Rich Habits Podcast - Q&A: $100K / Year in Passive Income, QQQM vs. QQQ, and House-Hacking

Starting point is 00:00:00 Amazon presents Laura versus Fruitflies. Swarming your fruit and terrorizing your kitchen, these little freaks multiply at a rate that would make a rabbit say, yo. Chill. But Laura shopped on Amazon and saved on cleaning spray, countertop wipes, and fly traps. Hey, fruit flies, your baby boom ends here. Save the Everyday with Amazon. Hey everyone and welcome back to the Rich Habits Podcast, a top 10 business podcast on Spotify.

Starting point is 00:00:36 This episode is our question and answer edition, which means you email us questions at Rich Habitspodcast at gmail.com or you send us DMs on Instagram at Rich Habits Podcast and we answer your questions. We love these episodes because we get to connect with you guys one-on-one. We feel like we're really building a community here and keep the questions coming. Now, before we jump into the episode, just a quick reminder, sign up for the Rich Habits newsletter. We had over 50% open rates on our first email that was sent out a couple weeks ago, and we've received a ton of positive feedback. This is going to become a weekly newsletter. Every single one of you can add to your rotation, and this week's edition was actually sent to you Thursday, today, May 16.

Starting point is 00:01:23 Now, it's such an easy read. It's full of personal finance and investing info. everyone needs to know, as well as the easiest way for you guys to sort of explore the curated affiliate offers that we've collected for you. Yeah, I'm so excited for the newsletter. Austin and I both get a chance to share our favorite callouts for the week. And last week, mine was all about these shady politicians who just happened to be worth hundreds of millions of dollars. Unreal, right? I wonder how they do that. And Austin, I think yours was about the U.S. consumer saving rate versus credit card debt. So yeah, really, really good one. Yeah, my callout was about

Starting point is 00:01:57 about how little money people are saving versus how our credit card debt just keeps going up until the right. It's pretty alarming. But if you want to see this week's call out, my call out and Robert's call out, you got to click the link in the show notes below and you can join 40,000 other people who are going to start reading the Rich Habits newsletter. Super excited about that and thanks everyone for being so receptive to these new properties and products that we send out for you. Before we jump into the episode two, Robert, I want my option traders to listen up because I want to tell you a little bit about public.com. But first, have you a little bit about public.com? But first, you ever actually thought about all the fees you're paying to trade options aside from the regulatory

Starting point is 00:02:32 fees there are commissions and most platforms even charge per contract fees as well that's what makes today's sponsor public.com so interesting because public doesn't charge commissions or per contract fees yeah as an industry first they offer a rebate of up to 18 cents per option contract traded so if you check it out if you trade 1,000 option contracts on public you'll get up to a hundred $180 in rebates, and if you were to trade 10,000 contracts, you could earn upwards of $2,000. More importantly, the rebate means you can maximize your profits. So to recap, Robert, there's no commissions, there's no per contract fees, and you get up to 18 cents on every contract traded.

Starting point is 00:03:14 So go see why NerdWallet recently awarded public five stars for options trading and start earning up to 18 cents per contract traded at public.com. This was, of course, paid for by public investing. options are not suitable for all investors and carry significant risk. Read the full disclosures in the podcast description below, and this is for U.S. members only. Now, our first question on today's episode comes from Parker B. Parker says, hey Austin and Robert, I'm a 21-year-old financial analyst living in Tampa, Florida, and I earn a total compensation of about $80,000 a year. I've diligently maxed out my Roth IRA and contributed to my 401k up to the employer match. I've saved $50,000 to put

Starting point is 00:03:56 20% down on a condo, aiming to close by the end of July. My current roommate has agreed to sign a contract to pay half the monthly mortgage for at least a year, which helps me house hack while living with a really good friend. Renting currently costs about $1,200 where I'm at, while my mortgage will be about $14 to $1,500, so that's a good deal for me. Now, the condo unit allows for 12-month leases, which also gives me flexibility to rent it out if I move within two years. Robert, Austin, do you all think this purchase is worth it? Robert, I like this purchase a lot. I'm really excited to hear your perspective, though.

Starting point is 00:04:31 Well, first and foremost, I want to give a big round of applause, everyone, for Parker being 21 years old and thinking this indefinitely about the future of, I'm assuming, his finances and, you know, financial wherewithal. So this is an incredible question, and I love it. And let me dig in. So I think it's a great idea, especially with Tampa being a hot market. so you'll enjoy a lot of capital appreciation here on this purchase. And so generally, you've covered house hacking.

