BiggerPockets Money Podcast - I FIREd with Index Funds, She FIREd with Rentals: Which is Better (& Faster)?

Episode Date: April 8, 2025

There’s no arguing that real estate and stocks are the two most proven ways to build wealth, but which one comes out on top in a race to FIRE? Stay tuned as we put these investment vehicles to the test and show you the fastest path to early retirement! Welcome back to the BiggerPockets Money podcast! Today, Mindy and guest co-host Amberly Grant are pitting real estate investing and stock investing against each other to determine which of these popular investments is most FIRE-friendly. The best part? They don’t exactly agree! First, Amberly will defend the position of real estate investing. From house hacking and live-in flips to out-of-state investing, there are several strategies you can use to create monthly cash flow, build wealth through appreciation, and save a fortune on taxes! Meanwhile, Mindy will defend her time-tested stock investing strategy. Along the way, she’ll share the many advantages of passive investing, compare 60/40 and 90/10 stock-to-bond investment portfolios, and show you the ideal portfolio mix for those who plan to retire on the 4% rule. YOU decide which of our financially independent hosts has the strongest case! In This Episode We Cover Real estate versus stocks (and which will help you FIRE faster) How YOU can “live for free” with the house hacking strategy Saving hundreds of thousands in taxes with the live-in flip strategy How to turn your rental properties passive by investing out of state The perfect stock portfolio allocation for retiring on the 4% rule And So Much More! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/money-626 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail] Learn more about your ad choices. Visit megaphone.fm/adchoices

Today, we are settling the ultimate investment showdown, real estate or stocks. Which path will actually get you to fight faster? Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen. And today I am so excited to introduce you to Amberly Grant, who is going to be joining me as my co-host while Scott is out on his paternity leave. Amberly is a dear friend of mine. She was featured on episode 449 of the Bigger Pockets Money podcast.

She is a fire fanatic too and has investing knowledge both real estate and money and both American and Canadian because she is a dual citizen. She runs FinTalks, which is a Tuesday evening finance discussion and she is going to be so great as a fill in for Scott. Amberly, thank you so much for joining me today. Mindy, what an intro. Thank you so much for having me. I'm so excited to be spending this time with you virtually and helping you co-exhaired. host the Bigger Pockets Money podcast. I love all things finance and real estate. It's just been something that I've enjoyed for the past actively five years, but passively by reading books

since I was 15 years old. And I'm not going to say how old I am today because you guys can figure it out over time, but I'm a lot older than 15 years old now. I'm going to put my best Scott voice on and tell you, Bigger Pockets has the goal of creating one million millionaires. You're in the right place if you want to get your financial house in order because we truly believe that financial freedom is attainable for everyone, no matter when or where you're starting. Did I do that right, Mindy? Scott's voice is a little lower, but otherwise, perfect. Excellent. Amberley, to start us off, what is your current five portfolio? My portfolio is 40% real estate and 60% stock, though that's not always been the case. I started off

almost solely investing in real estate while I was kind of siphoning some money into the stock market. So I started off in around 2019 at 75% real estate and 25% stock. Over time from about 2019 to 2023 before I bought my primary residence, I would say it stayed quite high in real estate, but more of like a 50-50. And then I bought a primary residence. So things started to move again into the 40% real estate. estate 60% stock because of changes in the stock market and other things. So, Amberley, my portfolio is actually 62% stocks, 37% real estate, and the remaining one-ish percent is cash.

The run-up in the stock market over the last, well, not the last few months, but the end of last year, all of 2024 actually got our stock portfolio up significantly, as well as a lot of our syndications sold off. So as they sold off, we got the cash and put it back into the stock market. So it's been kind of cycling through out of real estate into the stock market because for a while we were about 50-50 stocks in real estate. But my real estate is very different than your real estate. My real estate consists of my primary home equity because my house is an investment. It's a live-in flip. So I bought this for a low amount. I'm putting a lot of money and time into it. And I'm going to fix it up, sell it next year and take all of that cash out of

