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I Make Great Money – Why Do I Feel So Broke? Finance Friday

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In many of our lives, we make a decent salary, we try to save and invest, but we still feel bogged down by debt. How is it possible to feel “broke” while making a great salary? That is the question that Tiara, today’s guest, is asking. Tiara works as a park ranger in Texas, but wants to take a break in the next few years to go on a big travelling holiday.

This is a great idea! She’s worked very hard, managed to get some assets under her name, and needs a break. But before she can go out and explore the world, she needs to take care of some high-interest credit card debt eating away at her bank account and her financial sanity.

Tiara is also sitting on a rental property that has appreciated since she bought it. This rental property used to be her primary residence, so she still has some emotional ties to it, but with her current needs growing greater than her need to hang on to a negative cash-flowing rental, it may be time to sell the house.

Mindy:
Welcome to the BiggerPockets Money Podcast show number 192. Finance Friday edition, where we interview Tiara and talk about selling off underperforming assets to pay off high interest debt and proper capital allocation so that she can live long and prosper.

Tiara:
You saying that as I started over this puts things into perspective, because this was a pie in the sky years from now. I don’t even know what reality will look like possibility, right? My gap year. But if the house is what’s holding me back.

Mindy:
Hello, hello, hello. My name is Mindy Jensen. And with me as always is my Spock-like co-host Scott Trench.

Scott:
I see that you still cling on to these nerdy interests, Mindy.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story, because we truly believe financial freedom is attainable for everyone no matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or simply fund a gap year to have a couple of adventures, we’ll help you reach your financial goals and get money out of the way so that you can launch yourself towards your dreams.

Mindy:
Scott. I am so excited to have Tiara on the show today. She is facing what she feels is a financial crisis where she doesn’t really feel like she has enough money saved for retirement. She’s also got some high interest credit card debt and some student loans. And she’s wondering if “I make so much money, how come I feel broke all the time?” And I think that your advice to her today for reconsidering her capital allocation is really, really great. I think a lot of people just continue doing what they’ve always done. And you brought up the…?

Scott:
Well, I’ll just chime in here. Tiara had two problems. I think that were really fundamentally hurting her financial position. One is that she was not budgeting for large, irregular, a several $1,000 expenses. There’s a healthcare procedure, there’s new car, all that kind of stuff. That has to be something you include in your monthly budget. And we’ll talk about that. That’s called budgeting for CapEx. If you’re a real estate investor and it’s the same concept applied to your personal life where you have every couple of years, you’re going to have a big, large one-time expense. If you’re living a normal human life in America, and so you need to be able to plan those things. And if you don’t, it might look like in many months, you’re 500, a 1,000 bucks, but you’re really saving much less than that because some of that has to go to these large one-time payments.
And the second problem that she was having is what we call capital allocation problems, where she’s got a number of debts, a number of retirement accounts and a number of high interest debts, like credit card debts and significant assets in retirement vehicles and those types of things and an underperforming rental property. And by selling some assets, stopping contributing in other places, paying off debts, according to a specific approach, she can achieve a lot more freedom right away and on an ongoing basis in the future. And so I think there’s a lot of, lot of great lessons to be learned from Tiara story today. And I think you’re going to learn a ton here.
One quick caveat. One of Tiara’s goals is to fund a gap year in a few years. And so our advice is tailored towards that goal. We are not necessarily saying that it’s a good idea to save up a lot of money or sell off some assets and put that into a fund for a gap year rather than investing for the longterm or anything. But that was her goal. And that’s what we’re helping her achieve around that, while also I think appropriately caveating that like, hey, it’s also good to sustain a pattern of investing for the long run. So hope you enjoy today’s show there’s a lot to learn here. Lot of cool stuff going on that I think really is great examples of investment and wealth building principles that you can see applied in practice in her position and how with some tweaks she can achieve a lot more freedom relatively quickly.

Mindy:
Today we’re talking to Tiara. Tiara is getting a slightly later start on her journey to financial independence and has some debt she needs to take care of. She’s saving up for a gap year and is looking for tips for growing her investments. She has a rental property, but she isn’t sure if it’s a great investment. So we’ll dive into those numbers and see what we think. Tiara, welcome to the BiggerPockets Money Podcast.

Tiara:
How you all doing today?

Mindy:
Oh, I love a good holiday and a good you all. This is going to be such a great episode. So let’s dive right in. First of all, what part of the world do you live in and what do you do for a living?

Tiara:
I’m here in Northern Dallas, Texas, and I’m a park ranger.

Mindy:
A park ranger? Oh my God, that sounds like an awesome job. Is that an awesome job?

Tiara:
It’s amazing. I love it so much.

Mindy:
Oh, I’m jealous. I want to do your job. Let’s have a job swap for the day. Okay. So Dallas, Texas, and a park ranger, let’s set up your balance sheet. Let’s look at your income and where that money’s going.

Scott:
Well, yeah. Sorry. Let’s create that income statement and say, hey, how much do you bring in from your salary? And I think you mentioned you had a second job, how much income are you bringing in on a monthly basis?