Starting point is 00:05:01 You've covered capital appreciation. You're giving yourself the opportunity for a future long-term rental. So I think you've got kind of the trifecta there of how to build wealth and get started, especially right now in a hot market like Tampa. So I love this concept and the fact that at 21 years old, you're thinking about money this indepently and just like overall, It's just amazing, so I love it. Yeah, shout out to Parker.

Starting point is 00:05:26 I mean, he's 21 right now. And let's say he buys this condo for about $200-ish, $220,000, just depending on whatever he paid for it. Over the next 10 years. So, Parker, by the time you're, let's call it 30 to 31 years old, that $200, $220,000 should appreciate enough to double in value. So you're now going to be sitting on a $400, $450,000 condo, which is incredible. and you'll have been paying down your mortgage throughout the time versus just kind of not exactly throwing money away to rent because, you know, renting is decent and there are reasons to rent, but this is a really good situation for you, man. I mean, you're going to have nearly the

Starting point is 00:06:04 exact same payment as if you were renting except your building equity, which is awesome. And you now have a rental property to rent out and make some passive income, assuming you can probably get enough rent to offset your monthly mortgage when you're ready to do that in the next four, five, six, seven years. So Parker, I love the idea, man. I think you are crushing it at your age. And what's really cool about this question too, Robert, is we talk a lot about house hacking and encouraging people to house hack. And it gets a lot of people kind of scared. They're like, wait a second. I got to go buy a house. Like, that's a big deal. Well, Parker over here took that as like, let me go find a $200,000, $220,000 condo that I can

Starting point is 00:06:40 afford that can be shared with someone who's in my friend group. I've got a really close friend here. They don't want to pay rent at this. I'll call it $1,200 a month. So I'm going to help them lower their rent while also helping me pay off my mortgage faster. So there's a lot of really cool things that are happening here behind the scenes in Parker. We couldn't be more proud of you, man. Yeah, I love it. I see it every day on TikTok and Instagram. You see these stories of these groups of four, five, six, eight friends going in all together on buying these larger properties and campgrounds and Airbnb properties. And I just love it because people are learning to get creative to make up for the imbalance in our kind of economy right now with, you know, everything being so

Starting point is 00:07:18 expensive and it being difficult to purchase properties. So I just love people that are thinking outside of the box and coming up with creative ways to still enhance their wealth building and give themselves a great place to live. So great question. All right, Parker, keep crushing it. And I know Robert, you're in St. Petersburg. Maybe you're going to run into Parker one day. Who knows? There we go. Find me on the street like everybody else. All right. Our next question comes from Chris V. Chris says, thanks to Spotify's suggestions, I discovered your podcast a month ago and have been hooked after the first episode I listened to, episode 59 titled How to Generate Your First Thousand Dollars of Passive Income.

Starting point is 00:07:57 It really ignited a fire in me to build a dividend portfolio. I'm currently 51 years old. I draw a good pension as a retired firefighter. I currently work full-time for the benefits. My wife and I own five duplexes that produce solid cash flow. We have enough in savings for six months' worth of expenses. We don't have any other debt than our real estate. and we're ready to start investing $500 a month toward building a dividend portfolio.

Starting point is 00:08:22 Now, here's my question as a newbie. I've been looking at all the dividend-paying ETFs that you have recommended on your show, and I noticed that some of them have a higher yield than others. Since ETFs are designed for diversification, is it wrong to invest into a single ETF, assuming it has the highest yield, or should I be investing across multiple dividend ETFs? What's the best strategy behind investing into them, if so?

Starting point is 00:08:45 Okay, really good question here. Chris, super, super excited that you're as excited about dividend investing as I am. I am a dividend investing nerd and I love me some passive income. So what I would be thinking about to keep it super simple, and we kind of laid it out in that episode, right, it is totally okay if you are looking for yield in your portfolio to hold a single dividend ETF because, to your point, these ETFs are so diversified that you're not going to be overly exposed to a single sector of the stock market. or a single asset class, right? So let's say, for example, you went out and bought SPYI,

Starting point is 00:09:21 which I believe was the ETF we talked about in that podcast episode. Again, that's the S&P 500, right? We all want to own the S&P 500. It's a wonderful index to own. And if we can get some extra yield on top of that, then that's wonderful, right? So if really you all wanted to do was just put that 500 and SPYI per month, like that's great. You're going to start earning yield on that money immediately.

