BiggerPockets Money Podcast - 9: Financial Independence at Age 30 (by House Hacking + Side Hustles) with Drew from Guy On Fire

Episode Date: February 26, 2018

What would happen if someone had early financial independence in mind right out the gate, upon graduating college? Imagine the amount of money that person could stockpile... Today’s guest had exactly that in mind, and made the kind of decisions that will allow him to retire early (maybe even in his twenties!!!). Meet Drew, the “Guy on Fire.” At age 27, he has already accumulated four properties with seven units in the hot Washington DC housing market. He makes the numbers work, and work well, and is reaping the financial rewards of some sweat, self-education, and side-hustles so he can exit the workforce and live the life of his dreams. Don’t miss this inspirational and totally-repeatable episode with Drew! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Bigger Pockets Money, show number nine. I live like a college student for as long as possible. You know, it's not so much the hosting keg parties on a Tuesday or pulling a van wilder. But referring more to your budget and your spending habits, I mean, as I mentioned earlier, most of us didn't have a lavish budget in college. We lived on a spaghetti budget, you know, ramen in the dining hall. So just because you have a paycheck doesn't mean you should develop caviar taste now. 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, and I'm here with my co-host, Ms. Mindy Jensen. How you doing, Mindy? Scott, I am doing fantastic. Have you been outside today?

It is a beautiful day following kind of a run of cold weather here in Colorado. Yeah, I mean, it was still a little bit snow on the ground, so I drove to work today. But I'm thinking that because it's cleared up enough, I'm probably going to bike tomorrow. So I'm back to biking. And it's just I'm very excited about it. It's like going to be 50 degrees all day, every day this week. Nice. And, you know, today our guest mentioned that he bikes to work.

And that was one of the ways that he saved money was biking to work. I noticed that a lot in these frugality interviews. people either work from home or they bike to work or they use public transportation or some combination thereof so they don't really have that huge car expense. I am pleased to see you biking again. Although he did just drove a 20 year old car until maybe as recently as a few months ago when he bought himself a new one, right? Which is one of the perks. Yesterday. He bought a new car yesterday. Yes. That's right. Oh, did I give something away about the show? Whoops. Yeah, you're giving away all the secrets to the show. He bought a new car. That's this. No, Drew, I'm really

excited for today's guest because Drew is someone I've met maybe six months ago, and I was just so impressed at what he was doing, how he was buying all this real estate in a really hot market that is Washington, D.C., and how he kind of just got out the gates right out of college and got his personal financial house and order and has just accelerated so rapidly towards financial freedom. And the way he's done it is just hard work, hustle, savings, smart investing, and then opportunistic networking. And he takes jobs for not only side hustle is not only to make a little extra money, but also to learn more so he can help his long-term business. He's going to have a seven or less your career, I think. Yeah. Yeah, he's not going to be

in the workforce very long. You kind of glossed over this and I want to bring it back and say, hustle. He has so much ambition and can't even think of the word I'm looking for. He has so much oof. He's so much hustle. There you go. He has so much hustle. He doesn't just take his lifestyle for granted, he goes out and makes more money and continually looks for ways to increase his net worth, to increase his income in ways that aren't like just getting a second job. Anybody can get a second job. But he's doing these little side hustles. And you know what?

We always do this every single time. We sit here and tell their story for them. 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 focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management

simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at monarch.com code pockets. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this more fun, calculating quarterly estimated taxes? But somehow, every small business owner ends up doing it. Your dreams of creating, selling, and growing, get replaced by late nights chasing receipts, juggling invoices, and wondering if that bad sushi lunch with Scott counts as a write-off. Change all that with Found. Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season without you doing the heavy lifting.

You can set aside money for business goals, control spending with virtual cards and find tax write-offs you didn't even know existed. It saves time, money, and probably a few years of life expectancy. Found has over 30,000 five-star reviews from owners who say, Sound makes everything easier, expenses, income, profits, taxes, invoices even. So reclaim your time and your sanity. Open a found account for free at found.com. That's fowundd.com. Found is a financial technology company, not a bank.

Banking services are provided by lead bank, member FDIC. Don't put this one off. Join thousands of small business owners who have streamlined their finances with Found. Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leen or Stronger for Fitness, the anxious generation

for parenting perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful is its breadth. Beyond audiobooks, you also get Audible originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. Hold on. I want to add one more thing in there. Hustle is the key here. And this episode is for you.

if you're someone who wants to hear about what could have happened, if you graduated college and then optimize in every direction as much as you could in order to pursue financial freedom. This is the result of that kind of optimization, that opportunistic hustle, the high savings rate and smart investing. And it's just a really cool story to hear. So please listen to this show if you're interested in that concept and share it with anybody and everybody that is starting out so that they know what to do and have this repeatable path to them.

Yes, absolutely. So we should not just sit here and tell his story for him. Why don't we bring him in and let him tell his story? Drew, welcome to the show. Thanks for having me, guys. Yeah, so me and Drew met at a FinCon, I think back in September of 2017 and immediately hit it off because he's got a really cool story. I think there's a little bit of similarity we'd think between his story of mine. And actually one of my buddies is a D.C. resident and a huge fan of Guy on fire. I was like, you got to meet Guy on Fire. You got to meet Drew, I think it is. And I was okay, okay. So I ran into Drew. And I was very impressed and surprised to see it at everything that he's done. And I kind of excited to share that with everybody here. So Drew, can you tell us a little bit about where you first discovered the concept of financial freedom and how that kind of interested

you? Definitely. So I discovered financial independence or financial freedom somewhere between my last year of college and my first year of working. And it really hit home with me because I didn't like the idea of being stuck in the office in a cubicle for the next 40 years. I'm a big outdoors person. I like being able to have flexibility and freedom. So it really got me thinking, how do I get out of corporate America? And one of the big things I did was working in commercial real estate at the time. So I started a house hacking. I bought a three-bedroom, two-bathroom, two-bathroom house, and ran it out two of the extra rooms. And that really lowered my cost of living since I was able to reduce and then eventually eliminate one of my biggest expenses.

