BiggerPockets Money Podcast - 286: Finance Friday: Building Your Financial Runway Even with Irregular Income w/ Eric Dunn

Episode Date: March 25, 2022

It's not uncommon to have irregular income as a business owner or self-employed individual. But with different amounts of money coming in every month, how can you budget, invest, or plan? Some months you’ll make a killing, while other months may have huge burn rates. How do you gain financial clarity when running multiple businesses with multiple income streams? What about becoming debt-free? Is it possible with such inconsistent income?  This is how Eric Dunn has been feeling lately. After paying off a significant sum of debt, Eric has seen his income slowly rise and needs help ironing out his finances before he can invest in real estate. Eric has numerous businesses that haven’t been given the accounting love they deserve. Not only that, Eric has been trying to get his safety reserve up to hold himself over during the lean months of self-employment. Mindy and Scott work with Eric to build a financial framework that allows him to scale simply and with minimal effort. They also talk through self-employment tax, financial planning, safety reserves, renting vs. buying real estate, and more. If you’re a regular listener, you probably have more than one stream of income (or will in the future) making this advice worth its weight in gold so you don’t make some of the mistakes Eric is trying to avoid!  In This Episode We Cover Paying off consumer debt and using it to propel forward your financial position Separating business and personal expenses so tax time is headache-free  Financial planning and analysis, plus using it to model and predict future income Self-employment taxes and quarterly tax penalties that you can avoid as an entrepreneur  Whether to rent or buy a home in today’s hot housing market (and strategies for both) Why your emergency fund is meant to be spent on the right things  And So Much More! Check the full show notes here: https://www.biggerpockets.com/blog/money-286 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 286, Finance Friday edition, where we interview Eric Dunn and talk about getting real with your finances. After having $30,000 grand in debt, seeing that cash accumulate, you know, it feels good. But also at the same time, I got to realize seeing a zero credit card balance is also a good thing. Hello, hello, hello. My name is Mindy Jensen. And with me, as always is my Girl Scout cookie-loving co-host, Scott Trench. I'll take some of those types of introductions, Mindy.

Scott and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting. That's right. Whether you want to retire early and travel the world, going to make big-time investments in access to real estate, or scale your personal business, will help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Samoa introductions like those. I had to tag along to the Girl Scout cookie theme. Oh, that was good.

It is, we are in the middle of Girl Scout cookie selling season here. And I am the Girl Scout Cookie Trip manager. So I have so many cookies in my house. Boy, let me tell you, they are very, very, very tempting. I ordered a bunch of cookies from Mindy and actually Claire. And they haven't arrived yet. Yes, do you know what has arrived? No.

Every single time I'm planning on coming into the office, there's this huge snow store. I guess I'm not going to get them to them today. But tomorrow, physically tomorrow, they will be in the office. Right? Today's Tuesday? They're Wednesday. Yes, I'm in the office tomorrow and Thursday. Well, sounds great.

Looking forward to them. Yes, they're very delicious. But we're not here to talk about Girl Scout cookies. We are here to talk about Eric Dunn and his finances. And Eric is, this is a super fun show. Eric is 26 years old. He's a young guy. He has made some, you know, traditional financial mistakes.

he maxed out some credit cards, he wasn't paying them off, he has now fixed those problems, and he has a small business where he is making six figures. But he is making some classic mistakes financially by mingling his business expenses with his personal expenses. So some business expenses he's paying out of pocket from his personal life. And I think that we've given him some good things to think about along the way with regards to separating those out. Business expenses should come out of the business income. And I think that is going to be a big catalyst for him when he gets his finances, towards getting his finances in order.

Yeah, I think, I think that's right. Eric has most of the core foundational elements of good financial management in place, right? He spends much less than he earns. He's paid off all his bad debt. He's investing for the future. He's thinking about real estate investing. He's got his own business that has a really exciting amount of possibility ahead of it and income generation potential. And really, it comes down to his lack of systems for managing his business and personal finances are really kind of having impacts on his ability to execute a good long-term personal finance strategy.

And so that's where it comes down to the tactics really were the barrier to the strategy here today. and I think we had a good discussion about how to think about resolving those. Yeah, and I think that we are being a little too harsh on him. This is something that's super common with people who are starting a business. When you first started out, you're not sure how much money you're going to make. So you are the one who's funding the business. But then you need to, at some point, you need to decide, okay, the business is making its own money. It needs to be paying its own way now, too.

Yeah. And let's also be real that most people who have, you know, assets like Eric's are not actually, those assets aren't actually generating hundreds of thousands of dollars in annual income. Eric has built a real social media podcasting business in his niche that is producing big income, especially in the last two years. And my guess is that that wasn't the case before those past two years. So building these systems would have been unnecessary or irrelevant or maybe even a wasted time previous to the last year or two.

So certainly nothing he's doing wrong. He's crushing it. and he will have a very, he's already already a success story with personal finance and that will only continue to grow in the next couple of years. Absolutely. Scott, before we bring in Eric, I need to tell you that the contents of this podcast are informational in nature and are not legal or tax advice. And neither Scott nor I nor Bigger Pockets is engaged in the provision of legal tax or any other

advice. You should take your own advice from professional advisors, including lawyers and accountants, regarding the legal tax and financial implications of any financial decision you contemplate, which is something we bring up again during this episode because Eric does have some tax questions and tax preparation, tax planning issues that he needs professional advice on. So we give him some ideas, but then also tell him to go to an actual person who knows what they're talking about. Tax season is one of the only times all year when most people actually look at their full financial

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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 the 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,

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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 Leaner 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 as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive. 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. Our guest today has weird income, like super weird income.

His monthly pre-tax income is anywhere from $1,500 a month to $2,000. $27,000 a month. I'm going to repeat that. He makes from $1,500 to $27,000. This makes it incredibly difficult to budget and plan, right? But it makes it far more important to budget and plan. So you can cover the lean months when the money is flowing in. It can be really, really tempting to spend it all when the money's flowing, but what you really need to do is be very disciplined. So Eric done. welcome to the Bigger Pockets Money podcast. I'm so excited to jump into your story and look at your money. Thank you guys for having me.

I've been listening to you guys since 2019. I'm really happy to be here and share my story. Eric, before we jump into where your money, what money's coming in and where's it going, let's get a little bit of your backstory. What is your journey with money look like? I'll try to keep it short, but it's kind of a lot. Not really.

I don't think so. But I graduated college in 2016. In college is where I started my career, doing this digital media, this social media thing. I gained three plus million followers on Vine back in 2013. So I was on the Vine app. And that's really where I decided, okay, I'm going to do this social media thing full time. But in college, I didn't really know what to do with that money, you know, once I was getting it and doing brand deals with companies. So I didn't understand that I had to put money away for taxes. And I wasn't getting taxed on this 1099.

