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Finance Follow-Ups: When to Scale Up (or Down) Your Real Estate Portfolio

The BiggerPockets Money Podcast
32 min read
Finance Follow-Ups: When to Scale Up (or Down) Your Real Estate Portfolio

We’re back with another Finance Friday Follow-Up! This week, we talk to two past guests and review three life updates. Fabio from episode 174, Clayton from episode 168, and Rachael from episode 190 all have life updates for the audience!

When we last talked to Fabio, he was starting to expand his real estate empire. Since the market has been so hot, he has had to pivot his strategy towards what works best for him in the long term. With a few years of military service left, Fabio wants to wind down his more active income and pursue more passive income streams, while still including real estate and stocks/index funds in the mix!

Clayton shared with us on his solo episode how lucrative living on the road can be. Since then, his girlfriend has turned into his fiancé, he’s been offered a very large pay raise, and he has scaled his real estate portfolio with one more house hack. He also gets to take his foot off the literal gas pedal since he’ll be transitioning into a more stay-at-home role.

Rachael wasn’t able to be here for a video interview but sent Mindy an update on her overall financial situation. Since we last talked, Rachael realized that house hacking wouldn’t be exactly the right fit for her family. Thankfully, she’ll be closing on a new home closer to her children. Rachael also found herself in a particularly scary financial and medical situation since we last talked, something that you’ll hear about in-depth on a new episode in the coming months!

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Mindy:
Welcome to the BiggerPockets Money podcast show number 254 Finance Friday Edition, where we check in with Fabio, Clayton and Rachel, and see what’s been going on in their lives.

Fabio:
But honestly, at this point I still love the Marine Corps. So I might stay in a little bit longer, if not then my wife and I definitely want to do some traveling, volunteering, maybe work for a nonprofit somewhere, just, like I said, right now, it feels like we just have so many options outside of the Marine Corps that it’s unbelievable.

Mindy:
Hello, hello, hello. My name is Mindy Jensen and it’s just me today. I am here to make financial independence less scary, that’s just for somebody else, to introduce you to every money story, because I truly believe financial freedom is attainable for everyone, no matter when or where you’re starting. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, or start your own business, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.
Today, we’re checking in with Fabio, Clayton, and Rachel to see how their real estate adventures have been going. First up, we have Fabio. Fabio last joined us on episode 174, where we talked about keeping monthly expenses low, taking advantage of the equity you have in your different properties, and what to do with houses that aren’t cash flowing. Fabio, welcome back to the BiggerPockets Money podcast. It’s been a while since we talked, what’s been going on?

Fabio:
Hey Mindy, yeah, it’s definitely seems like the year’s flown by, but it’s been a pretty good year. So, looking forward to updating you on what you guys advised me on.

Mindy:
Awesome. Well, let’s start with those rental properties. I recall you had a rental property. You had purchased several around the country, and one of them wasn’t really doing all that well. What did you end up doing with that property?

Fabio:
So I ended up taking your advice. We had a property in Arizona that we’ve had since 2011, and just with everything going on, the market has shot up as everybody knows. So it actually was worth a lot more than I thought at the time. So we did end up putting it on the market and we sold that in late spring. At the time, I know when I talked to you guys, I thought market value was somewhere around 125. We actually ended up selling it for 186.

Mindy:
Oh, that’s a big difference.

Fabio:
Yeah.

Mindy:
Wow. Well yay, congratulations. And holy cow. Okay. You didn’t share that with me before we recorded. Okay. So what did you do with that extra $60,000 that you just found in your condo, and wow, now it turns out to be a really great deal.

Fabio:
Yeah. Once I started actually getting appraisals for it and found out how much it was worth, it was a no-brainer, the advice that you guys gave me. It wasn’t making any money. The rents had gone up, but not that much. So it was a no-brainer just to sell it, take the money. I ended up profiting close to 90K and then I just put that into the market. And as you know, the market has been really good this year.

Mindy:
The stock market?

Fabio:
The stock market, yes.

Mindy:
Okay. And you had other properties that you were working on. What did you do with those?

Fabio:
So I had another one that I was working on, a duplex in St. Louis. And the plan at the time was to finish it sometime around late spring, rent it out in the summer. But me being in the Marine Corps, I ended up getting sent to Quantico just outside of DC in May. And I was there until mid August working every day of the week [inaudible 00:03:56] things. So long story short, that project got delayed, got nothing done the entire summer. Came back, still needed a lot of work done, had other things that had come up during the rehab that added to the cost. And so running the numbers, it just didn’t make sense to continue that project. And again, with the market going up so much, that the value of that property had gone up as well, so I ended up selling that one.
I didn’t actually finish the rehab. I could have still finished it, but it would’ve been another four months or so. And so I decided just to sell it to another investor. I did end up losing just under 20K on that deal, so not the greatest, but once again, I sold that one and took that money and just invested that as well. So both of those ended up investing from this one from the duplex. Once I sold it with fees and all, I ended up walking away with 120, I had put just over 135, almost 140 on it. So I put 120 from that one into the stock market as well.

