BiggerPockets Money Podcast - 326: Finance Friday: Still Feeling "Money Anxious" After Hitting FI

Episode Date: August 12, 2022

The path to financial freedom is different for everyone. Some invest in stocks, others flip houses, but one couple breeds rats, trains horses, and buys rentals in cash. Before you get squeamish, this isn’t a show about flipping rats for profit. But, it is a show about horse training, unique investments, and how to ease off the gas when building wealth. Even if you’re far from your FI number, thinking about this concept will help you tremendously once you’ve retired. Alexis and Max have an interesting situation, and they aren’t your everyday workers. Both of them work out in the field, up against the elements, making some serious money to help train horses. Max was a self-taught trainer who built an impressive resume while only in his teenage years. He has a passion for finding, training, and flipping horses that will one day be champions. This is his life’s work and it’s allowed him to charge a pretty hefty price tag. But, the couple hasn’t just been investing in horses. They also have nine paid-off rental properties, subsidizing the entirety of their monthly spending. But, even with their high net worth, they’re struggling to feel comfortable with their financial situation. They’d like to buy a house of their own, take a break from work, and allow themselves more time freedom. But do they really need more money, or do they simply need to rethink their already solid situation? In This Episode We Cover Flipping horses and the astounding money this unique investment can make Rental property investing and why being debt-free isn’t such a bad thing Sheltering business taxes so you can keep more income at the end of the year When to use leverage to buy real estate vs. buying rentals in cash What to do with your “lazy money” even if you’ve already hit financial freedom Getting clear on your financial goals so you can work less and enjoy your wealth And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Scott's Instagram Mindy's Twitter Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Subscribe to The “On The Market” YouTube Channel Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets Check Out Mindy’s 2022 Live Spending Tracker and Budget The “Deathbed Toolkit” That Makes Building Wealth Much More Enjoyable Finance Friday: How to Avoid the “Middle Class Trap” When Building Wealth How to Find the Best Possible Certified Financial Planner (CFP) for Your Needs with Kyle Mast Episode 200 Special: A Personal Finance Masterclass with Kyle Mast XY Planning Advisor Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Check out our sponsor page! Click here to check the full show notes: https://www.biggerpockets.com/blog/money-326 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 326, Finance Friday edition, where we interview Alexis and Max and talk about horses, high income, taxes, and because we're bigger pockets, real estate. One reason we're doing that is because we do want to continue, you know, we've been in this mindset of like, we got to save for the next house. We got to save for the next house. So we've been just working so much to be able to just, we got to keep everything steady. so we can continue to save for this passive income. But now we are looking at the numbers and we're like, okay, we've kind of reached our fine number or whatever.

But we're still, I guess we're still just afraid. And there's lots of things we would do. Hello, hello, hello. My name is Mindy Jensen. And with me as always is my so excited about everything all the time, co-hosts Scott Trench. Is that me, Mindy or is that you? That's me.

Okay. With me as always is Scott. Thank you, Mindy. That's much more realistic. 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, go on to make big time investments in assets like horses or start your own business. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Scott, I am super excited about today's episode because we talk about something I've never heard of, well, I've heard of, something I've never done before investing in horses with somebody who knows what he's doing.

I will say that if you think this is a fun story, note when Max actually started with his horse ventures. This is a lifelong pursuit, literally. And I think that he's got a great story. I think he and his wife have a fabulous financial position. And this is an interesting look into, I have money, but I also hate debt. And personal finances personal, I think comes shining through in this particular episode because, yes, they could be doing more with their money. But debt is something that Max doesn't want to have. So don't go get it, Max.

Yeah, I think it's a fascinating situation. It's a thought exercise rather than really a money problem in this particular episode because they have such a strong financial position. But I think it's valuable to get a peek into the problems that exist at all stages of the wealth building journey. Yes. And stay tuned to Scott's really amazing announcement when you diagnosed the problem. That was a lot of fun, Scott. 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.

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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. Before we bring in Alexis and Max, I must tell you the contents of this podcast are in for 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 seek your own advice from professional advisors, including lawyers and accountants and tax professionals regarding

the legal, tax and financial implications of any financial decision you contemplate. Alexis and Max have the very fortunate position of generating a lot of income. They also have a very impressive net worth and a large gap between their spending and income. They are extremely averse to debt and looking for ways to increase their real estate holdings to further cushion their position. Alexis and Max, welcome to the Bigger Pockets Money podcast. Hi, guys. Thank you.

I'm so excited to talk to you today. I am going to jump into your numbers and I'm going to do things a little bit differently. I'm going to read them off today just to give us a really quick look at what's coming in and where it's going. So I'm going to look at your income, which is approximately $8,000 with an additional $4,600 in rental income. And this doesn't include your horse sales income, which is approximately $8,000 a month, give or take. Yeah. Is there a number of transactions per year that would be a better way to think about it, like four or five sales per year? That's a really good point, Scott, because

that, that average, like the $8,000 is extremely variable. Yeah, the income is very, very, very Yeah, it could be between like four and eight transactions a year, and it kind of levels out to around 80 or 8,000 a month, right? But you're essentially buy a horse, train it up to perform its task, and then sell it to somebody who will use it for that purpose, right? Yes. Correct. Could you describe that next one more layer deep there so folks can understand?

Because I probably butcher that. So what I do usually is I'm specialized in young horses in that discipline called raining. Which is like Western dressage pretty much to make it work. And so what I do is I train young horses to be a good prospect and become also a very valuable horse in the market and try to either sell it. or go show it or send it to the top showmen in the industry that will go and show it. So, yeah, the process is pretty simple. I get young roses in the beginning of January. And in about six months or a year, depending on their ability and their talent,

they will become very valuable or not a piece of property. So the thing that Max isn't saying that I will say for him because he's much more of an expert than I am in this field is that he from a very young age has studied bloodlines like to the max. Yeah, bloodlines. He knows his bloodlines very well. His pedigrees really well. And so he can really identify. Yeah. He can identify a lot just by papers on a horse and watching a horse.