income that I was making. So throughout college, when I graduated in 2016, I moved back home of my parents and I was there up until last year in April, just trying to get my mind right and my financial situation back together. And I ended up paying off $13,000 that I owed in back taxes over the course of 2014 to 2017. I also, when the pandemic hit in 2020, I decided I was going to buckle up and pay off all of my consumer debt with my credit cards. So that was over 17 grand. I forget the number, but it was pretty high up there. Total accumulation of debt I had was 34,000. And I remember that because I had all of my accounts listed on Northwestern Mutual site. And it tells me my net worth based on my liabilities and assets. And I had no assets. It was all

liability. So that number was upwards of 33 grand. So seeing that number come down and down and down over the months was really good. And how I got started with that was, I think in 2019, I was like, man, I have so much debt. How do I get rid of this? I was going through the bookstore, just looking for books to read. And I came across Aaron Lowry's book, Broke Millennial, Get Your Financial Life Together. And of course, that title stood out to me because it says broke millennial in the title and I picked it up and I got it. It was a first finance book that I ever picked up. And in her book, she mentioned your guy's podcast. So when she mentioned your podcast, I started tuning in and I had been listening all of 2020 and listening to all the people that you've had on and tell their stories. And

it really inspired me to pay down my debt. And that's what I did in 2020. And with the the type of lifestyle that I have with the variable income that I make, it's been tough to budget for that and keep that debt out of there while still trying to make income. So I think I'm right on the cusp right now of being able to manage that because I don't keep, you know, thousands of debt around anymore. And I now have a cash savings, you know, emergency reserve that Scott mentions in his book set for life, 10,000 to 25,000, which is another book that I have. I have several of books that you guys have had guests on that recommended every episode

when you guys do The Famous Four and they mention a book. I go on Amazon and I would buy it. So I have a bunch of finance books that I still have to read. But that's my background with my finances in college and post college. And now I'm ready to take the next step to find where I need to go to get to financial freedom because things have popped up since 2019. and I have to manage all of that and try not to fall back into that debt hole

that I once had because I'm not trying to go back. That was a rough time. Well, it's so awesome to hear that the show has been, you know, at least a part of your money journey and great to see all the success that you're having so far. It seems like things are in a pretty good spot and we can help accelerate things hopefully today on the show. Quick question before we get into the other stuff,

can you give us a little bit more of the money story with respect to your income general? and the various interests that you have there. So we heard about the vine and brand sponsorships. It sounds like in college, what about in the years leading up to today's show? So that was the main source of income in college. And it still is a pretty lucrative source of my income currently is the brand sponsorships, the collaborative campaigns with companies like Old Spice, McDonald's, you know, anybody that could,

you know, email me and say, hey, we have a campaign. We think you'd be perfect for it. I'm sure you've seen them on Instagram, Twitter, Facebook, TikTok, all of those channels. So that is still my main source of income where the big, you know, five figure dollars can come through. And now I have this podcast brand that I started in 2017 where we have exclusive content through a subscription on Patreon. We also sell merch. We do separate brand deals for the podcast channel than my personal ones. I also model.

I signed with a modeling agency back in 20. If you guys are watching, I don't know if you could tell, but I signed with a modeling agency back in 2017 and that kind of got started in 2019 and it's picking back up. I'm in the big and tall industry. So that one's still, you know, slow to grow right now. But that one can be really good money as well, especially if it comes in every couple months. I just did Fruit of the Loom last month. And I'm waiting to hear if I'm doing a Levi shoot next month. So those are really awesome campaigns to be a part of.

Also, I've got a YouTube channel with the podcast. So we're hoping that can grow. And we're going to probably be rebranding to and re-stratageized to help grow that channel because we've just moved in with my roommate and podcast co-host in 2021 of last year. And we had been doing the podcast since 2017. So that's just another income avenue for us. And then I have a couple albums on Spotify. Spotify and those bring in, you know, grocery money every couple months. So I get like a trickle in of

$100 here, $40 here every couple months. So that helps with, you know, just small things that I can purchase for myself. Awesome. So we kind of actually did hear about your income, the income statement that we would go through normally on the show here just now. And Mindy highlighted this earlier on in the show, but can you give us an idea of what that income looks like? Is it seasonal? Does it peak in certain parts of the year or is it truly variable and you're kind of you know very opportunistic about about a lot of these opportunities it peaks in the fall months because i'm a sports guy so a lot of the brands will reach out to me for sports content mostly football when football's going on between august and um december uh and it starts it's pretty good in the beginning of the year it kind of drops

off around march so coming up here march april may june july summer months are you know the slower months So, you know, having those brands come to me at the end of the year and then at the beginning of a year is when I usually have to budget for the next few months coming up in case something is slow and I need that money to, you know, fly out somewhere to create content or something like that. So I've been learning that over the years of, you know, what's the peak and what's the down so I can have money ready for when I do need to go somewhere to keep my personal brand alive. Okay. So it falls the bit, generally speaking, we have bigger, opportunities coming up in the fall.

That's where the bulk of the income is going to be made, or at least, you know, there's going to be more income being made there. And then there's a big dip, I guess, in the late winter, spring, early summer months. Right. Okay, awesome. And what are, how much are we spending per month? Yeah. How much control do you have there?

So the fixed ones, I have $6.50 rent currently. I'm renting a room in my podcast co-hosts newly purchased home. We broke a lease back in November because he found a house here in Jacksonville that he liked. And now I'm renting it out. It dropped my rent $200. But that will probably change here coming up soon. We'll get into that. But I've been here since November now.

So I've paid about three months in rent so far and it's only $650. Utilities is 80. I have a website that I use Wix for and it's 22 a month, gym 24 a month. Groceries. I use HelloFresh sometimes. some weeks and some weeks I'll actually go get groceries. That's usually 200, 300 a month. I use a community text platform, which is a social media platform that it's just a personalized number that I can tweet out or post on social media that people can connect with me directly

to without giving them my actual number. And to have up to 1,000 people use that. It's $99 a month. So I use that for just helping, you know, promote my podcast and other ventures that I'm in. And then outside of those expenses, I invest into a VT, S-A-X, Vanguard, brokerage account, $250 a month right now. And I have a custodian account for one of my nieces, which I put $165 in. So when she turns 18, she can have some money when she gets into the real world. So those are the expenses that won't really change right now. And in the other monthly expenses are all of the things that I do to travel for my work. that, you know, which I love.

These are my splurges really because I can't stay in one spot too long. I like to explore cities and meet, meet up with people and other content creators and my fans in other cities, like at Jaguars games or anything like that. And I create vlog videos of my experiences and put them on YouTube, which in turn, I hope creates more income for me. So in a way, these expenses, I'm investing into myself. So these will be like flights, hotels,

Airbnb, lifts and ubers, restaurants when I'm traveling and I eat out. And then rental cars, which are really high right now, those can be like a lot of money. And then Amazon, which isn't that much. I've seen some guests you've had that really splurge on there, but I don't really splurge on Amazon only when I need updated protein powder or vitamins. But those are like, monthly expenses can get upwards of a couple thousand dollars if, you know, it's NFL season. One thing I want to call out here real quick is you said you're a big guy, right? How big are you? I am six foot five and I weigh about 280 pounds.

Awesome. The reason I asked that you said you spent 200 bucks on groceries and that is remarkable, I think, from a lot of folks standpoint. How do you manage that? It's mostly because I used to splurge on DoorDash, but I didn't include that because I I deleted the app from my phone and I want nothing to do with it anymore because that I would spend 600 plus dollars a month in DoorDash and I would gain a lot of weight doing that. So I'm trying to start this new thing early this year where I buy, you know, healthy stuff, fruits, veggies and Hello Fresh is really filling. So they make good meals. Like the meals I get, I can make two servings for myself.

So I can spread out a three meal week all week. So I'm learning to do that, Scott, but I'm trying not to overeat because I want to drop weight. I know it sounds like $2.90 for my size is not that much, but I'm starting to go outward. And the more I age, I don't want to do that. So I'm trying to watch my diet a little more. Well, fair enough. I'm sure I'm sure you're not that out of shape if one of your income streams is modeling for Fruit of the Loom and Levi's. True, true.

Okay. So what would you, how would you pay your, and I think the first point Mindy and I would have here is, is to separate out business and personal expenses. So how much, if you exclude what you're traveling for work, if you can do that, how much are you spending per month? And then if you lay it, layer it back in, how much are you spending in total here? You mean like personal? What am I spending versus my business? Yep. Personal is pretty much nothing. Like, I don't drive. I pretty much just go to the gym and figure every day I wake up and I figure out what kind of content I can do or who can I email to get the next brand deal. It's a lot of planning in my day to day and trying to stay in shape. So there's not much that goes into personal expenses outside of the groceries and the day-to-day stuff. But the business expenses are where I spend the bulk of my money, which with taxes is one thing I've learned because back when I did have all that debt in college, I had upwards of eight credit cards. I was just using any old card for any expense.