Mindy:
Okay. And you had taken a loan from your retirement accounts-

Fabio:
Yes.

Mindy:
To fund these deals. Have you since paid back that loan in full?

Fabio:
Yes. And actually before I get to that, one other advice that you had … I can’t remember if it was your Scott, had given me was to pay off the private money lender for the duplex. So I did do that right away. Actually, I think I did that, that same week that I talked to you guys. And I’m so glad that I did that because I was paying I think 12 or 1300 a month on that loan, which I hardly even used at the time, so I paid that off. And since I didn’t sell the house till six months later, it ended up saving me just under 10 grand.

Mindy:
[crosstalk 00:05:43]. Oh yeah, lots and lots of money.

Fabio:
And then the TSP loan, I kind of went back and forth on that. And with the properties doing so well and the profits that I made from that, I didn’t really necessarily readjust my numbers, but I realized I was closer to my five goal than I anticipated. So what I decided to do is to pay back the TSP loan, which I know is what you had advised with the thought that I don’t necessarily need it. I’ve reached my five number without it. But now I’m thinking of the TSP as sort of a building block for a legacy that I can leave behind. So I’ll pay that off. Once I hit retirement, I’m not going to need it. So I’ll just keep investing that, keep it growing. And when I die at 250 years old, it’ll be worth a lot and I can pass it off at that point.

Mindy:
Well, I hope you live to be 250 years old. So you had 21 years in with the Marine Corps when we last spoke. What are your plans for your Marine service?

Fabio:
So I’ve got just a few more months left here at working at the University of Illinois right now. I’ll be due to move next summer. Actually just talked to the guy that’s in charge of giving us our orders, our duty stations. I just talked to him yesterday. I should be getting orders probably around December or January. And I plan to do at least three more years. So basically three and a half more years from now, which will put me at 25 years in the Marine Corps, potentially retire at that point. My military retirement at that point will be around 5,300 a month. So between that, my investments, I’ve pretty much reached five already, more than five.

Mindy:
Wow. That is fantastic. I love that. What real estate do you still own right now?

Fabio:
So the only things that I held onto right now are the San Diego duplex. And one reason I’ve decided not to sell it just yet is because I don’t know where I’m going next. If I get stationed in San Diego again, my wife and I discussed moving back into a duplex, which will save us a lot of money in rent. The value has gone up quite a bit. Right now it’s worth around 780. We only owe 487. So we’ve got quite a bit of equity in there.

Mindy:
Yeah you do. And it’s in San Diego. That’s kind of my favorite city to go visit.

Fabio:
And it’s still going up. So at least for now it makes sense to hold onto it a little longer. And then I still, if I do get stationed there and live in the duplex, I know I mentioned before about maybe trying to grow it in from a duplex to a fourplex. And I feel if I’m living there actually in the house, it would make it a little bit easier to try to manage. Not sure that I want to do that long distance. It was hard enough trying to do a St. Louis one that’s three hours away. So I’m kind of keeping my options open with that one. And then the house that I’ve got here in the Illinois, we’re still living in it. So depending on what happens with my orders next year, I was planning on keeping it as a rental, but I’m probably just going to sell it and then put that money towards the stock market as well.

Mindy:
So Illinois has some market issues right now. It’s not a really growing state. I’m assuming that you’re in a city near a base?

Fabio:
No. So because I’m working, this is sort of an independent duty at the university, so it’s just me and one other Marine.

Mindy:
Oh, that’s right. That’s right. You’re in Champaign–Urbana, right?

Fabio:
Correct.

Mindy:
Okay, yeah. So that has student rental opportunities. And I would suggest running the numbers before you get ready to sell it, just to make sure, Hey, maybe this does make a really great student rental. Or maybe this is better if I sell. I don’t know what the specific Champaign–Urbana market is, but I know that the overall Illinois market is not hugely appreciating right now.

Fabio:
Right.

Mindy:
So yeah.

Fabio:
I’m actually

Mindy:
Talk to an agent.

Fabio:
One of the great things about BP is using your calculators. I’ve used your calculators I don’t know how many times on these properties this year. Just kind of running the numbers over and over again, make sure I didn’t miss anything.

Mindy:
I love it. I love it. That’s biggerpockets.com/calculators if you want to run some numbers on your calculators.

Fabio:
Yeah.

