BiggerPockets Money Podcast - 71: 5 Years to Financial Freedom Through Real Estate Investing With Sarah P.

Episode Date: May 6, 2019

Like so many of our guests, Sarah P. did not grow up understanding how money works. She wasn’t bad with money, she just wasn’t very good with it. She learned about financial independence through Mr. Money Mustache and completely revamped her... Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 71. Certainly not Rosie. It's been a lot of work to get here, and I'm not saying that there will never be a storm. But that's why I've prepared. And this is what I would tell anybody. So when you're trying to build a real estate portfolio, you have your idea of how much it'll make, but make sure you are really, really conservative because you just don't know what you don't know. And I've run into that a few times, and luckily having conservative estimates have been very helpful there.

It's time for a new American dream, one that doesn't involve working in a cubicle for 40 years, barely scraping by. Whether you're looking to get your financial house in order, invest the money you already have, or discover new paths for wealth creation, you're in the right place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money podcast. How's it going, everybody? I'm Scott Trench. I'm here with my co-host, Miss Minnie Jensen. How you doing today, Mindy? Scott, I'm doing great. How are you today? I am doing fantastic. It is beautiful today. Although I did attempt to bike in today, and my little bag that I attached to my bike broke. So I actually ended up having to drive on this beautiful day instead of bike.

Oh, that stinks. Did it like completely break? You have to get a new one? It attaches to my bike brakes, and I could have probably just used another bag and carried in my back. But it's a one day problem. A one day problem. And there will be many more beautiful days here in sunny Colorado, because that's kind of what we expect. sport. People think that Colorado is filled with snow, and that's only in the mountains. We don't live in

the mountains. We live down at, I mean, it's still, it's not sea level. It's still a mile high. But yeah, we have beautiful days all year round, and I have never loved a state more. Yeah, it's pretty great here. It is pretty great here. I am doing really good. This weekend, I spent a lot of time doing real estateing, as Daphne calls it. I have a listing that went under contract. I've been working with some buyers and I made an offer for them. Hopefully it gets accepted. But I just went all out this weekend doing my real estate. So this show is just another extension of that. Today we're interviewing Sarah, who has become financially independent through her real estate investing. And her story is just fabulous. I really, really enjoy hearing how she made smart decisions. She made,

money conscious decisions and now she is retired at the age of, well, now she's 31, but she retired at the age of 30. And retired is, she's one of those people who can't sit still, just like most retired people that I know she didn't retire to lay on the beach and drink pinia collata. She retired to work on passion projects. So now she's more involved in the arts and she can do whatever she wants without thinking about how much it's going to cost because, or how much it's going to pay because she doesn't need the money. Yeah, I mean, I love the application of frugality. There's a little bit of minimalism here.

And then the off of the race is building real estate, but not so much off to the races that it's about building 100 units, massive portfolio. It's always, I think with her, at least with the impression I got, over the last five years, has been with the end in mind of financial freedom in the early 30s and the ability to have all that optionality. And wow, she just backed into that so effective. Yeah, yeah, her story's great. Before we tell her whole story and negate listening to the rest of it.

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 in a needle. Achieve your financial goals for good with Monarch, the all-in-one tool. that makes money management simple. Use the code Pockets at monarch.com for half off your first year.

That's 50% off at monarch.com code pockets. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this more fun? Calculating quarterly estimated taxes. But somehow, every small business owner ends up doing it. Your dreams of creating, selling, and growing get replaced by late nights chasing receipts,

juggling invoices, and wondering if that bad sushi lunch with Scott counts as a write-off. Change all that with Found. Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season without you doing the heavy lifting. You can set aside money for business goals, control spending with virtual cards, and find tax write-offs you didn't even know existed. It saves time, money, and probably a few years of life expectancy. Found has over 30,000 five-star reviews from owners

who say, Sound makes everything easier, expenses, income, profits, taxes, invoices even. So reclaim your time and your sanity. Open a found account for free at found.com. That's F-O-U-N-D.com. Found is a financial technology company, not a bank. Banking services are provided by lead bank, member FDIC. Don't put this one off. Join thousands of small business owners who have streamlined their finances with Found. Audible has been a core part of my routine for more than a decade.

I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leaner Stronger for Fitness. The Anxious Generation for Parenting Perspective and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive 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, dot com slash BP money. Okay, Sarah, welcome to the Bigger Pockets Money podcast. How are you doing today? I'm great. How are you guys? I'm doing fantastic, Scott.

Doing great. Excited to have you. Super excited to have you. So Sarah was a guest on the Bigger Pockets Real Estate podcast, but we did not exist back then. So we're going to take this time to introduce Sarah to our listeners because she's got a really awesome story of becoming financially independent through primarily real estate investing, which is, you know, kind of a thing that I'm really excited about.

So Sarah, why don't we start off with where your journey with money begins? Yeah, absolutely. It really kind of stems from a lack of understanding growing up. We weren't exactly hurting for money, but there weren't the best financial habits learned growing up. And I remember, honestly, I didn't really fully understand how money worked until I was a good bit out college. I remember I graduated and I called up a bank and I said, hey, I need to put my money somewhere and they say things like IRA and mutual funds and I had no idea. And I said, okay, sure, why not? And luckily I started that up, but it really didn't kind of skyrocket until I bought my first house and had no idea what I was doing. This is like my primary residence. And I'm getting

overwhelmed by mortgage terminology and thinking, what am I doing? And so it really wasn't until I stumbled upon Mr. Money Mustache and heard the financial independence retirement early, you know, the fire movement. That really excited me because that financial blueprint is, for me, was wanting to be secure. And that kind of just launched this whole process of where I am today. Wanting to be secure. That is a really great goal to have. How did you discover Mr. Money Mustache? Mr. Money Mustache was suggested by some anonymous forum member. I was perusing a site called Reddit of all places.

I was trying to learn personal finance on that subreddit. And somebody mentioned Mr. Money Mustash. I clicked that link. And I spent about probably two weeks just completely reading his entire blog and any of the questions that I would ask, a lot of his rental stuff before he kind of switched to reads primarily, he had his physical rental properties. And anytime I asked a question on Google, bigger pockets would show up. And I was like, well, I should probably look at this site a little more. And it was probably about six months until I was able to finally get my first rental.

And so, yeah, it was this crazy happenstance that I even discovered this. And last September, I was able to go to one of his pop-up business schools here in Colorado. It's just crazy to be able to see and meet all of these people in the fire community. What year was it that you kind of stumbled across this? When was that turning point? The turning point was 2014. It was toward the end. And then I got into my first rental in 2015. And I was, keep in mind, I was really not understanding where the best use of my money was. So I was able to, I think I had three or four by the end of that year. And since we bought in Colorado, the real estate went crazy here. So we were able to leverage things like a Helock, the home equity line of credit to get all those rentals as fast as we could.

without over-leveraging. What was your position, can you kind of go in and maybe give a little more detail on what your position overall was like in the months before you discovered that Reddit post and Mr. Money Mustache? Like, what were you spending? What was your income? What was kind of your asset allocation? And then how did that change?

