BiggerPockets Money Podcast 222: Finance Friday: Are You Too Over-Diversified In Your Investments?

BiggerPockets Money Podcast 222: Finance Friday: Are You Too Over-Diversified In Your Investments?

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Investments galore! This week, we talk to Jeana and Scott, a couple with a hefty amount of investments under their belt. We know what you’re thinking, “what type of stocks and real estate are they investing in?” This is where you might be surprised. Jeana and Scott are investing in three gyms, a gas and oil investment, a documentary, a 24-unit apartment building, a 52-unit apartment building, a senior care business, and…a $20,000 dog! Seriously! This is one of the most diversified couples we have ever had on the show!

While it’s great to have investments spread out over multiple different asset classes, Scott and Mindy want to help the couple come up with a more systematized and formulaic approach to wealth building. Since they both have well-paying jobs, once they set up a “set it and forget it” type investment strategy, they won’t be too far away from reaching FI.

If you’ve ever had an interest in running a memory care facility, dog breeding, or investment clubs, this will be a great episode to listen in on!

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Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome to the BiggerPockets Money Podcast, show number 222, Finance Friday edition, where we interviewed Jeana, and talk about creative investments.

Scott R:
The only thing I’ve learned from him financially, he never taught me about money, but he was very frugal. And it’s something I can’t really go off to this day, is just being super frugal.

Mindy:
Yeah.

Scott R:
The only thing I really want to spend money towards is investments. I do want the truck, but I don’t know, I’d rather buy another investment.

Mindy:
Hello, hello, hello. My name is Mindy Jensen, and with me, as always, is my definitely surviving a zombie apocalypse co-host, Scott Trench.

Scott T:
It wasn’t too hard, Mindy. They were all vegan zombies in search of grains, not the other thing, so I was in good shape. Mindy liked that one.

Mindy:
I’m telling you, that was hilarious. Okay, Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to everybody’s story, because we truly believe that financial freedom is attainable for everyone, no matter when or where you’re starting.

Scott T:
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, start your own business, or invest in 30 venture capital type things one by one over the course of years, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy:
Scott, that’s interesting that you say that, 30 venture capital programs. I think that they’re not quite at 30, but they’re getting pretty close. Scott and Jeana, not Scott Trench, Jeana and her husband, Scott, join us today to talk about creative investments. And boy, oh, boy, do they have some very creative investments, some that I have never heard of, some that I didn’t even know you could invest in. So, it’s a lot of fun talking to Scott and Jeana today.

Scott T:
Yeah, just unpacking their financial position took us, what, 25 minutes with this. And it’s fascinating. What a unique set of circumstances, I think, something that we have never encountered here on the BiggerPockets Money Show. And I think it’s really interesting. When they go through, it’s at least five to 10 completely different types of investments that they’ve made, all non-traditional. There’s basically no stock investments going on here, and no traditional real estate investments. There’s syndications and things like that with this. So, it’s really difficult to assess their net worth. It’s really difficult to assess the return profile of these investments.
And so, you’re going to hear me in this episode, as my biggest piece of advice to them, recommend developing the skillset of financial modeling, right? This is probably overkill for many folks that are not trying to do this kind of stuff. But if you’re interested, we will link to a free Excel course. It’s from a guy called ExcelIsFun. We have no affiliation with ExcelIsFun. I just took this course when I started as a financial analyst seven, eight years ago. And I think it’s super… It’s one of several ways to develop this skillset.
But if you’re interested in doing lots of analysis on small businesses or different types of investments, something like that, I think that would be a good hard skill to practice for a little bit so that you’re capable of budgeting, and making assumptions, and getting to the meat of what is going to actually drive the needle in terms of these things, valuing how much time you have to spend, and what the dollar per hour value of that time will be. Hey, if I’m going to spend 600 hours on a project, and it’s going to pay me $4 an hour, maybe I don’t want to do that, and I should factor that into the return profile of the venture or investment that I’m considering with this. So, that would be the biggest piece of advice there, and we will link to that in the show notes here at biggerpockets.com/moneyshow222.

Mindy:
Yeah, one thing I want to say before we bring in Jeana and Scott is that they are investing in these alternative investments from a position of no debt and a fairly guaranteed income. So, the advice that we give on these, oh, I’m sorry, the suggestions that we give on these Finance Fridays are always geared towards that one person or that couple and their specific set of circumstances. They have no debt. Outside of their mortgage, they have no debt. And that’s a hugely powerful position to be in. So, if you’re thinking that some of these alternative investments sound really great, but you yourself have a little bit of debt or a lot of debt, this may not be the best choice for you at this time. So, just keep in mind that they are investing from a position of no debt.

Scott T:
Yeah, yeah, again we got what, 10, 12, however many different types of businesses, all material investments 20, 25,000, $50,000 invested in these things. And so, because they’re all alternative assets and not traditionally valued, many of which are illiquid, like investment in an apartment complex, investment in a documentary, with these types of things, these completely alternative as investments, and a dog, right, as an investment, when you have those types of investments, it’s impossible to determine your net worth, unless you have the skillset to be able to do that on a regular basis on a financial modeling. And I want to point out that I was wondering about this after we recorded, if we should have just maybe advised, hey, go begin liquidating or disbanding this portfolio and go to something more traditional like real estate or stocks. But I think that would be irresponsible advice as well, because they’re not doing this irresponsibly. They bring in much more income than they spend, and have a great emergency reserve, and they’re not levered against these assets.
When you invest in alternative like this, you can lose everything you invest, but you’re probably not going to lose more than you invest, like you can in real estate, for example, if your property goes underwater, and the mortgage is more than the property’s value. So, I don’t think that they’re doing anything wrong with this. But I just think it’s impossible for you, me, or them to determine if this is more effective than a traditional stock or real estate investment portfolio, because we can’t model out and evaluate each asset from that position of having the skill to do that. And so, that’s, I think, the biggest takeaway. So, that’s a big, long intro for this, but hopefully, that’s helpful.

Mindy:
And before we bring in Jeana and Scott, let’s remind our listeners that the contents of this podcast are informational in nature and are not legal or tax advice, and neither Scott nor I nor BiggerPockets is engaged in the provision of legal, tax, or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal, tax, and financial implications of any financial decision you contemplate. Jeana and her husband make a great income, but they’ve been having a little bit of trouble reining in their spending. They’re in the middle of a live in flip, which is my favorite, and looking for ways to cut expenses to enable them to save more for even more real estate investing. Jeana and Scott, welcome to the BiggerPockets Money Podcast.

Jeana:
Thank you so much for having us. We’re so excited to be here.

Scott R:
Thank you. We’re big fans.

Mindy:
So, Jeana and Scott are our guests, and Mindy and Scott are the hosts. So, this isn’t going to be confusing at all. Let’s jump right into it. Jeana and Scott, not Trench, what is your income and expenses, debts and investments?

Jeana:
Okay, so, collectively, we do make a little bit over 100,000 a year, and that includes my salary and Scott’s disability. He was in the Marine Corps for over nine years. And also, that also includes our investment. So, that equates to about 8,300 a month. And right now, Scott just got back from a nursing COVID deployment, and so he’s looking for a per diem nursing gig here. And also, when Scott was deployed, he did make crazy amount of money. He made more than what I made in a year in a month, and he was there for six and a half months. Yeah.

Mindy:
Wow, what did you do with that?

Jeana:
Pretty much, he had to bribe me to stay longer, because we wanted him to only stay for a month or two. But he had to bribe me to stay longer, because he’s more long term, and I’m more like… I’m a millennial, so I’m like, “I want you home now.”

Mindy:
Well, they don’t pay you a lot to sit around on the beach and sip Mai Tais. That’s… I’m assuming you were in a slightly more dangerous area than just sitting around.

Scott R:
It was the islander COVID units, and it’s usually understaffed and…

Mindy:
Oh, this was the COVID unit?

Scott R:
Yes.

Jeana:
Yeah.

Scott R:
Oh, yeah, I’d want you home too.

Jeana:
Yeah, so-

Mindy:
Thank you for doing that, but also, we want you home, because you don’t get COVID nearly as high risk as if you’re actually working there when in the middle of COVID. Okay, so what is the disability income? Is that included in the 8,300?

Jeana:
Yes.

Scott R:
Yes.

Jeana:
Okay. Okay. Then I will just-

Scott T:
And does that continue if you find full time employment with the next gig?

Scott R:
Yes.

Scott T:
Okay, great.

Mindy:
Ooh, then can we pull that out, and specifically note what that disability income is?

Scott R:
Okay. It’s 3,500 a month.

Mindy:
Oh.

