BiggerPockets Money Podcast

BiggerPockets Money Podcast 151: From Single Dad w/ $61K in Student Loans to Financially Savvy Real Estate Investor with Tony J Robinson

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You may know Tony J Robinson as the co-host of the Real Estate Rookie podcast, but you probably don’t know his backstory.

As a single dad working his way through college and student debt, Tony knew that he needed to have a plan in place to pursue his goals and find financial freedom. He also knew he didn’t want to repeat the same real estate mistakes as his parents.

He went from an engineering student, to owning a small tutoring business, to marketing, and finally landed a sweet gig at Tesla!

After paying off debt, creating a healthy reserve fund, and divvying his money into over 20 different checking accounts (yes, 20+), he was able to reap the rewards of smart financial management and chase down freedom through real estate.

If you’re trying to consolidate debt, find ways to make more money at a job, or leverage creative funding to finance your next deal, Tony has a solution to your problem.

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Listen to the Podcast Here

Read the Transcript Here

Mindy: Welcome to the BiggerPockets money podcast show number 151, where we interviewed Tony Robinson, the new co-host of the real estate rookie podcast, and hear how he is building wealth through real estate.

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Tony: Find a plan that resonates with you. Right. Like personal finances. Like there are so many different opinions from so many different people that if you try and listen to everyone, you’ll just end up confused and you’ve got to find a process that works for you.

And for me, I took a little bit of the Dave Ramsey. I took a little bit of my own stuff and I’ve just kind of like found the system that works for me. And I’ve, I’ve really found my groove. So my thing is expose yourself as much as you can, but then find the system that works for you.

Mindy: Hello? Hello? Hello. My name is Mindy Jensen and with me as always is my fantasy football world champion.

Co-hosts Scott trench.

Scott: That’s right. Thanks for that first place introduction, Mindy. Okay,

Mindy: got it out. You're here to make financial independence less scary, less just for somebody else and show you that by following the proven steps, you can put yourself on the road to early financial freedom so you can get money out of the way and lead your best life.

Scott: That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate and start your own business or build your own cash flowing short-term rental business. We’ll help you build a position. People of launching yourself towards those dreams.

Mindy: Scott. I am super excited to have Tony on the podcast today. He is the new co-host of the real estate rookie podcast. He made his debut last week and you can listen to the rookie podcast every Wednesday at biggerpockets.com/rookie or wherever you find your podcasts. I like Tony story because he has hit upon some adversity in his.

Past his father lost his job at a very early age. His parents ended up getting divorced because of it. And he learned a lot of lessons from these trials and tribulations that happened to his family. And he didn’t let that define him. I think that’s so important. I think that’s a, a real hallmark of people who are successful is yeah.

Everybody has problems. Everybody has an issue that they hit. And when they let it define them, that kind of stops their forward progress. And Tony is like, I am going to be a trillionaire and I am just going to keep on going. And he is well on the way to financial freedom.

Scott: That’s right. Yeah, he’s on, he’s on a fast tracking it now with just a couple of years left, it looks like to being in a really, really, really strong financial position rather than just a really strong position, financial position that he’s in today.

You know,

Mindy: what I really like about his story is that he, it doesn’t stop with financial independence. He’s not looking to quit his job. And that is, I think a lot of people really focused on the archery part of fire and they don’t focus so much on the FII part of fire. And I think it’s, I think it’s more important to focus on the FII part.

And, you know, you might not like your current job, which isn’t the case with Tony, but I think working is really important to doing something productive with your time. Every day is really important to your mental wellbeing.

Scott: Absolutely. Yeah. Well, should we bring it in?

Mindy: We should. Tony Robinson from the real estate rookie podcast, welcome to the BiggerPockets money podcast.

I’m super excited to have you today. How are you?

Tony: I am doing well. This is kind of like a surreal moment for me to be sitting here with the two of you talking about just me. So I got to get used to this. This is, this is going to be fun.

Mindy: This is the all you show. We want to know everything. So. Down and dirty.

What is your journey with money? Where does it begin?

Tony: Yeah, so, I mean, for me, you know, I’ll probably have to take a far back, right? When I was a young kid, my parents separated when I was three years old and a lot of that kind of stemmed from like money fights and money problems. My dad was a general manager for this company.

He’d been there almost two decades with very short notice, stand up, going bankrupt and land him off. And I think it was a very kind of difficult thing for my family to deal with. You know, um, my dad was the breadwinner and, and they had built this life around, you know, his income. And when that went away, you know, they, I think they had a hard time coping with that.

So I learned from a very early age that, uh, security isn’t a job. You know, security, isn’t a W2 security is being able to provide for yourself and provide for your family. So, you know, I’ve always been kind of coached early on that that’s the way that you want to go. And then as I grew up, I say mostly with my mom, after my parents separated.

And for us, you know, w I wouldn’t say that we were, we were anywhere near poor. Right. But we didn’t. So didn’t have like a lot of discretionary income to spend, you know, like when I, when I went school shopping, we put clothes on layaway. We lived in apartments my whole life, and we moved every couple years because we weren’t, we’ll go up and we couldn’t really afford to stay where we were.

So I definitely grew up with kind of this scarcity mindset around money, and it definitely took me a while to kind of, kind of shake that off. And then I also became a dad when I was 16. So that definitely changes your perspective around money, you know, when you become a parent super early. So there was always, I think a lot of.

You know, kind of pressure on me internally, mostly to make sure that as I stepped into, you know, the, the adult world that I was able to, to provide for him and, and kind of build a life for my family in that way. So yeah, that, that was that’s kind of my introduction to money was, was, uh, all those different experiences.

Scott: What was your personal financial positions? Do you have any assets or any, any job whatsoever when you became a dad?

Tony: You, I worked part-time at a shoe store, so I was, I was selling tennis shoes in high school. So, you know, I mean, that was making like minimum wage at the time. So nothing, nothing too exciting.

Scott: What kind of happened next there w with that money story, you know, you’re a dad you’re finishing up high school. What does that look like for you?

Tony: So after I graduated high school, uh, I go to college and my initial focus was to become an engineer. You know, it was always decent, you know, in math. And, and I actually met someone when I was a kid and he drove this really nice car and I asked him, I said, Hey, what do you do?

And he said, I'm an engineer. And I was like, okay, cool. I'm going to be in a junior life. That was, that was how I made that decision and just kind of stuck with me. So I go to college and I'm doing really well as an engineering student. I get a job offer from Chevron. They're really big here in so Cal and they've got refineries down here and whatnot.

And like the year before I’m supposed to graduate, I make the decision that I actually hate engineering. So I switched my, uh, business. Uh, it takes me a few more years to graduate. When I graduate with a degree in business.

Scott: What, what did you, where did you go to college and how did you

Tony: finance it? Uh, I went to a local Cal state.

It's called Cal poly Pomona. It's Cal state here in so Cal and I've financed it with all student loans and looking back, that was probably one of the dumbest things that I ever could have done. So let me take a step back. So, you know, I talked to you about like, what money was like for me growing up, right?

Like things were always kind of tight and because I was a teenage parent, I got a lot of grants to go to school. Like California funds. A lot of kids go to school that way. And I actually had enough grant money to cover all of my school expenses, discover my books, my tuition. But after they gave me the grants, they also said, Hey, here’s some loans if you want them.

And at the time it was like, I dunno, I think I was getting like, $12,000 a year and student loans. And when I saw this money, I’m like, man, they’re just going to give me $12,000. Like, you know, there’s no strings attached. Like I didn’t understand like all the other consequences surrounded by that. But you know, you put $12,000 and 18 year old kids face and it’s kind of hard to say no.

So I accepted all those student loans. So the grants paid for everything, but I use the student loans to kind of help supplement my income and things like

Scott: that. Awesome. So it sounds like what I’m gathering from you is that you, if you could go back, you would have you think you could have found a way to graduate entirely debt-free which you didn’t.

Is that right?

Tony: 100% like the, the loans were not needed at all. Like, this is how irresponsible I was at the time. So like, when, when I got the first disbursement of my financial aid, I went out and bought two iPhones. I bought one for myself and about one for my girlfriend. Like that’s how unnecessary that money was, but yeah.

