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Mindy:
We’re in a recession or perhaps we’re headed right into a recession. I don’t know. All of the information is completely different, however lately we’ve had a ton of layoffs even hitting the usually fairly strong tech sector and all of their bloated employees hundreds. If you’re fearful about this taking place to you, at this time’s present will make it easier to get your funds ready so a layoff or recession doesn’t catch you off guard. Hiya, good day, good day and welcome to the BiggerPockets Cash podcast. My title is Mindy Jensen and becoming a member of me at this time is my fantabulous co-host, the She Wolf of Wall Avenue, Amanda Wolfe.

Amanda:
Hiya, good day. BiggerPockets has a purpose of making 1 million millionaires. You’re in the suitable place if you wish to get your monetary home so as as a result of we actually imagine monetary freedom is attainable for everybody irrespective of when or the place you’re beginning.

Mindy:
Amanda, I’m tremendous excited to have you ever becoming a member of me at this time to speak about easy methods to put together your self within the occasion of a recession or a job layoff that comes and wallops your funds or moderately easy methods to put together your self so {that a} job layoff doesn’t wall up your funds. You have got a variety of expertise with simply giving cash recommendation usually that’s rock strong. So I’m so grateful for you becoming a member of me at this time.

Amanda:
Yeah, and I’m so excited to be right here. These issues are by no means enjoyable to consider, however I do know simply how comforting having an excellent monetary basis feels. So if that is going to offer folks the little kick within the booty, they should form of set that strong basis. It makes me actually excited to speak about

Mindy:
It. At present we’re going to be speaking about boosting your emergency fund with some actionable steps that everybody can take If you happen to don’t have an emergency fund, and you’re conversant in the CNBC article that claims 44% of People can’t pay an surprising $1,000 expense. We speak about this text on a regular basis. It comes right down to being intentional. So we’re going to share ideas for how one can be intentional with constructing your emergency fund. We’re going to tackle the widespread concern. I don’t have any more money proper now. At present. We’re going that can assist you flip over these monetary stones to see what you could find in your present life and we’ll additionally speak about what do I do if I lose my job or if I’m liable to dropping my job.

Amanda:
So Mindy, that is the factor. I really feel like that is a kind of issues the place we’re simply form of getting caught up within the vernacular of one thing since you do have an emergency fund whether or not you wish to admit it or not, you simply don’t have one within the conventional sense that the remainder of us have one. So whereas I might need a selected set amount of cash parked away in a secret place that I don’t wish to contact as a result of that freaks me out not having it, you continue to have entry to money to liquid money at any given time. And I really feel prefer it’s completely not truthful to say you don’t have an emergency fund. You simply don’t have one with perhaps that particular label or it’s not packaged up the identical as the remainder of us.

Mindy:
Yeah, I do have choices accessible. I imply, first off, I’ve a bank card. So if I’m driving down the street and all 4 tires blow on the similar time, I’m not stranded and I’ve truly had a bank card since I used to be 17. My mother and father hooked me up with it as soon as I graduated highschool. They’re like, we don’t need you to be stranded on the aspect of the street. It’s been a minute since I used to be 17. I’ve by no means been stranded on the aspect of the street with 4 blown tires, however I’ve entry to a strategy to pay for these straight away as soon as I swipe that card and pay all of these 4 tires blowing without delay. By no means occurs. However as soon as I do this, I now have 30 days to determine how I’m going to pay that off. I’ve a job, I’ve investments, I’ve money in a not tremendous simply accessible, however nonetheless accessible to me inside that 30 days to repay my bank card time window. So I do have many various buckets I can pull from to fund an emergency of just about any measurement, however I don’t have a selected checking account labeled emergency fund that I by no means get entry to besides after I want cash. And I feel that that is a crucial factor to notice. So if you happen to don’t assume you might have an emergency fund, begin trying on the completely different ways in which you can cowl, let’s name it this fictitious, blowing out 4 tires suddenly. How might you pay for that? Argue

Amanda:
With you Once more, Mindy, as a result of I’m going to say {that a} bank card is just not an emergency fund. A bank card can cowl you till you might have the precise money in hand, however it’s undoubtedly not an emergency fund. And I form of assume there’s two teams of individuals right here. There are these people who they’ve entry to cash, they may have to maneuver some issues round to get entry to it, however they’ve it. It’s not like all of their fairness is of their dwelling or their automotive, and it’s going to be a very huge deal to get entry to that money. After which there’s the opposite camp of people that actually simply don’t have entry to cash, whether or not they don’t have any financial savings, they don’t have actual property investments which are bringing in further dough each month. They don’t have further money. So I feel it’s form of like two teams of individuals there. So the folks you’re speaking about are individuals who have entry to cash. They’ll use the bank card, they’ll determine it out in 30 days. Then there’s the camp of people that they don’t even have sufficient money or entry to money and placing it on a bank card is just going to additional snowball their debt. So I form of assume I needed to name that out as a result of an emergency fund for some folks, the bank card, that’s actually not going to do the job.

Mindy:
And I’m glad you stated that as a result of a bank card isn’t an emergency fund, regardless that I simply stated that I’ve a bank card. So if I’ve an emergency, I can swipe the cardboard and work out easy methods to pay for it later. I understand how I’m going to pay for it later. I’ve investments, I’ve revenue, I’ve extra revenue than I’m at present spending. So there’s a delta between how a lot is coming in and the way a lot goes out each single month. But in addition I feel that’s a very nice level. If you happen to don’t have methods to repay your bank card and I pay my bank card each month, I’m not paying 25% curiosity on my expenses from 17 months in the past. So if you happen to don’t have a strategy to pay that off each month, then completely your bank card is just not your emergency fund. It could actually cowl in case of emergency, and you then’re going to should determine it out later. However let’s speak about methods to construct up your emergency fund. For these of us who don’t have the flexibility to simply repay their bank card once they’re transferring issues round, what would your Dave Ramsey is legendary for saying, oh, I’ve a $1,000 emergency fund as child step primary, however that actually looks like that’s tremendous low.

Amanda:
Yeah, I’d say that I form of really feel like that may be a good purpose to shoot for when you have no money. However to your level, a thousand {dollars} may very well be not loads to 1 individual and may very well be a lot to a different. And there’s not a blanket reply of how a lot you want for an emergency fund. It relies on so many various components. You and I in all probability want completely different quantities, proper? A single mom of three youngsters in all probability wants a special quantity than I do. So it’s a matter of taking a look at a number of various factors in your life. So to start with, the factor that I wish to say is if you happen to had been to lose your job tomorrow, how simple would it not be so that you can get a job of comparable pay tomorrow? In case you have some tremendous area of interest job otherwise you’re tremendous govt stage who is very compensated, you’re in all probability not going to get a job subsequent month.
It’s going to be a bit little bit of an extended wait. Nevertheless, in case you are ready the place your job is a dime a dozen, you can simply go discover one thing down the road, you then in all probability might have a bit bit much less of an emergency fund, more durable job to search out, larger emergency fund, simpler job, smaller. The second huge factor is do you might have anyone else who’s financially reliant on you? Do you might have youngsters who you’re caring for? Do you might have sick mother and father who’re counting on you? These varieties of issues. In case you have folks in your life who’re financially counting on you, you in all probability wish to have a bit bit bigger of an emergency fund. If you’re sitting there, it’s simply me and me, me, it, child, that’s it. I simply should maintain me. Then you may in all probability get away with a smaller one. So there’s some components that you simply form of should bear in mind earlier than you resolve how a lot you really need.

Mindy:
I feel that’s an excellent level. What’s your job and the way simple is it so that you can get one other one? As a result of I’ve misplaced jobs previously, it’s pretty simple for me to get one other job as a result of I’ve a wide range of expertise and I’m not choosy in the case of making use of for a job. I’m hyper. Let’s see, not hyper. What’s the alternative of hyper-focused? I’m hyper unfocused, and if it sounds attention-grabbing to me, I’m making use of for it. I’ve my most important resume and I tweak it as I have to and my cowl letter to use to every particular person job and I apply to every thing. As a result of right here’s the factor, whenever you don’t have a job, no one’s calling you up. Hey, are you trying? Until you might have tremendous, tremendous, tremendous specified expertise. I really like that recommendation. How simple is it so that you can get a job and who’s counting on you if it’s simply you?
After I was 22, if I misplaced my job, I might simply transfer again in with my mother and father. Do I wish to? No, however might I? Sure. Now they dwell in an rv, so I’m not going to maneuver again in with them anyway, one piece of recommendation that I’ve seen is to cowl your largest deductible. And I feel it’s actually essential to notice that this isn’t recommendation. Have an emergency fund. You’re not going to have the ability to simply give you a quantity immediately. Oh, a thousand {dollars} sounds good. Actually have a look at all the bills in your life, all the issues which are absolute necessities. You need to have the ability to pay your hire or your mortgage. You need to have the ability to put meals on the desk. You wish to maintain the lights on. So have a look at these bills after which have a look at your different issues like what’s your largest deductible. For me, I feel it’s like $10,000. So I wish to have a minimum of $10,000 in a checking account that I can entry if I have to. We’re going to take a brief break, however after we come again, we are going to have a look at how one can calculate an excellent quantity to goal for as your emergency fund, and later we’ll share some ideas for staying marketable in your job search.

Amanda:
Welcome again to the present. Let’s have a look at easy methods to calculate how a lot you’ll want in your emergency fund.