Mindy:
Yeah, that’s fantastic. So what is next for you? You’re waiting on your orders, which is great. I hope you get San Diego. If you’re listening duty station determiner, please put him in San Diego. Do you have any space in your San Diego duplex for you guys?

Fabio:
Oh yes. So one side is a two bedroom that we’re … so we talked about, if we move into a two bedroom, we’ll turn that into a three bedroom, which adding the extra bedroom won’t be that much comparatively. And then the other side, we’ll just keep it rented out. So we’ll be able to fit our two boys in there.

Mindy:
Okay. Yeah. Good, good, good. So, okay. Duty station officer, please put Fabio in San Diego. You can give him my phone number, I’ll talk you. Up and three and a half more years in the Marine Corps, and then the world is your oyster. Are you going to travel? Are you going to invest more in real estate?

Fabio:
Well, so I thought a lot about this after Scott kind of mentioned that last time. And I got into real estate to help propel forward my finances and stuff. And it definitely helped me a lot over the years. But now as I’m getting closer to retirement from the Marine Corps, I do want to simplify things. And I know he kind of mentioned, why do you have properties all over the US? And yeah, the more I thought about it, it just didn’t make sense to keep investing in real estate, at least not all over the US. Maybe if I just stay in one location.
But so for now, I’m thinking no more real estate. I want to just index funds, pay off the TSP loan, and just cruise on out after that. As far as the Marine Corps, minimum amount of three and a half. But honestly, at this point I still love the Marine Corps, so I might stay in a little bit longer. If not then my wife and I definitely want to do some traveling, volunteering, maybe work for a nonprofit somewhere. Like I said, right now, it feels like we just have so many options outside of the Marine Corps that it’s unbelievable.

Mindy:
Yes, yes, yes, yes. That’s the whole purpose of financial independence is all the options that it affords you. And I’m so excited for you because you’ve got all your money set. And now you can do whatever you want. It makes you happy, you do whatever you want and money is taken care of. So you’re not having to constantly reevaluate, oh, that only pays $10 an hour. I would love to be a ranger, but I can’t afford to live on it in San Diego because it pays so little. But you’ve got 5,300 bucks coming in from the government. They’re not going out of business anytime soon.

Fabio:
Yeah. No, I know.

Mindy:
Plus real estate.

Fabio:
Yeah. The Marine that I work with here, we’ve talked a lot about that over this past year. And it’s crazy how COVID times have been so terrible, but financially for those of us that were prepared, it’s been a huge boost for us, for our investments, real estate, stock market, everything. It’s insane how everything’s kind of two different sides of the coin.

Mindy:
It is. And yeah, I wouldn’t want to go through COVID again, but it has really increased the housing market. I mean, look at how much you got for your Arizona condo. That’s fantastic. We didn’t love that investment when we last talked to you, but we also talked to you before the market went just crazy. So I’m really glad you were able to take advantage of all of that.

Fabio:
Yeah, it’s crazy. And it went up even after we sold it. It’s insane.

Mindy:
Well, Fabio, thank you for coming back and sharing an update with our listeners. Somebody had posted in our Facebook group that they were really excited to hear from people who had been on the show to see what they had done. So this is a great update and I really appreciate your time.

Fabio:
Thank you. I appreciate it.

Mindy:
Okay. We’ll talk to you soon.

Fabio:
All right, bye.

Mindy:
Thanks for the update Fabio. We’re checking back in now with Clayton Moss. We first heard from Clayton way back on episode 168, where he told us about his super sweet employment gig. He’s a renewable energy worker with a company car, a company phone, a food stipend, a handsome 401k match, on top of a cushy salary. Clayton has taken advantage of these big perks by maxing out his Roth, buying a rental property, and using his primary residence as a house hack while he lives in an RV, which he also gets a company stipend for while traveling for work. So on the income and living expenses front, he is doing really great.
But he wasn’t checking his expenses. And as you know, that is my mantra. He was just kind of paying the bills as they came in. I suggested that he write everything down on a piece of paper because I’m old school. Scott gave him the electronic option of mint or personal capital. But we did give him some budgeting homework. But I specifically said, I really don’t see a lot of opportunities to completely turn around your financial position, because it doesn’t need to be completely turned around. Basically he was killing it. And I can’t wait to see what he’s been up to since. Clayton. I’m super excited to check back in with you. What’s going on?

Clayton:
Yeah. Great to be back Mindy. Thanks for having me. So lots has changed. I guess for one, no more girlfriend, now fiance, so that is a big change in our lives. We have just gotten news that I’m going to be getting a promotion that came with a pretty hefty pay increase, and also going to be moving back home with that. We got a new house hack, so we’re moving into our second house hack, going to be selling the camper, and a lot has changed. I guess that’s the 30,000 foot overview of it. But yeah, pretty big move.

