BiggerPockets Money Podcast 71: 5 Years to Financial Freedom Through Real Estate Investing With Sarah P.

by | BiggerPockets.com

Like so many of our guests, Sarah P. did not grow up understanding how money works. She wasn’t bad with money, she just wasn’t very good with it.

She learned about financial independence through Mr. Money Mustache and completely revamped her finances, incorporating frugality and minimalism with investing to completely fund her lifestyle. Her goal was security, and financial freedom made a lot of sense.

Real estate was intriguing, and Google kept directing her to BiggerPockets. She started buying real estate, eventually accumulating 14 units in three states over the course of four years.

Sarah cemented her success by having a large cash cushion to shield her from the surprises that real estate throws at you—a trait most successful real estate investors have.

Making smart, money-conscious decisions allowed her to retire at the age of 30 from traditional work, so she can now spend time doing what she loves without regard to how much it pays.

Sarah and her husband are truly living their best lives because passive real estate investments fund everything they do.

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Welcome to the BiggerPockets Money Podcast show number 71.

Scott: Certainly not rosy. It’s been a lot of work to get here and I’m not saying that there will never be a storm. That’s why I’m prepared and this is what I would tell anybody so when you’re trying to build a real estate portfolio, you have your idea of how much it will make, but make sure you are really really conservative because you just don’t know what you don’t know. I’ve learned to do that a few times and luckily having conservative estimates have been very helpful there.

It’s time for a new American dream. One that doesn’t involve working in a cubicle for 40 years barely scraping by. Whether you’re looking to get your financial house in order, invest the money you already have or discover new paths for wealth creation. You’re in the right place. This show is for anyone who has money or wants more. This is the BiggerPockets Money Podcast.

Scott: How’s it going everybody? I’m Scott trench. I’m here with my cohost Miss Mindy Jensen. How are you doing today Mindy?

Mindy: Scott, I’m doing great. How are you today?

Scott: I am doing fantastic. It is beautiful today although I did attempt to bike in today and my little bag that I attached to my bike broke. I actually ended up.

Mindy: Ugh.

Scott: Drive on this beautiful day instead of like.

Mindy: Oh that stinks. Did it like completely break? Did you have to get a new one?

Scott: It attaches to my bike breaks and I could’ve probably just used another bag and carried in my back, but it’s a one day problem.

Mindy: A one-day problem. There will be many more beautiful days here in sunny Colorado because that’s kind of what we export.

Scott: That’s the yes.

Mindy: People think that Colorado is filled with snow and that’s only in the mountains. We don’t live in the mountains. We live down at I mean it’s still, it’s not sea level. It’s still a mile high, but yes. We have beautiful days all year around and I have never loved a state more.

Scott: Yes, it’s pretty great here. Very good.

Mindy: It is pretty great here. I am doing really good. This weekend I spent a lot of time doing real estating—as Daphne calls it. I have a listing that went under contract.

I’ve been working with some buyers and I made an offer for them. Hopefully gets accepted, but I just went all out this weekend doing my real estate so this show is just another extension of that. Today we’re interviewing Sarah who has become financially independent through her real estate investing. Her story is just fabulous.

I really really enjoy hearing how she made smart decisions. She made money conscious decisions and now she is retired at the age of well now she’s 31, but she retired at the age of 30. Retired is she’s one of those people who can’t sit still. Just like most retired people that I know she didn’t retire to lay on the beach and drink piña coladas. She retired to work on passion projects so now she’s more involved in the arts and she can do whatever she wants without thinking about how much it’s going to cost because or how much it’s going to pay because she doesn’t need the money.

Scott: Yes, I mean I love the application of frugality. There’s a little bit of minimalism here and then the off to the races building real estate, but not so much off to the races that it’s about building a hundred units massive portfolio. It’s always I think with her at least the impression I got over the last five years has been with the end in mind of financial freedom in the early 30s and the ability to have all that optionality and wow she just backed into that so effectively.

Mindy: Yes, yes her story is great. Before we tell her whole story and negate listening to the rest of it let’s hear a note from today’s show sponsor.

Taking financial risks might make sense at the time, but when they turn into big mistakes we end up stressed and scrambling. Being good with money and adhering to processes can be tough especially if you’re running a business. For business owners it’s important to avoid financial mistakes in a simple accounting solution like FreshBooks can help. FreshBooks is a Cloud accounting software that ensures your financials are properly tracked, organized, and your business is compliant come tax time. Here’s how FreshBooks helps.

First it keeps you organize with smart and simple time tracking for you and your team. Second when it’s time to collect, you can create and send super polished invoices in about 30 seconds or less. It lets you record and organize expenses with a tap of your mobile camera and finally it gets you paid in a snap by accepting credit card payments directly on those invoices. Best of all, FreshBooks keeps you compliant with helpful reports you’ll need for tax season. Right now we’re offering our listeners a free 30 day trial of FreshBooks. No credit card required. Go FreshBooks.com/BPMoney and enter BiggerPockets Money in the how did you hear about us section.

Mindy: A huge thanks to today’s show sponsor. Okay Sarah, welcome to the BiggerPockets Money Podcast. How are you doing today?

Sarah: I’m great. How are you guys?

Mindy: I’m doing fantastic. Scott?

Scott: Doing great. Excited to have you.

Mindy: Super excited to have you so Sarah was a guest on the BiggerPockets Real Estate Podcasts, but we did not exist back then so we are going to take this time to introduce Sarah to our listeners because she’s got a really awesome story of becoming financially independent through primarily real estate investing, which is you know kind of thing that I’m really excited about. Sarah, why don’t we start off with where your journey with money begins.

Sarah: Yes, absolutely it really kind of stems from a lack of understanding growing up. We weren’t exactly hurting for money, but there weren’t the best financial habits learned growing up and I remember honestly, I didn’t really fully understand how money worked until I was a good bit out of college. I remember I graduated and I called up the bank and I said, “Hey I need to put my money somewhere.” They say things like IRA and mutual funds and I had no idea and I said okay sure why not.

Luckily I started that up, but it really didn’t find of skyrocket until I bought my first house and had no idea what I was doing. This is like my primary residence and I’m getting overwhelmed by mortgage, terminology, and thinking what am I doing? It really wasn’t until I stumbled upon Mr. Money Mustache and heard the financial independence, retirement early, you know the FIRE Movement that really excited me because that financial blueprints is for me was wanting to be secure. That kind of just launched this whole process of where I am today.

Mindy: Wanting to be secure. That is a really great goal to have. How did you discover Mr. Money Mustache?

Sarah: Mr. Money Mustache was suggested by some anonymous forum member. I was perusing a site called Reddit of all places. I was trying to learn my personal-finance on that subhead and somebody mentioned Mr. Money Mustache. I clicked that link and I spent about probably two weeks just completely reading his entire blog and any of the questions that I would ask a lot of his rental stuff before he kind of switched to REETS primarily he had his physical rental properties and any time I asked a question on Google, BiggerPockets would show up.

I was like well I should probably look at the site a little more and it was probably about six months until I was able to finally get my first rental. Yes, it was this crazy happenstance that I even discovered this and last September I was able to go to one of his pop up business schools here in Colorado. It’s just crazy to be able to see and meet all of these people in the FIRE community.

Scott: What year was it that you kind of stumbled across this? When was that turning point?