You know, I, I just didn’t make the connection at the time.

Scott: And what year is this? Just to get a kind of,

Tony: this was 2009. So I started college in 2009. Okay, great.

Scott: So what was your position upon graduating college then? Was it 48,000 in student loan debt?

Tony: Yeah, so a little bit more because it actually took me six years to graduate because I made that switch in my major.

So I graduated in 2015 from college, you know, and yeah, I had this kind of big mountain of student loan debt that had built up over the time. And I was working in marketing when I graduated. And, uh, I actually had five jobs. The year that I graduated from college.

Scott: What was the total amount of debt?

Tony: It was at that time, it was about $61,000.

I want to say somewhere around there

Scott: for a year.

Tony: Yeah, about 61,000. So I, you know, I graduate and it’s so funny. One of my professors, he actually hired me. I was working in marketing at the time. I was working full time while I was going to school as well. I was working full time in marketing and right before I graduated, one of my professors came to me and said, Hey, I have this company that I started.

I’d love to hire you to help like run our marketing team. Uh, he’s like, you’ll, you’ll get to work from home. He was like, I’ll pay you more than what you’re making right now. And I said, great, you know, this, this is awesome. So I graduate, I go on this vacation with my, with my family to celebrate. I come back, I start work.

And six weeks after I started that job, my professor fires me and he says, Hey, I don't have the money to pay you anymore. Right. So, so I'm, I'm six weeks post-graduation I just resigned the lease on my apartment because I had this, you know, this first big boy job. Um, and then I ended up getting, let go. So I bounced around from a couple of different jobs, you know, I think I stayed at one for like four weeks and then I went somewhere else.

I stayed there for six weeks. And as I’m at one of these jobs, I get this random message from someone on LinkedIn saying, Hey, you know, have you ever thought about working for target? And, um, you know, I was like, I don’t look good in red and khaki, you know, definitely not something I want to do, but they said, Hey, it’s not working in the source.

It’s actually working in distribution and supply chain. So I ended up taking that job. And, um, I’ve been in that same kind of career path. I’ve switched companies since what I’ve been in that same kind of supply chain distribution career path ever since. But the lesson that I learned from that is that you typically are able to accelerate your income as you switched jobs.

Right. So when I first graduated from college, I think the first job offer was like $37,000 a year. But by the time I got that last job offer that year, I had more than doubled my, my annual income and that wouldn’t have happened. Had I stayed at the same company and I’ve been able to kind of use that same process of like jumping from one company to another, to help increase my income as well.

Since then,

Scott: I mean, what was your approach to money management upon graduation? Were you, um, you know, with that first job, it sounds like you’re making less and you’re able to increase your income with, with these switches, but were you able to start a humiliating wealth? Were you spending almost everything you had?

Were you disciplined with budgeting? How, what did that look like upon graduation

Tony: for you? So I knew what I should be doing. Right. Like, you know, I’d read the books now. I, you know, I went through like the financial peace university, like I had the workbook and all that stuff. So I knew what the basics were and I don’t want to seem like I had a budget, you know, but I wouldn’t always stick to it.

I had a car loan, a little bit of a credit card debt, things like that. So I was kind of working, I wouldn’t say that it was, you know, radically out of control, but I definitely wasn’t as disciplined as I am today with it. How

Scott: would you kind of describe your maybe like peak? Like where does your position kind of get maybe the worst or the lowest point here

Tony: in the, in the story?

Um, so, I mean, I would say the worst point was in the summer of 2013, so I was still in college actually. And you know, I’ve been interning at Chevron all, you know, all throughout my college years when I made the decision that I didn’t want to be an engineer. Obviously, I couldn’t go back to 10 at Chevron and it was a paid internship.

So what I would do is I would work there during the summer, make a decent chunk of cash or in the summer I’d use that money to help kind of finance my life during the school year. So the first summer that I wasn’t working there, I was working like some minimum wage jobs somewhere, you know, just trying to make ends meet and things were super, super tight for me.

And I’ll never forget this day. It was like middle of July, 2013. I’m at home with my son and he’s, he’s sick. You know, he’s, he’s got a fever, he’s coughing and sneezing and have been going on for a couple of days. And you know, I’m like 22 at the time. I’m like, man, I gotta, like, I don’t know what to do.

Like I should take him to urgent care. So whatever we get in the car, we started driving there and mind you, my, my AC is broken. So we have to pull over like three times on the way to urgent care because my son’s like that I’m too hot. Like, I feel like I’m gonna throw up. So we’re pulling over so he can try and throw up.

I get to urgent care. And they say, know, check them in and letting them know what was going on. And they’re like, Hey, it’s a, it’s a $15 copay. And at the time, my account was in the negative. Like I had no money. Like I owed the bank money and I said, Hey, you know, I don’t have the cash. Like, can you bill me later?

You know, can I do something else? I just eat my son to get seen. And they’re like, I’m so sorry. But without the $15 copay being paid, we can’t take him in. So I had to call my sons, my son and his mother. We weren’t, we’re not together. So I had to call her husband. And say, Hey, can you guys please come meet me at the urgent care to pay this $15 copay?

And that moment for me, it stuck with me so heavily because I, you know, I, I realized that I’d never want to be in another position again, where I, I’m not able to provide for the people that I’m supposed to provide for. So that was definitely a low moment for me. Um, and since then, I, I think that’s, what’s really lit the fire under me to make sure that I can, you know, find that financial success that I’m looking

Scott: for.

So let’s dive into this because it seems like a big turning point here. What was your position financially at that moment? We had the student loan debt. I imagine we’re racking up towards that 60, Hey, number that you ultimately end up. Are there other debts, credit card debts, those types of things

Tony: layered on top the credit card debt.

Wasn’t too much, maybe like a couple thousand bucks, but I did have a car loan and really just not. Managing my expenses to make sure that obviously, right. Like if you’re in the negative, it’s because you’ve got more money going out than what you’ve got coming in. Um, so it was definitely like a wake up call for me to make sure that, that, Hey, you’ve got to be disciplined because it’s not just about you.

Right? It’s like when you make poor financial decisions, now they’re impacting the people that, that depend on

Scott: what changed about your, your approach to money following that.

Tony: Yeah. Couple of things, right. One is that I realized that. I needed to find a way to automate my budgeting. Right. And, and I needed to find a way to take some of the, those decision points out, because I feel like when, when you have to make a decision, you people typically tend towards the path of least resistance.

Right. But if you can automate things and take the decision making out of it, then you can find success. Um, second was that I needed more money, right? Like I just, I needed to find a way to actually generate more income. Because if I’m only relying on this one source or like the resources that I had at the time, it wasn’t enough.

And then the third was that I needed a cushion, right? Like I needed to make sure that there was some kind of financial runway emergency fund, whatever it is to make sure that when, when things did go South, I had enough breathing room to, to still be able to live and provide for my family.

Scott: Nice. So how did that translate?

Did you begin working extra through the second part of college? What did that look like? Let’s start with them. Maybe they need more income. How did you figure out a way to generate more income? How long did that take you?

Tony: Yeah, so man, I, I, I tried a lot of different things in college. Like to try and generate more income.

I tried. Selling stuff online. I tried like blogging and podcasting. I tried so many different things, but the, the kind of side hustle that I ended up finding that works really well for me was, uh, tutoring. So again, you, I mentioned that I was an engineering student. I took every math class that you’ve ever heard of and probably some that you had.

And like I took multi-variable calculus in three dimensions. Right. So, you know, I’ve seen all, all the math there is to take. So I started tutoring kids and in my neighborhood, right. And it got to the point where I actually had two other tutors working with me. Right. So like I get people calling me and I didn’t have enough time to go through to all of these kids.

So I’ve found other people to start working with me. So, you know, I had my regular job, you know, my part-time job at the college that I was working with. Then I also kind of built this tutoring business that was, you know, doing pretty well. I think it was charging like 50 bucks an hour at the time per kid, you know?

And I had like four or five, six kids that I was tutoring multiple times a week. So it ended up helping me kind of close that gap. Do

Mindy: you still do that? Cause I have a child taking advanced math that I’ve never even seen before. I don’t know what that,

Tony: yeah, it’s, it’s been while I’m, I’m probably a little rusty now, but uh, I’ll see what I can do to help me for you.

