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We Spend $12K a Month…Can We Still Retire in 10 Years?

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Tyler and Jenna need to know how to retire in ten years or less so they can spend less time working and more time with their family. The problem? They’re spending more than $10,000 monthly in expenses, and even with a high salary, that hurts their bottom line. But, a bigger problem to take care of is the six-figure savings sitting in their bank account, not bringing them any closer to becoming financially free. So, what should they do next?

Today, Mindy is joined by her husband, Carl, as these lucrative lovebirds advise a young couple who just had their first child and are looking to speed up their early retirement timeline. Tyler works in finance, taking home a stable income, and Jenna runs her own business that’s still expanding. They want to increase their incomes, invest more, and move closer to early retirement, so where do they start?

With three FI-friendly investment options—index funds, short-term rentals, and syndications—Tyler and Jenna can use any (or all) of these to multiply their wealth. But, one of these options poses a substantially bigger risk than they may think, and Mindy and Carl feel that they MUST warn this couple about it before they pull the trigger. If you dream of hitting FI in a decade or less, this episode can help you get there!

Mindy:
Hello listeners and welcome to the BiggerPockets Money Podcast, Finance Friday edition, where we interview Tyler and Jenna and talk about what they should do with their large cash reserves and if they should be active or passive investors. Hello. Hello. Hello. My name is Mindy Jensen and joining me today is my Tesla loving co-host and husband, Carl Jensen.

Carl:
Thank you for having me. Do I get a Tesla for appearing on this show?

Mindy:
I’ve told you to buy the Tesla. I am not the reason you don’t have a Tesla, mister.

Carl:
Okay.

Mindy:
When are you going to buy it, again?

Carl:
Soon. Soon.

Mindy:
Soon. Yeah. That is not very time sensitive. Soon. All right, I’m going to stop harassing him and tell you that Carl and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story because we truly believe that financial freedom is attainable for everyone, no matter when or where you’re starting.

Carl:
Whether you want to retire early and travel the world in your Tesla, go on to make big time investments in assets like real estate, or start your own business, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your Tesla dreams.

Mindy:
Wow. Sounds like somebody else needs to launch himself towards his Tesla dreams. All right, Carl, I’m not going to harass you anymore. Next up is the segment of our show called The Money Moment, where we share a money hack tip or trick to help you on your financial journey. And today’s money moment is actually fitting for us. Don’t be afraid of flipping, and we’re not talking about flipping houses. Did you know that certain VHS copies of movies like Back to the Future are selling for hundreds of dollars? Your local thrift store sells vintage items like VHS, record players, records or cassettes. Some of them may be sought after on eBay or Etsy. With a little research and some digging, you could find some items worth buying and reselling at a higher price. Do you have a money tip for us? Email [email protected]. All right, Carl, I am excited for today’s show. Tyler and Jenna have a good set of problems, but they also need some guidance on where to invest their money so they can reach financial independence a little quicker.

Carl:
Yeah, this is an interesting one because looking at their spreadsheet and their application, to back up a second, some people are just VTSAX, other people want to do real estate, some people even have a very specific niche within real estate, but with Tyler and Jenna, they’re all over the place. They’re willing to try a little bit of everything. We know they have index funds, we know they’re considering Airbnbs, and they even have crypto. So very experimental.

Mindy:
Yes, but I think that they need a little bit of guidance for their large cash reserve, so I am excited to bring them in. Tyler and Jenna are a married couple with a brand new baby. Jenna is an artist who has her own business and Tyler works in technology. They have a strong financial position but are not sure how to optimize it and what they should do with their large cash reserve. Tyler and Jenna, welcome to the BiggerPockets Money podcast. I’m super excited to dive into your numbers today.

Tyler:
Great to meet you, Mindy and Carl.

Jenna:
Great to meet you both. So happy to be here.

Mindy:
Let’s start off the show with a little bit of your money background and a little bit about you guys.

Tyler:
Sure. I can start and then maybe you can fill in. So our money background is vastly different, mine to wifey’s here. So mine, I’m very much the finance numbers, nerdy kind of guy. Grew up in finance, worked in finance for a big chunk of my career, and I spent a ton of time in spreadsheets. I love budgeting, I love forecasting. I worked in financial planning and analysis for a period of time, and so numbers actually give me a ton of energy. And yeah, the last 10 years of my career I’ve been in tech and finance, and so I’ve been very career oriented and focused on growing that. And over the last few years we’ve gotten to a place with personal finances where we’re in a happy place and ready to dial up investing in a bigger way. So we’re trying to figure that out. But maybe I’ll back up a little bit and let Jenna speak to her background too.

Jenna:
So I’m the opposite. I went to school for art, art major, and unfortunately the majority of art majors, they’re not really taught numbers or business, which is so silly because if you want to be an artist, you essentially need… You are essentially a business owner and need to know your finances. So I never… Finances and money wasn’t really top of mind. For me, I was like, “Oh, if there’s money in my bank account, I’m doing great, amazing.” And I really wanted to focus more on my business, take it full time. And he was like, “Well, in order for you to be successful and really go all in, you have to be aware of what’s coming in, what money you’re spending on forecasting, budgeting, all these things.” And so yeah, we make a good match because we’re very opposite, but together we make a good team. So yeah, I’m very much more aligned. I’m still learning and so that’s why I’m really excited to be here and learn more. But it’s hard for me, finances and all that numbers stuff, it’s definitely challenging. I’d rather be doing more creative stuff, and that’s my story.

