market, but then we always speculate on what interest rates are going to do. And I can't help it. My dad, when I first bought my first property, he was like, get an arm, right? Why get an, you get an arm because, you know, the rates are so much lower. And this was seven years ago, right?

And if I got in the arm, I would have had a way lower rate and I would have paid way less in payments and it would have gone down. over the last couple of years. I would have saved a boatload of money with that. And he's constantly telling me you get an arm, and I've never got an arm on this kind of stuff. And that's kind of, I think it's kind of like what you have with this land contract. We have a balloon payment. You're going to have to refinance it in a few years. You're speculating on what interest rates are going to do over the next couple of years. If you refinance now, I bet you you're at over that rate on a conventional mortgage with this.

and what you have to ask yourself and what we have to kind of think about is do we think interest rates are going to go up, down, stay the same, or we can't time them, right? And I can't, yeah, so I can't predict that, but I'm too afraid of interest rates going up over the next five years to go into a deal like you have right here where I have that kind of exposure to those interest rates. I always lock in at fixed year, fixed long term, 30 years. mortgages in spite of the fact that I've lost a lot of money over the last seven years by doing that.

Okay. I am going to say that Scott, your situation is similar but very different. Connor bought this a year ago in your situation that your dad is telling you to get an arm. So Connor did what your dad told him to do and that would have been great. But now we are in a different situation and I will speculate that rates are going to go up because the Fed has said we're going to raise rates. Even after all this other stuff has happened, they said we're going to raise rates. We're not changing our plans.

Of course, they can change their plans at any time. But I would bet that rates are going to go up. Rates have been unbelievably low for so long that there's, I mean, they can't, I keep saying this and then they prove me wrong. They can't go lower, but they will go lower. And they won't. They're not going to, okay, that didn't make any sense. I keep saying rates can't go lower and then they go lower.

This time, I truly do not believe that rates are going to go any lower. I believe that they're going to go up. And the reason that I believe that is because the Fed has said we're going to raise rates three times in 2022. Three months ago, the Fed was saying inflation is just temporary. So I tend to agree with Mindy on this one. So all of what I just said is tongue in cheek. But I wouldn't be comfortable with a five-year blow. balloon on a mortgage of that level relative to your overall financial situation with that,

and a five-year picture right now. That's how I'd personally be feeling about the situation and we wanted to lock into a long-term rate in the next couple of months, I'd imagine. Okay. So general consensus, probably look at refinancing. This is a good time to go into the forums at biggerpockets.com slash forums and ask that question. And hey, I've heard that the Fed is going to go up or the Fed is going to raise rates.

What are your thoughts on interest rates? And if everybody in the forums says, oh, no, they're going to stay low forever. Then, you know, maybe I'm wrong. But I don't think everybody in the forums is going to say that. I think they're going to say, hey, I've seen, you know, and they're going to cite articles. Here's an article where the Fed says they're going to raise the rate. I mean, it's been what, zero, almost zero for so long. Well, we'll see. So a lot to think about on that one.

What else can we help you with, Connor? So we went through general trajectory. We went through some scaling techniques. Obviously, student loans are the next big one. I've been paying those. This is another kind of speculation type topic. But I just want to get your thoughts. I know you guys are doing an episode on student loans, but just wanted to get a little bit input on my specific situation. Yes, so this episode 267 came out on January 17th with Robert Farrington from thecollegeinvestor.com. And we talked about different ways to look at your student loans. If you have private student loans, the student loan repayment pause didn't affect you. But if you had federal student loans, it did. It sounds like Connor does have federal student loans.

and the repayment pause is now through May 1st. So what Robert said in that episode is that he does not think that you should be making any payments right now if you could be putting your money towards other uses, if you've got other debt, et cetera. So if you have a low interest rate, what is your student loan interest rate? Isn't it like 3.2 or something? It's 4.6, actually. 4.6.

So that's still within Scott's range of don't pay it off early because you can get a better return on your money in a different investment. I tend to agree with Scott. 4.6 starts to get a little high for me to not pay off. But I generally defer to Scott. He has a big economic break. I think it's an interesting thing because the blended, like the overall interest rate on that is slightly lower than 4.6%.