Yeah. You have to watch a horse of paper. It will not tell you everything about it. It would just tell you how well. the parents done and is that combination of that mom and the sire will be a good one. And also, you have to look at the prospect himself and see if he's going to be a good mover, a good-minded horse and try to make the best out of it. And then after the price of those horses, there's no regulation.

So, I mean, it can go very low. you can lose money and we lost some money, but you can make a lot of money too. It's worth what someone's willing to pay for in all this you think. Exactly. Like last year, for example, to give you one of the good hosts we bought, we buy it for 25,000, and in three months we turned in and sold him for $100,000. And then we had a few very good sales. Yeah, we got very...

Awesome. So you are a cowboy, a French cowboy living in Texas. Is that correct? Yes. Perfect. All right. Yes. Yeah.

A horse flipping cowboy. Perfect. This is great. Yes. Yes. This is a unique experience for Mindy and I on a podcast here. So thank you. Okay.

And so that is variable income. And then you said $8,000 or Minnie said $8,000 in income. Where does that come from on a month? monthly basis. Is that an additional source of income or is that just the average rate of these sales? No. So my company trained horses for also the public, not just me and Alexis or other partners. So if you guys buy a host and decide to send it to me, you're going to pay me a fee every month to train and take care of your host. And part of it, there's a lot of expense in that that I have to pay to take care of your host just for keeping my life. But there's a part of that fee that is going

to come to me to get pay. And so part of the $8,000 is simply a salary that my company pay me. So to summarize, you get paid $8,000 a month in salary, and on top of that, you have rental properties, and on top of that, you have varying numbers of transactions that can be good, bad, or ugly from your horse training and flipping business. Yes. And the $8,000 is the salary of Alexis and my salary. The total. The total of both of our salaries is eight. And then on top of that, we have rental income. And then on top of that, we have the variable income of the horse transactions.

Yeah, in competition too. So we separate out Max's salary from the variable distribution. So you can think about it as just like an owner distribution. So if we have a great month of sales, we can do a $12,000 owner distribution. And our company set up as an S-Corp entity. so we can do the distribution that month, for example. So for the sake of example, we put $8,000 here for you guys. Great.

Well, let's keep going with this financial snapshot. I think we've got a good understanding of the business and income, or as good as we're going to get in the early stages here with a unique business or new to us business. Let's keep going with the financial snapshot, Mindy. Okay. So where that money is going is $150 in gas, $200 in eating out, $100 for late night. $50 for fun money, $50 for clothes, $200 for travel, $150 for animals. I'm assuming

that is not horse feed, $600 for groceries, $720 for child care, $50 for a person's name here. I'm assuming that is the child that you have. Yes. $150 miscellaneous. $95 for Verizon. I see an opportunity to transfer to Mint Mobile for $10 a month. They're $15. a month. But still, that's like a drop in the bucket. $160 for car insurance, $250 for personal cap X, which I love this concept, Dr. Dentist, random personal capital expenditures. I love that. $400 for giving, $100 for random household, $300 for taxes. And then you have separated out, which I think is very important for people who may not be in your same financial position, auto debits,

Audible, Spotify, Zander, Naked Wine, Kira, Amazon Prime, Amazon Prime Video, health insurance. Those are all like $100 and then health insurance is $688. For a grand total of spending $4,500, but let's circle back to the income is $12,605.

And you're spending $4,500. So you have a monthly savings of $8,106.55 cents, which is, you know, that's not bad or amazing, depending on who you want to talk to. I think everybody that you would talk to would say, holy, connolly, that's fantastic. So I see that you are sending those savings to a brokerage account, $1,000, reinvesting in your houses $2,600 and $4,500 in just savings, which isn't explained here. So I would like to get into that a little bit. But let's look at your debt scenario. I'm guessing that your debts are pretty low. Yeah, our debt is zero. We have no debt. No debt.

Our what? Yeah, no debt. You have no debt. Okay. That by itself is a really impressive statement. However, let's go look at your assets because they include one, two, three, four, five, six houses and with zero debt. That includes mortgages. You have $0 on mortgages in $920,000 worth of real estate. Yes. That's, that's, you know, you guys are, you guys are okay. Why don't you call it? We're afraid.

We've been listening for three years. I need to ask you some questions. And so we, yeah, we want to bump it up. We want to get better at this. So you won. You've already won't. I would just say we're really lazy. We just like just plug it all in and we don't get through any of the work of, you know, figuring out leveraging. Yes. Okay. So hold on. Monthly spending is 4,500. Real estate income is 4,600 after. That's your net real estate income. You won. Yeah. The end. Now you can just go sell horses for fun. Well, let's list the rest of their assets.

Just for fun then. Yeah. Yeah, just for fun. That's not all they have. Yeah. So we have, I'm just going to say, various Vanguard holdings in the total of $371,000. There are some Roth IRAs. There are some brokerage accounts. There are some money market accounts that are emergency funds.

And the bulk of that is in a Vanguard. brokerage account. So that is an after-tax brokerage account. Do you have anything in a 401k or a pre-tax account? No. Okay. You own a brewery or part of a brewery? Yeah. That's Alexis. Yeah. We own shares in a brewery out of Atlanta. I bet actually a lot of your, I or some of the listeners probably know of Monday Night brewing, but they were friends of my brother. Like when I I was in college, and they started brewing beer in their garage. And my brother called me one day, and he's like, you should give some money to these guys. And I had some cash on the side, and I gave it to him.