Tyler:
I’ll pump her tires for a second. She’s come an incredibly long way in the last three years since she went full on entrepreneurship. We look at our numbers every month. She does her revenue journal and she understands this stuff and we have a good relationship in the sense where she brings me down into reality and reminds me to live my life instead of living in spreadsheets, and I can help her with my spreadsheet stuff.

Mindy:
Well, speaking of spreadsheets, that’s actually a really great natural segue. I have your spreadsheet, which is filled with numbers, but I’m going to highlight just a few of them. So your money snapshot looks a little like this. We’ve got a combined salary of approximately $15,000 a month, which is awesome. We’ve got bills that hover around $12,000 a month on average, and that average word is going to come back a little bit later. So we’ve got food and eating out about $2,000 a month, shopping, about $800 a month, entertainment, five 50 utilities, almost 600, auto, $800, home, on average so far this year, is $6,800 a month. So like I said, it hovers around 12,000 on average, but you have some up months that are a little bit more or a lot more. So we’re going to dive into that a little bit.
Investments, I have an after-tax brokerage of $25,000, 401K of 182,000. That’s awesome. HSA of $8,000, crypto, $10,000. I reserve judgment. And cash savings account, this is the big one. You have $185,000 in a high yield cash savings account. So spoiler, we’re going to be talking about that. And debt, I see one mortgage of $440,000 at 3.55% interest. I think that’s an amazing rate. And if I were you, I wouldn’t pay anything down on that. So I have some goals here to talk about that cash reserve, talk about your budget, talk about the difference between active and passive investing to reach financial independence.

Jenna:
Yeah.

Tyler:
Sounds amazing.

Jenna:
Sounds great.

Carl:
So Tyler and Jenna, your snapshot looks like you’re in a really good financial position. What can we help you with?

Tyler:
Yeah. Overall our goal is to bring our projected FI date inward. So right now, if we’re trending the way that we’re trending, we’ll reach FI in somewhere between 15 to 20 years. We want to pull that into under 10. We want to do that because we want to prioritize flexibility for our family. I’m creative, wifey is creative, and so we want to spend time creating, unencumbered necessarily by the financial impacts and opportunity cost of our time. And so what we really want to do is run you through our high level strategy, and then the tactics that we’re using to get there, to a closer FI date, and get your feedback and yeah, hopefully you guys can poke some holes in our thinking and maybe tell us some things we don’t want to hear.

Carl:
And what is your FI goal? I don’t think I saw it on the spreadsheet. Do you have a number in mind?

Tyler:
4 million.

Carl:
4 million, okay. So you’d have to roughly… You have about maybe $400,000, so you’d have to 10x what you have now to get there.

Tyler:
Yes.

Mindy:
Okay. So tell me what you think you want to do with your money and Carl and I will sit here and listen for a moment and then give you our feedback.

Tyler:
Cool. So our strategy bakes down on three key pillars, manage expenses, earn more in our careers and invest passively. So on the managing expenses side, Mindy, you mentioned some of the lumpy expenses that we have and some of the buckets. We can deep dive into some of those, but basically managing our spend down over time and just around the edges, there’s always improvements that can be made there. Earning more in our careers. So I work in tech. I have high growth income potential both on cash compensation and on equity compensation. And so continuing to keep an iron in that fire. And Jenna’s business, do you want to talk a little bit about how your business can grow?

Jenna:
Yeah, just ways that I could continue to work smarter, not harder. So I mean for me, a lot of my business… I’m in the wedding industry and I’ve been noticing just weddings for me has just been really, really successful. Little time goes into events like that and I get way more in return. And so maybe focusing more on that as well as other ways to just generate income without really thinking about it. So maybe licensing, more prints, just things in my business that I could just fine tune. So yeah.

Tyler:
Yeah, so there’s a lot of room, I think, to grow in both of our earnings potential, I think is the punchline there. So that’s earning more in our careers. And then finally investing passively. So we spend a lot of time thinking about art, thinking about tech, and we have a new baby boy, so he’s also taking a lot of our time and so that doesn’t leave a ton of time to invest in flipping houses and that kind of stuff. And so the passive mechanisms that we’ve decided to work on are just good old-fashioned indexing for now. And then we’re just about to make our first syndication, real estate syndication investment, and we’re evaluating some short-term rentals as well. And so those are the three major buckets. Maybe I’ll stop there and see if you guys have any questions first.

Mindy:
Oh, so many questions. You want to manage expenses, earn more and invest passively. We’re going to start with managing expenses, and when I was going through your spreadsheet that you shared with us in preparation for the show, one of the things that really struck me is that you have only 15 categories on your budget, and if anybody was following along last year, when Carl and I were tracking our expenses, we had 30 different categories. And that doesn’t mean that our way is better, our way is just different. And the reason that we had so many categories is because if I need to cut something, some of the categories are easy to cut, we have a pool in our backyard and we have parties. So when I buy supplies for the parties, I put those in the parties’ category.
If my budget suddenly gets tight, I am canceling my parties or having more potluck parties than me hosting everything parties. I have a line item for alcohol. If the budget gets high, that’s the first thing to go. The second thing to go. There’s so many easy ways to make small cuts when you have such a granular tracking of your expenses, which is also a complete pain in the patoot because you have to track every single thing. So I can see why you have fewer categories than we did, but one thing that I would suggest is if you want to manage your expenses, truly get in there and see where your money’s going.
Like food and dining, that’s easy to lump together because it’s food that you’re consuming, but it’s also easy to separate. This is groceries and this is going out to dinner, because going out to dinner is going to be more expensive than making food at home. So if you’re looking to cut back, “Oh, we spend a thousand dollars a month at restaurants, maybe we’ll cut that back to 750 this month, then 500 the next month, unless that’s your big thing and then there’s something else to cut. But it’s easier to make small tweaks or even big tweaks when you have more information. I’m a big fan of the data.