And again, I can't compute this math. So someone else has to put together this spreadsheet and figure this out. But like, you'd think, okay, because that's in forbearance right now, I'm actually paying zero. And there isn't time value money and all those other nonsense, the blended rate of my student loan debt is actually less than something else. I'm accruing interest on my car payment right now on this. So it makes sense to stop accruing that interest at the very least in a temporary period.

and put it towards some other debt rather than towards a student loan debt that is currently not accruing interest there. Now, if it was 8%, you'd be like, okay, well, if I don't put it towards the student loan debt now, it's going to be accruing a higher interest rate when it's all said and done in a few months. So that's kind of the art, and that's where I'm having trouble figuring out the right economic answer, where that cutoff is because of that dynamic. But that's the framework I'd be thinking about the problem with. And we've already had extensions of this student loan repayment and of repayment forbearance.

I can't remember what it was called. We've already had extensions of that. So it was definitely going to end on January 31st and payments were going to definitely start on February 1st. And now it's been kicked to May 1st. So now payments are definitely going to start on May 1st, unless they decide that they're not definitely going to start on May 1st. So that was another point that Robert made is that we could see this kick down the line further.

So why start making payments again if you don't have to see if it's further kicked down and then you can take the money that you would be paying towards that and further reduce your car payment? And there has been talk of student loan forgiveness. And if you pay off your student loan, then there isn't student loan forgiveness. And whatever side of the coin you are on with regards to student loan forgiveness, what it boils down to is if there's no student loan to forgive, you can't take advantage of this program. So the student loans definitely go back and listen to episode 267 of the money podcast with Robert Farrington and get some great advice from him. Visit his website, the college investor.com.

he's got a lot of stuff about student loans. That's kind of all he talks about. And you want to make people angry talk about how I'm going to wait for the student loans to be forgiven. And the people who paid off their student loans will be livid that they did that. So that's always a controversial topic as well with this. But like our job is not like, oh, here's what should be the case. It's what's the best decision you can make with your money with that?

And failing to take into account the possibility that student loans might be forgiven in some amount is a financial mistake, I think, at the end of the day, regardless of what your views on that from a policy perspective is, just to save us from the inevitable comments that will come from a commentary on, hey, the student loans might be forgiven, therefore we shouldn't pay them off. Well, that is a rational economic thought that an individual needs to have when they're considering their long-term financial planning, an overall situation is, what is that probability? So I think it's a fair point and heading off those nasty comments now.

However, if you would like to make a nasty comment, you can send it to Scott at biggerpockets.com. Okay. And we need to talk about baby. Your baby does not care if he or she is wearing brand name items. Your baby does not care if he or she is wearing clothes that another baby has worn. Your baby does not care if he or she has a room full of toys or three toys. especially when they're brand new because all they're going to do is eat sleep and poop. So don't buy brand new everything.

You don't need it. You do need, in my opinion, you do need a brand new car seat because that protects your baby when traveling at upwards of 40 miles an hour in a metal shell. You need a brand new crib because crib technology changes all the time and what was acceptable for us is now against the law to make. So otherwise you can shop at thrift stores and garage sales. Tell everybody you know that you're having a baby. And they'll be like, oh my goodness, can I give you all of my old baby stuff?

And you'll be like, yeah, I guess. Take the stuff that you like, pass it on to somebody else who was having a baby. When I was done having babies, I'm like, what do I do with all this stuff? People who no longer need it want to get rid of it. They want to give it to you. Let them go through what you want. Get rid of the rest. It does not have to be super expensive.

to have a baby. You can cloth diaper and breastfeed and get used everything and spend almost nothing on your baby. What do you have to say to the folks that maybe listening or Connor here who I'm aligned with that. The baby is aligned with that for sure, but maybe the spouse is not aligned with that. How do we have that discussion? Tell her to call me up and I'll tell her the same thing. But, and I get it, I get it, you want your baby to have, like, when I was pregnant with my first, I was working with a woman who was also pregnant with her first. And I was telling her about this enormous garage sale that was happening at like the fairgrounds that weekend.