Jeana:
Yeah, that’s-

Mindy:
I’m sorry that you’re hurt. I guess I shouldn’t be all excited, yay, but that’s a nice amount of money that’s just coming in every month forever?

Scott R:
It just started.

Mindy:
Okay.

Scott R:
Recently, so it’s just a combination of disabilities that occurred. And that’s why I’m not going back full time necessarily, because it’s… I had to pretty much rough it. I hurt myself, my back especially, a couple times on that deployment. And you can only take one day off, so I literally had to work through everything.

Mindy:
Okay, well, 3,500, I think is a significant amount of money that we should pull out of the 8,300.

Scott T:
And that continues in perpetuity? Does it go up with inflation over time, or how does that-

Scott R:
It does go up. They’ll reevaluate every year, so it can go up. Usually it goes up one or 2% per year. It just depends on what Congress passes. It’s through the VA.

Scott T:
Okay, great, but that will continue forever, is that right?

Scott R:
It can. So, they’ll do reevaluations every five years and see if things have gotten worse, gotten better. But I’m assuming it’s going to go on.

Scott T:
Okay. Well, I think that that’s very unfortunate to be in a situation where you’re earning that, but at the same time, it’s an important part of the financial story that we have to acknowledge with this discussion.

Jeana:
Yeah, definitely.

Mindy:
So, you mentioned VA. Do you have VA health benefits for the family forever?

Scott R:
So, it’s mainly just me. So, I’m 100% covered medical, now dental, but I need to apply for that, and prescriptions. Now, they do have a program where I’m still finding out about it, but there’ll be covered, but to a lesser extent, and we’ll have to pay out of pocket for some of it.

Mindy:
Okay, that’s an important part of it, because I’m assuming that you have health insurance then, Jeana, through your employer?

Jeana:
Yeah, I do work for an e-commerce company. So, yeah, I actually pay it for my kids. We have two boys. So, my insurance is free, which is amazing. However, I do have to pay for my kids for their insurance.

Mindy:
Okay. In this context, I think that’s very helpful. Okay, so is there any other income besides the salary and the disability income? You said that there’s-

Jeana:
Yeah, we do have investments. So, right now, we do have… We put in $25,000 for a gym investment, and that’s a 12% ROI. So, we used to get actually 250 a week, not a week, a month. We used to get 250 a month, but because of COVID, you know how everything shut down, our gyms shut down. So, we invested in… How many gyms was it? Three?

Scott R:
Well-

Jeana:
It was three-

Scott R:
Specifically, ours was into three of them, but they’re trying to take over… They’re mostly in California, and California was one of the biggest shut down areas in the US. So, they’re acquiring gyms all along Southern California. They even went into Mexico now. But they’re expecting the payments to start up towards the end of the year.

Mindy:
Okay.

Scott T:
So, you’re not investing in a gym, you’re investing in a conglomerate, a business that owns many, many gyms and is expanding?

Jeana:
Yeah.

Scott R:
So, we’re a part of this investment club, and they find deals. And they’ve been pretty successful with, I think, just about all of their investments up to this point. And they bring us deals, and you get to decide if you want to go in or not.

Scott T:
Yeah, that’s awesome. I would love to learn more about this investment club.

Jeana:
Also, we have a gas and oil investment that we invested in. This was two years ago. We took a risk and invested our whole savings, which was 25,000, and we put that towards the gas and oil. And so, that is collectively… They’re collectively drilling in Texas. And because of COVID, of course, things slowed down, so we haven’t seen a return yet. We did get one check. However, because of COVID, it did slow things down, but they are actively drilling and finding gas and oil. So, we’re excited to see the return on that. And also, we put in 25,000 on a documentary. We did sign an NDA, so we can’t talk too much about the deets. But the film broker did shop it to Netflix, and Netflix loved it so much that they said that they wanted more episodes. So, that’s where our investment club came back to us and said, “Oh, we’re going to do a round of funding so we could create more episodes.” So, that’s where we decided, oh, yeah, we want to go in on this. This is exciting. So, we did that. We also have a 24 unit that we put 50,000 in for 18% ownership, and we also have a 52 unit that we put in 50,000 for 4% ownership. And this is with Alex Felice. I know you guys know him.

Mindy:
I think everybody knows Alex.

Jeana:
I know. We’re so grateful for you guys’ show, because we met him through BiggerPockets.

Mindy:
Oh, really? Oh, you didn’t know him before? Okay.

Jeana:
Yeah.

Scott T:
We love Alex. He’s a great friend and an awesome guy. Have we had him on the Money Show yet, Mindy?

Mindy:
We haven’t. You would remember that.

Scott T:
I’ve been on his podcast, but I don’t think we’ve had him on. We have to invite him at some point.

Mindy:
We should invite him.

Scott T:
How much collectively do you have invested in these alternative investments?

Jeana:
Probably, it was like 230? 230,000.

Scott T:
In everything?

Scott R:
Yeah.

Jeana:
Yeah, because we also have a… Scott, you want to talk about our memory care home that we have as well? We’re a mess. As you can see, we’ve dabbled into so many things that were just like…

Scott R:
We never focused on one thing and attacked it. We just went everywhere.

Scott T:
It seems like you guys are doing your fundamentals perfectly. You’re saving up a ton of cash, you’re deploying it one after another in the next investment with that. And now you’ve got a unique portfolio as well with a lot of stuff, which I think is really interesting. But let’s hear about this other one.

Scott R:
Okay, so for this memory care home, we started about two years ago, here in Las Vegas. It’s a residential assisted living. So, just a six bedroom house. We can have eight residents. And we just jumped in. We should have did more research, but we were newer, we didn’t know. We have a business partner that we know through church. We think pretty similar, me and him, Nick and I. We just jumped into everything. We didn’t really assess the location and all this. We just wanted to… We know we want to be in business, we have similar interests, so we just jumped in.

Jeana:
And then with his nursing background, and him losing his dad, we’ve… Both of us, we’ve lost our parents. So, it was a natural instinct to want to open a care home so we could be able to care for others. We wanted to own a business that actually you’re giving back to the elder community, but also making money at the same time. Yeah.

Scott T:
Awesome. And so, what I’m hearing lots of good intent, but what sounds like maybe things are not going so well with this investment, or are they going very well?

Scott R:
Decent. We’re not putting money into it anymore. Those days, it hurt. We were constantly paying for payroll or we were there ourselves being the caregivers. That’s a difficult job.

Mindy:
It is a difficult job. And it’s difficult to do well, it’s really easy to do poorly, which is unfortunate. I think that there’s a lot of issues surrounding the whole thing. So, I think there’s some opportunity to discuss that a little bit, but let’s jump back into the debts and expenses really quick, and let’s see, income and investments.

Scott T:
Well, since we just went through the investments, I’ve got gym ownership, gas and oil investment, documentary, 24 unit, 52 unit, residential assisted living, and a very difficult time evaluating the value of these investments at any moment in time. But you can tell how much you put in, is that correct?

Jeana:
Yeah. And also, do you want to talk about your crypto? Are we allowed to talk about crypto in this-

Mindy:
Sure.

Scott T:
Yes, of course.

Jeana:
Okay.

Scott T:
And I’d love to know your cash position and your other investments, maybe in retirement accounts if you have any like that.

Jeana:
Oh, yeah.

Scott R:
We have a question about her retirement account. We’ll get to that soon. So, I’ve been into crypto since 2017. I know you guys aren’t the biggest fans of crypto, but-

Mindy:
I’m not, but Scott does.

Scott T:
I love a little bit of crypto.

Scott R:
I watched it go up, and I watched it crash down 2017, and I was mad at myself for not taking any profits. So, this time, I said to myself I’m going to end up pulling out, which I haven’t yet. So, right now, I only put 21,000 in total. Last I checked last night, it was at 66,000. As much as I don’t want to pull it out right now, I have a feeling it’s going to go up again, even if it doesn’t, I’m not mad. I just don’t want to take a tax hit on it.

Mindy:
If you sell, you’ll take a tax hit.

Scott R:
Yes.

Mindy:
Uncle Sam-

Scott R:
Sell, transfer, anything.

Mindy:
Now, Scott, do you take a tax hit… Does Uncle Sam take a preliminary tax hit based on the gain throughout the year? I was talking to David Daly about this.

Scott R:
They only-

Mindy:
And I didn’t really understand what he was talking about.

Scott R:
The only time you don’t get taxed is when you buy. But if you trade within different cryptos, if you sell any of your assets, it’s a taxable event.

Mindy:
Okay, but they’re not taking taxes like, oh, you bought it here and now it’s worth this, so you have to pay taxes on this even though you haven’t sold, okay. That was-

Scott R:
No.