Yeah. So it was really scary at first because I think I had some mutual funds. And I had a considerable savings. So I operate under the, you should have. more than six months for an emergency fund, because I think, worst case scenario, what if I can't find a job for a year? What am I going to do? And so I had that, I guess, put away. And even though I would say achieving fire, trimming your budget is extremely important and probably one of the most crucial steps you can take, we didn't have a budget at all. But at the same time, and by we,

me and my husband. We aren't big spenders. We do travel a good bit, but we'll go out to eat, but we don't have a ton of nice clothing. I like to buy clothing, but I've changed how I do that since then. So our spending wasn't really tracked, but it wasn't out of control. There were definitely things that we could have cut out of our budget. I think we were including our mortgage spending close to, I don't know, 3,000 a month with our mortgage being a good chunk of that. So So we were able to kind of trim that our spending down a good bit. And at the time, I was active duty military. So we didn't have things like health care costs.

So it was a little bit of a different situation then. So what did you kind of peg your savings rate at if you had to guess at this period? I know you weren't tracking it rigorously at that point. But do you know? Yeah. Right now we're close to 70%. But that is about to kind of go down because we're going to make some transitions pretty soon, which I'm sure we'll touch on it.

Well, what was it at prior to the discovery of the fire movement? I would estimate maybe it was 30 to 40%, which isn't too bad, but there was definitely being able to, I suppose, increase our savings rate helped us get to fire that much faster. Got it. And so once you discovered that what were the changes, you said that there were minimal, but what were those changes? Were they more on the income front?

Were they on the, you start deploying your, I mean, I know you bought real estate six months later, but was that really where you applied the pressure, I guess, is on the investing front? It was a good bit on the investing front, but in terms of trimming our budget, we were very, very conscious of purchases we made. And so, well, I think there's a good bit of overlap

for things like zero waste and minimalism. I found a lot of people who are interested in the fire movement talk about these things. So we bought into that minimalist documentary that's on Netflix, and I know they have their podcast. And I remember pausing about halfway through that documentary and going upstairs and going through clothing and trying to say, this needs to leave the house, this needs to leave the house.

And so there were a lot of things we did that changed our frame of mind in terms of how we buy things. So we got rid of a lot of stuff in our house. We went down to one car, which was huge and has been really exciting. We have clothing exchanges instead of buying new clothing because we want to do the zero waste, right? So we don't want to buy new things if there are things locally that people don't want and we can just trade for. We compost our food, you know, kind of like typical hippie stuff, I suppose, if you want to think about it that way.

And so all of those steps, you may not think are fire-minded or directly related to fire. But for us, it was because we're no longer spending so much money on new couches if we can find something to buy locally or trade or whatever. That helped us a lot. So you're trading locally. How do you do that? Well, there's a lot of, I know, like on social media and stuff, like next door, you can find in this community, there are a lot of free things that people will put out really nice things for completely free and they must come get it at the end of the day.

So there's that. You can do trades on Craigslist, the typical fair for buy and sell. Okay. I'm going to throw a ton of questions at you just to get a little bit of background. How old are you? Are you still working now? I think your husband is still working, but are you still working as well? What is your combined income and do you and your husband combine expenses and bank accounts? So go. Okay. So there's a hundred questions. Yes. So I'm 31. And I, oh, sorry, what were the other questions? Are you still working? Oh, yes. So yes and no.

I'm officially retired when I was 30. And like many other people who have retired, I've used this opportunity to pursue passions of mine. So right now I manage my properties, which is really minimal work, if you ask me. But I do a lot of art-related stuff, you know, teaching instruments and dance. And so it's been a lot of fun to explore those opportunities

in more of a capacity than I would have otherwise. My husband is working, but since we've reached this, I suppose he is a term called Coast Fire, where he's not accepting new clients at the moment. So for all we know, you know, these projects will peter out and he may not accept any other additional work unless he wants to, which is a great position to be in. So right now, I think our annual spending is, I don't know,

be close to 40,000 a year. And our real estate right now is covering that for us, which is great. And I think a lot of people have a problem with making that jump, right? They're financially independent, but they are not ready to retire early. And what really helped us with that was we had kind of like this bizarre world account where all of our rental stuff came in and all of our bills and everything went out. And so we did that for a year, actually probably a little over a year, and try to figure out with what's left over or what wasn't going to be left over, are we ready to make this jump? And so that's what kind of prompted that.

Okay, so your real estate covers your spending, which is awesome. Do you have additional investments? And you said, I think I had some mutual funds. Do you still have any of that kind of thing? Because the whole 4% rule at $40,000, you have to have a million in the bank to retire, which actually isn't true. you could do some sort of real estateing where you bring in income and then so do you have any other investments we do we have paper assets for sure and yeah and those have those create dividends but right

now we're just reinvesting them right away so we are kind of those are like just bonus bonuses for us right now the primary was seeing what real estate could do for us and how much did you spend on your real estate that it's kicking off $40,000 a year because with the 4% rule that I talked about a minute ago, you have to have a million dollars, which will generate 4% is 40,000, and then you can live off of that. Did you spend a million dollars on real estate? Like your total dollars into it, not equity? Yeah, nowhere near. Nowhere near. And I would say maybe not even a quarter of that. And the reason I say that is because when you buy a property, especially an investment property, a lot of people like to see 25% down. So I wouldn't even say

it's a quarter of that if you were to estimate that because, you know, we used home equity line of credit and other kind of creative ways to finance these deals when we took out mortgages. And then when you get a certain amount of mortgages, you have all these rentals bringing in money. And so you can pay down the home equity line of credit. And then once that was paid off, we were able to say, okay, well, we, you know, now we can start keeping this excess money, which has been fantastic. So yeah, nowhere near, and that's why I love real estate so much. I love the term excess money. Yeah, excess.

Well, you know, the actual, yeah, the actual profits, I suppose, from that. Well, because this seems like the heart of the journey here is all through this real estate portfolio, can we spend a few minutes and walk through the creation of it? So maybe starting with, hey, discovered Mr. Money Mustache and bigger pockets and Reddit and all these sites, I guess Reddit, you know. You discovered FI in 2014 and then got into that first property in early to mid-2015. What's that look like? How do you finance that first one?