And they've made us a ton of, I mean, yeah, clearly it's worth a lot now. So it's pretty cool. So it's just shares. I should probably have some market research on this before I could really comment on that. So Monday Night Brewery, you can send me some beer. There you go. I like that. Yeah, very good.

I like the dark beard. There you know. Okay. And in addition to $920,000 worth of real estate and $371,000 in Vanguard Holdings, you have $114,000 worth of a brewery that you, that's passive income, like 100% passive. They never call you for anything or they just send you money every once in a while. No, we just hold the shares right now. We're not like we're not, we had a decision a couple months ago to get a payout and we decided

to reinvest. So we're just just leaving the money there, letting it reinvest and letting them continue to build. We're just building our equity. Yeah. And it's a company that we love and we just... Yeah, great guys.

We want to support them as much as you can and we don't need the money right now. We just act like we don't have it. You know, we just ignore it kind of. And it's great. And then you own five horses that are $330,000 total, which is... I think a bit of a misnomer because people who are not looking at your numbers will be like,

wow, that's like whatever 330 divided by five is, you have four horses that are worth like 20,000 and one horse that's worth 250,000. So is that like four horses that are one gender and one horse that's a different gender? Because clearly I'm not a horse expert. I know I'm hiding that really well. Yeah. So yeah, I'm looking at the paper right now. And yes, this different genders, different age, and also, so the age will give you an idea of the level where they add in their training. So the value that we put on is only what we spend on them and as far purchase the horse or if we raise the rose, how much we spend on it until now. The value of the roses might not be those numbers.

It actually probably way higher than 348,000. But it's what we spend on them pretty much. Yes. The $250,000 horse, though, that is his insured values. So that horse in particular performed really, really well the past year and a half. And so we've just consistently upped his insurance. And so now we bought him originally for $25,000. with a partner.

And now he's performed really well. We've received a lot of paychecks from him. And so we've just continued to boost up his insurance. So if he... He's a very valuable host as far. He can go on and still win a lot of money. He's very competitive in the industry that we are in. And also he is now a sire, which means that we sell his semen because he was

super he was very successful people interested to breed to him and so we didn't have the the balance sheet of his work as far as a sire this year yet but he bred around 70 mares and each seamen's sold for 2,500 and so and we have a partner on it basically each baby is 2500 if you buy a breeding if you buy a breeding you pay 2,500 a part of it 500 bucks going to the breeding station who is taking care of that horse and handling the semen and chipping the cement and the rest is between us and our partners. Great. Do you guys own your house? We actually live for free because I manage a ranch that's a breeding facility and I have housing in my job so we don't pay utilities or

anything. We have everything for free. And also what we realize is we were We're very lucky. It's very popular in the industry that we are in. That if you work to train horses a few times since we were married, we're married since seven years now. And since we were married, we never pay for housing. We've lived in some interesting places for sure. And so, but the gift is, yes, we live. But it's always been free.

So we've always taken it. Yes, we're very grateful. Phenomenal. Okay, so we got to spend three to five minutes here and get a condensed version of your money story here in order to get a picture of this because your position is phenomenal. We have a $1.8 million net worth and you're telling us that that's way undervaluing your horses. With that, you live for free. We've got a phenomenal financial situation overall, really unique jobs and living situation. So could you give us the five-minute overview of how your money story transpired? Yeah. To do it really briefly, I grew up in a family that was in manufacturing. My grandfather, after the war, after World War II, he took over a coordinated box manufacturing business. My whole family was in that for years. So I grew up with a lot of comfort with debt, with we, there was always, it seemed like there was always money. I didn't really know whether there was or not, but it just seemed like there was. I had like zero financial education. My parents were much more worried about kind of my moral status, me being a good person, rather than teaching me about finances, which I appreciate. But, you know, when you get out out of the house, it gets more complicated. So anyway, that business, though, sold when I was 16 years old. My, and we all as, you know, family members, we did receive a church. chunk of that company, a little piece. There was a lot of debt that had to be paid, but I did receive a small piece. And that went towards, it went into managed funds. I had no idea about it.

Nobody told me what to do with it. It went into manage mutual funds. I took money out of there to pay for college, to build a house because my brother's an amazing woodworker and I paid for it all in cash. It's ridiculous. Thinking back. And then also, um, I started business, a small business with one of my brothers. Anyway, all that to say, that was kind of my story, really little education. I got a big chunk of cash and I didn't really know what to do with it. And so I did things that I thought were good. And then I kind of panicked when I started figuring out that that was a really bad idea.

So I just left it all in the managed funds. And then Max, well, anyway, and then after that, You know, kind of fast word to when we got married. That's when we started. I didn't tell Max anything about my financial status until like a week before we got married. Yeah, I have no idea. And we actually talked about just giving away everything and just starting from zero. But we really didn't even know what to do with where we stood.

For two years in your marriage, too. We never touched that money. Yeah, we didn't touch any of that. And it was around, I think it was around $200,000 at that point. So we just left it and managed mutual funds. So and then Max's kind of history with money, you can sell it briefly. It's very different. My parents, I grew up in South of France.

My parents, my mom was selling insurance and was working in a big company for insurance. And my dad was a banker. They didn't have a lot of money, but they quit their job. and took my brother and my sister and buy a piece of property and a building that was going down and they rebuilt it. They had huge, huge that I felt it through my childhood. It was a big stress in the family. It was a vineyard.