Sarah: The turning point was 2014. It was toward the end and then I got into my first rental in 2015 and I was keep in mind I was really not understanding where the best use of my money was so I was able to I think I had three or four by the end of that year and since we bought in Colorado, the real estate went crazy here so we were able to leverage things like a HELOC, a home equity line of credit to get all of those rentals as fast as we could without over leveraging.

Scott: What was your like position? Can you kind of go in and maybe give a little bit more detail on what your position overall was like in the months before you discovered that Reddit post and Mr. Money Mustache. Like what were you spending? What was your income? What was kind of your asset allocation and then how did that change?

Sarah: Yes, so it was really scary at first because I think I had some mutual funds and I had a considerable savings so I operate under the you should have more than six month for an emergency find because I think worst case scenario what if I can’t find a job for a year? What am I going to do? I had that, I guess put away and even though I would say achieving FIRE, achieving your budget is extremely important and probably one of the most crucial steps you can take, we didn’t have a budget at all, but at the same time and by we I mean me and my husband. We aren’t big spenders.

We do travel a good bit, but you know we’ll go out to eat, but we don’t have a ton of nice clothing. I like to buy clothing, but I’ve changed how I do that since when. Our spending wasn’t really tracked, but it wasn’t out of control. There were definitely things that we could have cut out of our budget. I think we were including our mortgage spending close to I don’t know, $3,000 a month with our mortgage being a good chunk of that. We were able to kind of trim that, our spending down a good bit and at the time I was active duty military so we didn’t have things like healthcare costs so it was a little bit of a different situation then.

Sarah: What did you kind of peg your savings rate at? If you had to guess at this period. I know you weren’t tracking it rigorously at that point, but do you know? Yes, right now we’re close to 70%, but that is about two kind of go down because we’re going to make some transitions pretty soon, which I’m sure we’ll touch on.

Scott: Well what was it at prior to the discovery of the FIRE movement?

Sarah: I would estimate maybe it was 30% to 40%, which isn’t too bad, but there was definitely being able to I suppose increase our savings rate helped us get to FIRE that much faster.

Scott: Got it and so once you discovered that, what were the changes. You said they were minimal, but what were those changes? Were they more on the income front? Were they on the did you start deploying your—I mean I know you bought real estate next month later, but was that really where you applied the pressure I guess is on the investing front?

Sarah: It was a good bit on the investing front, but in terms of trimming our budget we were very very conscious of purchases we made and so well I think there’s a good bit of overlap for things like zero waste and minimalism. I found a lot of people who are interested in the FIRE Movement talk about these things so we bought into that minimalist documentary that’s on Netflix and I know they have their podcast and I remember pausing about halfway through that documentary and going upstairs and going through clothing and trying to say this needs to leave the house. This needs to leave the house and so there were a lot of things we did that changed our frame of mind in terms of how we buy things so we got rid of a lot of stuff in our house. We went down to one car, which was huge and has been really exciting. We have clothing exchanges instead of buying new clothing because we want to do the is zero waste right so we don’t want to buy new things if there are things locally the people don’t want and you can just trade for. We compost our food. You know kind of like typical hippie stuff I suppose if you want to think about it that way. All of those steps you may not think are FIRE minded or directly related to FIRE, but for us it was because we’re no longer spending so much money on new couches if we can find something to buy locally or trade or whatever. That helped us a lot.

Mindy: You’re trading locally how do you do that?

Sarah: Well there’s a lot of I know like on social media and stuff like next door you can find in this community there are a lot of free things that people will put out really nice things for completely free and then they cut you know must come get it at the end of the day so there’s that. You can do trades on Craigslist, the typical fair for buy and sell.

Mindy: Okay. I’m going to throw a ton of questions at you just to get a little bit of background. How old are you? Are you still working now? I think your husband is still working, but are you still working as well? What is your combined income and do you and your husband combine expenses and bank accounts so go.

Sarah: Okay so.

Mindy: There’s a hundred questions.

Sarah: Yes, so I’m 31 and.

Mindy: Okay.

Sarah: I’m sorry, what were the other questions? There’s.

Mindy: Are you still working?

Sarah: Oh yes. Yes and no. I officially retired when I was 30 and like many other people who have retired I have used this opportunity to pursue passions of mine so right now I manage my properties, which is really minimal work if he ask me, but I do a lot of art related stuff you know with teaching instruments and dance and so it’s been a lot of fun to explore those opportunities in more of a capacity than I would have otherwise. My husband is working, but since we’ve reached this. I suppose he is a term called Coast FIRE where he’s not accepting new clients at the moment so for all we know you know these projects will peter out and he may not accept any other additional work unless he wants to, which is a great position to be in.

Right now I think our annual spending is I don’t know, may be close to $40,000 a year and our real estate right now is covering that for us, which is great and I think a lot of people will have a problem with making that jump right. They’re financially independent, but they are not ready to retire early and what really helped us with that was we had kind of like this bizarre world account where all of our rental stuff came in and all of our bills and everything went out and so we did that for a year actually probably a little over a year and tried to figure out like with what’s left over or what wasn’t going to be left over are we ready to make this jump? That’s what kind of prompted that.

Mindy: Okay so your real estate covers your spending, which is awesome. Do you have additional investments and you said I think I had some mutual funds. Do you still have any of that kind of thing because you know the whole 4% rule and at $40,000 you have to have a million in the bank to retire, which actually isn’t true. You could do some sort of real estating where you bring in income and then so do you have any other investments?

Sarah: We do. We have paper assets for sure and.

Mindy: Okay.

Sarah: Those have, those create dividends, but right now we’re just reinvesting them right away so we are kind of. Those are like just bonus, bonuses for us right now. The primary was seeing what real estate could do for us.

Mindy: How much did you spend on your real estate that it’s kicking off $40,000 a year because with the 4% rule that I talked about a minute ago you have to have a million, which will generate 4% is $40,000 and then you can live off of that. Did you spend a million on real estate? Like your total dollars into it not equity.

Sarah: Yes, nowhere near. Nowhere near and I would say maybe not even a quarter of that and the reason I say that is because when you buy a property especially an investment property, a lot of people like to see 25% down. I wouldn’t even say it’s a quarter of that if you were to estimate that because you know we used home equity line of credit and other kind of creative ways to finance these deals when we took out mortgages and then when you get a certain amount of mortgages you have all these rentals bringing in money and so you can pay down to the home equity line of credit and then once that was paid off we were able to say okay well we you know now we can start keeping this this excess money. Which has been fantastic so yes nowhere near and that’s why I love real estate so much.

Mindy: I love the term excess money.

Sarah: Yes, excess. Well you know the actual yes the actual profits I suppose from that.

Scott: Well because this seems like the heart of the journey here is all through this real estate portfolio. Can we spend a few minutes and walk-through the creation of it so maybe starting with hey discovered Mr. Money Mustache from BiggerPockets and Reddit and all these sites. I guess Reddit you know. He discovered FI in 2014 and then got into that first property at early to mid 2015. What’s that looks like? How do you finance that first one? How do you parlay that into the current portfolio?

Sarah: Well the first one it was pretty funny because I had just discovered Mr. Money Mustache and the military it was like cool well you’re going away for you know a few weeks for training and so strangely enough in Colorado here. The real estate scene was insane. If you are not a cash buyer offering $30,000 above these, the asking price, you’re going to have a difficult time in most cases. Of course you know, you can get creative and find off market deals and all that good stuff, but at the time I wasn’t really well-versed in that and I didn’t know what I wanted to do.