And how do you parlay that into the current portfolio? Well, the first one, it was pretty funny because I had just discovered Mr. Money Mustache and the military is like, cool, well, you're going away for, you know, a few weeks for training. And so strangely enough, in Colorado here, the real estate scene was insane. If you are not a cash buyer offering $30,000 above the asking price, you're going to have a difficult time in most cases. Of course, you can get creative and find off-market deals and all that good stuff. But at the time, I wasn't really well-versed in that. I didn't know what I wanted to do. So at this training, I'm talking to one of my flightmates and he says, hey, my wife's a real estate agent.

and they were based where I used to be in Florida. And I thought, you know what? I was thinking I wanted to start in Florida because townhouses down there or anywhere, I mean, they're definitely below $100,000 where in my local area it was certainly more and it was less competitive down there in Florida. So that's where I decided on my market first because I knew the market and I knew the areas and what I had a good idea of what would be successful.

So yes, six months later, we eventually find a townhouse down there. And then we get that rented out. Everything goes fairly smoothly. There were some obstacles along the way. But then by the end of that year, I had two more townhouses again in that area. How did you finance that townhouse? The very first townhouse was our home equity line and credit. We eventually, yeah, we initially had a mortgage set up.

And then the very last second, the mortgage people, they found out they had made a mistake and they wanted to delay. And the people who were selling were saying, like, I need to sell this as soon as possible. So it just worked out. We were able to put the whole thing on our line of credit. That's how cheap real estate is down there. How much was the place then? The place was, I think, 81. But we had, again, our own savings up to that point that we were ready to put 25% down and all that fun stuff. So yeah, we got that down there. And then there were other townhouses like 45 minutes north of that area that were $60,000. And so we got two of those. And right now, I think we have the four places in Florida,

which are all townhouses. We had two condos in Colorado, one of which we sold. And then the rest of them were up in Michigan where I was kind of around where I grew up. So I also knew that market. And the Michigan market is kind of cheaper as well. So it was easy to kind of, And after you get one and then two and three, you have enough money to pay down the home equity line of credit. And then you can use that to get more mortgages and go on from there. I don't know if that's what you're looking for in terms of the answer. No, I mean, it just sounds like you with one at a time using mostly primarily leveraging the lines of credit in order to kind of move that forward. And then the cash flow generated by the portfolio bit by bit.

Yes, yes. And it was easy to find the second, and I remember writing about this too, this is a really, you want to tell people you invest in real estate because I remember one of the townhouses I even have is because a neighbor had known I was looking for places, a neighbor of the townhouse, the first townhouse I bought. And he said, hey, I want to sell mine. Do you want to buy it? And we were able to do a direct transaction with a like a real estate lawyer. And so it was cheaper for him and it was cheaper for us. And it was pretty quick transaction. And it was great. And if it's on the same block, there's probably some synergies there too. Exactly. Exactly. So if I have a handyman who,

needs to service one. I just tell them, hey, can you pop into the other one and just make sure the filters are changed and that everything's in good working condition. So it works definitely when you put them together. Yeah, I definitely love that idea where you just tell everybody, hey, I'm an investor. If you ever know anybody who's thinking of selling, I'm talking to somebody about a potential foreclosure because I just said, hey, if you ever know, I'm always looking. They're like, oh, there's this one house. Yes, yes, yes, that's what I want. So how many properties do you own total? Yeah, I have 14 units.

So some of them are, two of them are duplexes. So, yeah, I guess 12 buildings or 12 buildings. And how many have leverage on them versus how many are free and clear? Oh, goodness. So it's hard to say because when you say free and clear, technically there are a few properties that we have on our line of credit right now that to, for all intents, and purposes, it's free and clear on that side, but we're still paying on them locally. And so I think six of them we have mortgages on.

Okay. Wow. Wow. Good for you. That's like 50. Okay. Woohoo. So you said a moment ago, I managed my properties, which is really minimal work if you

ask me, how much time goes into managing 12 properties across three states? I mean, you're getting calls every night in the middle of the night. My toilet broke. And so how much? much time is this really? Oh, right. I love this question because in, you know, my very, I suppose, a small bubble of real estate management, at least. I mean, I have properties that are built in the late 1800s and some that are built in the 90s. So, you know, there's a, there's like a hundred years difference in some of these properties. Some of them need more attention

than others. But the ones up in Michigan, I just have a manager for because it's hard for me to know the policies and codes and make sure I manage annual inspections and whatever. So because a lot of those are the older properties, I have a manager there. And I found that sometimes managing the manager has been most of my time. But I've recently found a manager that is just so great. And I really only have to check in whenever I have a question that's specific or something like that. So for the ones that I manage directly, it's been, I would say, an average of maybe an hour to a week. And I think that's being generous because I oftentimes, it's kind of trying to average out recently. We had some turnover because we're coming up on the summer months. And then we had, I know I was talking

about having three furnace and AC replacements. And that took up a whole lot of time because it happened in the peak season when it's extremely cold in Michigan. So that took up a lot of time trying to work things out there. Okay. So you make $40,000 a year averaging an hour a week. I want that job. It's a good job. She spends $40,000 a year. She earns probably more than that portfolio, right? Thank you for the correction. Yeah. Thank you for the correction. Wow. Well, let me ask you this, because sometimes we paint a really rosy picture of the outcome here. But the reason, you have the situation, I presume, is because a lot of work went into the front end here to build this portfolio and get your education right. Oh, yes. Yes. How many hundreds of hours

that you put in learning about real estate and laying the foundation for this portfolio and situation you currently have? Well, before I made my first jump, I would say, and I know this probably sounds low, but I would say it was maybe 50 hours. And I say that because maybe more, I just remember listening to the bigger pockets podcast on the way to work, on the way from work. And so it would be at least maybe a podcast a day. And then I'd be sitting there on my lunch break or during Lul's and just reading bigger pockets. Whatever's. I mean, it might be, I was on a few webinars with Brandon. So, yeah, I mean, until I jumped into my first deal, it was probably around that much. And then, I mean, since then it's been hundreds. So it's hard to say,

But it's also, I mean, how many hours of work, right? Because once I started learning about this, it wasn't really work to me. It was just fun. And it's this, I don't know, weird money-making hobby I have. So I haven't really tracked it, but I would say probably hundreds or so. Nice. Yeah. I think when it comes to this, like, when it comes to real estate and all this stuff,

it's really like 250-some-odd decisions that you have to make, you know, give or take. I don't know. And you just have to like understand what those are. listen to absorb a lot of content, like you listened to a lot of podcasts and bigger pockets and audiobooks and read blog posts and forum posts and all that kind of stuff. But yeah, it's up front and knowledge accumulation over time and absorption that really saves you the time and it creates a situation of what you've currently got, this great situation where you don't really do much work and it brings in a lot of money and it has probably appreciated

a little bit your portfolio and that's where you're at. Anyways, it's not as rosy as one to two hours a week and you get to this position, I think, is what I'm trying to communicate to us. Oh, yes. Absolutely not. I mean, and I know I made a whole lot of mistakes, costly mistakes. And so it's certainly not Rosie. I've had, you know, some, like I said, I just found this new PM where I just kind of, you know, plug and chug. I don't even need to worry about him. But in this area that I am in in Michigan, it's just, it's really easy to find for managers that you don't really, you can ask all the right questions and they can tell you what you want to hear, whatever the case is, but you can still run into your fair share issues, whether it's somebody you've hired to manage or you managing.

