BiggerPockets Money Podcast - 407: 8 Rentals in 8 Years and Unlocking MASSIVE Tax Breaks with One Career Move

Episode Date: May 1, 2023

Think it might be too late for you to enjoy the spoils of real estate investing? Well, you’d be wrong! Regardless of age, background, or financial circumstances, it’s never too late to switch careers and become a real estate investor. Just ask today’s guest! In this edition of the BiggerPockets Money podcast, we’re joined by Evan Miller, who was a bright-eyed, bushy-tailed US Air Force cadet when he first took an interest in real estate. It wasn’t long before his childhood dream of becoming a pilot was ousted by the entrepreneurial pull of building his own real estate empire. Although his journey included a stint in intelligence and a pit stop as a certified financial planner, Evan has managed to create a portfolio of eight properties over the last eight years. In today’s episode, Evan shares his entire story from start to finish, including his frugal upbringing, his time at the academy, and his journey towards becoming a full-time real estate investor. As always, our trusted hosts Mindy and Scott are along for the ride. Tune in as we demystify a handful of money-related topics—qualifying for real estate professional status (REPS) and its enormous tax benefits, finding exclusive deals through assumable loans, and flipping houses for a profit—even in a bad housing market! In This Episode We Cover How to seamlessly transition from your current vocation to a career in real estate The value of frontloading depreciation when building your real estate portfolio Assumable loans and how to find HUGE deals in military markets How to flip houses at a profit in a volatile housing market Real estate professional status (REPS) tax benefits (and how to qualify!) The opportunities that come from surrounding yourself with other real estate investors And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Join BiggerPockets for FREE Mindy on BiggerPockets Scott's Instagram Grab Scott’s Book, “Set for Life” Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! The Real Estate Rookie Podcast Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets Money Moment Episode 217: 16 Units in 3 States as a BiggerPockets Power Couple Working Full-Time Grab “The Book on Investing in Real Estate with No (and Low) Money Down Tax Day Q&A: Live CPAs Help YOU Owe Less To the IRS Year-End Tax Tips and How to Owe Even Less in 2023 Try the BiggerPockets Calculators: Mortgages Rental Calculator Rental Estimator Click here to check the full show notes: https://www.biggerpockets.com/blog/money-407 Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Let us know! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast where we interview Evan Miller and talk about his journey from being in the Air Force to becoming a CFP to landing on real estate full time. Hello, hello, hello. My name is Mindy Jensen and with me as always is my co-pilot co-host, Scott Trench. Thanks, Mindy. Great to be here and always delighted to be your wingman. 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 real estate, or go full-time as a real estate investor, will help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Scott, I am very excited to bring on Evan Miller today to talk about real estate and the Air Force and CFP stuff. This is a fun conversation. Absolutely. Evan has picked up a cash flow positive asset, including houses and a cash flow positive house every year for the last eight years in a row. And it's really enabled him to build a solid portfolio and go full time into real estate investing. All right, Mindy, we have a new segment of the show called Money Moments, where we share a money hack, tip, or trick to help you on your financial

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30-day trial at audible.com slash BP Money. And we're back. Evan Miller is a financial planner turned real estate investor who can be heard on episode 217 of our sister show, The Real Estate Rookie Podcast. He's also the husband of our general manager of publishing at Bigger Pockets, Katie Miller. Evan, welcome to the Bigger Pockets Money podcast. I'm so excited to talk to you today. Thanks, Mindy.

Hi, Scott. Highman, Mindy. So great to be on the show. I'm a huge fan. I try not to fan boy too much, but it's really cool to actually get to be on the show and to talk to you guys in this context. Well, Evan, let's jump into your money story. Let's look at the history of your experiences and journey with money. Yeah, so I grew up in a big family, have five siblings, so six of us total. And my parents raised us on a one-income household.

and they didn't have a ton of income, but they put us through. I did the math. It was 54 years of private school total. All of us attended the same school for nine years. They remodeled their house while we were growing up. Just really made the most out of a relatively modest income. And I think the reason they were able to do a lot of that was through Dave Ramsey. They did the total money makeover, all of that stuff that Dave Ramsey puts out.

And we learned about the envelope. and like literally taking your spending money out of the bank account into cash, putting it in envelopes. And I grew up on that. And I loved it. I was always kind of a finance nerd before I even realized it and would like have like probably 10 different envelopes. And that would dictate it how I would spend. And, you know, that started when I was like before high school. And then when I got into high school, I started being able to make my own money,

did a little lawn mowing business in the summer. or some other jobs in the summer to make some extra money. And all that money was going into my envelope. So I was watching everything I was spending down to the last detail, down to how many half pieces of gum I could chew throughout each day in my classes. It was pretty OCD. So that's kind of how I approached it until I got into college. But I think it was a really powerful start and an awesome foundation that set me up to

to kind of parlay into the entrepreneurial journey that I've started since then. I believe you decided to go into the Air Force after high school. Can you walk us through that journey and where college comes in and where the Air Force begins? Yeah. So I did always been my dream to be a pilot. So come junior year and stuff, I started looking into the service academies. And I ended up going to the Air Force Academy. Something that's really cool about the Air Force Academy is that they pay for your whole school.