Starting point is 00:09:42 Now, if you also wanted to diversify away from the S&P, kind of like what we talk about, Robert and I have our five ETFs that we really like, including QQQ, the Nios Investments team has created QQI, right? Which is the exact same thing as QQQ, except they try and have a little bit more yield on top of that. So, you know, to answer your question, Chris, if I were you, I'd split 250, 250, SPYI, QQQQI. Rock and roll, lock and load, that's your answer. Now, if you want to have a little bit less of the high income side and maybe a little bit more of the growth side of the equation, I think there's other ETFs out there that are exciting. You know, there's S-C-H-D, V-Y-M, S-P-H-D. There's a bunch of different of these dividend ETFs that you can explore.

Starting point is 00:10:25 In my opinion, and in my own portfolio, my largest dividend-paying ETFs are S-P-Y-I and K-Q-Q-Q-I. I've got thousands upon thousands of dollars in both of them, and I'm very, very happy about that. Yeah, I agree. And I think that's a great breakdown. I too have QQQI and SPYI. We talk about them every day. And that's just because we love them for ourselves and for our listeners. We really try to, as you all know, flush out the best strategies and the best investments we can find in every sector of investing. And we love those two specifically. So I think it's a great question and a great breakdown by Austin. And Chris, when you're ready to start sprinkling some single stocks inside of this dividend portfolio of yours, let me give you a couple things. things to just write down and keep in the back of your mind when you're doing that research. The first thing I want you to look at is the payout ratio, right? So if a company is paying a dividend, they're going to have something called a payout ratio, which is essentially how much of their profits every year are they paying out in cash dividends to their investors, right? And some of these

Starting point is 00:11:29 companies that are like 70, 80, 90 percent, it's like, wait, what profits are left over in case of a tragedy or to reinvest? You know what I'm saying? So you want to find a company. So you want to find a company with a payout ratio between, let's call it 40 to 60%. That's a really healthy payout ratio. The next thing I want you to look at is understand the difference between trailing 12-month yield and forward 12-month yield. Trailing 12-month yield is looking back the last 12 months and seeing how much of a dividend did investors get paid and then use that to kind of compute what the yield would be on the current share price. Where the forward 12-month yield, which is a little bit more important because it's forward-looking. You can look at what the recent quarter dividend was,

Starting point is 00:12:10 multiply that by four, assuming they're going to keep that dividend, which they normally do if they're paying a dividend and have been for a couple decades. And then that allows you to kind of figure out what that yield turns into into the future. So those are the two things. I want you to check out. Again, payout ratio and the TTM versus the forward 12-month yield. And you'll be just fine, man. Welcome to the dividend growth investing club, my friend. All right. Our next question comes from J.D. Hey Robert Nostin. My name's J.D. And I'm a current senior in high school and I just committed to Indiana University to major in finance. I'm fairly needed to investing and I just opened a brokerage account on public where I began investing into high dividends stocks as well as some more mainstream ones like Microsoft and Apple. If you guys were in my shoes, right, an 18 year old about to head off to college, what would you do? Apologies for such a broad question. I just am looking for some direction. I love your podcast and appreciate everything you guys do. Robert, give J.D. The sauce. So I would say first and foremost, J.D., I hope you're going to college for something that is going to be meaningful and help you really crush it later on. I know you say finance. I'd love to

Starting point is 00:13:15 hear more about what that means to you and what you're looking to do with it. Love IU, great college. Almost went there for baseball myself. It didn't work out. But yeah, I think you're on the right track. But the way I would see it right now is the number one thing we always talk about is get that Roth IRA up and running. You know, with you just being a senior in high school, school, you're right at that age, get the Roth IRA up and running, get that basket of index funds. We talk about all the time, the VOO and the QQ and the MOAT and the AIQ, those types of funds. Get that up and running, that mix of those funds, and then start diversifying out into some of the other kind of sectors that we would look at for investing. But I think you're off to a great start.

Starting point is 00:13:56 I'd get the Roth up and running. I would try to have a couple side hustles going on while at school. Maybe you can work from home on some stuff online or have some side hustles at school. But I would keep adding to those funds while you're in school and just set yourself up for when you finish college so you're not starting from zero. What a wonderful answer, Robert. I'm right there with you, man. Public.com is a wonderful way to have an online brokerage account and have all the cool things they offer. We love public, but they don't offer a Roth IRA. And that's what J.D needs right now.

