Finance Friday: FI by 40? Make These Career and Investment Moves Now

Mindy:
Today’s Finance Friday guest is looking to hit financial independence in seven years at the age of 40, but could his timeline be fast tracked to retire even earlier with some slight changes to his investment strategy? Let’s see what’s possible today. Before we get into Travis’s Finances, we want to thank our sponsor. This episode is brought to you by Connect Invest Real Estate Investing simplified and within your reach. Now back to the show. Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and with me as always is my blueberry loving co-host Scott Trench.

Scott:
Mindy, I don’t know how you always produce such great intros

Mindy:
Here.

Scott:
BiggerPockets has a goal of creating 1 million millionaires. You’re in the right place if you want to get your financial house in order because we truly believe financial freedom is attainable for everyone no matter when or where you’re starting. Today, we’re going to discuss if Travis is on track to reach five by 40, what to do when you’re at a crossroads with investing. What could fast track Travis’s financial journey and how can we generate more income? Travis, super excited to welcome you to BiggerPockets Money Today. Thank you so much for being here.

Travis:
Thanks for having me. I’m really excited to be here.

Mindy:
So Travis, let’s jump into your money story really quick. What does your journey with money look like?

Travis:
I really have BiggerPockets to thank for my money journey because it all started just before I went to buy my first house. I stumbled upon the first time home buyer book from BiggerPockets and it just opened so many doors for me, opened my eyes. I learned a ton and that was really where my money story started because it wasn’t until I read that book that I actually was able to learn what I had and where I could go. So that was really only maybe two and a half years ago that I picked that up and read that.

Scott:
Awesome. Yeah, I love that book, but I can never remember what it’s about.

Mindy:
Who wrote that book? Scott, do we Know?

Scott:
Oh, that Mindy and I co-wrote that book, so thank you for the plug Travis. Well, Travis, could you give us a little bit of background on how you got after you kind of read that book and how have things gone the last two and a half years and to get us to this point?

Travis:
Yeah, things have gone really well. So after reading the book, my wife and I had a better plan for the house we wanted to buy and what we want to do with it and then we also after that learned so much more about index funds, retirement accounts, it just kind of ran with all of it. So in the last two and a half years things have been really well for us. We really focusing on financial independence. We bought that first house, we’re doing the house hack and things are going really well.

Mindy:
Yay. I love it. What is your retirement goal?

Travis:
Yeah, so right now my retirement goal is to be work optional by age 40. So I know financial independence oftentimes is truly not working at all and that’s not really what my wife and I want. So we chose the age of, because it was a nice round number I think to get there and it was really only then that we would kind of decide what work optional actually looked like for us.

Mindy:
And let’s remind our listeners, how old are you right now?

Travis:
33. 33,

Mindy:
Okay. Let’s take a quick peek at your numbers. I see income of 208,000. Nice. That’s both you and your partner. Expenses of 83 36 a month. The income was annual, not monthly. Although boy, I’d like to talk to you about changing jobs if it was debts of $7,000 and then your investments. I see $20,000 in cash, $196,000 in a 401k, 18,000 in an HSA 45 in a Roth, 80,000 in a brokerage, negative 7,000 in credit cards, which means you have a credit card debt, but since that matches your debt load, we’re going to talk about that in a minute. And a primary mortgage of $380,000. What is that interest rate that you have on that mortgage?

Travis:
6.3%.

Mindy:
So that was a purchase after June of 2022. That stinks, but that’s also, that’s not horrible considering how high it did get up to. And your retirement goals are work optional. I love that phrasing work optional in seven years. Do you like your job?

Travis:
Not really, no. It’s hard to say that, but it is the truth. I don’t really have a lot of passion for my work and I don’t feel that it makes a whole lot of difference or helps a lot of people. So I like my coworkers and I obviously like my salary, but the actual work itself is not that great.

Mindy:
Okay. Is there something else you want to do? You said work optional instead of early retirement.

Travis:
Yeah, so for me personally, two of my biggest hobbies are mountain biking and gardening and so a work optional setup for me could be teaching or guiding mountain biking and maybe doing something with gardening as a side business or a small business or working at a farm here in the local area, maybe part-time. So doing both of those things, that would be work that I definitely would enjoy more than what I currently am doing.