So graduated from the Air Force Academy debt-free of sorts. I did have the debt of time. You have a commitment. You have to serve for five years. But a benefit of that commitment is you have an awesome job when you graduate and a very clear career progression really for as long as you want, but certainly for the first five years. You graduate with about a $50,000 salary if you're living in Denver.

and then throughout the five years you get automatic raises all the way up to you're making about 100,000 by the time you make captain in your fifth year. And Evan, that includes that base salary is also buffered by allowances for food and housing. Is that correct? What would you estimate the total comp for a new Air Force graduate is at 02? So that is the total comp. And it's about 60% salary and 40% base allowance for housing. And a cool thing about that, the BAA doesn't get taxed.

So the $100,000 once you're a captain, so four years in, is like 40% of that isn't taxed. It complicates it a little bit when you're trying to go buy your first houses. But ultimately, if you get the right lender, it's better because you're not having to pay tax on that so they can round up a little bit. Awesome. And while you were at the Air Force Academy and getting started in your career, can you tell you Tell us a little bit about your financial habits and were they the same as your peers. Did you spend like a sailor? Other than that's Navy.

But how did that go? I certainly didn't spend like a sailor. I tried to do nothing like a sailor. But there's quite the spread of spending habits at the Air Force Academy for sure. I continued my envelope strategy. I didn't actually have envelopes. I switched it to an Excel sheet. But I would look at that Excel sheet, you know, now that we're in Excel, we're not limited

by paper. So I had 20 plus categories of spending and then I would, every time you get a paycheck every two weeks, just like a normal W2, that paycheck already had every dollar spent. And I would put it into my spreadsheet. It would replenish what I had been spending over the last couple weeks. And I would look at that. I mean like every day sometimes and at least every few days. and that that was pretty different than the rest of the year for the rest of the cadets there were some people that um had a pretty good financial background but a lot of us this was the first money we were making and it was fun to go spend it um and you know each year we started making more we had some debts that we technically had to pay back to buy our uniforms and stuff in the first year um but i managed to buy my first car that i bought um was a 1995 Honda civic uh one of my favorite cars ever and it was, it cost, I think, about $2,000, maybe $2,500, and drove that thing until I was almost done with my Air Force career. And then I switched to a much fancier 2001 forester. My understanding is that the smart thing to do for folks who are attending service academies

is to use, I think you have a career starter loan that gives you $30,000 to $35,000 in very low interest debt to buy a bright red, shiny, jacked up F-250 pickup truck. Why did you choose not to do that? And was that common amongst your peers? Either that or corvettes. There was a lot of corvettes in the parking lot once you got to junior year, a lot of really fancy cars. A lot of these cadets had college funds that their parents had as well.

So some of them, their parents were able to just use that and buy them cars. But that wasn't my life. My parents put a lot of money into my first 12 years of education. And after that, it was up to us. And but also there's, I mean, people were buying parachutes, people were buying guns, people, all sorts of things that were not all hobby related. And they spent through that $35,000 real quick. And I saw some people, you know, when you graduate, you're paying that off in five years. You get it's a really low, it's an awesome loan, really low interest, less than 1%. And it's because USAA knows we're obligated to work for five years at least and we have a good salary. but that's a it's like a car payment it's like five to six hundred dollars a month not a small payment that takes a good chunk out of your spending um i luckily didn't consider that at all and took the loan and just invested it um i ended up having to pay it off early so that i could

afford my first house but i made like a couple thousand dollars um kind of free money in the process okay i've never been in the military but i have driven past the air force academy on my way to other things in Colorado Springs. Do you have a lot of free time? I had a no free time. Yeah. No, not a lot of free time. So there's just corvettes and big trucks sitting in the parking lot doing nothing, getting flat spots on their tires. Like there's, if you're in the military, if you're thinking about joining the military, you don't have this luxurious free lifestyle. Don't go watch Top Gun and think that you're just going to play sweaty volleyball all the time. You're doing stuff all the time. You don't have time to go drive these

cars. So why are you making payments on these cars you can't ever drive? Have a crappy car that you never drive or have no car. I mean, can you just, if you're at the Air Force Academy, could you just theoretically spend all of your time on campus base? Is it a campus or a base? It's both. Yep. It's both in the cadet area. We called it on the hill, yeah. Like you can just spend all your time there. Yeah, you could. And save a bunch of money. Yeah, you could really be set up really well. That is a good point. There's a lot of Corvettes in the parking lot. There's not a lot of empty parking lot space. It's a lot of time in the parking lot. That was also a good point because that's part kind of what got me into wanting to be a financial advisor, talking to people about personal finance, was talking to Airman once I was an officer. And they would get their first big paychecks right out of high school. They were making like probably 40,000, 45,000, which is awesome, you know, right after you graduate. And they'd go buy a $50,000 truck, put a $15,000 lift on it, start paying,

you know, five miles of the gallon when gas isn't cheap. And I would, those were the, the airmen that I would really sit down and want to talk to and connect with, try to change, change their perspective a little bit on that. But I mean, we were no different. Well, most of cadets and my peers were no different. They wanted to have that fancy car. I actually had one of my friends tell me, Evan, there's no reason that you shouldn't be driving a nice car by the time you're an officer. And I just looked at him and I was like, I'm never going to be driving a car that costs me more than 2015's version of $2,500. Just not a thing. Okay, life hack, if you are in the military, point to any car in the parking lot and say, that's my car.