So, yeah, certainly not Rosie. It's been a lot of work to get here, and I'm not saying that there will never be a storm. But that's why I've prepared, and this is what I would tell anybody. So when you're trying to build a real estate portfolio, you have your idea of how much it'll make, but make sure you are really, really conservative because you just don't know what you don't know. And I've run into that a few times, and luckily having conservative estimates have been very helpful there.

Moving into the kind of current state situation, how do you feel about a cash position as someone who's going to live off of a lot of real estate income and kind of, you know, both you guys are moving towards this full-time retirement piece? I mean, obviously entrepreneurship, all that kind of. stuff. But like, how do you, how do you feel about a cash position at this point in making the transition to retirement? Can you explain, sorry, when you mean cash position as in like having all your assets in paper assets? Or do you mean? No, I'm sorry, that's a good, good follow-up.

Earlier on the show, you mentioned that you felt that you liked having more than six months cash reserve. Oh, yes. Do you still feel that way? Is that something that you've, do you have a very large cash position in going into this relative to maybe someone who had a, stock portfolio that they could just sell off a little bit at a time if they needed extra cash. Oh, yeah, that's a great question. And something I haven't really considered. Right now, I still have more than six months saved up. And on the same end for my real estate's business checking, you know, all those, the capital expenditures that you set aside, the repairs and vacancy, the HOA fees, that insurance, whatever, taxes. I have at least a year, whatever that

total is at the end of my spreadsheet. I try to maintain at least a year and that balance, assuming that at some point, everybody is going to be vacant. Like, worst case scenario, of course that's not likely. But again, I had three HVACs I had to replace this year. So that was a big chunk of that annual savings that I should have. And it really paid off because when one of them broke down and they said, hey, we need two to put into this duplex. Like, okay, fine. And then another one broke down and they said, all right, we need to replace a whole thing and said, okay. And that just helps me not feel that gut-wrenching loss at any point. I've saved up for it, or rather my business is saved up for it. And I feel better about it. So I think there's still those

symptoms of that blueprint feeling of insecurity, but it's just the stress I feel behind all that, all the tension that I used to have, is really melting away. So there's just a little bit there left, but right now I'm feeling pretty okay. I want to clap so hard for you for that whole thing you just said, because I'm in the bigger pockets forums all day, every day. That's like my job. And I see this question pop up over and over again. How do I get started in? investing with no money. No, don't. Don't invest with no money because you need reserves. Something always breaks in real estate. It is a rule. It is carved in stone. As soon as you buy a property, something breaks. And the cost of that repair is inversely proportionate to how much money you have

in the bank. So if you buy a house and you've got a year's worth of reserves, you need a new outlet. But if you buy a house and you have nothing, you need a new furnace or a new air conditioner, depending on what season. It needs a new roof. Like there's all these things. Real estate costs money. And you put aside a little bit every month based on how old the thing is. You're going to need new appliances. Are you going to need them today? Well, not if they're all brand new, but if they're all 15 years old, you need to have a big chunk of reserves set aside so you don't feel the pinch. I have neighbors who had a rental property and like the air conditioner, the water heater, and the furnace all broke at this in like in the same year. Oh my goodness. And then as soon as that year was up,

as soon as their lease was up, they sold the house. I'm like, why'd you sell everything's new now? You don't have to sell again. You know, you don't have to replace anything for decades, but they didn't have the reserves. So it was really difficult for them to come up with the money to, you know, fund these repairs. You have to have reserves. And I love that you have reserves. Sorry. And rant. I will always. And I'm the same way because I operate on that. security slash safety. And for anyone who is in that position, like you just described, where they think they have a lot of old appliances and that's coming up, my recommendation for anyone who doesn't have a huge reserve is to consider a home warranty. And so on my older properties, I have home warranties

on them and it's been extremely helpful. You know, hot water heater goes out, call the home warranty within 24 hours. They're there. They'll replace it. Same thing with one of the HVs that went out. that was a unique situation. I can explain later if you want. But those home warranties, like if they had had one, all those major appliances that you mentioned are covered. And they, you know, you pay into that. It's like buying insurance, right? So it might be like four to six hundred or so a year. And then you pay like a service fee for them to come out. And that's pretty much it in most cases. Going back a second here to the whole no money conversation, buying real estate with no money. You essentially did this in a little bit of a way with your home equity light of credit

on that first property using that to kind of, but you came into that with a strong cash position, right? You had cash. You had a high savings rate. You had a very strong financial foundation, right? That's the appropriate situation from which to invest in rental property with no money. I don't want to correct you, Scott, but she didn't invest with no money. She didn't have like a big pile saved up. She borrowed from the equity in her home, but she had money. She had, no, I'm saying she did have a pile of money saved up. She just didn't use that to buy the real estate. She used another creative financing method. Okay. Yes, because, you know, we were taking the mortgage out, right? And so we had the 25%, right? But it wasn't until they came back and

said, we messed up that I was like, oh my gosh, how are we going to pay for this? We can't just start the mortgage process all over again with somebody else. And then I learned about home equity line and credit or I read about it at some point. And then we took one out because it was actually pretty fast process. And that's how we did it. So it was a little bit of both because our home equity line of credit, I think at the time couldn't do the whole thing. So it was a mixture. It was a little bit of both. Just we didn't we hadn't planned on it. Yeah, but my point is that a lot of people get excited about buying real estate with no money down, right? Like no, like bringing nothing disabled. That's great. It's awesome to do that if you have a strong financial position and are going

into that in a way that it will advance your position, but you're not dependent on it. Where I think is not appropriate is if you had done the same thing, but had had no liquidity. We're living paycheck to paycheck and we're using tapping out on your home equity to buy this one deal where everything hinges on that as being successful. That's where I think to a lot of trouble. And that's, I think, the whole point of, you know, one of the whole major points for me of our show here is this is the foundation that you need to build from which to make investments in real estate, in the stock market, in whatever it is you're going to do to build out, build toward financial freedom. Yes, yes. And that is the sole reason we were ready to jump in and buy something just six

months after figuring all this out. Because otherwise, if we were leaving paycheck to paycheck, I know I wouldn't have felt nearly as comfortable knowing myself. It would have been a bit longer until I had bought my first one. Okay. So, Scott, I'm glad you clarified that because that makes a lot more sense. I actually, I do the live-in flip, and I never had a big pile of money saved up to fund the repairs. In fact, I put them all on credit cards because I wanted the points and or the Home Depot credit card allows you to pay little bits with no interest for $6.12.