Mindy:
Let’s jump. Okay. First of all, congratulations on your engagement.

Clayton:
Thank you.

Mindy:
Next up, talk about this hefty increase, and moving back home, and getting a new house hack, and selling the camper. So that’s a lot to unpack. Let’s first start with the hefty pay increase. And it sounds like the pay increase comes hand in hand with the moving back home.

Clayton:
Yeah. So before when we talked, I was working on the road. I was in Texas at the time and now I’m up in Montana, so quite the drastic change there. And then I just got the promotion offer about two weeks ago, and just officially transitioned into the role. And we’re going to be moving back home with that. So it’s going to be, instead of me traveling and on the road every day, every week, for six, eight months at one job site, it’s going to be me having a home base. So I’ll actually be more in the house hack more often than I was previously, and traveling from home out to the job site. And basically what my boss’s position is right now, checks and balances of multiple job sites. I’ll probably be in charge of maybe five or six of them.
And that came with, like I said, hefty pay increases, probably like a 60% increase, which is huge. But on top of that too, having to consider that my fiance is losing her position again, as we talked previously. So that was factored into the decision making process there. I will be losing per diem, unfortunately being that I will be back home every week.

Mindy:
So I would take a hefty pay increase of 60% over the per diem of what, 25 or $40 a day? I can’t remember what your per diem was.

Clayton:
Yeah, it was just under 50, 50 a day.

Mindy:
Okay.

Clayton:
And then-

Mindy:
So I’ll take a 60% pay increase because that’s 60% on top of a cushy, already fairly cushy salary.

Clayton:
Right. And I guess the bigger part of it wasn’t-

Mindy:
What sort of hour?

Clayton:
What sort of hours?

Mindy:
What sort of hour increase are we looking at?

Clayton:
Oh boy, I don’t even know.

Mindy:
Yeah. Are you doubling your hours?

Clayton:
It’s going to be different. I don’t know. It’s going to be a lot of travel. I’m going to travel Monday, travel back Friday, and on call constantly, which I already am. So it’s not, I wouldn’t say a huge difference. It’s just going to be a different type of travel, and different type of stress with the position. As far as like the hourly rate difference, I’m not too sure what that would chalk up to, to be honest with you.

Mindy:
Still 60% increase goes pretty far.

Clayton:
Yeah. And one of the bigger factors that I was considering too, is that my fiance gets a per diem as well. So that would be we’re losing out on that tax free income, which is, she was getting $700 a week for that per diem, which was, that’s almost like a salary in itself. So yeah, so there’s a lot, like I said, that factored into it.

Mindy:
Okay. So can she go get a job in your company, because your company sounds pretty sweet?

Clayton:
Yeah. So she has been with our company for a while, but like I said, with this transition, moving back home, her position was a field based position. So right now it’s going to be going, like I said, last time back to the art thing, and I’ve been encouraging her on top of that to do maybe a real estate agent position. I think that’d be pretty fitting for her. And then it would align with our investment goals too.

Mindy:
Okay. So let’s look at your house hack. What does house hack mean to you? And what does that look like in your specific situation? Because you were basically on the road the whole time, so they kind of had the house to themselves.

Clayton:
Right. Yeah, so we’re moving out of that one, the first one that we had, and have rented that unit or room that we were in, so that one’s fully rented. It’s just a pure investment property now. And we did buy another duplex that we’re house hacking. We remodeled the lower unit and we have a tenant that just moved in there this past month. So we do have an upper unit that has not been remodeled. So it’s going to be a live-in remodel house hack, probably mess, but we’ll see. But yeah, that’s the target right now is to get back, moved home, into that, and remodel that upper unit.

Mindy:
And what sort of timeframe are we looking at to … because you just took this new job, so when do you stop field work and transition into more office work for lack of a better word? And when do you move into your new house hack?

Clayton:
So I’ll be leaving the field in like two weeks, and taking about a week or so to transition, move everything out of the camper, send the camper back home, send it to a shop to get it fixed, and then get back into the house, and then start traveling like the week after Thanksgiving, so that puts us out about three weeks.

Mindy:
Okay, so you’re going to be home on the weekends?

Clayton:
Yeah. It’s going to be fun.

Mindy:
Well, and you’re young, right? Remind us how old you are.

Clayton:
27.

Mindy:
27, okay. The best time to do all this traveling is when there’s no kids involved, and your fiance’s kind of on board with all of this and knows the score, as opposed to meeting somebody and you’re like, Hey, I’m just going to be gone all the time.

Clayton:
Right.

Mindy:
You’re still home on the weekends.