Tyler:
That makes a ton of sense and I totally agree with you. There are some line items hidden on the document or no, not hidden, they’re grouped. So we actually budget on 125 different categories.

Mindy:
Oh, that makes my heart sing. No, no, no. That is, I saw all these little plus signs and I don’t know enough about this spreadsheet.

Tyler:
You hit the plus sign, it expands them out. There’s categories on categories. Jenna could tell you all about the categories. We sit together every month and we look at those exhaustively, actually.

Mindy:
That is fantastic. No, that’s great news, and for the sake of this conversation, I don’t need all of that information, but for the fact that you have it, that’s awesome. Now, a homework assignment would be to review all of those categories and ask yourself, is this truly where I want my money to be going? You make a good salary, you don’t have to live on a thousand dollars a month, but is $12,000 the amount of money that you want to be spending? Does that feel like the right amount for you? And that’s more of a homework assignment than I need an answer to that.

Tyler:
That makes sense. We have some big rocks I think in the spend that make up over two thirds of it. Our mortgage is high, it’s just south or just north of $3,000 a month, which is relatively high. Then also we both want to continue to work now that we have a child and so we have to pay for daycare. And daycare is not cheap either. And so you think you take daycare, housing costs and then food and that’s like over two thirds of the budget right there. And so that is one thing is bringing in the FI date. Yeah, we could drive that stuff down by figuring out a different housing situation. That one’s tough for us, because we just bought this house. It’s basically our dream house. We love it. We want to stay here. And so taking that as a given, can we still get there? And this is maybe where you guys may tell us something that we don’t want to hear is like, “Okay, fine, but to get to your goal, you may have to reconsider that house.”

Mindy:
Well, here’s the thing, you’ve got, what did you say it was a $3,000 a month mortgage payment? Where are you going to go for a lower mortgage payment? Now that interest rates have gone up so much, I think we’re going to start seeing a lot of people who might have a higher than they want mortgage payment, but that’s going to be the lowest option they have for a long time.

Tyler:
Yeah, it’s a very good point. I totally agree. We feel lucky that we have the rate that we do, and we’re in the place that we want to be, and think that’s… So we want to build a plan around that. It’s a very good point.

Carl:
Yeah, I think that’s a lot of money, but I also think it’s really incredible that you’re this young and you’re in pretty much your dream house and the location you want to be. It sounds like y’all value that a lot, and if you do, I would suggest not moving, staying there. You’re already set. That part of your life is already taken care of.

Tyler:
Cool.

Carl:
Yeah. Let’s talk about… So we talked about three different things. The first one was your budget, the second one was increasing your income. Do y’all have a plan for that? And to back up a second, y’all have a pretty healthy income already. It’s good. What would you do to increase that? I heard one hint of maybe short-term rentals, but so would the increase in income come through your jobs or from other sources like Airbnb or both?

Tyler:
Both, for sure. So first and foremost would be our jobs. If I stay the course in my job, I will make more money. I have stock-based compensation in the companies that I work for. And so there’s potential for some, if there are liquidity events down the line, some windfalls that could come our way, that could expedite things, and so want to ensure that I stay on that path. And then Jenna, I don’t know if you want to talk about…

Jenna:
No, I mean I think I touched base on it a little bit before, just like I want to still work, but just do less and make more money. But who doesn’t?

Mindy:
I have something for you, Jenna. Have you heard about Printables on Etsy?

Jenna:
No, I have not. Tell me more.

Mindy:
Oh, okay. This is a homework assignment for you. It is practically perfect for you because you are creative and you want to work less and make more money. Who doesn’t? So, okay, Printables is kind of just what it sounds like. It is something that I buy a file that Jenna has created and I buy it on Etsy. I pay her, I don’t know, three bucks, five bucks, whatever, and I download this file and then I print it out at my house on my own paper however I want, however many times I want for bachelorette parties, for birthdays, for baby milestone months. You just had a baby, here’s a picture of my baby at one month. Here’s a picture of my baby at two months. And you do this cute little thing. You can’t just write two on a chalkboard, Jenna, you have to buy this thing.
You print it out, you put it on paper, you put it next to the baby, and then you can have these wonderful pictures for every month of your baby’s first year. But they also do a ton of stuff in the bridal, like invitations and save the dates and a whole look for your wedding and bachelorette parties and bridesmaids or bridal showers, and all the things that you need to have a successful wedding is available as a Printable on Etsy. And you create this once, either you do it or you hire a designer to create this, and then you put it on Etsy and you wait for people to download it. I have a friend, Carl and I have a friend, Cody Berman, who is making thousands of dollars a month by selling these items that he has designed once and put up on Etsy, and then they just sell over and over again.
If you can get… The more things you get on Etsy, the more chance you have to hit on a winner, because you could put something up there and not one person buys it. You can put something else up there and 20,000 people buy it. It’s hit or miss, but there are courses out there to help teach you, keywords and take all of the guesswork out of it. There’s also, you could just do it yourself and figure it out yourself. But that is a great thing for you to do a lot more research into is called the Principles on Etsy.