Mindy:
Amanda, I feel this can be a actually nice level. I feel so many individuals are like, okay, I do know I want an emergency fund, however how do I work out how a lot I want?

Amanda:
So it’s going to be completely different per individual. And I truly do have a free emergency fund calculator on my web site. If you happen to go to she wolf of wall road.com/ecal calc, and it’ll be linked within the present notes beneath. So that you don’t should memorize that, however it’s going to stroll you thru the completely different eventualities to determine what your necessities are in life and the way to determine how a lot you personally are going to want. So it’ll stroll you thru completely different eventualities as a result of paying your hire and your mortgage and shopping for groceries are necessities. It’s essential be sure you come up with the money for for these issues. However ordering Postmates and going out to the membership are in all probability not going to be included in your emergency fund if you happen to’re going to tighten issues up a bit bit. So I’ve a free calculator the place you may stroll by way of that to see how a lot you’ll want, however it’s going to fluctuate per individual.

Mindy:
Amanda, let’s speak about methods to cut back your spending so that you simply don’t want as a lot in your emergency fund to start with. I do know you had a latest Instagram put up about one among your coworkers that was reducing down her grocery invoice virtually in half. I’m fascinated by this.

Amanda:
This was truly such an attention-grabbing dialog. So one among my good pals had despatched me a textual content saying, do you’re feeling like groceries are simply uncontrolled? I’m spending $600 a month proper now, and thoughts you, let’s give some context. She is one individual. She’s like in her twenties, 5 foot one, 105 kilos like moist noodle. I imply, can’t be consuming that a lot. And when she informed me she was spending 600 a month, I used to be like, there is no such thing as a means that’s how a lot mainly me and my husband are spending for the 2 of us. The place are you procuring? And she or he informed me, I’m simply going to Kroger. And I used to be like, that my good friend is your drawback. As a result of I found this subject myself a few years in the past hitting up my native jewel Oscar the place my grocery invoice was getting insane. So we truly began going to Complete Meals and our invoice dropped drastically.
She’s like, no means. I consider Complete Meals as complete paycheck, proper? Sure. That’s the form of factor that we’ve all heard. So we determined to do some check the place we in contrast an entire bunch of various grocery objects at Dealer Joe’s, Aldi, Kroger, and Albertson’s. And understand that Kroger has an umbrella of shops beneath them. Albertson’s has an umbrella of shops beneath them as effectively. So it was Dealer Joe’s, Aldi, complete Meals, Albertson’s, Kroger. We did it throughout these 5 chains, and a number of the knowledge can be very stunning to you. Aldi least expensive by far. That’s in all probability not a shock. However

Mindy:
Not all of us have Aldi close to them, and I’m one among them. Colorado doesn’t have Aldi. Hey, Aldi, if you happen to’re listening, come to Colorado.

Amanda:
No. So many individuals had been saying the identical factor. However after we did an evaluation of those prime 25 objects, as a result of what she primarily began doing was going to Dealer Joe’s and her invoice went from a $600 a month to a strong three 50 for about two months in a row. So then we had been like, let’s go on this endeavor to see is it simply the issues that perhaps you and I are shopping for? Let’s lookup the highest 25, 30 hottest objects that individuals buy at grocery shops and examine ’em throughout these 5 chains. And we discovered Aldi was the most cost effective. Then Dealer Joe’s, then Complete Meals, then Kroger, then Albertsons on most issues, most issues, after all, there are some outliers, however it was truly actually surprising. So sure, by her simply merely altering the grocery retailer, she picked her groceries up at, she saved a whole lot of {dollars} a month and she or he’s nonetheless shopping for the identical kind of stuff. So whenever you go searching for further money in your finances, typically it’s so simple as taking a step again and being like, the place am I shopping for my issues?

Mindy:
And likewise when are you procuring? Are you procuring whenever you’re hungry? Your grocery cart goes to be a lot fuller than if you happen to’re procuring whenever you eat a snack, eat a giant meal earlier than you go to the grocery retailer. I don’t really feel like purchasing for groceries when my abdomen is so full I can barely stroll. So perhaps a bit bit between abdomen. So full you may barely stroll and ravenous.

Amanda:
Or I additionally actually like the thought of doing a web-based pickup in your groceries. You possibly can see precisely how a lot you’re going to spend earlier than you even try. And I do know that some folks have an issue. I like choosing my very own avocados. Effectively, if you happen to did it for even 90% of your groceries and also you picked out your individual avocados and bananas and you realize that these are the 2 issues I’m shopping for like myself, I’m choosing myself, you can nonetheless save some huge cash when you see that complete earlier than you try, you’re like, oh, I would pull a number of issues again. So I feel to cut back your total spend, typically it’s only a matter of adjusting the best way that you simply’re doing issues at this time.

Mindy:
In order that’s attention-grabbing. Whenever you say do the web pickup, that forces you to both make a listing or undergo and particularly select objects. I really like going grocery procuring and I’m horrible at it as a result of I’m like, oh, this seems attention-grabbing. That appears attention-grabbing. If I don’t go in with an precise checklist, I come out with far more issues than I meant to. And what’s one factor, two further issues? That’s not a giant deal, however when it’s 15 further issues, there goes your grocery finances.

Amanda:
Completely, and I feel that the checklist is so essential as a result of I was the one who would go to the shop 3 times per week, simply decide a factor up right here. I had no plans for my meals, after which I let a lot meals go to waste and I used to be like, that is making me really feel dangerous as a result of I’m just like the stereotypical individual, throw within the bag of spinach away on the finish of the week. That has now gone dangerous. But in addition it simply makes me really feel dangerous as a result of I’m losing cash. I’m losing meals. I’ve acquired to get this underneath management. So making a listing was form of life-changing for me.

Mindy:
Yeah, completely. This, I do know we began speaking about emergency funds and we form of acquired off into it, however that is all a part of your emergency fund. If you’re spending $600 per week on groceries, you then’re going to want $600 per week occasions nevertheless many months you’re going to do your grocery budgets. Nevertheless many months your emergency fund goes to be, you’re going to want that a lot. However if you happen to’re solely spending $350 per week on groceries now you simply reduce your grocery wants in your emergency fund virtually in half. That’s large. So I feel it’s really easy to mindlessly spend. I do know I do it myself typically. I want I used to be excellent, however I’m not. So yeah, I actually like that. Simply audit your spending groceries, every thing, audit your spending and see what you may reduce simply by making little tweaks.

Amanda:
Completely. And even simply reevaluate. It goes past the grocery finances. I imply, we’ve undoubtedly deep dived into the groceries proper now, however there are different locations in your life too. When was the final time that you simply renegotiated your automotive insurance coverage or when was the final time you renegotiated your cable invoice? wifi. I do know calling them is a ache within the butt, however it can save you tons of cash or your automotive insurance coverage, issues like that.

Mindy:
Completely. I simply renegotiated my automotive insurance coverage a couple of 12 months in the past and I had fairly low protection. I’m an excellent driver. I don’t get into accidents which are my fault. I’ve a excessive deductible on my house owner’s coverage. However I had carried out an episode of the BiggerPockets Cash podcast the place we talked a couple of fireplace that was close to my home that took out 1100 properties, and a variety of these home costs had gone up, however their insurance coverage protection had not. If you happen to purchase a home for $500,000, you insure it for about $500,000, after which when your property values go up, how ceaselessly are you checking again in along with your insurance coverage firm to be sure you’re lined? A number of these homes had gone as much as like $750,000, however they’re nonetheless insured for 500,000. Guess what test they acquired from their insurance coverage firm when their home burned to the bottom $500,000.
So I checked out my coverage, I’m like, oh, this can be a little outdated. So I referred to as up my insurance coverage firm they usually provided to extend my protection for fairly the value. I referred to as up Liberty Mutual, I’ll completely title names. I referred to as up Liberty Mutual and I stated, Hey, a good friend simply renewed their insurance coverage with you. They acquired an umbrella coverage as effectively, and she or he stated that she had actually nice expertise. Are you able to give me a quote? They stated, positive. They checked out every thing. I acquired extra protection on my auto coverage, extra protection on my dwelling coverage, and an umbrella protection coverage for lower than I used to be paying earlier than. Your insurance coverage firm is just not going to reward your loyalty, so don’t reward your loyalty to them by staying with them at the same time as they regularly enhance your costs. One other place that I’ve saved cash is on my cellphone invoice.
Once more, each expense that you’re placing out goes to simply enhance your emergency fund want. I’ve Mint Cell. They’ve been a sponsor of the present previously, and that’s not why I selected Mint Cell. I selected Mint Cell as a result of they’re $15 a month and they’re completely very, very dependable. I’ve had nothing however nice service from Mint Cell, besides after I was in Alaska, they didn’t cowl Alaska. So undoubtedly discover the place your protection is, however why would I pay 100 {dollars} a month for a similar service that I’m getting for $15 a month? I by no means use all of my knowledge, not on my cellphone all that a lot. They do have completely different ranges of plans, and I imply the distinction between 100 {dollars} and $15 is $85. That’s some huge cash that you simply’re saving, or extra importantly, some huge cash you don’t want in your emergency fund that may very well be counted in the direction of different issues.
One thing that I’ve instructed a few occasions is canceling Amazon Prime. For me, it is rather tough to pay transport prices. It’s a psychological block. However when I’ve Amazon Prime, I am going on Amazon, I click on the factor, I put it in my cart, I ship it to myself, and it’s really easy as a result of I’m getting free transport, but when I needed to pay for transport, that might trigger me to pause. Do I actually need this factor? Can I get it nearer? Do I actually need this factor? I imply, it’s really easy to simply put it in your cart and go. So when you have the identical psychological block, I do cancel Amazon Prime, save the cash for the price of the subscription, but in addition that’ll stop you from making ridiculous purchases. If you happen to don’t have the psychological block of paying for transport. I’d recommend auditing your Amazon purchases anyway, simply to be sure you’re not mindlessly shopping for stuff. It’s really easy to purchase with Amazon, they’ve actually made it really easy to purchase. And whilst you’re auditing your Amazon Prime subscription audit, your whole subscriptions, what are you paying for? Are you continue to utilizing all of it? Amanda? I do know you probably did this with Rocket Cash, you audited your whole subscriptions.