Mindy:
Yeah, because that was confusing when I was talking to David. Maybe I misunderstood.

Scott T:
What you’re thinking, Mindy, is if you get paid for something in crypto instead of dollars, someone hands you Bitcoin instead of dollars for something, you have to pay tax on the then present value of the Bitcoin or the cryptocurrency in exchange for the goods or services that you bartered with or with it. So, it’s much more complicated. There’s a conversion factor from that to the dollar. I think that’s maybe what you’re thinking of. But you don’t pay tax on gains until you realize the gains.

Mindy:
Okay, that makes a lot more sense. And just yet another reason why I am not personally going to invest in crypto. But-

Scott T:
Mostly going through the assets, this is the most interesting asset [inaudible 00:21:35] on the Money Podcast in all this time.

Jeana:
Oh, yeah, okay. So, for our memory care home, we average about 20,000 in income. Our overhead is around 9,000, and our bills are 5,000. We do have a savings that includes $15,000. But we are saving up, because we do want to extend, because right now, we’re only licensed for eight residents. So, in order for us… In Nevada, we could be up to 10 residents. So, we’re going to save and extend out and do renovations for and add additional two rooms.

Scott T:
You’re saying that there’s 15,000 in savings in that business?

Jeana:
Yeah, in the business account.

Scott T:
Okay.

Jeana:
Yeah. And there’s another…

Scott R:
Yeah, I don’t know if this-

Jeana:
[inaudible 00:22:29]. We’re going to show-

Scott R:
This is our puppy.

Mindy:
Oh, my daughter’s going to love that.

Jeana:
That’s [inaudible 00:22:36].

Scott T:
All right.

Jeana:
Yeah. He’s a fluffy Frenchie, and they are a rare breed. And Scotty, do you want to tell them how much you spent on that dog?

Scott R:
It was 20,000.

Scott T:
All right.

Scott R:
[inaudible 00:22:55], there’s an investment case here as well.

Jeana:
Yeah. So, our intention was to use him as stud service. And so, his stud service fee can be anywhere, when you first start out, it can start at 1,500 all the way-

Scott R:
I’d say 3,000.

Jeana:
…to 3,000. We would start out… So, we would start out at 3,000, and then it could go all the way up to 15,000. And that just depends on the DNA match with him and the female. So, yeah.

Scott T:
All right.

Mindy:
Wow.

Scott T:
Let’s keep rolling. [inaudible 00:23:31].

Jeana:
I know it’s so crazy and random. But yeah, that’s one of the investments that… We love Frenchies. We have two Frenchies, so we’re Frenchie freaks. So, naturally, we just wanted to get into that business.

Scott T:
Have you guys listened to the episode… Who do we have, Mindy, that talked about the alternative investment list?

Mindy:
Oh, that was Kirk Chisholm. And that was on-

Scott T:
So, you guys are going through his entire list here. This is phenomenal, because he talked about [crosstalk 00:24:04] dogs or horses, that kind of stuff, and what you’re doing with this.

Jeana:
Yeah.

Mindy:
That was episode 144.

Scott R:
Okay, we’ll definitely-

Jeana:
We’ll take a look at it.

Scott R:
I don’t know if I’ve heard of that one, but…

Jeana:
But yeah.

Scott T:
Let’s keep rolling. So, we got the crypto, we got the dog, we finished out the assisted living business.

Jeana:
Yeah, so that is pretty much what we have that’s for investments. And now, for liquid, we have 40,000 liquid, and that includes $2,500 savings, and we are saving up for a Haiti water well. So, a few years ago, Scotty and I went to Haiti, and we went to an orphanage that had 60 kids, and we just felt led and drawn to go back. So, we’re going to save up for water well, and this is where it’s about $10,000 to build out a water well, and for them, once they build out the water well, at the orphanage, they could sell the water locally. So, it’s a business for them. So, that’s our main goal, is to be able to build that business for them so it could keep income coming in. And then also, our emergency fund is about 20,000. We do have a fund for Scott’s truck, because he does want to get a truck really bad.

Scott R:
I can wait.

Jeana:
But in that fund, it’s 12,500. We do have a family trip fund, and that’s 2,500 in there. And then we also have… This is one of our biggest goals as well, is to write a children’s book course on finances. So, we have 2,500 in that account, and that’s going to pay for illustrations. So, yeah.

Mindy:
You’ve got two kids. I would take that 2,500 and put it in another fund, and say, “Hey, guys, start drawing.”

Jeana:
I know, right?

Scott T:
Do you guys have any traditional retirement accounts like Roth or 401k?

Jeana:
Okay, so I did have a 401K, but at the time, during the pandemic, I took out all of the 21,000 that I had in there, and took the 10% penalty. And that was to fund our 52 unit. So, that was one of our questions, was should I pay back the 21,000 since we have 40,000 liquid, or should we just move on and use it, or just… Yeah.

Scott R:
Which direction to go.

Jeana:
Which direction to go.

Scott T:
I don’t know the answer to that quite yet, but we’ll we’ll keep that in mind as we get rolling with all this. So, anything else? Any other businesses that you haven’t funded, but you’ve started or-

Jeana:
Oh, yeah.

Scott T:
…things going on like that?

Jeana:
I forgot. So, before the pandemic, we actually, our kids, we put our kids into a 3D printing class, and we invested in a 3D printer, a really expensive one. They did generate around $700 for that year. And they were making 3D printed items for my friends, family, and their friends, and they would hustle. Our boys are 10 and 12 years old, so they have a little bit of their entrepreneurial from us, I guess you can say.

Scott R:
We try to push them in that direction.

Mindy:
A little.

Jeana:
Yeah, we try to push them in that direction. So, every year we ask them-

Scott T:
[inaudible 00:27:37] entrepreneurial.

Jeana:
Every year, we ask them what they want to be. So, it changes every year.

Mindy:
As it should. You don’t need to know when you’re 10 what you want to do. But starting to make money is really awesome.

Jeana:
Yeah.

Scott T:
Okay.

Mindy:
Okay.

Scott T:
Let’s keep… Do we have any more on the list of investments or businesses?

Jeana:
I think that’s it.

Scott R:
I think that’s it.

Jeana:
Yeah, that’s it.

Scott T:
Okay, [crosstalk 00:28:07] so we’ve got our cash, our investments, 401Ks, Roth IRAs, there we go. I have absolutely no idea how to peg your net worth. So-

Jeana:
I know.

Scott R:
I don’t either.

Scott T:
Given-

Scott R:
I was going to ask you guys, but I couldn’t figure it out. There’s just too much going on.

Scott T:
Yeah, you’re going to have a crazy time attempting to value the long list of assets you have here with this. Let’s call it 500K, making that up, in assets here outside of a home and all that stuff. You guys have a house as well?

Scott R:
Yes.

Jeana:
Yeah, we’re doing a live in flip. And because of Scotty being able to go on that nurse appointment, we were able to save and hire that out, which is amazing, because we were going to attempt to do most of the work ourselves, which would have took three years.

Scott R:
I wasn’t looking forward to doing all that by myself.

Mindy:
It’ll take three years, but you got to live there for at least two anyway, so-

Jeana:
Yeah.

Mindy:
But yeah, living in a construction zone can be less than ideal.

Jeana:
Yeah.

Scott T:
Okay, so in addition to all of this, you’re doing a flip.

Jeana:
Yeah.

Mindy:
Oh, good. I wouldn’t want you to be bored.

Scott R:
Yes.

Mindy:
Okay.

Scott T:
And what do you expect… Well, how much do you think it will be worth when it’s completed? And how much will you have bought it for and put in?

Jeana:
We bought the house for 280, 280,000. We did put in around 50,000 of renovations. There is comps in the area that’s going for 375 ish, but that’s not even fully renovated. The way we renovated it was we spent more because we were bougie, [inaudible 00:29:59]. And because of how the market is, we don’t want to buy right now, so we decided to live in it for a few more years. Yeah.

Mindy:
Okay.

Scott T:
Okay, so you guys think that 375 is a really conservative estimate for the after repair value for the property since it’s really nice?

Jeana:
Yeah.

Scott T:
Okay, good.

Jeana:
Yeah, we have a gold sink and everything.

Scott T:
And let’s go through your… That’s the last asset then, I guess.

Jeana:
Yeah.

Scott T:
So, what are your debts?

Jeana:
Well, we have no debt, actually.

Scott R:
Just the mortgage.

Jeana:
Just our mortgage. So, can we tell just a little bit of backstory about me and Scott-

Mindy:
Of course.