Mindy:
So is your goal in seven years to be financially independent or another flavor of phi like coast fire, lean Fi?

Travis:
I think the goal really is true financial independence to where if the money from the part-time jobs was almost zero, that we could fall back on just true financial independence. So financially that is the goal, but as far as continuing to work, having no job at all is not the goal.

Mindy:
Okay. So how can Scott and I help you today?

Travis:
I’m here really to ask for if you think I am on track or if there are any things I can do that I am not seeing that would help me for sure reach my goal or maybe even speed up my goal to get to that financial independent, that work optional stage. I spend so much time getting to where we are now and learning so much and making some money moves to get where we are that I am sort of stuck in what I see and I think a fresh set of eyes or some experienced opinion would really help give me some ideas or at least reassure me that we’re on the right path.

Scott:
Just a couple of observations that I have here is one, you’re a great income, you’re saving and investing a lot, $91,000 a year, but your expenses are also fairly high relative to your current net worth in terms of retirement. So if I just do some simple math, I see $8,300 in monthly spend, $8,300 times 12 times 25 gets you 2.5 million, you need 2.5 million in assets in order to retire on the 4% rule with your current numbers. Have you done that math before? Have you ever boiled it up to that level?

Travis:
Yeah, and the actual expenses per year of living expenses, part of that number is more like $72,000 a year. So what is included in some of my expenses are investments to or contributions to a Roth account, contributions to the brokerage account. If I were to stop those and roll that down, truly living expenses is more like 72,000 a year. I think that comes out to about 1.8 million for the 25 x or the 4% rule.

Scott:
And then I think there’s something to boil down in Mindy’s question there that I want to just push a little harder on here because the fact that you don’t like your job and it’s a good job, it’s a very good job, it earns about a hundred thousand dollars a year, but it’s not an incredible job that is from an income perspective at this point. I think that for me that makes me question or want to start the discussion around is there something active that you can begin doing in real estate or in business to some degree outside of that in the near term that can provide some of those benefits a little earlier and give you that optionality sooner than what you’re doing. Because in another observation that I’m seeing in your overall profile here is that that $91,000 in investments is heavily coming from tax advantaged accounts like the 401k and HSA, which can be done around that. But if you’re going to go that route, you’re going to have very little liquidity until you start setting up some sort of withdrawal mechanism from those 4 0 1 ks. And I worry that you, you’re on a path into a trap over the next seven, 10 years where you’ll become a millionaire, but it’ll be hard to access that with that career. How’s that sound? Any reaction to that observation or that thought process?

Travis:
Yeah, that is something I have thought about. Most of our investments are in the 4 0 1 Ks or the Roth IRAs and they’re tied up in those and I have done some research on the SEP 72 or the Roth conversion ladders. It’s something I’ve thought about and that’s kind of why I’m here as well is to find a way to maybe increase the taxable account, the brokerage account so we don’t have to be locked into some strategic tax advantaged withdrawal strategy. But I guess I’ll follow up with that and saying it’s hard to get away from the four one K investing, the Roth investing HSA investing because the tax advantages right now are so good and it’s so easy to just park the money there that that’s where I’m at this crossroads of do we pull back for any particular reason and do I give up those tax advantages now to have more flexibility in

Scott:
The future? Alright, we need to take a break to pay some of our own bills and celebrate the sponsors who make BiggerPockets money possible. And when we’re back, Mindy and I will discuss how on track you are to meet your goal of retiring in seven years. Travis,

Mindy:
Welcome back to the show.

Scott:
That’s going to be the multimillion dollar question here. I think as we go through this and I think it comes down to how much belief do you have in your job and career because the reason I think that that’s a crux question or the first place I want to probe is if you think your career has big upside on that front and that income’s going to go up, then that makes a lot of sense to continue doing the strategy that you’re doing right now. But if you’re not passionate about it, don’t like it and are feeling stuck, you know won’t get to where you want to be in seven years with this approach, right? Because I can just do the math right now you’re investing $91,000 a year, that’s 637. What am I doing with my math here? 91 times seven is going to be $637,000 in aggregate contributions to this on top of your $400,000 net current net worth. You’re not going to get quite to where you want to be at age 40 unless you get a lot of help from your investment portfolio and the market booms on that front and that’s all going to be in those retirement accounts. But if you think that income’s going to go up and the career is going to accelerate pretty dramatically for you, then that becomes the kicker and that number is much higher.