You know, the average American spends about a third of their income on a place to live. So where was this house hack? Were you still living in D.C. at this point or was this somewhere else? It was. So I'm from the D.C. area and I've been here for the last eight years now. So I've been house hacking in the D.C. area for the last four years, too. And so I have a quick question here about the way you approach this. So did you come out of college and into this first job with, assets, or did you kind of accumulate them over the course of that initial period and then use

this as your first major investment? And kind of what was your thought process, I guess, going into that house hack? Yeah, so graduating college, I had a little bit of credit card, nothing too out of control. I think it was $4,000 or $5,000. And I had about $20,000 in student loans. I was fortunate enough to be living at home for the first couple months after graduating. So I was able to stock away a lot of my paychecks. But I also really took advantage of that time. And I was definitely side hustling while living with my parents to save up for a down payment. So I was working as a freelance photographer. I was delivering moon bounces. And I would also serve as a swim practice taxi for a kid in our neighborhood. And that involved waking up at 3.45 every morning

to drive him to swim practice. Who was that? Michael Phelps? I wish. The next Michael Phelps. Yeah, 345, that's a pretty hardcore swim practice for a kid that obviously can't drive. Yeah, you know, he was a high school age student and it was very interesting. It self-motivated. His parents weren't pushing him to do it, but they were willing to find a way to get him to the practice. They're like, we're not going to drive you at 3 o'clock at the morning, but we'll hire this guy. Hey, you know, finding ways to fix problems is a great way to make money on the side.

Oh, my God. That's such a great quote. That's awesome. So tell me, what did you study in college? Finance and economics. Okay. And that you said you were working in commercial real estate. What were you doing in commercial real estate?

So I started off underwriting commercial real estate loans and did a lot of multifamily, ground up construction and value add and stabilized assets. So what I learned on the job was great for actually analyzing my own investments. Yeah, that's awesome. So that seems to have some, you know, a lot of people I know that work in the commercial real estate space kind of treat it like another. finance gig where it's a lot of, I don't know about your job, but it can be fairly high income, long hours, kind of stressful work. Did you find that to be the case at all? Absolutely. I mean, the hours were very demanding, especially my first couple years on the job. I'd usually be the first one in the office around seven in the morning. And it'd be a lot of 12, 14 hour

days, nights, weekends. It took you three hours to get to work? Sorry. First he had to drop the kid off. Oh, are you still doing commercial real estate? I am. So I still work in commercial real estate during the daytime. And I also run my own investments on the side. And I actually ran a property management company for about two and a half years also on the side.

So that is a fun side hustle where I managed about 50 properties. DC. And that was your own company? Were you working for someone else or you were the head dude? I was running a lot of the day to day, but it was another gentleman's company. And he actually served as my mentor. And he taught me a lot about the actual mechanics of being a landlord. Yeah, the working for a property management company is a great way to get experience. So with the background and commercial, do you have any interest in doing commercial yourself? Definitely. So the one challenging aspect about living in a place like DC is property in general is very expensive. And to buy anything kind of a space, people are paying like four and a half for five cap rates

to where it's just not a very lucrative return. Can you explain a cap rate real quick for people who may not know what that is? So cap rate is a way to evaluate commercial real estate. Simply put, you take the net operating income of the property, which is all the revenue minus the expenses and what would be left over, and you divide it by what's called a cap rate. And that gives you the value of the property. So if I had $10,000 in income and I bought $100,000, if the property produced $10,000 in income was purchased for $100,000, you'd have a 10% cap rate. That is correct. Awesome. So quickly, let's go back to the world of kind of personal

finance and that house hack. And the reason I wanted to ask you about your career in commercial real estate here is because that's a high income long hours career that I know, and I know a lot of peers that are in kind of situations like that who would love to learn more about personal finance, but they just can't seem to make the time or put in the effort after those long hours to then go and build private wealth. Yet you've been able to do that in a really cool way. And so I really want to hear, how did you go from $20,000 in student loan debt and a couple thousand dollars in credit card to buying this house hack? What were the levers that you put into place into your own life to come up with a down payment or otherwise finance the property.

And then what did your expenses on the rent side look like before and after the purchase? Definitely. So jumping into first the savings part, as I mentioned, I was fortunate enough to live with my parents for a couple months after graduating. And during that time, I learned to live off my side hustle income. So I was banking probably 80 to 90% of my take home pay for my day job. So I was able to stock away money rather quickly. And then I was able to save up enough for a FHA loan, which was a 3.5% down payment on my first house.

And I think that was about maybe $12,000, give or take. And I was able to rent out those two extra rooms. And one of the mistakes I learned along the way was giving friends rental rates below market. I charge each of them $750. So the total is $1,500. And it was great for them, great for me. I wouldn't recommend necessarily always doing that. And because it's an FHA loan, the loan was a bit more expensive since you have PMI.

And I believe my initial carrying cost were about $23 or $2,400. Thankfully, I was able to refinance out of that loan because the property value went up and I was also able to pay down some of the principal. And when I refinanced, that dropped my mortgage by about $400 a month. So my payment was around $1,900. So my rents were $1,500. and my mortgage was 19, which meant I was owning a home essentially for $400 a month. What year did you buy this house?