18 months or whatever. So I took advantage of that too. But my husband was making something like $130,000 a year and we're spending 40 on our living expenses. I mean, we were spending the rest on our home improvement, but we were just spending a small amount. So we had the money there. We didn't really have an emergency fund. We just had, here comes again, an excess of money. So, you know, we just spent it at Home Depot. They're both two sides of the same coin, high savings rate and cash reserve. Right? So if you have one or the other, you're in a really strong place. If you have both, then that's where you start thinking about, oh, I could retire pretty

early here and achieve financial freedom. Yes, yes. And I think a lot of people, because I am on a lot of just like kind of passive fire forums where I see people talking about, you know, I have my spending rate is $70,000, $80,000 a year. I, I would, achieved financial independence, but I'm just afraid to make the jump and people, and to each their own, right? Some people want to just retire to part-time work, which I think it's great. Some people are saying, well, I want my McMansion to maintain this high level, which they call fatfire. And I think that's great. But at the same time, you hear them, I guess you hear their voice when they're writing about how much they dislike their current situation and they're not

willing to trim their budget or whatever the case is. And that's where that high savings rate is just, that was the key for me to retire. And when people hear I'm retired, sometimes I don't actually come out and say it. I'll say, well, you know, I'm kind of a low-key real estate consultant now. But when I talked to them about that and you say, oh, yeah, let's go here, let's do this. And I'm like, well, you know, not really in the budget today. And like, well, why you got this money? I'm like, yes, but I would like to maintain, I'd like to stay retired. So yeah, that savings rate and sticking to a budget once you kind of figure it out is really important. 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 taxed refund can make the biggest impact. Because the goal isn't just to look backward. It's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off

your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focus on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place, so every decision actually moves the needle. Achieve your financial financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at monarch.com for half off your first year. That's 50% off at monarch.com code pockets. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed's sponsor jobs

helps you stand out and hire the right people quickly. Your job post jumps straight. to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored posts. The best part? No monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash bigger pockets. Just go to Indeed.com slash bigger pockets right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash bigger pockets.

Terms and conditions apply. Hiring, Indeed is all you need. When you want more, start your business with Northwest Registered Agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They're the largest registered agent and LLC service in the U.S. with over 1,500 corporate guides, who are real people who know your local laws and can help you and your business every step of the way. Northwest makes life easy for business owners. They don't just help you form your business.

They give you the free tools you need after you form it, like operating agreements, meeting minutes, and thousands of how-to guides that explain the complicated ins and outs of running a business. And with Northwest, privacy is automatic. They never sell your data and all services are handled in-house because privacy by default is their pledge to all customers. Visit Northwest Registeredagent.com slash money-free and start building something amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money-free. At Desjardin, our business is helping yours. We are here to support your business through every stage of growth.

from your first pitch to your first acquisition. Whether it's improving cash flow or exploring investment banking solutions, with Desjardin business, it's all under one roof. So join the more than 400,000 Canadian entrepreneurs who already count on us, and contact Desjardin today. We'd love to talk, business. So do you have next steps here to maintain retirement? Is there other levels to the goal, or are you kind of letting it coast?

Yes, it's a little bit of coasting, or it has been at least for, I say coast for like six months. But we recently were trying to figure out what we wanted to do next. And the idea of paying down debt was really important to us. So one of the condos here in Colorado has just appreciated fairly nicely. And we decided, okay, well, if we sell this property right now, even though we make, I don't know, I think it's $3 or $400 dollars a month off of this property, it would take us 12 years, I think, is close to 12 years to make what we've made in appreciation after expenses if we sold. So we decided if we sell this property, we can pay off our house and go from there because that will increase our savings

rate a good bit because now we won't have a mortgage. And so we decided to do that, which a lot of people might say, no, no, why would you ever do that? But for us, it's the right decision. Because some people, they just don't like having debt. I am one of those people, strangely enough, even though I leveraged it to get to where I am today. So that is our next move, is selling this condo, paying off our house, and enjoying that. Have you already sold the condo, or are you in the process of doing that? So, you know, knock on wood, we have the offer in hand. We're supposed to close in a few weeks. Again, a cash buyer. I just, you know, it's crazy. to have that people have these surplus to just buy properties like that. But maybe he has a

helot too. Who knows? I have a question about this concept here. I'm thinking about through the strategy and my inter-reambications for myself, I'm probably a few years out from actually executing any of this. But, you know, this rental, this condo, I assume it appreciated a lot, right? Oh, yes. Like $50,000. Okay. So when you sell, you're going to have $50,000 less depreciation in recapture. from that perspective. Plus our initial investment that we had and what we've paid down in our principal. Got it.

Did you consider 1031 exchange at all as an alternative? I absolutely did. I was looking at two other condos in another economy thinking, well, you know what? In this market, I could buy two properties and have a good bit of that. And I would double my monthly income. But then I would also take. on a good bit of mortgages again. Yeah, so we thought about the 1031 and rolling that into other

properties, but we're looking for right now is simplicity. And so paying off our mortgage would just be amazing because when we first got the mortgage, again, I didn't know anything about money. I'm like, oh my gosh, this massive amount of money, I need to pay it down, pay it down, pay it down. So that's what we were doing when I say our savings rate is hard to calculate. We were just paying down our mortgage and I didn't realize the power of money and how I could invest it and have all these properties pay my mortgage for me and all that good stuff. Anyways, all this is to say that, yeah, this is where we settled on because it's right for us. It simplifies our life. No, I love it. I think, I think that's, hey, it's very powerful. We've won. We've won. Our

situation is great. And this is going to make things a lot easier for us, even though I could potentially squeeze more ROI out of a different move or a different investment or whatever. what will your annual expenses go to once your mortgage is eliminated? I would say it's probably 15 to 20,000 max. Total. Total. Your total lifestyle expenses will be $20,000. That's what I'm estimating.

We've been trying to closely track. I mean, we don't buy clothes all that much. We trade clothing. We buy and make a lot of food. I mean, we do travel, but we travel cheaply. I like, we love this site called Travel Zoo. And in December, you can go to Mexico, at least from this area, for like $400 a person, including flights and an all-inclusive resort. So when we do travel, we do it in the off season and between seasons.

And you can live a really lavish lifestyle on this amount if you don't have a mortgage, obviously. So there are very specific circumstances to being able to spend this much and feeling full. Love it. Yeah. So on the Bigger Pockets, Real Estate Investing podcast, they interview a really wide range of investors. There's people who have a few properties. There's people who have like the I Want More investors.