And as I'm learning taxes now, I'm learning that, hey, you should be using certain credit cards for your business expenses and certain credit cards for your personal expenses. So that's one thing I'm trying to organize as I'm doing this career path a lot more. But my business expenses are way more than my personal expenses. I try to keep those down because I know when tax season comes, everything I do in my life is pretty much for my business. So that's going to be the bulk of my expenses. Okay. So for our purposes here, Mindy just kind of wrote this out.

We're going to peg your monthly expenses at around $1,500 from what you just said from an ordinary course of living. And that's like the low, low end with very little business activity. And then it will skyrocket depending on what you're doing from an income generating perspective and traveling and all that kind of stuff. Can you walk us through your net worth real quick with investments less than any debts? Investments. I have the VTSAX, which is about 12,000 in there, started that last year. Got a Roth with has 9,000 in it. I just transferred that one over from a different financial institution.

So I didn't put any in there last year, really. I was letting the weeds grow. I don't know what phrase to use for that. But I was just letting it sit in the new account for a little bit. Got $4,000 in crypto, you know, just dabble money, in case it goes up. And then a cash reserve of $17,000 that I, you know, started after I cleared all my debt back in 2020. So that's what I've been trying to build up while reading Set for Life. and then the custodian account for my niece has $1,100 in it.

My student loans, I have three student loans that are a total of $10,930. It's like a 4% or so interest rate, but it's nothing right now until May. I was paying on those last year just to get the principal down while there was no interest on it, but I haven't paid any this year. I'm satisfied with what I did last year on it, so I'm content not paying until the payments are back. Um, no car payments because I don't own one, never owned one, uh, no house, just the rent. And then I do have five credit cards left after I clear all that debt. Um, I keep, I've been keeping them paid off as best as I can.

Uh, I still use them for a majority of my travel expenses. Like I just put, um, $1,100 on an Airbnb for the Honda Classic golf tournament in Palm Beach this upcoming week. But I get paid for that event, working that event. So when I get the money, I'll, you know, pay that off before the statement closes. And I try to do that as best as I can. And if I can't do so like a slow month or something, then I just try to keep them below 30% of the balance as best as I can. But I'm just trying to keep my credit score above 750 because, you know, the end goal eventually here is to get into real estate investing.

and I don't want to have to be coming from behind with my credit score, you know, so I'm just trying to keep that maintained at the moment. But I do have two credit card balances currently because my birthday was this past week and so I've been using them. But they're manageable right now. And one of them is, I think one is about to be like $1,200. And then this other card is going to be like $1,200. But I do have income coming in that I did not account for yet because it's not actually

in my account, but I'm not worried about paying those off because I have a few jobs that I do have accounts receivable to get those cleared. So I only really am counting the student loan debt because the credit cards will be paid off. So net worth looking about 20 grand probably. Okay, great. So we have 17,000 liquid. You have the ability to pay off these credit card balances if you wanted to tomorrow. You just choose not to and you kind of roll over time with them, is that right? That's correct because I, my, my philosophy is do not touch that $17,000 cash savings for debt. That's, I don't want to touch it at all. I get that. But credit card debt is obscenely high interest rates. So I would, if I was in your position and the credit cards are

coming due and the income hasn't come in yet to pay them off, I would take the emergency fund, pay off, pay off the credit cards and then when the income does finally come in, replenish the emergency fund rather than pay 10, 14, 29% interest on these credit cards. Because $1,200 at 29% interest is still going to be a lot of money. And credit card companies should be ashamed of themselves for charging so much, but that's outside the scope of this conversation. I would, and because it's so little, relatively speaking, and there's income you're anticipating.

I would pay them off rather than pay the interest on it. So the goal here is to get into real estate investing, but I think we have a number of Finance 101 things that will be helpful here, that will get you in position to make that a more accessible opportunity going forward. And I think Mindy's right on this one, or at least I agree with her, where that cash savings account, that $17,000, that's funding your business, that's your personal emergency reserve. That's this safety net for you.

The purpose of that for me, or one of the purposes, is to not accumulate bad debts on a go-forward basis. So the fact that there is a bad debt, a credit card balance, even if it's a relatively small balance, would be something I'd use this money to pay down rather than have that. And, you know, if we're getting below $1,000 or $2,000 in that cash savings account, that's when, okay, I'm not going to even pay off the bad debt because I need that to be a buffer between myself and the world, you're nowhere close to that. So I think, I think that I would, I would use some of that to pay down the credit card debt and then maintain a position where you never

essentially have a rolling credit balance that you don't pay off in full each month. So if I had a daily balance, but it's paid off before the statement closes, do the credit bureaus know that? Or do they only? That's perfectly fine. Like, what I do is my credit, I purchase items my credit card, and then I actually pay the balance two months later. That's just the automatic payment. mechanism that my bank chooses. And so I carry that balance and then pay it off when the statement comes due in full every month. Is that what you're doing?

Yes, because the reason that they're carrying the balances right now is because I'm trying to, I try to time it sometimes to use the card that isn't about to close. So I know that the cards that I've got balances on right now, they don't close for, you know, a couple weeks or a few weeks. So if the money does come in that I'm owed before that statement closes, then I'll pay that. And just usually what I'll do is I'll send some to my emergency reserve first, then pay off the balances of the cards and then save some for taxes. So if the timing works out like that, then I, yes, I do pay off the balance first. But sometimes I do leave it rolling over because I got to get out of my own head about seeing that cash savings reserve drop.

And after having 30,000 grand in debt, seeing that cash accumulate, you know, it feels good. So, but also at the same time, I got to realize seeing a zero credit card balance is also a good thing. So I'd think about it net, right? My cash position is my cash savings net of my credit card debt. So just because it's in the bank doesn't mean you can actually access it if you have $10,000 off setting it. Right? You have $7,000 in cash, not 17 in that scenario. So I would just reframe it to think around that.

The second observation I have here, and, you know, this is something we mentioned earlier, is separation of business and personal. I think that's going to be a really important challenge for you. And it may be right now it's all intertwined and it's all one thing. But that's not a sustainable approach over a five, 10-year look-forward period here. And it's going to hurt you when it comes to real estate investing and these other opportunities where you want to use those income streams to help you qualify for debt for other assets. So I'd really think, I'd really put together a plan there to think about how do I separate out my business or businesses, right?

Are some of these things altogether one business, like Bigger Pockets has a YouTube channel, a podcast, you know, books, those kinds of things. And that's one business, right? With this. So do you want to, can you, you know, put a bunch of them together in one business? It sounds like you have a partner on another line here. So that maybe that's a second business. but the simpler you can make this, the better off your life is going to be from this. So you can get out of thinking about how do I time my five credit card payments?

And it's just, no, I've got one credit card for business and one credit card for personal. And I am separating those expenses out. The personal expense goes on this one. The business expense goes on that one. And both of those balances are paid in full each time the statement comes due automatically from an automatic, automatically with your bank feed. With the credit cards, I do a lot of the travel rewards. So the only actual business card that I have is a Chase one.

And then with flights, I like to use my Delta Amex card. And then with hotel stays, I like to use my Hilton card. So is that my spreading myself too thin with rewards cards that I use for business as well, but they're not actually business cards. They're just expenses for business. I think the goal has to be, how do you keep that super simple? So everything's automated. If you know how things are going to get paid, and then you can move on to the more

fundamental items in your financial position here and be worried about those things. If you're spending mind share thinking about how to time the payments on these credit cards, you're probably doing too much, in my opinion, on this and would benefit from simplifying to a certain degree. If you are, if it's super straightforward, I use this one for this, this one for this, and I'm maximizing my benefits, maybe there's something there with given how much you travel. So that's a good context. Yeah.

So you've mentioned that you have five cards. You've got one for business, one for hotels, and one for airlines. What are the other two? If they're not giving you rewards, unless one of them is the longest card that you've had open, I would close those out just because it sounds like there is a lot of mind space being taken up with the credit cards that doesn't really need to be. The other one is what you just said. It's the oldest card that I've ever had.