Travis:
I don’t really see a huge acceleration in the career or in the salary over let’s say the next seven years. It’s not non-existent, it’s going to stay stagnant. But to say that I can stay in my current career with my current company and maybe double my income to something that’s really substantial, I don’t really have a belief in that, but I could see staying and having it rise a bit, but nothing,

Mindy:
Is there any opportunity for additional education without a huge expense that can help you get to the next level at your company or going into a contractor role or even taking a part-time, additional job in this same field or similar field?

Travis:
It could be a possibility. I think maybe with some certifications, sort of like non-traditional college schooling teaching and certifications, there could be a possibility to get that and then maybe career hop. It’s one thing I’ve thought about in the past is doing something like that to really up the salary. It’s not something I’ve really dove into, but I think that there is a possibility to get a larger increase in salary from something like that versus just going for a promotion. In my current career, my current company,

Mindy:
Yeah, we’ve spoken with several people who have job hopped their way to doubling their salary and the bottom line is companies have more new hire budget than they do retention budget, so that could be something to look into. That doesn’t necessarily mean you’re going to double your salary, but if you can get a nice bump and kind of do the same thing, that could be something that could help propel you further closer to financial independence.

Scott:
I misspoke earlier, so I actually ran the numbers just now on this. I apologize. You starting with a $400,000 current net worth, you’re adding $91,000 a year and if you average 7% returns over the next seven years, you will get to 1.55 million by the end of that time period. So you’re pretty darn close with that. Now we got to adjust for inflation. There’s probably puts and takes, you’re not quite there, but you’re much closer than my initial incorrect math suggested on that front. So maybe even modest career growth would actually help get you there. Sorry to interrupt there Mindy, I just was obsessing the numbers for a second.

Mindy:
I’m glad you did. I like those numbers better and remember he’s still going to work, he’s just not going to work at this career. He’s going to go do mountain biking. I have no idea what that pays, but even if it brings in half or a quarter of your annual spending, then that changes how much you need. And your partner has a job, does she enjoy her job? Does she want to continue that or is she looking for seven years in out as well?

Scott:
Oh yeah, you can definitely wifi at

Mindy:
Seven years

Scott:
Based on this it seems that seems very high probability.

Travis:
Yeah, my wife, she does enjoy her job. She’s a physical therapist and she really enjoys her current role, her current company and her career in general and that is really kind of a saving grace for both of us in terms of reaching five because we are on board together to meet Reach’s goal and that actually might be the perfect segue to answering this whole career hopping slightly, increasing the salary to meet the seven year goal is that my wife does have the opportunity to start traveling in her role rather than working at a clinic in her hometown and traveling would increase her salary by about 20 to $30,000 a year and come with a few other benefits. And so that’s one thing we’re actually weighing right now that do we do that as sort of a salary boost and a way to kind of pursue PHI on the road, doing some more traveling and travel hacking while working at the same time so that it’s not something we’ve decided on yet. But

Mindy:
How far away would she be from you?

Travis:
We would most likely be traveling together so I can work remotely.

Mindy:
Oh, okay.

Travis:
Yeah, I work remotely. So it would be kind of all around the country. That would be 12 weeks for each job and then you take another contract for another 12 weeks

Scott:
And you would Airbnb your house, right?

Travis:
Yeah, so we currently house hack two out of the three rooms in the house, three bed, two bath house, and we would find a tenant for our current room, that third room and then we would obviously be renting a place on the road

Scott:
And that would increase your savings and your income, which would continue to accelerate this. Do you want to do that? Does that sound fun to do?

Travis:
It does. There are some downsides though. So being in Nashville, North Carolina, we just survived Hurricane Helene and I could only imagine the stress level if I was not home when the hurricane hit. So there’s some downside to traveling in that now you’re a remote landlord of the house hack, you’re not here at the house to kind of maintain or deal with things. There’s a lot of logistics in moving traveling, there’s a lot of logistics in the taxes for a traveling physical therapist. So it really is something we’re on the fence about because there’s so many ups and downs to it, but I think we’re leaning towards doing it just maybe not immediately.