The chances of you pointing to the person you're talking to, their actual car is very, very low. So you can have a nice car, have in air quotes, a nice car without having the payments. There you go, because it's just going to sit in the parking lot anyway. We have very similar opinions on cars, Mindy, I think. What do you think that the average airman ends that five-year car? commitment with in terms of net worth. Yeah, graduated negative net worth, which is surprising because none of us have, you know, we have like a $250,000 education that we didn't have to pay for, and we're still managing, a lot of them are still managing to graduate with no savings. And then

I didn't spend a lot of time socializing with other officers, but there was plenty of spending, you know, a lot of drinking, a lot of going out to bars and those bar tabs can go up. and just, yeah, I don't think, you know, small savings, if any, then a lot of people go negative. And after the five years of service, that's still negative? Yeah, I would say so. Yeah, I had actually, because by the time I was getting out, I had a few properties and just was starting to talk to people about real estate investing and people are asking me about it. And people that I had graduated with, you know, just were getting started. It's all the way from that to like some people do end up being super busy and manage to just let that keep them from spending. And so there are some people that once they get into the captain and hire, they can start accumulating some net worth.

But most of them have no idea what to do with their money. So I again, I was like, listen to these podcasts. You know, I have a whole bunch of ideas. Let's let's spoil the surprise. What was your net worth approximately at the time that you exited? the Air Force or after the five-year commitment more specifically. Yeah, it was probably like $100,000. Awesome.

I was more towards the beginning of my investing career when the gains are frustrating because you're, you know, you, especially if you're like me, I invested with VA loans. And so I started with zero equity, negative equity, actually, by a couple thousand dollars. And so that was like the difficult part in the beginning was just being frustrated with how slowly it was accumulating. But now looking back, I mean, it just keeps, keeps growing. And it's really, time is really on your side once you get going. So how did you begin approaching investing and wealth building with an intentional focus? When would that begin in the, at the academy,

in the first few years of service? Walk us through the, the journey and the aha moment. Yeah, it really started with my first house purchase. I don't think I was really into budgeting, really into being like money conscious and it was bugging me that I had a limited spending ability because I was never going to spend more than my income certainly but more accurately like 70% of my income. And so that was always frustrating to me but I didn't really see a way to be building a net worth and then I bought my first condo my uncle who had been it who was a retired pilot in the Air Force told me like whatever you do first thing you do when you get to your first duty state. is buy a house. And so I did that. I was fortunate for that to be in Denver where I'm from,

really familiar with the area anyway. But I bought my first condo. I really love the process. I loved getting to know the city, as we would call it now, getting to know the market. And just going in and touring houses and learning about the, you know, the various pockets of Denver. Love the process. And so I was like, how can I make this a thing? I didn't want to be a real estate agent, probably because of my job and probably just because that wasn't what was exciting me. So I googled investing in real estate and Brandon's book, the book on investing in real estate with low or no money down came up. So I listened to that book. Brandon was still the narrator on that at the time. So I listened to Brandon for about eight and a half hours.

And that got me hooked on the podcast. So I really am a product of bigger pockets real estate content. I've listened to hundreds of episodes of bigger pockets content including hundreds of bigger pockets money. So that and then just read read book after book after book. So I think yeah, you guys can take a victory lot. It's definitely a huge, huge contribution to my learning. We're hearing that more and more, right, on all these episodes that a lot of these people are becoming, getting a lot of what they know from bigger pockets. Yeah. Awesome. I don't want to toot our own horn, but I'm suiting it. I'm suiting your horn. There's a lot of information here. And, you know, we're not. It's incredible.

Selling anything. We're just sharing this information because we want you to have it. I mean, school is so lacking in financial education. And then you graduate. At 18, you're supposed to know what you want to do for the rest of your life. I mean, you wanted to be a pie. But I didn't end up becoming a pilot. Oh, what did you do in the Air Force? I was in intelligence. So I didn't end up becoming a pilot. We can go down that path if you want.

He could tell us, but then you have to kill us. Exactly. Okay, then I don't want to know. I think that it's really unfortunate that we expect kids to literal kids to know what they want to do for the rest of their lives at age 18. So that's why we do this show to help people learn their money. learn how to handle their money so that they can be better with it. Evan, it sounds like you had an instinctive or a kind of ingrained instinct to go and buy a property from your uncle. And you also had time in some capacity to immerse yourself in the world

of self-education around real estate and investing. Is that a theme in military service that there's a good amount of time if you want to use it that way to put in some earbuds and just absorb a tremendous amount of educational material. It depends on the job. But yes, one of the reasons I didn't become a pilot was because I was getting a fun ride with a pilot in an intelligence plane that just basically circles over a combat zone. And he was bragging to me that he had like over 300 combat hours and he said like 280 of those hours were spent watching Netflix and I was like I do not want to be doing that but the amount of times that you have no matter what you're doing even if you're flying in a combat zone supporting live combat you there's other things you can be