Starting point is 00:14:27 Go to M1.com and open up a Roth IRA through their platform. and you can create what they call like a pie and slice. Think about it like a pizza, right? Let's say there are four slices of your pizza. In each one of those slices could be an ETF that we talk about. V-O-O-Q-Q-Q-G-T and moat. And so you can put $100 toward the pizza, and $25 of that is going to be invested into each of the slices.

Starting point is 00:14:50 It's really cool. It's rebalances automatically. They have auto-invest. It's a wonderful platform for the Roth IRA. So, J.D, I'm not saying you need to sell your current investments in public. Just keep them there. Let them ride. But any more money,

Starting point is 00:15:01 that you generate and want to invest, I want you putting that into a Roth IRA. You can do that up to $7,000 a year and make sure this is earned income, right? Make sure you have a job. This is money that's coming from, you know, your wages, your salary, your hourly wage, whatever you're doing there, because that's how the Roth IRA works. And then finally, you know, Robert mentioned side hustles. And Robert, I need to share this, dude. I saw a side hustle over the weekend that blew my mind. Okay, so there's an Instagram account with 26,000 followers called Hamza underscore automates. I'll put it in the show notes below. But this guy essentially makes these videos that show you how to make automations for boring businesses that sort of allow them to be more efficient.

Starting point is 00:15:45 So he talked about a restaurant automation, a personal trainer automation, a plumber automation, a hair salon automation. And you essentially use like this tech stack of different types of websites and apps and different things that can talk to each other with APIs to automate the whole process of these companies. And then you can charge them five, six, eight, $1,000 a month and say, yeah, I'll run your automation software for your plumbing business. So every time, you know, someone calls in, they're put into this trip campaign and this and that like, I don't know, right? Automations are crazy. But Hamza underscore automates. I'll put it in the show notes below. Really interesting stuff.

Starting point is 00:16:19 And J.D., if you're technically inclined like most 18-year-olds are, dude, that could be an awesome, awesome side hustle for you. Yeah, I love that. We are always looking for those new side hustles. And there are so many good ones out there. That's why it's just so important for people to understand. There's so many ways to get money these days. And they're not all traditional. And I love when we seek out and find something new and fun. And people can learn from that. 100%. Our next question comes from MJ. MJ emailed us instead. I understand that VT. is slightly different from VO because it is broader with more mid-cap companies. But when comparing the performance, VOO seems to outperform VTI year over year. If that is true, then why should we invest in both? Robert, we talk about VOO, QQQ, VGT, VTI, and Mote. And these are our five ETFs that we really, really encourage people to have in their portfolios as they build their base.

Starting point is 00:17:17 So do you want to walk MJ through why VTI is in that lineup? Yeah, I think for me, it just really comes down to when you think about VOO and you're thinking about the S&P 500, you never want to bet against that. But then if you also want to have some exposure to the total world markets, then you can look at VTI as a good way to do that. So I think for me, that's the simplest way to look at it. They both perform well. And you can't really, or you shouldn't probably really just look at what's performing the best and go all in on that. Because you want to have some diversity across multiple sectors. That's why we're always talking about having exposure to the S&P, the NASDAQ, maybe, you know, alternative stuff like AIQ.

Starting point is 00:18:03 We really love that fund for a global AI exposure. So I think the easiest way to understand it is having enough diversity that you're covering all of the sectors while not being so spread thin that you're not getting the coverage that you need. So I think that's the best way I can explain it. I love it. I'm right there with you. VTI is a diversity play. It is a way for you to diversify your portfolio to not just include the 500 largest,

Starting point is 00:18:29 most profitable companies on the stock market, but all 3,719 of them. If you want to be investing in the total stock market, that's what you do with VTI. And to your point, yes, VTI has moderately underperform. the S&P, but that's what's so cool about diversification, right? That's why we have five and not just one. We're not just going all in on VTI for underperformance. We add it as a little sprinkle, a bit of gravy on top of our chicken fried steak and using it as a way to build our portfolio, right? So looking out the total return here, Robert, VOO over the last one year has had a total return of 28.2%, where VTI has had a total return of 27%. So we're talking about a 1% difference here. So I'm not going to

Starting point is 00:19:12 going to cry over a 1% underperformance as it relates to VTI. And it's a very similar story over the last 5, 3, 10, 20 years as well. But that's why we have it, right? It's a way for us to diversify our portfolios out of not just the top 500, but into the other 3,719. Yeah, and it's really important to understand. We talk about VGT as well. We love VGT. There's a lot of tech carryover with VGT and QQQQ. doesn't mean you can't own both of them because they are different enough to where you can still have the diversity while still having high performance. So just keep that in mind when you're talking about what to do with these, Jay. And I think it's really important to understand. And Jay, we also saw that you asked the question about QQQQ versus QQM outperforming QQQ since inception.