Scott: Isn’t it strange or ironic. Maybe it’s a better word that, you know, money is theoretically this game, this mathematical game, it’s very simple mathematically. Right? You spend less than you earn and then you invest it and you compound it. Right. And yet, so many finance professionals, so many math. Geniuses are folks that are taking these very admit advanced math classes, struggle with these basic concepts of personal finance for a little bit.

Like, I don’t know where I’m going with that, but do you think that there’s any, like, do you think that’s interesting that you were studying these mathematical concepts and yet struggling yourself with the math of personal finance to a certain extent.

Tony: Absolutely right. Because you, if we think about it, you’re, you’re taught math almost every single year from the time that you’re like five years old until you’re 18.

And even further, if you go to college, but when it comes to personal finance, I’ve had zero classes, you know, from elementary to junior high to high school, to college that talked about. About personal finances and everyone’s got to kind of figure that out for themselves. And unless it’s a normal part of the conversation, mostly I just don’t really take the time to figure it out.

And they just, you know, they, they see the money coming in and they hope that there’s enough to capture everything that’s going on, but because it’s not a normal part of the conversation, most people don’t have the discipline to actually put the processes in place to make it work.

Scott: Yeah, it’s just, it’s just a thing.

They’re like everybody, everybody can struggle with this, including the folks take in multi-variable advanced math, three pre calculus, whatever you described it as, um, and folks who manage business finances for a living. So don’t feel bad if you’re overwhelmed by this stuff at first, if you’re and you’re listening to this.

Okay. So . You were starting to tutor and find other ways to generate income. By the time you graduate college, are you able to take care of some of that credit card debt and the car payment or what’s? What is your, did we get a complete picture of your finances with the 60,000 student loan debt? Or was there a little bit more, or some other color to add to that?

Tony: There were still some credit card data, and I don’t remember the exact numbers at this time, but you know, I probably still had like a couple of thousand dollars in credit card debt. And I also have like the car loan, but at that time now that I was making more than I’d ever made before I was able to actually like save, right.

Like I had never really had a savings. Like I had a savings account, but you know, there just wasn’t much in there. So like my focus after graduating was like, how do I kind of try and live below my means, start building that savings. And, you know, honestly it wasn’t a big savings at the time, you know, maybe, actually I won’t say that because to some people that definitely is, but you know, I might’ve had like a couple of thousand dollars in my savings account at that time, you know, like shortly after graduating and saving that money from that first job.

Okay.

Scott: And what was your kind of, did you have a philosophy or were you thinking about this at the time in terms of whether I should save that money up or begin paying down some of my debt or begin investing?

Tony: Yeah. So the investing piece, I always knew that that’s where I wanted to go, but I knew that I didn’t quite have like the capital or the experience at the time to, to really tackle that.

So at that moment was really just more so about. Okay. How do I kind of, we start setting a foundation, um, so that when I do get to that point, I can, I can make it happen. So it was about trying to reduce some of the debt while also. Focusing on the savings, you know, Dave Ramsey disciples. So he’s really big on having a very little emergency fund to start and like aggressively attack the debt.

But, you know, again, I, I always wanted to make sure that I had a little bit of cushion, right. Because I, I never really knew what was going to happen. So it was a little bit of both building the savings while also trying to limit creation of new debt while burning down some of the debt that was already

Scott: there.

When you said you, you knew you always wanted to be investor. Were you aware of the concept of financial freedom or passive income upon graduation, or was that kind of something you discovered in the following years?

Tony: So my dad, back in 2006, he had started a real estate business. He was essentially wholesaling homes to people who lived in California for properties that were in Michigan.

And he was doing really well. He actually ended up going full-time in that business. And I think they ran it for about two years. Um, and then 2008 happened. And it just literally the bottom fell out, but as he was doing this, he was, you know, kind of communicating to me, it’s to say tastes like, unless you want to get up and go to a job every day for the rest of your life, you need to have some kind of passive income coming in.

And his thing was always, you know, real estate is a perfect way because the people are going to pay their rent every month, every single month. And after his business kind of, after it came to an end, he told me that his biggest regret was that. He wholesaled everything as opposed to holding some of those properties for himself, you know, he’s like, man had, I just held some of those properties.

I would have been a much better position, you know, post-crash so, you know, again, a lot of my dad’s kind of, I won’t say mistakes, but a lot of the lessons that he’s learned, um, have really impacted how I view the world. So it was, it was that conversation to kind of let me know that I needed to become an investor.

Mindy: It sounds like your dad wasn’t making mistakes so much as things were happening to him, he didn’t have any control over the company going bankrupt. He had no control over 2008. It’s not like he’s the only person that lost money in the stock market and the real estate market in 2008. You know, I like that, that you’re still being able to take lessons from him.

Having a source of passive income is such an important lesson to learn. And I think along with personal finance, that’s not taught in schools and there’s so many ways to make passive income or passive ish income. And that really needs to be taught more in schools.

Tony: But I, I agree. Right. And, and if I can add one thing, Mindy, so, um, you know, my son’s 12, almost 13 now, and I’m making a point.

To talk to him about, you know, our real estate business about our personal finances. Like, I want that to be a regular part of the conversation because, you know, if, if I’m being honest in a lot of their communities and people of color, you know, like the, it’s just not part of the conversation. Like we don’t talk about how to leverage debt effectively.

Like a lot of people and you know, the black and Brown communities have debt, but they’re not using using it as a tool to build wealth. They’re using that as, as like a, as an anchor, right. That kind of holds them back from building financial freedom. So. I want to make sure that he understands what an investment is, what an asset is, what a liability is and how to use these things.

So I definitely appreciate that. My dad shared those things with me, and now I’m trying to do a tenfold with my son to make sure that he understands. So we played like the cashflow, uh, app board game all the time. Right. And he’s got it down, you know, he, he knows when to buy won’t sell. So we’re just trying to make sure the, the, the everyday conversation in our family.

That’s

Scott: awesome. I love that. Going back a moment here to story with it sounds, I’m developing this picture of a position with $60,000 in debt, some personal debts and a rapidly expanding income across that first year, and maybe a lack of clear framework for how to deploy any excess cash. That you are generating.

I’m also gathering a picture based on some of the high levels we discussed of a pretty frugal lifestyle. That’s that’s accompanying that. Is that, is that a reasonable statement? Restatement of the position there?

Tony: Yeah, that, that that’s a fair statement, but I will say the, that I wasn’t extremely disciplined at that point where like I had these kinds of ideas about what I wanted, but, you know, I would still.

Every now and again, buy something on the credit card writer or, you know, I wasn’t aggressively paying down the car loan debt, but I knew that these were things that I wanted to work towards. And that was, that was 2015. It wasn’t really until 2018, about three years later, I had since changed jobs where the income really kind of winds up.

And then that’s when I was able to apply a lot more of that excess income to some of the personal financial goals that I had.

Scott: Nice. And so can you walk us through, was that turning point, like when that occurred?

Tony: Yeah, so the job, uh, target, um, and I ended up getting another job with, with Tesla. So that’s where I work for today.

And, um, you know, it was, it was a promotion, right. I was able to increase the scope of my job and obviously that comes with a, with an increase in pay as well. And I had done a pretty good job of, um, like keeping my. My expense is pretty much around the, the old income. So I had some personal goals in life.

I ended up getting engaged to my girlfriend of, uh, I think it was like 10 years at the time we went to buy on a personal residence together as well. So those were two things that I wanted to kind of make happen before I jumped into the investing piece. And then once those two boxes were checked, two boxes were checked.

That’s when we kind of went head first into paying down a lot of stuff that we wanted to pay down. Um, and then taking all that extra income and putting it into the real estate investing.

Scott: What year would you say that? Do you, you were kind of getting really disciplined. Maybe you, when, when did you got married, bought the house and began to really begin the investing approach.

Tony: That was 2018. So I want to say we got engaged actually in October, 2018 and that’s when we got the house. So like at that moment, uh, leading into like summer or fall 2018 is when everything kind of changed for us. Okay.