doing and for me I was sitting on the watch floor out in Aurora Buckley Air Force Base and I spent to keep myself awake, which this is a little bit embarrassing to admit, but to keep myself awake, I would be building spreadsheets and that could help me underwrite properties. That made the 12-hour shift go by quick. Biggerpockets.com has a calculator. And this is why you missed the big, the Chinese balloon that was spying over us, right, last month? Well, he was out by then. That's not his fault. No, no, by that one, you're right. But no, I do, I do hope my, uh, commanders at the time are not listening right now. I mean, it kept me awake so that I was available when something did happen. So got to find it, find some way. But there is. You can use your time

for multiple, multiple different ways in the Air Force. And that was something that drove me nuts. I had a really secure path that I could stick with for the rest of my career if I wanted to. It just felt like I wasn't maximizing the potential of that. And I wanted to make sure it once I got to the end of the five years that I had kind of used that security to set myself up for something else, even if I ended up staying in, but certainly if I was leaving. So when did you first start thinking real estate is the way to go? It was a slow process. I think I knew I wanted to be investing in real estate one way or the other, but I always thought it was going to be a side thing. until maybe even like a couple years ago after I got out of the military I was pursuing my career

in financial planning getting my CFP and just understanding the world outside of the military because it's a very unique bubble that you're in when you're in the military and I barely knew like what modern technology looked like in the workplace because the Air Force is pretty behind on that. once I got to feel for what businesses were like, I realized having your own business or trying to build a business was really complicated and really hard. So you should probably focus on your strengths when it comes to what type of business you want to build. At one point, I started a suits, like an e-commerce suits website and found out that you really got to know everything about suits

if you're going to start a company in it. So that's when I was like, all right, I need to focus on something that I'm passionate about. Just the longer I was investing in real estate, the more I became passionate about it. And maybe in the last year or two, I started to really think I want to make real estate a full-time thing. And it was just last year that I told Katie, I was like, I think I want to do this full-time. And I was really happy with her response. He was pretty open to it. Going back a little bit, let's walk through the timeline of deals that you did while in the Air Force. Can you walk us through those one by one? Yeah. So I graduated. in 2015. I had 10 months of intelligence training. Then I got to my first duty station,

which was Buckley, my only duty station in the summer of 2016. And that's here in Colorado, near Denver. Right. East to Denver in Aurora. Yeah. And so I was living in southern Denver, looking for a house. And we closed on my first house, which is downtown, a condo downtown. in November of 2016. So that one, the problem, that one's still my only one that doesn't actually cash flow. It basically breaks even. I didn't buy it with investment in mind.

And so it was pretty expensive. I mean, it was an awesome place. I loved, I love living there. So I bought that one in 2016. I lived there for about a year. I closed on the next one close, at the very end of December in 2017. And did you use a VA loan for either of these purchases?

VA loan for the Pearl Street one. It was too quick. The first one. Right. Yeah, sorry, for the first one. So I used my VA loan on the first one, and that purchase price was $3,000. And my loan on that was $383,000. So the VA loan, and I've heard this come up on the UP money a few times,

but the VA loan actually covers 100% of the purchase price and closing costs up to 5% of the purchase price. which usually that covers all of it. So I actually got a check at the closing, at closing, because my earnest money came back to me. Evan, quick tangent on this. VA loans are assumable, right? So if you live in a military area, even if you're not military, I could say, Evan, I'd like to purchase your property from you, and I'd like to assume your VA loan on that property. And you'd be able to allow me to do that, right? And because, VA loans are often purchased with zero percent financing. Even after the big run-up in equity values for the last two years, folks might only have 15, 20 percent equity. So this would be a great place

to go fishing for deals in military markets. If there are officers, for example, who have bought property using this type of loan product, probably don't have a lot of equity and would be willing to sell to get out of that mortgage. Is that a fair tangent and statement? Yeah, it's a fair, it's a fair point. There's a few nuances in there, though. So the VA loan, the conditions of that is you're only allowed to hold one VA loan in your name per market. It's not just one VA loan. It's per market.

So as long as you're moving, I think it's like outside of a 50 mile radius, you can buy another house with a VA loan. So that applies well. You need to make sure that the seller knows that because the loan is still going to be on their name. but if they're I mean most military if they're leaving and selling they're moving to a completely new state maybe a completely new country and if they're they can buy again using a VA loan like if I went from Buckley in Denver to Colorado Springs Peterson now Space Force space in in Colorado Springs that's a new market I could still use my VA loan down there but if they were moving just to upgrade in town which is what I was doing, well, not upgrade, but I was moving in town. I couldn't have another VA loan.

But it is, the equity issue is a big thing for people moving. And you must owner occupy as well, correct? Right. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch.

Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. so every decision actually moves an needle.

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Well, the seller must owner occupy and is that another condition of the assumable loans? I wasn't, I didn't know. I believe, I will have to check this. This would be a great conversation. the Bigger Pockets Money Facebook group for folks that can chime in with additional details. My understanding, though, is that you, to your point, you may be limiting the options of the seller and being able to use their VA loan for another purchase, depending on whether certain conditions are met. And you must owner-occupy the property with a VA or FHA loan that you assume.