Jenna:
Awesome. Thank you so much, Mindy. Yeah, no, I didn’t know about that. I have my own website, so I’m not really on Etsy, but it’s one of those things where especially where I offer prints, just getting more eyes on my product and that’s just another way to do that, so that’s great. Thank you.

Mindy:
Yeah, that is… I’ve never bought a printable, but I really love the idea. Okay, invest passively is the last one, you talked about index funds, you talked about syndication investments and you talked about short-term rentals. Short-term rentals are not passive, they’re passive ish. They can be passive, but one of the biggest problems with the short-term rental is finding a cleaner. So where would you have this short-term rental, and who is going to clean it? Are my two big questions for you.

Tyler:
My retired parents.

Mindy:
Do they know that they’re going to be cleaning it?

Tyler:
They do. They’re looking for something to do. No, no, no. In all honesty, yeah, yeah, that’s a big consideration. There are two different short-term rental deals that we’re evaluating right now. One is actually to buy my childhood home from my parents, which is on a beautiful property. It’s on the northeast, and we could potentially split it into two different units, and I think it’s a very desirable rental location, both summer and winter months. But yes, we would need to consider lining up cleaners, lining up property management, those kinds of things and making the numbers work for it to actually cashflow.
But yeah, this actually gets to maybe a broader question that I have too, is that we’re not dogmatic about the types of asset classes we invest in. Really looking at a short-term rental deal or doing our first syndication investment, we’re just getting comfortable with what these things are, the level of diligence that we need to do on these types of investments, because we don’t know. We’ve never done them before. And there may be asset classes that I haven’t thought about, that Jenna hasn’t thought about, that we should be looking into more given our situation and the fact that we do spend so much time on our careers and less so in investing. I’d love your guys’ take on that. Yes, we want real estate exposure because yes, the long-term outlook on real estate is good because of all the supply problems in the country, et cetera. But am I missing anything? Are we missing anything? I don’t know if you have any thoughts, we’d love to kick around ideas on it.

Carl:
Yep. I’m curious. I’d like to back up a second. You have some in investments through a 401K. I’m going back looking at the numbers here, 182,000 in a 401K. What is that money in?

Tyler:
Primarily VTSAX.

Carl:
So you are a believer in index funds, you know all about that type of thing.

Tyler:
Yeah, Simple path to wealth. It was a great book.

Carl:
Yeah. Yeah. Okay. But you’re on top of it. You’re on top of it. You’re looking to diversify perhaps a little bit more beyond that, and I think you’re going to have to, because one thing about your numbers is you want to 10x your money in 10 years, and if it was just in VTSAX and we’re looking at doubling every eight or nine years, that’s going to be… You needed to double at least three times. So you’re looking at a 30-year horizon, so you’re going to have to do some extraordinary things if you really want to get to that 4 million in a decade, that’s extremely aggressive.

Tyler:
Yeah. I like setting aggressive goals. There are some caveats to that aggressive goal. I had mentioned stock-based compensation earlier. If one of the companies that I’ve worked at has a liquidity event that could accelerate us very quickly towards that 4 million number. However, those are… I try not to plan around those because there’s a lot of risk factors.

Carl:
I’m really curious. The one thing that gives me a lot of anxiety looking at your numbers is that $185,000 in cash. I know it’s in a high yield savings account, so you’re probably making like 4.5, 5%, but why do you have all that money in cash?

Tyler:
Yeah, a few reasons. First and foremost, a big piece of it is earmarked for the syndication investment that we haven’t made yet. We just got the offering docs today, so 30K off the top will go directly into that. We just bought a car as well about a week ago, so we needed another vehicle because we have a baby, so that was another 15K. We bought a used car. And then we have a high cash balance because the last two years have been a bit chaotic, honestly. We moved across the country, we bought a house. I work in crypto and the crypto industry has been very tumultuous for the last two years, and so there’s just an element of safety and carrying a high cash balance. I like to… We have a high burn and so I like to have at least a year’s worth on hand. And so I think all those factors are leading to the higher cash balance that we have this period in time.

Carl:
And I’m super curious about syndications because we’ve done a lot with syndications, but they’re more, I would say they’re an advanced method. What drew you to syndications?

Tyler:
Yeah, the notion that getting good at evaluating syndication deals, it actually can be more passive than actively managing a short-term rental or a long-term rental for that perspective. That, and I have a couple of relationships with property developers and sponsors that I trust, and so I’ve talked to them a lot about the things that they have going on, and I know one of the biggest pieces of investing in syndications is vetting a quality sponsor. And so I feel like I do have that. I’ve spent a lot of time learning about syndications over the last six to eight months in preparation for making our first investment there. And so yeah, that’s where I’m at with it.