Starting point is 00:20:00 I look at this as they're very, very much the same product. And they have a slightly different expense ratio, but very, very nominal. So I don't think it matters too much between the two of those as far as what you choose. I don't know of a difference. I've never read of anything that's a difference. So it's just up to your preference. Yeah. So, you know, MJ, if you want to own KQQM versus KQQ, be our guest.

Starting point is 00:20:24 The expense ratio is five basis points less. They have the exact same strategy. They hold all the exact same things. And I don't know why it's outperformed it by let's call it 10 basis points over the last couple of years. I really don't have an answer for you. but they have the exact same strategy, the exact same holdings. One of them has a five basis point higher expense ratio than the other.

Starting point is 00:20:44 That's your answer. Earlier in the show, you heard us talk about the investing platform, public.com. That's where you can trade options with no commissions or per contract fees. And you get a rebate of up to 18 cents per contract traded. NerdWallet recently gave public five out of five stars for options trading. If you want to see why, go to public.com and start getting a rebate of up to 18 cents. cents per contract traded paid for by public investing options not suitable for all investors and carry significant risk full disclosures in podcast description u.s members only and remember

Starting point is 00:21:19 we're hosting a webinar with public dot com's options trading expert to teach us all things options we'll be learning about long calls long puts long straddles everything in between if that sounded like a foreign language to you you need to sign up for our webinar on june 4th link is in the notes below because this one is going to be a good one. So many of you have been to all of our other webinars and they just keep growing and growing. And we're digging up all the cool tools to help you guys reach financial freedom that much earlier. We cannot wait for this webinar because I trade options, Robert. You know, I got my covered calls. I do my stuff there. But like, I'm really excited to go in on these long calls, long puts, long straddles, call debit spreads, all the fun crazy

Starting point is 00:22:05 things that are a part of this, right? Long call calendar spread. Like, I'm so excited to learn, dude. I know there are people crushing it right now and using this more importantly, Robert, as a way to hedge their portfolios, right? They use options as a way to hedge against downside risk. And so I think it's going to be a really cool opportunity for not just us, but everyone else to learn about these different ways to trade options on public. And we're going to have a blast. I love it. I can't wait. So our next question comes from Francis R. Francis says, my wife and I are 50 years old. My wife works full time, and I'm self-employed. My income fluctuates, so our average income is about $150,000 a year, and excluding our low-rate mortgage and car loan, we have no other debts. We have saved over the

Starting point is 00:22:46 years and now have a little more than $1 million sitting in a high-yield savings account. Other than these savings, we have two Roth IRAs with about $80,000 in them each, and two small-income-producing properties. We have about $800,000 of equity in our primary residence, and our child's prepaid college is paid in full and ready to go. Our goal is to retire in the next five to 10 years, yielding at least $100,000 annually from these investments alone. I slightly panicked and I had my bank's financial advisor invest $250,000 into a very aggressive mutual fund, but I'm concerned that I may be investing too fast because of my regrets on missing so much of gains over the prior years. So here's the deal. Do we continue to work with the financial advisor at the bank? Do I hire another

Starting point is 00:23:33 advisor, do I do a DIY approach, manage this money on my own? How do I get to $100,000 in income per year? You want me to take this one? I would love to. I'll let you go. Francis, first and foremost, great job from what you've done so far. Let me touch on some of the good, the bad, and the ugly. To get you to that 100K in retirement, utilizing the 4% rule, it means you're going to have to have $2.5 million as a minimum in your retirement accounts when you and the misses are ready for retirement. So let's get that out of the way first. We know how much we need. Let's go to the bad.

Starting point is 00:24:06 I don't know if I would just take a bank's financial advisor on their word that they're going to do a great job. Because remember, they are going to be selling you specified products based on what they're allowed to sell you. Because with not being independent, they're going to tell you what's best for them based on what they're allowed to sell you. Whereas when you're dealing with an independent advisor or someone that's an educator like us, we can share all of the best stuff with you because we're not bound to any certain company. So what I would recommend in that instance is, if you really want to do the DIY approach, go for it as long as you're going to really put in the work

Starting point is 00:24:42 and optimize your money as much as possible. But otherwise, get a second opinion. It's just like going to an eye doctor or going to a mechanic or a surgeon. You're not just going to take the first person at their word. You're going to get multiple opinions, I hope, when you're getting that appendix taken out. So just keep that in mind that look around,

Starting point is 00:25:00 get some different opinions. if you want, book a call with me. I can get you in front of the team at Croke Capital. They can certainly take a look at everything and see how you're looking. We would love to help you there. But always get another opinion. So I would say that is secondarily. And then the last thing I would say is don't worry about feeling like you're so far behind.