And she said, oh, this is my first baby. I want my first baby to have everything brand new. And I was like, oh, we're not the same person at all. Okay. I just won't tell you about these garage sales that are coming up. always keep your baby in a onesie because when you don't, they poop everywhere. And every mom listening, every dad listening is like, yep, that's what happens. So buy a bunch of onesies at a garage sale.

And when they get covered in unmentionables, you can throw them away because they only cost a quarter. And that's kind of gross to clean that out. But yeah, so you can spend very little on having a baby. And you can spend a whole lot of money on having a baby. You could buy Ralph Lauren actual baby clothes, which seems absurd to me. I think you can even buy Chanel baby clothes at the garage sale. I think it's absurd.

And everybody's going to buy you baby clothes anyway. Like get good diapers, love your baby, spend time with them, and that's all they want. But, I mean, that's oversimplifying everything. But it's like the baby industry will tell you you need all the things. You don't. You need something to put in this end and something to clean the other end. And that's like keep it warm in the middle. And that's like, that's kind of it.

And there's lots of ways to do that on the cheap. Yeah. I was trying to actually go through and put together a budget for a baby. And it was very, very bad. Yeah, I was like Googling like, how much does a baby cost per month? And it's just wildly inaccurate. It's like anywhere from $1 to $10,000. thousand dollars. That is a true statement. Anywhere from one dollar to ten thousand dollars. And

you know, there I went off on a tangent. I said breastfeed in cloth diaper. Not everybody can breastfeed if you need to buy formula. You need to buy formula. Reach out to the formula companies and ask for coupons. They'll send them to you. Formula is expensive. Getting the liquid formula that you just pour into the bottle is more expensive than getting the powder formula that you mix with water. It's not that hard. It dissolves super fast. It's real easy to make.

Get the powdered kind. Buy in bulk. Ask your doctor for samples if they have samples or ask them if they have any way to save money on them. Some babies need special formula and sometimes you can get that prescribed by the doctor. And then your insurance might cover it. There's a lot of different things to try when your baby. doesn't fit the

traditional, I don't want to say norms, but like the traditional, you know, everything's okay. That doesn't sound right either. So sorry, I don't mean it like that. But, you know, when your baby, I cannot figure out a way to say this. It doesn't make me sound like a horrible person.

So talk to your doctor, but like talk to moms, join moms groups. Like there's always people looking to get rid of their baby stuff. Take everything. Go through. it, take what you like, and pass on what you don't. And that's a great way to get baby stuff. We do have the age old issue right now, which is obviously when my wife is off of work,

she doesn't have maternity leave. So that brings this whole different budget scenario that we're just banging our heads against the wall trying to figure out. Jeez, yeah. What state are you in again? Wisconsin. We're in Milwaukee. They have four-year-old kindergarten.

So obviously we knew it was coming. So we're still excited for everything, but we do have a little bit of a dilemma we're trying to work through right now with us. Yeah, that's just going to be another expense that you guys are going to have to have to put into the budget there. And then when she goes back to work, there's child care expense. What are you going to do about child care? Right. Who do you have to watch the baby? That's what we're kind of.

We're tossing around ideas. I mean, we talk about it a lot. We're just, we're not quite there with a final decision, but trying to look at some side hustles, maybe some stuff we can do from home. We're just, we're really trying to navigate right now. So it's a lot to think about. Well, the good news is you've got a really strong financial position with all this kind of stuff on your money journey.

You've got a big margin to safety. You've got a number of assets with this and a portfolio that looks like an end. Your net worth is not just in retirement accounts or your personal home equity. it's in assets that can excel you towards your financial goals. You're generating passive cash flow from these properties already with this. That will probably partially or completely offset some of these child care expenses. So you're in a good spot and you're going to build wealth over the next couple of years with it, regardless of whether you buy the baby clothes at the Ralph Lauren Polo store, most likely,

or at the garage shell, although Mindy's advice will certainly help. with that. So yeah, but I think it is interesting. It's something I got to think about if we if we start a family, Mindy, in the next couple of years. So thank you. Healthcare or I'm sorry, child care can be, there's lots of creative options for child care. Maybe your wife can work. I mean, she works as a pediatric dental hygienist, did you say? Pediatric dental assistant. Yeah. So there's the, there could be the opportunity. for a four-day work week and maybe other people that she knows could do a four-day work week. And it just the same kids rotate through people's houses.