They've got 100 units and they want more. They've got hundreds of units and they can't get enough. And I like this story because you have 12, which could seem like a lot to somebody. But it could also seem like, oh, I could handle 12 or now you'll have 11. I could handle 11 or maybe you condense more. and you know what, 10 covers it for us. So you don't have to have hundreds of units across the entire country to still fund your whole life. I love that. Yeah. And that's that's kind of when I touch on, you know, people who fat fire and lean fire and whatever the terms you want to

think about there is for us, it was trying to settle on what is enough. And we went a little past that point of what's enough and we've settled on, okay, this is enough. We are happy with this because just teaching private lessons, you know, if I want to teach some instruments and go out and do X, Y, and Z for some money here and there, I mean, that'll be enough. It'll be enough. If we, for whatever reason, lost all our properties, it would still be enough because we were able to leverage ourselves into the position we are now. And so that's when I say that stress is really melting away because we just feel so much better about. it, which is great. We love it. All right. So one, one big question left here. What are you guys

doing for health care? What's your kind of plan around that? So the health care, because I mentioned I was in military, and I'm still technically a reservist here. And so our health care is through the reserves. And so we pay, because it's not always consistent, and we have a max out of pocket. So I think each year we pay about $5,000. Total? Yes. Oh, my goodness. When I was on the health care exchange, I was paying $900 a month.

Yeah. Isn't that crazy? It was the crappiest policy. It covered nothing except like every policy covers your well child visits and your annual exam. And that's it. And then it doesn't cover anything until like $15,000 or something. Wow.

Is that through the VA or is that through the health exchange? Technically, it's through the military network. So part of it for me can be through the VA because how that goes is like if you're paramilitary and you claim, I don't know, if you like injured your left elbow, which I did when I was teaching. I taught combatives for a little bit and I injured myself. So anything with my elbow, I can claim if I want and, you know, go in and get that treated for free by the VA because it's something that, you know, hey, you.

had this injury because we put you in a position to have this injury. And so I can do that or, you know, you go through the TRICARE military network with the family and you pay, you have a co-pay and you have that max out of pocket. So if something happens, you can go to urgent care, you can go wherever you need and have that covered for the most part. So going back one more step here, after you pay off your mortgage, you're going to say that your annual spending is going to be $20,000, $15,000 and $20,000, you said. So this is $5,000 of that. So you're looking at $1,200 a month between the two of you to kind of fund your entire lifestyle,

including these trips to Mexico and all that kind of stuff. And that's outstanding. Yeah, I mean, I would say maybe $400 a month for food and groceries. And we have solar panels on our property. So, you know, that helps with our electric bill. The solar panels were there when we bought the property. And luckily, people owned them. They purchased to own.

And so, yeah, we kind of inherited it, paid for it when we bought the property, of course. But yeah, I mean, it's just we don't have a much need to go out and do a lot. I don't know what I could spend $1,200 on. I mean, we do. Like, we would really love a Tesla. That would be great. But right now we don't need one. Do you have paid off cars?

Yes. One paid off cars. Is that right? Yep. We had two paid off cars. Then we did this whole, I think it was eight months of just figuring out trying to use one car. And really, I don't know, it was like $75 or so a month in just insurance we were paying. And we said even with these conflicts that we've had with just the one car,

it would be so easy to just buy an Uber for, you know, that five mile or ride a bicycle, right? The bicycle life we've really embraced too. And so it's way less than $75 a month if we ever have that conflict, if one of us needs to use an Uber to go somewhere. Or we can just ride here. We can ask for a ride and get somebody a coffee as a thank you. It's so easy to do something like that and to be more communal in the way you live, which we've really enjoyed that. And to curb food expenses, I guess, you know, we have a garden in the back and we grow food. And it's nice. It's good. We love it. So, yeah. Yeah. When you don't have a mortgage, you really do.

don't have very many expenses. I mean, you could. You could have the really expensive phone and the clothing habit and the shoes and the, you know, going out to eat all the time. And you could really find ways to spend it. But it's also really easy to find ways to not spend it. And I love that you have a garden. Yeah, yeah. The gardening thing has been really fun, especially the square foot gardening is, is what we did. And you can make those a lot cheaper than, you know, the actual garden beds. There's just so many things that you can fill up your time with that at least we've found happiness in our position. I'm sure a lot of people would be like, oh, I couldn't live that way. And people have said that. But, you know, when I'm home and not setting an alarm, I know I was in

the military, but I hate waking up early. So that's been really, really nice. Okay, Sarah, this was awesome. I love your story. I love that you used real estate to get where you are. I love that it did not cost you a million dollars to generate your $40,000. I was recently looking at a triplex that I did not end up getting it just closed the other day that would have generated $38,000 a year and it would have cost me $450,000, which sounds like a lot, but this is, you know, Colorado money. It was a triplex and there was a lot of room to move those rents up. But I didn't have time.

There's so many things that I have going on right now. it just didn't work out. But I love that you've got this going on. And, you know, what's the worst that can happen? It's time to, time to quote Joel from FI-180 again. What's the worst thing that could happen? You run out of money. You have to go back and get a job. It's not like you're going strong today and then all of a sudden tomorrow you're out of money. You're going to know if it starts going down because you're going to be selling the properties or you can see the market take a bit of a downturn. So you've got some time to figure it out. Who was it? Bryce and Christy from episode 55 were talking about their cash cushion and their yield shield and all of that.

You just have to still pay a little bit of attention to it. But financial independence at 31, I mean, if you never worked again, you could still live. You're not going to be homeless. You're not going to be destitute. That's awesome. Okay. It is time for our famous four questions. These are the same four questions and one demand, one command that we ask of all of our guests. Are you ready? I am ready. Okay, what is your favorite finance book? I really loved Who Took My Money by Robert Kiyosaki. It's kind of one of his lesser known books,

but it kind of covers a lot of the rich dad, poor dad, his guide on investing and all these other things in its early retirement geared as well. I love that book. Awesome. I'll have to check that out. I've never heard of that one. Yeah, I've never heard of that either. Yeah, it's really great in my opinion.

And it's kind of shorter too. So it's more compact. So if you know your stuff already, it might help you out. Nice. Cool. All right, what was your biggest money mistake? Oh, goodness. They're probably one of the biggest money mistakes was buying a duplex in a city that,

where it wasn't up to code, it had been grandfathered in. I didn't realize that if you had a duplex with one HVAC, when it broke, you needed to have two HVACs put in one for each unit. So I was like, no worries, I have a warranty for that. Then they came in and they said, well, we will replace the one that broke, but we're not going to give you two, which makes sense, right? That makes complete sense. But at the same time, I was like, oh, me, it stinks. So, you know, you can do a cash payout with these warranties, which helps curb the cost. But then you had to get the two because if you had them replace the one, it would be overpowered. I can't remember the term they used, but it would be too big for just that one unit. So anyways, we had to get that. We had to get the duct done. We had to work with the city to get the energy on the outside wired properly. Oh, my goodness. Biggest mistake.