Amanda:
Yeah, so I had truly been talking with a good friend who stated she had used Rocket Cash and was capable of finding all varieties of subscriptions that she had subscribed to that weren’t even going to her present e mail tackle, that they had been hooked as much as her mother and father, and they also had been being charged for them and she or he had by no means even observed it. So I believed, okay, I’m going to join Rocket Cash and I’m going to search out all of this more money mendacity round that I didn’t even notice I used to be losing it on. And lengthy story brief, I sadly didn’t discover any subscription. Effectively, I suppose happily and sadly, I didn’t discover any subscriptions to avoid wasting myself cash on, however the annoying factor is that Rocket Cash doesn’t audit itself. So the following month I forgot to cancel Rocket Cash after which I acquired it with their subscription charge for the month. So I’d say if you happen to’re going to make use of these subscription providers, they are often useful, however don’t neglect to cancel them. They’re not going to offer you a warning.

Mindy:
That may be a actually nice level. I’m glad you introduced that up. One other strategy to scale back your spending is to get issues without cost as an alternative of paying for them. After all, Mindy, what a no brainer. What I’m speaking about is locations like your library as an alternative of your bookstore. And sure, you wish to help your native authors and also you wish to help your favourite authors, however if you find yourself both in a layoff or in a recession or actually seeking to increase your financial savings, you may look out in your favourite authors down the street. A technique that I do that is by subscribing to Kindle Limitless. I blow by way of books left and and I don’t actually wish to purchase 500 books. I don’t have the area for them, so I’ve Kindle Limitless. However after we had been speaking about this, you had a very nice suggestion that’s even higher than Kindle Limitless.

Amanda:
It’s completely free as a result of Kindle Limitless, it’s not free, Mindy, you simply form of get to purchase in bulk.

Mindy:
It’s not free. It’s like $70 a 12 months.

Amanda:
Okay, that’s nonetheless an excellent deal if you happen to’re studying loads, not if you happen to’re studying one guide a 12 months, that’s in all probability not an excellent deal. However yeah, if you happen to’re studying loads, no, Libby to me, I used to spend a lot cash on books and I found Libby, that could be previous information to some folks, however I do know that it’s going to be new information to some, so we’re going to speak about it for a second. However Libby is the general public library, so clearly you may go in individual to your bodily public library, however typically the millennial and me doesn’t essentially wish to go do this. I wish to do every thing digitally. So it’s a digital library card. I didn’t even have to go away my sofa and I downloaded the app, it hooked me as much as my closest library, after which I get to borrow books without cost digitally like eBooks, in addition to audiobooks, which I feel lots of people don’t notice that audiobooks are included in it as effectively, however Libby is freaking so legit and it’s completely free, however you do should typically wait per week or two. So what I love to do is load up in my queue in order that I’ve some ready for me. After which yeah, you may pay actually no cash. You possibly can pay $0 in your books.

Mindy:
My favourite is to pay $0 for my books, particularly after I’m blowing by way of these books left and proper. Verify along with your native library to see which service they subscribe to. There’s Libby, L-I-B-B-Y, however there’s additionally Hoopla, H-O-O-P-L-A. So test on each of those and we’d love to listen to from you. In case you have extra methods to get free books, please share these in our Fb group or in our present notes or depart a remark. Alright, let’s rethink the thought of important objects. Your day by day espresso actually isn’t all that important, however whether it is, you can also make it at dwelling. There’s gasoline in your automotive. That’s fairly important. Goes to the membership important? In all probability not

Amanda:
Perhaps for some folks, however it’s undoubtedly a kind of issues the place it’s utterly completely subjective. It’s obligatory in case you are the bouncer on the membership and you bought to get there, proper, Mindy? So completely your necessities are going to be subjective. And I’m not the one who is like, we work so exhausting for our cash and I’m by no means going to be the individual to say, you shouldn’t go get pleasure from your fancy latte within the mornings. If that’s your pleasure, that lights up your life each morning. However when you have gotten into the behavior of I’m simply used to strolling by it and now I’m losing tons of cash, I’ve a good friend who we simply form of did a bit monetary audit for her and she or he was choosing herself up a pleasant little deal with on her stroll dwelling every single day as a result of it’s heat in Chicago now it was $9 and 50 cents. She’s like, I don’t even keep in mind what I’ve been consuming. $9 and 50 cents every single day, occasions 5. That provides up. So in case you are someone who’s struggling to fill your emergency fund and you must reduce out some cash out of your finances, simply taking a look at these small issues that do add up over time is a very great spot to begin too. And it’s not like it’s a must to do it ceaselessly, proper?

Mindy:
Effectively, and that’s an excellent level. It’s not like it’s a must to do it ceaselessly. It’s completely subjective. I really like that you simply shared that as a result of what you discover worth on Amanda Might not be one thing that I discover worth on and vice versa. I feel all of us discover worth in meals after which shelter, and that’s form of the place the lists of our similarities finish. And that’s okay. However taking a look at what you’re spending cash on can actually open up your eyes to the place issues may be reduce and the place issues can’t be reduce. I feel that’s actually, actually an excellent level. We’re going to take a very fast advert break, however after we’re again, we’re going to take a look at extra locations which you can pull cash from and methods to spice up your sellability to new employers

Amanda:
And welcome again to the present.

Mindy:
Alright, Amanda, what are some extra issues that you’d recommend folks have a look at once they’re looking for more money to spice up their emergency fund?

Amanda:
Yeah, so I feel in case you are someone who’s sitting there considering I’ve nowhere to drag cash from, I feel that one factor that may be very, very useful is doing a no spend month. Have you ever ever carried out a kind of earlier than, Mindy?

Mindy:
I’ve carried out no spend month challenges in the direction of the tip of the month I form of fall off, however to start with of the month, it’s really easy to be like, no, I’m not going to do that. I’m not going to do that. If a no spend month doesn’t work, attempt a no spend week, attempt a no spend half month each time you don’t spend cash on frivolous issues that you simply actually don’t want. That’s more cash which you can put into your emergency fund.

Amanda:
Completely. And I wish to caveat it by saying no spend month doesn’t actually imply don’t spend any cash. You’re nonetheless paying your payments. Please don’t default in your mortgage or get kicked out of your residence or have your cellphone turned off. You’re nonetheless paying your obligatory payments and also you’re nonetheless shopping for groceries. You’re simply being extremely intentional round how you’re spending your cash. So you aren’t ordering out Postmates for the month. You aren’t procuring and making stops at Sephora or Zara or no matter in your means dwelling from work. You aren’t spending something past the requirements. And it may be actually useful to determine the locations in your life that you simply’ve simply been filling this void and spending cash as a result of it’s snug or since you’re bored or as a result of one thing else doesn’t really feel good and procuring makes you’re feeling good or no matter your kryptonite is.
However it causes you to do a variety of self-reflection and deal with the issues that you simply really need in life. I feel it’s an incredible reset. And once more, what we had been speaking about earlier, my good friend who was spending the $9 and 54 cents, it was very certain quantity every single day she did the no spend month and now she’s not even tempted to cease and do these items. She’s realized like, wow, I’ve a lot more cash on the finish of the month and now I can use it in the direction of that aircraft ticket to go go to my good friend or no matter. Different issues are extra essential to you. So it’s a very nice strategy to reset.

Mindy:
I really like that it’s a reset. It’s not a totally altering your complete life ceaselessly, though it might have some future penalties. So my good friend Angela Mond began the Ladies’s Private Finance Fb group and she or he began off having a no spend month as a result of she needed to get that reset and it’s now been seven years since she has purchased any garments. Now that doesn’t imply she hasn’t gotten any garments that had been new to her. We did a clothes swap at my coworking area. We had 12 or 15 girls herald luggage of garments. I took all of the leftovers after everyone picked by way of every thing. I took 168 kilos of clothes to my native homeless shelter after every thing was carried out. So there’s plenty of inventive methods to do away with issues, purchase new issues all with out spending, simply attain out to your native group and begin brainstorming concepts to haven’t any spend months, haven’t any spend on particular objects, haven’t any spend on something further above the requirements. However yeah, like Amanda stated, undoubtedly pay a mortgage.

Amanda:
Yeah, don’t default on that. And one man or girl’s trash is one other girl’s treasure. So I really like the thought of the swaps too. It’s such as you get one thing new and also you additionally offload muddle from your individual dwelling.

Mindy:
Earlier than we get into some job ideas, let’s have a look at different methods to avoid wasting. One other strategy to save is to cease making further funds. If you happen to’re making further funds in your mortgage, further funds in your automotive, further funds on something, pull again on that and both use that cash to fund your emergency fund or use that cash to place it right into a excessive yield financial savings account to have entry to it. You possibly can at all times make these further funds later. And once more, this isn’t simply common recommendation. That is funding your emergency fund and making ready for a possible layoff recommendation.