the real estate bucket and put it into the stock market. I do a lot of private lending. I have a couple of syndications left. And I have investments in local small businesses that I have just counted as real estate because a lot of those are real estate related. It sounds like over time you're kind of getting out of the real estate game. Is that correct in regards to what you're doing? I think our real estate and stock portfolio kind of ebbs and flows, but right now it's flowing more towards stocks. You're right, because real estate can be more time intensive than I would like it to be. I am, I always consider myself to be the same age as everybody, but I'm not. I am significantly older than you, then Scott, and I'm wanting to declutter my life. So I am taking

hassles out of it. And sometimes real estate can be really time intensive. And I am looking for very low time commitment investments. Yeah, I completely understand that. And I think when we go into what we would prefer, we'll definitely talk about passive versus active income sources for fire, because they're very different when it comes to stocks or real estate. Don't you agree? I do agree. I think that there's this romantic notion that real estate is so sexy and you're going to make so much money out of it. And for a long time, that was true. But now we're in this period of higher interest rates. And I talk to a lot of people who say things like, oh, I have to invest in real estate. You don't.

There's a lot of people who don't really have any interest in real estate. Then don't invest in real estate. The best time to not invest in real estate is when you're not all that interested in it. I have always been invested in real estate. I've always been interested in real estate. I love the idea, but I'm getting a little lazy in my old age. And I just don't want to put the time into it anymore. Okay, so we both have real estate in our portfolio. But Amberley, is that necessarily the best vehicle to get you to fire faster in today's market?

Yes. Real estate, depending how you do it, can exponentially change your path to financial independence. And it requires a lot of sacrifice and hard work if you do it the quote unquote right way. Buying a primary residence won't get you there. Buying a house that you're going to flip, if you can find an appropriate priced house with an appropriate interest rate, which that's the big problem with today's market,

can really help you move on the path to fire. So real estate, if you are doing some sort of house hacking still or a live-in flip, can definitely exponentially change your path to fire, though I don't love it because I'm over it right now. Okay, so like we said earlier, Amberley and I are great friends. I've been to her house. I've seen that she is living through a construction zone. I've also lived through a construction zone. I really like this answer for a lot of reasons. The live-in flip can generate a lot of money. I have made, I think, I think 700,000 tax-free dollars, I should say more than, because I don't remember the exact number, more than 700,000 tax-free dollars over the course of my live-in flipping life, which started in 1996. I love this idea because I don't want to pay any more taxes than I have to, but also this is one of the safest ways to invest because it's your house.

If the market crashes, as soon as you buy the house, you still are going to just live in it. Your exit strategy can just be continue to live there because once you sell it, you're going to have to find someplace else to live. Why would you sell it for a loss if you didn't have to? So the live and flip strategy can be quite lucrative, especially if you're coming into a period where the stock market is going up. There have been rumblings right now from the Fed saying that they're going to think about reducing rates near the end of the year. We have stock market uncertainty, and we have a new administration right now who is throwing out some different changes. So this could change the economy that we're in right now. When the economy goes down, the Fed wants to bump back up.

They're going to decrease interest rates, which will cause people who have been sitting on the sidelines waiting for rates to come. down to jump back into the market, which will bring up the market. So a live and flip is a great idea on paper. You just said that you are over it. Totally hear you. I am in my last live and flip, my final live and flip because this is a lot of work. I don't think there's one wall in this house that we haven't touched. And we're not done yet. It's been five years. We took some time off for COVID, but it is weighing heavily on us and we just want to get it done. Yep. Completely understand.