At this training I’m talking to one of my flight mates and he says, “Hey my wife’s real estate agent.” They were based where I used to be in Florida and I thought you know what I was thinking I wanted to start in Florida because townhouses down there or anywhere I mean they’re definitely below a $100,000 where. Yes, in my local area it was certainly more and it was less competitive down there in Florida so that’s where I decided on my market first because I knew the market and I knew the areas and what I had a good idea of what would be successful so yes six months later we eventually find a townhouse down there and then we get that rented out. Everything goes fairly smoothly. There were some obstacles along the way, but then by the end of that year I had two more townhouses again in that area.

Scott: How did you finance that townhouse?

Sarah: The very first townhouse was our home equity line of credit.

Scott: Okay.

Sarah: We eventually yes, we initially had a mortgage set up and then the very last second the mortgage people they found out they had made a mistake and they wanted to delay and the people who were selling were saying that I need to sell this as soon as possible so it just worked out. We were able to put the whole thing on a line of credit. That’s how cheap real estate is down there.

Scott: How much was the place then?

Sarah: The place was I think $81, but we had again our own savings up to that point that we were ready to put 25% down and all that fun stuff so yes we got that down there and then there were other townhouses like 45 minutes north of that area that were $60,000 and so we got two of those and right now I think we have the four places in Florida, which are all townhouses. We had two condos in Colorado, one of which we sold and then the rest of them were up in Michigan where I was kind of around where I grew up. I also knew that market and that’s the Michigan market is on a cheaper as well so it was easy the kind of after you get one and then two and three, you have enough money to pay down the home equity line of credit and then you can use that to get more mortgages and go on from there. I don’t know if that’s what you’re looking for in terms of answer.

Scott: I mean it just sounds like you with one at a time using primarily leveraging the lines of credit in order to kind of move that forward and then the cash are generated by the portfolio bit by bit.

Sarah: Yes, yes and it was easy to find the second and I remember writing about this too. This is a reason you want to tell people you invest in real estate because I remember one of the townhouses I even have is because a neighbor had known I was looking for places, a neighbor of the townhouse, the first townhouse I bought and he said hey I want to sell mine. Do you want to buy it? We were able to do a direct transaction with a like a real estate lawyer and so it was cheaper for him and it was cheaper for us and it was pretty quick transaction and it was great.

Scott: Yes, if it’s on the same block there’s probably some synergies there too.

Sarah: Exactly. Exactly so if I have a handyman who needs to service one I just tell him hey can you pop into the other one and just make sure the filters are changed and that everything’s in good working condition and so. It works definitely when you put them together.

Mindy: Yes, I definitely love that idea where you just tell everybody, “Hey, I’m an investor. If you ever know anybody who’s thinking of selling,” I’m talking to somebody about a potential foreclosure because I just said, “Hey if you ever know I’m always looking.” They’re like, “Oh there’s this one house.” “Yes, yes, yes that’s what I want.” How many properties do you own total?

Sarah: Yes, I have 14 units so some of them are, two of them are duplexes so yes I used 12 buildings or.

Mindy: 12 buildings and how many have leverage on them versus how many are free and clear?

Sarah: Oh goodness so it’s hard to say because when you say free and clear technically there are a few properties that we have on a line of credit right now that to for all intents and purposes it’s free and clear on that side, but we’re still paying them locally and so I think six of them we have mortgages on.

Mindy: Okay. Wow.

Sarah: Yes.

Mindy: Wow good for you. That’s like $50 okay woo hoo so you said a moment ago I manage my properties, which is really minimal work if you ask me. How much time goes into managing 12 properties across three states. I mean you’re getting calls every night in the middle of the night. My toilet broke and so how much time is this really?

Sarah: Oh right. I love this question because in you know my very I suppose a small bubble of real estate management at least I mean I have properties that are built in the late 1800s and some that are built in the 90s so you know there’s a—there’s like a hundred years the difference in some of these properties. Some of them need more attention than others, but the ones up in Michigan I just have a manager for because it’s hard for me to know the policies and codes and make sure I manage annual inspections and whatever so because a lot of those are the older properties, I have a manager there and I found that sometimes managing the manager has been most of my time. I’ve recently found a manager that is just so great and I really only have to check in whenever I have a question that’s specific or something like that. For the ones that I manage directly it’s been I would say an average of maybe an hour or two a week. I think that’s being generous because I often times it’s kind of trying to average out recently we had some turn over because we’re coming up on the summer months and then we had I know I was telling, talking about having three furnace and AC replacements and that took up a whole lot of time because it happened in the peak season when it’s extremely cold in Michigan so that took up a lot of time trying to work things out there.

Mindy: Okay so you make $40,000 a year, averaging an hour a week. I want that job.

Sarah: It’s a great job.

Scott: She spent $40,000 a year. She earns probably more than that.

Mindy: Oh oh.

Scott: From that full portfolio right.

Mindy: Thank you for the correction.

Scott: Yes.

Mindy: Thank you for the correction. Wow.

Scott: Well let me ask you this because you know sometimes we paint a really rosy picture of the outcome here, but the reason you have the situation I presume is because a lot of work went into the front end here to build this portfolio and get your education right.

Sarah: Oh yes, yes.

Scott: How many hundreds of hours did you put in learning about real estate and putting it, laying the foundation for this portfolio to and situation you currently have.

Sarah: Well before I made my first jump I would say and I know this probably sounds low, but I would say it was maybe 50 hours and I say that because maybe more. I just remember listening to the BiggerPockets Podcast on the way to work, on the way from work and so it will be at least maybe a podcast a day and then I’d be sitting there in my lunch break or doing rolls and just waiting BiggerPockets, whatevers. I mean it might be I was on a few webinars with Brandon so yes I mean until I jumped into my first deal it was probably around that much. Then I mean since then it’s been hundreds so it’s hard to say, but it’s also I mean how many hours of work? Right? Because once I started learning about this it wasn’t really work to me. It was just fun and it’s this on a weird moneymaking hobby I have. I haven’t really tracked it, but I would they probably hundreds or so.

Scott: Right so yes. I think when it comes to this like when it comes to real estate and all this stuff it’s really like $250 some odd decisions that you have to make. You know, give or take. I don’t know and you just have to like understand what those are and listen to absorb a lot of content like you listened to a lot of podcasts in BiggerPockets and audiobooks and you know read blog posts and forum posts and all that kind of stuff. Yes, it’s upfront and knowledge accumulation over time, the absorption that really saves you the time and creates a situation of what you’ve currently got. This great situation where you don’t really do much work and it brings in a lot of money and it has probably appreciated a little bit, your portfolio and that’s where you’re at. Anyways, it’s not as rosy as 1 to 2 hours a week and you get to this position I think is what I’m trying to communicate to us.

Sarah: Oh yes. Absolutely not I mean and I know. I made a whole lot of mistakes, costly mistakes and so it’s certainly not rosy. I’ve had you know some like I said I just found this new PM where I just kind of you know plug and chug that I don’t even need to worry about him, but in this area that I am in in Michigan it’s just, it’s really easy to find poor managers that you don’t really, you can ask all the right questions and they can tell you what you want to hear, whatever the case is, but you can still run into your special issues whether it’s somebody you hired to manage or you manage it and so. Yes, certainly not rosy, it’s been a lot of work to get here and I’m not saying that there will never be a storm. That’s why I’m prepared and this is what I would tell anybody so when you’re trying to build a real estate portfolio, you have your idea of how much it will make, but make sure you are really really conservative because you just don’t know what you don’t know. I’ve run into that a few times and luckily having conservative estimates have been very helpful there.