This was 2014. Okay. So back in 2014. So I was looking at it. I was owning a house for $400 a month where the average rent in the DC area at the time was about $1,500 a month or a studio or a very small one bedroom. So it seemed like a bargain is definitely a way to keep my expenses down. What would market rents have been for your friends? if you would have been charging them?

Would that have been $1,500 each? It would have been probably closer to $8.25 or $8.50. So they were $75, $200 below. Okay. So that's not a super low discount. It's not like you gave them 50% off. Okay. Definitely not.

I didn't give away the farm. Yeah, I think you're not giving yourself enough credit because it sounds like this was a pretty good living situation, right? Did you enjoy your time in this house hack with your friends? and were you close to any cool parts of town or anything like that? It was great. So me personally, I'm a biker and there's the trail a block away from the house. So it's easy to actually bike to work once I started working downtown. We had a brewery two blocks away from the house, which was fun.

And it's actually a very walkable part of town, which was great. And I enjoyed it. And, you know, during the two years I lived in that property, my living expenses were under $1,000 a month or right around $1,000. So it was a great way to stock up, way of money. I was putting a lot in my 401k as investing in individual stocks too. So, I mean, it's awesome. You start out and you have a couple of advantages.

You have a modest amount of student loan debt. You have the ability to live at home with your folks and not pay rent to save up for those initial years. And you take advantage of those things. And then you immediately set out to pack your housing here in a way that is fun, is more financially savvy even than living for fun. free, which is very difficult for most people to do. And then, you know, I assume that you had the option at least to retain this place as a rental property. Is that what you did? I did. After a little

while, I started running some numbers. I remember one day sitting on my living room couch, updating my expenses, my budget for the month and a track where my net worth is. And I think I was 24, maybe 25 at the time. And I was wondering, what would it take for me to become a millionaire by age 30. And I was like, well, ran through some scenarios. Okay, if I save 20,000 a year, not going to get me there. I try to save $40,000 a year, not going to get me there. And I ran a bunch of scenarios and I realized I need to focus on earning more. So this led me down the path of buying my second property. So I got a property in downtown D.C. is an old row home, complete fixer upper. Ripped it down to the studs, all new electric plumbing. And

moved out of my first house, had a roommate take over my room. So then my first property became cash flow positive. It's renting for 2350, I believe. And the carrying costs were about 1,900 a month. Not the greatest cash flow, but it definitely was throwing off cash. But the house I moved into, I took a three-bedroom, one-and-a-half bathroom house and turned it into a five-bedroom, two-and-a-half bathroom house. Wow. It was great. It took a lot of work. I mean, I was waking up most mornings at 4.35 in the morning so I could be the first person at Home Depot to pick up supplies. I was doing some of the work myself, but I also had contractors doing some of the work since I still had to maintain a full-time job.

Well, you were used to getting up early, right? Were you still driving a kid to some practice? That ended probably about a year or two before that. The kid turned old enough to get his license, I think he was 17, and started driving himself. Fair enough. The second house is great. The location was much better, and I was able to get about $1,000 per room on average. So I was collecting $4,000 in rent, and my carrying costs were about $2,400 in rent.

So I was able to live for free in pocket $1,600 a month. Yeah, those are better numbers. Much better, right? No, the first, I don't think I've ever met anyone where their first property was their best investment. So definitely learn some things along the way. Yeah, but you know what? buying a property and doing the work and figuring it out as you go is a really great way to learn. You can't learn better than experience. And there are a number of people who will go on,

you know, go on TV or go on the radio and, oh, I'll teach you how to do this. And all you have to do is pay me $40,000. Put that $40,000 in the house and learn your own self. Absolutely. And I should throw out there, I used a 203K FHA loan. So the loan, we're required only three and a half percent down. And I was also able to have extra loan dollars provide money for most of the renovation. So if anyone's looking to get into real estate, that's a great way to buy a fixer-upper with limited funds. So how did you find your experience with the 203K? It's a little slower than I would like because you have to have an, I believe they call them an FHA inspector, come to the property. He makes sure the budget makes

sense. And then say you're replacing all the windows. So he has to say, well, yes, there's new windows here. Yes, they were installed correctly. And he submits a report to the bank. And then the bank has a couple days to process the report. And then they send you a check on a reimbursement basis for you and the contractor. Okay. So you still need to put money up front for the renovations. Your contractor is supposed to work on a reimbursement basis. So there's a lot of documentation that goes into the 203 R-K FHA loan. You have an agreement with the inspector and the contractor. And there's a lot of contractors that actually specialize in this type of loan. And they understand that they will be reimbursed within a reasonable time frame. Oh, that's better than just a regular person.

There's no guarantees. How does this impact you if you're kind of a do-it-yourself type person? Like, were you doing any of the work yourself or did you have to hire out a lot of it because it was going to get inspected? And, you know, you had to have the government. to all involved with the licensed contractors and all that kind of stuff. So you are able to do some of the work yourself. It depends a bit on your background. I worked and volunteered with Habitat for Humanity for about seven years. So I had some background.

I am not an electrician. I am not a plumber. Those things you needed permits for and you needed a licensed plumber and electrician. And you also needed a general contractor to oversee the project. Now, if you are a licensed general contractor, you could run the job yourself. Okay, so this is not going to be necessarily the cheapest way to do things if you're an investor, for example, or self-educating a lot in real estate. But the advantage, again, is that you didn't have to bring very much cash to this. And you could buy the property with three and a half or five percent down and then finance out the majority of the construction expense in what appears to be a major rehab here, moving, you know, adding bedrooms and bathrooms.