It's a student credit card that has. no benefits, but it's not even my highest limit anymore. It once was, but I just keep it around for the credit age, but it's some small private bank in South Dakota that I've had since 2012 when I first started college. So I just kept it around for that reason. So that's 10 years old. I would keep that. I would use that, like put a calendar note or something on buy gas every month with this card, swipe it and then come home and pay it off. So that's not taking up any space in your head. You just want to make sure that you're using it regularly enough that they don't close it

because that is your longest credit card. That's your credit length of the length of your credit history is now 10 years. If you close that, then your credit history shrinks. And that could have a detrimental effect against your credit score. But also you can go several months without. charging before they'll cancel it. But yeah, that one I would keep the other one I would get rid of unless it is some amazing card.

But you've already got a lot that you're thinking about. Yeah, this one's a JetBlue card because I fly Delta in JetBlue. Maybe only use those four flights on their respective airlines and then don't use them. You know, use. So we have multiple cards, but we have. one everyday card. This is just what we put everything on. We swipe it. And then that's the one card that we're paying off all the time. We're not really thinking about the other ones. That is what, that is what I do with the, with the longest age card that I have. I just used it for that

community text platform. For a monthly payment, I just added that as my card for that monthly payment every month because I know I need to keep it in use. Yes, but that community text platform is a business expense. Yeah. True. So I agree with Scott, that you need to sit down and separate out your business expenses from your personal expenses. And as somebody who has an LLC of my own, I'm always looking for things that I can call a legitimate business expense. If I don't personally have to pay it, if I can pay it on my business instead, that's just better for me. So your community text platform, absolutely a business expense. Website, 100% of business expense. Jim, this is where we need to get a CPA in here.

because I don't know since you're a model, can the gym be considered a business expense? I'm also wondering if your expenses are actually this low. And I'm not trying to call you a liar. But how do you get to the gym? You don't have a car. How do you get to the grocery store? How do you get to modeling shoes? How do you get to the airport?

I don't see any expenses for like Lyft and Uber. So if you're not driving and you're not taking a lifter Uber, how are you getting to all these places? I did mention lift and Uber, but I didn't say a number, but I. Oh, that's in the other. I'm sorry, I have it in a different space. Right. That was the other monthly expenses where I said that they can get upwards into the thousands with the flights, the hotels, the lifts and Uber's, the rental cars. I was since moving here to this new house from the apartment, I've gone to the gym less, I'll admit.

but it's also because I sprained my ankle back in December, so it was tough to do anything. But when I did, I went for a week straight a couple weeks ago and I was Ubering round strip to and from the gym for a week. And I was like, this isn't very efficient. I need to figure out a way how I can get to a gym, you know, without a car and without paying for $10 to $15 Uber's every. Yeah. Like I think, I think a bicycle actually is a really good option there.

And, you know, for $200, you know, go to a couple yard sales or, you know, buy when used. That's how I got around Denver for a couple of years, primarily. I did have a car, but I probably would have been better off if I had lifted, used Lyft or Uber in a lot of those scenarios. And so it's actually a remarkably practical way to get around for someone in your situation. Yeah, but Lyft an Uber around town is a personal expense. lift an Uber to the airport because you're flying to an NFL game, which you're covering for your podcast, is a business expense. So I think it's really important to be very, very careful about tracking your spending and which one is business and which one is personal and separating those out and as much legitimate business as you can throw into the business, that's just better from a accounting perspective. I'm saying legitimate business expenses.

You're, you know, going out to dinner when you're visiting your girlfriend is not a legitimate business expense. But going out to dinner when you are out covering an NFL game is a legitimate business expense. So, you know, you want to keep really, really meticulous track of because it's a deduction, right? Scott, how does that work? Yeah. So it depends, right, with a lot of this. And this is where we're not CPAs and can't get into the, the,

You know, there's something around, for example, meals changed from being at least fully deductible or partially deductible to being less deductible as they relate to business expenses. But I think that based on what we're discussing here, I think there's a lot of spreadsheet work that you need to do here in the next couple of weeks or months. I think that'll be your homework to say, last year I went on these trips. How much is a trip costing me? And what is the business asset that I'm producing? It may be hard to calculate the income directly from that trip because it may be just helping you with your podcast or whatever it is. But I think you need to say, you know, from this trip, I created these assets that related to my business and, you know, an asset being a podcast, a video, a social media post, whatever. And this is what it cost me.

Here was the flights. Here was those types of things. And I think that will tell you a lot. You be like, that trip was definitely not worth it. And that trip definitely was. And maybe even if I can't quantify the straight-up income, I'll get something there. And then at the end of the year, you can hand that to your CPA and say, here's what I spent from my standpoint believing, you know, around and how I'll judge it on my business, which of

these items are tax deductible, which are partially tax deductible, and which are not. And I think that will be a really helpful conversation for you because you can categorize those things and you can have a discussion over a few hours. And if you can get to that point, bigger pockets will sponsor your visit with a CPA, either before or after tax season this year. Yeah, that's my biggest hurdle currently was figuring out how to break that down for tax season because, as I mentioned earlier, I had back Texas owed since 2014 up until 2020. So really figuring out how as a business owner and being employed by myself, how to figure that out

for a tax season is what I need to learn so I can go into this thing full steam ahead. And I haven't filed yet this year. I just went home where all my 1099s went. So that's, you know, the next step will be going back because last year I got so overwhelmed with how much traveling I did. I did a lot more last year. So I was keeping track of my expenses on a monthly basis. And then as the year kind of came to an end, I fell off with it.

So I'm going to really have to sit down. and take the month of March to go through all of that because from the book, your money or your life, that's when I started really tracking my expenses and getting on Excel and putting numbers in because I actually like doing that. I like going on Excel. I have one open up right here. And I put my numbers in and plug and play. But for this year, I've been writing them down, actually writing them down in a planner.

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amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money free. The game begins in three, two, one. Ready or not, too, here I come. Only in theaters March 20th. After surviving one deadly game, Grace and her sister Faith must now face off against four rival families in a fresh round of blood in games filled with more action, scares, laughs, and combustions. Starring Samara Weaving, Catherine Newton, Sarah Michelle Geller and Elijah Wood. Ready or not too, here I come. Only in theaters March 20th. Get tickets now. So it sounds like you have all the data from this. You need to organize it in a way that makes sense to you. I would think about it. You can take my suggestion and do it by trip or by activity set. You can do it by

business line. There's a lot of right ways to do this. But that's going to be a big, I think, strategic question for you is how am I going to organize my life and how I think about managing my money since my personal life and business are so intertwined or my businesses or most of my expenses are coming through this business. So I think that'll be a big challenge for you and there's an art to that, right? And again, you have those choices around per trip or per opportunity or per, you know, per gig. If you want to do it that way, hey, I'm going to fly out to this place and do a shoot or whatever. That's a gig. I would put that into this business line. There's some way to do that, But those systems are going to get really tough for you if you don't invest the time to setting them up or thinking them through up front, I think.

Right. Especially the gigs start coming in more frequently. I'm going to get very overwhelmed with that. But I really need to find me a good accountant as well because travel with one of these. There's an envelope, number 10 envelope, random old envelope. Travel with one of them and a pen and write the name of your trip and put your receipts in here. Every time you go anywhere, when you're out to dinner, you're with, you take Scott out to dinner because you're going to interview him on your podcast.

You write on the receipt, dinner with Scott to talk about the podcast. And then you slip that in there. And then when you come back from your trip, you've got all your receipts. You can, oh, I had the airline and it cost me this much. And the hotel was this much. And all of the things, all of the surrounding things, maybe you miss a receipt, but missing one receipt as opposed to missing 14 receipts is going to be better for your taxes. And you're right, you do need to get a great CPA.