Starting point is 00:25:20 At a million dollars right now at 50 years old, you're in great shape and way better off than most people. So keep that in mind at 50 years old, even if you wanted to retire at 60 or 60. instead of 65 or 70, you still have plenty of time to make up for what you think you need to do to get to that $2.5 million mark. I think you'll be fine. I couldn't have said it better myself, Robert. And I think what's really important for Francis to understand here is the rule of 72. So the rule of 72 states, take the number 72 and divide into that number what you're expected annual return on your investment is supposed to be. And it will tell you how many years it's going to take you to.

Starting point is 00:26:01 double your original investment. So the S&P 500 averages about 10 to 12% per year. So if you take 72, divide it by 10, 11, 12%, you come out to about seven, right? Seven years to double your original investment. So if you took all $1 million of this, Francis, invested it strategically into the S&P 500, maybe some of these other ETFs we talk about, your $1 million, statistically speaking, should double to $2 million by the time you're 57, 58 years old. getting you a lot closer to that $2.5 million goal that Robert had laid out to you. Now, that's assuming you have that five to 10 year time horizon to start generating yield on your money. You can generate a lot more yield on $2 million than you can with $1 million.

Starting point is 00:26:45 Again, if you want to start generating yield today, we just talked with Chris about this. You can invest into SPY or QQQQQI and those ETFs are going to pay you every single month, as well as help you track the underlying indices that we love, the S&P and the NASDAQ. But if I were you, I would take Robert's advice and get a second opinion. You know, you could DIY this. Don't get me wrong. But just considering the fact that you didn't earn this money, at least isn't say that you earn this money by investing it your whole life, maybe you actually just went out like

Starting point is 00:27:12 this was your salary and you saved it into a high yield savings, then maybe you're just not an investor. And that's okay. That's why we're listening to the podcast and learning. But it's probably with a million dollars a good idea to get an investor in your corner, right? Someone who has the heart of a teacher wants to really show you what's going on with your money and why they think ABC XYZ. And, you know, just from some, you know, personal experience here,

Starting point is 00:27:33 my mom had her money with SunTrust, her bank, right? SunTrust has like a wealth management thing. Man, they screwed the pooch. It was, it was a disaster. So she moved her money out of that real quick. But that was, that was pretty sad to see. Yeah, so Francis, you can stick with the bank, but probably not a good idea. We definitely want to encourage you to get that second opinion. Check out Crow Capital. Check out all the others on the internet, right? We don't want to sway you one way or another. But it's a really good idea with a million dollars to have someone else. give you a different perspective. Yeah, I really love it. And another way to think of it, when people think about getting a financial advisor involved, there's just a couple shortlist things that I would

Starting point is 00:28:10 talk about. Make sure that you understand if they're a fiduciary or a non-fiduciary. You want to have a fiduciary, if you can, just because they're bound by law to give you the best products they can for your well-being, and they don't charge commissions. Secondarily, understand the fee structures, so you know what you're getting yourselves into. And in this instance, with your net worth, where you're heading, and having kids, it might be good to have a financial advisor that's really strong because it's not just about how much you're making, it's how much you keep. And also having the tax strategies for building into retirement,

Starting point is 00:28:47 having those succession plans, having things laid out for your properties and your home, you know, to make sure that they're covered, you know, through a trust. sometimes a holding company. There's just so many strategies that go into building wealth and keeping it for your family in the future. So there's more to it than just picking stocks and mutual funds and index funds. So that's why I would definitely get another opinion. And something else, Robert, I forgot. Episode 60 of the Rich Habits podcast, what to avoid when picking a financial advisor in 2024. So go listen to that episode. I mean, this is an episode that lays out for you, Francis,

Starting point is 00:29:23 everything you need to know when you're going through that process. So go give episode 60 a listen. Our last question comes from Emma. Emma says, hi Austin and Robert. I'm a huge fan of the podcast. Thank you both for all you do. I'm hoping you guys can give me some advice. Here's a little bit of background information on myself. I'm 25 years old. I'm a CPA and I live in Manhattan. I make a little bit over $100,000 a year. I currently have $90,000 invested into the stock market between my Roth IRA, my 401k, and my regular brokerage account. I also have 35,000 in a high-yield savings account in about $3,000 in crypto. No credit card debt, no student loan debt. Wow, that is awesome, Emma. Now, Emma says, I understand and appreciate that I'm ahead of the