And like you said, with changes in our environment, so stock market, whatever it might be, sometimes having that cushion of a primary residence that you're living in, that you're flipping or that you have roommates can really make all of that uncertainty feel a little more certain. So it's a sense like you have a sense of control over your environment and actually over your possible profits in the future, just depending on what you do with the house. I do find some people with live and flips, you have to be careful not to over, like, produce your house, like make it look better than everything around you. So just keeping in mind that when you are doing this, there is a market that you're going to have to walk back into with your house. And so just ensuring that your

home matches the market around you. I think that's a really great point. You don't want to over-improve because your buyers aren't going to see that as value to them. So while we have had a lovely conversation about Live Inflips, I do have to disagree with your point of view and say that for me, I think the stock market is going to be a better vehicle to get you to Fy faster. So presumably we are talking to somebody who is new to the space and who wants to reach financial independence as soon as they can. Now, I do have the advantage that I have spoken to about 600 people about their path to

financial independence and over the course of this podcast. And it seems to me that investing in the stock market is the fastest way to get you there. So the stock market has no, like you have no bearing on what the stock market is going to do. I love the stock market because it's a set it and forgetic kind of way of investing. You put your money in and then you wait. And I have seen the stock market going up. And yes, I'm going to address the people who are saying, well, of course, it's been going up since 2008.

Yes, it has. But I have been investing since 1998. And it has gone up and down and up and down and up and down. But over the course of time, it goes up and to the right. If you zoom in on that over the course of time, you'll see a lot of ups and downs. but I have faith in the American economy and the strength of American businesses, and I do believe that the stock market will continue to go up and to the right. Another thing I want to point out is that if you are just discovering the concept of

financial independence, you are either young and have a long time horizon, or you are older and want to get there faster. If you're older and want to get there faster, you probably have, a higher income than our younger cohorts. You might not have so much time to put into investments like real estate, learning about real estate. It isn't just, I want to invest in real estate. I'm going to buy a house and there we go. There's a lot more involved in that. So I think that especially if you are older, well, see, it's like it's better for both people because you've got this long time horizon. You can just set it and forget it. And then when it's time for your retirement,

there's your money. And I'm oversimplifying it. Past performance is not indicative of future gains, but I do believe that history repeats itself. My dear listeners, as you may or may not know, we have a new BiggerPockets Money newsletter. While we're away, go over to biggerpockets.com slash money newsletter to subscribe today. Now a quick word from our show sponsor. 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.

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Welcome back to the show. So I understand your point. I completely get it that, first of all, it's an easier way in a very, for someone especially starting out, whether you are higher income or lower income or you have time or you don't have time, it's a really great way just to get started and to actually move towards the goal of financial independence. The thing, though, with real estate is that we forgot to talk about, you know, the rental income that can come from real estate if you are, you know, again, renting out rooms in your house, not just a flip. And then where do you put that money? The stock market. So then, you know, what about tax benefits?

So you're lowering maybe a higher income tax that you have to a lower one and then funneling that money into the stock market. You know, we might have appreciation in your house when you sell it. Like you said, you're going to funnel it into the stock market. So for me, I truly do see the stock market, though I understand your point. A house, I think, gives you both. I like that you're funneling your real estate money into the stock market. I'm just, I'm wondering about the time commitment for learning real estate. Absolutely terrible.

Yes. Okay. I got you on that one. Scott Trench has said that if you don't have, is it 200 hours to learn about real estate and real estate investing, then it's not the investment vehicle for you. And if you are, let's use our older, new fire follower. and they're older. They're set in their ways.

They've got their life going on. They maybe have kids. Maybe they have, you know, all these different obligations that a young single, like 25 just out of college might not have the same obligations. I'm not saying that you don't have obligations, youngsters, just saying that, you know, the older you are, the more like your life is already set. And now you need to find 200 hours in your day to go and figure out real estate. I like to say you have more money than time.

The stock market might be a better choice for them. They could have the advantage of money. They just have been spending it, paycheck to paycheck sort of situation where they don't have a lot saved. Or they have the advantage of having more money that they can plow into the stock market. They have the after 50 catch up on their 401k, on their IRA. And they might not, like I said before, they just might not have the time to put into learning real estate.

Real estate is a lot of work. You can make a lot of money in real estate. I'm not saying it's not a great investment. I'm saying that it is not the one that's going to get you fastest to fire. I can see that if you're doing it right, meaning you bought them back when interest rates were 3%. That could give you a much bigger boost than somebody who's doing it right now. But if somebody's starting right now, I'm going to suggest stocks.