Scott: And at this time, without going to any. Crazy specifics with this. We have a, I assume a mortgage on the house.

We have some remaining student loan debt and any other credit card or vehicle debt and things like that.

Tony: Yeah, so my fiance had a car, right? So we, you know, that, that, that came over as well. She had some student loan debt. That’s almost actually mostly paid off as well. So, you know, all of our debts kind of came together now, but as we’re building, right, we’re trying to be strategic in how we pay off some of the debts.

Like for example, we have a car loan. Right, but we've got a pretty good interest rate on the, on the loan where it's, you know, three, 3% and some change. But in order for us to pay that off, we'd have to sell off some of our stocks, but our stocks have been doing really, really well lately. Right. So it was like, do we want to sell stocks that might gain 10, 15% in a year for a car loan is two and 3%.

Probably not. Right. It maybe just makes more sense to pay that off, pay that interest, but still let the Sox grow. Uh, at the rate that they’re growing at. So we’re, we’re trying to be strategic and not just dump all of our cash into paying off the debt, because we know that we’ll lose some of that, that growth

Scott: there.

That’s awesome. Let’s start with the fundamentals. I assume that you guys, uh, spend less than you earn as a household in order to fundamentally to achieve that. How do you think about your budgeting and income?

Tony: Yeah. So we were really fortunate where we might live on, I don’t know, 50% of our income, right.

And the other 50% is what we’ve used to kind of build our emergency savings and, you know, invest in real estate in terms of like the actual budgeting. And this kind of gets into my crazy kind of, uh, a way of making these things automated, but we’ve got, uh, 24 checking accounts. And each checking account represents a different budget line for us.

So we’ve got a single checking account for the mortgage, a single checking account for like all of our memberships, you know, like a, the gym, the, you know, all the other things we pay for. We’ve got one for, uh, utilities. We’ve got one for like all of the different line items that you can think of. We have a checking account for, and the way that we have it set up is that whenever we get paid.

All of this money automatically deposits into these different accounts and we have one debit card and that debit card aside to the account that says spending. So whenever we want to buy something, like if we’re going to the grocery store, we’ll transfer money from the grocery checking account into the spending account, and then we’ll pay with that debit card.

So we’re not walking around with 30 debit cards when we have one, but we transfer money in and out, depending on what category we’re spending from. And that’s been super beneficial for us because it can be hard to budget when all of your money is just in one big bucket. Right. And you see all this money and you don’t like, man, do I have enough left for everything and all that.

But when you can see like, Oh groceries and there’s X dollars left in the grocery account, we know how much we have to spend or entertainment and dining out. And we know, okay, Hey, for the next two weeks, there’s so much we have to spend. So it’s really helped us kind of take the thinking out of the budgeting because it’s already set up and I might go in know every couple months and just like update how everything’s supposed to be, you know, falling into these different accounts.

But for the most part, it’s on autopilot for us.

Mindy: I’m sorry. Did you say you have 24 different accounts?

Tony: We have 24 different accounts.

Mindy: Okay. And does it

Tony: work for you? It works like super well, my, I will say that my fiance was, you know, kind of looking at me like I was crazy when I said, Hey, I just opened up 24 checking accounts, but you know, she’s, she’s really bought into it now because she sees just how easy it is for us to manage our finances now.

And

Mindy: you’re the only person that this has to work for. I don’t know that I could handle that, but I’m also not sharing finances with you. So how you handle your finances only has to work for you and your fiance. And that’s awesome. It sounds similar to the Dave Ramsey envelope system. Except it’s online.

You’re not carrying around all these envelopes of cash. Can you imagine if you dropped your, your wallet and then just all your cash has gone like that? I love the idea of paying cash for everything, but I don’t like the reality physically paying cash for everything, especially now in COVID. I don’t want all that change.

I don’t want to deal with all of that. So this just sounds like an electronic. Cash envelope system, which is perfect. And you said you’re living on about 50% of your income. Do you take 50% out of the paycheck and put it into investments before you do all of this? Or do you do it afterwards?

Tony: So a big portion of my income is, uh, uh, restricted stock units.

So like stocks for the company that I worked for. Um, so those as, so as those come in, we just like pretty much ignore those. Right. And those just kind of go into to a separate account. So like we live off of like the base income and that’s where all the expenses get paid and the mortgage and everything.

But as the, the stocks come in, we just kind of set that money aside and don’t even add it to like the regular accounts that we have.

Mindy: Okay. And does she work as well?

Tony: So furloughed, uh, during COVID and then she, she actually ended up starting her own business. So she's got like a cotton candy cart and party rentals businesses.

She started during COVID and it’s actually been pretty successful because there’s been a lot of like drive-bys and things like that. And people trying to get creative. So, uh, most weekends she’s kind of out running her business as well.

Mindy: Oh, that’s awesome.

Tony: Yeah.

Scott: So is most of your excess income in the form of these, these stocks or these types of things?

Or how are you accumulating cash with which to pay down debt and, and invest in.

Tony: Yeah. So it’s mostly stocks. And then as we need to pay for different things, then we’ll sell off, uh, you know, w whatever percent percentage of the stocks we need to, to fund whatever it is we need. So if we’re going out and we’re putting money down for a property, we’ll sell off just enough to, to, to, to buy the property.

We’re getting married, like literally in two weeks. So we, we needed a little bit of cash for that. So we’re, you know, we’ll pull out, but we try and eat as much as we can. Thank you. On November 21st Oh

Scott: nine two.

I’m also getting married in two weeks.

Tony: You’re also getting married in Cabo, San Lucas or

Scott: Fort Collins, Colorado. That’s ridiculous.

Tony: Congrats, congrats as well. Yeah, but you know, so as, as we need the funds from the socks, we’ll sell off a little bit, but we really want to try and keep as much as we can in there.

Um, because it’s, it’s done so well from a growth perspective that we, we don’t want to lose out on any of those gains.

Scott: Got it. Okay. So, so I love this. It sounds like you have an extremely disciplined approach to spending and money management and then a large amount of variable upside. This sounds just like a situation.

We had a parallel situation recently where we reviewed, uh, Nick groovers finances on episode one 49. And our advice to Nick at that time was to basically kind of think through it the same way you’re thinking through it, where he has a significant portion of his income, which is. The salary and then a significant portion, which is commission income.

And the idea is get really disciplined and find a way to live within the means of your base income so that all of the upside can go towards wealth, accumulation, investing, debt, paid out those types of things. And so I think that’s a fantastic approach to that. And, um, Yeah. I mean, it sounds, it sounds like now you’re just making an asset allocation decision at the end of the day, about where the best, highest, and best use of these invested funds are.

Whether it’s keeping them in the stocks that you’re getting here or redeploying them into real estate,

Tony: I will say that it’s not easy, right? Like as you see your income start to go up, it’s very tempting to go out and start buying, you know, the, the toys and all these other things. Like I. I drove a 2008 Toyota Yarus with 218,000 miles.

Like we literally just got a new car yesterday only because of yours, like started dying on us, you know? Um, and even that we, we got like a $19,000 Nissan, right? So we’re, we’re not trying to live beyond our means, but it’s really because we know that if we. As you said, Scott, if we deploy this capital in the right way, over the next several years, that we can really truly change the financial trajectory of not just our lives, like for our kids and our future kids, kids.

So we’re really excited for what’s coming in here for sure.

Scott: So what is your vision for the next couple of years? What do you want to build towards, uh, in terms of, uh, a portfolio.

Tony: Yeah, so it’s changed a little bit. So with our recent pivot into the short-term rentals, our goal right now is to acquire a new short-term rental every quarter for the next two years.

And we feel that, uh, me and my partner, we feel that if we can achieve that goal, that at the end of two years, both of us would have the option. From an income perspective to walk away from our W2 jobs. Now, the sentence is not necessarily saying that we will, right? Because I, I, I liked the work that I do.

You know, I worked for a pretty cool company and I’ve got a really cool team, but again, like going back to the store with my dad, I want to make sure that there’s always the fallback option of here’s my own business. And I’m in control of my destiny. So that’s the goal for us right now is a property every quarter for the next few

Scott: years.