Starting point is 00:30:05 curve from my age. However, I can't fathom working in corporate for another 40 years, and I'm looking to retire early. Just not sure how possible that is, and that's where I'm hoping you two can both help me out. I'm interested in investing in real estate, and I love the idea of buying a duplex and living in half of it while renting out the other half. However, buying property in Manhattan or even in a relative proximity to the city is not feasible and I don't think it would make the most sense financially. Side note, I currently live in a rent-stabilized building and pay 1750 per month. I've considered moving to Charlotte, North Carolina, where buying would seem more feasible and I believe more profitable. So here's my question. Do you all think real estate is the next

Starting point is 00:30:44 best step for me in my investing journey? How do I go about buying property for the first time? I really don't know where to begin. Any other advice or recommendations to help me continue on this journey of financial freedom would be greatly appreciated. Thank you both so much. Your podcast is my favorite part of my morning commute. Emma, thank you so much for the kind words. What an awesome, awesome question.

Starting point is 00:31:04 I'll let Robert kick us off and then I'll rally behind them. So yeah, I think this is great. And at 25 years old, you're killing it. It's awesome to see. And I agree with you. If real estate is the goal for you, the next kind of goal you're looking for Manhattan and anywhere around it would be really, really tough. I don't think the numbers would pencil out for you in real estate,

Starting point is 00:31:24 but I do like the idea of looking elsewhere. You know, Charlotte might be great. I'm in the Tampa area. The market is growing and booming here as well. You want to find the areas that aren't outpricing themselves, but also have great capital appreciation. So you can find those in many parts of the country. And then just hire a management firm to run it for you and help you if you need it.

Starting point is 00:31:47 but you might even be able to do it all remotely just because of the fact that there are so many great tools out there to use. But I like the idea of you going the real estate route sooner than later because you've got your 401K covered. You've already got stocks. I would like to see you have more cryptocurrency in your portfolio given your age and where we're at in the cryptocurrency market. But I love this as the next step in your financial growth of you getting into real estate in the rental world. So Emma, I'm going to give you the play by play on what I did. I graduated college at 22 years old on my 22nd birthday. I moved to Nashville in October of 2018 to work in finance for a healthcare company. I think I was making 60 or 65,000 in 2018 as my salary. I use that

Starting point is 00:32:38 money to start maxing out my Roth IRA, paying down some my student loans, things like that. And I had a little bit of a savings and I realized, wait a second, in 2019, I was doing this right for a whole year. In 2019, I was like, I need to buy real estate in Nashville. That should be my end game. I need to own property here in Nashville because it's just appreciating like crazy and I can always run it out in the future. And so what I did is I researched the different types of mortgages that I could get and I found something called an FHA loan, which is a three and a half percent down loan on a property. So the property I wanted to buy was a three-bedroom, two-and-a-half-bath townhome 20 minutes south of Nashville that I was going to live in and house hack, like what you're sort of talking about here, Emma.

Starting point is 00:33:21 And total money out of pocket with this FHA loan, including the closing cost being covered by the seller, was $10,455. So for $10,455, I had a $280,000 townhome, which is now worth about $450,000 in that, let's call it, five-year period, six-year period that it is appreciated. And so, Emma, the reason why this is so important and why I'm just thrilled that I bought a house at that age was because as we look around, and of course, you're in a rent-stabilized sort of situation, so your rent's not going to go up like crazy. But I've got a really close friend that lives in South Florida and his rent increased by like 26% year-over-year for like no reason, right? So it's like, oh, I'm paying $2,000 a month and now I'm paying $2,600 a month, right? It's just like, what the heck? I mean,

Starting point is 00:34:06 that was the same situation to happen to me. A big reason why I want out to go buy a house is because my landlord said, hey, you guys living in this house right now. I was a roommate. They said, we're going to increase your rent from 1,800 to 2,400. You have two months to figure it out. And I was like, $2,400. That's a mortgage. Let's go buy a house. So what I'm trying to get at here, Emma, is it's a really, really good idea to buy a house anytime in your life because, one, it's like a forced savings account. Two, if you get it for the right price, right? That's the big thing here. Buying at the right price and making sure that the monthly payment fits in your budget. You're not house poor. House broke. Robert and I talk about that a lot, which it does.