Jeana:
…before? Okay, so with me, I came from a single parent home. My mom raised me and my two boys.

Scott R:
Your two brothers.

Jeana:
My mom raised me and my two brothers. And we were on welfare, food stamps, Section 8. And so, I didn’t come from a financial educated background. And also, we came from similar backgrounds. Scott, you want to-

Scott R:
With mine, my mother passed when I was four. And so, it was just my dad raising myself and my two brothers. But he was always working. He was retired Navy, and then went to the post office. So, the only thing I’ve learned from him financially, he never taught me about money, but he was very frugal, and it’s something I can’t really let go off to this day, is just being super frugal. The only thing I really want to spend money towards is investments. I do want the truck, but I don’t know, I’d rather buy another investment.

Jeana:
He knows the late satisfaction more than anybody that I know. So, I’m the spender of the relationship, and he’s the saver. And so, both of us together, we’re always bickering.

Scott T:
Well, something’s going really right in your financial position if you have all these assets and no debt outside of the mortgage with all this stuff, a really solid emergency reserve, all your fundamentals are in place with this. You have a unique investing approach. I don’t even know if it’s bad. I probably… I’m really interested to dive into that in a second here.

Jeana:
Well, also, I wanted to share that we did… So, we did get married after knowing each other for two months, and we’ve been married for 16 years now. When we first got married, we slept on a air mattress for four months, and we got used furniture for $100 that furnished our whole apartment. We were pretty much broke. He was in the Marine Corps, I was working odd end jobs. And then we got into $104,000 in debt, and that included two car payments, my school loan, which was $60,000. I went to school for my MBA, and also television production. And we used the Dave Ramsey method to get out of debt, and that took us four years. So, yeah, that’s where we’re at right now. We’re-

Mindy:
Okay, well, I think it’s fantastic that you’ve paid off this debt. You’ve got a great income, and from where your backgrounds started from, it’s completely understandable and frankly normal to have gone through a period of collecting debt. And then, frankly, a lot of people don’t pay it off, so you’re already ahead of the game. I want to look at your expenses, because I think you can get those down. Las Vegas isn’t that expensive. You have a… What’s your mortgage payment?

Jeana:
Our mortgage is a little bit over 1,450. So, we did use a VA loan on that. And so, our bills is around 5,600 a month, and that includes tithing, and that’s 10%, so it varies. Our electric is 200. Our gas is 50. Our water bill is 50. And then GEICO for our car insurance is 600 every six months, but we do pay that in a one lump sum fee so we can save the $5 service fee a month. We’re only saving $30, but that’s a little hack that we do. And then for T Mobile, we have four lines for all four of us, and we pay 102. That’s another military hack that we have, just ask for the military discount. And then our Internet’s 112. We have property insurance, which is $5.66. And then we work out at a bougie gym, which is Lifetime Fitness, and we only pay $55 a month for the family, and that’s another military hack. And normally, it’s 150 per person a month.

Mindy:
Yes, I know.

Jeana:
So, we save a lot. And then trash and sewer, if we break it down, because that’s every quarter, it’s about $10 a month. And then our pool, we have to clean our pool. We get a pool cleaner, that’s 135. And then YouTube premium, because he likes to listen to all his motivational stuff, all your guys’ podcasts, so that’s 2,299. We have Trupanion, which is really expensive. It’s $322, and that includes insurance for both of our Frenchies. And our car gas is $100 a month. I do work from home, so that saves us a lot of money. And groceries is probably one of our biggest expenses besides our mortgage, because it’s 1,200 a month. It’s because I have two boys, and they eat more than I do, so yeah. And then restaurants, we budget around 250 a month. So, we eat out once a week as a family. And then we have our Amazon miscellaneous budget, which is 400 a month. So, it comes out to an average around 5,600 a month that we spend.

Mindy:
Okay.

Scott T:
My first reaction is that maybe there’s a little bit on the groceries, restaurants, and miscellaneous category to cut. But it doesn’t seem like there’s a ton here. It seems like a lot of your expenses that are there are conscious choices or things that are unique to your situation, like if you’re going to invest $20,000 in a dog, they need to have insurance on that, given what you described there. So, that makes a lot of sense with those types of things. So, I don’t know, Mindy. What is your reaction?

Mindy:
My reaction is those boys are not going to stop eating. They’re going to get even bigger. They’re only 10 and 12 right now. They’re going to get even bigger, and they’re going to start consuming… I have two girls, and they eat me out of house at home. So, I would want you to look at the grocery budget. But you might be able to squeeze $400 out of that by doing some meal planning and shopping around the sales. We had Erin Chase from $5 Dinners on episode three to talk about how to reduce your grocery budget. So, definitely throw that back on the podcast playlist and listen to that again. Because there are some tips, and it’s really easy to go to the grocery store, and, oh, this looks interesting, and, oh, this looks good. No, make a list and shop from the list. And also, what are some big, bulky items that the boys can eat, like broccoli will fill them up, and throw some protein at them. But yeah, I don’t see a ton of things to remove, unless you wanted to go bare bones. But I think with your income, you don’t really need to. When I first read your application, I thought, oh, well, this is going to be real easy. Let’s just cut your expenses. But I think that my recommendations would be back in the investment categories. Scott, what do you think about the investments?

Scott T:
Well, I think here’s… And we talked about this on a recent episode. Actually, it will be released after recording this, but before we release this episode. But another couple, and they… I think what I’m struggling with here is to become wealthy, you need to do two things that are seemingly in conflict with one another, I think. One is formulaically build wealth. Save this much and invest according to a formula that will get you from X to Y over a set period of time with those types of things, and seize opportunity that is unique to your circumstance in a creative and proactive way. And what I see from your situation is a complete dive down the ladder of those two things, that creative opportunistic front. And what I think you’ve created here is a financial position that is strong. You are clearly bringing in more money than you spend on a regular basis, month after month after month after month, with no question about that continuing.
But all of your investments are in things that are really highly illiquid, that you don’t have control over. You can’t decide to sell or realize portions of your investment at any time, right? Your investments are in a dog. You’re either in an apartment complex that somebody else’s operating and makes all the decisions around capital, distributions, and allocations with it. In the gym, you don’t have those decision making, I would imagine, with the way that that’s structured. With the retirement… What’s the word? The assisted living facility? Yeah, with that one, you do have control over that one, but that sounds like it can be a job in and of itself sometimes, rather than a true more of an investment property with that. Same thing with the house.
And so, that, I think, is where my instinct comes down to, I love it, keep doing that stuff, but maybe consider bringing in a formulaic approach to investing in something that is not more traditional, but more you have more control over. It could be real estate, it could be stocks, it could be a doubling down in one of these businesses in automating it or something like that. But if you can get into that situation, I think you’ll find you’ll have a lot more flexibility. Because you’re at this point where you could be worth between 500 and one and a half million dollars with this, right? I don’t know with that. But I think you’ll feel a lot better if you can say, “Hey, my passive income that I can controllably predict is above that 5,600 mark on average.” That seems like a good moving target from your formulaic approach. And then a couple of these ventures may pay off big and accelerate you over that tipping point or produce that passive cash flow.
But that’s where my instinct comes back to, is thinking, hey, let’s continue doing a lot of the cool, creative stuff you’re doing, but maybe also pull back a little bit and layer in some sort of formula that can move you towards something more predictable, I guess, with some of this stuff. Because finances, your finances are very exciting. And I think that might not be… I don’t know, is that something that you’re trying to move towards? Is that-

Scott R:
And that’s what I wanted to do. That’s why I was thinking real estate more so over other things. But I want to ask you guys what you thought about, everybody says, “Oh, I want to get started,” but they never get started. And then my biggest thing now is I’m worried about inflation and all this. What do you guys think about that?

Jeana:
Oh, I do want to mention that the 24 unit is currently for sale. And since we did put in 50 grand, we will make a little bit if we would-

Scott R:
I’m guessing around 75,000.

Jeana:
So, if everything goes well, we will have another 75,000 liquid. So, that’s another thing I wanted to ask you guys. Scott doesn’t want to get into Airbnb, so-

Scott R:
Short term rentals.

Jeana:
And we don’t know if we should… I want to stick in Vegas, just because we live here and it’d just be easier. But then I know he wants to go to another market.

Scott R:
The only thing with Vegas is it’s very restrictive. It’s one of the heaviest restrictive short term rental markets in the US, because we do have the Strip and-

Jeana:
The casinos and all that.