Scott: Moving into the kind of current state situation you know how do you feel about like a cash position is as someone who’s going live off of a lot of real estate income and kind of you know both of you guys are moving towards this full-time retirement piece. I mean obviously entrepreneurship, all that kind of stuff. Like how do you feel about a cash position at this point in making the transition to retirement.

Sarah: Can you explain, sorry when you mean cash position as in like having all your assets in like paper assets or do you mean?

Scott: No I’m sorry that’s a good follow-up. I earlier in the show you mentioned that you felt that you liked having more then six months cash reserve.

Sarah: Oh yes.

Scott: To retire of this thing. Do you still feel that way? Is that something that you’ve—do you have a very large cash position in going into this relative to may be someone who had a stock portfolio that they could just siddle off a little bit a time if they needed extra cash.

Sarah: Oh yes, that’s a great question and something I haven’t really considered right now I still have more than six months saved up and on the same end for my real estate’s business checking you know all those, the capital expenditures that you set aside. The repairs and vacancy, the HOA fees, the insurance, whatever taxes I have at least a year whatever that it total is at the end of my spreadsheet. I try to maintain at least a year and that balance assuming that at some point everybody’s going to be vacant. Like worst-case scenario of course that’s not likely, but again I had three HVAC’s I had to replace this year so that was a big chunk of that annual savings that I should have and it really paid off because when one of them broke down and they said hey we need two—to put into this duplex. Like okay fine and then another one broke down and they said alright we need to replace the whole thing and said okay. That just helps me not feel that gut wrenching loss at any point. I’ve saved up for it or rather my business has saved up for it and I feel better about it so I think there’s still those symptoms of that blueprint feeling of insecurity, but it’s just the stress I feel behind all that, all the tension that a use to have is really melting away so there’s just a little bit there left. Right now, I’m feeling pretty okay.

Mindy: I want to clap so hard for you for that whole thing you just said because I’m in the BiggerPockets forums all day, every day. That’s like my job and I see this question pop-up over and over again. How do I get started investing with no money? No don’t, don’t invest with no money because you need reserves. Something always breaks in real estate.

It is a rule. It is carved in stone. As soon as you buy a property something breaks and the cost of that repair is inversely proportionate to how much money you have in the bank so if you buy a house and you’ve got a year’s worth of reserves you need a new outlet. If you buy a house and you have nothing, you need a new furnace or a new air conditioner depending on what season.

It needs a new roof, like there’s all these things. Real estate costs money and you put aside a little bit every month based on how old the thing is. You’re going to need new appliances. Are you going to need them today? Well not if they’re all brand-new, but if they’re all 15 years old, you need to have a big chunk of reserves set aside so you don’t feel the pinch. I have neighbors who had a rental property and like the air conditioner, the water heater, and the furnace all broke at this in like in the same year.

Sarah: Oh my goodness.

Mindy: Then as soon as that year was up, as soon as their lease was up, they sold the house. I’m like, “Why did you sell everything’s new now. You don’t have to sell again. You know you don’t have to replace anything for decades.” They didn’t have the reserves. It was really difficult for them to come up with the money to you know fund these repairs. You have to have reserves and I love that you have reserves.

Sarah: Right.

Mindy: End rant.

Sarah: I will always and I’m the same way because I operate on that security/safety and for anyone who it is in that position like you just described where they think they have a lot of old appliances and that’s coming up. My recommendation for anyone who doesn’t have a huge reserve is to consider a home warranty and so on my older properties, I have warranties on them and it’s been extremely helpful. You know hot water heater goes out, call the home warranty within 24 hours they’re there. They will replace it. Same thing with one of the HVAC’s that went out. That was a unique situation. I can explain later if you want, but those home warranties like if they had had one all those major appliances that you mentioned are covered and they you know you pay into that. It’s like buying insurance right so it might be like four to $600 or so a year and then you pay like a service fee for them to come out and that’s pretty much it in most cases.

Scott: Going back a second here to the whole no money conversation. Buying real estate with no money you essentially did this in a little bit of a way with your home equity line of credit right on that first property using that to kind of, but you came in to that with a strong cash position right. You had cash.

Sarah: We did.

Scott: You had a high savings rate. You had a very strong financial foundation right. That’s the appropriate situation from which to invest in rental property with no money. Right?

Mindy: I don’t want to correct you Scott, but she didn’t invest with no money. She didn’t have like a big pile saved up. She borrowed from the equity in her home, but she had money.

Scott: No I’m saying she did have a pile of money saved up. She just didn’t use that to buy the real estate. She used another creative financing method.

Mindy: Okay.

Scott: Right.

Sarah: I did both.

Scott: You did both.

Sarah: Yes, because you know we were taking the mortgage out right and so we had the 25% right, but it wasn’t until they came back and said we messed up, but I was like oh my gosh. How are we going to pay for this? We can’t just start the mortgage process all over again with somebody else and then I learned about home equity line of credit or I read about it at some point and then we took one out because it was actually a pretty fast process and that’s how we did it. It was a little bit of both because our home equity line of credit I think at the time couldn’t do the whole thing so it was a mixture. It was a little bit of both. Just we didn’t we hadn’t planned on it.

Scott: Yes, but my point is that a lot of people get excited about buying real estate with no money down. Right like no like bringing nothing to the table. That’s great. It’s awesome to do that if you have a strong financial position and are going into that in a way that it will advance your position, but you’re not dependent on it. What I think is not appropriate is if you had done the same thing, but had had no liquidity. We’re living paycheck to paycheck and we’re using tapping up your home equity to buy this one deal. Where everything hinges on that as being successful. That’s where I think.

Sarah: Absolutely.

Scott: Do a lot of trouble and that’s I think the whole point of you know one of the whole point, major points for me of our show here is this is the foundation that you need to build from which to make investments in real estate. In the stock market, in whatever it is you’re going to do to build out, build toward financial freedom.

Sarah: Yes yes and that is the sole reason we were ready to jump in and buy something just six months after figuring all of this out. Because otherwise if we were living paycheck to paycheck I know I wouldn’t have felt nearly as comfortable knowing myself it would have been a bit longer until I had bought my first one. Okay so Scott I’m glad you clarified that because that makes a lot more sense. I actually.

I did the live in flip and I never had a big pile of money saved up to fund the repairs. In fact, I put them all on credit cards because I wanted the points and or the Home Depot credit card allows you to pay little bits with no interest for six- 12- 18 months or whatever so I took advantage of that too, but my husband was making something like $130,000 a year and were spending $40 on our living expenses. I mean we were spending the rest on our home improvement, but we were just spending a small amount so we have the money there. We didn’t really have an emergency fund. We just had here it comes again an excess of money so you know we just spent it.

Scott: Yes.

Mindy: At Home Depot.

Scott: They’re both two sides of the same coin, a high savings rate and cash reserve. Right so if you have one or the other you’re in a really strong place. If you have both then that’s where you start thinking about oh I could retire pretty early here and achieve financial freedom.