Tiara:
Got you. For my primary job, I bring in 4,070, from my secondary job I brought in last year about another extra 1,000. And I’m trying to back off that second job now that I got some debt squared away, so about a little under 5,000 a month.

Scott:
Okay, awesome. And can you tell us a little bit about how far that goes? How much are you able to save on a monthly basis and what are your big expenses?

Tiara:
That my biggest expense is going to be rent it’s about 1,800 a month. That little under five grand a month goes pretty far. I would save about 1,000, maybe $1,200 a month.

Scott:
Okay, awesome. Can you walk us through kind of maybe like, you’re saying you’re bringing in about 5,000, is it 4,070 plus a few 100 bucks a month from the second job which may end, where’s the three to $4,000 in total expense going?

Tiara:
Got you. Okay. So rent for one about 1,300 at the month groceries. I do another $300 a month capitation gas for me is like 40 bucks a month. And then I have some insurance me is about $108 a month. I have some debt I’m still paying off to the tune of about $50 a month. And then I’m paying the minimums on my credit cards and then student loans have been deferred.

Scott:
Okay. So I’m hearing 1,300 per month and then about $700 or $800 in other major expenses, which gets to 2,000. But you said you’re spending about closer to three or 4,000?

Tiara:
I spend definitely $5,000 a month. I asked much on average.

Scott:
Okay, great. And how long have you been tracking or keeping a budget?

Tiara:
Ooh this will be my second year using LINE app.

Scott:
Second year using LINE app. Okay. So you feel like you’re pretty consistent about all those types of tracking. Do you feel like there’s some room or some thing, question marks in your budget that you’d want help with today that we should file away? Or do you feel like you’re pretty comfy about how much you’re spending on a monthly basis and the command of your money?

Tiara:
I’m pretty comfy with it. It’s just a discipline issue. I got really into plan and next thing an album Monstera cost a grand, so.

Scott:
That’s awesome. I’ve not heard of a planned spending issue there. So there’s a pun here that’ll come to me in a few minutes, but, well-

Tiara:
Unbelievable.

Scott:
Yeah, there you go.

Mindy:
Got the two of you on this show today.

Scott:
We’ll identify a root cause here. All right.

Mindy:
Oh, no.

Scott:
But let’s talk about your debts here. Can you walk us through debts and assets?

Tiara:
Most definitely. So I have a 457 loan that’s active right now. That’s about $157 a month. I have another year and a half worth to pay for and the balance is about 1,800 left.

Scott:
Great. Okay.

Tiara:
And then I have three student loans. The only one that’s not currently deferred is about $50 a month. The balance I have remaining there is $2,400. And the other two groups of loans total out to be about 35,000.

Scott:
Okay. So you have 35,000 in student loans, but a lot of those are in forbearance through September.

Tiara:
Mh-mm-hmm (affirmative).

Scott:
Okay. Any other debts?

Tiara:
My partner and I share three credit cards. And the total on those credit cards is about four, maybe 45 or $4,500.

Scott:
Okay. And is that past due or is that just your monthly balance that you carry and you pay it off usually?

Tiara:
Our monthly balance that we carry, but we don’t pay it off. We just pay the minimums right now.

Scott:
Okay. All right. And do you have any-

Mindy:
Hold on Scott, what interest rates are we talking about on these credit cards?

Tiara:
In the 20s.

Mindy:
In the 20%?

Tiara:
Yes, ma’am.

Mindy:
Okay. I can see my first order of recommendation.

Scott:
Well, let’s keep going here. What other debts do we have?

Tiara:
Oh, I have a mortgage in a different city and now that property is being rented out and that mortgage has $100,000 left on it, that’s at four and a quarter, I believe.

Scott:
Okay, great. So you’ve got a rental property. All right. And let’s go. Any other debts?

Tiara:
No, that’s it. That’s everything.

Scott:
All right, let’s go to assets. So we know we have a rental property. Can you walk us through any cash app on hand investments, real estate, those kinds of things?

Tiara:
Most definitely. So that rental property in San Antonio rents were about 14, 15 and cash flows after property management and expenses and stuff about $100. And then from there I have a retirement account. That’s a pension from a park ranger. I said about 13,000 and then my deferred or 457 deferred compensation plan is that about 28,000. And I have a couple of investment accounts and that is at $3,000. The other one is at 2,500. My basic savings account is 5,000. And then I have a 401(k) and around 401(k) was my second job. And that’s about 4,000.

Scott:
All right. You said, I was just slowing down here. So it would be a cash at 5,000 and then the 401(k) balance is what?

Tiara:
The 401(k) balance for my second job is 4,000.

Mindy:
And what is that second job?

Tiara:
I work at a grocery store.

Mindy:
Okay. Do they have any sort of a pension plan or any other profit sharing or anything like that? It’s okay. But the 401(k) that’s still really awesome that you have one.

Scott:
Yeah. Well, great. This is lots of work with you. You’ve got a lot of things going on here. And my first question before we get into some of the details around this is how comfortable do you feel around the world of personal finance and all that kind of stuff? Have you spent a lot of time thinking about this is, have a lot of the concepts new. Do you have a plan in mind or what what’s kind of your framework for approaching things?