You need to get a CPA who understands small business and what is deductible and what isn't. There are, I think most CPAs would understand small business. So this is, what we're talking about here is account. It's called accounting, right, obviously. And, you know, depending on how much you think you're going to earn next year, this is something you should either be doing yourself and placing the system and building it. investing in time to figure out, or if you're making a lot of money, then you hire a bookkeeper to do that, right?

Maybe a lot being over $200,000 in net income, right? And that's an art, right? It's like, who knows what actually that line is. But if it's going to be, hey, I'm going to make $50,000 after expenses, that's probably a really good activity to do yourself because hiring the bookkeeper is going to be more expensive than your hourly rate. And if it's going to be $200,000 in annual income, that's where you might invest in a bookkeeper to help you set those systems.

So you don't have to spend quite as much time thinking through that and learning the ins and outs there. The other part of finance that's really important for what you're doing is what we call financial planning and analysis or FP&A in business jargon. And that's estimating what's going to happen in the future and are things happening as I plan for them to happen. So the million dollar question for you is how much income do you think you're going to bring in net of expenses?

over the next, you know, separating out your personal expenses over the next 12 months. And do you think that's sustainable? That is, that is tough to guess because it is so random. Like the number is so different every month that it's, but they do, they are consistent. And if the podcast that we're making currently can grow at the rate that I know it can grow, then I'm not sure what number to put there. but I think this career is sustainable and has been so far. I'm not saying your career is not sustainable.

It sounds very sustainable. It sounds like things are going very well in most cases. I'm saying that you need to have an understanding or ability to forecast your income across at least some of your bigger income generation channels, especially if you want to get into real estate investing. That's going to be a central challenge for you. So to some degree, you've got to be able to look a lender in the eye and say, I make this amount of money from this business line and this amount from this business line and this amount from this business line.

And you can expect that to continue on a go forward basis, which is why you should give me several hundred thousand dollars to buy this piece of property. And here are my tax returns from the last couple of years showing something that's consistent with what I described there. It is harder for a self-employed individual or a business owner to get access to mortgages in debt than it is for someone with a a job, but it's not impossible, especially if you've been generating that income reasonably consistently over the past couple of years. And you may look back, if you look back at your tax returns and say, wow, this business line or that business line actually was pretty consistent. I made, you know, 50 this year and 75 this year with that. Okay, great. That's going to help make your case to this person. But I think that's where it's like, it's really important to have

that breakout and say, this is one business. This is a separate. business and this is my partnership and these are my personal expenses. What is that business line actually bringing in? Yes, you want to be able to categorize these expenses to save money on taxes and offset that income, but you also want to show income so that you can get a loan in the future against one of these properties and also you want your business to make money. So do you have any, can you give us like kind of your best guess maybe over the last couple of years or what these, what the business income, you know, how you would set up or categorize your business income and how much it's brought in? The YouTube channel is podcast. Then we have the brand deals that we got for that.

And then the premium content we got for that. I'm not sure the numbers because I'm not organized, like you've been saying. So I kind of just jumble it all together. But for the 1099s that I've gotten from the modeling that I do, the collaborative campaigns on social media, my YouTube channel, and the music stuff. Last year, I know I did well over 100,000. And then the year before that was my first year actually making over 100,000. So back to back years 2020 and 2021, six figures from my personal business income. And then the podcast channel, I'll have to go through.

through that. But our best year was last year for sure because we moved in together and we started this is why we moved in together is to create better content and to be able to make more income from it. So I know last year was definitely our best year from any other year. And that was probably $20,000. So those are the two businesses right now. I don't know if modeling is because they send me 1099s, but it's under Eric Dunn and not under my LLC. So I think with the modeling, you have all your assets in one or two LLCs and then you have a separate sole proprietor income as well. Correct. Which I think that's where the modeling stuff goes, if I'm not mistaken.

It goes to just Eric Dunn and then the social media stuff. I give them my EIN for my LLC personal LLC and then the podcast stuff. We just made an LLC for the podcast a couple years ago. So we're starting to get organized with that. but those would probably be the three different categories for the jobs that I do. That's great. So you're in really good shape with that. I think that's a perfect structure to have some things in your personal.

If your modeling income were to get much larger, then you can consider creating a second or separate LLC for that. But that makes sense to me the way that you're setting this up. And it seems pretty organized. The next question is, how much money are you? expensing against the that those the income you're generating from those those areas in the LLC right so if you brought in 100,000 inside of your LLC for your brand and then you offset that with 80,000 in expenses you'd show 20,000 in income to the IRS on your tax return and that's going to that's impact your ability to get a loan if you didn't expense any of that or expense it in your personal

name you're going to have two years of 100,000 dollars in income do you have any idea of what you you might have been shown to the IRS the last two years? Well, this year I haven't gone through it yet, but last year it was, I think, 116 gross, and after the expenses and all that, it dropped down to 85,000 in net income to the IRS. Wonderful. So I think you're going to have to talk to a few lenders, but when you file your taxes this year, if you show a number similar to that and growing, I think that you're probably going

have a case to be able to get a load for equivalent to somebody who's earning $85,000, $90,000 a year at a W-2 job or more. It'll be, you'll have more paperwork, but that I believe that should be the end result. Something that we can confirm, perhaps, in the Facebook group, if we have some lenders there that could chime in and help us. Yeah, I will post a question for our lenders to talk about how you can best present yourself as a borrower when you go to get a loan. What I do know is that you need to start talking to lenders now

or as soon as you start getting serious about looking for a property. You need to talk to lenders and see what they're going to say. You don't want to get a property under contract and then talk to a lender and the lender's like, no way. Or the lender's like, hey, give us 10,000 documents. You want to be able to get those to them in advance because there is a process to getting alone and it's long and drawn out. And it doesn't matter how much stuff they ask you in the beginning. They're going to ask you for more later. That's just the sorry lenders. I love you,

but you ask for so much stuff. Yeah. Now, because, and this is something I would change going forward, but because I think it hasn't been quite as clear the past year or two, what expenses are business and what are personal, right? That may be something to think through as you're talking with your CPA and bookkeeper, right? Hey, this meal expense is not tax deductible. Well, I don't want to offset my LLC's income with that since it's going to be six of one. Since it's not going to affect my taxes either way, and I want to show a consistent number there, right? Like, that's something to think through. You need to do what's legal and what's correct with these types of things, but you may have gray zones in there.

And you don't want to think about what that's going to say at the end state about your business when it, when and where it is fuzzy. and then going to go forward basis, make sure it's not fuzzy, it's super clear. Right. But that's something to keep in that back of your mind. But I think from a real estate perspective, it took us a couple of minutes to pick through this situation, but you're going to be in great shape to invest in real estate. You've got $17,000 in cash. You'll probably build up substantially more cash over the course of the year.

If you file taxes and your income from your LLC is close to that $85,000 you filed last year, I think you're going to have two years of tax. returns that showcase income from that business, that might be reasonably stable. You know, that's an unknown. And I think, I think after you file your taxes this year would be a really good time to begin talking to lenders and see what you can qualify for. There are some question marks around whether that modeling income, in my mind, will count for loan purposes.

Hopefully it does. There will be questions about whether the podcast income will count yet. But I think you'd be able to qualify somewhere in that $3 to $450,000 range from a financing perspective would be my very cursory initial hope based on what you're telling us. So before I talk more about the real estate, the reason I started actually looking this year, even though we just moved into this house and I'm renting from it, is because I have a girlfriend who wants to move from Ohio down to Florida. me. So obviously we, I don't want to bring her here to this one bathroom house. We want to have

our own space. So, um, I was looking at houses just because I had been consuming all of this finance content and just wanted to, you know, finally get my feet wet because I'd been sitting on this idea for a while. And in this life opportunity, a girlfriend that wants to move in me, presented itself to move forward with the idea. So, uh, we actually just went apartment shopping as a backup plan. But I have, it's a funny story. on a Facebook post, one of my Facebook posts, sometimes I'll go through the comments to see, you know, the type of people that are commenting. And I hovered over this one woman's name and she was a realtor here in Jacksonville. So I messaged her and I said, hey, I told her my situation,

hey, I'm in the market for a house, you know, girlfriend coming down and self-employed. I know it's a little bit harder to get lending and all that. And then she told me she would help me and that her husband is actually a lender. So he got on the phone with me. And, we took an initial call. He's going through all these, you know, he's going through all these, you know, terms and phrases and asking me my income. And he asked, he actually asked me, Scott, what was I was projecting for next year. So, and I just didn't know.