Mindy:
Oh, okay. I was going to say that’s a huge destination. But yeah, the hotels is where everybody wants to stay, and they want to exercise their lobby muscle. Okay, so what I am seeing, what Scott, the guest, said was we never focused on one thing. And I think that that could be a bit of a hindrance. You’ve got all these really exciting investments. And it’s super cool to invest in a documentary, and you have an NDA, and we can’t discuss what it is about, but what is that going to get you? I don’t see that as a ton of upside, unless it’s the Game of Thrones documentary, or something really pop culture that would be very popular. But those are really easy to have Netflix say, “You know what? Never mind.” And then what happens to your investment? So, that one, I think, is… I would classify that as risky or speculative. And I personally don’t like risky and speculative. I think that real estate is risky and speculative. It’s definitely as risky and speculative as I want to go. I shouldn’t say I think it’s risky and speculative. I think it’s a great investment, but that is as risky and speculative as I want to go. So, I don’t really like the documentary investment personally, and I don’t know if there’s any way for you to get out of it.

Scott R:
No.

Mindy:
I don’t know that I… If I was in your position, I wouldn’t put any more money into it. And I would hope that whatever happens, happens well. I wish you luck, but I would stop looking at these creative and exciting investments, and more focus on the boring ones.

Scott T:
I just want to give a slight disagreement to that with this.

Mindy:
It’s fine. You could disagree with me, even though you’re wrong.

Scott T:
How long you’ve been doing this? How many years have contributed to the current situation with this?

Scott R:
Just the investing in the random things?

Scott T:
Yeah.

Scott R:
The shotgun style, I would imagine. Probably, what-

Jeana:
Three years?

Scott R:
Yeah, three years now.

Scott T:
Have you learned a lot?

Jeana:
Yeah. I would say, well, because we do go to the investment club, they have once a month meetings. So, we go, and we’re the youngest ones there. And there’s about 50 people that go, so we’re around older people who are much more into the game. So, we are learning from them. So, that’s what another hack that we do, is hang out with older people that know what they’re doing, and then you learn from them.

Scott R:
It was definitely a big learning curve, because when I first went there, I didn’t understand anything they were saying. And we didn’t invest for a good, I don’t know, before we jumped into the gyms, the first one.

Scott T:
Here’s what your story is going to be if you keep doing this. You’re going to get hosed and flushed on a couple of these investments. You’re going to have unpredictable payouts at random future dates in large amounts of money on a couple of them, hopefully with that. And you’re going to get an education and a unique type of investing here, which could be fun and exciting for a lifetime with this. You have no ability to plan around when you will achieve certain financial hurdles with this type of approach to investing. But you could end up very wealthy over a 10 year period with very surprising puts and takes across the portfolio with these kinds of things. So, if you’re okay with that, it doesn’t look irresponsible to me.
You have all these different investments. You’re not levered against very many of them in any unsustainable way, all right? The things you’re levered against are real estate investments, right? It sounds like the real estate in the assisted living place and your primary with that, right? You bring in much more income than you spend. I just think what I imagine your sense, your feeling about this is, what do I have here? I have a random collection of investments. Am I doing something right? Am I doing something wrong? No one else is doing this. What am I… Am I crazy? I guess maybe that’s what’s going through your head to a certain extent.

Scott R:
That’s what I was thinking, yes.

Scott T:
Yeah. But I read it as, hey, you’re going to have that outcome, most likely. And even if you get flushed on all of the investments, which is very unlikely, it seems like, you’re still in a strong financial position, because you save more than bring in, and you’ve got 65% of your expenses covered by the disability, which you think will continue for a long time. And you have flexible and creative options for work, including in your business, and with high dollar per hour opportunities that come up, Scott. And Jeana, it sounds like you have stable employment that it brings in plenty to cover things, even if that doesn’t come… Even if Scott temporarily has no opportunity in the short run, that’s super good. And he then has a base salary job that you can go after, right? So, I think it’s an interesting and creative situation. And frankly, I have no idea how to proceed from here.
I think it’s going to be about what you want, right? If you want a stable, formulaic approach to phi, you’re going to have to stop contributing to more of these investments, and as some of them cash out, like the apartment complex, begin diverting that to a formula that may or may not go faster. But you are also, we have to acknowledge, getting an education that is going to be very unique in these types of investments through your investment club, and maybe continuing that is unpredictably going to generate some sort of return. So, I’m having trouble knowing what to make of this. Mindy, you have your hand raised, go ahead.

Mindy:
Yeah. So, I think what is giving me the heebie jeebies about these investments is there isn’t any traditional retirement funds in here. You took the money out of your 401K. I didn’t hear you say anything about a Roth IRA or anything in the stock market. And that is where a lot of my investments are. We have divested of some of our real estate just because this market is so hot. It was great to sell, take advantage of what we thought was the top, and now isn’t even close to the top, and put that money into the stock market, where it continues to grow, because the stock market is also on a tear. Do you have any interest in the stock market? I guess I should ask that, because that’s what I would do, but I’m not you. There’s just a lot of different things. You just called it the shotgun approach, which is really quite accurate here. And I’m trying not to sound condescending, I’m not meaning to be, but I think a little bit of focus would help a lot. It sounds like you like real estate. How much money is in the gyms, again?

Scott R:
Most of those investments were 25,000 together in-

Jeana:
Each.

Mindy:
Okay, each. So, you have 25,000 and three gyms, so that’s 75,000.

Scott R:
Well, that particular gym deal was for those three.

Mindy:
So, three for 25,000. So, you’re getting 250 a month, or you were, okay. So, that is… I didn’t write down how much was initially in there for that one. So, that, we’ve got a gym, we’ve got oil and gas, we’ve got a documentary, some real estate. The residential assisting living, I want to talk about whatever that is. Crypto-

Scott R:
Our most meaningful asset, it sounds like.

Jeana:
Yeah, we do own the house. So, we put in $70,000 in that. That included the startup funds, and also furnishing the house, buying the beds. We got medical beds for our residents, and also, just to furnish it fully, make it comfortable for a house.

Mindy:
So, that was the 70,000 encompassed all of that.

Jeana:
Yeah.

Mindy:
Crypto, I know nothing about. The dog, I don’t really know anything about. How old is the dog now? And how old does it have to be before it can start making money?

Jeana:
He is six months old now, and he could start. He’s our money maker at 11 months old, so-

Mindy:
Okay.

Jeana:
Yeah.

Mindy:
And is there an easy way to get him started working?

Scott R:
Because we go on these Facebook groups, and they’re called fluffy French Bulldog groups, or whatever they call them. But people just post stuff and people reply if they’re interested, or-

Mindy:
So, there’s a way to connect into a group that would be interested in the services that he provides. Okay.

Jeana:
Yes.

Scott R:
Yes.

Jeana:
It’s a huge demand.

Scott R:
There’s a lot of interest when we see people post. You’ll see just messages saying interested, DM, or-

Mindy:
And does that cost you any money? Are you flying someplace, or traveling, or do they come to you?

Scott R:
We would go through the vet, and he’d do the pulling, and-

Mindy:
He would do all the stuff, okay, great.

Scott R:
We can ship it.

Mindy:
Oh, well, there you go. That’s even better. Okay, so some in-person transaction. Okay, well, that…

Scott T:
What do you guys want from this? Maybe that’s the thing, is what’s the goal that you’re trying to move towards?

Jeana:
The goal is… Are you talking about for the French Bulldog, or-

Scott T:
No, for your overall-

Mindy:
For the overall investments.

Jeana:
The overall for me is that I want to just to be able to inspire, travel with purpose, create a legacy for my boys, and write out and finish that children’s finance book course as a family so it’s something that could also be passive income as well, and just, yeah. I love where I work, I love my team, so I will stick out with my W2 job for a while, because it’s amazing. I feel really grateful.

Scott T:
Scott, what do you want?

Scott R:
Okay, so, I just wanted to… I want to be able to work from home, which technically I can’t. I’m still a nurse after all, but I have a opportunity to continue school for free to get a nurse practitioner degree. The only thing, my long term goal, even though there’s a certain sub-specialty in that field that I would love to do, I don’t want to be stuck in the mindset of, oh, I have to work for money. I want to be able to manage investments, properties, and just more freedom so we can travel around and spend family time, things like that.