It was definitely an extensive rehab. I think the loan gave me about $70,000 for the renovation. and I intentionally went over budget and I think spent about another $25,000 on other items over the course of the construction. And I ended up renovating the property during the fall. So I waited until spring to redo the backyard and the patio area. Okay. So you have the second property here with that's producing $4,000 a month or $1,000 per room. You got your first property spitting off $2,300 in cash flow and rent on a $1,900 payment. happens next? What was your kind of your next move there? How did things progress? So around the time I started the second properties when I started the side hustle as a property manager. So I was still

working the day job, but my mornings, nights and weekends, I was working as a property manager. The company started off around, I think it was about 23 or 25 properties when I joined and we were able to actually scale the company up to just over 50 properties. So that was a fun learning process. learning how to rent an apartment, learning all the different landlord tenant laws. I was also doing a lot of the kind of handy work, learning how to fix a toilet, what to do when a garbage disposal isn't working. So in many ways, I consider kind of like going to school, except I got paid to learn. So I had a mentor teaching me everything, and I also was paid for my time, which is a good experience.

That's a really great way to learn how to landlord. you're learning on somebody else's properties. And did you know this person ahead of time? Or what qualifications did you have that got you the job? So he was actually my real estate agent. Okay. And he's been in the D.C. area at that time, probably about 15 years investing and buying his own properties.

And real estate is very much a side business for him. He also has a daytime job. But he's been able to grow his own portfolio and be a third party property manager for a lot of people. Then he was looking for someone to free up some of his time and somebody that wanted to learn the ropes and that's where I entered the picture. Nice. That's a nice mesh of both of your interests. It is great. I still pick up the phone occasionally when I have an issue, something I haven't seen before and we bounce ideas off each other. So if anyone's interested in real estate, I highly recommend finding some form of mentor. I think it's fantastic. So you've got the first two properties,

right? The first house hack, I just mentioned, you got the second one here with $4,000 in income. Do you then move out and buy another one or what happens after this property? You've got the side hustle. You got a full-time job. You've got two properties. Things are starting to move along now, right? There's some scale that's getting into play. Definitely, you know, so I'm still hustling, keeping my expenses low, still living in the house hack, but I've since bought two more properties. Two additional properties that you're not living in, that you never lived in. Correct. Okay. So the first one was a duplice. or is a duplex.

And it's two by one, so two bedroom, one bathroom, one bathroom on each. And rent both those out. And I bought that last spring. And the cash flow on that is great. I rent it for, I think, around $3,400 total. And it's about double the mortgage. Oh, nice. It's great.

It's fantastic. What about the other duplex? The other one is a triplex, actually. And I closed on that at the end of last year and just finishing up the renovation process on that property. And that is three one bedroom apartments and should be wrapping up in the next couple weeks and getting tenants for that place. But as a quick, easy renovation, I think I spent maybe $15,000, mostly cosmetic and new appliances. But that property will also rent for about double the mortgage. Okay.

I want to talk more about your finances. You are making X at your job and you are bringing in all this money. What is your current rate of savings? And I know that it goes down a bit during renovations. I'm a live-in flipper myself and savings gets nowhere when you're actually in the middle of the renovation. Yeah, it's challenging to sometimes track when you have the renovation going on. As far as my day job, I probably save somewhere between 50 and 70% of that income. So I save a majority of that and I try to keep my living still modest.

I'm not paying for rent or a mortgage since I'm still living in a house hack, which is still doing wonders for my savings rate. And then as far as my real estate income, I save all of that and just plow it back into more real estate. So I think if you're going to buy the two, it's definitely north of 70%. Wow. That's awesome. And all of your mortgages, it sounds like all of four mortgages are covered by the rent. that you are receiving or will be in the case of the triplex? They are.

All of them are, there's a very comfortable margin above the mortgage. I think my break even is somewhere around 65 or 70% occupancy across the entire portfolio. That's so smart. That's so smart. So Scott was featured on Bigger Pockets Money episode two, and he has savings account for each one of his properties. it's, hey, Scott, maybe you should tell this story.

So my rule of thumb is I put aside $20,000 for the first property. And I added $10,000 to that pot for each additional property. And I may change that or tweak it as I scale my portfolio. But right now I've got about 40K just going to sit in there ready for expenses. How do you handle an emergency funder? Do you even have one? So I don't have a definitive account earmarked just for emergencies. I do like to keep a lot of cash on hand, given that I am a real estate investor.

And if I find a property, I want to buy, I want to have the funds to do it. But also having seven rental units, I also own seven water eaters, seven HVACs, and things can get expensive quickly. So I always keep a good amount of money on hand. And I also have a line of credit that I can draw down on at any time if I am short on cash. That's really awesome. And, you know, I think that you can draw a correlation between this with, that like budgeting. I don't budget, but I also don't have to budget. If there's an emergency,

I know I can cover it just because my frugal lifestyle allows me to save a significant portion of my income. So it sounds like having, and Scott's a frugal guy too. I love that he is planning ahead with having this emergency fund that he never touches. And I look at you and I'm sorry, you don't look like you're 25 years old or 26. How old are you now? 27. 29. 27. 27. You don't look 27 either. I think it's the beard. I'm not saying you look like an old man. I'm just saying you look. I know how old Scott is and he's very young. I'm like, oh, you know, Scott's young. He doesn't have this, all this experience, but you're young. You don't have all this experience either. I am not young. I am not 27 and that's as far as we'll go with that.