Carl:
Okay. I’m super happy that you actually know a lot of the syndicators. We’ve probably done between 10 and 50 syndication, 10 and 15 syndication deals, and out of those, I don’t think… I’m trying to think. I don’t think anyone has… No one has performed exactly how they said they were going to perform, and a lot of them weren’t doing so hot and then COVID happened and we made the money on the backend when they went to sell. But the interesting thing is I found about syndication deals is they’re not going to tell you, “Oh, our numbers might be okay.” No, they’re going to give you these crazy numbers, and sometimes if they’re not local, especially if they’re not in your area, it can be very difficult to vet, but they’re never going to tell you they’re just going to do okay.
They’re going to shoot for the sky and put that all in the numbers. Mindy and I were talking about our syndication deals, the interesting thing is I think all of them, without exception, have outperformed what they originally said they would, and some of that’s because of COVID and all that, but the other thing is zero of them outperformed VTSAX, so take that for what you will, but I do like it that you know the people because that’s so important, and I think… I would say for me personally, that outweighs the numbers knowing that you know the person and having that feel for them. I think that’s super important.

Tyler:
Yeah, that’s really helpful perspective. I do think of it a little bit as a YOLO bet still because, you’re right, it’s a more advanced mechanism, it’s our first one, and it’s a new development project, so this isn’t like a value add. So there’s just inherent risk in the project in and of itself. But going back to the ambitious goals, we can afford to take a big swing and take some risk with some of the money that we do have on hand, and this seems well aligned to that.

Mindy:
So it doesn’t seem like you are an accredited investor yet. Do you have any trepidation going into a syndication that is traditionally an investment vehicle for accredited investors? I can’t remember when they started allowing syndicators to accept money from non-accredited investors.

Tyler:
Yeah, that’s not an issue for me, because of those kind of equity crowdfunding rules that you’re referring to. Yeah, we’ve been able to vet that and we’re comfortable with it.

Mindy:
I would say if you have not yet listened to episode 219 of the BiggerPockets Money podcast where we interview Jay Scott and do a two-hour epic episode on syndications, he explains everything. He talks about pitfalls in the investment vehicle itself, and he talks about just the general concept, things to look out for, ways to vet your syndicators. I agree with Carl, if you don’t trust the syndicator, you should not be giving them any money at all, but trusting them isn’t enough. You also have to go through the deal, and if it smells too good to be true, it’s too good to be true. And right now there’s, what’s the word? Frothiness in the commercial market, and I’m just concerned that that’s going to shake down to the commercial apartment building, the residential apartment building thing as well.
So I would just say be cautious. If I was in your position, I would be really looking at those numbers with a fine tooth comb. “This doesn’t make any sense at all, okay, then maybe this isn’t the right one for me,” or “Hey, this really does sound good,” and you ask questions and they have a great answer that makes sense and doesn’t just sound like a bunch of fluff, then maybe it is a great idea. But another option you could think of or you could pursue or look into, is becoming a private lender. Carl and I have been lending money to friends who are doing real estate investments. It’s a similar situation where we know the person we’re lending almost to the person more than the deal, and it’s… What are we getting? 11, 10, 11, 12% Carl?

Carl:
12%, which is pretty cheap considering inflation, but they’re friends, so I don’t want to charge them too much.

Mindy:
And 12 percent is a great return. And we know them. I know that the person we’re interviewing or we’re lending money to right now isn’t going to leave us hanging, and if he does, we’ve got a property that we can own in a place that we don’t really want to own property, but it’s a trust thing and that could be another avenue to look at, and you don’t have to throw all 185 at private lending. You can start small and see how it works out.

Tyler:
Yeah. So I actually wanted to ask you about this because the research that I did on private lending, I struggled with looking at that versus a syndication and getting comfortable with it on a couple of dimensions. One is that, at least with a syndicator, you’ve got a more professional operation with an accredited sponsor that’s providing you reporting, that has skin in the game with you. In this situation, obviously I know that person, whereas hard money lending or private lending, it feels like there’s another layer of abstraction also with less information coming to me about the project and everything. It has to be a close friend or something where that would make sense relative to syndication. Am I thinking about that right? Because I haven’t done a ton of research on it. I’ve just read a bit on private money lending, but it just sounded like, it sounded like a more fly by the seat of your pants kind of syndication investment, honestly.

Mindy:
You’re not wrong. I think that that’s a pretty good way to describe it, but also you control it a lot more. That’s how I feel, because I know that I am lending to my friend Bob, and I know that Bob is going to pay me back, because Bob’s an upstanding person and Bob has done this before. Bob is experienced, and I know he’s experienced because we’ve been friends for a long time, and I’ve seen him do his things. There are other ways to do private lending where you just give your money to a company and then they lend it out.
BiggerPockets has a book called Lend to Live, and it’s written by Beth Johnson and Alex Breshears, and we interviewed them on episode 328 of this podcast. And that’s another great episode to listen to get more information about the concept of private lending. One of them lends to the deal. They don’t care who’s asking for the money, they look at the numbers and they lend only to the deal, and one of them lends more to the person, where they look at the person and, “Oh, I don’t know this person,” or “I don’t have a good feeling about this person. I’m not going to lend to them,” that sort of thing.
That’s a great episode, and I’m going to send you a copy of the book Lend to Live when we’re done with this show. So you can read through it. There’s a lot of really great information about private lending. I think it could be a great option for… A great way to diversify your portfolio. And again, it’s pretty passive. You do all the work upfront, you read their proposal or you look at their numbers or whatever and you’re like, “Aah, not a chance,” or “Hey, that looks great,” and you get a little bit more information. Ultimately you have to be comfortable with the investment strategy.