Tiara:
On a scale of one to 10 my confidence is about an eight. I feel like I understand the basics. It’s just that willpower and discipline piece, right? I’m going to buy that Monstera and I’m not going to feel bad about it, but it is about the dollars. I listened to podcasts like these daily. I look at my budget daily. I save and plan for different expenses and I make sure to take into account what the numbers are before I go out and buy expensive plan.

Scott:
I think we’ll, well go ahead Mindy.

Mindy:
On your application, you said “We make a great living. Why I feel so broke?” And I think that there are a lot of people who are listening right now who have that exact same thought in their mind. “Why am I feeling so broke? I make such a great salary. What’s the problem?” So I want to know if you track your spending actively, or do you do it after the month’s over?

Tiara:
No actively. So every day I’ll go through, before I go ahead and make a purchase, because why not has your buckets you can spend out of, and so I’ll look at that bucket and take the money out and then go ahead and swipe my card and pay for the purchase. Right? And so I look at that every day, I record what I spend every day. It’s just I’ve been spending a lot of time saving, last year I saved $20,000 and I only make 52. I’m really proud of myself for that. And I’m feeling a crunch in that and I’m feeling regretful because I think my account balances for my retirement accounts are great. However, the liquid cash I have, that’s not enough. And that feels really weird to me. So that’s why, I mean, when I feel broke, we make all this money and I’m doing the saving piece, but why is it my savings account kind of matching up with how much money I’m putting away?

Scott:
Yeah. I think for me, my sense of the situation is I think that there is some nuance to your budget and to make if there’s 20,000, I still don’t fully understand what’s going on. Because what you told us earlier, it sounds like you’re saving like 1,000 a month, which is still good, but 20,000 is a lot of savings. But I think that like a bigger issue here might be capital allocation where what you’re investing in and how you’re choosing to pay off or not pay off debts is creating a situation that’s very stressful for you that could be probably cleaned up within a year. And I’ll definitely want to touch in on that in a second here, but because you have assets, you’re clearly building wealth, but at the same time, you’ve got all of these ticky tack debts that are upping against your cashflow on a regular basis and accumulating unreasonable interest in some cases.

Tiara:
Okay. Well let me back up a little bit there. I’m sorry. So last year that 20 grand came through a combination of putting away a grand a month and that 457 different some additional money in my HSA. It came from some contributions to a country fund that I’m not in control of about 7%. And it came from little ticky tack contributions to my betterment account and my ally account, like $35 a week, that kind of thing. And just grew over time. And then the market’s been okay if you kept an invest in through March and little things like that. There are some investments I’m actively investing in than other things are out of my control and all that comes together to build up that 20K.

Scott:
Okay. So a lot of that’s going into tax deferred plans, like the retirement accounts and the 457.

Tiara:
Yeah.

Scott:
Okay, great. And that’s almost sounds like a 60, 70, 80% of what you saved, went into those areas. Is that right?

Tiara:
That is correct.

Scott:
Okay, great. And then another question here before we get into some of the other stuff, what is your goal?

Tiara:
I thought really hard about this over the weekend. I can’t pin down a long term goal, but my midterm call is definitely in 2023. I want to take a mini retirement. I want to take a couple of years off from work, get my head straight and take a break. I’ve been grinding since I was seven years old and I’m tired. My short [crosstalk 00:17:12]. Yes ma’am. When you get in school, get them grades. You got to get scholarships. Let’s go and do this. A’s A’s A’s, A’s.

Mindy:
Good for you. But yeah, I can totally understand the gap year. What does your gap year look like and what does employment look like? Can you take time off and come back to your employment? Or would you be switching careers?

Tiara:
Both those options are possible. So my gap year, well, it looks and ideally in my head from 2023 to 2025, I’d be able to take a break and travel. I would explore some passions. I want to learn how to renovate a house in my own bare hands. I want to write a book. I want to go travel like long-term I would like to retire overseas in Portugal, but it’d be a good idea to go over there first and start your plan here. And then I’m coming back off of that. I’m at a point in my career where I’m at mid-level management. And so I can probably turn the skills I learned in that gap year into a director’s level position coming back, or I can get a chance to pivot completely and explore a career in different field. I love libraries and I love the post office, so I might explore things in there.

Scott:
All right. I love it. And I think that, that gives us something very clear to plan around here. Can I ask how old you are?

Tiara:
I’m 34.

Scott:
34. Okay. So let’s start with capital allocation here.

Mindy:
Actually, before you start with capital allocation, I’m going to jump in here and say, you’re not getting a late start. 34 is only a late start compared to all these 20 year olds who are retired early because they were-

Scott:
Oh, 100% agree.

Mindy:
Software developers and made $150,000 a year while they lived in their mom’s basement in Iowa. And if that’s you, I’m not picking fun at you. I’m just saying that Tiara is not starting late. She is starting well within the normal American timeframe and actually probably pretty early in the normal American timeframe. Also we met, we glossed over the fact that you saved $20,000. Hurray. Good job. You did excellent. That is huge $20,000 in one year. So, okay, sorry.