I don't know if you said that. Yes, and it was a vineyard. My dad went back to school. It was just we live very little. and debt was very present in our life. And so that's why also, I think, to fast forward, that's why we don't have debt now also with my combination of being afraid of debt

and Alexis had a little bit of cash that pushed us forward, we figured out how to stay out of debt. But we had both zero money education. my only money that I had in high school around high school and all this was me working horses for outside people and buying horses and saying actually there's a story that we should tell right now because Max always forgets this story when Max was I don't know yeah to buy my first horse 10 years old were you 10 a little younger too I bought I had different jobs but one one of my first and my first business that I built was I love rats. And so I built a breeding rat company. A breeding program for rats,

pretty much. Yes. So I bred rats like crazy. And they sell really good. So I made very good money doing this. And then that gave me enough cash to buy a saddle, a bridle, a pad, and a horse, and some fencing. And so when I was 10-year-old, I figured out, I, no, I asked my parents, because they had some land, I asked my parents if I could buy a rose. And, no, first, I wanted a rose. And my parents approached me, say, that's a great idea how you're going to get it done. And we're not going to help you. We can't help you.

So I got it done with the rats. And then slowly, I quit the rats, buy my first horse. And I actually bought a second rose six months later. And then I stopped flipping horses like. And then he, like, networked himself. with all these pony clubs that wanted horses. And so Max would buy these cheap horses and train them, write them, and then just sell them to the pony club to these kids who wanted a horse that was broke.

And which kind of pushed me forward when I was 15. I wanted to come work for this host trainer in US. And I didn't speak English. But my English teacher write an email for me. And I stole the credit card of my parents, but an airplane ticket. And I paid my parents back, obviously. but I didn't have a credit card, so I had to steal it, and I wanted to get it done before arguing with them.

So I flew to US just on all the money I made on hostes in South of France, and then after through high school, I kept on going doing this. And then after high school, I got offered a job with this big host trainer. And I had probably $15,000 coming to you. Yes. So that's where I started. And then I had a job, but I don't know if I can say that on the podcast, but I had a job that was not paid, totally illegal for three years. I had a legal visa, but I was not paid and worked. That's awesome. And what year did you guys get married? 2016. Yeah.

Awesome. And so most of the wealth beyond that $200,000 in cash you had has been accumulated in the last six years by flipping horses. but your salary, living frugally, investing, and then buying cash-free real estate. Yes. Phenomenal. That's awesome. All right. So how can we help you here today? So for me, one of the biggest, my biggest question is, is, I'm stunning. One of the biggest arguments in our house and the biggest question we have.

It's about debt. Yes, it's about that. I did not like that. But now that we build some kind of, you know, portfolio or a nest egg that produce enough money, I feel more comfortable to use debt and to maybe if debt will help us to push us to maybe, we would like to in two to five years, we would like to have 10 houses, maybe more. and 500,000 in brokerage account, that's our big goal right now. And so...

And we're also dealing with, like, we're paying a lot of taxes for high income, and we're trying to figure out how to, like, you know, how we can incorporate some good debt into our lives so that we can mitigate that a little bit. Let me ask you this. What would you do with the 10 houses and from a lifestyle perspective, the 10 houses and the 500,000 in the brokerage account. Personally, I will keep doing what I do, probably a small paste. I have, you know, a pretty intense paste at work.

And also maybe investing more into our own roses. Right now we have five roses, but I would love to have 10, 15. Basically, write more for yourself, Ren, you're insured. Yeah, I have a very good partner that I would love to keep working with and also just investing harder maybe in the horses with me and the lexas because the horses is great but it's high cost and it is very risky extremely risky i mean a host can die i have one right now that is sick and i don't know how i mean i'm going to take care of it do all we can but we might lose 20 000 right now yeah he could lose it tonight like it could be gone and does insurance pay anything

If a horse dies? Yes. Yes, they do. But I mean, you do ensure a horse. I mean, you do whatever you want to do. You can insure a horse that costs you 500 bucks. But you usually, my perspective is they need to show you that they have a lot of talent. They have to, yeah, show you that is a good prospect before I put insurance on them.

Ah, so this is a little bit risky. Yeah. So they kind of have to earn. This horse doesn't have an insurance. Yes. Yes, but he should. He should, especially today. Yeah, but that's always how it goes.

Always how it goes. Okay. But I think also, Scott, I have a really great position right now. And we would love, like, we, we, Max and I both just work a lot of hours all the time. We have a six-month-old kid. And we're trying to figure out how to, like, chill. little bit, how to become a little bit more. And like we always talk about, you know, quitting our jobs and moving somewhere.

And the thing we haven't tried is just moderation, you know. We haven't tried moderating things like the level of work that we're doing. Because our work is also very physical. We both just have to like be out in the elements like pretty much all year. And it's it's a lot. And it's horses. So like on Sunday at. Eight o'clock, we got a call and we have to go check a horse.

And for an hour, we have to figure out how we're going to do with the kid and go check the horse and take care of it. So it's figuring out like how we can, yeah, change a little bit the way we're doing it right now. One reason we're doing that is because we do want to continue. You know, we've been in this mindset of like we got to save for the next house. We've got to save for the next house. So we've been just working so much to be able to just, we got to keep everything. steady so we can continue to save for this passive income. But now we are looking at the numbers and we're like, okay, we've kind of reached our, our fine number or whatever. But we're still, I guess we're

still just afraid. And there's lots of things we would do. You know, Max is from France. We always talk about opening a bakery. We always talk about doing different things outside of the horse business. we do love the horse business a lot. Yeah, and we want to stay involved and keep doing what we do and maybe different. But anyway, I don't know if that answers your question a little bit, but, you know, we basically just want to like double what we've done already with the houses and so that we feel really safe to make any kind of a gentle transition, not necessarily quitting our jobs because we both really value work and we want to model that for our children.