Also, let's talk again about the last few weeks. The stock market's been up and down and up and down. There's some uncertainty in the stock market right now. So when you're putting your money into the stock market and you're buying on sale, you're buying when it's lower, maybe you buy and then it drops a little bit. You buy again when it drops. I believe that the stock market will eventually go back up. You're getting all of those gains without having to wait for the housing market to catch up.

It's true. And I'm not changing my position, though I do want to reinforce. that real estate isn't passive. So for me, my time and attention to my portfolio has been exhausting. So like when I moved into my second, like second duplex and I did some flipping in there, I had to get Hello Fresh delivered because I did not have the time and energy to even think about food or go to the grocery store. I literally had 15 of my friends on my birthday come and help out and do a huge punch list of tasks. So that was really nice.

Shout out to the Denver Longmont Phi community. And I find, you know, like you said, you need to have some sort of knowledge in this because one bad purchase happens all at once. The stock market, you know, you can dollar cost average in over time. So that does make sense that you can kind of keep hitting those lows and get to a high or just continue to invest over time. but one purchase where you buy your house, you know, 50 over asking and you can't sell it for that amount really can sink you in real estate. So you do have to be knowledgeable. And like you said,

a passion for it. So I have a passion for real estate. And so that's driven me towards that and driven me towards my opinion in regards to why I think someone can replicate this, though it is more difficult in this environment. It can happen if you're doing it appropriately and that you're finding the right place with the right realtor, the right city, et cetera. So you might not be buying in San Francisco, though my sister did just get a house there, and it wasn't that crazy. So, you know, there's ways to do it. So I understand what you're saying.

There's a time commitment, mental and physical when it comes to real estate. And that passive part that you've gotten to, a lot of times doesn't happen without the knowledge to find syndications and the right people or, you know, having a property management company, but then you have to manage them. But someone's starting out with a little bit of money, can't really get into that passive stage for a while. 100% agree. The money can be a big barrier to entry. And there are ways around it. I'm investing in real estate right now through my live and flip. So I am in this property with a owner-occupant mortgage, so that's lower interest rate than an investor loan, comment,

you have to actually live in the property to get an owner-occupant loan. So don't say, oh, I'll just get an owner-occupant loan, and I promise I'll live there, wink, wink, when really you're not planning on that. That is considered mortgage fraud, which is a felony, which is up to 30 years in prison. So don't do that. But when you are investing, you can, there are ways around. these barriers, but ultimately you are still putting at a minimum 3% down, usually more like 5% or 10% down on your owner-occupant property. You have to live there for a year. Once you live there

for a year, you can move out and rent the whole property. You can rent by the room if your city allows. While you're living there as an owner-occupant, you can rent out other rooms to other people that can help you pay your mortgage. We call this house hacking. There's lots of different ways to get into real estate, but it is still a lot more expensive than getting into the stock market. I don't know what the minimum investment in the stock market is, but it's a whole lot less than buying a house. I mean, the minimum is five bucks if it allows it, right? If you can buy a fractional share, so depending on what platform, well, Mindy, if you were to redo your journey, Like you did, you know, you said he made $700,000 in a flip.

And so let's just say over a bunch of flips. Over a bunch of flips. Sorry, yeah, yeah, of course, yeah. Let's just say not from today, but if you were to go back, would you go the same route you did today? Or would you have taken a more passive route? Oh, way to put me on the spot because I'd probably do the same thing. Yeah, yeah. No.

The live and flip is such a great way to generate. funds. And it comes with rules. Like you have to live in the property for at least two years. You have to live in it and own it for two out of the last five years to get the tax-free capital gains. Like I said, I have made $700,000 over the course of, and that's not even counting this house because I haven't sold it yet, but I'm going to make another 300 at least on this house when I sell it. Simply because I put the time into it. I lived in a dump. I mean, it's not glamorous. I live in a construction zone. My house is not finished. My kids are sometimes embarrassed of the way the house looks, which makes me sad because it's a great house. It just doesn't have any trim around the windows.