Scott T:
Okay, so, let me try to boil that, what I heard there, into a financial goal here. So, Jeana, it sounds like you just want a little bit more free time to work on some of these side projects, and travel, and those kinds of things. And Scott, you want the option to not have to work sooner rather than later, it sounds like with this. And I don’t think you’re that far away from that reality with this stuff. And I think the first and most important thing I would look at from a strategic level is your biggest asset by far is your disability with that. That is a million dollar, perhaps plus asset if you think that is likely to continue. Unfortunately, that is your biggest asset with that. And so, that’s 65% of your spending with that. All you need after that is 2,000 more in passive income, and you cover your expenses, right? For the most part, maybe a little bit more than that, and you’re done, right? And you may or may not have that with your current portfolio across these things, but you have no way of telling that based on what you’ve invested in with that.
And I just think you’ve done something a little tiny bit out of order if you’re going for the optimal approach here, which is, you’ve gotten this interesting and unique investment profile before you’ve gotten that foundational level of stable, predictable, capacitive cash flow. And I think that there’s no reason to go and blow up your formula with these types of things, and all that stuff. But if you can find a way to stably generate that additional $2,000 a month and work towards that for a year or two, and slowly, perhaps, redeploy the winnings that you get, or the returns that you get from some of these things like the apartment complex into that, along with your savings rate over a one, two, to three year period, you’ll cross that finish line, and then you can begin replaying everything you want into this type of stuff, probably… Not guilt free, but without having to worry that you’ve got a unique portfolio with that. Because the whole game is to get to the other side of the rat race with this and cross that passive income bridge, and get over that point where you’re bringing in more passive income than your lifestyle costs. And then all of this stuff makes perfect sense from that position.
So, I think that would be how I would zoom out and think about the position, is I don’t think you’re doing anything wrong with this. I just think that you’re not going to feel free the way that you could if you just put the head down for one, not that long, one, two, three years, and think about how to creatively get that last 2,000 a month very predictably. And then you’re good to go, all these things. You could make it big on the Netflix investment. Crypto could do great. You could do great on these apartment complexes. You’ve got to stabilize and automate your assisted living place with those types of things. But I don’t think you’re very far away, if you just focus in and say, “I’m going to make sure that I get a couple of core assets over that threshold.” And then it becomes about this diversification. And you’re building a venture capital business here, in effect, with this, bit by bit by bit. I think that just the time and place for that is after you’ve crossed the cashflow threshold with that. That would be my high level, 30,000 foot view advice.
And perhaps a good starting point to doing that would be doing the dirty work of attempting to value your assets one by one, predict the timing of those returns. If it’s in a documentary, just dismiss it from your net worth, right? You can watch it and root for it with those types of things, but you have absolutely no control over whether Netflix buys that or whatever. You may get a ton back, it may be a great investment, but I wouldn’t think about it as part of your financial position in the short run here. And I might do that, the same thing with a couple of these other investments like the dog with that. I can’t imagine selling the family dog, even if… Yeah, some of those things. So, I would exclude a bunch of them to get a really conservative picture, but one by one value those assets, figure out the timing of those cash flows and that kind of stuff.
And I think from there, think about cutting a couple of them, and doubling down, and saying, hey, if I just put my heads, I don’t want to do it. But if I finish out this residential assisted living, which is your most meaningful asset, and where I would suspect this exercise would lead and point first, is you’ve got the most control and the most value locked up in that residential assisted living property, whatever concluding that play looks like so you don’t have to go in and work at it on a regular basis, and it’s generating enough income is where my gut would tell me in this long list is the place to start looking, and then keep marching down the list with that. But if you can get $2,000 a month in passive cash flow, you’re done with that. And the rest of your career and life can be-

Jeana:
Play money.

Scott T:
Having more fun with what you like to do, and build now this venture, this alternative investment portfolio, and you’ll probably win great with that if you keep… Your fundamentals are fine. You obviously analyze these deals, you look at a lot of them, and you pounce when opportunity and cash go inside, it seems to me. I’m getting going on a rant here. I probably said many things that weren’t true. [crosstalk 01:00:13] How is that? Was that helpful?

Jeana:
Yeah.

Scott R:
Yes.

Jeana:
There’s one thing, though, with our memory care home, is that we haven’t paid ourselves yet from it. So, we’ve been in it for about three-

Scott R:
Two years.

Jeana:
Two years. And so, all of that, we’re just putting into a savings fund for the business. So, that’s another thing too, is that eventually we do want to start paying ourselves, but we haven’t yet, just because our overhead cost is pretty high. And also, things come up, things break, and so we have to get that fixed. So, that’s one of our main goals. We do… Before though, Scott was there a lot working. He would sleep there, be a caregiver, then go to his nursing job during the day. So, we were all tired?

Scott T:
How do you guys feel about your skills with respect to financial modeling?

Jeana:
[inaudible 01:01:09].

Scott R:
Not great.

Scott T:
I think that would be a really valuable skill to invest in developing. You can take a YouTube course or something free on it. But if you can begin building out basic financial modeling skills, or maybe there’s someone in your investment club, will be good with that, I think that will really help you. Because I imagine when you talk about that rental, that assisted living property, which I think we can get into because that’s your biggest investment, you’ve invested 75K. It sounds like you’ve poured more money into that over time. You had to buy the property, you’ve invested money, you’ve spent the night there, you’ve invested large, your time is valuable, so you’ve invested probably hundreds of hours or thousands of hours-

Scott R:
A lot of hours.

Scott T:
…into that. So, maybe your investment in there is $200,000 or $250,000 with that, right? And what I’m hearing is things break with that kind of stuff, and here’s the income and expenses. A good budget, a good financial model for these businesses will include things like here’s how much the salary and payroll and bonuses and benefits will be per employee, and here’s my CapEx, office supplies, repair budget, those types of things, just like you would for a rental property with those types of things. And I think that a good, a set of… If you can develop and hone your financial modeling skills, it will give you a much clearer picture into the prospects of this business over the next couple of years and what you need to do there.
Because I suspect you’re just missing things in your forecast, because you’re doing it back of the napkin, that are like, hey, the roof’s going to need to get replaced on this business, or the beds are going to need to be replaced every couple of months, because they’re going to get more… I have no idea what the CapEx expenses are in this business. But I imagine some of those things are getting missed, because there perhaps is not a good budgeting architecture in there. And if you’re interested in doing this type of stuff over a long career, I suspect that being able to look at financial models and immediately know when there’s crap in there will be very advantageous to you as you make more investments in things like gyms and those types of things. So, I think that would be a skill that I’m noticing might dramatically change your ROI or your decision making on many of these things over time.

Jeana:
Yeah, and I think that’s one reason too why we do want to extend out and renovate the memory care home and add two rooms, is so we could get to the cap of having 10 residents, because right now we’re only licensed for eight. So, if we get to 10, then that means more income. So, that’s our main goal as well.

Scott R:
Anyway, it would help out a lot if we had that 10. Even the location wasn’t ideal. It’s like a-

Jeana:
Old Summerlin area-

Scott R:
The people that live there, they’ve owned the houses since 1980. Most of them are original owners. But if I were to do it over, I’d probably go on a little bit higher scale neighborhood than that, and you could demand more income from the residents.

Scott T:
What do you expect to generate from this business over the next year?

Scott R:
After everything, probably roughly 5,000, maybe. Five to 10,000.

Jeana:
That’s net.

Scott R:
Yes.

Scott T:
And that’s without you working in it? That’s with you hiring everything out?

Scott R:
So, we have a good manager now-

Jeana:
She’s amazing.

Scott R:
And she’s taken a lot of responsibilities off our plates. We still do the financial stuff and planning, but I don’t have to, we don’t have to go in anymore. Well, it’s been a while since we went in.

Scott T:
And that’s after you move the property to the full capacity, the 10 units?

Jeana:
Oh, after it would be more.

Scott R:
After? Oh, after [crosstalk 01:05:04]. Oh, yeah, I’d imagine about anywhere from 20 to 40,000, just depending on if we can stay full. But we do pretty good with-

Scott T:
How much is the… How much would it be worth just to sell everything today? If you sold that entire business today, how much would you realize?

Jeana:
Well, right now per bed, it goes for 15,000. So, since we’re licensed for eight, what is that, 15… I’m not good with math, so…

Scott R:
15, 30, 60, what, 90?

Scott T:
So, you could sell it for 90,000-

Jeana:
That’s just the business. And then the house, we bought it for 275, and the house is worth around 320, 325.

Scott R:
So, the thing with the house is, I don’t think it’d go for the regular price. As a constant area, because it does have all the things we had to do to set up for the home, like a fire sprinkler system, fire system, all these things add up.

Jeana:
Handicapped, all our bathrooms are handicap accessible, though, yeah.