But I told him the last two years that I had made pretty good money and I could see it continuing for sure. And he just ran through some simple numbers for a $300,000 house with a FHA loan and said I would probably get approved for, you know, $300,000. house. So that was good news. It was a good like intro call, but I knew in the back of my mind that I had to get through this tax season first because I was stressing about that because every year I'm trying to do it a little bit better. And every time it comes around, I'm a little bit more stressed about it because now there's more businesses involved. There's, you know, a relationship

involved now. I'm like bouncing between places. The business is picking up. So I'm getting more distracted from all the work that I'm getting. So I'm really just going to have to take some time to actually get it done this year and pick through some accountants so I can, you know, organize this better and especially organize it for this year for next year because I've already got the bookkeeping for this year's expenses from January and February. So I can just go through that and categorize it better for this year. But last year's expenses, I'm really going to have to sit down and actually do the homework for that. But I think I'm going to be, really good for next year. It's just I'm worried about this year because everything's going to be

coming up so quickly. And I know I need that tax return from 2021 to be able to even be able to talk to lenders about getting a house by summer. Yeah. I mean, it sounds like the big, you know, you're doing great from a overall financial perspective. You've paid off a ton of debt. You've clearly have a positive cash flow. You clearly have low fixed, regular ongoing expenses from that. There's probably opportunity to analyze your business expenses and make sure that you're actually getting the ROI that you want on those. But it really comes down to accounting at this point. It's just this system is going to get worse if you don't invest in it, I think, in the next couple of months and figure out how am I going to track all this stuff? How am I going to make sure

here's what a business expense is? Here's what it is. And if you do it in real time, it's a few minutes that day or that week to handle those expenses or it's a miserable slog that you're going to want to keep putting off during around tax time. And that's what it's been the past seven years. So a miserable slag. You've got a six-figure business. You've got a real business. Like it is time to treat the finances, a financial piece of that like a business with this. And I think that will solve a lot of day-to-day problems and it will give you insight on how to fix.

you know, things that are not making you money that you're spending money on. Yeah, that's a good point, Scott. Just because these streams of income are bringing in some money doesn't necessarily mean that they are good long-term options or things that you should be focusing on or even allowing to continue to grow. And it seems weird to be saying or even giving advice, hey, something wants to give you money. Just say no.

But that's mental energy that you're spending. and physical energy that you're spending doing something that might not be generating a lot of income. Whereas if you cut that part out of your life and focused on your podcast or your YouTube channel or something that is bringing in more income, you could exponentially grow that. So the three hours you're spending here to make $1.50, you spend three hours over here and you're making $10,000. It's a better return on your mental investment and your time. in addition to, I love that you're getting 2022 expenses, like all set up and rate. In addition to getting a CPA, we want you to talk to a tax professional about tax planning

because now we can't plan for your taxes for 2021. Whatever you owe is what you owe. And there are some, you know, I'm sure your CPA can find deductions that you may not know about. but going forward, your CPA can give you advice or your tax professional can give you advice on, hey, if you do this, you can save this much money in taxes, but you have to do this during the tax year. And like Scott said, we're not CPAs. I am not a tax planner.

I've got one and they're great. And I don't, you know, I don't try to figure out what I'm going to do by myself anymore. Because I have complicated taxes. You have complicated taxes. If you had a W-2 and you were, you know, straight income, no deductions, it's a lot easier to not have to worry about things like this. But once you start having self-employed income and all this like financial monkey business, you need somebody who knows what they're talking about that can help guide you so that you're taking advantage of all of the tax loopholes that are out there and tax deductions and tax advantages of running your own business that there are so that you can pay less taxes. Are you paying taxes periodically throughout the year? I just started last year doing that.

Okay, good. So you're not going to have an enormous tax bill that you need to save up for from a cash perspective this year. I hope not. If I'm doing it right, I hope not. Because in 2020, I put everything pretty much, after I paid off the credit card debts, I put everything into the emergency reserve that I have now. But like back then, it was to prepare. for this enormous bill that I was expecting.

And I ended up paying 18,000 in taxes for the 2020 year. But I think it's because I didn't, you know, I didn't go through all of it like I should have. I kind of just shrugged my shoulder and said, okay, I saved for this. Let me get back right next year. This is another example of where the accounting system is going to come into play here. Because what you can do is, you know, like most businesses, you can close your books monthly, right, and say, January, we made this much money. February, I made this much money. March, I made this much money. And the IRS for businesses that, you know, for or individuals who

have this type of, you know, self-employment income, if you don't pay taxes throughout the year, you will pay a penalty of a three, which accrues about a 3% interest rate over the course of the year and pay that. That's going to be unavoidable in some circumstances. And frankly, I'd rather pay a little bit of that penalty or error in the side of paying that a little bit that penalty than, you know, pre-paying too much and getting a big, a giant refund, right? There's, that's a, that's a philosophical debate we can have. Right. But, but I, but I don't want it to be a big surprise either way.

I want it to be pretty close at the end of the year. And again, that's philosophical. That's, that's, but how I, how I feel about it. If you can close your books monthly and set up your accounting systems, you can say, okay, okay, in the first quarter of 2022, I'm going to make this much money, you know, 10 grand, because it's a slow season or whatever. And I'm going to set aside 35% of that, 3500 for taxes. And that's going to go in a separate savings account.

I'm going to write that check to the government and do it on my periodic payment date. In Q2, which I think is actually just two months, it's kind of like a week. There's a weird quarterly schedule. It's not first quarter, second quarter, third quarter, fourth quarter. It's like January through March, then April, May, then three months, three months. It's something, or four months, three months, something weird like that. But anyways, then you can go through and say, okay, great, over the course, the year, every couple of months, I'm going to close my books. I'm going to say, here's how much

I made, and I'm going to write that check to the government, and I'm not getting surprised at tax time with that. Maybe I'm being a little conservative in my estimates so that I'm making sure I don't get a huge refund. I'm going to managing my cash flow poorly and, you know, giving them an interest-free loan, but I'm going to not get a, I'm not going to figure out my taxes and be like, whoa, I owe 20 grand. That's going to be real my real estate investing. You said 35. I've been putting 30, I think 30%, like for taxes. Like if I get a big chunk of cash, it'll do like 30% and put it. I have a bank account solely just to direct deposit to IRS for quarterly payments.

And it's usually 30%. But I don't know if that's enough or not. You're in Florida, you know, with that. But if you have a good year, it won't be enough. So this is where a tax professional can come in and give you actual advice instead of Scott and Mindy. Yeah, there you go. Who is going by flying by the seat of their pants because they also have tax professionals who tell them what to do. So, but yeah, all of this stuff, it's funny because this is usually not where we spend a lot of the time.

But the strategy for your finances seems pretty good, right? You spend very little. You have a variety of business interests that seem to be growing that you seem excited about over time. And like, it seems like you know what you need to do to grow those businesses. We can also talk about those, talk about that as another topic if you'd like. And you want to invest in real estate. to grow your wealth. So there's not much in the way of strategy here that we've gotten to yet, but it really has been about the basics of putting your systems in place to get a really

fundamental view, fundamentally strong view of what's coming in, what's going out. How can you plan around that? What's making money? What's losing money? And I think that's where it starts with us here because I have been educating myself from the other conversations you guys have had with everyone else. So all the other stuff that you guys would have talked about, I have been, you know, putting to work in my own life. It's just the tax part of it is what's been keeping me bog down all these years and what I really had to come out of back in 2020. So the paying off the debt, I already knew I wanted to do that. And then building up a cash reserve, you know, I had to get that implemented. But it was the tax. It's like the business expenses, you know,

calculating that, organizing that, and then when more business comes in, like different from my personal, that's where it gets even more confusing. So now we're here and need to get this nice and tight so we can keep this going. I'd also look at it as an opportunity, not just from the tax angle, but to understand the value of the business activities you're doing, right? And I think that's where you can come down again going back and saying, I did this trip. These assets were produced as a result of that. It was necessary. for my job. It's like I talk about football.