Clayton:
Yeah. It’s going to be a lifestyle change. It’s like I said, different type of travel, and that’s one thing that she is in sure of how it’s going to look yet, just questioning the new hours and schedule and all that. Being that Monday through Friday, I’ll be on the road. But weekends we’ll have at home to do all the fun things that we always want to do and work on the house.

Mindy:
Awesome.

Clayton:
Yeah.

Mindy:
So what do your duplex numbers look like?

Clayton:
So we bought it for 212, and we did have to put a little bit more down on this one because our lender required a little bit more being that was our second multifamily owner occupant. But the mortgage is just under $1,100. And the lower unit we have rented for 900, or 950, which could be more, truthfully with where it’s at. It was a quick thing and we didn’t remodel it up to the highest standard, so there’s more potential there. It’s just, we got somebody that was interested and made it nice to where it was going to be putting out a decent rent. And we would expect the same for the upper unit as well. So once we move out, it would be like that 1800 to $2,000 mark for the whole place.

Mindy:
I’m shaking my head because I don’t have those kinds of numbers in my market and I’m jealous. So how much money did you put into the rehab on the lower level, and what did you do for that money? And then how much did you put into the upper level, and what are you going to do with that? Or how much are you going to put into the upper level, and what are you going to do with that?

Clayton:
Truthfully, I don’t have an exact amount on it. Flooring and all that stuff, we did a lot of it ourselves and hired out a friend to do the flooring. So I’d say what, we were in it for 5,000 maybe, for the rehab. And then we probably put in, in the upper unit, we haven’t done anything to that yet. So that’s all upcoming in the next couple of weeks. But I’d say we’re probably going to be doing another, at least 5,000, probably more. I think there’s a little bit more work to be done up on that unit. So maybe up to 10. And as far as financing that, we did self-finance that. Another big change that we’ve had recently was on that previous house hack, we just had to replace a roof. So that was a $20,000 expense that we expected in the future, but not a year after buying it. So our finances have actually been a little bit burdened here recently. Not in a bad way, but not in a good way either.

Mindy:
Unexpected expenses can be kind of a pain in the butt. However, you have the funds to cover it. Remind me what your emergency fund looks like.

Clayton:
We had six months, give or take. Probably a little bit more if you, seeing how the mortgage is covered with the rent and all that. That’s still factored in into that six months, so we realistically have more than that, but six to nine months. And we didn’t actually even touch that. I-

Mindy:
Good.

Clayton:
Yes.

Mindy:
I love a big …

Clayton:
Didn’t actually touch that for the roof just because I’m kind of stubborn and I don’t want to.

Mindy:
Okay, I approve. I love that. I try to cash flow all of my expenses right now anyway, because it’s just better. Like it’s a game. Okay, how much can I get my regular expenses down so that I can cash flow this big expense, and I don’t have to take anything out of savings? I totally get that. One of the things that we challenged you to do is look into budgeting. Did you do any of that?

Clayton:
A little bit. You’re going to be mad at me. I did. I downloaded mint first thing. And it started off great. And I’m going to blame my work a little bit, nature of what we do is I spend a lot of money for work that gets reimbursed, so it was a little it muddy. But it did still outline, looking back at those expenses, exactly what you had said, is that who knew that we went to Walmart so much? Granted, we lived right next door to it, but that makes it too easy to just go there and buy something. And then you’d impulse buy because you’re hungry, and you want Oreos or whatever it is. But that kind of highlighted some things to keep track of.

Mindy:
Okay. Hey, it’s a work in progress. Personal finance is personal and your budget is fluid. I am actually starting off 2022 by being very transparent with my budget. I’ve got all of my projected budgets, and then my actual spending that I’m going to be sharing with the [email protected]/Mindy’s budget. And I want to just show people that it isn’t set in stone. Just because I budget this much for food doesn’t mean that all of a sudden I’m literally out of like everything. All the things that you don’t think about, like mayonnaise, and mustard, and ketchup, they all run out at different times.
But every once in a while, there is this confluence of events and everything runs out at the same time. So instead of going to the grocery store and spending your allotted $125 for the week, you’re like, how did I spend $200? I didn’t get anything different. You kind of did. You got all these like weird things. So I am glad that you’re keeping track of it. Once you plant a seed, you start to notice like, oh, I did go to Walmart today. Oh. And yesterday. And then the next day you’re like, Ooh, I went again. That’s the, boy, Mindy was right. I think I heard you say, wow, Mindy, you were totally a hundred percent right.

Clayton:
Yep. Exactly. No. And it did make us cut down on the grocery budget a little bit, just because of that psychological thing saying, Hey, like we have been to Walmart frequently. And why are we going there when we have frozen meats and whatever else? So it’s made us think about it, it’s just we haven’t honed into a specific number. But progress.