Like she takes three kids one day and somebody else takes three kids one day and somebody else takes three kids one day. And that could work out. Babysit swaps are great as long as you trust all the other people that are, you know, within the swap. But there's like, I think you just really have to get creative if you don't have family near you or, you know, trusted friends or trusted like neighbors that do this. I mean, just because somebody works from home doesn't mean that they get to be your babysitter.

Speaking up for all of you, work from home moms that get asked this all the time. Hey, you work from home. Can you watch my kid? Well, no, I work from home. Sorry. I digress. Well, how else can we help you today, Connor? Any other areas that you want to touch on or anything that you don't feel we've quite

covered enough? No, I mean, we covered a lot of the areas I wanted to talk about, kind of backtracking a little bit. I guess I want to get your thoughts on currently, you know, I'm not putting anything into my Roth IRA. My Roth 401K, I'm just putting in the company match, 4%. All cash above and beyond that I'm taking and dumping in real estate. I'm assuming with my goals of the five, seven years or 10 years at max, that's kind of what I should be doing with. purchasing more real estate? I think it's an impossible it's an impossible question to know the right

answer to. If you believe that your returns from real estate will be greater than the returns you can get from the stock market, that 10%, maybe tax advantaged, long term average at the stock market by return 8 to 10%. Then you should then you can continue doing that.

And I see nothing wrong with it. It's what I did when I got started, but something very similar to what you're describing here. And it works out for me, although that was in the middle of a very good market for real estate. I guess and stocks over the last couple of years when I started there. So I think it's a decision to make, and I love the fact that you have made a decision, and you're doing that for the most part, rather than spreading it all across everything

and getting rich very slowly with this. So I can't argue with it, but I think, and I think if you're going to do that, then apply your trade in real estate and and figure out a way to make sure that you can get the best returns there possible with it. I completely agree with what you said, Scott. I think that trying to do everything is going to be difficult and focusing on one thing with your background. I think that focusing on real estate is a really great choice. Next question. Yeah, I guess I don't know. I mean, we wind over.

It's just the one thing I want to talk about was the scaling and, you know, I just, there's days where I just don't have enough hours in a day, and I'm sure you guys are familiar with that. So it's not like it's my problem only. But, yeah, just general time management. I mean, my W-2 jobs pretty, they require a lot of time to it. So it's tough to also try to scale the real estate portfolio on top of that. it's getting extremely difficult.

You're in a great income and a great bonus potential from your W-2 job. So that's why it's difficult to build a business on the side because you have a great job. Fair enough. Yeah. No, I think that is the big crux is if you're going to scale your real estate portfolio, you need to do, you need to go back to a drawing board on the basic math about what that return is going to be and an estimate of how that's going to impact your time commitment, right?

Because, and I think that's the big challenge for you is to figure out, am I really getting wealthy faster because I'm partnering with these two individuals? Or am I just going to own a bigger portfolio with more partners that produces essentially the same economic return long term as if I didn't have those partners in the first place? That's the trap I think you should save yourself from. And it may be the answer is yes, having these partners are going to get me there faster. But I bet you it will take a structural change in the way that you've done that more clearly outlining the rules and responsibilities or giving you economic interest that results from the

extra work you're going to do. And also, scaling doesn't have to go from zero to a million today. I would keep your real estate agent, make sure they know that you are ready, willing and able to jump in with both feet when the right property pops up on the market, have them send you a list based on whatever your criteria is over whatever market or markets you're looking at. And what I do every morning is I go through all the listings that came in overnight. And I go through the listings as I'm drinking my coffee. I check them out. I review what the property is, how much it's what like where I think it's, I'm only looking

in my specific city. What this is doing is showing me just how fast my market is appreciating. and where the markets, where the prices are rising. And in my city, it's everywhere, which is awesome. But it's, it just keeps the properties in the forefront of your mind all the time. And it just, it doesn't take very long to do because I'm not looking through all 500 properties that are on the market. I'm looking through the 15 that came on the market last night. And I can scroll through them really quickly and say, nope, nope, nope.