You're 26. Exactly. Exactly. My new best friend. Yeah. So I know from years of experience that I have enough money to cover it because I'm not going out and buying all this crazy stuff. So I guess it's just the savings rate allows you to feel comfortable with not having a huge specific account. It's definitely the savings rate. I mean, I definitely do keep a sizable amount in cash at all times, but it's also the cash flow. So all my properties are on year-long lease. So I know that there's predictable cash flow coming in. I also do have my paycheck for my day job.

And given that my expenses are essentially walking around money in terms of what do I want to spend for food, transportation and entertainment, that leaves a lot of room for air. So being frugal early on in life definitely helps. Yeah, you can work at McDonald's and pay all your bills. I probably could. Although that is a hard job. 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 focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, net worth all in one place. So every decision actually moves in Edle. Achieve your financial goals for good with Monarch, the all in one tool that makes money management simple. Use the code pockets at Monarch.com

for half off your first year. That's 50% off at monarch.com code pockets. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed's sponsored jobs helps you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored posts. The best part? No monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through

Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash bigger pockets. Just go to Indeed.com slash bigger pockets right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash bigger pockets. Terms and conditions apply.

Hiring, Indeed is all you need. When you want more, start your business with Northwest registered agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest Today. Northwest registered agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They're the largest registered agent and LLC service in the U.S.

With over 1,500 corporate guides who are real people who know your local laws and can help you and your business every step of the way. Northwest makes life easy for business owners. 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 Registered Agent.com slash money-free. What I'm observing about you, Drew, and let me know if I'm wrong on this, is you're basically, in my opinion, and doing all four areas of finance exactly correctly. And the four areas, as I define them, are the savings rate. You got a huge savings rate, 80, 90% at first and now 50 to 70.

That savings rate, you quote, is just from your take-home pay. It doesn't include the additional income that you're getting from your rental properties now, right? Or some side hustles. Yeah. So you have a huge savings rate. You're consistently throughout this entire time period working on side hustles that will give you an opportunity to make a good additional income. you have a high-paying job in the first place, which I'm sure was not an accident, something that you worked hard throughout your childhood and college to put yourself a position

for. And then you're investing in a way that you're self-managing in a way that you believe will allow you to reap outsized returns over time. Right. And that's a conservative position. That's not a risky or aggressive position. What you're doing isn't crazy and wild. It's a conservative way to approach life and give yourself way more options than the next guy. Sorry, I just rambled there for a little bit, but that's what I'm seeing here. It is crazy and wild. It is crazy and wild because in America we spend every dime we make and then some. And then we have brand new cars and we have fancy clothes and we go out to dinner all the time.

And don't you feel like you're missing out on life? So I just had my first non-fruble purchase of my life other than real estate yesterday. Up until yesterday, I was driving a 20-year-old car that had over 200,000 miles on it. And she still runs and I'll still probably use her, especially for property management stuff. But it's time to upgrade. So I splurged and bought a lightly used car. What kind of car do you have? A Honda Tucson.

Or she has me a Hyundai. Hyundai Tucson. Okay. Okay. I'm like, I'm not familiar with a Honda Tucson. Hyundai Tucson. I know that. My friend has that.

Well, you could probably still use that for property management. So I just splurged. I am, like I said, 26. I just splurged on a car that I had been wanting since high school. And I have a 1991 Accura NSX that I am so excited to drive. This is the most awesome thing ever. But if I would have bought it when it was brand new, I would have had to spend like three years of salary on it. And that's just not the right choice.

And now I spent less than a year's salary on it. And I'm at a point in my life where it's okay to buy that. So congratulations on your beautiful new purchase. Thank you. And that's the whole point of this is you've done all these things over the last couple of years and hustled and worked. And now these options, you know, okay, I'm going to get exactly what I want because that's the whole point of doing this in the first place is to give you those things. I guess one question kind of going along this is what was your lifestyle like when you were doing this? And is there any change now that maybe on the other side and continuing to accelerate your rate of progress?

So the first couple of years out of the gates, I was definitely more frugal tracking every single expense. I've developed a frugal lifestyle so I don't necessarily follow a budget or say I spent 10, 30 bucks too much in this category type of thing. So I've definitely loosened the belt a bit. But yeah, I guess that answer the question. Well, I guess what do you do for fun? Do you go to bars? Do you travel?

He doesn't have fun. He's frugal and you can't do anything fun when you're frugal, Scott. Oh, I see. We're the frugal weirdos that have no fun. No, actually, I do have a good bit of fun. I just balance it with very little sleep. So I love the outdoors. I'm a big biker.

I love hiking and I love climbing. I do go out to the bars occasionally, not really my scene. I'm a big foodie, so my splurges are definitely trying the new trendy restaurants around town. Wow. That could be a splurge. So what kind of biking do you do, road mountain? I lived in Colorado when I was younger. And back then, I did a lot more mountain.

The D.C. area is better for road. We have a ton of trails. I mean, there's probably four or five hundred miles of trail network where it's all paved. Nice. You've got all those monuments to drive past and statues and awesome places that we've got some in Denver. But I mean, Denver's got the mountains. I love the mountains. I would trade monuments for mountains any day.

Well, come visit. You can stay with Scott. He's got extra rooms. Yeah, one day we'll be neighbors out here maybe. So what's next for you then? So you've got the four properties, the two additional rentals that you've accumulated. Job seems to be going well. Work side hustle seems to be going well.