Got it. Okay. So wonderful. So property I recorded for the next two years and to become financially independent. Was that, was that the goal right after you got engaged a few years ago? No,

Tony: actually the, the goal, when I, when I got engaged was like, let’s just get the first one, honestly, like I just wanted to get started.

I said, Hey, you know, we can figure everything else out afterwards, but let's get the first one. Let's let's let's, you know, learn the ins and outs of real estate investing. And then we'll see where we kind of go from there. Um, and now that I've, I've closed in a few properties, initially, we were thinking that we wanted to go to the multifamily syndication route and we spent some time kind of diving into that, but we've kind of really found our niche with the short-term rentals because it really compliments our skillset.

You know, I'm really good at like the systems and the operations. My partner's really good at like all the details and managing the cleaners. And my fiance does a really good job with like managing the hosts and the, the, the designing. So like the three of us together built a really good team. We feel we can scale properly.

Scott: Well, let let’s walk through your very first purchase. How did you get involved in that very first rental?

Tony: Yeah. So my mom and my stepdad, you know, they’re, they’re from California, but they retired three years ago now to tree Fort Louisiana. Um, my stepdad had family out there and the cost of living is so much cheaper than, than California, where we live.

So their retirement dollars would stretch a little bit more. They moved out there, they bought a house for $25,000. It had been vacant for a few years. Um, they put another $30,000 into the rehab. And the property and it prepares them for like $90,000. Right. So they had some instant equity. And the cool part was that the bank that they found out they're financed 100% of both the purchase and the rehab.

And, you know, they weren’t real estate investor. They were just, you know, my mom and my subject, but they went out there and they made this really cool. Real estate transaction happened. Um, so when I saw that I immediately reached out to that same bank and said, Hey, can I do the same thing that my parents just did?

And they’re like, yeah, you can. So they gave me all the, the criteria, the guidelines. So I just went out. I started building my team and that market, um, I found a property and went through the rehab and placed the tenant and then, uh, spent almost a little over a year now that we’ve had that property rented out.

Scott: Awesome. And so you got the financing upfront for that rather than putting any cash in at all.

Tony: Exactly. So it was a zero money down situation for me to, to buy that first property. Awesome.

Scott: Okay. So, so what happens next in your real estate journey here?

Mindy: What happened next? I want to know was this special financing, because I know a lot of people are looking for zero money down loans and it sounds great, but I know that that’s also kind of hard to find.

So was this like a two or three K loan? And I thought that actually had to have money down two or USDA loan.

Tony: No. So this was, this was a local credit union, uh, in the, in the city that, that I was investing in. And, uh, my question to them was, Hey, if I find a property where the purchase price and the rehab is like low enough compared to the after repair value, where you fund the entire thing and they were like, yeah, sure.

And that was it. I will say though, that, that since COVID came on, but they’re no longer doing this, they’re only doing it on primary residences, but they’ve stopped doing it on a investment property. So I haven’t been able to leverage that same loan since covered it.

Mindy: Okay. I was going to say you are going to get 12,000 people emailing you after, right?

Tony: Yeah. So if you guys wanna hear the whole story, um, it was real estate rookie show tin, where I kind of go into all the details about how I made that whole deal happen.

Mindy: Okay. We will link to that show in our show notes, which can be found at biggerpockets.com/money show one 51. Uh, okay. Now let’s get back to where you went to next.

Sorry, I just wanted to jump in there cause I know people are listening. Like, wait, how did he get this? What’s the name of that bank?

Tony: Yeah. So from there, um, I bought the first property on my own. I ended up getting with the partner for the second property. Know it was, uh, my fiance’s cousin. So we bought a second property in the same town.

Use the same loan process and everything. And then we got that one renovated, rinse it out, um, and an album’s coming along as well. And then from there we picked up two more properties in Freeport. Last summer, we picked up our first, uh, Airbnb in Tennessee, um, in September. Uh, and then we just bought again another one in Joshua tree a couple of weeks ago.

And then we’ve got another one closing. So we, we scaled a lot during 2019 to add to our portfolio.

Scott: Yeah. So, so the, the big question I think Mindy and I have is kind of like, we just walked through your, your financial position. And it sounds like you’re not accumulating a tremendous amount of cash personally, from this it’s mostly stock and those types of options, but it’s also, it also sounds like you have the option to sell off those stocks.

And you’re finding creative ways to finance with very little down, at least on the first property. Can you give us a high level overview of how you’re financing these properties, whether it’s through bank financing or you redeploying, you know, you’re reallocating existing assets that you have or cash that you’re accumulating.

How are you doing that with the across students?

Tony: Yeah. So a little bit of all of that. So the first two properties were with that zero money down loan through the bank. So we were pretty much burned, but with no money down, the second two properties actually used a line of credit. Where my, my stocks, where the collateral.

So I was able to pull a line of credit against my stocks. We paid cash essentially for those two properties. And then the last two properties that we purchased, which were these short-term rentals, we just introduced traditional financing with the 10% down on both of those. And again, I’ve leveraged the cash from the stocks to, I liquidated some stocks and they use that money to pay for the down payments.

Okay.

Scott: So these are, these are kind of like, uh, Fannie Mae mortgages. We put in 10% down on those with the properties that you put, you purchased a 0% down where they, how are those finance? Are they 30 year mortgages? Are they, are, did you refinance them after the rehab into a different loan? Can you walk us through that

Tony: real quick?

Yeah. So the, I had a year term on both of those loans, right? So like the, the initial term, they were amortized over 30 years, but they were one year interest only loans. And at the end of that first year, I had to refinance into permanent financing. So we went to that whole process and we refinanced both of those.

And they’re now on 30 year fixed, you know, your, your, your standard mortgages. Um, so that’s, uh, that’s how we finance those two.

Scott: And do you have like a good 25% equity ish position in those properties? After the rehabs?

Tony: We do site the first property. Gosh, I want to say the mortgage is like one 55 somewhere around there and that one appraise for two 30.

Um, and the second property, uh, it’s about one 29 is our mortgage. And that would appraise for one. 75 if I recall correctly. So a decent spread on both of those, but that was the requirement going into it is that it had to be no more than I think it was like 75 or 80% of the after repair value for them to approve the loan in the first place.

Scott: Great. So if you're listening, what Tony is doing here is not really an uncommon, uncommon strategy for real estate investing. Many people will go in buy properties that need significant rehabs and use an interest only. Short-term one, one ish, 12 to 16 months. One to basically flip these properties. That process is usually called getting a hard money loan.

Your bank may have called it something different than that. Tony did. Was it a hard money loan?

Tony: It. Yeah, they didn’t call it a hard money loan and the costs were significantly cheaper. Right? I think my interest rate was like 6%. There were, there were no points that I had to pay as well, so similar to a hard money loan, but, but much cheaper.

Scott: That’s great. Yeah. And then obviously, even at 6%, you, you don’t want to finance long-term debt at, at 6% nowadays in 2020, right. You can get much better interest rates. So once you build up enough equity, you can then refinance out of them. You can do these loans with 0% down. If you’re able to buy and rehab the property cheaply enough and get that after a pair value.

It's just that that's. Extraordinarily difficult for many investors in most markets, because where it is, where you are able to do that with 0% down up and convince a banker, a lender to finance it a hundred percent for you upfront, that's a pretty inefficient hole in the market that investors like Tony are going to flood into.

So if you find that great, do it and the risk reward is that good, but it’s going to be increasingly difficult here over the next couple of years until we see a change in market conditions. Not impossible though. So

Mindy: I have a question you said, and you kind of glossed over it, and I’m really excited about this.

You said you got a line of credit against your stocks. Is that an employee thing or where did you get this line of credit? Because I haven’t heard of that and I would love to do that too. Um, I liked that better than selling the stocks because those stocks are on a tear right now. I dunno if you know this company’s doing a little while.

Tony: Yeah. So yeah, it’s not a company specific product. So like our provider for our socks is E-Trade but like fidelity offers the same thing. So if you have a certain dollar figure in stocks with these companies, they’ll all use those as collateral for a line of credit. And the interest rates are pretty good.

I want to say when I first opened it up, it was somewhere North of 3%. Um, and they fluctuate kind of daily depending on what the markets do. And I think now it’s up to 4%, but very, very quick and easy way to get access to your stocks without actually selling them.