Scott:
You doing good.

Mindy:
Now let’s start with your capital allocation.

Scott:
You’re doing great with all this stuff. And it looks like I would estimate that you have a just positive net worth here with all that kind of stuff, with a lot of good things going on and a huge savings rate as you outlined with that. I’ll have to verify some of that. But here’s the problem is you have 35,000 in student loan debt. You’ve got $4,500 in various credit cards, debt. So you’ve got a loan against your 457 with that kind of stuff. And what this tells me and you’re saving a lot of money. So what that tells me, is that all of this is going towards retirement accounts and these types of things. And you’re not cash flowing your day to day life, which is what’s going to cause you a lot of stress. And because you have to borrow against the 457 plan and all that kind of stuff.
So I think we have to make a fundament. And by the way, that retirement accounts stuff is not going to help you with your major goal here in three years, taking a sabbatical for a year. Right? So I would, go ahead.

Tiara:
The 457. So I can use part of that to do it because taking withdrawals, I don’t pay a penalty, just regular taxes. If I’m not working for the year, then my tasks could be up to zero. That’s how-

Scott:
Yeah, but I wouldn’t think of the 457 as an ideal investment vehicle to save for this sabbatical. It could be good, but I just don’t know if that’s the purpose. I would place under it as much here. But yeah, I think there could be nuance there, I think I could be wrong on that. But bottom line is, I think you should discern, are you familiar with the concept of financial runway? It’s something I like to describe with [inaudible 00:21:04].

Tiara:
Mm-hmm (affirmative). [inaudible 00:21:05].

Scott:
Yeah. Amount of time. You can survive without a paycheck, right now you’ve got what looks like to be one month of financial runway with the cash in the bank right there. And that’s a function of both the amount of cash you have on hand and the spending you have, which is largely being pushed out by these debts here. And remember if we’re backing into a three-year time picture, the payments on that 35,000 in student loan debt is going to be an offset to this that we have to think ahead too. Right? S
So what does this all mean? I think what this means is that we need to start, I wonder, and I’ll just put this out as a hypothesis. If we stop contributing as much to the 401(k) and even maybe even significantly reduced the 457 contributions and begin attacking these debts much more aggressively starting with the credit card debt to begin knocking those out. You say you’re saving 20,000 a year. That’s a lot of tax deferred. Let’s call it 15, 16,000 a year. If you’re not doing it inside of your tax deferred accounts, that means you can knock out that credit card and the 457 loan in no time and then begin deciding whether you want to invest. Or if you want to figure out a way to cash flow, like build assets outside of your student loans. I’ll just stop there as a very high level thesis. What your reaction to that?

Tiara:
I completely agree. I started that process this year because when I wrote everything down and saw that 20 grand number, I was like, man, I could really use that as cash somewhere. And so I started with I think it took effect in February, where I was taking that money, I was putting into my 457, 450 a paycheck and just dropping down to get just the match. And then now that’s how I got that $5,000 in my savings account. And so a combination of that together and then our standard fees and then just putting $10 a week in there, just little stuff. And so that’s why that built up that way and that feels really good. And now I’m afraid to spend it.

Scott:
Yeah. Well, how comfortable do you feel having 5,000 in the bank? How good does it feel?

Tiara:
Oh, it feels amazing.

Scott:
Let me tell you something. You’re not going to like here. I would suggest you knock that down to 1,000 and put all 4,000 towards your credit card debt.

Mindy:
I agree with that phase Tiara.

Scott:
Here’s why I don’t think you should be feeling comfortable right now. I think you’ve got a high interest credit card debt. I think you got a 457 loan. The student loan debt is going to be a different animal. You’re going to need a longer term repayment plan. Maybe that’s when you bump it back up to 5,000 after that, and then you can begin paying those down. But the point of having an emergency reserve is to protect against an emergency and credit card debt is an emergency in my opinion around that. And so that’s where I think having zero is too little, that’s going to be very stressful, but having 1,000, I think if you go back to being uncomfortable for another couple of months, you can make a lot more progress against some of these things and be sitting pretty at the end of the year, feeling really good about having a lot of these debts knocked out in a different investment approach with some of these things, Mindy, what do you think?

Mindy:
I do not agree and would give a different suggestion. So right now you are contributing enough to get the match, which I think is fabulous. That is literally free money. That is what is that 100% return on your investment, simply for putting it in there. So I love that you’re doing that. I would say you said that you’re able to pay, save $1,000 a month outside of like, that’s just the difference between how much you make and how much you spent. That 1,000 is that what’s going into the investment accounts or is that just extra stuff?

Tiara:
That’s what was going into my savings account. So that $5,000 that’s been that $1,000 since February and also the stem of days though.