But we do want to also do other things. Here's how I would instinctively react, and you can let me know. First, I don't think twice as many houses are going to help your situation, because I think you have a mental problem, not a financial problem here. Your houses pay for your expenses. But you're like, I'm not a mental problem. You're not wrong. You can say it.

You're a mental block. Yeah. Not not a. Yeah. Sorry. But like, but like I think I think you have like, hey, I'm, why am I so worried about money? I got nine paid off rentals. I got a brewery pay, giving me passive income on top of that.

My expenses are $4,500 a month. I live for free. And yeah, like, if you wanted to just chill out now, you could do that, right? That's totally an option with your current situation. Adding debt to the equation is going to hurt that temporarily, not help it, because you're going to refinance your mortgage, your current properties. And you're going to, if you pull out, you know, let's call it four or 500 grand, you're almost certainly going to get 300, 3,000-ish in expenses on top of that.

You have to buy more property. and it'll actually almost feel even more tight in the short run, right? A lot of people's long-term goal is to get the six paid-off rental properties on a million-dollar portfolio and chill on $4,500 in passive income per month. So like, it's almost backwards to go the other way, unless you want to get very, very wealthy, which is not what I'm hearing you say. I'm not hearing you say, I want to build a huge net worth. You're saying I want to feel secure.

So my next reaction to that is, my next reaction to that is, I don't think, I think it's a cash, I think there's a little bit of a cash issue here. You have plenty of cash. Your financial position is rock solid. But wouldn't, you know, in the case where you have a horse that could go, you know, get sick and die and do this 20 grand, or you have all these rental properties in this stuff, I would feel more comfortable if I was sitting on like a hundred grand in cash that I could just, you know, feel very good about that I don't have to worry about that to cover my business and personal expenses at a high level. And then after that, you guys are going to stockpile, you know, hundreds of thousands of dollars per year. I think you're very underestimating the potential in your horse flipping business here with that, right? You told me you're underestimating that.

You have assets that are worth half a million dollars at least in the current horses you have. There's something there where you could just do that business full time right now if you wanted to or part time, whatever. And it seems like you love it. You seem like your world class at this activity. and that this is not something that you're just going to give up on next year. So it's not really a financial freedom thing. Like, you're going to be dealing with horses at 8 p.m. in the evening under any circumstance that is realistic based on my take, talking to you for 30 minutes.

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Go ahead. Yeah, I agree. I agree on the fact that, yes, I will keep riding horses. I want to. But I also feel like Alexis and I decide to, you know, for example, homeschool or kids. We have one, but we'll like to have more. And so that will maybe take away the potential of Alexis to have. have a job for time. Maybe she will work more with me in my business. But so that means we need to,

if she quit her job, that means we need to move out this house. We live for free. So we need to go buy a house. Which we've never had housing costs. So we're really afraid of that, which sounds very funny. I know. But we feel like little kids. You know, it's like we do look at our numbers and we're like, wow, it does look good. But, you know, we've never had to buy a personal residence. And so we feel like that's kind of scary. So anyway, maybe this is more a counseling session. In the region right now in Dallas is really a lot to buy houses. I mean, we've been looking at a bunch of houses.

And I mean, for two and we have sticks. Where are those located? Yeah, too far from here. Okay. Yeah, those are located in Kansas. So, Wichita and Kansas City. If there's anybody in DFW, wants to find us a great duplex we love that yes um but yes so buying house here is very expensive and we probably

right now because i didn't sell horses and we have like what 25 000 in our saving in the bank um we probably going to have to use that to go buy one if we find something that we like and feel comfortable to purchase um maybe in two months no maybe we'll have plenty cash to go buy one but um so So there's a part of us that, okay, if we want to maybe do homeschool and Alexis maybe want to wean herself out of her job, because it is a very stressful job, especially with the person she's working with. Okay. I have a lot of things to say.

My first thing that I'm going to say is your current six paid off properties rental income is $4,600. Your current expenses are $4,500. $4,600 minus $4,500 is $1,600. 100 extra dollars. So both of you quit your jobs right now. Number two, Scott is very harsh, but I'm not going to completely disagree with him. I came out wrong. That was that way. No. No. We love it. That's what we want your feedback. Yeah. That's what we have to call. Third question is you are currently saving $4,500, $1,000 on your rent and $3,500 for Max's salary.

What are you doing with this money? Where does the $1,000 for rent go? And where does the $3,500 for max a salary go? Right now, that's going towards, like, what we do in our, we've set up our personal banking so that we, you know, we have, like, I don't know, a bunch of different accounts in there. But we separate it out and we have just general savings that typically goes towards, you know, like a down payment or not a down payment, but it goes towards paying for a house. We just let that savings bank account grow, grow, grow.

And then we also have a separate bank account that is for the houses. And here, yeah, so the reinvestment amount. That just continues to grow as well. So basically those two in tandem grow. So that $4,500, like that'll just go into our savings. And then we'll transfer out $1,000 to invest in our Vanguard brokerage, which is exclusively VTSAX. We don't even think about it.

we just do it, try to do it on a monthly basis. And then we let the rental house account and then also our savings account grow. To potentially buy another house. The thing that it does strap us for, I mean, the thing that is tricky about this tactic is that we will have opportunities that we can't reach. So, for example, I'm always looking. Like, I'm always, we invest in Wichita, Kansas, which is where I'm from, because I know the market really well, or I know the neighborhoods, I'll say that.