Scott T:
Based on what I just heard, let’s say you sell it for 300. And you would collect 30,000 from the sale, right, after the mortgage. And then you have another 90,000 for the business that’s $120,000. Right now, you would be selling that business, you collect 120,000, or the after tax amount, instead of collecting the five to 10,000 in profit from that, which sounds like… And it sounds like a lot of your time is going towards collecting that five to 10,000. To me, that’s a sell side for this business in its current state. If the future state of the business is different then, and dramatically different, then that says I got some work to do to transform the business to that, just because that’s a five or 10%, a five to 10% or less ROI in a business that is is probably not growing a ton with a lot of these things with that, right?
And it’s a private business, and it’s doing a lot of all of those… It’s not generating a huge cash and cash return relative to its value with it. And it’s not likely to appreciate unless you perform a lot of activity, right, with it. So, if you complete the activity, you have 10 units, you’re making 40 grand a year, how much is that business worth?

Jeana:
Another 30,000?

Scott R:
Yeah. I would say yeah.

Scott T:
130,000? So, $130,000 business spitting out $40,000 a year in cash is a great business. $130,000 business spitting out 20,000 is in that middle zone, I think, with a lot of this kind of stuff, right? Because you could take that money and buy two, three Airbnbs, for example, and potentially make a different ROI on that. And so, I think that’s, again, where that skill of financial modeling, that hard skill, being able to put this into a spreadsheet and say, “Best case scenario, this happens, best case scenario, this happens,” I think you’ll have to play around and make some tax moves. I think that that will result in you making moves. I don’t know with this particular business. I think it will result in you making moves that are hard and big in getting out of and into investments.
But it might clean up your position dramatically when you’re like, “Oh, I’m making this much per hour in this business, and I’m making this much per hour in this business,” right? I have this option here and I don’t have it here. My best possible state for this one is this. That doesn’t make any sense. So, you have to completely change up my formula with that. But I think that’s where I’m sensing opportunity lies with a lot of this stuff. And I think that you have to start with that business, because that’s where you’ve invested the most and have the most value. Don’t worry about what you’ve put in. That’s called sunk cost, right? But what is it worth today? And I’m looking at this as an objective outsider, where’s it going to go? And is that good value, or should I sell and restart?
And if the worst case scenario is you get out of this for 100K, and then you restart in the higher end one that you just said, because you know that now and that’s what the market is going, maybe that’s the start of a huge business for you that works really well. And this is not wasted. It’s just an educational experience with it. But I think that that’s where I would begin my search with, by modeling out every one of your assets in detail, starting with the biggest and most important, and the ones you have the most control over, and going down the list thinking through what are their prospects today? Where are they going to go in the future? Am I budgeting correctly? Because if you’re going to own assets and be a venture investor, you will want your CEOs of your businesses to. as they will all grow, many of them will grow into big businesses to present you with an annual budget that you will beat up, and believe it or not. I know this from personal experience. So, that would be my biggest piece of advice for this, not that you should change up fundamentally what you’re doing with this, just that that’s a tool that I think is necessary if you’re going to go down this approach or will be immensely helpful to you.

Mindy:
Yeah, I definitely agree with what Scott said. When you started talking about the residential assisted living, and that Scott, the guest, was working in there, the numbers started to be a little bit less exciting. So, I love the… What did you call it, Scott? Financial modeling? Can you find a YouTube video that we can-

Scott T:
Yeah, I took one with a guy named ExcelIsFun or the channel is ExcelIsFun. It was very nerdy. I took it a few years ago. I was a two week thing, and I took it right before I started my job, and found it immensely helpful. You don’t need to be the pro at this. But if you can feel very comfortable inside that spreadsheet and making basic assumptions, or at least the key assumptions in these unique businesses, and you got to be able to just do it from scratch. You can’t use templates if you’re going to be doing creative stuff like this. Because you’ll need to figure out what is the actual key driver of the value and expense in an assisted living place or a dog in-person visit company or whatever it is. So, those are… Again, I think that will just take… Two weeks study there, they give you a lot of value.

Mindy:
Yeah.

Scott R:
Yes, that sounds like something we need.

Mindy:
Yeah, I think that-

Scott R:
I’m interested. I’m very interested.

Jeana:
Yeah, I think that’d be super helpful.

Scott T:
Any other areas that you want us to dive into here? This is, again, unique, so we haven’t had a chance to think through this. And I’m very grateful for you guys for bringing this to us, because it’s made us think in a new way, at least me.

Jeana:
Yeah, if we do sell the 24 unit, we’ll probably get around 70 to 75,000, so that’s liquid. And we do want to invest in… Originally, we were going to do, get a female fluffy Frenchie so we could just be set, and just make the babies there that way. But then we decided that we wanted to do Airbnb.

Scott R:
Short term rentals. I’m just thinking real estate, because to me, I see that as the biggest wealth builder. Depreciation, things like that, write off on taxes and being able just to travel. Because I want to do a little bit of distance between from wherever we get the property. It does worry me though, but…

Mindy:
If you’re doing Airbnb, if that is your plan, to purchase a property and do an Airbnb, I would say listen to episode 364 of the BiggerPockets Real Estate Podcast, where we interviewed Avery Carl, who does Airbnb. She has more general information about the concept of Airbnb. She does it in the Smoky Mountains area. And she said going into a place where you have already existing Airbnb laws is the best place. If you’re already going to do it outside of where you live, do it where they’ve already discovered or decided on the Airbnb laws and the short term rental laws. Because then you don’t have to worry about, oh, well, it penciled out as an Airbnb, but it doesn’t really work as a long term rental, and now my city just changed all the laws. So, she’s got a lot of great information on that episode.

Scott R:
Yes, I just listened to that one recently.

Mindy:
Oh, good, good.

Scott T:
I like Airbnb. I like Airbnb as an asset class, because there’s a big shortage. I think that travel is going to come roaring back with a lot of this stuff. I think it’s local, and depends on a lot of those things. And I think it will be yet another one of these little areas that you guys are exploring with this, and another business line. So, I would be cautious of just saying, “How do I focus for some time on this, and maybe replicate it a few times with it?” But yeah, I think that’s where a little bit of more modeling and thinking about everything and a little bit more cold numbers. What is the ROI on this going to be? What’s the upside? Am I being realistic? Does my model show that? Am I making the right trade offs with these types of things? So, you can allocate your cash as you come into it in these intervals into the highest and best use, rather than whatever happens to show up when you have the cash available and the inclination with that.
So, I think that’s the biggest thing, is Airbnb might well be it. And I think Airbnb is a phenomenal, is the move across the country in many markets for ROI right now and in the future. There’s a lot of really good tailwinds behind it. But I just think that it comes back down to, I have no… It’s impossible to tell whether that’s a better investment than what you’ve currently got here, unless we can get more detail into the numbers and the prospects of each one of your individual investments, and whether there’s capability to play more money there, and that kind of stuff.

Jeana:
The reason why, too, I want to get into Airbnb is because I want to make it an experience as well. I was looking into Airbnb glamping, also yachts, and even mini houses. Because people like those weird, crazy Airbnbs. They want the full experience. So, that’s what I want to be able to do, is get a either land or property, but also in the backyard have a yacht or a mini house. And then have a room where there is a flower wall with a big lighted backdrop that says, “Dream big.” People like stuff like that. They want… When you look at Airbnbs, people want that Instagram mogul type of house, or yacht experience to be able to share, I guess.

Scott T:
Yeah, look, I think you guys are not short on ideas, and all that kind of stuff. I think you guys have… And I think it’s great. I know you got all this… There’s so many good options here, and you guys are just doing the right things fundamentally to generate liquidity to sustain this. But again, I think it comes just all back down to, what does your model say? And maybe using that to drive a big part of the decision making with a lot of these things, because they’re all good ideas. At some point, though, you’re missing opportunities and taking risk and diversifying unnecessarily with the spread across all of these things. So, that would be the biggest, I think, fundamental with a lot of this.

Scott R:
I just had a question about as far as mortgages. Our mortgage is at 4.5%, and at the time, that was good. Do you recommend a cash out refinance? I could do the IRRRL, which is a VA refinance, just to lower the rate. What do you guys think? Should we try to get some of that capital in case we can use it, deploy it somewhere, or…

Scott T:
I think a refinance makes a lot of sense to me. Just either, you’re going to lower your payment, or you’re going to pull out cash and probably keep your payment pretty close. So, the refinance makes a lot of sense to me at the strategic level with one of those options. I think… Yeah, if you have plans for it, maybe consider pulling some cash out. That’s what I did with across my portfolios over the last year, is pull out a bunch of cash with a couple of those. What do you think, Mindy?

Mindy:
I would say if you have a place to put the money, then refinance, as long as it’s going to make sense to refinance. You don’t want to go from 3.3 to 3.2, and spend a lot of money doing it. And I don’t know-

Scott T:
[inaudible 01:18:14] from 4.5 to 3.5, or something lower with that on the primary with this.