Mindy:
Okay. So I would say a couple of things, and I have the benefit of having read your application and people who are listening have not. You had a second job and you said that you cut down your hours after paying off a couple of credit cards. I would start maybe not doing, taking on more hours consistently, but letting everybody know, “Hey, do you need me to cover your shift? I can cover your shift,” and picking up time and throwing that at the debts, you’ve got a credit card with a $540 balance at 21%, take every dollar you have throw it at that, knock that card out, and then cut it up. Unless it’s your oldest card, whatever is your credit card that you’ve had opened the longest, keep that open, but don’t use it anymore. I don’t like these 22, 23% interest rates. I want to yell at the banks for charging that that’s a lot.

Scott:
Mindy, I’m a little confused though. Where do you disagree with me?

Mindy:
I’m not done yet. Scott. I disagree with taking the 5,000 out of your savings account and throwing it up that I would rather have that in the bank, because that’s when you get those really crazy expenses that you have to cover, and you’re like, oh, where am I going to get this money from? Oh, a 22% interest rate credit card. So we’ll knock that one out in April or May, we will knock out the next one has about an $800 balance at 23%. So you have restaurant budgets. I want you to cut the entire restaurant budget and throw it at those cards and then get those two with the sub $1,000 payments or balances, get those, knock those out, and then start attacking the one that has about a $2,700 balance. And again, attack that until it’s all gone while keeping the $5,000 in the bank, because we want to make sure that we do have a buffer. So with that part I disagree with Scott, but the rest of it, I like.

Scott:
I want to continue to disagree here, because look you just said, “Hey, if you have an emergency, you’ve got to get it. You got to then pay for it with a 21% credit card.” She’s already paying 21% in our credit card with the with what’s going on here. So that’s a guarantee, why not take the guarantee and pay that off? What the 5,000 she has in the bank. And then now she’s got 1,000 which is still a buffer between her and the world. And if she does need to finance something, she’s got clearly credit limit to be able to put that back on the credit card, if the tires do go out and blow in those kinds of things. But I think we’re overcharging interest rate really inappropriate there 0% for 21% with cash she has on hand.
And I am not convinced Tiara that you need to overhaul. I think you should still focused on like, hey, this is still heavy lift mode, but you’re not, I don’t think you’re that far away from being out of heavy lift mode and moving into more of like a longer term sustainable approach with that. I wouldn’t cut your hours quite yet, but you’re probably only two or three, four months away from on the second job from being in a place where all these debts are paid off there. So what’s your action there Mindy?

Tiara:
[inaudible 00:28:28] out there. I have been doing exactly what Mindy was talking about with that debt snowball and throwing things at those credit card debts, but my partner needs implants, dental implants, and it was about seven grand. So I had to pivot and really take all that money. I was paying toward those credit card debt because those credit cards were at three grand a piece before about this time last year. And so I had to pivot all that money and start saving for that [inaudible 00:28:51] surgery. Because he needs [inaudible 00:28:52] think is delicious.

Scott:
Yeah. Well, that’s a great use of that, that makes perfect sense. That’s I think a great, have you already paid that? Or is there?

Tiara:
No, I haven’t pay that at all. I’ve taken all that money. We were paying 150 a week on each one of those cads until we got rid of them. And then this popped up that where he needed the surgery in a surgery is about $7,000. And so once we get to that $7,000 in that account that has a five grand, then we’re taking all of that to pay for a surgery and I’ll be back at zero.

Scott:
Okay. So that makes sense then, I think that negates the entire argument Mindy and I were having around that. [crosstalk 00:29:37].

Mindy:
Yeah. Okay. So then have you checked with the dentist? Does he offer any sort of financing plans? Some dentists will offer like a 0% financing just so you can get the work done. And if this just doesn’t then maybe another dentist does.

Tiara:
I definitely will. Oh my goodness. I didn’t even think to think about that.

Mindy:
Yeah. And I mean, even if it’s like a really, really low interest rate, maybe, 5% down or do they offer a discount for paying cash and see if there’s anything you can do to tweak that at all, because I have found that dentists frequently have a financing program that they can offer. Let’s see. Okay. So let’s look at… You know what Scott? I’d like to look at the rental property as well.

Scott:
Yeah. That was where I was hoping to go next as well. Yeah. Could you walk us through the equity, how you get to that estimation of $100 a month in cashflow and what that property is looking like?

Tiara:
Definitely. So I paid $200 a month for property management. Their rent is 14, 15, and the mortgage now, now that PMI has dropped is one or 1,010, right? And there’s HOA fees of 200 a year and the house is about 10 years old. So everything’s starting to break.

Scott:
Great. Okay. So yeah, 14, 15 in rent. We’ve got 200 or we’ve got a 10% in property management. How much in property mentioned?

Tiara:
$200.

Scott:
200 a month in property management. We’ve got a 1,010 mortgage, which is 1,210 now and expenses. And you’ve got 200 and in HOA, which is 1,410 in expenses, right?

Tiara:
No, 200 a year. So 20 bucks a month, sorry.

Scott:
Oh, sorry.

Mindy:
Oh, okay.

Scott:
That makes much more sense. How much do you budget for maintenance and utilities and those kinds of things?

Tiara:
Zero. So anything that’s left over after the mortgage and after property management just sits in his own account and that just builds up and then I pay off the HOA fees. And right now in that account is maybe $450. This is my third year of renting that house out. And if anything comes up, then it comes out of that account first. And then I look to my savings and see what I have to cover it.