Tyler:
Yeah. That makes a ton of sense. I’ll definitely look into that. I feel like I don’t understand it well enough, and so yeah, getting smarter on that piece too would be awesome.

Mindy:
Yeah, I’ll send you a copy of that book. Let’s move over to Jenna now. Jenna, let’s talk a little bit about your business.

Jenna:
I’m an artist, so I sell my own work. So I have my originals, but I’m also big in the wedding industry. So I do live event paintings, so weddings, fundraisers, galas. So I show up live, I paint for a specific amount of time, and then depending on what the event is, either the painting stays with the client or I take it home to my studio and finish it and ship it off. I do workshops for corporate clients, private group settings. Those are my three main buckets, so wedding, workshop and my own work.

Mindy:
Okay. And what is the process to getting more wedding or workshop clients?

Jenna:
So I think for me, just doing what I know would be the easiest thing is Pinterest. Pinterest is the wedding… Anyone planning a wedding, just from my past experience with our wedding, you’re on Pinterest, you’re looking, you’re researching, you’re seeing what vendors are in your area, you’re typing in all these keywords into Pinterest and all these things pop up. So all my friends that are either event planners or florists are all on Pinterest promoting their work by uploading pictures, and I’m just like, “I need to do this. I haven’t done that.” So that’s one way I could think about just getting more exposure. Other than just reaching out and doing cold call emails and networking events, which I’ve been doing in the past. We’ve moved twice all the way to the other side of the country and back, and I’ve done a really good job of just networking myself, but it’s a lot of work, and now I have a baby and it’s really hard to find the time to do all these things I used to do pre baby.

Mindy:
Yes, it’s super easy to sit here and tell you all the things that you should be doing, and it’s a lot harder to be the one hearing it and be like, “Oh yeah, I could totally fit that in around all of the baby stuff.” I remember when my babies were little, I thought I would have time to work.

Jenna:
Yeah. Same. I’m always like, “Yeah, I can do all these things,” and then you just… It’s a lot. It’s overwhelming. It’s amazing, but it’s just… For someone that is a business owner, it’s challenging it.

Mindy:
So how long would it take to create a look for your Pinterest pictures? I know that you want to keep a cohesive look for all of your branding. Do you have that already?

Jenna:
Yeah, so the great thing about doing the live event painting is I work with… There’s photographers on site all the time, and so I get all these beautiful professional photos taken of me throughout the event. So I have this backlog of all these photos, and it’s just a matter of uploading and categorizing and really thinking about keyword explanations that are searchable on the Pinterest. So if I just had uninterrupted time for maybe a day, I could do it, but for some reason I just haven’t found it, and I think it’s on me, so I just… And I was just talking about time management. It’s probably a time management thing, but if I had a solid two days, it would be up and ready to go.

Mindy:
So Tyler is going to, over the course of the rest of this month and all of next month, work on giving you a whole day to do this and then a whole another day to do this, and by doing that, he’s going to take the baby and do the diapers and the feeding and the everything so you can focus on this. And so that is Tyler’s homework assignment. What day, coming up through the rest of this month, works that you could do that? Or even a half day, I mean a whole day might be-

Jenna:
It might be a little bit much. So right now our son’s in daycare Monday, Wednesday, Friday, so it could even just be one of those two days, and maybe it’s half of each those three days, I just work on that.

Mindy:
And that could be just, “I know I have to do this, actually setting time on next Wednesday, I am going to sit down and just collect all of my photographs and on Friday I am going to start my Pinterest page and start uploading, and I’m going to upload a hundred pictures,” or however many you have. Start with something that’s doable and break it down into chunks because it’s probably overwhelming, and when something is super overwhelming, it’s super easy to just be like, “I’ll do it tomorrow.”

Jenna:
Yeah, it’s overwhelming, it’s tedious. And for me, what I struggle with is I would much rather be doing the fun creative stuff, and for things like admin doing things that are just for me a little more on the boring side, which are actually really crucial and important for me and my business, I just need to carve out time for that. So I will do that and Tyler will help me, right?

Tyler:
Yes. Fact.

Mindy:
And something to consider is hiring a virtual assistant, somebody to upload all the pictures for you, somebody to sort all the pictures for you. This is… However you want to break it down, the admin work can be really easy to pass off to somebody else. You have to set up the parameters that you want to make the work in or make them work within or ask them to work within. And then sometimes that can be a little difficult to figure out exactly what you need, but when you are very explicit with your directions, that’s when things get done the way you want them done.

Jenna:
Awesome. Thank you. I appreciate that. I didn’t even think about a virtual assistant because for me, I’m like I have to do everything myself, but yeah, why not make my life a little bit easier by handing that task off with super clear instructions, which I’m great at doing, so that’s good.