Mindy:
Yeah, I would try it out.

Scott:
Yeah, I think that sounds super reasonable and for what it’s worth, I think those are very reasonable puts and takes. There’s no right answer on this, but I don’t think you should overweight the managing remotely piece. Managing remotely can get you into trouble if you’re buying out of state in Ohio and don’t know what you’re doing from someplace. But if this is your house and you’re setting things up and finding the tenants, then yeah, you’ll have the occasional pain in the rear, but it’s one property that well and I think you’ll be reasonably successful with it with a couple of pains in the rear that will probably be well worth it would be my guess. So you can come back on in a year or two and tell me how very wrong that is on that, but I wouldn’t be that worried about managing one property that you house hacked.

Mindy:
The two rooms that you’re renting out right now, are those long-term rentals or are those Airbnb rentals?

Travis:
They are long-term rentals. So we currently have a tenant in each room that’s on a one year lease.

Mindy:
Would either of them wish to do a little bit of property management for you, like turning over the Airbnb or managing and making sure that the cleaner comes to turn over the Airbnb part of it for you?

Travis:
Potentially. I haven’t proposed it yet, but that is something we thought about as well of maybe them making a little bit of side income or reducing the rent for a little bit of work in doing some of that management. So yeah, that is an option for sure.

Scott:
I would probably not pay any of the tenants to do any management work. I would probably find the tenant myself, place them and then manage the property remotely. This is not, if there’s a turnover event or a major problem, you fly back, you work remote anyways and go deal with the problem around it, but what’s most likely going to happen is there’s going to be minor maintenance issues. You call the plumber, they come out and fix it, so you’re really going to give one of the tenants the job of managing that. I would just do it myself in this particular instance, especially since these are 12 week stints and if it’s not working out, you just end the 12 week stint and you have pain for three months and come back. I don’t think you’re going to have a major management issue. If you had a portfolio of 10 properties then I would hire a property manager figure something else out. But this is one property with three roommates in it, very, very standard management practice there.

Travis:
Yeah, totally. I totally understand.

Mindy:
And that extra income could go into your after tax brokerage account as opposed to the 401k or whatever. Now would your wife have a 401k through the travel company or does that go away?

Travis:
She would, yeah, that would still exist and she would still be maxing out her 401k.

Mindy:
Okay. Well I think we answered the question of should your wife change her job? Yeah, I would. If she doesn’t like it, she could always go and get a position again, I mean as I recall correctly, physical therapists are in demand.

Travis:
Yeah, absolutely. That is something we’ve talked about is that she has a good position right now, but they’re really a dime a dozen out here because it’s a really in demand career field.

Mindy:
Stay tuned after one final break to hear what investment vehicles might be a good fit for Travis’s goals and financial timeline right after this.

Scott:
Alright, let’s jump back in with Travis.

Mindy:
What other questions do you have for us

Travis:
Besides the questions around slightly increasing the salary or pursuing a different job, is there anything else with money moves or investing that we could make to speed things up or to get away from the 401k investing? As I mentioned earlier, it’s so easy and the tax advantages are so nice of the 401k that I always gravitate toward that, but I fear that we’re not seeing an opportunity either in real estate or in investing in the taxable account first that we’re not taking.

Scott:
That’s the hard question, right? I mean it, it’s so textbook to go down the stack like you’re doing, I’m looking at your statement here and it says 401k 46,000 401k match 4,000 HSA 8,300 Roth IRA 14,000. Then we have the ESPP, which I imagine is a purchase at a discount, 10 15% off the market value of the company stock. Is that right?

Travis:
Yeah, it’s 15%.