Mindy: And then you just pay it back like a regular loan.

Tony: Yep. Yeah. So, and it’s actually up to you because it’s not like amortized or anything, right. So they’ll only charge you the interest and you can pay monthly on the interest if you want to, or you can just let it roll. Right. And then it’ll just kind of accumulate. If you want to sell some of those stocks paid off, you can.

So there’s flexibility in how you pay for it, but you don’t have to make a payment every month, which is the cool

Scott: part. So, this is just, just I’m curious. Cause I got a pile of money sitting in index funds right now. Could I take out a line of credit and then pay back the line of credit with just like the dividends on the index funds?

Is that an option that they automate or those types of?

Tony: Yeah. Right. So like as, as the, you know, I opened up that line of credit over the summer and there’s been growth on the money that I have. Set as collateral. So now like the spread between what I need to have in that account and what I actually have is grown.

So if I want to take those gains and pay off that line of credit, I can totally do that. Okay,

Scott: well, that's a really creative solution to that, that I've never considered. So you can get a line of credit against your income. You can get a line of credit against your stocks. You can get a line of credit against your home equity.

You can get a line of credit against a lot of different things. And hopefully that sparks some ideas and people who are listening’s minds about, Hey, if you’re interested, maybe there’s an opportunity here to do that.

Mindy: It sparks interest in my mind, and my husband is obsessed with Tesla. I am frankly, very sick of hearing about Tesla.

Look at this. Do you want to watch a video of them doing the drive around? No, I don’t. I D I’m glad they’re doing well. That’s great, but I don’t want to watch this video. And he talks about it all the time, but from his point of view, he would be like, no, no, it’s all the sock don’t sell the stock. How do you reconcile selling the stock versus holding onto it and just getting a line of credit?

Tony: Yeah. So one, there’s a limit to how much line of credit you can get. Right? So like, say that you put, I don’t know, $10,000 as collateral, they only give you up to like 20% of that as your line of credit. Right? So unless you’ve got like some, some really, really big amounts of money there, the, the amount of line of credit you can get as kind of limited.

And then for me, like I’m, I’m willing to sell the stock because it’s also. Um, I’m, I’m just trying to manage my risk, right? Like I could leave the socks in there and I’m hoping that it continues to go up, but there’s also the cost of me not buying this cash flowing asset that I know is going to push off X dollars of profit every single month.

And for me, the, the certainty of knowing that. I’m going to have this as a longterm rental or as a short-term rental. And I can get this very predictable income. That security is, is, is more important to me than leaving all of the money in the stocks and seeing that growth. So I’m trying to balance both, right?

I want to let the Sox row, but I also want to pull off, you know, when I, when I have good games that I can realize, use that cash to go fund smart acquisitions of, of real estate.

Scott: Yeah. Th th this concept is brand new to me, so I I’m trying to be cautious and how I am embracing it or approaching it. What you’re effectively doing is you’re leveraging against your stock portfolio, which is.

In some ways dangerous, but you can mitigate that risk by only borrowing a small, against a small percentage of it. For example, if 20% is truly the limit that really limits your, the risk of you having a catastrophic event here, because. You’re probably, if you’re investing for the very, very longterm, not going to have an event where you lose 80% of your equity and are truly underwater on that in addition to that, but what you’re doing is you’re saying, okay, I’m taking, let’s say if a a hundred thousand dollars portfolio, I’m taking 20 grand out of that.

And I’m using that as a down payment on another property, which is again, in and of itself leveraged. So you have to just be, be careful and understand the risks and benefits of that. But that is a really. Creative and interesting way that I’ve never heard of to accelerate real estate investing in something I’m going to have to noodle on and think about whether I’m going to use myself here.

So

Tony: that’s awesome. I’m glad I’m dropping some, some knowledge them. Yeah.

Mindy: Yeah, no, I’m really excited about this too, because you know, you said it’s a way to, to mitigate risk. I am struggling with how much of my portfolio stays in one stock. I have a lot of stocks that I bought a long time ago that are, you know, as, as you buy them and they grow all of a sudden.

Now Apple is 33% of my entire portfolio. That gives me the heebie-jeebies. I don’t want that. 30% of my portfolio in one stock. And this is where the index fund comes in. And we bought them a long time ago before we were really involved in the whole index fund thing. So, you know, I, I don’t want the lecture on buying stocks, individual stocks, but you know, there are some stocks, like, I think we bought Tesla like $20 pre split.

So, you know, it’s grown a little bit. And then now it’s a certain percent of your portfolio. When do you. Sell that, when do you diversify? When do you,

Scott: you know, cause

Mindy: like, I, I always go back to Enron. People who worked at Enron had all of their retirement funds in Enron or like 90% of their retirement funds at Enron.

And now they’re working because an run no longer exists. So at what point do you diversify? And then if you sell the stock because you don’t want 30% of your, your portfolio in one stock, then. You miss out on the growth, I believe in the stock, so I should keep it, but I also don’t want to, you know, it’s, it’s this, like,

Scott: I just fear that, you know, look, if, if let’s say, let’s say I have this problem and, and all your stock is in Apple at this point, if you follow Tony’s approach here and borrow against that now, even more dependent on Apple, not less because, because you’re leveraged against it, right.

Is that. Right.

Tony: Yeah. So I sell the socks as well as Scott. So I do have the line of credit, but also as I’m going to acquire a new properties, I’ll actually sell the sock as well. So the, the line of credit against the stock is only like a small percentage of what I’ve actually used, but typically I’ll just sell what I need to, but I hear what you’re saying, Mindy.

And for me, like, there are a lot of people that have been at the company that I worked for for like a decade. Right. So they, they got them when the stock was like really, really low. And they’ve, they’ve kind of seen it explode and their thought process. Hey, I’m, you know, I’m just going to ride it out. It’s been a good ride so far.

I’m sure it’ll continue to be a good ride, but again, for me, I value certainty and you know, I’m willing to give up some of that upside in exchange for that certainty of having it in, you know, a lower kind of volatility investment, like real estate.

Mindy: Yeah, I am excited about the idea of the line of credit.

And I definitely need to do more research. I would like if you are listening to the show and you use the line of credit frequently, or have, you know, more information about that, I’d love. If you would get in touch with us, [email protected] [email protected], because this is, this is like brand new information.

15 minutes ago. I had never even heard of that.

Scott: It seems so clear now that you could probably borrow against almost any asset at up to some limit, but wow. Yeah, I think it’s a, I think it’s a perspective changing piece of information you can share with your shared

Mindy: Tony. I want to go, I want to go have a conversation now.

Um, but I don’t want to dive way deep into that for this episode because that’s, I mean, we’re hitting up on time already anyway, but that’s fascinating. I’m super excited about this. W

Scott: we’ll move them back to your story here. So it sounds like we’ve got a sprawling portfolio across a number of areas around the country buying real estate.

Sounds like there’s, you know, idea, opportunity I’m going after that. Okay. Opportunity closes with lack, you know, no more financing of that type, for example, in Shreveport, but it sounds like you’ve got this groove now in short-term rentals that you plan to act pretty aggressively on over the next couple of years.

Can you share that formula

Tony: with us? In terms of like market selection or

Scott: what is it, what is it? You said you’re going to buy a one, one short term rental every quarter for the next two years. Sounds like it sounds to me like, that sounds like a formula to me, it sounds like, you know what you want, right.

You’re looking for how are you going to do it?

Tony: I mean, so we, yeah, so we, you know, we. We’ve got the capital, right? So we know that from a financial perspective, we can, we can put the money down that we need to. I think the challenge for us is going to start being like, can we actually get approved for all of these loans without having to go, like, you know, the commercial route, like we want to be able to, to, uh, capitalize on like these really attractive interest rates that we’re seeing.

So once we kind of max out our own personal ability to capture these loans, we’ll probably start looking for other folks to partner with. And it’ll be good at that point, because we can say, Hey, look, we’ve already kind of built out this model. Here’s the success that we’ve had. We just need you to come on and help us sign for the loans.