Right. I think that's a, that's kind of how a lot of these types of, you know, hacks, you can column in real estate investing are like you you can't take the hack and force it into a situation you want to be aware of a whole bunch of different tools that you can apply and be able to apply the right tool in each situation because each thing is pretty nuanced and pretty specific to a certain set of criteria and it's not going to apply to every criteria and when I was listening to that I've listened to a few episodes on that few podcasts on that and they are it's a very specific scenario where that would work, but it will work really well in those scenarios. And as you're going through your deal analysis and looking at a whole bunch of different

deals, knowing that that's a possibility could turn a mediocre potential into a really good option or turn you into a much better buyer if you're able to be able to help the sellers in that way. Awesome. Let's resume your journey. I'm sorry for the interruption. So the next one I bought was another townhouse in southern Denver. and I was owner occupied. We put 5% down, partnered with my parents on that. So I didn't use any of my money

there. And that was about $277,000 purchase with 5% down. And so that was the next year, basically one year later. 2017. And then I got married in 2018. And I didn't personally purchase a property, but Katie had purchased one. So it was kind of like my purchase, my property acquisition, getting married, because I added that to our portfolio then. So that was 2018.

And then in September of 2019, is when we closed on the 10 unit that we own with a couple of investors in Omaha. And we own a smaller portion of that, but I manage it. And then that's, that's been a really fun story as well. We still own that one and we're hopefully getting close to the exit now.

And then in January of 2020, I bought a single family home. We bought that with cash for $38,000 in Omaha. And now I have people, my phone's ringing off the hook to buy it without having done anything to it. The tenant spend a really great tenant. Probably the easiest property I've had was this one and there it's appreciated. But people are offering for like 60 to 65,000. thousand without even having remodeled it. So that's been a really fun one. I think I've had maybe three maintenance calls from that tenant over the last three years. So over five years in a row, you pick up a new cash flow positive asset, right? Property number one, property number two, wife, property number three, and then probably number four, because we got it, we had another property

in the marriage. And then we have this Omaha property in 2020. So five years in a row, one asset at a time. Was that the plan going into this? No, I wanted it to be way faster. I think it always drove me crazy how slow it felt at the beginning, like I said earlier. But I was doing something, I think. And now it's super powerful how that set me up. And one, those years passed no matter how much I wanted them to slow down. And so like one at a time really added up to now we have eight properties. But yeah, it averaged out to one property a year all the way to this year. We didn't buy one. So we bought in January 2020, we bought that Omaha single family.

And then in May we moved into the house that we live in now. And we Airbnb our basement. So that was the purchase in January in 2020. So there was two in 2020. That in 2021 we didn't buy anything. And then last year we bought two. short-term rentals down in the Gulf Shores. So it is one a year, but those years really add up and it starts to be a nice-looking portfolio. When did you know you were ready to make the leap

from financial planner to full-time real estate investor? Sometime last summer. There was a few, last year was a really serendipitous year for Katie and I. We had our first baby. I was looking at a different firm. So I took a really deep dive into what I wanted my career to look like and just saw basically a five-year projection of what it would look like in the financial planning world, what a lead advisor. Because my trajectory was three to five years if I was doing really well to become a lead advisor. And what that would look like, what my life would look like to get there and then what my life would look like to really build on that after. And all of that stuff kind of put it into perspective that what I really wanted to pursue

over the next three to five years was building my own, our own real estate portfolio and our own real estate business. And then spreadsheets, again, were really big. I did a very detailed budget, looked at our income, all the different line items of our income, all of the expenses, including taxes, including having child care, and did the math on how much cash we were ending up with because I was working this job after all expenses versus how much cash we would it like how much more my job was adding was really important to me to learn and that was about $17,000 for a more than 40 an hour week effort and for the prior prioritizing my attention and that just was like you know not very exciting to see and it was kind of the the kind of the last

thing that pushed us over to be committed to me working on real estate and knowing kind of the minimum that I needed to make in the first year to even, you know, for our lifestyle to not even feel any different. And how much did you expect? What did your spreadsheet tell you would happen if you quit and went into real estate full-time? Well, the first piece of that is being able to claim that I'm a real estate professional full-time. We have a whole bunch of real estate assets that we have not depreciated.

by a whole bunch, I should say, a handful of more. We're like, but it's, you know, it's a few million dollars of equity that we haven't been able to use in tax depreciation. You mean you've been depreciating it, but it's been a passive loss instead of an active loss offsetting your your taxable income because you're in the good fortune of being above the $150,000 limit where you, in a household income where you can use that benefit. So sorry if that's way over people's heads. That's a great tax thing to go in and study.

we'll link to some resources in the show notes. There's plenty of episodes about that from bigger pockets, mostly, that are really helpful. But it's a life-changing detail with real estate investing to be able to accelerate your depreciation. And we were able to accelerate depreciation on our basement because it was our primary residence, and we were using it as an investment. So we were able to accelerate depreciation in one year. I think it was for our 2021 taxes.