Scott:
How’d you come to own this property?

Tiara:
It’s my first house. So I moved here from Georgia about 10 years ago, and I moved to Dallas for an opportunity to be out here in these woods. And now I just have it. I didn’t want to let it go because a part of my plan after that gap year is to come back to it.

Scott:
Awesome. What’s the mortgage on this property and how much do you estimate it’s worth?

Tiara:
The house might be worth about $220,000. If I do a couple updates like flooring and painting and stuff, and the mortgage, I have left as $100,000.

Mindy:
So you have $120,000 in equity sitting in this property. If these numbers are correct, what I am seeing right now in the real estate market is that there aren’t enough houses for sale. So houses you listed at 220 and you get into a bidding war and I’m not familiar with the specific market that it’s in. So take this with a grain of salt, but I’m seeing this across a lot of places in America. Now is a really great time to be a seller and not a great time to be a buyer because there’s just nothing on the market. I’m wondering if it would be a better financial choice to sell it and take that $120,000 in equity, pay off the credit cards, get the dental surgery, pay off the student loans, put anything else in after tax investment funds and just cut ties and be done.
If your plans are to travel, you don’t need a house and you would be renting it out, which is great. But it’s not cash flowing, if you were making $700 a month on this property, I would be having different advice, but you’re not making very much of anything. It’s 10 years old at the 10 year mark, little things start to break and then bigger things start to break. And then all of a sudden it’s a big pile of deferred maintenance and nobody wants to buy it from you at any price. You said this is your third year renting it, does that mean that you lived in it up until three years ago?

Tiara:
Yes.

Mindy:
Okay. So we are hitting upon the section 121 timeline, so you can sell it and hopefully you have been taking depreciation as a rental. And so, because when you sell it, the government’s going to assume you did, and will make you pay depreciation recapture when you sell it. But you lived in it for two of the last five years, which means that it was your primary residence. You can sell it and pay no capital gains taxes. So this is something that you’re going to want to talk to an agent about and see if you can list it. When does your current lease end?

Tiara:
December of this year. My lease of the place I’m renting now, or the tenants lease?

Mindy:
The tenants lease.

Tiara:
December of this year.

Mindy:
Okay. So you can sell unoccupied property if you have history documentation for when they pay rent and they’re a great tenant and here’s all the things that here’s their lease and blah, blah, blah. It’s a lot easier to sell a tenanted property with a good tenant, as opposed to somebody who isn’t paying rent and causing you a lot of headaches. And you’re like, “I just want to get out of here and don’t want to deal with this anymore.” So I would start the documentation process of how great of a tenant you have. If you have a great tenant, I would talk to a real estate agent about what is it worth? How long do they think it will take to sell, et cetera. And I would talk to your tax preparer or a CPA and ask them about the recapture. Can they double check that you’ve been doing all the things properly so that you can make the most amount of money and take the most advantage of the section 121 exclusion for primary residence, capital gains, Texas. Scott. I saw you had something to say [inaudible 00:35:56].

Scott:
Yeah. I just want to chime in and say, I absolutely agree with everything Mindy said. I think that’s brilliant to think through that whole thing, Mindy, about, hey, if you’ve lived there for two of the past. So the difference between what she’s saying, if it’s a rental property and you sell it for 220, you’re probably going to pay taxes on like, I don’t know, 50 grand of gains at least. Right? I don’t know. I don’t remember. It depends on what you bought it for, but if it’s your primary residence, because you apply for this law. Because for the tax exemption here, then that’s 100,00 in cold, hard cash that will come flowing into your bank account. The moment you sell this property, I also want to emphasize, this is not a cash flowing property.
You’re bringing in 1,415 a month in rent, you are spending 1,010 in your mortgage. So that leaves us with 300 or I’m sorry, $405 left between that. You have $200 in property management, which gives you $205. Then you’re going to experience vacancy 5% vacancy on an average basis that’s going to be 70 bucks. Now you’re down to 130. You’re going to have repairs every once in a while, I would budget 250 to 300, at least for those repairs. Those will come up a month and those will come in large infrequent chunks when you got to replace the roof or remodel the place and those types of things. So I think you’re losing money on average, on a monthly basis. It’s just that most months you don’t have that big maintenance expense or a vacancy expense.
And that’s why it’s masking. It feels like a little bit of money is coming into your account every month. But I think if you run the analysis with those numbers, you’ll see you’re losing money here. And this is the key to the kingdom, in my opinion, for a lot of this stuff, if you can take 100 grand, you wipe out every single one of those debts, you flush your emergency reserve with six months of reserve and you begin dumping the rest into a long-term investment strategy or even another rental property. That makes more sense as a rental. I think that completely solves tons of your problems there. And then you can get back to, “Okay, what’s my sustainable average monthly approach right there?”
I mean, that’s your year off right there. And inside of that stuff if you wanted to take out tomorrow, you can be completely debt-free and have 6,070 grand in the bank. It seems like with that rather than losing money on average every month with this, I just want to completely emphasize everything Mindy said with how much I agree.