Mindy:
No, their primary is 3.3.

Scott T:
Oh, [crosstalk 01:18:21].

Jeana:
4.5.

Mindy:
Oh, it’s 4.5? Oh, okay, I have the wrong information here. 4.56 [crosstalk 01:18:29], oh, yeah. If it’s a… You go ahead, Scott.

Scott R:
He has to go.

Scott T:
I think we started late, and that’s how I lost track of this. Usually, we have plenty of time with this. I am so sorry-

Mindy:
Goodbye, Scott.

Scott T:
I really enjoyed this. I really enjoyed meeting you. I think one of your sons sent us a key chain? Is that-

Jeana:
Yeah.

Mindy:
Yeah. I went to their meetup.

Scott T:
That’s awesome. I’m so sorry, I have to run here.

Jeana:
No, it’s all good. We appreciate you guys’ time.

Scott R:
Thank you.

Scott T:
Yeah-

Mindy:
I don’t have to run.

Scott T:
Yeah, [crosstalk 01:18:56], and we’d be happy to chat again some time with this. But thank you for coming on the show, listening, and all that stuff.

Jeana:
Yeah, thank you.

Scott R:
Thank you. Appreciate it.

Jeana:
Appreciate it.

Mindy:
Okay, so with a 4.5% mortgage rate, yes, I would almost assuredly… You would almost assuredly be able to find a lower rate. And I would refinance out of that. Of course, run the numbers and make sure that it’s not going to cost you $10,000 to save $1.50 on your mortgage, but I think you’re going to find some pretty great rates. I have a lender who is an amazing VA lender, but I don’t know if he does, VA re-fi. So, I am sending him a note right now asking him if he does.

Scott R:
Okay.

Mindy:
Do you know [John Lalant 01:19:38] by any chance?

Scott R:
No.

Mindy:
And you said that’s IRRL?

Scott R:
Yes.

Mindy:
[inaudible 01:19:45].

Scott R:
Or they call it a streamline as well. VA streamline loan.

Mindy:
VA streamline. I spelt that wrong.

Scott R:
Because all that would do is that would just lower our interest rate. But I was wondering, should we try to take out a HELOC or just to have some funds available if we need it?

Mindy:
Yeah, so the HELOC is going to have a variable rate. And if you could get a refinance, that brings down your mortgage rate, that isn’t going to cost a lot. I would go that route instead, because that’s fixed. I don’t know if you’ve got a 15 or 30 year, but I would go with a 30 year, because that’s a lower price point or a lower payment than the 15. You could always increase your payoff time. But why would you re-fi into a 15 year again when you need that money to deploy someplace else? So, yeah, I would definitely… When I hear from him, I’ll let you know. I’ll send you an email.

Scott R:
Okay.

Jeana:
Thank you.

Mindy:
Yeah, but I think this is… There’s a lot to think about here, but I also think that you guys have the income covered. It’s a great position to be in. I would personally like to see more traditional investing. You’ve got the creative investing down pat. But the more traditional investing is your baseline, your safety zone. It’s not safe. Past performance is not indicative of future gains. But it’s the sedative, forget it, I’ll just keep putting money into the 401K, and it’ll just grow by itself, or whatever it does. And then you can focus on these other things. It doesn’t take up any mental bandwidth to throw it in a 401K. And regarding the 401K loan, so did you take out a loan, or did you cash it out?

Jeana:
I cashed it out, 21,000.

Mindy:
And did you do this within the COVID window? Because you said-

Jeana:
Yes.

Mindy:
…you took the 10% hit. It was supposed to be penalty free when you-

Jeana:
It was actually supposed to be 20% penalty, but because it was during COVID, it was only 10%.

Mindy:
20% penalty?

Jeana:
Yeah, when you cash out.

Mindy:
I thought it was a 10% penalty, in addition to taxes. That if you took it out, if you’d make the withdrawal, because you suffered a COVID hardship, you shouldn’t have to… You shouldn’t pay the penalty, and then you have three years to pay it back or pay taxes on it. So, I would… Do you have a CPA?

Jeana:
We just found one.

Mindy:
Okay, I would ask them about that in specific detail. Because I don’t think you were supposed to pay 10%. As long as you have a COVID hardship and can prove the COVID hardship, I don’t think you pay the 10% penalty, and you have three years to pay it back or pay taxes on it. So, you can do that over the course of three years. You can do it all in the third year, or the first year, whatever. So, definitely talk to your CPA about what is the best course of action, or what are your options there?

Jeana:
Okay.

Mindy:
But yeah, I think we’ve covered a lot today. And I would love to check back in with you in six or 12 months and see where you have decided what financial modeling you’ve done and what you’ve decided on, the different options that you have available to you. But you have a lot of things to look into, and lots of time to have these money dates, and sit down and talk about each individual thing, and I’m excited for your prospects.

Jeana:
Thank you.

Scott R:
Thank you.

Jeana:
Yeah, we’re so excited to be here. This is a privilege and an honor, and we’re so grateful.

Mindy:
I’m so grateful that you shared your story today. Thank you so much.

Jeana:
Thank you.

Scott R:
Thank you.

Mindy:
Okay, and we will talk to you soon.

Scott R:
Okay.

Jeana:
Bye.

Scott R:
Bye.

Mindy:
Okay, I’m going to hit stop recording. Boy, Scott, that was Jeana and Scott, and they have a fun, fun story. What did you think of their investments?

Scott T:
I loved it. Clearly I do something different with my money, right? I invest in real estate, stocks, and a company called BiggerPockets. And I have a pretty simple formulaic approach to that stuff. But I honestly, when I hear stuff like this, I get excited, and I wonder, maybe they’re going to do really, really well with this approach over the long run with this, if they can keep taking shots like this, and creative things opportunistically, and develop a big skillset. You think it’s going to be much riskier. At first, you’re going to have some big losses, maybe a couple of big wins. But over the long run, you think this is a pretty interesting skillset that’s giving you exposure to something that’s a little different. And so, it’s impossible. I have absolutely no framework to be able to tell what the return profile of the asset, the variety of asset classes that they are participating in, I have no idea what the return profile is going to be over a long period of time with those types of things. I don’t think… I think it would be extremely difficult to calculate that.
But I’m excited for them, interested, and I think that, like I mentioned in the show in the intro, I think that if they learn how to model and more appropriately evaluate these assets from a financial perspective, it’ll just guide their decision making and give them that much better odds.

Mindy:
Yeah, as I said at the very end of the show, I’m really excited to talk to them again in six or 12 months and see where they’ve gone, see where they’ve… How did it go with the dog? And did anything ever come out of the documentary? And a lot of different things. So, I’m super excited to talk to them. I can’t wait to check in with them again. And I just put a note on my calendar so that I bring them back in in about a year to catch up, because I think this is a fun way to think about investing. But I also want to remind our listeners that they are investing from a position of no debt, and they aren’t leveraging their investments. They are taking the $25,000 and putting all of that in there. They’re not borrowing against that. So-

Scott T:
Yeah, if they had credit card debt, or they had student loan debt, or other types of situations like that, I’m completely aligned with Mindy on that. This would be irresponsible, because you’re putting money into assets that may never pay off, or you’ll have a completely… When you invest in a documentary, God only knows when they’re going to finish the documentary, even if they present you the schedule, and if someone’s going to buy it, like Netflix, right? So, [inaudible 01:26:38] there’s a huge pray and wait component to that. Doesn’t mean it’s a… Maybe invest in 100 of those, and your ROI is 15, 20% across the 100 investments. It could be a great asset class. Can’t say anything about that. But you can’t do that when you have debt or cash flow problems that are fundamentally not being addressed in your personal financial position. They don’t have that.

Mindy:
In addition to that, they have almost guaranteed income for at least five years, and unfortunately, probably for the rest of his life with his disability. So, there’s really specific levers that they have pulled that contributed to our conversation today. But yeah, I’m excited for them, and I can’t wait to catch up with them. Scott, this episode did run a little long, so we should get out of here. Are you ready?

Scott T:
Let’s do it.

Mindy:
From episode 222 of the BiggerPockets Money Podcast, he is Scott Trench, and I am Mindy Jensen, saying catch you later, future dudes.

 

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In This Episode We Cover

  • Diversifying your investments into multiple different asset classes
  • Knowing which investments are likely to make a return and planning for those that won’t
  • Setting up a system for wealth creation so you can develop an early retirement plan
  • Investing in multifamily real estate like apartment buildings and senior living homes
  • Using government benefits to maximize wealth as quickly as possible
  • Investing in an Airbnb property and which markets make the most sense for it
  • And So Much More!

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