Sarah: Yes, yes and I think a lot of people because I’m on a lot of just like kind of passive FIRE forums where I see people talking about you know I have my spending rate is $70- $80,000 a year. I’ve achieved financial independence, but I’m just afraid to make the jump and people to each their own right. Some people want to just retire to part-time work, which is great. Some people are saying well I want mine with me and Shane and to maintain as high-level, which they call Saphire and I think that’s great, but at the same time you hear them, I guess you hear their voice when you’re writing about how much they dislike their current situation and they’re not willing to trim their budget or whatever the case is. That’s where that high savings rate is just, that was the key for me to retire and when people hear I’m retired sometimes I don’t actually come out and say it.

I’ll say well you know I’m kind of a low-key real estate consultant now, but when I talk to them about that and say, “Oh yes let’s go here, let’s do this.” Then we’re like, “Well you know not really in the budget today.” I’m like, “Well why? You got this money.” I’m like, “Yes, but I would like to maintain—I’d like to stay retired.” Yes that savings rate and sticking to a budget once you kind of figure it out is really important.

Scott: Do you have next steps here to maintain retirement? Is there other levels to the goal or are you kind of letting it coast?

Sarah: Yes, it’s a little bit of coasting or it has been at least for I say coast for like six months, but we recently were trying to figure out what we wanted to do next and the idea of paying down debt was really important to us so one of the condos here in Colorado has just appreciated really nicely and we decided okay well if we sell this property. Right now even though we make I don’t know I think it’s three or $400 a month off of this property. It would take us 12 years I think. It’s close to 12 years to make what we’ve made in appreciation after expenses if we sold. We decided if we sell this property we can pay off our house and go from there. Because that will increase our savings rate a good bit because now we won’t have a mortgage. We decided to do that, which a lot of people might say, “No no. Why would you ever do that?” For us, it’s the right decision because some people they just don’t like having that. I am one of those people strangely enough. Even though I leveraged it to get to where I am today so that is our next move is selling this condo, paying off our house and enjoying that.

Scott: Have you already sold the condo or are you in the process of doing that?

Sarah: You know knock on wood we have the offer in hand. We’re supposed to close in a few weeks. Again a cash buyer, I just you know it’s crazy to have that people have the surplus to just buy properties like that, but maybe he has a HELOC too. Who knows.

Scott: I got, I have a question about this this concept here. I’m thinking about through the strategy and the ramifications for myself. I’m probably a few years out from actually executing any of this, but you know this rental, this condo I assume it appreciated a lot. Right?

Sarah: Oh yes, like $50,000.

Scott: Okay so when you sell your going to have $50,000 less depreciation in recapture? From that perspective.

Sarah: Plus our initial investment that we had and what we’ve paid down in a principal.

Scott: Got it.

Mindy: Real estate investing is known for a lot of things. Mainly making a select group of people a lot of money, but being an online cutting-edge experience is usually not one of its hallmarks. Well that’s no longer the case. Fundrise is the future of real estate investing. Their revolutionary model is transforming the industry thanks to software that cuts out costly middlemen and old market inefficiencies.

Fundrise delivers the kind of investing power you usually only see at giant institutions, bringing real estate’s unique potential for long-term growth and cash flow to individual investors. Getting started is simple and usually takes less than five minutes. When you invest, you will be instantly diversified across dozens of real estate projects. Each one carefully vetted an actively managed by Fundrise’s team of real estate pros.

Then you can use their intuitive investor dashboard and real-time reporting system to monitor the progress of each property within your portfolio. That’s the future of real estate investing. Ready to get started? Visit Fundrise.com/BPMoney. That’s F-U-N-D-R-I-S-E.com/BPMoney to have your first three months of fees waived.

Scott: Did you consider 1031 exchange at all? As an alternative?

Sarah: I absolutely did. I was looking at two other condos in another economy thinking well you know what in this market I could buy two properties with you know and have a good bit of that and it would double my monthly income, but then I would also take on a good bit of mortgages again and yes so we thought about the 1031 and blowing that in to other properties. We’re looking for right now is simplicity and so paying off our mortgage would just be amazing because when we first got the mortgage again I didn’t know anything about money I’m like oh my gosh this massive amount of money, I need to pay it down, pay it down so that’s what we were doing when I say our savings rate started to calculate. We were just paying down our mortgage and I didn’t realize the power of money and how I could invest it and have all these properties pay my mortgage for me and all that good stuff. Anyways, all the best to say that yes this is where we settle on because it’s right for us. It simplifies our life.

Scott: No, I love it. I think that’s like hey, it’s very powerful. We’ve won. We’ve won.

Sarah: Yes.

Scott: Our situation is great and this is going to make things a lot easier for us even though I could potentially squeeze more ROI out of a different move or a different investment or whatever. What will your annual expenses go to once your mortgage this eliminated?

Sarah: I would say it’s probably $15 to $20,000 max.

Scott: Total.

Sarah: Total. Yes.

Scott: Your total lifestyle expenses would be $20,000.

Sarah: I would that’s what I’m estimating. We’ve been trying to closely track. I mean we don’t buy clothes all that much. We trade clothing. We buy and make a lot of food. I mean we do travel, but we travel cheaply. I like—we love this site called Travel Zoo and in December you can go to Mexico at least from this area for like $400 a person including flights and an all-inclusive resort so. When we do travel we do it in the off-season, in between seasons and you can live a really lavish lifestyle on this amount if you don’t have a mortgage obviously so there are very specific circumstances to being able to spend this much and feeling whole.

Scott: Love it.

Mindy: Yes, so on the BiggerPockets real estate investing podcast, they interview a really wide range of investors. There’s people have a few properties. There’s people who have like the I want more investors. They’ve got a hundred units and they want more. They’ve got hundreds of units and they can’t get enough. I like this story because you have 12, which could seem like a lot to somebody, but it could also seem like oh I could handle 12. Or now you’ll have 11. I could handle 11 or maybe you condense more and you know what 10 covers it for us. You don’t have to have hundreds of unit across the entire country to still fund your whole life. I love that.

Sarah: Yes and that’s kind of one I touched on you know found FIRE and Lean FIRE and whatever the terms you want to think about there is for us it was trying to settle on what is enough and we went a little past that point of what’s enough and we’ve settled on okay this is enough. We are happy with this. Because just teaching private lessons you know if I want to teach some instrument and go out and do X, Y, and Z for some money here and there I mean that will be enough. It will be enough if we for whatever reason lost all our properties it would still be enough because we were able through leverage ourselves into the position we are now. That’s when I say that stress is really melting away because we just feel so much better about it, which is great. We love it.

Scott: Alright so one big question left here, what are you guys doing for healthcare? What’s your kind of plan around that?

Sarah: The healthcare because I mentioned I was in military and I’m still technically a reservist here and so our healthcare is through the reserves and so we pay inquiry. Because it’s not always consistent and we have a max out-of-pocket so. I think each year we pay about $5,000.

Mindy: Total?

Sarah: Yes, yes.

Mindy: Oh my goodness.

Sarah: Yes.

Mindy: When I was on the healthcare exchange I was paying $900 a month.

Sarah: Yes.

Mindy: For like.

Sarah: I know, isn’t that crazy?

Mindy: It was the crappiest policy. It covered nothing except like every policy covers your well-child visits and your annual exam and that’s it. Then it doesn’t cover anything until like $15,000 or something.