Scott:
Yep. Awesome. So you got to take that from a free money perspective. You got to take your match, you got to take your ESPP, right? Those are the no-brainers in this stack. You’re just never going to get a better deal than those two things and almost anything else. And then the question is how much further down this list do you go? Do you continue to max out the HSA? Do you continue to max out the 401k that will free up 25 $30,000 a year after tax to go into your savings account? And I think that that’s just really hard in your situation because you’re doing the textbook play here. You’ve got to have really high conviction that you’ll actually use it for something that will give you freedom in a much earlier fashion. So if you wanted to go and flip houses or build a portfolio in Asheville for example, I’d say that’s the time to make that change.
But I’m not hearing that from you. I’m not hearing a business idea or an itch to become an entrepreneur or to kind of go into the small business world or just get out of that job way earlier I’m hearing, I kind like the situation, I want to travel. I’m thinking about actually traveling 12 months to 12 weeks of the year to different locations from this and want to enjoy that. And if that’s the route you want to go, I think what you’re doing is great. You are to your point missing opportunities that you’re probably not even thinking about right now because the cash liquidity in the after tax bucket is not going to growing very meaningfully right now and won’t with this approach. But that’s okay. It’s just a matter of knowing that and making out of conscious decision.

Mindy:
Yeah. If I was in your position with your numbers and your goals, I would continue to max out the HSA, assuming that you are in generally good health and that you are keeping all of the receipts for all of the expenses that you are incurring and then when you do retire in seven years, your HSA account is going to be significantly larger. You can start cashing in those receipts and that can supplement your income, which reduces the amount that you need, the total amount that you need to retire. And the same with the Roth IRA. That’s just you pay taxes now and then it grows tax free. The HSA, you don’t pay taxes, now it grows tax free and then you pull it out without paying taxes, which is my favorite kind of account. I wish that limit for contribution was a billion percent, but it’s not. It’s like $7,400 a year or something. You have if you have a family and it’s less if you don’t, and I dunno what those numbers are off the top of my head. You’ve got 46,000 that’s going to the 401k. Have you put any of that into a Roth 401k that gets rid of the taxable advantage but then it grows tax free?

Travis:
I have not. It really just started with the 401k and then followed up with the Roth IRA afterwards.

Mindy:
I wonder, Scott, he wants to retire in seven years. The Roth conversion ladder, the Roth money has to be in there for five years before you can start withdrawing it, but then if you’re putting money in, you’re paying taxes on it before it can. I’m thinking out loud, I’m sure nobody’s following along, but could you start that in a couple of years so that it’s there for you?

Scott:
I like the 401k for Travis, right? I put my money into the Roth. I have different goals and different pursuit there. Travis I think is right to go the tax deferred route first. Once that’s exhausted, then to move into the Roth situation because your income’s high right now and it’s going to be lower. That’s your plan. You seem very convicted in that plan after the age of 40, if that’s the case, take the tax deferral now and shift it over at that point in time. Yeah, there’s a risk that tax brackets go up or whatever around that and you’re missing some opportunity in the Roth. But I think that based on the information we have today, that’s the logical choice in this route. And once you get to that retirement bracket, you’re going to have to do the math. Your net worth is going to be heavily concentrated in your 401k at that point and you’re going to have to think through one of several options including the substantial equal periodic payments route or the Roth conversion ladder.
But I think that you’re going to get, and you’re going to need some sort of extra oomph over the next seven years in order to actually finish the play with a good margin of safety to retirement. So something on top of this approach has to be done and that could be something in the physical therapy world that could be something in the mountain biking space, although I’m very curious to see how you’re going to make money from mountain biking. I would love to rehear that one more time on that front, but there’s going to be something extra that you’re going to have to do in order to finish this play unless you get lucky with returns over that and that will probably, whatever that ends up being, that will be your bridge to accessing the money in the 401k would be my guess. Can you share how you make money in mountain biking real quick and then onto that overall thought process?

Travis:
Yeah, so the idea was actually to either be coaching or guiding either on my own through my own small business or working for a guiding company. Mountain bike tourism is really big here in Asheville. We have lots of trails, so it’s an industry that does exist out here. So that’s the way to make money through that. Not just riding but coaching and guiding other people. And then to answer, well, I’ll go back and answer Mindy’s question on the Roth conversions part of our plans. So you’re right, it is like a five-year window as you mentioned on the Roth conversions. But part of our plan was to start those conversions once we had reached financial independence and that we had really stepped down to our part-time jobs or those work optional jobs and that our income was much, much lower before we started making those conversions and then living on that part-time, money, that much lower income while we let those conversions bake. And then Scott, to answer your question, the greatest opportunity we have right now I think is maybe this traveling kind of physical therapy job the quickest way to get us kind of that bump in income, that small bump that we need to really give us that margin of error in the next seven years, that coverage over the next seven years.