I need to go to the game for this. So there's like, how can you, how can you break apart those things? And I bet you since you're not doing that at a high level, that there have been a couple of activities that have lost your money or that you wouldn't do again from an ROI standpoint. Is that a fair? Do you think there was a couple? Definitely. Most likely, yes.

So, but that's, that, every business will have those. But if you can, if you can analyze this and learn from them. that'll be really helpful. Okay, what else? What's another area that we could help you with today? Is there, or what are some other things that you'd like to ask while we've got some time here? I wanted to know what your advice would be in terms of because the market is so hot right now in Florida. And I do have a realtor showing me listings.

Like I get an email for the new listings that pop up on the MLS. Just because I want to stay in the know of what's going on as I get further into wanting to purchase. But would you guys recommend me waiting a year, maybe renting for 12 months while I build this cash reserve to something greater than $25,000? Or should I get my taxes in order and be looking and try to jump on something as early as July or June or May? What would you buy if you bought in June? I'm looking for either a townhouse. home or a single family residence. But the thing is, I don't know if Jacksonville is going to be a place where I want to be long term. But I don't think that matters because you can always,

you know, sell a property or, you know, leave and rent it out and stuff like that. But what would your payment be the on the for the mortgage or the apartment? Well, right now you're paying $6.50 for a bedroom, essentially in a house, right? What would you be paying for the apartment? Apartment is anywhere between 15 and 1900, so that's going to go up. So it sounds like you're paying $6.50 a month right now, and you'd be looking to buy an apartment or a condo or a townhome that would be, have a payment of $1,500 to $1,900 in the Jacksonville area. How much would you pay in rent if you were to rent instead of buying?

Oh, that's, I was saying that would be rent for like a one bedroom plus amenities at an apartment complex. That's the rent, $1,500, $1,900. That's what rent's going for for those kind of places around here. Okay. And what would the mortgage be then if you were to buy instead of rent? I'm sure it would be a lot less if I could build, you know, a substantial cash position to be able to put down something or because my credit's good.

I think that's one of the factors of having a lower mortgage is good credit and a high down payment if I'm not mistaken. So the research still has to be done on that. but I think it would be lower than paying rent in an apartment complex because this house here, the mortgage is like $1,200. That's why I'm able to pay $650. So I know the house is a better decision. We've got, I've got a spreadsheet for you.

That will be helpful. It has kind of the rent versus buy decision on there. Personally, I'm actually leading towards basically when you just said here, renting instead of buying, as a better option once your girlfriend moves down to Jacksonville, because you don't plan on living there for a long period of time. When you buy a house, there are a number of factors that come in that actually, that are expenses that don't show up on the simple back of the napkin math, right? Like, you're going to spend 2% of the purchase price in buyer's closing costs to close the deal. If you were to turn around and sell the house right after, you know, a year from now, you'd spend,

seven or eight percent of the purchase price. Let's say a $300,000 property. You're going to spend $6,000 buying it, and you're going to spend $3 times $8,000 or so, $21,000 to $24,000 selling it in terms of commissions to the agent and the agent on both sides, the seller's paid transaction cost,

all those different types of things. You're going to have the mortgage payment, which may be slightly less than the rent, and you're going to be building equity and appreciating, and the property may be appreciating to some degree. So, yes, those will offset that. But that payback period in a three, three and a half percent appreciating market can be like

five to seven years. And it depends on the circumstances in your market. I've built a spreadsheet that will be available at the show notes here at BiggerPockets.com slash Money Show 286, and we'll send it to you that you can use to kind of do that math in your area based on what you believe. If you believe appreciation is going to be at 20% next year, then buying a house will be better than renting. But that's, I think, a pretty bold assumption in that last year. I don't know, Jacksonville's got a lot of land and a lot of things are getting built up here, so I could see it.

So something, but yeah, something to think about there is, and I've done that math for myself, and because I'm not 100% clear on what I want over the next couple of years from a housing situation, I rent right now. And I've rented for the last year and a half, and I've been perfectly fine with that because I've done that math and said, if I'm not clear, I should probably rent instead of buy. If I am clear about where I want to do long term, then I can buy. Another way to avoid that decision in the first place is to buy a place that makes a lot of sense as a rental, be like, I'm just going to buy it, and then I'm going to convert it into a rental within a year or two, and that will be the first property in my portfolio. Because that way, you're going to hold

the property. You don't have to live in the property, but you have to own the property long enough to allow the magic of appreciation, debt amortization, and then, you know, ideally a nice, solid cash flow spread to work to your advantage. I would. Oh, go ahead, Mindy. I just ran the numbers on a $300,000 mortgage with a 20% down payment at 3.8% interest and some like random made up numbers for property tax and homeowners insurance. And it's $1,500 a month for that.

So it's the same price monthly, approximately, as the rental and the house. Now, if you can house hack where you're paying $1,500, but then you're renting out a room to a roommate, and they're paying you $500 a month. Now your payment is only $1,000 and you're renting out another room and they're paying $500 a month. Now your payment's only $500 a month. And all of a sudden, it looks like a better deal to buy. I would agree with Scott that you should absolutely run these numbers and make sure that you're buying a property that makes sense as a rental. Not every property makes sense as a rental. You could buy this house with your $1,500 a month mortgage payment, and then all of a sudden you need to leave, you can only rent it out for $1,000 a month. You just bought yourself a $500 a month deficit in your monthly budget because you can't rent this for more than your mortgage payment. And you don't choose what it rents for. The market chooses what a property rents for.

So I once heard Brandon Turner say, oh, I ran the numbers on a property, it would only make sense if they paid me to buy this house. Like, there are some properties that just don't make any sense. So, but knowing that going in, you can then not purchase that property. Purchase the one that makes sense as a rental. Purchase the one that's in the great neighborhood or right next to the school so you can rent it out to students or, you know, near the beach or wherever you guys are living. I can't remember where Jacksonville is in Florida.

A north, north side. North, northeast. Do you guys have a beach? Are you close to a beach? Yes. Yeah. Yeah. So go by the beach.

They're probably not $300,000 by the beach. But the closer you are to the beach, the more Airbnb opportunities you have. Yeah, the future is just like with everything. I just don't like it's hard to plan for the future. And I don't know if this city, I'll be in a long term, even though the content that I make right now for the podcast business is around the local NFL team here. So that could possibly keep me here.

for a longer period of time, but in the end, I just don't know. And that's why I've been kind of hesitant for a home purchase, but buying a home to rent is obviously on the top of my list because I do want to build a portfolio of rental properties because that's what you guys are about. And that's all I've been listening to. So like, I think that's a great move. I think you're thinking about it perfectly there. If you buy a nice house that doesn't have good numbers from a rental property perspective, you're going to be stuck. And that's going to impact your career to some degree, right? Because it's going to make you wait more towards local things than the broader opportunities that may come up over a long period of time. So I like the idea of buying a

house hack or a house that, buying a rental property that you're just going to happen to live in instead of rent for a year or two and then will make sense as a rental long term. But if you're going to buy a house, I would lean towards that, and that didn't factor those things in as primary considerations, I would personally lean toward renting. And that's why I personally rent. I wanted to live in a nice place. The second bathroom is a game changer when you, when you have a girlfriend or a wife in the house. So, you know, and always buy a house with two bathroom, two toilets. Yeah. The same shower is one thing, but the, yeah, the toilets is a good one. Yeah, I want to invite you, if you haven't yet listened to Monday's episode.