Oh, that would be very interesting. I'd like to go look at that. or, you know, hey, this is awesome. I don't even need to look at it. I know that this is going to be a smoking hot deal. I can jump on it right now. So I would make a point to review the listings every morning and quickly dismiss anything that you know is not going to work out.

Dive a little deeper into something that you think might work out and see the properties or make offers on the properties that you really want to own and see what happens. Do you guys, I'm not too familiar with the 1031, but do you guys see opportunity for that in my position where I'm at now? You haven't known the properties. I don't think you've owned the properties very long. I don't think that you have a lot of equity in those properties. I don't think you have a use case for trading up from those properties to another, to a larger property. Right.

So looking at some of your numbers here, you know, one of the properties you have 375 asset value, you have a $305,000. mortgage against it, right? Another one you have $355,000 value, $305,000 land contract. Another one, you have $315,000 in asset value in 227. So you maybe have $150,000 in equity between all these properties, maybe $200 on that. And to me, you're highly leveraged against all those properties, which means your return profile, if things go reasonably well, is likely to remain strong. And you won't be able to 1031, even if you 1031 all of those properties, you're pulling out 150 to 200 grand, maybe less after transaction costs associated with that. And you're buying a, I don't know, $7,800,000 asset. But that, I mean, it's almost less asset

value than you currently have with it based on that. If you had, if your mortgages were $100,000 across those things, you had $600,000. and equity value, that would be a real consideration. You own those things for for seven to ten years, then we might be talking about that as a tactic. But I think you just have another several years to sit on these guys before that becomes a more practical, a more useful tool in your arsenal. Yeah, I will only disagree with Scott about the amount of time that you've held the property for a 1031. There's no actual set amount of time that you have to own the property. Otherwise, everything that he says is correct. There's just not enough equity in there to make the 1031 and the

hassle of a 1031, the deadlines of a 1031 worth your while right now. In a few years, it might be. I mean, we're in a rapidly appreciating market. I'm not that tuned into the Milwaukee market right now, so I don't know how fast your market is appreciating. But over the course, like over most of America, it is appreciating rather quickly because we just have no. supply right now. So I can say maybe in a few years, I can see this being more of an opportunity or more of a worthwhile endeavor. I will say if a 1031 does actually work for your specific situation, get involved with a qualified intermediary before you list your house because if you take possession of the money, your 1031 is out the window. There's no way to save it. So there are several

really great 1031 exchange qualified intermediaries. that's a specific phrase. That's the person that handles the 1031 exchange for you. They know all the rules. And you can find a couple of really great ones at biggerpockets.com in the forums. Just type in 1031 in our search bar and you will find the same names referred over and over again. Because they're awesome. Okay.

Well, Connor, this has been a lot of fun. I had a great time jumping into all of your different options. you really do have a great financial situation where you're at right now. I don't think that Scott and I do enough to praise the financial situation because you could be 30 with a boatload of debt and no assets at all. I mean, you're doing great. You are in that phase where you sit and wait. Now you just got to wait for the appreciation to grow and the portfolio to get larger.

So as you continue doing what you're doing, it will continue to grow. I would echo that you're doing fantastic with this. You've got a really strong financial position. You earn a great income. You spend much less than you earn, and you're applying, you have a strategy that seems effective for your investing, especially with this real estate stuff with it. This is the frustrating part of the financial journey because you look up in five years, and if you just ply this, you're going to probably go from 250 to 500 to 750 in net worth,

depending on how the markets do and what the compounding. of your assets, how that plays out. And your frustration, your biggest pain point, which we have not solved today on the show, really, is how do I make that grind go faster in the end? And the answer is, I don't really have a good answer for that, from the grind perspective, of moving from this period of several hundred thousand dollars in net worth and strong cash flow positive situation to financial freedom that much faster, other than, you know, finding that creative option for your business

that actually changes the economic potential. It's taking more risk or working harder or finding some sort of opportunity to, you know, systematically exploit in your market with that. And I don't think we uncovered that for you today. So this is one of those finance priorities. Hopefully we're helpful and at least, you know, not at least helping you avoid or tweak a situation that might have resulted in more work for the same or essentially the same gain as if you did it on your own.