I know the neighborhoods really well. The other reason we invest in Wichita is that our property management company is incredible there. We love them, so we've invested all of it there. I'll be watching Wichita's market. We'll see a house come up or something, but then we look at our savings, we look at our bank account and we're like, we only have $50,000 in cash right now, so we can't go buy that house because we haven't allowed ourselves to buy on debt. So anyway, that's Mindy, to answer your question, the long way, that savings goes just into a bank account and just sits there until we have enough to buy another house.

Okay. Did you tell us? Did you tell us how much is in that bank account? Right now, $25,000. That's good. And then why doesn't your company buy a horse property for you to live on? Because then your corporation can buy this. And Scott, correct me if I'm wrong.

CPAs, tax pros, correct me if I'm wrong, but if your corporation buys this house and provides you free housing, which is a thing in horse. Yes, business industry. In the horse community. So that's totally valid in my mind, but definitely check with somebody who knows what they're talking about. And the corporate income that you have so much of that you're paying all these taxes on has now purchased this asset. Scott, is that how assets work with corporations?

Yeah, I'm a little more rusty on this. So I don't want to say anything that I'm not sure on. I think you could either buy it as a business and then have the business pay you for that, or you could buy it in your personal name or a different entity name and have one business own one thing, the actual business of buying and selling horses and the other business own the real estate and land on that. But that would be a good thing to do some homework on with your CPA. With your tax professional, yes, who knows what they're talking about. Yes, but I personally don't want to go through the headache of owning a ranch.

There's so many ranch built in North Texas that are amazing, and I just rent stalls out of it. And actually, my partner, I build an amazing facility. And I just rent stalls. But maybe the company could buy a house. Yes, that's something we're kind of thinking is to buy a house. because my employee could live in the house and said right now I'm renting a room for him. Possibly we could buy a house that has like another option for another room and he could live there. We could live in the main house.

Yes. Or buying a big enough house that there's so many people working around horses and we know so many people working in the business that we probably could rent those extra rooms to other people. that they are involved. Max is still thinking about, like, making money on it. I'm thinking about us moving into it. But I think that's the key is, is you guys are set from a financial position. You guys, you're not going to do anything rash. You think through all these things very carefully.

Like, my zooming out would be like, okay, like, clearly this is more than just, this is more than a business, more than a hobby. It's a passion that you've got for these horses. So set up your life long term to facilitate that in a, happy way that you're going to like. Buy the house you like that you're going to be happy in for a long period of time. Maybe go a little higher with that. It's great if you have a house hack or additional supplemental income, but like you can afford to do that at this point to a certain degree. And like, sure, you won't be your rental income alone will no longer pay

for all of your expenses at that point. But you still have a million in other assets that you can that you could you can redeploy at any time for that. And by the way, yeah, your horse could go, could get sick and die. One of your five horses, but the stock market can also go down 30% as can real estate value. So it's the same risk profile across your asset classes. You just happen to have a lot more, a lot of wealth concentrated into an alternative asset class horses that you know really well and are probably likely to get a much better ROI on than these other asset classes.

So I don't think there's anything wrong with that in your situation with that. So I think it's like put down, this goes back to like, we get the same advice. I feel like, you know, we've got another, but like sit down and say, what do I want to be in three years? And where do I, what does that look like? What's a happy life there? Home school, nice house. We've got a sunset view. I don't know, whatever, right?

We're very easy horseback ride or drive or ATV or whatever. However you get, you cowboys get around to your work. right? We're very, very easy with that. And we've got all these other things. Like, let's go make that happen. And surely, you know, even if it's a little bit of a stretch in the next year or two, my business has such good prospects that even if I take on $300,000 in debt or something like that, I could probably pay it off in two or three years if I am debt diverse from the flipping business here, not to mention my salary. So this is how I would be thinking about your situation right here. I think you are, you are in the privileged position of being able to design.

your dream life, like, go do it and then start living it in the next couple of years. It would be my opinion on this. And then if, and I also like the no debt. I think it's a personal choice. And I think you guys are thriving in that situation. Why take on a lot of debt for debt's sake? Take it on if you need it to accelerate your vision by a year or two and then paid off because you have that, you have the ability to do that with your situation. If you get unlucky for a year or two with a couple of, uh, with the market or whatever, then you paid off in three, four, or five. Your income can cash flow it from your, your wage income, even with one salary plus those properties. So I'm ranting here about how good

you guys are doing. But hopefully this is helpful. I think you're ready to map out exactly how you want to live your day-to-day life. And then you can begin making those changes tomorrow if you wanted because of the way you've set yourself up. I do think you'll be feel more comfortable with that as you stockpile closer to six figures in cash, though. It's just a little kind of have crossed the T or dot the I to do, which is crazy. We are very curious about, you know, the only thing we've done is single family. And so we're like really interested to branch into multifamily. And we feel like we'd have less, a little bit less competition in that area.

But we're, you know, that's going to require us a lot higher savings rate and everything. Yeah. And to be also to be honest, we got, we stopped being passionate. it about real estate. We start really loving it. Enjoying it a lot. We start doing it and we're like, wow, this is great for us, for our lifestyle. And we, you know, I don't know if I want to quit right now.

I feel like we're just starting. And I want to keep on, I want to keep on moving. With the real estate. It's saying, oh, yeah, I did a good job on a horse. I sold it for, I made $20,000. Good job, Max. No, I want to make a host that worth, you know, 150,000.

And it's the real estate is the same way for me. It's maybe my competitive part of it is like, well, we tried it to see if it's going to fit our lifestyle. It did. And now I'm personally, I am that way. I'm like, okay, well, what can we do next? What can we? I think also, I mean, I'm sure I heard it somewhere on Y'all's show or on the real

estate show, but, you know, that money is like blood. You know, it needs to circulate. It needs to keep moving. and we feel very much that way. Like we just, we're in the like the primaries of our working life. And we're like, we want to continue to just like go at it and like,

you know, build and not just let our money like sit. Like I feel like our money is kind of lazy right now in those houses. Maybe it's not. But I feel like it's just kind of sitting there. It is giving us a little, you know, I love the paychecks that we get from those houses.