I should have asked that question, but at the same time, you don't know what you don't know. So that was a huge mistake. But it still works. It cash flows nicely. So I'm evidently. No, I like your comment. You don't know what you don't know. And that is precisely why Bigger Pockets exists.

We've got a blog. We've got a forum. We've got two podcasts. Three podcasts now. We've got the business podcast that just day. debuted last Tuesday. And it is a great place to ask questions or learn from people who are in it and love it and want to help other people. If you are thinking about investing in real estate and you don't have a bigger pockets account, what are you waiting for? It's free. All this information

is free. And it's just, you won't believe when you get on the site, you won't believe how much information is there. We've been around for, what, 14 and a half years. So we're kind of like drinking from a fire hose. Yeah, it's so easy too. You can ask anything like the most obscure question and it's been asked in the forum most likely. And if it hasn't been, you can ask it and there will be people who reply. It's amazing. Yeah, there's somebody who has gone through it and knows exactly, you know, oh, don't forget to fill out form 72. Why? Because that makes it tax deductible. Like just all these things you don't know. I can't believe that bigger pockets exists. I can't believe I get to

work here and I can't believe I get to read the forums all day long. It's like a dream come true. Sorry, this isn't my show. This is your show. I'll just chime out on this also. I have a little bit of bias here for Bigger Pockets. I don't. That's kind of natural in there. But what I love about it is it's not about Sarah's opinion. It's not about my opinion.

It's not about Mindy's opinion. It's not about Brandon Turner's opinion, David Green, any of these other folks that you might have heard on Bigger Pockets, it is about the communities and the crowdsourced ability to get feedback. You ask a question on this, and you might get three totally opposite answers, right? Three just totally different. Hey, should I allow pets my property? Yes, no, only certain types and all the different caveats in there.

There is no right answer, but that debate is where you really get to learn a lot. And I think that a lot of content out there is really black and white these days. Here's how to do that. Here's a three-step guide. Here's the checklist or whatever. And that debate and dialogue and that different community source perspective gathering is just not available anymore. So that's what I love about what we're doing here at Picker Pockets is. Well, and I'm going to jump on top of that and say, when you ask, you know, should I allow pets? Yes. No, it's not just yes or no. It's yes because of these reasons. No, because of these reasons. So it gives you something to think about, oh, no, I shouldn't allow cats because they spray. Oh, that's a good point. I don't want to deal with that. Or, hey, I don't care so much. Or yes, I should because all these people with pets are really good pet owners or, you know, they tend to stay longer or whatever. It gets to what's important to you.

as an investor. So it gives you people, our members are so amazing and they just give you a lot of different things to think about and then you can make an informed decision as opposed to just guessing. Okay. Back to Sarah. Sorry for the, that your pocket slummer show. What is your best piece of advice for people who are just starting out? Oh, goodness. It is so easy to be really eager to do any sort of action. I remember. I remember when I first started when service calls came in, I was like, I must get this done in four hours or else they're going to hate me or whatever. They're going to want to move out. And I think,

no, that has never happened. When I was a renter, I remember this apartment complex. There was something that needed fixing and a month later they came in and I had just, you know, forgotten all about it. I'm like, okay, I got time here. We can work. So the piece of advice is to gather yourself if you feel overwhelmed and shop around if you need to. Some of the largest mistakes I've made is to not just make a second call and say, hey, how much is this? This is what needs to be done. How much would you charge? Because if you are so desperate to get into something, you may not take a second look and realize, oh, you know what, that could have saved me $10,000 if I just bought this neighbor property that needed a little bit of work or something. So the best piece of

advice is to just kind of calm down, know your surroundings, and make a second call or reconsider something if you need to. Now, I'm not like encouraging analysis paralysis, right? But it's just when you need to spend money, make that second consideration. Are there other options here? And you'll find yourself saving so much money left and right. Yeah. You know, in some cases, contractors don't have time to do your job. So they will give you some outrageous quote. Oh, that'll be $5,000. And you're like, oh, I guess that's what it costs. But it's worth it to them to do it if you'll pay them $5,000. They'll make time in their schedule. But it's a $1,200 job. So you call around in one guy's $5,000 and somebody else's $2,000 and somebody else is $1,500. Why are you $1,500? Oh, I just had a job

cancel or whatever. So, yeah, always get at least three opinions. Right, right. And cheaper isn't always better at the same time, you know? That is true. That is true. I was thinking of that, as I said that cheaper isn't always better, but why is one 1500 and one is 5,000? So, you know, do a little bit of research. Yep, absolutely. Great, great, great. All right. What is your favorite joke to tell at parties? So I'm, I'm not a funny person, I don't think, but my favorite joke. And I'm a bad storyteller. Okay, so anyways, you hear about the restaurant on the moon? Great food, but no atmosphere. I'm sorry. I'm trying to think about a moon is made of cheese pun related to that.

I also, I like the one where the magician is driving down the road and he turns into a driveway. Evans, a good one too. Anyways. Okay, you and Scott are now best friends. The two ones are the best. So we record these shows

a couple of weeks in advance and one of the guys came into the office today. He's like, oh, I was listening to the show that just came out this morning. Scott's Samoa pun, you need to get him in check. That's from even Stevens episode, oh, I think 67. Yep, even Stevens episode Scott makes a very terrible joke in the beginning about Girl Scout cookies. Because that's,

that's just Scott. Okay, Sarah, where can people find out more about you? You know, I don't have much of a social media presence, but I do have bigger pockets. So, you know, if you want to find me on my profile, I know you said you'd link it. So that's where you can find me. I'm fairly responsive, happy to help you with questions if I can or just talk about real estate or fire or really anything. Awesome. We will link to Sarah's profile in our show notes, which can be found at biggerpockets.com slash money show 71. Sarah, this was awesome.

I love your story. I love that you are financially independent of real estate. It's one of our goals with the whole Bigger Pockets website. is to create a million millionaires who are independently wealthy through real estate investing. And you are a shining example of everything we stand for. Shining, shining example. Okay, thank you so much for your time today. This is awesome.

Thank you. Okay. We'll talk soon. Thank you. All right. Big thanks to Sarah. Mindy, what you think? Oh, my goodness.