Starting point is 00:34:40 definitely fit in my budget. And those two things are really important because, one, you're building equity. Two, you have predictable sort of monthly expenses going forward. And you're also hopefully going to get to a point where you can turn that into passive income, renting it out, things like that. Now, you also mentioned here, you want to get financially free. Really want to encourage you to look up the fire movement, F-I-R-E. That stands for financially independent, retire early. There's a sub-reddit. You can go check out. There's a lot of information there. But they teach you essentially, and Robert and I talked about this. I don't know how many episodes back, but we talked about the freedom number, right? They teach you how to find your freedom number so that you can live a modest life, but retire in your

Starting point is 00:35:19 30s or 40s, right? You don't have to work corporate for the next 40 years, which I'm right there with you. I didn't want to do that. Now I'm an entrepreneur. So if I were you, Emma, I would definitely consider moving, right? I'd find a place somewhere in the United States where you could perhaps buy a house for three, four, maybe $500,000, find two or three roommates along the way and get in the real estate game when it makes sense for you. But I've also heard horror stories of people that stay in Manhattan, stay in New York, things like that, and they are never able to buy a house because it's so expensive. We're never able to buy a condo because it's so expensive. And they're still renting in their 40s, right? You don't want to be in your 40s and not ever own property

Starting point is 00:35:54 because you want that equity, right? You want it to go up in value. So I know that was a lot of a ramble, Robert, but as someone who's recently bought some real estate, right, I've got a rental property. I got this house here. I think Emma's got a lot of good stuff going for her. And she's got a really good head on her shoulders. And she could definitely use some of this 35,000 in her savings account to maybe move somewhere in the country, find that new job and maybe get after some real estate in 2025 or 2026. Yeah. And we didn't really go down the road of house hacking. She's in a great spot where if she were to move and bought a duplex, triplex or quadplex, she could live in one unit, rent out the rest, use the Fannie Mae new mortgage, which is 5% down

Starting point is 00:36:32 mortgage so she doesn't have to have a lot of cash out of pocket. And that mortgage, you can go up to four doors and $1.3 million of purchase price. So that's a great program that we could look at too for this scenario and could be really awesome in the right market. So I think you really covered it well. And I love the rambles because this is really all about us getting the best information we can to our listeners. And so sometimes it takes a little longer for us to get it out. So I love it. Okay.

Starting point is 00:36:58 I really get excited about this because, you know, we talked about the Fannie Mae 5%. I just went to Zillow right now, Robert. I found a duplex. in Knoxville, Tennessee, $320,000, $2,200 square feet. And, you know, it's this multifamily. It looks awesome. This is exactly what we're talking about, right? This is exactly it. So these are these, you know, situations where, you know, what's 5% down on 320 grand, right? That's only $16,000 plus closing costs. I mean, you can find these little 300,000, 400,000 duplexes all around the country, Emma, and use that as an opportunity to get in real estate, become a landlord, a little, little

Starting point is 00:37:36 house hack action. And then once you're ready to move out of the duplex, go find your single family home. You now have two doors, right, a duplex. You're now able to charge rent across two different tenants that pay your mortgage and a little bit on top of that too. So there's a lot to be excited about, Emma. I know you're only 25, but there is so much ahead of you. I love it. Well, thank you all for joining us on this episode of the Rich Habits podcast. We have an amazing options trading webinar coming up. Austin. What's the date on that? June 4. June 4 at 4 p.m. Eastern time. Join us. It's going to be a blast. We're going to learn all about the long straddles, the call debits, the long calls, long puts, things I don't even know, right? I'm so excited, Robert. I am too,

Starting point is 00:38:16 but yes, please sign up. There is a link in the show notes below. And again, we appreciate each and every one of you every single week. We are back in the top 10. Next stop is top five again. And we appreciate all that you do. And just look out for the newsletter, too. If you have not signed up for the newsletter, please do that because we have a lot of great stuff happening there and we have more to come for all of you in the rich habits community. Yeah, I mean, Robert, we've got newsletter only giveaways coming here pretty soon. So don't miss out on those giveaways by not being subscribed to the newsletter. Join 40,000 other readers every Thursday morning with the rich habits newsletter hitting your inbox and being part of your new rotation. Thanks, everyone, and have a great

Starting point is 00:39:01 rest of your week.

Rich Habits Podcast - Q&A: $100K / Year in Passive Income, QQQM vs. QQQ, and House-Hacking

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