Scott:
Yeah, I mean maybe that’s it. Maybe it’s as simple as go travel around the country for 12 weeks at a time. You love some hate some on it, but that’s the missing link that gets you that last kind of 300 K to that 1.8 million mark that you’re looking for on it. But yeah, I think your plan is great and what you’re doing is a very reasonable way to go about it and it seems like you understand the consequences and what you’ll have to do from a planning perspective to actually use that to fuel retirement at 40.

Mindy:
Travis, do you and your wife have children?

Travis:
We do not. And no plans to have any in the future.

Mindy:
No plans to. Okay. That could also impact the number that you would need. Yeah, I really like a lot of these ideas. The only issue I’m thinking is if you look into potentially job hopping, you could get a job that says you need to be in the office. There’s no more remote work and that would hinder you traveling with your travel PT wife job. I’m wondering if you could read that mad scientist article, how to access retirement funds early. He talks about the Roth conversion ladder and since you have so much time, you can plan ahead. You know that the Roth conversion ladder takes five years. Could you save up money during these next seven years that you could live off of during those five years so that you could do the Roth conversion ladder when your income is much lower and you don’t have to pay all of those crazy income taxes.
So I love the opportunities that you have because you have seven years and listeners listen up if you are thinking, oh, I have seven more years before I can retire. No, you have seven years to plan your perfect retirement. You don’t need to wait Travis until you are retired to find a mountain biking job or to look into starting a mountain biking tour company. You can start looking into that now. You can start doing that on the weekends, build up your company now so that when you retire, you’re not starting from scratch. You’ve already got a big loyal following because you’re the most awesome mountain biker in all of Asheville. But yeah, you’ve got all of this time to plan and like Scott said, running the numbers that you’re doing right now, you’re going to be weighted heavily into your 401k, but you have a lot of options and you can start thinking and running numbers. Have you run any of your numbers on the CFI SIM calculator?

Travis:
I have not.

Mindy:
Okay. That’s another homework assignment. It’s the letter C-F-I-R-E-S as in Sam. I like simulator cfi sim.com, check that out. That has a lot of different opportunities to run all sorts of numbers and see how it’s going to work for you.

Scott:
I want to address one last question. It seems you, you mentioned in the notes here that you were interested in live-in flipping as a strategy. Could you share that interest here and let us know how that factors into what we’re talking about? That was one of the things I was thinking about when I was talking about extra oomph to get over the finish line.

Travis:
Something I’ve kind of been doing at the current house and sort of been on the fence about for a while. Obviously Mindy, I know you are the queen of the live and flip in that strategy and I love it. It is something I do. So I am handy at the house here. We’ve already been doing a lot of remodeling, so it is kind of a skillset I have to pursue sort of live and flip, but at the same time, there’s a lot of cons that come with the stress of remodeling or renovating a house, and I’m not a hundred percent sure if I want to be on board for more of that in my future. There’s already been quite a bit at the house, hack house, but it is another strategy that we’re interested in. Just again, not maybe a hundred percent sold on it, ready to jump in tomorrow on another house.