Mindy:
So in the next three to five years, let’s talk about your investment philosophy. Index funds are about as passive as you can get. You just put the money in there and then you never have to think about it again. Syndications, we have a syndication episode coming up. We’re bringing Jay Scott back to talk about what to do when your syndication doesn’t go all rosy and according to plan. And that’s something that I would want you to listen to before you invest in a syndication because I think that there’s going to be some syndications coming up that have some challenges.
Short-term rentals, you mentioned that you have the opportunity to buy your childhood home. That is fantastic, so long as there’s actually people who want to rent a property in your childhood city. So you said that you did think that there was opportunity there. A really quick homework assignment is just to hop on the short-term rental websites and see if there’s any other properties in your city, and what their availability is, because if they’re all booked up, that’s a great indicator that there could be more opportunity there, but if they’re all empty, I would want to know why.

Tyler:
That makes sense. Yeah. My parents who live there right now, the house is far too big for them. They’re both retired and hanging out. They actually, they Airbnb the entire home from time to time, and when they put it on the market, it doesn’t stay on for very long. It’s got a really big pretty view of the mountains and things, and so I think we feel good about… Obviously I built the financial model with a bunch of assumptions on vacancy and all of this stuff, and so we’ve gone through that analysis and tried to be as conservative as possible with vacancy rates, with the nightly rate that we’re able to charge, and the set of expenses and everything. But I feel, yeah, like we’re just in assumption mode and trying to validate those assumptions as much as possible, but we’re not going to be able to truly validate until we do one of these deals. I feel like we’re a bit in analysis paralysis right now with that kind of stuff.

Carl:
Yeah. I have two quick follow-up questions about the Airbnb. Number one, would your parents consider holding the note on it because that could be a huge benefit for you, and does the house need any updates or can you just turnkey and rent it out on Airbnb right now?

Tyler:
My parents are actively considering seller financing for us. They want to keep it in the family and everything, and so they’re incentivized to give us a reasonable deal and everything. So it’s a good situation, and so that’s definitely possible, and that would improve the cashflow profile if that were the case, obviously. And then in terms of updates, we could buy it and start short-term renting it today if we wanted to. It’s well taken care of. However, I think that there is an opportunity to drive additional cashflow by creating a second unit in the basement, potentially doing some hip camps in the backyard. It’s on three acres, so there’s a lot of room for improvement. So yeah, it’s a good opportunity if we can make it work. I think.

Carl:
One random comment about you, Tyler, is every time you mentioned the syndication or the Airbnb, it looks like you’ve really done your homework. You’re not diving into any of these things blindly, and that’s impressive because I don’t think a lot of people… Some people aren’t like that. They’re just so hell-bent on getting into a rental or whatever deal it is that they don’t do all the work, but it looks like you have and that’s great. I’m impressed.

Tyler:
Thank you. I appreciate it. That is the reason our cash balance is so high as well because we haven’t been able to deploy any of the cash, so I think it’s a double-edged sword, but I appreciate the comment.

Mindy:
If short-term doesn’t work out for this property, what would you do with it?

Tyler:
That’s a good question. I think we may look at long-term rental, although I think it would be more difficult to make it cashflow in that scenario. It’s a big house too. I actually not really privy on even how we would find demand for a long-term rental for such a big house. You don’t see many big houses renting for seven, eight grand a month or something like that. I feel like that’s not a common scenario, especially in the town that it is. So in terms of an out, we haven’t really thought through the contingency on that.

Mindy:
So I would give you another homework assignment of running the numbers as a short-term rental and running the numbers either as a long-term rental the way it is, or what would it cost to turn it into a two unit property and long-term rent that? What would it cost and what would it rent for on each side, if you could do that or top, bottom, or however you would split it up? I think that would be a good exercise before you purchase the property, because not every property makes sense, even if you can get it at a super low interest rate because your parents are holding the note, even if you’re getting it at a discount because it was your parents’ house, that doesn’t make it a good rental property, that just makes it a good purchase. But it doesn’t sound like it’s near where you’re at right now. It’s not something you would move into.

Tyler:
It’s three hours away. So not a place that we’d want to live, definitely a place we’d want to go visit, but a place that we wouldn’t want to live.

Mindy:
Carl, do you have any comments on what you would do, what you would do in their position in the next three to five years, investment wise?

Carl:
Yeah, I think what they’re doing is super interesting because there’s a lot of different balls in the air and most people aren’t like that either. Most people are hell-bent on real estate or VTSAX, and y’all are just trying a little bit of everything, but I kind of like that, it’s adventurous. On the other hand, it’s not like VTSAX where it’s going to be a slow and steady return. Y’all might knock it out of the park or it could go down in flames. Lots of variability. But you know this already.

Mindy:
Well, if you were in their position, wanting to get to financial independence within the next 10 years, starting at approximately $400,000 with all these different options, what path would you take?

Carl:
Yeah, well, I would say, again, that goal is super aggressive, so you’re going to have to do some extraordinary things, and it sounds like that might happen. You might have the liquidity event with a company and you might be able to really ramp up the Airbnb, but you’re not going to be able to take a conventional path and hope to achieve that. Just no way. You’re going to have to knock something out of the park and do something crazy. And if that’s your tolerance for risk, that’s great. Go for it.