And that was just crazy. We got like, I think, $15,000 back. The study costs $3,000. So we netted $12,000 that we normally would have had to pay in taxes. So that got our attention and really simply looking at how to do that. And that's why we focused on short-term rentals last year, because as long as you are meeting the active participation requirement of 500 hours in the asset a year, you can accelerate depreciation on those assets, which is great, but I had to, you know, I had to be pushing beyond my 40 hour a week job to be acquiring those properties and managing them and making sure they were cash flowing assets. So it just wasn't the lifestyle that I wanted. And also, um, we had a few properties that we couldn't accelerate the depreciation on. So it really, it was almost costing me money that actually might have been costing us money for me to be working. Um, because, now that I can claim real estate professional, we can write off a lot of our W2 income that's coming from Katie's awesome job with bigger pockets. And that 17,000 will quickly be made up by

just depreciating our real estate. And that'll last for a couple of years before I even need to be making any money, which is not my goal, but that pretty much immediately upon quitting, we had the access to tax strategies that would make us more money than me working full-time. Now, before folks listening have dollar signs popping up into their brains with this, this is not saving money on taxes. This is deferring taxes, right? So you're able to claim depreciation now. You will have to recapture it at some point unless you play the lifetime game of 1031 exchanging, deferring taxes indefinitely, and then dying and passing. on all of your assets to your new, wonderful daughter at that point, the stepped up basis.

So it's possible to defer them perpetually, at least with the current tax law. But really, what you're doing is if you were to sell these properties, you have to reclaim that depreciation and pay taxes on those gains, perhaps even at ordinary income tax levels. Is that right? It depends on the, it depends on how long you had the asset. But for most of the, like if you're selling most of your real. estate, it'll be capital gains tax tax rate. I'm pretty, I'm like 95% sure on that. But that's true. It is a much more active and attention requiring, like, demanding way to do

your real estate. You certainly have to be ready to manage the exits of all of these properties very attentively. And according to the laws of the day and you're risking that today's taxes tax law to change. All of that is true, and it's still a really powerful way to start your career especially and to supercharge it as you go each level. Okay, I just want to time in here and say that I know we have talked about the real estate professional, and this is capital R real estate, capital E, capital P. This is a tax designation that the IRS came up with.

I know we've talked about it briefly in the past. This is an official thing. And essentially, if you have a full-time job, you're not going to qualify to be a real estate professional. You have to have more time spent. It's a minimum of 750 hours a year. And you can't spend more time at another job than your real estate job. So I want to, I just want to reiterate that this is an amazing thing, but it is not available for everyone. If you file taxes as a real estate professional, the IRS is going to take a real close look at your taxes.

So you definitely want to make sure you qualify and you definitely want to make sure that your tax professional understands what this is and is taking advantage of this for you. Yeah, completely agree with what you said there, Mindy. That plug for finding tax professionals on bigger pockets is under the navigation bar, under Build Your Team. There is a tax professionals link, and that will take you to some of the best tax professionals that we found on bigger pockets, usually active forum participants, folks who have been around a long time, and are used to working with real estate investors. And I think that to your point on this rep status, real estate professional status,

our EPS, is a really good option for someone in Evan and Katie's situation. One person's working a full-time job, has stable cash flow to bring into the family. Other person is working on building the real estate empire and using the tax advantages that come with that. And it's also particularly valuable at this point where after seven, eight years of investing, there's a portfolio to depreciate that has assets that you can actually play these games with appropriately with the tax games that you're playing with the advice of your excellent tax professional. They're not games. Yeah. Very specific approach. They're strategies.

Evan, I want to circle back to where you're going currently. So you are a real estate professional now, your full time on real estate. I believe that you just completed a flip in this market. Can you walk us through that and what your advice would be for other folks who are looking to get started in today's market conditions? Yeah. So one of the other things that lined up last year while I was considering moving on from my full-time financial planning job was more opportunities to flip houses were coming up. And I ended up meeting an awesome couple, Sarah and Jose Gooth, Sala. And they were wholesalers, their flippers in the Denver area. And they had a couple of properties that they thought I should come look at. And they

became really great mentors to me, especially Sarah. She just did so much selfless time to help me make this a success. And so I guess that would be a piece of advice. And you hear this a lot like go find a mentor. I didn't go find a mentor. I was being active telling people about what I wanted to do, getting my plan and what I've already done out there. And the right people kind of came into my life and I was able to capitalize on that and really be able to have somebody that I could learn from. But that's really important to be around other people who are doing it. That can you can bounce ideas off of that you can prevent like rabbit holes from from ruining your first project. So that'd be a big piece. But so anyway,

so we ended up looking at several different properties. The one that ended up really being a good fit for myself and the contractor that I worked with, and he's also my real estate agent. We've worked for years together. It was a small condo in southern Denver, and the budget was we bought it for $230,000. Target sale price was between $315,000 and $325,000, and the construction cost was around $40,000 with $15,000 to $20,000 of other costs, holding costs and everything that closing costs, everything else that came into the transactions. One of the challenges at the beginning was knowing what the sell price could be, because we were analyzing this property in November of 2022,

and everybody knows all the ups and downs and the volatility that the real estate market and the interest rates experience. So you can't really have, you don't have too many comps as you look back. You have to look at like, for us, we looked at the last three months of actual sales of condos that were really similar to this one that we were going to be flipping. And if you're flipping a condo, you need to be looking at pretty much that community or really similar communities like it. Because as we were looking at the comps, there's a, there's a main thoroughway. Fair just north, 285, just north of this complex. And right on the other side of that was another condo complex that had really similar numbers, two bed, two bath, about 1,000 square foot condos.