What are you going to do next? So right now, I guess we'll ask ourselves, why are we doing this? Really financial independence, I'm probably a year or two out from, I guess, being financially independent. Right now, working on diversifying a bit away from real estate and stocking money and do index funds, dividend stocks, and trying to develop other side hustle incomes. But ultimately, I want to get away from corporate America. I don't want to do a lot of traveling. I have a lot of bucket list items I'd like to do, bike across America or do that

latch and trail. But, you know, those things are tough to do when you have a nine to five. So at what point would you consider yourself ready to leave corporate America? Is there a number for you? Is there a certain amount of properties? What is ready to leave corporate America? Because a lot of people would say you're ready, right? A lot of people would say, hey, if I don't spend there very much,

I got four rental properties in the D.C. area, I'm done. Still trying to figure that out with the fourth property, but at the end of last year. So I need to recoup some of those costs. That's definitely a lot of money flowing out between the purchase or the down payment and the renovation. And I also need to make sure that property is humming along nicely. And there's no issues with it. But sometime in the next probably two years or so, I'll feel comfortable enough with the cash flow. And really the big thing is also just building back up kind of my own.

emergency fund. When you do have real estate, you want to make sure you have money aside when errors do happen. I mean, a roof could, you have roofs, you have HVACs. There's a lot of expensive items that may need repair in the future. Right. So we briefly talked on side hustles with the pool kid is now gone and you don't work for the property management company anymore. Is that correct? That is correct. Okay. So what are your current side hustles? So other than the real estate, I do run my blog where I talk about financial independence. I talk about real estate investing and dividend investing. So working on that, I am also working on a house hacking course.

So there's a couple of ones right now. And I have a few others that are still a little too early to talk about. Okay. What has been your biggest challenge with the house hacking? Where I am currently, D.C. real estate, the prices keep going up. And the thing with single family homes, people talk about cap rates. That's not really a good metric for residential properties because people are willing to pay for a house what they think it's worth to live there as opposed to the income it would generate. So if you're in a good school district or a desirable neighborhood, it's tough to make the numbers work sometimes.

I think now one out of every three properties in D.C. is over a million dollars. Oh, wow. Definitely wouldn't recommend doing a million dollar house hack. no well you know i mean a lot of people though the prices in dc just seem absurd in general compared to whether you know a lot of people are out in places where you can buy a house for a hundred thousand dollars right the way you're doing it which i think is really smart and the way that my friend is doing it is hey i'm going to buy a nice place in a part of town that i would want to be in that i'm kind of proud to own but i'm going to rent it out by room and that's going to allow me to generate a substantially

more cash flow than I could if I rented out the whole thing to a single tenant or whatever it is, right? So I think that's a fantastic way to get around that problem in these kind of more expensive markets. So have you found that house hacking is a repeatable, profitable, profitable strategy for folks in the D.C. area at today's prices? Like, for example, could you find another house hack at today's prices? You definitely could. It would be more challenging in the neighborhood that I am in currently, just because property values have gone up probably 40 or 50% in the neighborhood I'm in in the last couple years, but there are still emerging neighborhoods or neighborhoods going through gentrification where you can make it work. Being in these gentrifying neighborhoods is a really great place

to be in. You're not paying the top dollar that some of these other neighborhoods that have already gone through the rehabilitation process. Scott's first property is in a gentrified neighborhood and the way that you look at the growth of Denver, it was very clear if you did a little bit of calculations, this is the next big spot. So, Scott, would you say that's true? Yeah, I think that if you do your homework, and let me know what your opinion is on this true, but my opinion is that if you do your homework and you study the areas, you can tell what areas are likely to appreciate greater than market averages over time, but you can't tell when that's going to happen or by how much. I think that you can kind of increase your odds at getting a good return by

doing what I did and thinking, hmm, this looks like the next spot of town that's going, that's going to improve because it has to because all this development is going in there and the way the city works. But I certainly does not expecting the amount of appreciation I got or the in the time period that I got. Yeah, definitely. How do you feel, true? I definitely agree. I definitely agree. If you spend some time looking around different neighborhoods, you can tell where the momentum might pick up and where people might start moving to. I oftentimes a little generic, but I look for coffee shops or I look for like neighborhood bars popping up. One thing that is very interesting to look for. A lot of cities and counties, their building permits are public.

And the zoning process for a developer to build something a little bit more sizable. So an apartment building or a condo building with a couple dozen units or even a couple hundred units, all those records are on file and you can see that, oh, along this road, there's three apartment buildings going up. And it might be a year or two before they open their doors. But if you have a couple hundred people now living within three blocks of this place, you're going to start having bars and restaurants and grocery stores come in. And really everything starts feeding off each other. Yeah. And so I look... Starbucks pays a lot of money to do research in these, these up.

and coming neighborhoods and they're not going in to neighborhoods that aren't popping up. I mean, when a Starbucks opens up, you're like, oh, that's a great place to live. But they already know that that's a great place. They got their property super cheap. If you can find out when they're permitting their stores, that would be a really great way to get in even earlier than the ground floor. Absolutely. That's a great one.

People always talk about the Starbucks effect or some areas, even the whole food. effect. So there's, or any organic grocery. Yeah. And Amazon has this new, have you read about this? They have a new unmanned store. You have to have an Amazon Prime account to get into it. And everything is RFID chipped or whatever.

So you walk through and you put all these things in your cart and then you just leave and it gets automatically billed to your Amazon account. If there's one popping up in your neighborhood, that's a good neighborhood to be in. Wow, that's awesome. Yeah, I have to check what it is at. Yeah, they only have the first one in Seattle right now. But they're, I would look for the new HQ to have a lot of properties around it popping up like that. It just seems like a really great.