Mindy:
Yeah. If I was in the same position, I would be looking at index funds because they are passive, which is what you’re looking for. They are fairly steady. Past performance is not indicative of future gains, but the index funds, I would make the foundation of your investment strategy, and then this short-term rental with your parents’ house, once I ran the numbers, it’s on three acres. It’s in a desirable location. It’s a big house that you could rent out. I have a big family and finding a property that can host all of us can be really, really difficult. I think there’s like 10 or 15 properties in the nation that can host all of us. So having these big properties is actually pretty attractive for short-term rentals. How many beds can you feasibly squeeze into there and get a comfortable place for somebody to stay?
You could probably fit a bed in every single room and in the living room and bunk beds everywhere, and that’s not a fun experience, but having every couch be a pullout couch and every bedroom, and in the basement, you’ve got several beds because all the kids could sleep together, and there’s a way to set up this property to make it comfortable to stay at while also maximizing the amount of people you can sleep. You can get some pretty high returns on your short-term rental if you can sleep more people. But more people means more wear and tear on your property. So that’s something to consider as well.
Of the three things that you mentioned, index fund syndication, investments in short-term rentals, the syndication is my least favorite, and the reason it’s my least favorite is because interest rates are so high, and there’s a lot of syndicators out there who talk a good game, but they don’t bring it when they really need to bring it. Like Carl said, all of our syndications did better than expected, but I think every single one of them did better than expected because of COVID. Nobody predicted COVID. Nobody had this… Well, lots of people predicted, but that’s another story. Nobody had this in their projected plan when they were pitching us this syndication, and then in 2020 there’s going to be this housing crisis and a big global pandemic. Nobody said that. So all of the numbers were falling short, and then COVID bumped them up and made them happen.
COVID bumped everything up anyway if it was running well. We had syndications with some pretty well-known syndicators. So my experience with syndications has not been exceptionally positive, and I’m not excited about syndications right now, but that’s me. So that’s just me giving you a cautionary tale to really, really read those numbers that they’re sharing with you, and just question everything. Make sure it sounds like this is actually legit, and because you’re a CPA, because you have this numbers background anyway, I think you would already do that. I’m just giving you a little bit of extra caution that you should really look into those because you don’t want to get involved in a bad syndication.

Tyler:
That makes a lot of sense, for sure.

Mindy:
Okay. Is there anything else that we can help you with today?

Tyler:
I’m good on my end. Jenna, you good?

Jenna:
I’m good.

Tyler:
Yeah. I really appreciate the perspective you guys in helping us think through this. It sounds like we have a little bit of homework and some good books to read and stuff, and yeah, we’ll dig into it from here.

Mindy:
Yeah, I have a couple of homework assignments that I’ve given you, and I’m really excited about the Printables one for Jenna, because that is… The sky’s the limit on the income potential there. I’ll send you a couple of articles and we’ll include those in our show notes on this episode as well. But there are… I think I even did a video with Cody Berman about this for the BiggerPockets Money YouTube channel, so I’ll share a link with that as well. But yeah, I think you’ve got a great financial position. I think you’ve got a lot of opportunities ahead of you, and I would have heebie-jeebies if I had $185,000 in cash. So I would say, look at what you feel is a comfortable emergency fund. Keep that. Look at the syndication that you were looking at. You said something like 30,000, 35,000 for that. Make sure that that’s really where you want that 35,000 to go. I think there’s always going to be opportunities for syndications, but again, this could be a really awesome syndication. There’s still a couple of people that I would invest with.

Jenna:
Awesome. Thank you guys so much.

Mindy:
Tyler and Jenna, thank you so much for your time today and we will talk to you soon. I can’t wait to hear about those Printables on jennasnewwebsite.com at Etsy.

Jenna:
Love it. Yeah, me too. I’ll keep you posted.

Mindy:
Please do. Okay. Thank you so much, guys. We’ll talk to you soon. Carl, I really enjoyed talking to Tyler and Jenna, and I was pleasantly surprised by their level of research that they’ve done into each of their anticipated investment strategies. I was really expecting to ask a question and have them be like, “Oh, I don’t know.” And they had answers for everything. That was really awesome. That makes me feel great about their options, and we had a couple of homework projects for them. And I think that once they dive into those a little bit deeper, they’re going to just come back with a more solid idea of where they want to put their money.

Carl:
Yeah, they were super impressive. I was a bit worried that what I saw, everything they wanted to do, maybe they saw someone’s post on Instagram and thought, “Hey, Airbnb is great,” but it turns out that’s not true. Whenever Tyler brought up any of these things, he talked about all the research he did on it and his spreadsheets, so they’re not going into any of these things blindly. They’re going into them from a point of a lot of research and a lot of thought.

Mindy:
All right, Carl, thank you so much for joining me today. I really appreciate you taking time out of your very busy remodeling schedule to talk to me and our guests, Tyler and Jenna, about money. Where can people find out more about you when you’re not remodeling bathrooms?

Carl:
Probably will be remodeling bathrooms for the next six months of my life, which is kind of fun. Maybe three months. It won’t be that long. They can follow my remodeling exploits at 1500days.com. We put a bidet in which greatly excites me in all the right ways. And my podcast, which is at milehighfi.com.

Mindy:
Thank you, Carl. I appreciate your time today. And that wraps up this episode of the BiggerPockets Money Podcast. He is Carl Jensen. I am Mindy Jensen saying, keep it real, baby seal.

Speaker 5:
If you enjoyed today’s episode, please give us a five star review on Spotify or Apple, and if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Mindy:
BiggerPockets money was created by Mindy Jensen and Scott Trench, produced by Kaylin Bennett, editing by Exodus Media. Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.

 

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