I want to invite you to listen to Monday's episode with J.L. Collins talking about how he lost money in real estate. He lost a lot of money in real estate. And yes, it was a very different market, but there's nothing that is preventing our current market from switching and turning into the kind of market that J.L. was talking about during his episode and during his rather tragic real estate experience. So, you know, there's no, there's no changing or there's no predicting the future, like you said. So you want to make sure that you're buying a solid investment. And J.L. didn't. He just bought on a whim and, you know, kind of flew by the seat of his pants. We didn't have bigger pockets when he was buying. And when was it, 1979, Scott, that he bought this

property? Yep. So, you know, slightly different market. But still, same outcome. You can lose a lot of money in real estate. That's super easy. On that episode, Does he talk about the ways to analyze whether a property is worth getting as a rental? No, I think it was more of just a cautionary tale. But lucky for you, we have an entire website about how to analyze real estate properties to make sure that they work out as a rental property. Yeah. If you have any books that you would like to read on that that bigger pockets produces

or you want access to the calculators on our website with a pro membership, just reach out to me or Mindy afterwards and we can connect. connect you with any of those titles or the pro membership to help you analyze it. I do have Brandon Turner's, what's that book, Real Estate? The book on rental property investing. Yes, I have that one. I feel like that would be a good one. House hacking.

Oh, hey, let me get a mom on you right now and say, what are your plans when your girlfriend moves in? Who's going to pay what? That's a conversation to have before she moves in. who pays the rent? How are you splitting it? Are you splitting it based on income percentages? Are you splitting it 50-50?

Who pays for food? Utilities, all the things. You want to get that all hashed out before you move in together because it's super exciting before you move in together. And then once you're like, once you're moving in and you're like, hey, you owe 50% of the gas bill. And she's like, wait, I thought you were going to pay for everything. You want to know that in advance that there are different expectations or that you're

all on the same page and that's great. And then you can have a celebratory hello fresh meal. We've talked about that because all of the finance has been on my mind the past few years. And I've been teaching and telling her about all the things I've learned from bigger pockets as well. So she's in the same mindset as me with money. So before we even started looking at places, we were talking about opening. Like we haven't written down already. When I was in Ohio visiting her last week, we were writing down the monthly expenses. I love it. I love it. Yay. Okay, that's fantastic. Yeah, it'll, we'll be all right with that. We're going to know who's owing what. So that's the least of my worries. I'm glad that

that's the least of your worries. Have we answered your questions? Have we answered a question about housing and that this point or what else would you like to talk about today? Definitely. I think I was just trying to get, you know, direction for just renting versus buying at the moment and I think you guys have cleared it up. I just need to get my tax situation in order so I can keep a clear head. But you guys have definitely given me a lot of information that I can use for the rest of this year and beyond. Awesome. Well, I want to reiterate that you're crushing it here. You're building an awesome brand. You're bringing in great income. You're you've paid off a tremendous amount of debt. So you have a great money story coming

into this. You're clearly going to continue stockpiling wealth over the next couple of years. Real estate can be a great avenue to that. If you decide to rent, stock markets another great avenue for that. Just keep piling it into those retirement accounts and after-tax brokerage things there. And put a vision together for that business as well and what that's going to look like over the next couple of years. Get a little tighter on that forecasting. You're doing great. And this is going to, It seems very clear to me, based in our conversation, little I know about your brand, that things are likely to accelerate over the next couple of years for you from an income standpoint and a business standpoint in particular.

Yeah. Where can people find out more about you and what you do? My website is Eric V. Dunn, V as in Vincent. Podcast is done and drew. It's done and drew across all social media accounts. Eric V. Dunn on all social media accounts. Google either one of those names, we are pretty easy to find because social media is our business. Awesome.

We will, you can Google all those things. Eric V. Dunn, D-U-N-N-N. And you can also find all of the, we'll link to everything he just discussed there at the show notes at BiggerPockets.com slash Money Show 286. Eric, this has been super fun. Thank you so much for spending time with us today. I really enjoyed talking to you. I enjoyed talking to you guys as well.

I'm glad I could finally come on here and talk to you guys after all the consumption of your podcast that I've done. Yeah, thanks so much for having us. And I'll need to check out a bunch of your stuff as well. So this will be fun. Hey, check out the vlogs at Jags games. They're funny but sad. Absolutely. Okay, Eric, we'll talk to you soon.

Okay, Scott, that was Eric done. And that was super fun. We ran a little bit long. But I thought we had a really great discussion with him with regards to lots of things, including, like I said, in the beginning of the show. the very real issue of not really wanting to separate out your public or your business and your personal finances in the beginning of creating a company. But then at some point, you need to start creating two separate entities. There's personal you and business you. And I think once Eric fixes

that situation, a lot of other things are going to fall into place. Yeah. Now, if you're trying to do it by the book, you know, you start that way and you keep it that way forever. But in a practical sense, a lot of these business ideas can not really generate any income. And so going to all that work to set up of those systems and those types of things at first for, you know, if nine out of ten businesses fail, 90% of time are going to be a waste of time. But eventually, they need to be set up, they need to be structured, and they need to be able to give you insight into where you're spending, what's producing a good ROI for you inside your business, what's not, how you can eliminate waste, that's just straight up, you know, not adding value at all, and how you can sort that out

from a tax perspective. And, you know, I think we also touch on this as well. Expensing everything, if and when there is a blurry line between personal and business in some cases, Eric is not doing this, to his credit. He declared a substantial amount of income on a section of term, but trying to play the game of reducing your tax income too much can actually have adverse effects on you in terms of your ability to get mortgages and loans and those types of things if you are interested in investing in real estate.

So something to think about if you have, you know, if you have expenses that can kind of go either way with it is try to draw that line really clearly and stick to it. And then you want your business to make money at the end of the day that you can spend and fund your lifestyle with this and not, you know, and showing a big loss can have drawbacks as much as benefits. Yeah, I thought that was a really good point, Scott. And we are going to ask in our Facebook group, we're going to ask our lender.

So if you are a lender, Seth, John, if you're a lender and, oh, Seth is in Florida, too. Let us know in the Facebook group what a self-employed person can do to show a lender that they are generating income, that they do have a lot of money that they are making. Because it is more difficult for a self-employed person to get a loan than more difficult than a W-2 employee. Also, Scott, I thought you made a really great point by telling him to check the ROI on each individual trip and each individual thing that he's doing because, like I said before, sometimes it's really tough to look at a thing that is paying you money and say, I don't want that money anymore. But sometimes it's better to take that time off of your calendar so you can put it into something else that's going to be generating a lot more income. I think it was a wonderful discussion and learned a lot from him. What an unusual personal financial situation, but also what an exciting one. I think there's a lot of folks out there that maybe if you don't like your job or you don't like where something's going, he's got a really exciting career trajectory that you can learn a lot from.

And what makes it all possible at the end of the day or what allows him to build so much wealth is his fixed expenses are pretty low from a personal standpoint. that keeps it there. He's renting a house or a room in a house with a buddy with that to keep his expenses low. It's the benefit. He's experiencing the benefit of what it sounds like somebody else's house hack there as a tenant. So it's a really, it's a really strong financial foundation that he's got to enable this. It obviously took him a few years to cover up from, recover from some mistakes and build that. That's not something we really focus on, Scott, is the people who are helping you hack your housing by renting a room from you. They're getting a good deal out of it, too, because they're not paying full rental price. He's only paying $6.50 now. He cut $200 off of his rent

expenses. And that's, you know, that's another point. You can't really help. If you don't have anybody there to help you hack your housing. That's right. Okay. Should we get out of here, Scott? Let's do it. From episode 286 of the Bigger Pockets Money podcast, he is Scott Trench, and I am Indy Jensen saying go forth and prosper. Thank you.