Tiara:
Thank you, Scott.

Mindy:
And you have student loans that are deferred right now. You could even do a little bit of playing around, you pay off everything that isn’t deferred, and then just hold on to that for a minute, make sure that all of the things are going through and you don’t have any big expenses. And then when they come out of forbearance, you knock them out. But yeah, I love that idea. Definitely something to think about, talk to your partner, run the numbers, talk to an agent who’s more familiar with the market and just see what sort of, maybe you think it’s worth 220, but it’s actually worth 240 or 180, but either way, you’ve still got a lot of money sitting in that property that could be put to better use.
And again, if it was cash flowing much more, I would have a different suggestion, but not every property makes sense as a rental. I just sold my former primary residence as well, because it didn’t make any sense as a rental. And it had appreciated a lot.

Scott:
Yeah. Either that, or you need to rethink through how you make these numbers look better, for example can you refinance, can you find a different property manager that’s cheaper? Can you raise the rents? Those types of things. I mean, it could be that there’s a way to make this into a better cash flowing property, but as it stands now, if you believe those numbers are pretty reasonable, this is a loser as a rental property, but it’s a huge winner for your overall financial position. If you can pull off directionally what we just articulated there, what do you think?

Tiara:
First thing that comes to my mind is ah, and that’s just a scarcity mindset that I have. I think if I sell that house, I’m not going to be able to get another one ever in my life. I don’t know why I think that, but that’s just the truth. Right? Everything in San Antonio has been skyrocketing in price. And so, yeah, I’d sell it and I knock out these short-term goals, but what do I do 10 years from now? I don’t know.

Scott:
Well, that’s where I think you need a philosophy or system for investing in general, right? So let’s pretend this property didn’t exist. The philosophy for me would be, hey, every month you’re saving 1,000, 1,500 bucks and you’re dumping that towards the highest, best next investment, which right now is your credit card, right? Because that’s a 21%, 23% guaranteed interest rate return, right? And once you’ve knocked out all those debts, then it goes to what’s my long-term investing philosophy? For me, for Scott Trench, I invest regularly in index funds. I dump a few thousand dollars a month into index funds. It might be a few 100 or whatever it is. And then I also set aside money to regularly buy real estate properties bit by bit year after year one by one, over the course of a long period of time.
So I think you need to have a philosophy about, “Hey, how do I want to build wealth? And what’s my why here?” It sounds like your why is at the very beginning, just like, “How do I get enough to take a no stress year sabbatical where I write my book and do some traveling and all that kind of stuff?” But you probably also wouldn’t mind being able to have plenty leftover in your retirement accounts that those are compounding at the very least, even if you’re not pulling other wealth through that year, you’re off. Right? Whether there’s in the market having a chance to grow. And so I think that’s the strategies you need an investment philosophy and overall, and you’re not in position to act on that investment philosophy because of the, ticky tack things, I used that earlier inside of your financial position with your credit card and your 457 loan and the other kinds of stuff.
And so if you can clean that all up, get your six month emergency reserve really in place and feel good, which is you can also look at that as your sabbatical fund. What’s the word you used? It was not sabbatical.

Tiara:
A gap year.

Scott:
Gap year. Yes. That’s your gap year fund or 12 months put putting that in there and then everything else on top of that for the next couple of years goes towards your investment philosophy. But I think that could probably needs to happen simultaneously with the sale of the rental property or if you liked that suggestion for you to feel good about it. Because right now you’re like, “Oh, I just have that property. I bought it when it was so low. Look at how high it is now. There’ll never be another property like that,” but there’s always more assets, whether they’re rental properties, whether they’re stocks, whether they’re small businesses, you create, whether it’s a book you write that becomes an asset for you, there’s always another asset that you can build or create. With that, I just don’t think right now, this asset is helping move you towards your goals.

Tiara:
I hear what you’re saying and deep down inside, I pretty much agree, but man, I’m the first homeowner in my family, it means so much.

Mindy:
Take a picture of the home and frame it on your wall. And then once you sell it, you can buy that dull offices, whatever plant that you want for a $1,000. No more plants. How about this? No more plants until you sell the house.

Tiara:
All roll with it today.

Scott:
Yeah, do not list it today because you have some research to do before you do that. Sorry, this is not a rushed decision. I just want to be careful because the CPA may have some stuff about, like, there may be a $30,000 tax question here, depending on whether you are or are not qualifying for that rule where you lived in it for two in the last five years or whatever it is. So that this is definitely one to say like, “Okay, some of that $5,000, I’m going to put towards hired a CPA to advise me on this,” that might be really good, money well spent in the context of this decision, even though it will be painful, it’s a few hundred bucks.

Mindy:
Yes. And we’re recording this on April 12th, we’ve got tax day coming up, there isn’t a CPA on the planet, unless it’s your brother. That’s going to answer your call in the next three days. So yeah, definitely-

Scott:
I thought they extended the deadline.

Mindy:
They might have extended the deadline, but there’s still CPAs that are cranking it out right now. So I’m not sure what the deadline is. Actually. Carl’s doing the taxes today though. So maybe something’s going on. Are corporate taxes due on the same time, or maybe that was much, I don’t know.