but I don't think, I actually don't think we solved your fundamental problem today, unfortunately. Is that right? I wouldn't say that's right. I mean, you guys, you gave a lot of good feedback and kind of reassured that the path of mine will get me there. I don't want to put the cart before the horse. I got to make sure I still do things correct and not try to scale too fast. There's an end in sight. It was nice to kind of hear some reassurance from you guys and a lot of good feedback, so I appreciate it.

Oh, well, great. Okay. I was just a little down myself. I was like, I don't know. I don't have a silver bullet here for this, for this. I think you're doing all the right things. It's going to take you some time from your fundamentals. And then, you know, I don't know if you're, you've, we've really cracked the nut on the partnership or scaling the real estate thing faster with this right now.

Well, I think we gave him a lot to think about. So I think you're wrong, Scott. Okay. Okay. Okay. Okay, Connor. Well, thank you so much for your time and we'll talk to you soon. All right.

Thanks, guys. Bye. Okay. Scott, that was Connor, and that was a fun episode. What did you think? Yeah, I think it was great. I think Connor has a lot going on as financial position. He earns a great income. He's got a clear command of his expenses, a lot of moving parts with his move coming up, and a lot of different assets and debts with different parts of their picture. So it was a fun discussion because there's a lot of, it's a more complicated financial position than many we've talked to. And so there's a lot of

opportunities to dissect various decisions and make capital allocation decisions. Yeah. I do think that we gave him a lot of really great points to think about. And that's kind of the whole purpose of this show is to, yes, give a little bit of, hey, if I was in your position, I would do this, but also to give our guests something to think about and something to, you know, what do we call it, research opportunities. These are things you should consider. These are things that you need to come to the decision about on your own. But here's some frameworks to think about that can be things that you didn't consider until Scott's big economic brain brought them up. So I'm very pleased.

Awesome. I have a personal favor to ask of the listeners today. on this. There is a account, but my Instagram account is at Scott underscore Trench. There is an account that has at Scott underscore underscore Trench. It is a scammer or spammer. They're impersonating me. They're messaging people about crypto trading, which I will never do. This, could you please, if you have an Instagram account, could you look up this fake account at Scott underscore underscore Trench and report it as, you know, I'm forgetting the language that they use there, but you can report it as impersonating a fake, or impersonating my real profile. That would be very helpful. And I think

hopefully would, would save some people from getting scammed, hopefully, with that. So thank you very much. Could you please report the fake Scott Trench on Instagram? My real one is at Scott underscore trench, one underscore. Thank you guys. He's even posting your same post. hosts. And he used your picture. And he or she blocked me. So I couldn't even see it there. I didn't even know that there was a fake account.

So yes, please, please go and report those guys, that guy or that person and getting kicked off, please. Oh, I hope by the time this airs that that has been removed. So, yes, please help Scott out. And also follow Scott underscore trench on Instagram. And you can follow me, Mindy at BP. And that's everywhere, Facebook, Twitter, Instagram. That's where I'm at. And Bigger Pockets Money, or BP money,

depending on what platform you're on, because somebody took Bigger Pockets money on several platforms. Anyway, okay, that's enough asking for favors. Oh, wait, no, we should ask for a review, too, while we're at it. We would like to be able to share this show with the whole world. But since we can't share it with the whole world, we'd like you to help us spread it as far and wide as we can. And the best way to do that is to leave a ratings and review wherever you get your podcast. Of course, we'd love a five-star review, but please give us the review

that you think we deserve. Which is five stars. Okay, should we get out of here, Scott? Let's do it. He is Scott Trench. And I am Indy Jensen saying, see you later, alligator. After a while, crocodile. Go back to the basics.