We can get this, this attractive financing. So that’s the goal, right? We’ll, we’ll max out as many as we can. And then what we’ll start bringing partners in to help us close the gap. And really, we, we landed on that goal of one every quarter for the next two years, because we did the backwards math of okay.

Our like freedom number is we want. $20,000 per month in cashflow for each of us. And based on, you know, what we think these Airbnbs can do and what our expense ratios are. We feel that, you know, we’ll be at 11 short-term rentals, if we can achieve our goal. And that should help us get to where we want to be.

Scott: So, so what, w could you walk us through, like what kind of short-term rental you’re buying? And it sounds like you’ve got something very efficient here. If you’re going to be generating that kind of income on just 11 properties, what is it that you’re doing?

Tony: So two markets that we’re kind of focusing on right now, we’re, we’re open to expand to more, but one is pigeon forge, Tennessee, which is right outside the great smoky mountains, which is like the most visited national park in America by far.

And then we’ve got Josh. Gentry California, which is another, uh, highly visited national park. And the, the good things about these two markets is that there’s very low seasonality. Um, so in pigeon forge, we’re going after a larger property. So our, our, our first cabin, there is a five bedroom, 3000 square foot property.

We’re looking for more of the kind of fit that, uh, that same size model. And then the Joshua tree we’re going after slightly smaller properties, because you don’t see the big kind of groups traveling to Joshua tree. It’s usually smaller, smaller groups of people. So we’re looking at like the two bedroom.

Range somewhere between like a thousand square feet give or take. Um, and we’ve got the infrastructure already set up. We’ve got our, our, our cleaning teams. We’ve got our handyman, but in these markets and now it’s just a matter of a kit you can find and fund the properties. That’ll kind of fit the mold that we’re looking

Scott: for.

Awesome. So it sounds like you’re off to the races. If you’ve got the capital, the teams and the markets and the numbers, I’ll figure it out news. You’ve got a formula there. Have you, have you seen, COVID impacting this business at all?

Tony: So in Tennessee, no, they’ve been pretty consistent in California when COVID first hit in March, they actually stopped at least in the County that we’re investing in and they stopped all short-term rentals for about a month.

So there was a lot of lost revenue there. So that, that always is, is a risk force, you know, depending on how COVID shakes out. But again, you know, we’ve, we’ve got the cash reserves where if we need to carry the mortgage for a month, um, we, we know that we can do that.

Scott: Awesome. And then, you know, on the flip side of that, are you finding better deals or bargains in this space for this type of rental, given the COVID environment and the uncertainty.

Tony: Not so much because both, both of the markets that we’re investing in, these are kind of a mature Airbnb markets. So there’s actually been more demand for Airbnb since COVID came on because a lot of folks just want to get away. Like a lot of the folks staying in our Joshua tree house, um, they’re local, but they’re just trying to, you know, Hey, um, I want to work from home, but not for my own home for a week.

And they’re in, they’re renting our cabin with a couple of friends. So there’s actually been a little bit more demand for Airbnbs in these markets.

Scott: That’s really interesting.

Mindy: Yeah. Natalie quality has said she just started a Airbnb, like in the, in the ADU behind her house that she just bought. And she said that as soon as she opened it up for rentals, boom booked.

And, uh, we rented a home in pigeon forge a few years ago for my family. It slept 60 and, um, I have a big family and it was a super awesome. Place to stay. Please provide toilet paper for your tenants, for your renters. Ours did not. That was my big beef there, but yeah, it’s a lot of the local people are going away just to get away.

I don’t want to jump on an airplane, but I could drive two hours and stay in an Airbnb. We’ve done that several times just because I’ve been in my house since March.

Tony: Right. Yeah. So w we’re we’re exceptionally excited about this opportunity with the short term rentals, because we feel like it’s, we’re still getting in early enough where, you know, everyone doesn’t know, you know, and we’re, we’re kind of, we’re, we’re trying to capitalize the best we can.

Mindy: I want to know about your reserve fund and because I, as soon as COVID hit and like, w it was March 13th, that kind of the world’s shut, or the U shut down and all of a sudden on bigger pockets, everybody’s saying, how am I going to pay my rent? Or how am I gonna pay my mortgage? How am I going to pay my mortgage?

I’m like, It’s been two weeks and you don’t have April’s payment already. You should have had April’s payment in February at the very latest and probably last July. So that was really shocking to me. I want to know what your reserve fund is in case they shut down short-term rentals again.

Tony: You know, so our, our goal right now is to build up for the short-term rentals, at least $10,000, uh, per property and reserves, as we built that up, we’ve got, you know, our, our own capitalist partners kind of set aside, you know, so if we, if there is an emergency, we know that we can kind of fund some of these properties, but that’s the goal is at least $10,000 per property and reserves.

Mindy: Thank you. I really, it, it broke my heart. When so many people were freaking out about how they’re going to pay their mortgages, because it has been going on a tear for so long. And then all of a sudden it’s slammed stop. It wasn’t even just like trickling off. It just, Nope, everybody’s closed. So that was what we’ve already been talking about.

Your investments. Let’s look into, we’ve got this new segment called the financial scan. We know you have stocks in the company that you work for. We know that you have a rental properties. Do you have any other investments? Do you do anything in like an index fund or 401ks or IRAs Roth areas? Anything?

Tony: Yeah, so, no, that’s all I’ve got. I thought about taking the money or it’s at least taking some of my income and putting it into a 401k. Um, but my thought process was what’s going to be more beneficial for me is if I invest into the 401k or if I take this extra money and I put it into real estate. So all I’m putting all of my eggs in the basket of real estate right now.

Um, and then I think once that business gets up and going, then I’ll look to look to diversify. But from there,

Mindy: does your company offer a 401k match?

Tony: They do not, which is why I made the decision not to, not to invest in it, but what they do offer as an employee discount or as an employee benefit is you get a discount on Tesla stock.

So I get stocks as part of like my compensation package, but then I also take a percentage of my income and I’m able to purchase additional stocks at a discount. So I’m leveraging both of those to increase the number of shares that I’m holding. Okay.

Scott: You’ve got an amazing why behind all of these things, by the way.

Um, which is great to hear it. You just have, it seems like it’s all really well thought out, which was nothing less than what should be expected from the guy with 24 bank account.

Tony: Okay.

Scott: But that, that’s where you want to get to. If you’re listening to this, you want to get to a place like Tony, where you’ve got a very clear. Mathematical reason behind every financial choice that you’re making across your spending, your income, your business, building decisions, those types of things.

Even if it’s dealing with the realities of student loan debts that are leftover and, uh, why I am paying those off right now, or, uh, why I, why I’m delaying on those right now and using something else, it can be good, bad or whatever, but until you get to that, and that that point takes years. To get to that level, right.

Where you’ve got that you didn’t have a why behind every one of your financial decisions during college and after graduation. I bet. Right?

Tony: I mean, th the only why at that time was because I wanted it. Right. So if I, if I bought a car is because I wanted it right. Or if I want, if I bought a TV is because I wanted it.

But now, like you said, it’s got, it has been this kind of, you know, decade of me making mistakes and learning and, you know, understanding what it is that I really want out of life. Um, and making sure that my financial decisions support that. Yeah,

Mindy: I think that’s a really good point. Scott. There is a reason why you’re doing this and being intentional with your money is so important.

There’s, it’s so easy to lose track of, you know, it goes back to your 24 bank accounts. It’s so easy to lose track of where that money is supposed to go. Oh, I’ve got five extra dollars. I’ll just buy this. I’ll just buy that. It’s only a dollar, but only a dollar adds up. So

Scott: I think it was great. I could not agree more.

Yeah. I think that’s just, it’s just, I was just reflecting on that when he was going through. Here’s why I don’t invest in 401k. Here’s why I buy Tesla stock. It may not even be, he thinks Tesla. I mean maybe, maybe he thinks does doesn’t stock is going to do really well. I, you know, it certainly seems to be, so

Mindy: Doug’s going to do really well,

Scott: but Hey, I’ll take some restock and if I can just buy it at 15%.

So I used to work at dish network.

Tony: Okay.

Scott: And I’ll tell you what. I didn’t have any particular faith in dish network stock while I worked there, I really didn’t. But they had a program that allowed me to buy the stock at a 15% off discount. And so what did I do? I put every dollar, I maxed it out. I bought the stock and I sold it immediately.