I love her story. I love that she has a manageable. portfolio that she, that is kicking off enough for her to live on. As soon as she pays off her mortgage, it's going to kick off twice what she needs to live on. And the power of real estate investing is so awesome. I'm so happy to be able to share that with our listeners who may not be interested in listening to the Bigger Pockets, a real estate investing podcast because that might not be their passion. But they can see from Sarah's story how you can use real estate to literally fund your entire life. Yeah, you know, the two-pronged approach of real estate investing and frugality,

I guess the three-pronged approach of a full-time job, real estate investing and frugality. I mean, what a powerful winning combination to move towards five very, very efficiently. And she did it when she was 30. Yeah. That's just, it doesn't take that much. What does she build up her portfolio in three or four years? Yeah, I mean, well, she started in 2014, right? So. Yeah, it's true. 2019 now, so five years. Yep. Five years to financial freedom. Absolutely. And it doesn't sound like it was, you know,

cramping her style too much or anything like that. I mean, she's doing exactly what she wants to do and is very successful there. Yeah. Yeah. So a couple of things that I noticed coming up here that seem to be an emerging trend is that in addition to saving money, investing in real estate, and slowly easing into this concept of financial freedom, rather than taking it all, reducing all the income in the family in one big shot. She's making conscious step-by-step decisions to do that, right?

She's got a very significant cash reserve, and she's always had a significant cash reserve. That's something I found in common with a lot of real estate investors in the past. Successful. A lot of successful real estate investors. Yes. A lot of successful real estate investors tend to have a large cash cushion, which absolutely eats into the overall returns of your portfolio, right? because that cash is technically generating less than you could if you had put it to work.

But it is providing an opportunity. There's opportunity access by having that cash. And it really negates a lot of the risk. So she's talking about a concept where she has both a large cash position for her personal life and for her real estate portfolio. And this is exactly what I personally do as well. I've got a large cash position for my rental property portfolio and a slightly less large cash position for my personal use. And I think that that is a trait or characteristic of the portfolios of a lot of

real estate investors, I'd imagine, who are using it to achieve this financial freedom early in life. So definitely wanted to point that out. I think it's interesting that this is yet another person who has gotten around the healthcare issue moving into early retirement by using military benefits and a military background. I mean, very powerful tool there and well-deserved from anybody who's listening with any military background. That does make things, it seems. It's a little bit easier going into early retirement. Yeah. The healthcare question is tied for number one with what do you do for child care.

And there's no magic answer. There's no magic button. Oh, you could just not have it. You have to have health insurance because the alternative is to get sick and have just a crippling bill from the hospitals and whatever is wrong with you. So you do need to have health insurance. there's ways around that. You can have a high deductible plan

and then just have a like a reserve for your costs up to that high deductible. If you know that you are very sickly or you have a chronic condition or something like that, then maybe a high deductible plan isn't the best choice for you. There's a lot of options out there, but this is going to be an expense that you're going to have to account for. I like that she's got the military background.

Like you said, very well deserved, absolutely well deserved. She was a fighter pilot, wasn't she? We didn't really talk about that too much. But the picture that she sent me is her in full mask and like cords coming out of her face kind of thing in her airplane, which is just so bad ass. Yeah. So badass. There's not enough ladies out there doing that.

Wow, that's awesome. Yeah. With way back to the healthcare thing, though, a couple of themes that we seem to emerge, right? The military is helpful if you're a devout Christian or at least willing to abide by the rules. of those groups that are, what are they called? The health share. The Christian health shares. And then what's the, we have a term for this now that we use,

where you go to other countries and leverage. Oh, medical tourism. Medical tourism, yes, medical tourism. Or just generally traveling the world seems to be much cheaper than living in the United States when it comes to health care issues. What we haven't, I don't think, come up with a great solution for across any of our guests, across all the episodes, is what if you intend to retire or achieve financial independence and earn a median income

in terms of adjustable gross income on your tax returns are not Christian and want to stay put in a major U.S. city, right? What's the good answer for that person who wants to get health insurance, right? We haven't found that yet, I don't think. Is that right? Not really. There's talk of, I've heard conversations that surround people who have this lower income because they don't have a job anymore. And then they get subsidies for the health exchange, the health care exchange. Some people find that fine and some people have an issue with that. And that's, I don't know that we really want to get into that conversation right now, but you know, you don't apply for the health subsidies. They just kind of happen, right? I haven't gotten to that point

yet. So I shouldn't actually say that. Yeah. No, no, I think it's fair to, without either of us expressing an opinion. We won't express an opinion on this. The debate basically is, is, you know, hey, should I produce a portfolio that has a very low taxable adjust, AGI, right? Which would then allow me basically, would then, hey, my tax return shows that I'm basically living at or below the poverty line. But as a financially independent millionaire, you know, or close to it with lots of passive income, you know, I'm not really the target audience necessarily of that government program, right, in order to get Medicaid. for example. Right. So the question is, is that permissible? And some people say, hey,

that, you know, this is something that can cripple my portfolio and it's just a chronic societal problem. And other people say, hey, I'm not going to take government subsidies to fund my early retirement as part of my plan. Again, without expressing an opinion on that, those are the arguments. But let's suppose that you're one of those in that bucket that says, hey, I'm not going to do that. I'm not going to produce a low AGI through my portfolio allocation. I'm not going to qualify for any of these government subsidies or programs. How do I go about getting a great or a reasonable health care plan that will cover what I need in early retirement outside of full-time work?

And so that is, I think, the challenge that we should pose to listeners. Who has that solution for us for that person who is looking to make this transition, but is not going to work a part-time job, not going to travel around other countries, not going to join a Christian health share, and not going to qualify for government subsidies. What's the good solution for health care for that person? Oh, that's a really good question.

That's a really good question because when I was, before I started working here, where I do have health insurance, my husband was working in a position that he did not have health insurance, and we were on the exchange, and it was $900 a month to cover pretty much nothing. and that's $11,000 a year, $10,000 a year, $10,5, that's a lot of money. So that's an expense you're going to have to consider. I did see somebody talking on a chat group about having a chronic condition that costs

him about $11,000 a year. And the general consensus was, okay, you're going to take your FI number and add $11,000 a year to that because that is now your FI number. You can't get away from having these expenses, so you need to account for them. And there might not be a good answer for this. But if you've got one, please send it to Mindy at biggerpockets.com, Scott at biggerpockets.com, or money at biggerpockets.com. But you can always also take Mindy's solution and just come work for Bigger Pockets.

And we have a great health care plan. And you can find any open jobs at biggerpockets.com slash jobs. Yes. And then you too can talk about real estate and money all day long. Yes. All right. Should we get out of here? We should get out of here from episode.

71 of the Bigger Pockets Money podcast. This is Mr. Scott Trench and I am Indy Jensen and we are, I don't have any good Air Force sign-offs. We are, oh, all I know is that Top Gun movie. We're jetting off to our next activity. We're jetting off to our next activity. That's, Scott's not mine because that's... That was not so good. You know, none of them are good. Goodbye.