Mindy:
Okay, so live and flipping is awesome and awful simultaneously for all the reasons that you said. You’ve got this potential to make a lot of tax-free money, but you’re living in a construction zone. The good news is you can vary how much you’re going to be doing in any particular type of flip. You can just paint walls. I mean I have walked into some houses and been like, what were you thinking? Painting the walls, these colors. But everything else is okay. I mean there’s various levels of live and flip. I’ve also popped the top. Don’t do that. That stinks. That is a horrible experience. Both times I did it were horrible experiences. I’m never doing it again and if I ever say that I want to please come punch me in the face, it’s the worst experience ever. But if you’re in construction, maybe that’s your jam.
You can control a lot more if you own a construction company and popping the top. We are in a property now that is hideously ugly. Every wall, every floor needed to be touched. We’re not done yet because Covid thanks really derailed our timeline. But painting isn’t that hard. Installing flooring isn’t that hard. Moving walls is a little more work and remodeling a kitchen isn’t that hard. So when you start looking at potential live and flips, look at what it’s really going to take. Go to an open house or have a real estate agent, schedule a really long timeline and take a notebook in there and just write down in every single room it needs this much work. It needs that much work. These are the projects I’m going to have to do. We have replaced electric and plumbing and we have done roofs and new windows and there’s a lot of things that you can either do yourself or hire out inexpensively.
There’s a lot of things you can’t hire out inexpensively and it’s going to cost you a lot of money and be really honest with yourself. What is it that you like to do? What are your strengths? If painting is really the only thing that you’re handy at, then a live and flip might not be the right choice for you. But the reason that Carl and I make so much money with our live and flips is we do almost all of the work ourselves. We hire out very little. We hired out two people to pop the top. It’s hard to find good contractors, which is why we do everything ourselves, but it also takes longer because we’re doing it ourselves after work, before the kids get home from school before bed over the weekends. I mean, there’s a lot of things that I’m missing out on with my friends because I’m choosing to work on my house.
So if I can talk you out of a live and flip, great. That means live and flipping is not for you. But if you have a series of things that you like to do, maybe you love laying tile. My husband loves laying tile. That’s a large part of the bathroom remodel is putting down a new floor. Anybody can, well, not anybody. Those toilets are really hard. I was about to say, anybody can install a toilet by themselves. I actually can’t. They’re so awkward and I’m not strong enough to do it. But you can paint a bathtub so that pink bathtub can very easily be turned white. Don’t believe what the box says that it only takes two coats. It takes like 26 coats. But all of these little things are, they’re maybe time consuming, but if you have the time to do it and a live and flip, you do it over the course of two years. If you’re going to be traveling, I wouldn’t live and flip then. But if you decide that you want to come back to Asheville or you decide that traveling isn’t for you, a live and flip with a moderate amount of work could be a great way to boost your income or your bottom line.

Scott:
I’ll just chime in on some of the things that Mindy said and frame it where a live and flip, again, I use that word extra oo, that can really get you through to your goals much faster and provide a lot of optionality. The live and flip is not scalable. You can only do it once every two years if you want to take full advantage of the tax benefits. I don’t know Asheville, but many cities around the country are putting laws in place that say or rules around short-term rentals don’t that only allow owner occupants to do that. Something is bubbling up from a thought process perspective around is there an opportunity to purchase a live and flip, turn it into a short-term rental and combine that with these 12 week traveling stints. Is that owner occupant? Is that your house and you’re airbnbing it for 12 weeks around there at a time, coming back, taking a look or whatever.
Spending enough time in Asheville as your primary to make sure that everything is above board and getting some really good benefits that are not scalable but that a single investment could put you over the finish line. Is your high income going to be a really nice asset in that world as well? Allowing you to do something that’s going to be a nice quality short-term rental for that area. So I don’t know where that leads, but those are the types of questions that start to come up for me and I think there might be something there. It will not be as fun as not living in a live and flip. You’ll have to decide if it’s 200, 300, $500,000 and more money at the end of seven years from that decision. Is that worth it maybe?

Mindy:
Yeah, cashing those big checks is super fun

Travis:
After tax. Mindy kind of sounds like you were saying that live and flips can be all variety of levels and flavors. So I would’ve asked you what makes a candidate for a great live and flip, but it sounds like the answer is up to the buyer and the amount of work they want to put in.