Amanda:
Completely. And I’d say it extends past even simply the additional mortgage funds. It could be further even bank card debt cost that you simply’re making, which I do know sounds counterintuitive to lots of people. Like if I’m paying 30% curiosity, I should be dumping all of my cash towards that. And I’d argue that positive, that is essential to prioritize, however you must have a bit bit of money in case one thing occurs. As a result of to our level, the start, your bank card is actually not an emergency fund. So if you happen to’re ready the place you might have some bank card debt, you wish to have some money on the aspect simply in case. After which when you’ve constructed that up, now go and hammer that dwelling. I’d say it’s further funds actually on something. Your emergency fund ought to be your primary monetary precedence

Mindy:
Ever. Sure. And once more, tagging onto that, your 401k, when you have contributions to your 401k above, no matter you’re getting as a match out of your firm, contemplate pulling again on these as effectively as a result of that may go once more into your emergency fund, into serving to you put together for a layoff and you’ll at all times make extra contributions down the street. And also you’re proper, that is completely counterintuitive to all of the issues that we usually say, however this can be a completely different time interval that we’re making ready for Amanda. These are nice ideas and I’m tremendous excited to share them with our listeners. However I’d additionally like to listen to from our listeners, what ideas do you might have for enhancing your emergency fund reducing bills so as to increase your emergency fund? Please give us some notes within the Fb group, which is fb.com/teams/bp cash or be at liberty to e mail me immediately [email protected]. Alright, we’ve got teased that we’re going to look into the job market and easy methods to put together your self so as to begin discovering a brand new job. Amanda, what would you say is the primary factor folks ought to be doing when they’re making ready for a brand new job? I feel

Amanda:
The primary factor is to be tremendous sensible in how you’re making use of. So I’ve shared earlier than that my greatest monetary mistake I’ve ever made in my life that I, up up to now, hopefully it’s a ceaselessly factor, however my primary mistake is staying on the similar firm for means too lengthy. So I stayed at my final firm for 12 years and knowledge reveals that those that keep at their similar firm for greater than two years find yourself paid much less, like one million {dollars} much less over their lifetime. So for me, it wasn’t essentially that I wasn’t prepared to go away the corporate. I had a freaking exhausting time even getting an interview. So for a strong two years, I used to be making use of to locations and never even getting anyone to reply again to me. And it wasn’t till I employed an precise resume author to put in writing my resume that I then began getting callbacks on virtually each single one. And that’s after I realized my resume was not even getting in entrance of people. It was not even passing the pc. So what was causing me really feel so dangerous about myself? Like, wow, I’ve no expertise. No person is focused on hiring me. Really wasn’t true in any respect. I simply wasn’t enjoying the sport. Proper? So I feel the primary factor is earlier than you pour your coronary heart and soul into every thing is to use actually neatly and acknowledge that there are a variety of computer systems getting used to research these resumes within the first place.

Mindy:
Yeah, episode 110 of the BiggerPockets Cash podcast, we interviewed a purple life and she or he talked about how she job hopped to I feel double or triple her authentic wage as a result of the brand new rent finances is way bigger than the retention finances. I don’t have to persuade you to remain, you’re already right here

Amanda:
Completely. However it may be exhausting to get these jobs.

Mindy:
Yeah, it may be. Having knowledgeable resume author may be completely the distinction between a resume that will get learn and a resume that will get tossed within the bin, and these are expertise that someone else has that you could be not. If you’re superior at writing resumes, then nice, write your individual. However chances are high actually good that you simply’re not superior at writing your resumes. I’ve a good friend Alexa, she has a profession counseling firm. It’s referred to as Loken Careers, that’s L-O-Ok-E-N careers.com. And she or he is completely superior at getting you ready in your interview, getting your resume excellent so as to get these remembers and get these interviews within the first place. It’s one factor to have nice expertise, however it’s one other factor to have an organization truly name you again. So I really like that.

Amanda:
Completely. And simply to showcase your self,

Mindy:
Yeah, you wish to showcase your expertise. And one other tip that I’ve for you is to maintain your resume up to date. You’re at present at a job that you simply’ve been at for 5 years. Is your resume reflecting that you simply’ve been there for 5 years? I do know mine isn’t. Mine doesn’t replicate all of the issues that I’ve carried out at BiggerPockets, however I’m not searching for a job. If you’re searching for a job otherwise you’re occupied with searching for a job, now could be the time to begin occupied with all the issues that you’ve got been doing at your organization. What have you ever improved? What processes have you ever made higher? How have you ever saved the corporate cash? Something that’s tangible, that’s exhausting, numbers and information which you can put into your resume is completely going to make you look higher. So take inventory of your expertise, make a listing of your exhausting expertise and your gentle expertise and maintain your whole expertise updated.
If a brand new model of no matter it’s you do, be sure you know that. So that you’re not saying, oh, you’re on Microsoft. I don’t even know what Microsoft’s on now I do know Microsoft 3.1. Effectively nice. That’s not going that can assist you in any respect now as a result of a bit completely different and the perfect time to do this can be a whilst you nonetheless have a job. So you may undergo your whole previous emails and undergo the corporate, your whole initiatives and all of every thing and Oh yeah, I forgot that I did that undertaking and I saved the corporate one million {dollars}. That’s a tangible truth. You wish to maintain these items in your resume updated always as a result of whenever you not have entry to the corporate recordsdata, you would possibly neglect all of the stuff you’ve carried out or a number of the stuff you’ve carried out.

Amanda:
Completely. And we are likely to, after we are panicked, we are likely to make dangerous choices and we’ve got short-term loss, proper? So that you won’t keep in mind all of the superb stuff you’ve carried out whenever you’re in a panic like, oh crap, I’ve misplaced my job. Now I don’t have an emergency fund. Hopefully you’ll by the point you’re carried out with the episode right here, however hopefully you’ll have some steps in place in order that you’ll have one as soon as this episode is completed. However doing it whenever you’re not panicked and determined is a very nice time to replace your resume. And I’d additionally argue that that can be the time that you simply wish to do some market analysis evaluation too, to see are you even being paid pretty within the job you’re in now that you simply could be sitting right here considering, I’m snug, I’m not going wherever. However if you happen to discover out that persons are being paid double at your whole neighboring corporations which may gentle a special fireplace underneath your booty to get transferring.

Mindy:
I completely love that. That may be a nice level. And it’s at all times good to know what your market worth is, Amanda, the place can I search for my market worth?

Amanda:
So I feel that that was one actually complicated piece for me is after I was making use of to jobs is I don’t even know what wage to ask for. I don’t know the place to search out this info. However fortunately an entire bunch of states now are required to state their wage vary inside the precise job description. So what I feel is a very nice thought is that if you don’t dwell in a state the place that’s required to lookup an identical state, similar-ish state that does have it required and see what these jobs are paying in these states. So for instance, if you happen to dwell in Iowa, don’t go and have a look at New York Metropolis’s pay vary. Perhaps you’re going to take a look at Ohio, which a few these cities require wage transparency within the job description. So you may simply do a fast Google search of what states require wage transparency within the job description and see what these are. However entering into armed with that info, to start with, simply understanding it within the first place, however then when you truly get a callback from that resume, typically one of many first questions they ask you is What are you searching for by way of wage? You wish to just remember to’re not underselling your self, particularly if you happen to’ve been in a job for a very long time, you could be so underpaid and never even notice it.

Mindy:
Yeah, if you happen to’ve been in a job for an excellent very long time, you virtually assured are underpaid. So not solely have a look at what different jobs can be found, try Glassdoor and see what different corporations are paying for a similar job as effectively.

Amanda:
Completely. And one among my favourite issues is also to slip into folks’s dms on LinkedIn and see if they really like the corporate they’re working at, as a result of there’s nothing worse than additionally doing all of this tough work, attending to an organization and realizing the tradition is horrible, the administration is disorganized and it’s only a dumpster fireplace. So I feel that simply even listening to from precise individuals who work there, Hey, do you want working there? Is large. Is large. It’s not simply essentially a disgruntled worker who’s writing a foul evaluation concerning the firm, however people who find themselves at present actively working there. Do you prefer it or not? As a result of it might prevent a variety of time and potential heartache if you happen to don’t find yourself getting truly employed there.

Mindy:
I had an interview as soon as the place the individual that was interviewing me, I requested her, do you want your job? She was giving off, I hate my job vibes. And she or he informed me level clean, no.

Amanda:
And now

Mindy:
I imply why leap out of the firing pan into the fireplace? If you’re interviewing at an organization the place everyone seems sad, undoubtedly take a deep dive into their LinkedIn staff and take a peek. Ask them. I imply the worst factor is that they don’t even reply high quality, no matter. However you may get a variety of actually helpful suggestions from staff once they know that they’re attempting to stop you from doing the identical factor that they did. Perhaps they had been searching for a brand new job too.

Amanda:
Completely. Completely. And I feel that additionally if you find yourself reaching out to people who find themselves even at an identical stage, you’ll have a greater probability of getting a response again than reaching out to someone in HR the place they’re simply getting a whole lot of messages a day or reaching out to an govt the place they’re in all probability getting hit up on a regular basis. Simply you’re your not that we aren’t. Simply your common on a regular basis one who’s going to work might be not getting a whole lot of LinkedIn messages so you might have the next probability of being seen too.