I'm so grateful. But I'm also like, I'm kind of curious about like reviving that. Can we be smarter about it? Because we only dated one way. So the goal is less about achieving a lifestyle outcome and more about playing the game of wealth building more optimally. Is that, is that a right way to phrase the goal? Yeah, I think so. Okay. Well, if that's the case, you can certainly do that. And then you know where to go. You've got $920,000 in equity. You can leverage it probably at a 75 LTV. So you could get, you know, close to $700,000 in cash out of that.

You're going to get that at a seven-ish percent interest rate, so it's going to be high. So you're going to have to be creative with how you use that. I'd start smaller and take out only a chunk of that in the first place when you buy the next, the first or next thing. But yeah, I mean, try it. Buy your $25,000 horse equivalent, the $125,000 house or something like that or the $300,000 duplex or the small multifamily properties, start doing that and then begin accelerating the game like you would in your horse business.

Or I imagine how I imagine it went for your horse business. But yeah, I think that's great. It will create stress and more work in that, but you'll also build wealth. And yeah, so I think that's interesting that we got to that. That's the goal. It was less about lifestyle, more about playing the game of building wealth. Okay.

I'm going to jump in here because you said game twice. This is not a game, Scott, playing the strategic maneuver. to planning out the strategic maneuvers to generate wealth. And then Alexis, you said you feel like your money is lazy. I know that there are people listening right now who are saying, oh, my goodness, all that money is just sitting there in equity. It's dead equity. Use that money to generate more money.

But I heard Max say that he is so averse to debt. He doesn't want any debt. This is a conversation to have. How much debt are you comfortable with, Max? Zero is a valid answer. But if you go and get a bunch of leveraged properties and then you can't sleep at night, you did not win the game of building wealth. Scott's game.

Yeah, you're exactly right. So this is, you know, by one with some leverage and see how that makes you feel. Oh, my goodness, I have a mortgage. It gives me the heby-gibs. Pay off the mortgage and then your money isn't being lazy. It is buying you income. And it is growing as the properties appreciate. And that is valid.

So it doesn't have to be leveraged to the hilt. I appreciate that. And I think it's a very good point because it is something that, like, I'm much more comfortable thinking about debt than maxes usually. And that's a good, like, it's just a thing in our marriage that we have to figure out. But, yeah, I think that the other reality that we look at and, you know, everybody's mortal. But, you know, Max's job is very risky. Like, high, high risk. Like, he's going in the, the round pen with unbroke horses that want to kill him, like, 20 horses in January.

You know, so it's like, this is like, I mean, it's a lot. And he's very safe. He's very safe and he does a really good job. But that's part of where we are terrified to lean on the horse business because if Max breaks his leg, it's. done. Like no horses. Like we have to sell them. We have to get rid of them. Or figure out friends. Other training. But we have to pay them to write all of all of a sudden they become liabilities instead of assets. So that's a anyway, that's kind of that's kind of part of it also. That's also why we did no debt idea also is because I was very afraid and this is what also we have a 40,000 emergency fund. Just because if I do break, my leg for for three months or six months, then I can't work. But yeah, I think you have a point,

as for like how comfortable I am with that and, you know, maybe go try to buy one house on that and see how that feel. Yeah. That's a good, yeah, I like that. And then if we feel better about it and feel good about it, then we can go kind of where Scott's saying is like, leverage more of our portfolio. Yes, leverage more of the portfolio. I also think that you should consult with a tax pro about your tax situation. And you can find CFPs, fee-only financial advisors and tax professionals at the XYP Planning Network.com. This is run by Michael Kitsis, who is brilliant and walks on water and knows everything there is to know about money and tax and all the things. And you can find somebody who specializes in your thing.

So they specialize in small business or they specialize in self-futable. employment or they specialize in real estate or there's a bunch of different options to choose from and you can really help narrow it down. A couple of episodes that we have are episode, I think, 41 or 44 with Kyle Masked, episode 81 with Kyle Masked and episode 200 with Kyle Masked. I don't know if you're sensing a pattern here. I love Kyle Maast. He gives a lot of really great information about how to find a CFP, questions to ask, and just like things your CFP should be doing, how much costs, like they will go over your financial situation similar to this, but they will actually have tax knowledge. And I think somebody who can help guide you with some tax preparation can

help you cut down on the taxes that you're paying now. I think you're going to have a hard time with the taxes because you're flipping property, right? And so you're making a lot of money, which is why you're paying a lot of taxes. So that's a good problem with that. But there probably are games where if you're going to have a big loss one year, you know, don't sell your other, you know, or maybe make a big sale that year, for example, to stay in that major bracket. Or can you time certain transactions with the buyer to happen before or after January 1st to make sure that those go into the years that make more sense? And if you have a big one, you don't want to get into another tax bracket, can you defer

payment for a few months to put it into the next calendar year? Those would be games that your tax pro might be able to help you play a little bit better on the front. Okay. Very good. But I think the fundamental challenge is not going to go away. You have a lot of tax. You pay a lot of taxes.

You make a lot of income because you're good at what you do. So that's great. Great problem. Yeah. Be thankful for that problem. Yes. Yeah. I have one more item here that I'll go back to.