And that enabled me to arbitrage this 15% discount. I don’t understand why everyone didn’t do that. And people were like, Oh, taxes, come on.  are you kidding me? Of course. Like if you get a raise of, I think I was able to put $25,000 into this thing. And so I did, I put $25,000 into the dish stock, bought it for 85% of its market value turned around and sold it for a hundred percent of market value.

What does that, that gives me. 53,750 bucks, 3,750 bucks that I got. And yeah, I had to pay taxes on the gain of 3,750 bucks, but that’s like saying I don’t want to raise because I don’t want to pay tax on it anyways. And I’m going on a rant here, but

Mindy: you’re not paying a hundred percent tax.

Scott: No you’re paying, you’re paying only 20% of the day.

Yeah, I guess I pay short term games. That’s probably going to be simple income, but still, you know, like whatever that was 30% marginal tax rate, maybe that I was at at the time, that’s still a huge gain. And so regardless of that, that’s a better choice than putting the money in the 401k. If there’s no match, in my opinion.

Right. It sounds like you share that opinion today.

Tony: Yeah, absolutely. And you know, it’s hard sometimes because you look at some of your friends, your colleagues, and, you know, they’ve got the 401ks and then they’re doing all these things and you, you kind of second guess yourself, like, am I making the right choice or am I not?

But to your point, Scott, like as, as long as you understand what your plan is and why you’re doing what you’re doing, you, you, you create your plan, you stick to it and you execute the best of your ability.

Scott: That’s right. Oh, I like that.

Mindy: Uh, should we

Scott: do the year into the famous for.

Mindy: I believe it’s time, Tony.

These are the same four questions we ask of all of our guests. Are you ready?

Tony: I am ready.

Mindy: Tony. What is your favorite finance book?

Tony: Yeah, I would say one that really shaped my mentality about business and entrepreneurship and finance. It's kind of a finance book, more so an entrepreneurship book, but it's called the millionaire Fastlane by M J DeMarco.

And, um, he talks a lot about building this business that puts off enough income to support your goals. So either it’s like, you know, there’s a lot of monthly cashflow coming in. Or there’s one big exit event where you get this big lump sum, which is what he did. He sold like an internet company back in the early two thousands.

But that book really kind of changed my perspective on, on how you should go about building your business. Right? Like his, his thought processes, don’t buy a franchise, build a business and then sell a franchise. Right? Like, so you want to be the person selling the system, not so much the person that’s buying into a system.

So that, that book really changed my perspective quite a bit.

Scott: Awesome. Yeah. I’ve read that book and I think it’s a great read as well.

Tony: What

Scott: was your biggest money mistake?

Tony: Definitely the student loans, we talked about that, you know, it was, it was money that I did not need, but was enticed into accepting.

And you know, now I’m kind of carrying that with me. So the student loans were the biggest money mistake for

Mindy: sure. What is your best piece of advice for people who are just starting out?

Tony: I would say, find a plan. It resonates with you, right? Like personal finances. Like there’s so many different opinions from so many different people that if you try and listen to everyone, you’ll just end up confused and you’ve got to find a process that works for you.

And for me, I took a little bit of the Dave Ramsey. I took a little bit of my own stuff and I’ve just kind of like found the system that works for me and I’ve really found my groove. So my thing is expose yourself as much as you can, but then find the system that works

Scott: for you. Love it. All right. What’s your favorite joke to tell at

Tony: parties?

Every joke is tell at parties, you know, I’m a, I’m more of like a situationally funny guy. I don’t really have like a good joke to tell. So is it okay if I tap on that one? Like I’m, I’m not much not much of a joke guy.

Mindy: Claire will we’ll tag in and tell you her latest joke. She said she wrote this herself.

I was very proud. What do you call a drunk shark?

Tony: Or I don’t know,

Mindy: daddy head

Tony: or hammered head. Okay.

Scott: So fantastic. Thank you.

I appreciate it.

Mindy: I want to draw attention to Scott’s pun because he said that’s fantastic. And I think that it got lost.

Scott: I don’t like it either way. It’s okay. Yeah.

Mindy: Tony, I don’t want these jokes either. Tony. I think they’re horrible. Scott is not even a dad and he wants to tell dad jokes all day everyday.

He does tell dad jokes all day, every day. Okay. Tony, where can people find out more about you?

Tony: Um, so I’ll be the new host of the real estate rookie podcast. So definitely come, come hang out with us there. Um, also, uh, Instagram, I’m pretty active there, so you can follow me at Tony J Robinson. Um, I do my best to, to share content and help people get started in real estate investing.

Mindy: Awesome. I’m so excited for the real estate rookie show. This is going to be fabulous. You and Ashley are an awesome team.

Scott: Yeah, really looking forward to listen to a lot of that. And, uh, yeah, I think you’ve just got so many mental models, Tony. I think it’s going to be fantastic. And a lot of people are going to learn a tremendous amount from you.

So thank you for joining us here and hosting that show for us.

Tony: Absolutely. Well, thank you both so much for having me. It was a great conversation. I hope the listeners got some value out of hearing it.

Mindy: I bet they will. I bet you’re going to get a bunch of new followers too, and a bunch of questions.

Scott: Mindy.

I just want to chime in here again and say that I get a lot of leverage and scale out of these shark jokes that Claire is bringing. So thank you again.

Mindy: Oh, I quit. I quit. That’s the end of my tenure here at BiggerPockets.

Tony: Goodbye.

Scott: Bye everybody,

Mindy: Tony. Thank you so much for your time today. This was a really awesome conversation and you can hear Tony on.

Every Wednesday on the real estate Ricky podcast. Okay. Tony, we will talk to you soon. Thank you. That was Tony Robinson from the real estate rookie show. Scott, what’d you think?

Scott: I, I, I learned a lot from Tony. I had a couple of, uh, game changing mental models thrown my way, like with that, uh, uh, ability to leverage and get a personal loan.

On that stock portfolio there, and then just wild that we’re getting married again. The same day. I learned that here, alive on the show. That’s pretty funny. So, uh, impressive. I think, I think he’s got an incredible framework for doing this and really has, you know, you can tell it’s still, there’s still parts that are work in progress with all this stuff, but he’s really beginning to get dialed in on it, on his boat building approach and formula here.

And I think he’s going to be off to the races over the next couple of years.

Mindy: Yeah, I love how he keeps learning. She doesn’t have this mentality of up. I already know that, um, I’m sometimes guilty of that, but he is very much, Oh, I can learn another thing. I can learn another thing. I’m going to take the lessons that I have learned from this and apply them going forward.

And that’s just. He’s a better person than me.

Scott: No, you’re not doing about that, but I’m I’m. I did enjoy it and learn a lot from it.

Mindy: I do like him very much, and I’m super excited for him to be the new co-host of the real estate rookie show. If you are not listening to the real estate rookie show, and you are interested in real estate, what are you waiting for?

You can find the real estate rookie show, wherever you get your podcasts. I mean, you know, listen to us first, but then on Wednesday, so you can listen to them.

Scott: That’s right.

Mindy: The notes for today’s show can be found at biggerpockets.com/money. Show one 51, and we hope you enjoyed our show today. We would like to ask you to leave us a rating and review wherever you listen to your podcasts, ratings and reviews, help other podcasts listeners find our show.

Scott, should we get out of here?

Scott: Let’s do it

Mindy: from episode 150. One of the bigger pockets, money podcast. He is Scott trench and I am Mindy Jensen saying peace out, rainbow trout. .

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In This Episode We Cover

  • How job jumping can accelerate your raises and income growth
  • Why EVERY investor (and person in general) needs a healthy cash reserve
  • The importance of talking to your children about finance
  • Why being good at math doesn’t mean you’re great at financial management 
  • How paying off debt can drive investment funding
  • How to fight lifestyle/income creep so you can live below your means
  • The strategy to leverage your stock portfolio for real estate funding
  • Creating the “why” behind financial decisions
  • And so much more!

Links from the Show

Book:

Connect with Tony:

The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager and Podcast Director Mindy Jensen and CEO Scott Trench weekly for the BiggerP...
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