Mindy:
Alright, Amanda, thanks a lot for becoming a member of me at this time. This was tremendous enjoyable to recap, recovered methods to avoid wasting locations you may search for to search out new funds to place into your emergency fund. We’ve given recommendation to probably cease paying further or cease contributing further to your 401k above the match and given you some ideas for easy methods to get organized for a brand new job search, we might love to listen to from you. In case you have any further ideas, please share them in our Fb group, which may be discovered at fb.com/teams/bp cash. Amanda gave an excellent emergency fund calculator. It’s discovered at she wolf of wall road.com/e calc. All of those hyperlinks shall be present in our present notes and we respect you listening. That wraps up this episode of the BiggerPockets Cash Podcast. I’m Mindy Jensen and she or he is the Wolf of Wall Avenue, Amanda Wolf. We’re saying Alou Canoe

Outro:
BiggerPockets Cash was created by Mindy Jensen and Scott Trench. This episode was produced by Eric Knutson, copywriting by Calico Content material, post-production by Exodus Media and Cris Mikkan. Thanks for listening.

David Greene:
This is the BiggerPockets Podcast show, 9 93. What’s going on everyone? Welcome to the BiggerPockets podcast. I am your host, David Green. Here today with my co-host spazzing out on YouTube. Rob Abola. How’s it going, Rob?

Rob:
Oh, it is warm outside. A tree fell in front of my house. We’re dealing with wreckage here in Houston, Texas, but I’ve got a lot to be thankful for because we’ve got AC and it’s okay.

David Greene:
We got no food, we got no booze, and our pet’s heads are falling off. But in today’s episode of Seeing Green, we’re going to be answering your questions, not bringing you our problems. We actually have a really fun show today with lots of laughs and lots of information being shared. We cover if flipping works in expensive markets like mine in the Bay Area from a caller who lives in the same city where I’m recording this podcast right now. How to decide the responsibilities in a partnership on how to structure a house hack whether someone should get into commercial real estate, stay in residential real estate or blend the two. And if you’ve never heard of a cashflow casserole, you want to make sure you listen all the way to the end because you’re going to be fascinated by the strategy as well as common colloquialisms that are often messed up in the world of finance and real estate.

David Greene:
You’re going to laugh, you’re going to cry, you’re going to learn. Welcome Toine Green. Alright, our first question today comes from David Moranis in Brentwood. Ooh, is this to say Brentwood that I am recording in right now or is this Southern California Brentwood where Rob and all his posh friends used to play croquet and practice their putting. We’ll never know. Alright, a little background on David before we get into his question. He currently owns a short-term rental in Davenport, Florida and a long-term rental in New Braunfels, Texas, as well as a primary residence in Brentwood, still undetermined, which Brentwood as an accredit investor. He also is in three syndications, San Jose, Texas, and Florida. Would like to continue investing in Texas and Florida and maybe Tennessee, which are three states that I recommended five years ago everybody invested in. If you listened to my advice, you probably did good with the goal of increasing his cashflow. Appreciation from his other investments has been great so far. No experience in flipping but has done do it yourself projects on previous primary residences. He works in project management for his W2 and has experience working with contractors hopes to leverage his mechanical engineering background and experience to build a small flipping business. Alright, let’s get to David’s question.

David Maranhas :
Hey David, this is David from your hometown of Brentwood. My question is about flipping the Bay Area or maybe Sacramento as a means of supplementing my W2 income profits. We put into down payments for buy and holds outside of state. Since I am terrified of being a landlord here in California, I had been thinking of an STR or small multifamily in Orlando and I am pre-approved through the one brokerage for a conventional loan, but I’ve been struggling to find deals, so I’d like to get a flipping side hustle, going to increase my cash reserves. I am a super commuter, so would really only be able to physically visit sites on weekends a majority of the time. So what do you think is flipping in the Bay Area working during these times? Thank you Sir BP podcast and your books have helped educate me over the past few years, but I need to get my butt in motion and grow my portfolio so I can retire ASAP and give back to others. Thanks for your help. Appreciate you. Bye.

David Greene:
All right, David, you know how to get on scene green. Well done. You’ve answered the question. You are in my hometown of Brentwood crazy that you live here. You got my book in the background, which looks like it was strategically moved to show long distance real estate investing in the center shot of the camera. You got some of Brandon’s books there. I see look like they’re kind of playing second fiddle to mine, which was also a great way to cater to my ego. It felt like looking at an audition for a role in a movie that was so good. All right, what advice do we have for David here who wants to get out of the rat race and start giving back?

Rob:
Okay, so the question is, is Bay area flipping working these days? I think that is always the question. You are the NorCal guy that specializes in hella real estate, as you all say. I think this is the same question that’s asked every year in San Francisco.

David Greene:
Yes, everyone does ask this question is impossible to invest in Northern California real estate and every year it just gets better and better and harder and harder. That’s what’s going to be tough about flipping out here. If you’re trying to flip locally, David, you’re just going under costs crazy competition. You’ve got legit full-time flippers that make an entire business out of this that spend massive amounts of money mailing people because the majority of homeowners out here know what their house is worth. You’re not going to bump into the kind of people who just want to get the things sold easy. They’ve been hearing everyone talk about how expensive real estate is. So if you’re going to flip, I would not look away from doing it here. If you come across an opportunity, absolutely take it, but you’re probably going to have to put the majority of your efforts in an out of state market somewhere different to get a machine going.

David Greene:
I would recommend somewhere in the Midwest. I think more Californians are going to be moving there. I think more Americans are going to be moving there. As you see less and less affordability through rising energy costs, food costs, housing costs, everything. I think you’re going to get more and more people that move into some of those cheaper markets and because the margins are thinner, you don’t have as many of the big boys that are competing over there. You still got a decent chance to turn a profit. You just got to kind of do it at volume, which if you have a mechanical engineering background, you’re a systems guy that gives you an advantage when you’re trying to do it at volume. Rob, what do you think?

Rob:
I don’t know. Yes and no. I mean I would say that the Midwest could still be competitive because there are a lot of people that don’t have high budgets that all they can afford is that entry level flip where they make 10 to 20 5K. I think that the San Francisco area is also very competitive, but I also think it’s also weeds out a lot of people that try to get into it. So ultimately I think, I don’t know. I mean I don’t have the data to support if one is more competitive than the other. I would ultimately say that it comes down to how deep is he buying As our friend Henry Washington would say, how deep of a discount is he getting on that property? You said David yourself that it’s much harder to get these deeply discounted houses out there. The only thing that gives me hesitation is that if you’re flipping in the Bay Area, we’re talking about a very expensive first project, first flip, first brrrr, whatever it is.

Rob:
So to kind of get started in the flipping world in the Bay Area feels a bit risky if you don’t really have much of a foundation doing any flips at all. Many people have done it, many people have done it successfully for that reason. I think I would agree with maybe trying to start in a lower priced market, maybe some of the suburbs, maybe outside of sort of the prime area of the Bay Area or the Midwest, but I mean I just kind of think it’s how good of a deal did he get on the property? If he got a really good deal, then yes, a flip is going to work. My hesitation is it’s expensive, thus very risky for a first time flip.

David Greene:
I like the idea for you, David, of finding a wholesaler two, maybe three that is kind of newer in the business and doesn’t have a huge buyer list built out that is going to feed everything to you first. You’re going to have to get out there and network to find that person or a couple of them. But if you get someone who’s trying to break into the wholesaling model and they actually get a seller on the line who’s got something to sell, and they’ll come to you with it first and you can give an offer that they’ll take where they make some money and you feel pretty good about it and you’re not competing with nine other people and having to increase your bid to get this property that you don’t even know if you can flip or not, and they just feed you a steady stream of these projects and you can have two, three, maybe four going on at a time.

David Greene:
You’ve got a decent chunk of capital that you can use to fund these, especially if you don’t have to use hard money right away. I kind of like the idea of you cutting your chops there, figuring it out and putting a system together and hey, if you come across something in Northern California to flip, we’ve got some great bridge products that we can use. So you can put little money into the deal to be able to flip it, but don’t make it your bread and butter in a competitive market where you could lose everything on one deal and put yourself back. Diversify that. Try to get some base hits to mix in with those home runs.

Rob:
That’s how I feel too. I think it’s just kind of one of those where I’m like, well, he didn’t tell us how much capital he had, so my answer’s going to depend on, I mean, he’s a mechanical engineer, so he probably a six figure earner doing pretty well. It’s my guess, so assumption of course, but ultimately I think if he’s got a lot of capital, it’s one of those things where he can enter it and have some room for error. Maybe he can go over budget, maybe make a little less. If he’s coming in with 50 grand, then he should not be touching the Bay area. So I think my point of view is going to really depend on if you have a little bit of capital, don’t even touch it. I would not go the bridge loan route or the credit card route of just trying to get something done for your first deal.

Rob:
As much as I love take action spirit, I would say go into some of these lower price markets and try that. Especially because he said he has no flipping experience, but he’s done several DIY projects, which is sort of congruent to what he’s doing, but it’s still not flipping a house. But if he’s got a lot of capital, then I would say maybe find someone in the Bay area market, find a mentor, go to a meetup partner with someone who’s doing it, say, Hey, for this first one, what if I pitch in half the money and I shadow you? And that way he can actually transition into this. Not so he just said he can’t go every day. He’s a very long commuter, he could only go on weekends. So maybe what he offers this experienced flipper is, Hey, I’ve got capital, I’ll put capital into this. I can show up on weekends to walk the property and make sure that the progress is coming along and there could be a partnership that he strikes up. I think I’d feel more comfortable with him trying to do that versus trying to just jump right into potentially six figure or multi-six figure flip in the Bay area.