Sarah: Wow, is that through the VA? Or is that through the health exchange?

Mindy: Technically, it’s through the military network so part of it for me can be through the VA because how that goes is like if you’re paramilitary and you claim I don’t know if you like injured your left elbow, which I did when I was teaching. I taught combatives for a little bit and I injured myself so anything with my elbow I can claim if I want and know go in and get that treated for free by the VA because it’s something that you know hey you’ve had this injury because we put you in a position to have this injury and so I can do that or you know you go through the tricare military network with a family and you’ve paid. Oh you have a co-pay and you have that max out-of-pocket so if something happens you can go to urgent care or you can go wherever you need and have that covered for the most part.

Scott: Going back one more step here. After you pay off your mortgage, you’re going to say that your annual spending is going to be $20,000— $15- $20,000 you said. This is $5,000 of that so you’re looking at $1,200 bucks a month between the two of you to kind of fund your entire lifestyle including these trips to Mexico and on that kind of stuff. I mean that’s how. That’s outstanding.

Sarah: Yes, I mean I would say maybe $400 a month for food and groceries and we have solar panels on our property so you know that helps with our electric bill. The solar panels were there when we bought the property luckily people owned them. They purchase to own and so yes me and kind of inherited it and paid for it when we bought the property of course, but yes, I mean it’s just we don’t have a much need to go out and do a lot. I don’t know what I could spend $1,200 on. I mean we do like we would really love a Tesla. That would be great, but right now we don’t need one and.

Scott: Do you have paid off cars or?

Sarah: Yes.

Scott: One paid off car is that right?

Sarah: Yes, we have two paid off cars then we did this whole I think it was eight months of just figuring out, trying to use one car and really I don’t know. It was like $75 or so a month in just insurance we were paying and so to even with these conflicts that we’ve had with just the one car it would be so easy to just buy an Uber for you know that five mile or ride a bicycle right? The bicycle like we bought. We’ve really embraced to and so it’s way less than $75 a month if we ever have that conflict if one of us needs to use an Uber to go somewhere or we can just rideshare. We can ask for a ride and you know get somebody a coffee as a thank you. It’s so easy to do something like that and to be more communal in the way you live. Which I know we’ve really enjoyed that and to curb food expenses I guess. You know we have a garden in the back and we grow food and it’s nice. It’s good. We love it so, yes.

Mindy: Yes, when you don’t have a mortgage you really don’t have very many expenses. I mean you could. You could have the really expensive phone and the clothing habit and the shoes and the you know going out to eat all the time and you can really find ways to spend, but it’s also really easy to find ways to not spend it. I love that you have a garden.

Sarah: Yes, yes, the gardening thing has been really fun especially the square foot gardening is what we did and you can make those a lot cheaper than you know the actual garden beds. There’s just so many things that you can fill up your time with that at least we found happiness in our position. I’m sure a lot of people will be like ugh—I couldn’t live that way and people have said that. You know, when I’m home and not setting an alarm I know I was in the military, but I hate waking up early so. That’s been really really nice.

Mindy: Okay so this was awesome. I love your story. I love that you used real estate to get where you are. I love that it did not cost you a million dollars to generate your $40,000.

I was recently looking at a triplex that I did not end up getting it. Just closed the other day. That would have generated $38,000 a year and it would’ve cost $450,000, which sounds like a lot, but this is you know Colorado money. It was a triplex and there was a lot a room to move those rents up. I didn’t have time. There’s so many things that I have going on right now. It just didn’t work out, but I love that you got this going on and you know what’s the worst that can happen? It’s time to quote Joel from FI 180 again.

What’s the worst thing that could happen? You run out of money, you have to go back and get a job. It’s not like you’re going strong today and then all of a sudden tomorrow you’re out of money. You’re going to know if it starts going down because you’re going to be selling the properties or you can see the market take a bit of a downturn. You’ve got some time to figure it out. Who was it? Bryce and Kristi from episode 55 we’re talking about their cash cushion and their yield shield and all of that.

You just have to still pay a little bit of attention to it, but financial independence at 31. I mean if you never worked again, you could still live. You’re not going to be homeless, you’re not going to be destitute. That’s awesome. Okay. It is time for our famous four questions. These are the same for questions and one demand, one command that we ask of all of our guests. Are you ready?

Sarah: I am ready.

Mindy: Okay, what is your favorite finance book?

Sarah: I really loved Who Took My Money by Robert. Kiyosake. It’s kind of one of his lesser-known books, but it kind of covers a lot of the Rich Dad, Poor Dad, his guide on investing and all these other things of in its early retirement geared as well. I love that book.

Scott: Awesome. I’ll have to check that out. I’ve never heard of that one.

Mindy: Yes, I’ve never heard of that either.

Sarah: Yes, it’s really great in my opinion and it’s kind of shorter to so it’s more compact so if you know your stuff already it might help you out.

Scott: Nice.

Mindy: Ooh cool.

Scott: All right, what was your biggest money mistake?

Sarah: Ugh, goodness their probably one of the biggest money mistakes was buying a duplex in a city that where it wasn’t up to code. It had been grandfathered in. I didn’t realize that if you had a duplex with one HVAC when it broke you needed to have two HVAC’s put in, one for each unit. I was like no worries. I have a warranty for that, then they came in and they said well we will replace the one that broke, but we’re not going to give you two.

Which makes sense right? That makes complete sense, but at the same time I was like oh me this stinks so you know can do a cash payout with these warranties, which helped curb the cost, but then you had to get the two because if you had them replace the one it would be overpowered. I can’t remember the term they used. It will be too big for just that one unit. Anyways, we had to get that. We had to get the ducks done. We had to work with the city to get the energy on the outside wired properly. Oh my goodness. Biggest mistake. I should have asked that question, but at the same time you don’t know what you don’t know so that was a huge mistake. It still works. It cash flows nicely so. Dividently.

Mindy: No, I like your comment. You don’t know what you don’t know and that is precisely why BiggerPockets exists. We’ve got a blog. We’ve got a forum. We’ve got two podcasts, three podcasts now. We’ve got the business podcast that just debuted last Tuesday and it is a great place to ask questions or learn from people who are in it and love it and want to help other people. If you are thinking about investing in real estate and you don’t have a BiggerPockets account. What are you waiting for? It’s free. All this information is free and it’s just you won’t believe when you get on the site you won’t believe how much information is there. We’ve been around for what? Fourteen and a half years so we’re kind of like drinking from a fire hose.

Sarah: Yes, it’s so easy too. You can ask anything like the most obscure question and it’s been asked in the forum most likely and if that hasn’t been you can ask it and there will be people who reply. It’s amazing.

Mindy: Yes, there’s somebody who has gone through it and knows exactly you know oh don’t forget to fill out forms, 72 why because that makes it. Tax deductible. Like just all these things you don’t know. I can’t believe the BiggerPockets exists. I can’t believe I get to work here and I can’t believe I get to read the forums all day long. It’s like a dream come true. Okay sorry, this isn’t my show. This is your show.

Scott: I’ll just chime in on this also. I have a little bit of a bias here you know for BiggerPockets.

Mindy: I don’t.

Scott: It’s kind of natural in there, but you know what I love about it is it’s not about Sarah’s opinion. It’s not about my opinion. It’s not about Mindy’s opinion. It’s not about Brandon Turner’s opinion, David Greene, any of these other folks that you might have heard on BiggerPockets.