Mindy:
That’s okay. Progress, knowing about it, being cognizant of it is huge. And that was, like I said, that was the catalyst for me, just writing down everything because it is in front of your face, because it is so front and center, right when I walked in the door, it was like, oh, I forgot. I have to write this down. And then like, oh, not only did I go to the grocery store, but I went to the gas station, and I went here, and I went here. And it’s only a dollar, but only a dollar adds up to only a lot of dollars. Well, I’m very pleased that you are cognizant of what’s going on. I have every confidence that once you are done with this, I mean, being on the road is kind of crazy. Let me tell you how crazy it is being on the road all the time, because you don’t personally know.
It can be kind of crazy and I’m sure you’re working hard. They’re not having you sit on a lounge chair, sippin’ margaritas when you’re on the road, you’re working. So you come home from a tough day and you’re like, God, an Oreo would be really good right now. Yeah. An Oreo would be really good all the time. But just say no. Or put it in your shopping cart for when you’re actually at the grocery store. And then if you run out of Oreos before it’s time to go to the grocery store, well I guess you’re not getting any more Oreos that week. So being cognizant of it, I think is number one. So let’s see. You had a company car, a company phone, a food stipend, and RV stipend. I’m assuming that your handsome 401k match and very cushy salary are going to continue. I mean the salary of course is, and the 401k is kind of a thing. So your food stipend is going away. Do you still get the company car and the company phone?

Clayton:
Yeah. So still kind of unclear on the vehicle. Right now I am keeping my company truck, but there is an option for an allowance, which I believe, somebody I was just talking to this morning was saying is right around 700 a month for a vehicle if I buy that. But it has to fall in a certain range of like three years old, less than X amount of miles. I guess my first impression of it is I’m going to try and keep the truck if that is continuing to be an option to me, just because I don’t want to go into a car, first of all right now, because the market’s just crazy for vehicles, whether they’re used or new. And then you got the depreciation of the vehicle itself. And I don’t necessarily think that $700 a month is going to cover all of that in the long run. But yeah, so far keeping that and then losing the camper stipend.

Mindy:
Okay. So my thought is, if they give you the option of keeping the truck, absolutely keep the truck. If they say, Hey, we really want you to get rid of the truck, unless the truck is going to go to somebody else, I would pitch to them, at least in the short term, that the car market is crazy. There’s no inventory. There’s no truck inventory. The horizon doesn’t look like it’s going to change at all. There’s a computer ship shortage that’s kind of affecting everything. So if you could, Hey, let’s revisit this in a year, if they really want you to have your own personal car instead of a truck. Like kick that can down the road. And then I agree with you. I don’t know that $700 is going to cover everything. And you already have a vehicle that works, so I would just keep that. I like your thinking on that. Let’s see. Oh, oh, oh, you were talking about traveling. You and your fiance like to travel a lot. And you just said that you are traveling for work now a lot more. You live in Iowa?

Clayton:
Wisconsin.

Mindy:
Is that your home base?

Clayton:
.Yeah, Wisconsin is

Mindy:
Oh Wisconsin. Okay. They’re very close. So if you’re going to Montana, are you expected to fly there or drive there?

Clayton:
I would fly to Montana. It would just depend on where the job is that I’m covering. So we do have a few jobs in Wisconsin. Obviously I would drive to those, but reasonable travel distance, usually if it’s a five, six hour drive, I’d probably make that. But if it’s any longer than that, I’d fly it.

Mindy:
Okay, so My advice to you is so sign up for a rewards program with a airline and make all of your reservations yourself and get reimbursed because then all of those points are yours. If the airline has a credit card, see if you can open up the credit card. So you book your United miles on your United credit card, which sometimes gives you extra bonus points.

Clayton:
Yep. Yeah. We started venturing down that.

Mindy:
And then where are you staying?

Clayton:
Staying when I’m there? So the company will put me up in a hotel.

Mindy:
Yeah, are you staying at a hotel?

Clayton:
Yeah.

Mindy:
There’s another opportunity for generating points. If you stay at the Hyatt, get the Hyatt credit card, and make your reservations with your Hyatt card. And sometimes they’ll have deals where, oh, if you stay for four nights, then you get another free night. And you don’t have to use it right then and there. So I would try to … I don’t know if arbitrage is the right word, but I’m going to use it here anyway. I would try to arbitrage the company buying you plane tickets and hotel stays, and then you get the point.

Clayton:
Right. Yeah, and actually that’s something that I’ve talked with the other guys that are already in this position. They were telling me about how they’re staying for free in hotels on their free time, traveling around, and just solely because of that, capitalizing on all of that. So it’s definitely on the radar for sure.