And they were all comping for about $100,000 more than these condos. And so that was confusing at the beginning. But that was a really important thing to clarify. We literally just took comps in that condo complex and a couple outside. And then, um, nearby areas. And then ran the numbers and I had run the numbers a lot. I think like I said, I like spreadsheets. I've analyzed hundreds of properties. I've analyzed several before even considering doing a flip and then several during the process as well. And then we went for it and closed. I partnered with Sarah on the loan to get better terms. And then I brought all of the capital. that was going to be needed, the private capital that was going to be needed, ran the project.

She helped a ton with design choices and all the different details that you run into throughout a flip. And then the same guy who did most of the work is the one that listed it. And just last week, actually, we listed it on Friday and ended up with three offers all over asking. And we were able to take one that was 11,000 over our 320,000. thousand dollar asking price so it turned out amazing but some of the things that i kind of went into the project with were if it takes a couple extra months to sell i'll still make money or break even um if if we are desired if it's like 5% 10% below our um asking price what we wanted to sell for i would still break even um so this first one was learning how to do it going through the whole process and if we made

money great. And we did. So that's, it's awesome. What was the total profit on this? So the total before, there was a few total profit was probably about 20,000 it's looking like. But the total profit was about 30. I had one other investor and then Sarah got a little bit of a cut for partnering with me, a lot less than she deserved. But so we, the total capital in, the total private capital that was required was about 60,000. And, and the total, we made 30,000 in four months. So pretty good. A lot better result than I expected my first flip to be. And that's all during kind of one of the scarier markets. I am just saying that because I had a lot of doubters that were like, is this the right time to be flipping? Like,

you're crazy for doing your first flip right now. And I guess I had a lot of doubters. All of my close family were supportive, family and friends were supportive. But there's just a lot of questions out there of like what are you what are you thinking and um you know it turned out to be really a successful thing but it was because we i had a lot of experience in real estate i knew denver really well i love running numbers so i've run the numbers and i very conservative numbers several times over and over again um said no to a lot of other properties that could offend good projects but weren't the right fit and then also had um a couple of people that were really interested in my success and just great people that were helping all that happen.

Fantastic. I think it's an awesome approach. I think it's against the grain of conventional wisdom in this market. And again, an outsider, I would say I'm a novice at understanding all of this stuff. I have never actually done a flip, for example. But it seems like it was buy high, sell higher for the last, you know, eight years. And your approach is kind of buy low, sell less low in this flipping market. Is that a fair way to sum it up? Definitely. And we, when like we are after repair value that we looked at was lower than what properties had sold for in 2022. So we were expecting there not to be appreciation. And we were actually, even though I personally didn't think there was going to be any drop in the Denver market, you know,

it needed to take that into account because if there ever was a market that that that what happened and this was the this was it um and then if you get you know if there's appreciation in the process it's awesome bonus bonus profit so and that's what that's what happened and that's a much better feeling than counting on getting there and then even meeting it just not not as satisfying a way to approach it Evan this has been a lot of fun and I really appreciate you sharing all of these great tidbits I love your your quote I love running numbers you have have to nerd out about real estate if you're going to be successful. It's not a, that looked interesting. I think I'll just jump in. I mean, you can do that. There's lots of people who have,

and those are the people that are telling you, you'll never make money. Your experience will be terrible just like mine. Well, of course your experience was terrible. You didn't do any of the upfront work before you jumped in. So I loved all of the preparation and the learning and the, the just experience that you got before you got any experience. And I love that you shared your story with us today. Thank you so much. Where can people find more about you? So like on the side, I do some volunteer financial planning. And I'm also trying to just make just like you guys, I love the BP letting podcast because you're trying to make financial content and learning available to people who need it when they can't afford it. It was a,

is a big passion of mine. So I started a Instagram handle called Simple Fellow Finance. So I post just little tidbits throughout the week on that. So you can find me there. Then also my Bigger Pockets account. I pay attention to that as well. You can DM me in Instagram or on Bigger Pockets. I'd love to talk to people more about that because that's my other passion. It's really hard to make money being a financial planning coach, unless you're, mostly working with people who already have a nest egg. And they're great people and they need financial planning help as well. But where my passion is is really helping people that are at the beginning of their careers, not ready to spend thousands of dollars a year on financial

planning. But a few tweaks here and there can really set them up well. I think that's a big thing about my story is they were really a few small tweaks. They didn't like really excite me each time. It was just like, all right, this is at least a step that I can do, and it's the right direction. And it's really set us up to be able to do really exciting things like quit my W2 and go full time into my own business and our own real estate portfolio. So that's Simple Fellow Finance. And I'm always happy to talk on bigger pockets as well. Awesome. At Simple Fellow Finance on Instagram, Evans, a overnight success in just 10 short,