It is about the community’s and the crowd sourced ability to get feedback. You ask a question on this and you might get three totally opposite answers. Right three just totally different thing. Hey, should I allow that’s on my property? Yes, no.

Only certain types and all the different caveats in there. There is no right answer, but that debate is where you really get to learn a lot and I think that a lot of content out there is really black-and-white these days. Here’s how to do that. Here’s a three-step guide. Here’s the checklist or whatever and that debate and dialogue and that different community source to perspective gathering is just not available anymore. That’s what I love about what we’re doing here at BiggerPockets is.

Mindy: Well and I’m going to jump on top of that and say when you ask you know should I allow pets? Yes. No, it’s not just yes or no. It’s yes because of these reasons. No because of these reasons so it gives you something to think about oh no, I shouldn’t allow cats because they spray. Oh that’s a good point. I don’t want to deal with that or hey I don’t care so much or yes, I should because all these people with pets are really good pet owners or you know they tend to stay longer or whatever it gets to what’s important to you as an investor. It gives you people our members are so amazing and they just give you a lot of different things to think about and then you can make an informed decision as opposed to just guessing. Okay.

Sarah: Definitely.

Mindy: Back to Sarah. Sorry for the BiggerPockets commercial.

Sarah: Sure I love it.

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

Sarah: Oh goodness. It is so easy to be really eager to do any sort of action. I remember when I first started when service calls came in I was like I must get this done in four hours or else they’re going to hate me or whatever. You know they’re going to want to move out and they think no, that has never happened. When I was a renter, I remember this apartment complex. Like I there was something that needed fixing and a month later they came in and I had just you know forgotten all about them.

Okay, I got time here. We can work so the piece of advice is to gather yourself if you feel overwhelmed and shop around if you need to. Some of the largest mistakes I’ve made is to not just make a second call and say hey how much is this? You know this is what needs to be done. How much would you charge? Because if you are so desperate to get into something you may not take a second look and realize oh you know what that could have save me $10,000 if I had just but this neighborhood property but needed a little bit of work or something so the best piece of advice as to just kind of calm down. Know your surroundings and make a second call or reconsider something if you need to. Now I’m not like encouraging analysis paralysis right, but it’s just when you need to spend money, make that second consideration. Are there other options here? You will find yourself saving so much money left and right.

Mindy: Yes, you know in some cases contractors don’t have time to do your job. They will give you some outragous quote. Oh that will be $5,000. You’re like oh I guess that’s what it costs, but it’s worth it to them to do it if you’ll pay them $5,000. They’ll make time in their schedule, but it’s a $1,200 job. You call around and one guy is $5,000 and somebody else is you know $2,000 and somebody else is $1,500. Why are you $1,500 oh I have I just had a job cancel or whatever so yes, always get at least three opinions.

Sarah: Right right and cheaper isn’t always better at the same time. You know it’s.

Mindy: That is true. That is true. I was thinking of that as I said that. Cheaper isn’t always better, but why is $1,500 and one is $5,000 so you know.

Sarah: Exactly.

Mindy: Do a little bit of research. Yes, absolutely. Great, great, great.

Scott: All right, what is your favorite joke to tell at parties.

Sarah: I am, I’m not a funny person I don’t think, but my favorite joke and I’m a bad story teller okay so anyways you hear about the restaurant on the moon? Great food, but no atmosphere.

Scott: Okay.

Sarah: I’m sorry. I knew I would fall flat.

Scott: I’m trying to give you a moon’s name, cheese pun related to that, but I was too keen. Oh oh well.

Sarah: I also, I like the one where the magician is driving down the road and he turns into a driveway. That one is a good one too. Anyways.

Mindy: Okay. You and Scott are now best friends.

Sarah: Cheesy ones are the best.

Mindy: We record these shows a couple of weeks in advance and one of the guys came into the office today. He’s like oh I was listening to the show that just came out this morning. Scott, Samoa pun. You need to get him in check.

Scott: Guys.

Mindy: That’s from.

Scott: I like it.

Mindy: That’s from even Steven’s episode oh I think 67, yes, even Steven’s episode 67. Scott makes a very terrible joke in the beginning about Girl Scout cookies.

Scott: Ah.

Mindy: Because that’s that’s just Scott. Okay, Sarah, where can people find out more about you?

Sarah: You know, I don’t have much of a social media presence, but I do have BiggerPockets so you know if you want to find me on my profile I know you said you’d link it so that’s where it can find me. I am fairly responsive. Happy to help you with questions if I can or just talk about real estate or FIRE or really anything.

Mindy: Awesome, we will link to Sarah’s profile in our show notes, which can be found at BiggerPockets.com/MoneyShow71. Sarah, this was awesome. I love your story. I love that you are financially independent to real estate. It’s one of our goals with the whole BiggerPockets website is to create a million millionaire’s who are independently wealthy through real estate investing and you are a shining example of everything we stand for. Shining, shining example. Okay, thank you so much for your time today. This was awesome.

Sarah: Thank you.

Mindy: Okay, we’ll talk soon.

Scott: Thank you.

Mindy: Bye.

Scott: All right, big thanks to Sarah. Mindy, what did you think?

Mindy: Oh my goodness. I love her story. I love that she has a manageable portfolio that she, that is kicking off enough for her to live on.

Mindy: As soon as she pays off her mortgage it’s going to kick off twice what she needs to live on and the power of real estate investing is so awesome. I’m so happy to be able to share that with our listeners who may not be interested in listening to the BiggerPockets real estate investing podcast because that might not be their passion, but they can see from Sarah’s story how you can use real estate to literally fund your entire life.

Scott: Yes, you know the two-pronged approach of real estate investing and frugality. I guess the three-pronged approach of a full-time job, real estate investing and frugality. I mean what a powerful winning combination to move towards FI very efficiently.

Mindy: She did it when she was 30.

Scott: Yes.

Mindy: That’s just. It doesn’t take that and what did she build up her portfolio in three or four years?

Scott: Yes and well she started in 2014 right so.

Mindy: Yes, it’s 2019 now so five years.

Scott: Yes.

Mindy: Five years to financial freedom.

Scott: Absolutely, it doesn’t sound like it was you know cramping her style too much or anything like that. I mean she’s doing exactly what she wants to do and is very successful there so.

Mindy: Yes.

Scott: Yes so a couple of things that I noticed coming up. You get that seemed to be an emerging trend is that. In addition to saving money, investing in real estate and slowly easing into this concept of financial freedom rather than taking it all, all the, raising all the income in the family and one big shot. She is making conscious step-by-step decisions to do that. Right, she’s got a very significant cash reserve and she’s always had a significant cash reserve. That’s something I found in common with all lot of real estate investors in the past. Not everybody.

Mindy: Successful. A lot of successful real estate investors.

Scott: Yes, a lot of successful real estate investors tend to have a large cash cushion, which absolutely eats into the overall returns of your portfolio right because that cash is technically generating less than you could if you had put it to work, but it is providing an opportunity. There’s opportunity access by having that cash and it really negates a lot of the risks. Right so she’s talking about a concept where she has both a large cash position for her personal life and for her real estate portfolio. This is exactly what I personally do as well. I’ve got a large cash position for my rental property portfolio and a slightly less large cash position for my personal use.