David Greene:
Yeah, same thing. I was thinking if you can start off a little bit more consistently and smaller, diversify your risk and mix in some of the bigger ones when you get some confidence going, I think that’s a good strategy.

Rob:
Yeah, yeah, yeah, I feel better about that.

David Greene:
Alright, thank you David. Great question. Let us know how it goes. We want to hear from you again. Alright, coming up we have a question about de-leveraging risk while also growing a portfolio and we have a live guest coming up that wants to see if staying the course in residential real estate or going bigger in commercial is the right call. So stick around. All right, well come back. We have a few more questions before our residential commercial eval. The next question comes from Brian Sparger.

Rob:
Ooh, funny side note about Brian. He wants his username to be pretentious platypus on BiggerPockets. If the admins will allow it, we’ll make the call. We’ll see what we can do for you, Brian.

David Greene:
All right. Brian says, I am 44 and stuck between the idea of de-risking by paying things off and trying to grow my portfolio with the market where it’s at. I’m also struggling with how best to grow if I go that route. I only do long-term rentals. I have a portfolio that combine stands at about 29% loan to value. All of my notes are 30 year fixed rates. I have one class, some class Bs and a Class C. All my properties are profitable except one of the Class Bs where it breaks even. But I like the area because it’s tied to government jobs and it’s stable and appreciating well. I expect it to retain steady growth. I also have a savings rate that allows me to put about 140,000 a year to towards this. Any advices. Welcome. Thank you. All right, Rob, so Brian here has $140,000 a year that he’s able to save. He’s got a portfolio of long-term rentals and he doesn’t know if he should go big and scale or if he should pay off some of his existing properties to get them to cashflow. What do you

Rob:
Think? I mean, if I’m reading this correctly, he says that his current portfolio as it stands as a 29.2% LTV, meaning he’s paid off 70% of the total mortgages of his portfolio. That’s pretty good. I mean, as much as I’d love the idea of paying off properties, I would say given his age, he’s 44, he’s kind of right in the mid stretch of this real estate thing. He’s got a lot of time to still build a portfolio, pay things off. I think that will come pretty quickly. At this point, he’s probably attacking principal pretty aggressively already as it stands because he only has a 29.2% LTV. So I would say with that in mind, I think I’m okay with him just buying more properties and stacking equity, leaving his equity that’s in there, not touching it. He’s got some good low interest rates, maybe collect a couple more properties for a few more years and then we can work on attacking that principle.

David Greene:
Well, he owes about a million dollars in debt, so it would take him probably seven and a half or so years. Yeah, maybe, yeah, six or seven years to pay this thing off. But of all that debt, only 230,000 of it is at 6.75%. The rest of it is very low, 3.25 and lower. So he’s not going to save himself a ton of interest by paying those off. The only one I would even consider paying off is that 6.75%, which he could do in about two years.

Rob:
But that one’s cashflow positive. He said that the 180 7 K one, that’s the only one that’s breakeven, I guess.

David Greene:
Yeah, they’re all cashflow positive except for the one.

Rob:
Yeah. Yeah. So I would say let those cook and maybe just buy another properties using the same strategy that he used to get to this meaning maybe he puts down a little bit more so that he can actually cashflow and then once interest rates come down in a few years or whatever, refi, get his high interest rates from today down and then have this really LTV light portfolio. I like that. I think he’s in a pretty good position.

David Greene:
Brian, you could put 50% down and buy properties for about 280 $300,000 with this $140,000 that you’re able to save and buy one a year like that for the next 5, 6, 7, 8 years and just wait and see. Like Rob said, what rates do, if rates go down, you refinance the stuff you bought until lower rates. If they don’t go down, you still have money that you can put down, which allows you to buy cashflowing real estate that other people can’t. There’s going to be less competition. You’re in a very, very solid position here. Just keep making progress. Just don’t stop. Just keep hitting these base hits over the next 10 years and you’re going to be in a great position.

Rob:
He is in that dream scenario, man. I mean, I guess the dream scenario is to have everything paid off, but at 44 to have 70% of your portfolio paid off, that’s insane. So I would say keep scaling accordingly. Don’t go crazy, slow and steady. Use your savings wisely and enjoy your 29.2% LTV. I think it’s such a beautiful thing.

David Greene:
Alright, our next question comes from Harrison in Milwaukee. Hi David and Rob. My dad and I are thinking about going in on a duplex in Milwaukee together. We contribute equally for the down payment and own the property. 50 50. He’s currently house hacking his duplex and I would be house hacking this duplex, but we would own it together. I don’t know how to structure this partnership fairly. How do most partnerships split the responsibilities and the costs? Also, do you have any recommendations for how to purchase the property? We want to put as little down as possible. Thank you both for your wisdom and your time, Harrison. Alright. When it comes to the financing for this bad boy, Harrison, if you’re trying to put as little money down as possible, you’re going to want to use a conventional loan. You can do FHA for three and a half percent down or you could do a conventional loan for 3% down in most cases.

David Greene:
That’s usually the better option. All you need to do for that is consult with a loan officer. You need to tell a loan officer, ideally a mortgage broker, Hey, here’s the situation I’m in, how do we have to structure this? And they’re going to tell you one of you has to be untitled. The other one can be added later. One of you has to be on title. The other one can’t be added later. Both of you’re going to have to be on the loan. They will check with the underwriters and find out how the loan needs to be structured and the title for the property can be taken as far as the plan for owning the duplex, which I think was probably the gist of your question. Rob, do you have any ideas on how they can structure a partnership where they both own a property but one of them is living in it?

Rob:
Yeah, this one is pretty nuanced. I think if they’re going to own it 50 50, then the cleanest way would be for Harrison to kind of pay the entity of Harrison and Harrison and his dad’s entity, we’ll call it Sun and Co LLC, pay Sun and Co LLC rent to get to live in the property. That feels like it would be the cleanest.

David Greene:
So we like the idea of buying an investment property that’s not a primary residence and owning an entity and then paying rent to the entity. That’d be the cleanest way. What you just said, Rob, I think they might run into a problem if they have to get a primary residence loan. You can no longer purchase it in the name of an entity to be a primary residence. So in order to try to maintain the spirit of what you’re saying and also holding legal compliance, what I’m thinking, and I’ve never had to answer this before, is that rather than owning it in an entity, they own it in the name of whoever has to buy it based on what the loan officer tells them the rules are, but they open a bank account, they each contribute an equal amount to that bank account, say $10,000 each. So they start with $20,000 in that account. Then the mortgage comes out of that account as well as all the expenses for the property and the rent goes into that account that Harrison’s going to pay and that the tenant of the other unit is going to pay. So they’re each going to pay market rent to this account?

Rob:
Correct. Got it.

David Greene:
Now Harrison’s contribution to the account, half of that will be his. So if the property cash flows positively, Harrison will still be getting half of that positive cash flow out of the account, but he will be paying money into it as a tenant. So he’s sort of in a way that account functions like the entity that you were saying and Harrison is paying money into it as a tenant the way that you were saying. Does that make sense?

Rob:
It does, yeah. Yeah, so basically just it’s more of a personal bank account versus like a business bank account and they’re putting all their expenses in it and then taking profits 50 50 and basically Harrison is just a tenant sort of this

David Greene:
House. That’s it. He’s a tenant in that sense, even though he’s on title as owning it, he pays his rent into this shared account they have of which Harrison owns half of it. The other tenant’s full rent goes into that same account. When there’s expenses for the property, they come out of that account. If the property sells, they split the money that’s in the account. They also split the equity that comes their way from escrow after it closes. So Harrison becomes part tenant and part owner. Well, it’s scary. We’ve never had to work this out, right?

Rob:
Yeah, he is living as his primary. He’s living in it as a primary, as a tenant. So I don’t talk to your loan officer. How about that?

David Greene:
Another way could be Harrison buys it completely himself, gets some type of, see I want to say gets a gift letter from his dad, but now I don’t know if he can do that if his dad’s also going to own part of the property. So you could say we’re like, I’m going to give away 50% of the equity in the property to the person who gave me 50% of the down payment, but then I myself will be responsible for all of the repairs and I will be responsible for all of the expenses. That’s another way that this could be structured where Harrison buys it and he’s on title, but he gives his dad half of the equity in exchange for half of the down payment. All that has to be disclosed to the lender to make sure that they set that up legally and then when they sell the property, dad gets half of the profit. But Harrison was responsible for all of the expenses during the time that he lived in it.

Rob:
Yeah, I guess I think the only weird part is when they go to sell it, Harrison wouldn’t have to pay capital gains because he lived in it for two out of the five years, but then his dad would have to pay capital gains. He didn’t live in it

David Greene:
Most likely.

Rob:
Yes. So it’s kind of this really weird trying to make an investment property work as a residential set up and vice versa and have your cake and eat it too. So I would just say be careful. Talk to your loan officer, see what they say. There’s absolutely a way to do it. I think David, the way you said it is what feels the most correct, but everyone’s got their own set of lending guidelines, so make sure you connect with the lender that understands real estate investing, house hacking, and can guide you more accurately.