Mindy:
Oh, awesome. Okay. So then definitely look at … And not every airline flies to every location, so look at the ones that do, and look at, maybe you have a couple of different airline credit cards, and points, and reward systems, and maybe even a couple of hotels. But that is a great way for you and your fiance to fly for free to your honeymoon and stay for free at your honeymoon, so I totally encourage that. What else is on the horizon for you, Clayton?

Clayton:
Something I actually pretty excited to tell you, and I don’t know if this is for sure or not yet, but so the company I’m working for did get acquired by basically an overarching umbrella company. And being that we’ll fall under them, they might offer a stock purchase plan, so I’m pretty excited for that. And open and enrollment’s going to be happening here in the next week or so. And they’re going to offer a high deductible plan with an HSA. So those are two new things that I’m definitely going to capitalize on and I’m pretty excited for.

Mindy:
I’m very excited for you. Scott is a huge proponent of the employee stock purchase plan. He likes purchasing it as much as you can. Because you’re in such a sweet position financially, purchase absolutely as much as you can and sell it. It’s usually like a 15% discount, sell it as soon as it comes available. Now, my husband is not so in love with this particular plan for specific people. Tesla has an employee stock purchase plan. I’m sorry, employee gifted plan. And so does Amazon. And he’s like, I believe in those companies, I think they’re going to get bigger, so I wouldn’t sell them. So if the company that you’re working for, and has this opportunity to buy stock at a lower price is something you believe in and you think they’ve got room to grow, maybe you don’t sell it all. Maybe you don’t sell any of it, but it’s something to consider.
And you know what? I’m going to throw this question into our Facebook group and ask people to chime in on the employee stock purchase plan, and the different options available. Hold it, sell it, sell some of it, and see what they say. So I will, are you in our Facebook group?

Clayton:
I am.

Mindy:
Okay. I will tag you in our Facebook group so that you can see what everybody’s talking about. And then the HSA is, what does the mad scientist call it? The best retirement plan ever or something. This the secret retirement plan. Because of your financial position, you could to most likely cash flow all of your medical expenses. So I would say set up a tracking system for your receipts and go to, I think if you Google FSA reimbursable items, you will get a list of like, I don’t know, 10,000 things that are reimbursable. FSA is also reimbursable for the HSA program. So things like bandaids and contact solution, and let’s see, denture cream. I’m just looking at the list right here. Not saying that you have dentures, not that there’s anything wrong with it.
But there’s just a giant list of things that are, like I wouldn’t think that hot and cold packs would be a thing. Lip balm. Oh, why thermometers? I just bought a thermometer. I might have actually kept that. Sunscreen with SPF ratings of 15 and above. Okay, so there’s a lot of things that even I didn’t know about on the FSA reimbursable plan. So I would invite you to save your receipts, cash them, and don’t take the money out of your HSA plan now. Let it grow, invest it in whatever you invest in, VTSAX, index funds in general. And then in a few years when you stop working, or in a few years when your hours get cut, or in 20 years, when you stop working, you can take those receipts and collect that money. So if you have 20 years of receipts, that’s going to be a hefty sum, even if it’s just lip balm, and sunscreen, and Bandaids.

Clayton:
Right. Yeah, I assume like contacts and things would fall under that too, right? And I mean, that’s a decent expense. There’s already things that we’re already paying for that I wish we had the HSA already to hold those receipts over for.