I think that you're not clear on the game you want to play. And that's your fundamental problem. That's the mental problem I was talking about. So you're not sure. if you want to maximize your wealth creation or you want to play it safe or whatever. And the grass is always greener because you can have anything you want at this point, but you can't have all the things that you want, which is always the problem with money, including when you're a billionaire.

So I think what I, like when I look at your situation from an outsider, I see a phenomenal situation that I'm envious of, right? With no debt, an awesome, unique career that's going on there and the ability to do all these other things. and so I would say it's tempting to play the game of building that wealth, but you guys are already rich. You're likely to get richer. And if that leg did break or you had a problem like that, you'd be fine. You'd sell off those horses and you'd find another way to make money with your mind instead of your body.

And you're still working and you're going to be in good shape. That might not be true if you went too far in over your skis in certain directions with that. So I would say the grass is not always greener. in those other cases would be a little bit of a warning there. And I would also just encourage you, you know, hey, in two years, you can make enough from flipping horses to buy the house of your dreams, live in it right next to where you want to be paid off as another rental property and be chilling with your complete debt-free scenario and more wealth there with that. So all of this is within reach. It's just a matter of what you

want. And I would just warn you that the grass may not be greener on the leveraged side of the real estate investing equation. You've certainly won, according to a lot of rule books. Yeah. Already. Okay. Alexis and Max, this was a lot of fun. I learned a lot about horses.

I didn't know anything about horses before. So I appreciate your time today. Thank you so much for joining us. Thank you. Thank you, guys, so much. And we'll talk to you soon. Bye. Bye.

Scott, that was Max and Alexis. And they have a fabulous story of buying horses from age 10. You know what I bought when I was 10? I bought a candy bar. Do you buy horses when you were 10, Scott? Nope. I didn't buy anything at age 10. Soccer cleats.

Soccer cleats, rugby pads or whatever. I don't know. Rugby balls. Or football. I don't know how to play rugby. Holy cow. I do think you hit the nail on the head when you so eloquently posted, this is a mental problem. Yeah.

It is. But I mean, that's a really valid point. this is something that I have tried to verbalize so many different times. Personal finance is a personal journey. And if you don't like debt, then don't go get debt. It doesn't matter that you could be making more with your money. It doesn't matter that you could be optimizing your finances in a different way.

If you can't sleep at night, what does it matter? Yeah. I mean, at some point, like, you know, it's hard to find a couple that is in better financial shape, right? I mean, maybe you've got, you know, entrepreneurs or rock stars that are doing, you know, a more stable financial position. But, I mean, this is, this is as good as good gets, right, in terms of what we see on this show. What, you know, a $1.7 million portfolio, you know, every asset is conservatively underwritten. You know all their, they're underestiming the value of all their real estate. They're underestimating the value of all their horses.

They're underestimating all the value of other accounts. So it's a really conservative position. they spend $4,500 a month. You know that's an overstatement, and they've got buckets for CAPEX and appropriately categorized with that. And there's still a, what do I do next? Am I ready to take this plunge? Am I ready to do these things, right?

And so that's, I think it's like a good perspective shift to say, no, no, no, I've won. The grass is always greener. I can always be optimizing for ROI. I can take my 1.7 or whatever, $2.5 million net worth, whatever, somewhere between those two numbers is what the real net worth is. and I can re-deploy it into something that it's likely to generate more returns, but it's going to require me to watch it much more carefully, is going to have much more leverage on it and may give me less freedom,

or I can be very happy with the current situation. I think it's all about what you want. And in post-recording, we talked to them a little bit privately. It came out, you know, one of the things that I think we'd really helpful for them is that exercise of the money date and the vision setting, right? They need to go somewhere with a beautiful view, nice weather, have their cup of coffee, and around 10 a.m. and they're feeling at their peak energy just say, what are we going to do? Like, do we want to start

investing, you know, leveraging up our real estate and building a big thing here? Do we want to buy a nice house and set up for that? Do we want to just keep doing what we're doing? Like, what is good look like in terms of our life? And how do we, how does that inform the decisions about what we want to do with our money downstream? Because they can do anything they want right now and have that luxury and they just need to pick what it is that they want to do. They can't do all the things, right? If Paula Pant says, afford anything, but not everything, they can do anything they want. They can't do everything. They can kind of afford everything. Yeah. But yes, they are in a great position and I think that the exercises and homework that you gave them to do are going to be hugely

beneficial to them and to anybody listening who's in the same position. Oh, I'm stuck. What do I do next? Well, go back to the basics. What is it that you want? What do you want in five years? What do you want in 10 years? And, you know, map out a plan to get there or work backwards. You want this. How do you get there? And I think that's really great advice, Scott. The money date, I love that. I still love that advice every single time you give it. And I'll rant further here. You know, Max, in particular, is the kind of guy who's like, when I was eight years old, I bought a bunch of rats and bred them so I could buy a horse. And then I never stopped doing that. I did a thousand horses that I've broke it in my, in my, in my life.

life, starting from age 10 and going, when I was 15, I flew across the Atlantic Ocean to go and work for somebody who probably knew their stuff in that field to pursue my passion. Like, it'll never get easy. I don't think we'll find another person on this show who is like more certain of their passion in life than Max from that. And there's still, what do I do next with my money and my portfolio with that? So the problem never ends, even at these extreme ends where we've got a debt-free, finalized future state portfolio, fully capable of sustaining five forever, and a clear passion that we want to go after, it's still hard for Max and Alexis. It's going to be hard for you, too. It's going to be hard for everybody, which is why I think it's helpful to talk about it and hear

those perspectives. Absolutely. Okay, Scott, should we get out of here? Let's do it. From episode 326 of the Bigger Pockets Money podcast, he is Scott Trench and I am Andy Jensen saying, get on the bus, Octopus.