David Greene:
Alright, getting into the next section. This is where Rob and I like to review YouTube comments from previous shows. Sometimes we get into BiggerPockets forum questions or even reviews from Spotify or Apple podcasts. Today’s YouTube comments come out of episode 9 85 where we had lots of great comments from some road islanders chiming in and people sharing their situations. You want to take the first one, Rob?

Rob:
Sure. Okay. So SLE says, what I like about you guys and your show is that every time I watch it, I feel smarter and wiser. Thanks for making me better. I have not started my real estate as an investor, but praying that 2025 will be the year just lining up all my ducks in the middle of the road while traffic is moving as the ducks get ready to jump in the water full of crocodiles in Florida. Laughy cry face emoji. Hold on. Is it ducks in a road? It’s not that right.

David Greene:
Ducks in a row. Okay,

Rob:
Good. I was like uhoh, I’ve been saying it wrong my whole life and then he created a whole analogy out of it. So maybe we just rebranded to ducks in a road.

David Greene:
I do find it hilarious that there are things people could go their whole life thinking or what people say and then you’re like 34 years old before you find out that isn’t what people actually meant. You have a really funny one of these and we talked about this in Cabo Robb.

Rob:
I think so. So brass tax is not TAX, it’s not like a tax on brass. It’s like T-A-C-K-S getting down to brass tacks. That’s one of them. What is that obvious to you?

David Greene:
How old were you when you realized that it wasn’t a tax on your brass

Rob:
This morning? I was like looking. I see. I’m like what is this brass ax? Why do I always have to

David Greene:
That’s good. That’s really good. I remember there was an age where I learned that it wasn’t French benefits, it was fringe benefits.

Rob:
Okay, that’s a good

David Greene:
One. I don’t know how it was always pronounced like French benefits.

Rob:
It’s for all intense and purposes, not all intensive purposes. That’s a pretty good one. Good. Come on. I’m not alone here. I’m not alone. Hey, for all intensive purposes, that purpose is very intense.

David Greene:
Yep. It makes intense sex. All right. Thank you very much for sharing this.

Rob:
We appreciate you.

David Greene:
All right, coming up we have a live guest who’s going to be joining us with a question about staying the course in small multifamily for a million dollar purchase price or going bigger in commercial real estate and what the best route to take is. So stay tuned as we get into the real estate weeds on this one and welcome back Mark. Welcome to the BiggerPockets podcast. Mark here was on episode 7 47 where he was on scene green and asked some questions about residential versus commercial real estate. Mark, I understand you’ve had a few changes in your situation and you want to get some updated advice. So first off, welcome to the show. Second, tell us what we can do to help what’s been changed.

Mark:
Thanks for having me. So what’s changed over the last about year, year and a half? So originally I asked the question, we only had about a hundred thousand in cash. Since then we’ve bumped up to about 300,000 just being able to say save low cost of living with the house hack and also a little bit of an inheritance and our equity has grown in our first two properties. We’re sitting at about 500,000 in equity right now between two duplexes as well. So looking to see, our plan was to use the cash that we’ve accumulated to purchase a four unit property, which would be about a million dollars in my area, and then possibly using the equity down the road after that one is stabilized using some of the equity in one of the properties to purchase another four unit. And I actually just listened to, I believe it was episode 9 85 that just came out where you and Rob discussed exactly that as far as using how you guys feel as far as using HELOC from a rental, buying another property. So I actually, funny enough, I just kind of got your perspectives on that as well.

David Greene:
Okay, so first off, there’s some congratulations due here. You’ve increased your cash by how much? It’s

Rob:
A lot. 200

Mark:
K, 200 k. I can comfortably say that it’s mostly my wife and she makes a bit more than me and again, our expenses are just really, really low.

Rob:
That’s still awesome though. I mean that’s a

David Greene:
Lot. Yeah, that needs to be highlighted. There’s a benefit to keeping your expenses low. It’s not easy to do. It’s kind of like Rob’s haircut looking like it does every single day. He doesn’t just wake up like that. It takes some effort. Keeping your expenses low is not easy so congratulations there. Also staying on the path of wanting to buy more real estate, so making more money and saving more money, that is in my mind the best strategy to take. If you’re trying to build a portfolio, you’re investing money that you’ve made, you’re not trying to creatively come up with money you don’t have and shift equity around that just becomes more risky than real estate investing needs to be. It’s already a risky investing class. So several things you’ve done well there, mark. Congratulations. You have the goal I’m assuming here of scaling. That’s what we’re talking about today, right?

Mark:
Correct. But I think I’d like to keep it within the self-managing I kind of realm. I don’t really see myself as like a Brian Burke or one of these guys for thousands of units, just kind of keeping it within house. So scaling but nothing too crazy. I don’t feel that I need to go to a meetup and say I have hundreds of doors or anything like that.

Rob:
Sure, sure. I have a question. What does scaling mean to you? Obviously maybe that does mean more doors, but when you think of scaling for your ideal scenario, is scaling, meaning increasing your cashflow or increasing the size of your portfolio equity, what is it that you’re actually trying to attack right now?

Mark:
So I think scaling to me because finding a hard number. I know a lot of these people, they know their expenses, they know exactly how much you’re spending per year. Our situation will change over the next couple of years with kids. We’re going to finally stop house hacking after five years, so I know that’ll be a fluid number. Scaling to me means the properties are self-sufficient so that they are able to basically, I don’t need to take any of my money and put it into it. I have enough, let’s say I have enough properties that if four of ’em are doing well and one has a large X expense that year, I can just kind of move money around. It pays for itself. That’s one part of scaling. The other part of scaling to me is I’m going to be retiring at 55 from a government job and keeping me busy enough to stay busy while I’ll be retired.

Mark:
I won’t be working a government job anymore, but then I’ll still be involved in the day-to-day. I could step away for a week or two to travel, but it does keep me somewhat busy kind of either managing the managers or just doing things here or there. I know that’s not a specific answer, but just kind of keeping me busy enough to keep me stimulated but not so busy that I’m drowning in it and it’s I’ve just bought myself another job where I’m working 40, 50 hours a week on my portfolio. That’s what scaling means to me.

Rob:
Got it. So if I’m hearing it correctly, you’re looking to balance out your portfolio architecture, meaning you want a little bit of diversity and income so that whenever, when one property is not doing so hot, another property is picking up the slack and you always have that flexibility. That’s one. Two is you are willing to invest in something that might take a little bit more work and that would be worth the extra cash flow for you, but you don’t want so much work that it feels like you left retirement to go work another crazy, crazy job.

Mark:
Correct. And the other thing too is that I don’t need the money obviously like we talked about my expenses, I don’t need the money. So if I do buy a property and it’s not cashflowing day one, year one, year two, that’s totally fine. That’s what we bought. We purchased a three unit about four months ago. Now that I’m currently sitting in as a house hack and it’s probably not going to cashflow depending on when we move out. It might not cashflow for that first year, but it eventually will because it’s in a class A area which is totally fine with us and we’re fine with putting in a little bit of sweat equity because we know we’re playing the long game. We know after 5, 10, 15 years which we plan on holding that everything rent will appreciate the aerial appreciate.

Rob:
Nice. And so the question for today is with all these things in mind, what can you do? What are some ideas of how you could utilize 300 K to increase cashflow, increase maybe some equity and what’s that next move with that amount of money?

Mark:
Correct. And also I know last time when David answered the question, the main question was stay in residential or go commercial and it’s kind of a revisiting that question. I’m right on the cusp with our down payment and our cash size. It would be right around the four unit. However, it seems like when you buy more units like a bigger building, you usually get a better price per door. You could buy around here a duplex for anywhere from 600 to 800,000 or you could buy a four unit for around a million dollars. So obviously that’s less per door. Would it make sense for us to just wait a little bit and then scale up because about five units are going for about anywhere from 1.2 to 1.5 depending on the exact location. Should we just wait and kind of scale up a little bit more to a five unit again bridging the gap between residential, commercial or kind of stay right in that sweet spot, the four unit?

Rob:
Yeah. Yeah. Okay. So David, I’m going to turn this over to you really fast. I know you’ve owned commercial property in the past. I don’t know if you still do. What do you think, what is that appropriate moment for an investor from your experience of maybe parlaying or foraying if you will, into the commercial space?

David Greene:
It’s a different way to manage it and the financing is very different. You rarely ever find investors that do both commercial and residential. Super rare and it’s like two different sports. So I want to ask you Mark, what are the elements of real estate investing that you don’t like and you want to avoid?

Mark:
Some things I don’t like that I don’t do now really, I don’t like dealing with leasing up properties units. I don’t really enjoy finding deals. It’s so hard to find deals in my area that I just, Jonathan Green is one of the guys in my area and he has his thoughts on wholesalers, which I a hundred percent agree. There’s not really deals out there for wholesalers. It’s a lot of who and on market stuff. Those are I guess the things that I don’t really enjoy doing. I do doing some of the day to day in bits and pieces like working on properties. I don’t mind kind of self-managing, but I would say really the only thing I think I just do not are just leasing up and I think that’s pretty much about it.

David Greene:
Alright, so you don’t like looking for the deals, which I’m assuming means you don’t spinning your wheels and not making any traction. There’s not a lot of deals out there to look at. So you don’t like wasting time, you don’t like leasing up, meaning finding a tenant for the property, is that right?

Mark:
Correct. I’ve hired that out to my mentor and my realtor as well.