That's not a bad thing. But I have lived in a house where I didn't have a wall. I had a plastic wall because we were building and had opened up the ceiling on the back half of the house. and it was rather cold. My washing machine pipe froze. I have done a lot of dishes in the bathtub because, like, leading over, I'm not washing them as I'm, you know, taking a bath, but I've done a lot of dishes in the bathtub and made a lot of crock pot meals, you know, in the basement because my kitchen was undone. I've done 10 kitchens, remodeled 10 kitchens, which is not super fun when you're in the

remodeled. But you know what is a lot of fun? Caching that big check and writing $0 of it to the Uncle Sam. And I think one of the things that we are not touching on is that labor, the mental and physical labor, doesn't necessarily have a dollar per hour cost. So it can be really difficult to find where you are spending your actual money because it might be time that you're spending. And for me, the reason why I say like real estate may be the best way for someone to go. But in my situation now with two young kids, having a construction zone isn't feasible anymore. So I need to pause on that. As I mentioned, stick all my money in the stock market that, you know, I'm generating and then ride that train for a little while.

Live in flipping might not be appealing to some people. I totally get it. I don't want to live in a construction zone anymore either. Another option, for taking advantage of the lower interest rate for the owner occupant is house hacking. Either buying a house with more bedrooms than you need or a small multifamily, a two unit, three unit, four unit can all be purchased with a residential owner occupant mortgage. Again, so long as you're planning on living in the property for at least one year. But then in a perfect world, the rent that you collect from all the other people should cover all of your expenses.

But even if it doesn't cover all of your expenses, you're still. reducing your living costs simply by sharing your space with other people. Yep, that's how I started out essentially, but it was a, you know, up-down, something I turned into an up-down duplex and had other people specifically short-term rentals pay my mortgage. That was really helpful. You know, I don't know if you've invested outside of the state, like outside of your primary residence and bought an investment property somewhere else. I have inherited investment properties outside of like, my local area and inherited meaning like I pay the mortgage, but inherited in the sense that I wouldn't have gone and bought these properties, but I do have them. And they've worked out

quite well to be a long-distance property manager. But again, more work. And they were bought and I took them over when interest rates were lower. So I don't know with this interest environment if I would go out and buy a house outside of my current like area or outside of a primary residence, would you? Like, as a real term, Indy, would you? I might, but in a much less expensive area. So Amberley and I both live in Longmont, Colorado, which is in the Denver suburbs, and it's expensive here because it's so awesome. But it's expensive to live here. The house prices, I think, are like $5,000 or $600,000 median home price. Some places like Indianapolis or Kansas City or even in Minneapolis, you're seeing much lower

housing prices than what you're seeing here. And I can see why somebody would want to get into real estate. They can't afford where they are locally. So they go to one of these lower priced areas and buy real estate there. The Ohio rental market is really, really strong. And housing prices aren't that expensive. So I can see why somebody would want to go someplace else. I would just caution them to first visit the property and visit the area. Make sure that you know what you're buying. I have heard some less than savory stories in the Bigger Pockets forums about how somebody didn't go out and see the property ahead of time when they finally hired somebody

to go and check it out for them. They were horrified at the state of the property. So just make sure you know what you're getting yourself into. On the note of stocks, because we've gone through just the different ways. that someone could invest in real estate. And again, I think, you know, I've outlined which what I think is the most beneficial way to get to fire. Let's talk about your stocks. What type of portfolio this is not financial advice, but out of curiosity, what do you think about the different portfolios that someone could have in the stock market to get them to fire?

We have to take one final ad break, but we'll get into what we think is the perfect fire portfolio after this. 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 Pockes. 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 Edle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple.

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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. Thanks for sticking with us. Ah, so Scott and I have been talking recently about the 4% rule, the original Bill Bangan study back in 1996, where he talked about what is the safe withdrawal rate.