So all these people can move in and no jobs. No, there's probably jobs too. DC's on the finalist list for the new Amazon headquarters. So fingers crossed. So is Denver. Yeah, we'll see. We're competing there. Yes.

I don't think it's going to be Denver, but. hopefully I'm wrong. No, no. So it sounds like you've had a great career here and you're basically almost done, maybe five, six, seven years after you started. And it's gone pretty well. That's incredible. That's what I think a lot of people that are coming out of college need to hear is your story,

how you did it through this combination of four or five different things that you did and hard work and the hustle throughout and the discipline. And now you've just really set yourself up to do kind of whatever you want for the of your life. Do you have anything to add to that before we go on to the famous four? Is that pretty much cover it? That pretty much covers it. You know, just frugality, saving and investing. You do do those three and they'll take you to the good places. I'm going to add one. Hard work. You didn't just sit there and do nothing and have all of this just come to you because you're such a handsome guy, because you're such a nice person, because you drove the kid to swimming at 345. You got here because

you drove the kid to swimming at 345, and that's not something that a lot of people are willing to do. Oh, I could never do that. I could never get up early. I think hard work really pays off and doing these things. And I mean, when you're 25, 27, you don't need a ton of sleep. Your body will just recharge itself. So do it while you're young? And do all of your friends make a million dollars a year? Probably not. I mean, maybe the year in D.C. Maybe that's a stupid question to ask. But I mean, all of your friends are living like college students, you can live like a college student too. You're not making these huge sacrifices. It's, you know, it's a lot more difficult to make these huge sacrifices when you're 40 years old and you have kids and, you know, you've got a different life. But when your adulthood is just starting,

live as frugly as you can and bank all the cash you can. Yeah, you hit on something actually that really resonated with me. One of the best pieces of advice I ever actually received was to live like a college student for as long as you possibly can. You know, I mean, college, some of the most fun times of life, but I don't think many of us had a lot of disposable income. So just because you have a paycheck, that doesn't mean you need to start spending money wildly. Yeah, I mean, spend money on good beer. Yeah, I love it.

I do drink a little bit nicer beer than I did in college. I think I was drinking natural light for four years there. So I've graduated on to Coors Light now. Denver's going to kick you out. We've got some local breweries. A little nicer beard out. Yeah. Demme's going to kick you out for natural light.

No, I think it's really great though. And I think that the key, what we just point out here is that doing this while you're young and out of college is the key. I mean, the stakes are really high for doing what you've done now by this point in your life rather than starting at this point in your life. If you'd start at age 27, it would have been exponentially more difficult for you to make those changes that you needed to do to get that high savings rate, house hack, you know, start those side hustles, get up at three o'clock in the morning for one of them.

Like that stuff is not really as feasible for older folks that are a little bit farther along in life. And so, yeah, I think that the fact that you've done those things is just going to set you up for the rest of your life. And it's something that's, we, Mindy, it's our job to crack that nut for the people that are even a little older than Drew because I think we've got a formula here that works really well for the graduating college student, how do we translate that to the folks that are a little older? The live and flip.

The live and flip, yeah. I like the live and flip a lot. You can do that at any age. If you want to learn more, the live and flip, you can listen to episode five of the Bigger Pockets Money Show, where we interview Mindy and learn a lot more about that, right? Yes. And that's essentially what Drew is doing is living in his flip. Did you live in the property that you were renovating or did you move in after the renovation

were complete. A bit of both. I did not move in immediately because there's a lot of demo. Okay. But once things were framed up and cleaned up, I definitely moved in before it was finished. And I was doing a lot of the finishes at night after work. Yeah. And living in the property that you're flipping, it kind of covers two bases. You need a place to live. So here's a place to live. And you're not paying extra rent or extra mortgage payments on some other property. And you can work on it. You're not driving over there. I don't know about D.C. traffic. I've heard it's a little tight sometimes. You're not driving over there after work to try and squeeze in a couple of hours. You're driving home and then you can squeeze in like three or four hours and just

go to bed. And yeah, that's something you can do at any age, but really even house hacking. You can live in one half of a duplex and rent out the other half. You don't have to do the house hacking that Drew is doing where you live in the property and rent out extra bedrooms. Although you could certainly do that. I have a friend who has a house hack, they rent out the whole basement to somebody who is actually a traveling musician. So she's never home. And now she's getting married. So she spends most of her time at her boyfriend's house, but she doesn't want to move in yet or whatever. So she still has this place that she pays rent on and doesn't actually live there ever.

I mean, that's the sweetest gig. If you can find some sort of traveling person that's never home. That's the best roommate ever. Yeah. Well, awesome. Let's go ahead and move on to our famous four and close up here. All right. So, Drew, what is your favorite finance book? You mean other than your book and Scott's book? Yes, other than how to sell your home and set for life. I'd have to go with the millionaire next door or rich dad, poor dad.

So rich dad, poor dad is the most. the most recommended book on the Bigger Pockets Real Estate podcast, and the millionaire next door does not get enough love. I think it should everybody should be, it should be everybody's favorite book. That is such an amazing book, and it's so powerful, you know, you live next door to a millionaire, you just don't know it. They don't have flashy cars. They don't have flashy things. They save a lot of money. They're just regular people.