Mindy:
That’s one factor. Another factor is the neighborhood itself. It doesn’t matter if you take this garbage house and make it amazing if it’s surrounded by other garbage houses. I live in a neighborhood where the price point now is starting around $600,000, but there’s a golf course that borders one edge of the neighborhood and the house is on the golf course are far more expensive. I think there’s a $1.7 million house in my neighborhood. But the thing is my neighborhood isn’t a $1.7 million neighborhood, so in the middle of the neighborhood, that would be a terrible house to make a $1.7 million neighborhood on the golf course. It’s a little different. People like living on a golf course, so make sure that the house that you’re buying is much less expensive than the other houses in the neighborhood, but that you could make it to the same level as the house in the neighborhood.
If you’re buying a $500,000 house and you turn it into a million dollar house but you bought it in a $500,000 neighborhood, people who want to live in a million dollar neighborhood aren’t going to buy your $1 million house in your $500,000 neighborhood. So the house, it has to have enough of an upside that you can can still make money when you sell it, but also when you sell it, that price point is in line with the rest of the neighborhood in an area that people want to live in. Nobody wants to live in a house that backs up to a busy street or a train track or a school. You think it’s great because it’s all open space but it’s not. It’s loud. Kids are loud, but yeah, choose the kind of house that you want to do the work in. I don’t touch broken foundation houses, I don’t touch houses that have been contaminated with meth.
I don’t know anything about that and I don’t want to live in a house that has meth in it, so call me picky. But you want a house that you can live in too. Now you have 60 days to move in after you purchase the house if you buy it with a mortgage. So you can do all of the heavy lifting, the stinky work in that 60 days if you have that opportunity. That could be another way to live in a live and flip without living in a construction zone. There’s lots of different ways to do a successful live and flip, but don’t take on more than you can chew. Don’t tackle a house that isn’t in line with the same with other houses in the neighborhood and don’t ever buy on a busy street or backing up to trade tracks.

Travis:
Okay, noted. Thanks for the tips.

Mindy:
You’re welcome.

Scott:
Travis, anything else that you want us to cover? I think we’ve gotten through some of the questions that you came in today with. Have any new ones emerged or are there any other areas of your situation that you’d like us to take a look at?

Travis:
No, I think you guys have answered the questions and looked at the numbers and I’ve already learned a lot. I’m super grateful and happy to be on just to have the time to chat and get you guys’ take on everything is motivating and really helpful. So no other questions and I’m really thankful right now.

Scott:
Awesome. Well you’re in great shape because you save and invest so much every year. So you’re going to win whether it’s in seven years or 10 years or six years, it’s just a matter of a couple of fine tuning a couple of things and whether how much activity you’re willing to layer on top of the current really strong base that you’ve got here. So congratulations on a great position and look forward to seeing you retire and live that dream life mountain biking in a couple of years. Thank you.

Mindy:
Yeah, I think you are really on the right track. Like Scott said, you’ve got your numbers almost there. A few more things will help get you all the way there within about seven years and don’t do what I did and just be lying right for it. Make sure you enjoy the journey on the way there because if it takes you seven hard years or eight fun years, eight fun years is better.

Travis:
Definitely.

Mindy:
I mean I wouldn’t know from experience. Alright, Travis, thank you so much for your time today and we’ll talk to you soon.

Travis:
Thanks guys. Bye.

Mindy:
Alright, Scott, that was Travis and that was a really good set of circumstances. I have some homework assignments for him, but I want to know what you thought of the show.

Scott:
I think this is a guy who’s well on track for early retirement. Travis is right up the alley of the average BiggerPockets money listener. BiggerPockets Money listeners, as we all know, earn more from a household income perspective than the average American. That’s why they’re on track to fire to achieve financial independence, retire early as we’ve discussed in other topics there. He saves a good amount of his income. Think no kids, he’ll get there. Just a matter of speed and degree is taking that formula that he has got. He’s going right down the money guy or Dave Ramsey or whatever, all these different stacks for which retirement account bucket to fill up first. He’s doing it right and making sure to take advantage of the free money and the tax advantages that are coming in there. If he wants to get there a few years earlier, layer in a couple of real estate plays or a house hack or a live and flip on top of the house hack that he is already got. But he’ll get there no problem I think to financial independence as long as he gets some help or anything close to the historical average from a returns perspective in the stock market. So obviously that can throw everything off, but I didn’t think Guy was well on track and control him. What he can control. A couple of fine fiddles with this plan

Mindy:
And I like that you made a point of noting that he does not have kids. We get a lot of people with all different scenarios. So if you’ve got a scenario that you haven’t heard before, let us know [email protected]. [email protected]. You can drop us a line, but we’re also looking for people on the single path to financial independence. So if you’re single and would love to share your numbers, we would love to talk to you. Alright Scott, should we get out of here? Let’s do it. That wraps up this episode of the BiggerPockets Money podcast. He is the Scott Trench and I am Mindy Jensen saying Farewell snowball.