I think to that is a trait or characteristic of the portfolios of a lot of real estate investors. Imagine who are using it to achieve this financial freedom early in life. Definitely wanted to point that out. I think it’s interesting that this is yet another person who has gotten around the healthcare issue moving into early retirement by using military benefits and a military background. I mean very powerful tool there and well deserved from anybody who is listening with any military background that does make things it seems a little bit easier going into early retirement.

Mindy: Yes, the healthcare question is tied for number one with what do you do for childcare. There is no magic answer. There’s no magic button. Oh you could just not have it. You have to have health insurance. Because the alternative is to get sick and have just a crippling bill from the hospitals and you know whatever is wrong with you.

You do need to have health insurance. There’s ways around that. You could have a high deductible plan and then just have a like a reserve for your costs up to that high deductible. If you know that you are very sickly or you have a chronic condition or something like that then maybe a high deductible plan isn’t the best choice for you. There’s a lot of options out there, but this is going to be an expense that you’re going to have to account for. I like that she’s got the military background. Like you said, very well deserved absolutely well-deserved. She was a fighter pilot wasn’t she? We didn’t really talk about that too much, but the picture that she sent me is her and full mask and like cords coming out of her face kind of thing in her airplane, which is just such a mess.

Scott: Awesome.

Mindy: Yes.

Scott: Yes.

Mindy: So bad ass. There’s not enough ladies out there doing that.

Scott: Wow, that’s awesome.

Mindy: Yes.

Scott: With going back to the healthcare thing though, a couple of themes that we’ve seen to emerge right, the military is helpful. If you’re a devout Christian or at least willing to abide by the rules of those groups that are what are they called?

Mindy: The health share.

Scott: The Christian health shares and then what’s the, we have a term for this now that we use where you go to other countries and leverage.

Mindy: Oh, medical tourism.

Scott: Medical tourism, yes. Medical tourism or just generally traveling the world seems to be much cheaper than living in the United States when it comes to healthcare issues. What we haven’t I don’t think come up with a great solution for across any of our guests across all the episodes is what if you intend to retire or achieve financial independence and you know earn a median income in terms of adjustable gross income on your tax returns are not Christian and want to stay put in a major US city. Right. What’s the good answer for that person who wants to get health insurance right? We haven’t found that yet I don’t think. Is that right?

Mindy: Yes, not really. There’s talk of I’ve heard conversations that surround people who have this lower income because they don’t have a job anymore. Then they get subsidies for the health exchange, the healthcare exchange. Some people find that fine and some people have an issue with that. That’s, I don’t know that we really want to get into that conversation right now, but you know you don’t apply for the health subsidies. They just kind of happen right. I haven’t got into that point yet so I shouldn’t actually say that.

Scott: Yes, you know no I think it’s fair to without either of us expressing an opinion we won’t express an opinion on this. The debate basically is is you know hey should I produce a portfolio that has a very low taxable AGI right, which would then allow me basically. But then hey my tax returns shows that I’m basically living at or below the poverty line, but as a financially independent millionaire you know or close to it with lots of passive income you know I’m not really the target audience necessarily of that government program. Right in order to get Medicaid for example.

Mindy: Right.

Scott: The question is is that permissible? Some people say hey that you know this is something that can cripple my portfolio and it’s just a chronic societal problem. Other people say hey I’m not going to take government subsidies to fund my early retirement as part of my plan. Again without expressing an opinion on that those are the arguments, but let’s suppose that you’re one of those in that bucket that says hey I’m not going to do that.

I’m not going to produce a low AGI through my portfolio allocation. I’m not going to qualify for any of these government subsidies or programs. How do I go about getting a great or a reasonable health care plan that will cover what I need an early retirement outside of full-time work. Right and so that is I think the challenge that we should pose to listeners. Right who has that solution for us for that person who’s looking to make this transition, but is not going to work a part-time job. Not going to travel around other countries. Not going to join a Christian health share and not going to qualify for government subsidies. What’s the good solution for healthcare for that person?

Mindy: Ooh, that’s a really good question. That’s a really good question because when I was before I started working here where I do have health insurance, my husband was working in a position that he did not have health insurance and we were on the exchange and it was $900 a month to cover pretty much nothing. That’s $11,000 a year, $10,000 a year, $10,500. That’s a lot of money so that’s an expense you’re going to have to consider. I did see somebody talking on chat group about having a chronic condition that costs him about $11,000 a year and the general consensus was okay you’re going to take your FI number and add $11,000 a year to that. Because that is now your FI number. You can’t get away from having these expenses so you need to account for them. There might not be a good answer for this, but if you’ve got one, please send it [email protected], [email protected] or [email protected]

Scott: You can always also take Mindy’s solution and just come work for BiggerPockets. We have a great healthcare plan and you can find any open jobs at BiggerPockets.com/jobs.

Mindy: Yes, and then you too can’t talk about real estate and money all day long.

Scott: Yes. All right, should we get out of here?

Mindy: We should get out of here. From episode 71 of the BiggerPockets money podcast, this is Mr. Scott Trench and I am Mindy Jensen and we are I don’t have any good Air Force sign offs. We are ooh all I know is that Top Gun movie, Maverick.

Scott: We’re getting off to our next activity.

Mindy: We are jetting off to our next activity. That’s Scott’s not mine. Because that’s.

Scott: That was not so good.

Mindy: Ah you know.

Scott: Well good-bye.

Mindy: None of them are good. Goodbye.

Watch the Podcast Here

Help Us Out!

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds. Thanks! We really appreciate it!

Podcast Sponsors

The all-new FreshBooks is accounting software that makes running your small business easy, fast and secure. Spend less time on accounting and more time doing the work you love. For a 30-day unrestricted trial, go to FreshBooks.com/bpmoney

Second Sponsor

FundriseFundrise enables you to invest in high-quality, high-potential private market real estate projects. I’m talking anything from high rises in D.C. to multi-families in L.A. — institutional-quality stuff. And each project is carefully vetted and actively managed by Fundrise’s team of real estate pros.

Their  high-tech, low-cost online platform lets you track the progress of every single project, and keep more of the money you make. Oh, and by the way, you don’t have to be accredited.

Visit Fundrise.com/bpmoney to have your first 3 months of fees waived.

In This Episode We Cover:

  • Sarah’s journey with money
  • How she discovered Mr. Money Mustache
  • Having security as her financial blueprint
  • Her financial position before she discovered financial independence
  • Being conscious of the purchases she makes and officially retiring at 30
  • What their annual spending looks like
  • Other investments they have and creation of their real estate portfolio
  • How she financed her first townhouse
  • Total number of properties she owns
  • The importance of having cash reserves
  • Her recommendation to anyone who doesn’t have a huge reserve
  • Her total lifestyle expenses once her mortgage is eliminated
  • Their healthcare plans
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Certainly not rosy, it’s been a lot of work to get here and I’m not saying that there will never be a storm.” (Tweet This!)
  • “Be conservative because you don’t know what you don’t know.” (Tweet This!)

Connect with Sarah

About Author

The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager Mindy Jensen and Director of Operations Scott Trench weekly for the BiggerPockets Money Podcast! Each week, financial experts Mindy and Scott interview unique and powerful thought leaders about how to earn more, keep more, spend smarter, and grow your wealth. You'll get tips for getting your financial house in order and actionable advice from guests who have been in your shoes - and found their way out.

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here