They drive Ford, F-150s. You mean they don't drive brand-new car? and have McMansions and go on lavish vacations all the time? They don't. Those people are not millionaires, contrary to what you may believe, by their lavish exterior lifestyle. No, that's just a book that, that's one of my favorite books as well, possibly my favorite book on building wealth. And what's great about it is he has those kind of anecdotes about who these people are individually, but it's also just such a long-term data-driven study on millionaires and their habits, their mannerisms, they're where they're

they live, what they do, all that kind of stuff. That's just fascinating to think about. And remember, at the time was written, I think it was in the 80s. You know, a millionaire meant a lot more than it does today. You know, these are folks that would probably have two, three, four million dollars in 2018. Yeah. Awesome. So what was your biggest money mistake if you have any?

So I was definitely a little reluctant to start investing, you know. You started investing when you were what, 20? 21? What were you supposed to start at 13? Well, so I started college right as, you know, the whole world was falling apart. And I was working my way through college a bit and I had a little extra income here and there. And 2012, 13, 14, I kept thinking, you know, we're going to have another recession. And I was reluctant to put money in a stock market and missed out on some good years of compounding. So definitely just not jumping in right away.

I mean, I'm young and I have plenty of time to recover. if I do lose money on an investment. That's a great thing. I'm young and I have time to recover if I lose money on an investment. Perfect. Yeah, his downside is he has a 10-year career instead of a seven-year career. Right. Man, those last three years would be brutal.

Okay. What is your best piece of advice for people who are just starting out? I'd definitely say live like a college student for as long as possible. You know, it's not so much the hosting keg parties on a Tuesday or pulling a Van Wilder. But referring more to your budget and your spending habits, I mean, as I mentioned earlier, most of us didn't have a lavish budget in college. We lived on a spaghetti budget, you know, ramen in the dining hall. So just because you have a paycheck doesn't mean you should develop caviar taste now. Oh, good point. Yeah, my husband said that when he graduated from college, the first thing he did after he got his new job was go out and buy a steak.

Like, he was never able to have meat in his diet because it was too expensive. It was always pasta or peanut butter. And he's like, that was the best thing ever. I'm like, I'm so sad for you. But yeah, you don't need meat to live. You can eat a vegetarian pasta lifestyle for a whole lot less. So speaking of these parties with the Kigs and all that, they were just mentioning, what is your favorite joke to tell at parties? Geez. Well, let's throw a party and you'll find out. Oh, what a cop out. So Scott is going to have a party for you the next time you're in town.

Let me know. I'll set it up. Yeah, we'll put you on stage and you'll have a mic and you'll just have the floor for 10 minutes, telling jokes. That's a great idea. I'm here all week. Thank you very much. Okay, Drew, before we wrap up, where can people find out more about you? Definitely. They can go to my website, guyonfire.us. I'm also on Twitter, guy on underscore fire,

or they can send me an email, guy on fire.us at gmail.com. Awesome. Thank you so much. Yeah, I definitely recommend that you check out the site. I've enjoyed it. And as I mentioned, it is one of my really good buddies from home. that I grew up with. So you have a couple of huge fans, Drew. Glad to hear. Drew, thank you so much for your time today. I really appreciate you coming out and sharing your house hacking story. I think it's really important to share that so many people are doing this house hacking now. I did it back when it was called having a roommate, but then

Brandon Turner created this whole new term. And it's a really, really, really great way to live for free or significantly reduced. And I did it when I was younger. I was, I think I was 26 when I was doing it. And my brother was my roommate. And that was really awesome. And I think it's really telling how many people who come on the show do this exact same thing, some form of a house hack or some form of, you know, reducing their living costs.

And that's really awesome. So thank you very much for your time today. And I hope to see you around soon. Thanks for having me. Yeah. Thanks, Drew. All right. So that was Drew from Guy on Fire.

I am so excited to share his story with you, not just because he's got a great story, but to reiterate these points. A high savings rate, a focus on frugality, and the house hacking, the cutting out or cutting down your biggest expense, which is housing. And, you know, I see this over and over again from. so many people who are on this show and from so many people in person or in real life that I know, house hacking is such a powerful tool and it's really not that hard to do. Yeah, I love it. And I like to because, you know, this is a perspective that I really identify with as a single young man around the same age as Drew.

And I love how we have different perspectives on this show here. We have, you know, Drew, who's the 27-year-old with few obligations who can hustle and optimize and all these ways toward financial freedom. We've got, we've had the frugal woods. I think they're actually next week for us. We've had, uh, the waffles on Wednesday, all these folks that are in different life situations, families, people who are thinking about starting families, single. This is an example of why it's so important and so, uh, incredibly powerful to take

care of this financial part of the equation, to complete financial independence prior to moving on to those other stages in life. It's just so efficient and so effective for them. Yes. We didn't discover financial independence until we, meaning my husband and I, didn't discover it. I mean, the concept didn't even exist in our minds until 2012 when he was having a really bad day at work. And you do the math and you know, you might think this is garbage. This is a lie.

He's selling something or whatever. But you do the math and you realize it's not that hard. It can happen for everyone. And it is a big deal. Friends quote, you won't even get. That's a quote from a TV show that you've never, okay, but it's not that hard. Is that born? Shut up, Scott.

I think it was out after you were born. Maybe you were one. Anyway, so yeah, I hope you enjoyed the show. Please, if you have any questions about this episode, we have a new forum on the Bigger Pockets forums called Bigger Pockets Money. There will be a thread designed specifically just to discuss this particular episode. and we would love to hear your thoughts. So give us a shout out at biggerpockets.com slash forums.

And the BP Money Forum will be right there up at the top. Awesome. Okay. Scott, should we get out of here? Let's get out of here, Mindy. Okay. From episode nine of the Bigger Pockets Money podcast, this is Mindy Jensen over and out.