David Greene:
Okay, so what are the elements you do?

Mark:
So I guess as weird as it sounds, I actually don’t mind dealing with tenants. I know most people don’t and I can understand why I like being somewhat in the minutiae a little bit. I like kind of dealing with the, I don’t mind doing the bookkeeping at some point I would like to hire that off, but for now I don’t mind it. I like analyzing deals. I love looking on for right now just Redfin, Zillow and running numbers while I’m on the couch and going to look at properties. I enjoy that and I enjoy not necessarily rehabbing because I have a contractor who I’m actually friends with, so that really helps. But I enjoy dealing with him and some of the projects when we do have to take on renovations and things like that. Not being a GC as much as just kind of above the GC and just kind of directing him.

David Greene:
You like the vision, you like to look at it, you like just try to figure out how it’s going to work out and you like to manage it once it’s been purchased but you don’t like anything that doesn’t make progress. I can tell that’s a big theme in this talk today is I want to feel like I am moving forward. What can I do with commercial real estate? The majority of the effort to do that well is in the analyzation upfront. Looking at would it work and having the cash to pull off the plan once you buy it. I believe in our first segment we did with you, I talked about commercial real estates like a battleship and residential real estates like a jet ski. Once you buy that commercial property, it is very hard to change Course it takes a long time. Your leases go for a long time.

David Greene:
When you lose a tenant it is very expensive to get another tenant in there. Usually you have to spend a lot of money to improve the space for the next tenant to want to use it. The remodeling isn’t something that you’re going to have much to do with. It’s usually the tenant that’s going to be overseeing their own remodeling. A lot of the stuff you like about real estate is what I’m getting at. You’re not going to be doing, you’re going to be constantly looking at deals all the time and analyzing that, but not just how do the numbers look. It’s going to be how do I analyze the tenant themselves as opposed to the property. When you’re analyzing residential real estate, once you know what’s in a good neighborhood, there’s not a whole lot that goes into it other than having a screening process for a residential tenant.

David Greene:
You might pick a tenant for your commercial property, fill it up with six different tenants and four of those businesses go out of business and now you’ve got four vacancies that might take a year and a half before you find another tenant to put in them. It’s very, very different than residential real estate. It doesn’t mean it’s worse. It’s a completely different skillset. You also might have a tenant that stays in there for 15 years and you don’t have to worry about anything and you just keep getting rent bumps and when it’s triple net, they’re paying the property taxes, they’re paying the insurance, they’re paying for the improvements. It’s wonderful, but it’s definitely, in my experience, more high risk and more high reward. It’s very different than residential real estate, which you could just scale bit by bit.

Rob:
You’re looking to make progress in whatever it is you’re doing and I worry that possibly stepping into commercial real estate will feel much like the opposite. Oftentimes as you learn this new niche of real estate, it’s going to be frustrating, it’ll be hard work, all that good stuff and it may be a while before you see that progress in that vision come to fruition. So for that reason, I think I would probably push you a little bit towards staying in what you know, which is on the residential side.

Mark:
Would it make sense to start looking at instead of staying at the four unit multifamily, look at the five to 5, 6, 7 multifamily properties as well

David Greene:
More so than the triple net. It would make sense. What I like about it is you have something to chew on. You’re going to have like 8, 9, 10 units of different tenants. They’re going to be leaving. You’re going to have to conduct turns, make sure that everything gets done. It seems like you enjoy that part and that is what it takes to be successful as a mom and pop operator is you got to pay attention to the details. I think it’s one of the reasons Rob does really, really good with his business is he’s in those details all the time. Where it’s going to be tough for you is the uncertainty that comes with the financing. A lot of people bought good assets that were cashflowing well that when interest rates went up and their note came due, all of a sudden this cashflowing asset at the new interest rate does not cashflow and you no choice.

David Greene:
You have to either refinance it or sell it and if you’re going to try to sell it, the next person buying it is paying way less for it because they’re buying it at that new rate and now you’re the distressed seller that we are always targeting and you did nothing wrong to end up in that position, just you didn’t have a chair in front of you when the music stopped. That’s what makes me nervous about somebody in your position, mark, who’s trying to grow bigger. Those assets are really designed for someone that’s already grown big that can put 50% down on that thing or 40% down. So if interest rates move in an unfavorable way, they refinance and have less cashflow, but it’s not that they can’t refinance. You’re still at the point where you’re trying to turn a chunk of change into a much bigger chunk of change.

David Greene:
So the advice that I would be giving you is probably along the lines of go into cheaper properties and see what you can do with the brrr method. You’re going to be very active, you’re going to be overseeing rehabs, you’re going to be using your vision, you’re going to be trying to look at properties that need a lot of work, that have some equity in them that you can go in, turn around, fix up slowly, build equity, and then maybe once you get 8, 9, 10 of these single family properties or small multifamily properties with equity added and refinanced 10 31 into some of these commercial assets that you’re talking about, rather than taking your cash and putting it right into commercial, I’d rather see you take your cash, put it into residential, grow your equity like you have on the ones you have. At the point you think that, Hey, I’m ready to move away from managing 10 of these properties, sell 10 and buy one 10 unit apartment complex. You’re talking about what are your thoughts?

Rob:
Hold on one little thing. I think the 5, 6, 7, 8 doors, it’s not like once you get past four doors, it’s all of a sudden like, oh, oh my gosh, it’s way harder. I think you’re ready for that. I think that’s honestly a pretty similar decision. If you had said, Hey, I want to buy a 30 unit building, then I’d be like, okay, that’s different than a four unit 5, 6, 7, 8. I mean it’s more work for sure because it’s more doors. I just don’t think it’s anything that’s like a night and day difference personally, but that’s just my thought

David Greene:
There. Alright, so let’s see if we can sum some of this up. Mark, you’ve got quite a bit of cash, you’ve saved up. You want to scale. I think the best way to do it is to convert that cash into equity in different properties, which you’re going to do by buying them below market rate, adding value to them, and then hopefully you get a little bit of market appreciation equity too, where the wins carry it further. I would say do that until you run out of opportunities or you run out of time slash energy when you’re just like, oh, it hit me in northern Florida when I hit around 50 properties or so. I was like, I just hate this whole portfolio. It was not that bad, but it wasn’t that great. It was just constantly this thing broke, this tenant’s upset, this issue happened, this person got a bullet lodged in their garage door and they’re mad at their landlord for it or whatever, and I just realized, okay, let’s sell these 10 31 into something that’s going to be less work and then start over building a portfolio the same way again.

David Greene:
That’s the advice that I’m going to give to you. I think you’re going to like doing that because it’s going to give you stuff to look at. It’s not going to be a waste of your energy when you’re looking at the cheaper properties that are lower price point that need a lot of work that other investors maybe don’t want to take on. You’re going to have to find another market probably somewhere in the south, somewhere in the Midwest, just somewhere where housing overall is cheaper and there’s less competition from other real estate investors and most importantly, your dollar will go further. You’ve got quite a bit of money saved up if you’re trying to invest in somewhere in Ohio, somewhere in Alabama. Some of those investors, they don’t have as much money as you do to take on some of these projects so you can take something on that. They can’t and you’re also not going to need to hold it forever. They’re going to be looking at this stuff like, I’m going to hold this thing for 50 years, so it better be a great deal. You could be a little pickier, you’re probably going to exit, sell it to someone else that wants a turnkey investment. Then 10 31 that money into some of the stuff we’re talking about today, the more expensive properties and the better areas that you’re used to rob.

Rob:
Yep. Solid plan. I like it, I endorse it. I co-sign it

David Greene:
Even. You’re not going to tell ’em to do short-term rentals. This is your chance. You’re the short-term rental guy, right? Everyone in the comments is going to say, Rob, all you ever do is tell people to buy a short-term rental. I

Rob:
Do think for what it’s worth, if you were going to buy a five to eight unit building, I think the dream scenario is if you bought an eight unit building, you rent four of those out long-term, two of them out midterm, two of them out short term and have a super diversified eight unit building that kind of cranks out cash in different varieties and different returns and that to me is the juiciest way to do a small time multifamily.

David Greene:
Rob, I think that is great advice. In fact, I’m going to write another book and I’m going to call it Cashflow Casserole based on your idea of six regular, two midterm and two short term.

Rob:
Nice. I like it. I’ll write the forward. It’ll be forward.

David Greene:
Let us know in the comments. Do you think that this new book that Rob’s forward forward is going to be called The Cashflow? Cashflow or the Cashflow Quesadilla? I just may take it serious. Alright folks, that’s our show for today. We’ve covered quite a few topics, which is awesome, including does flipping in the Bay Area still work with all the high competition? How to decide if the responsibilities of a partnership are being split up fairly, the brass tacks that few investors talk about and how to avoid those ducks in a road, in your own portfolio. All that and more plus a live call on today’s Seeing Green. Did you love it? Did you find Rob to be hilarious? Did you find me to be tolerable? Let us know in the comment on YouTube your favorite part of today’s show as well as what you would like us to cover. Rob, anything you want to say before we get out of here?

Rob:
Listen for all intensive purposes, I just wanted to say this was a really fun episode. We got into some good philosophy and hey, maybe I’m changing the way I think I always do every single time I share the mic with you, man. So appreciate you having me on.

David Greene:
Awesome. I’ll let you get out of here. This is David Green for Rob. Putting the brass and brass tacks, Abba Solo signing off.