Mindy:
Yeah, there’s a lot of things that you can charge to it. And I would say, I just closed it out. Look up on Google FSBO or FSBO. Too much real estate on the brain. FSA eligible products. And then they will, in addition to your doctor visits, your copays, your prescription drugs, there’s a list of over the counter items. And it’s long and vast. Well, I’m excited for that for you. That’s awesome. Clayton, thank you for your time today and thank you for coming back and giving us an update. I know our listeners are always excited to hear what is going on with our finance Friday guests. You have a lot on your horizon. I would love to check back in with you in about a year, so I will give you a call then. Thank you so much for your time today, and we’ll talk soon.
Now for an update from Rachel. Rachel [Caskey 00:40:25] joined us on episode 190, where we talked about always having a side hustle. Rachel is a single mom with an income of just under $40,000 who had recently received her insurance certification and was pursuing an account management position at work, which would be a promotion with a raise. She was also, or she also is a very talented painter, and she hosts painting parties on the weekend. A divorce had wiped out her past financial gains and she was basically starting over. She was starting to invest in stocks and looking into real estate and considering a house hack. Her on paper savings rate should have been a lot higher than the reality. And she had determined that her biggest issue was spending. Welcome to the club, Rachel. When I reached out to Rachel for an update, she responded, I would be happy to provide an update. However, it might not be quite what people expect to hear. I think the one year mark would be a better time to check back in, but here’s a quick update.
At first, my fiance and I were looking at purchasing a multi-family property in which to house hack much further away from my sons and his son. After doing some deep introspection, I realized that that made no sense. We would barely see the boys. As for my insurance career, I was offered a 10% raise and promotion at my current employer. However, I decided to turn it down and stay in my current role for now. I notified my employer that I planned to move further away and closer to where my sons live with their dad. I felt like where I was currently living, over 40 minutes from their dad and their new school, was not giving me the opportunity to be fully present in their daily lives.
My employer is being gracious enough to let me stay on board and help out during the busy season while I move and search for a new job closer to where I’ll be living. I Was able to find a house only 10 minutes from where my kids live with their dad and attend school. I’m doing a double closing at the end of the next month on my current house and that new house. We plan to make this house, our permanent move. We do not want to move around and house hack with our family because we want to provide stability for the boys. So my real estate goal is to save money toward purchasing an investment property after I move into my new house. Also, I’ve mentioned before about my mental health. The stress of doing all of this at once, landed me in the hospital for a week. I was so afraid that it was going to affect my plans. However, I am blessed with a great support system. I truly believe money and mental health is not discussed enough.
Having a backup plan on how to deal with finances if an emergency happens is crucial. We found that since I’m the one who mainly pays the bills, Jim was unable to log into our accounts to check on them and pay them. Luckily, I was not in the hospital very long, but if I were, it would’ve made it into a financial fiasco in addition to a medical issue. So we’re working on getting him access to all of the accounts. I want to stop right here and interject my own commentary because this particular issue speaks to me on a deeply personal level. A friend of mine passed away suddenly in a freak accident recently. While he and his wife were financially independent, he had handled all the finances. And they hadn’t sat down and really talked about things. About a month after he passed, I read an article online about a woman whose husband had also passed away, leaving her to figure out all of the money stuff too. And I reached out to her.
She’s going to be a guest on the show in January to talk about the steps she took to figure out her finances, because I think this is so important. If you are the one who is listening to this show, you are the one who handles all the money in your relationship. Your spouse, your partner needs to know where all the money is, how to access it. They need to have their own access accounts. Sometimes it’s just an email. Sometimes it’s two factor authentication. Some of our accounts have an app on the phone where you have 30 seconds to enter the code that keeps changing constantly on your app in order to be able to log in. So there’s all these different ways to access your accounts. And it’s so much easier when you’re both present and able to discuss this and have these questions and conversations than it is if something unexpectedly happens to you and they have to figure it out themselves. So that’s why I’m going to be joined in January to talk about these very important issues. So we’re going to get back to Rachel’s update.
I’m sorry for the interruption, Rachel. But I really wanted to just kind of promote that show, because that’s going to be a really great show. I will cry in that episode, most likely. And sorry in advance. Okay, back to Rachel. My main team take away from all of this is that you should define your personal financial goals first to align your money goals with them. As for the savings goals we discussed last time, I have set up an automatic savings program in a high yield savings account. I reduced my phone costs by paying off all but one of my devices. I haven’t yet switched to a different phone plan because the one I have works well for me and my sons. But I’m not ruling out switching in the future. Also, my paid for car is in need of major work. The head gasket may be going bad. So I’m debating on whether or not to pay for the repairs, which might be $2,000, or sell it and another one. The Kelly blue book value is between seven and $8,000 if I sell it to a private party.
So I’m going to be reaching out to Rachel again in a few months to see how the double close went, to see how her job search went, and see how that spending is coming along. So look for another recap with Rachel in just a few months. This wraps up our episode today. I love these recap episodes. It’s so much fun to reach out and hear what our guests have accomplished, and what they’re working on towards the future. If you are interested in having your finances reviewed by Scott and I, we are always looking for more finances to go through. We are looking to give an unbiased third party viewpoint on anybody’s financial situation. So if you’d like to join us, you can apply to be on the show at biggerpockets.com/financereview. Also, do you know that we have a YouTube channel now? You can watch these videos with other videos about money and financial stuff at youtube.com/biggerpocketsmoney. Okay, from episode 254 of the BiggerPockets Money podcast, I am Mindy Jensen saying, I will see you on the flip side.

 

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In This Episode We Cover

  • When is the right time to sell a property, especially in a hot seller’s market?
  • Paying off high-interest debt so you can reach financial independence faster
  • The importance of budgeting and expense tracking so you don’t impulse buy
  • ESPPs (employee stock purchase plans), HSA (health savings accounts), and other lucrative investing options
  • Sharing the financial knowledge with your significant other in case of an emergency
  • And So Much More!

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.