years of real estate investing. And also a, I would say a nerd and expert in all things personal finance and willing and ready to help, licensed CFP. So go check them out. And there's a lot of probably good advice that you can learn from Evan on. Also going against the grain in the current real estate investing environment. So really admire what you've accomplished Evan and look forward to seeing what the next decade of real estate investing brings now that you're full time. Thanks, Scott. Thank you. All right, Scott, that was Evan Miller. That was super fun. And he had a couple of quotes that I love. He said near the end, he said, I love running numbers. First of all, huge nerd. But second of all, get good at running numbers. If you don't like running numbers, what are you doing in real estate? Why do you think you're going to be successful in real estate if you can't run the numbers? What does Brandon say, like run 10 a day or something like that? 10 a week. Get really, really good at running numbers. Do you know who doesn't run? numbers anymore? Me. Do you know why? Because I do it all the time. I am an expert in my local city,

and I know, because I'm a real estate agent, I am on the MLS all the time. I'm constantly seeing what houses are listed for, are selling for. I know what houses are renting for. I am flipping houses. I know how much it costs. Because I'm an agent, I am getting quotes all the time for roofs and air conditioners and appliances and and and and and so I'm not running numbers. I just have this running list of how much stuff costs in my head. So as I'm walking through a property, I can say, this will be, oh, it needs a new roof, I bet, because I can see through the ceiling. So that's $15,000 to $20,000. And the HVAC system was last replaced in the Roosevelt administration. So that's going to need to be replaced. That's $12,000. And I know this because I've already gotten $15,000.

57 quotes for 57 properties that I sold last year. So it's going to be something that you either need to know, but like the back of your hand or run the numbers. Get good at running numbers, period. Absolutely. You know, Brandon's 10 a day is great. I like the idea of just, if you analyze one deal a day, that's 90 deals in a quarter, right? And if you pick the best deal out of that, that's roughly one in 100, right? Maybe do two on a couple of Saturdays and you've got, you've rounded out to a nice hundred deals in one quarter of the year, that's a great ratio. You buy the best one of those deals, you're probably going to get a pretty good one. And that would be a very simple formula for someone who wants to, you know, flip in today's market, right?

You probably can still do it if you follow a simple rule of thumb like that. I wonder if Evan would agree with us if you were here. So I also think that someone like Evan who loves running numbers like that, now all of a sudden, that analysis counts towards your real estate professional status. That is literally your job to run the numbers on these things. And so a lot of those benefits begin to stack up if you're willing to do that, that level of analysis to get into real estate investing. So always start with the numbers, figure out what a good deal is. And I'd be remiss if I didn't take this absolutely perfect opportunity to now plug the Bigger Pockets calculators, which are available to all of our pro members,

which allow you to analyze those deals in a really simple but effective toolkit. It integrates with our rent estimation tool on BiggerPockets so you can get some accurate. If we have the data, if you're in a market with very little, very few properties, you're going to need to find your own comps. If we have accurate rental comps for many markets around the country, and that will help you, again, get used to the craft of analyzing deals. Help you get started. Golly, Scott. Where could I find these calculators? You can find them at BiggerPockets.com and just hover under the Tools section of our navigation bar.

Or you can use a quick link and go to biggerpock.com slash calc.c.c. Okay. Another tip that Evan shared with us is, I think this is brilliant. Don't try to force your scenario into a program. Use the program and all of the rules that come with the program because any of these programs are going to be a government-sponsored program and they're going to have a ton of rules involved. Use the program to your advantage. Figure out the rules. The government doesn't hide these rules.

They print them out in great detail online. You can find these rules, read them. Understand that the VA loan, if you qualify for a VA loan, go understand every rule about the VA loans. Call up your lender. They're not that busy right now because lending has dropped a little bit since rates have increased. Call them up and ask them.

Explain to me the VA loan. If they can't explain it to you, don't use them as your VA lender. And not all lenders understand the intricacies of the VA lending process. I have an amazing VA lender. I get nothing for referring them. Email me, media at biggerpockets.com, and I will send you my VA lender link because she's fantastic. But you just need to understand the programs that you're using. Figure out the loopholes.

There's always a loophole. It's a government program. So find the loopholes and use the program to your. advantage. Yeah, and three tips for doing that. One, network, right? Ask your lender, ask agents in your local market, ask peers and investors for tips. They will steer you towards these opportunities, many of which are so nuanced and so hyperlocal that we could never get to them on a podcast like this. The second is immerse yourself in content that is podcasts like this, right? And really spend the hours, make that your default when you're at work or at the gym or whatever

in kind of immersing yourself in the world of real estate investing. And then third, marry the head of publishing at Bigger Pockets and get all the Bigger Pockets books for free. That last one isn't going to work so well because she's already married. All right. Well, Mindy, should we get out of here? We should. That wraps up this episode at the Bigger Pockets Money podcast.

He is Scott Trench. And I am Mindy Jensen saying Hakuna Matata. If you enjoyed today's episode, please give us a five-star review on Spotify or Apple. And if you're looking for even... more money content, feel free to visit our YouTube channel at YouTube.com slash BiggerPockets Money. BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kaelin Bennett, editing by Exodus Media, copywriting by Nate Weintraub.

Lastly, a big thank you to the Bigger Pockets team for making this show possible.