And he said, based on a 60% stocks, 40% bonds portfolio, you can pull out 4% just for inflation every year and continue pulling out. You should not run out of money in 30 years. And I think they had a 96% success rate. I don't know very many people who have a large or significant bond portfolio. I know people who are 90% in stocks and 10% in bonds or bond-like structures. So Scott is very recently sold 40% of his stock portfolio to turn it into real estate, cash flowing real estate. That is acting as his bond. He is not 60, 40 stocks bonds yet or stocks bonds slash real estate, but he is making his way there.

I am probably not going to be going into bonds very soon just because the stock portfolio keeps performing so well. But ideally, I think that, I mean, Bill Bagan is much smarter than I am. And he said 70, 30, 60, 40 stock bond split is what you should have. So I think people should start thinking about this, especially as they're getting closer to retirement. When it comes to stocks too, I always think of the book, The Simple Path to Wealth. And when I think about that one, the recommendation there, I think is more of a 90-10 stocks to bonds. And no international. because the idea was J.L. Collin thought that, you know, large companies that we're investing in if you invest in the S&P 500 are already touching international because they're global companies. But I know that advice has recently changed. So the idea also is your stock portfolio can comprise of not only some sort of S&P 500 index fund, but possibly some international now.

because like we said, past performance doesn't necessarily indicate future performance, though I don't imagine the top 500 companies in the U.S. doing any, you know, going all under. So I think we're safe there. But that international piece is something we haven't considered in the past and has been outperforming the S&P 500 and doing well. So I'm curious if you would start to move any of your portfolio into a more international fund to even that out. Personally, no, but I can see why somebody would want to touch into international funds because they have been doing so much better. Again, we are in a period of uncertainty right now with the stock market. And I honestly don't know enough about international funds to speak intelligently on them.

I would defer to the J.L. Collins comment of, you know, he doesn't go into international funds because the, these global companies are already kind of touching internationally. So I would probably not do that, but I could see how somebody would want to. And if they have interest in it, I would encourage them to look into it further. Do a lot of research. This is a fun show where we're talking about money, but ultimately it's your money. So you should be doing research and educating yourself outside of just listening to what Mindy said on that show that one time. Agreed completely.

Yes. I have an interesting statistic here, Amberley. I think it's really, really fun to note that 87% of upper income Americans own stocks, followed by 65% of middle income Americans and only 25% of lower income individuals. It's the classic and proven way to accumulate wealth. Higher risk, maybe because you don't have any control over what's happening with your stocks, but also higher passive rewards. I would agree with that over time.

Okay, Amberley, it sounds like we both appreciate both aspects, real estate and stock market, but we have a difference of opinion where to start if you were starting from scratch. And I think that's okay. I think your opinion is valid. I think my opinion's valid. What I want to encourage our listeners to do is whoever you agree with, whichever path you choose to go, start from a position of education. and understanding what it is you're getting yourselves into.

For the real estate, biggerpockets.com or biggerpockets.com slash forums is a great place to start. Read through some of the questions people are asking. Look and see the problems that they're having. Are you going to be able to handle those problems yourself? Or are those going to make you say, oh, real estate's not for me? Then come over to my side and check out stocks. Yeah, I think that's a great thing. Education first, take action.

afterwards. And there are some horror stories about real estate out there. I don't know many horror stories about stocks, except for if you've pulled out the wrong time and never, you know, went back into the market. So just make sure you can deal with someone having a full-on brawl in your basement, smashing coffee tables and TVs. Yes, that has happened to me. But hey, it was worth it. For that sweet, sweet cash flow. And coffee tables can be replaced. That's exactly it. Yep. So it was definitely worth a journey for me, and it may or may not be worth a journey for you.

And as Mindy said, the stock market is a wonderful place as well. You can't go wrong either way. Amberley, this was so much fun chatting with you today. I am so excited to have you slipping into Scott's space and being my co-host over the next few weeks. I'm so happy to be doing this with you, Mindy. And though we can disagree on things, we are still friends. We are still friends. Yes.

All right, that wraps up this episode of the Bigger Pockets Money podcast. She is Amberley Grant. Amberley, where can people find out more about you? Amberley Grant.com. And I'm Indy Jensen saying, see you soon, Blue Moon.