Scott:
Corporate taxes are due when your shareholders want them. Now you mentioned that this is like your first time, first person to be a homeowner and all that kind of good stuff. As Mindy said, take a picture of the house. I think compare that to all the pictures you’re going to take on your gap year trip and ask yourself which one, which collection you want more and ask yourself like, hey, this a mental math, there’s that gap. You’re really three years away after you do this? From my seat, I would be turn, I would kind of be like, oh, financial, freedom’s a key goal. And a gap here will not help towards that. But this is certainly an option for you that has a cleaner financial outcome than sorry. If you could go with the sell the property option, pay off all those debts and fund the emergency reserve. You might be six months away from having the option to take the gap year and you can spend the next three years significantly padding your financial position or taking that gap year in six months to a year from now.

Tiara:
That really puts things in perspective. And I have a CPA that I work with and that calls coming up here, I think because it was extended to May the 15th, I think. And so our calls come up as soon as I get my life together. And man, so you saying that as I settle over this, puts things into perspective, because this was a pie in the sky years from now. I don’t even know what reality will look like possibility, right? My gap year. But if the house is what’s holding me back, whew.

Scott:
Well, what’s holding you back is something’s going on, where you’ve got a 457 loan and credit cards and you’ve got this expense that you’re not saving up for. So you are having an overall day to day, month to month capital allocation issue where you’re putting too much money, I think in retirement accounts and you don’t have a clean set of debts and they can progress against those. And that’s the root cause to make sure you’re, we talked about plant jokes here earlier. So you really need to get your framework down there and say, “If I’m going to bring in 1,000 a month, then 800 of that is going to go to my emergency reserve until it’s here. After that, it’s going to go to investments. Some of that’s going to be in retirement accounts. Some of it’s not so that I have optionality and runway in my life with that. And you first things first, I got to clean up those debts.”
The 120,000 year rental property is just a huge Kickstarter or jump start on that journey because you can just clear out all those debts and fund your emergency reserve and begin investing big chunks of that into the market. If it’s leftover and you do. And your smart with that. So I don’t want to say that’s not the whole thing in the financial position. The bigger issue is I think, whatever you do on a month to month basis over the next five, 10, 20 years with your finances, but that that’s pretty nice to have 120K there that could give you all of those options at once. And just completely clear this out and restart with a prototypical financial balance sheet. I guess.

Tiara:
I understand what you’re saying.

Mindy:
Okay. Well, and think back, how much are you paying on each one of these debts? It’s $50 here, $150 there, $300 there, all these little things add up and now that those debts are wiped away, all that money is back in your checkbook. So that can go into your emergency fund. Or like Scott said, if there’s $120,000 in equity there, all of your debts are wiped out and you’re putting some more money into your emergency fund. What does a fully funded emergency fund look like? Is it three months of expenses, six months, 12 months, could you fund your entire gap year? If it’s 12 months with the sale of this property after you’ve paid off all these debts and then still continue with whatever payments you were making to these other debts, still put that into your emergency fund for your current emergency fund.
I just think that there’s a huge opportunity, but like Scott said, let’s not make a rush decision. Let’s look at all the numbers and see what the condition of the market is. See what the property is actually worth, call up an agent, the agent that sold it to you and say, “What could I sell this house for? What are other houses in?” Is it a condo or is it a house?

Tiara:
Is a house.

Mindy:
Okay. What are other houses in this neighborhood selling for in the last 30 or 60 days? And that is going to be a really great example of what you can get for yours. Maybe not exactly if they’re all selling for 220, you could sell yours for 25 because it’s got a tenant in place, but that $5,000, less is going to not be any sort of significance in your future. And you’re going to be a millionaire real soon. Once we get all these debts knocked out with the sale of this house, and then you can go back and buy it later.

Scott:
Yeah. Your run rate, I bet you, how much do you think these debts are costing you on a monthly basis right now?

Tiara:
Oh, I know that number by half, the minimums all getting me by like 130 blocks, but what we’ve been paying on it, it’s 550 a month.

Scott:
Great. And then when your student loans get out of forbearance, how much of those going to be a month?

Tiara:
325.

Scott:
Great. So you’re going to to have to be spending at least 400, 500 a month to make the minimums on all of these debts come September. Right? And you want to pay $800 a month and your core problem coming into this call was you feel like you’re making good income, you have two jobs and all that kind of stuff, but you still feel broke. It’s because of this, right? If you can knock those out again, you can either do that by grinding out with your financial position, which well, you should do that by granting out with your financial position and continuing to have the cashflow come in those places, keep a tight budget and all that kind of stuff, but you can knock them all out with the sale of this property, I think.
Okay. So we’ve covered that one I think. What else can we help you with today? What are some other things you want to ask about? Or do you want to keep going on that or what’s the next best thing we can talk about for you?

Tiara:
So I am putting a lot of way for retirement. I did pull out away for retirement going forward, I’m trying to get that back and really build up definition remember we were talking about putting that more into cash, but I keep seeing these huge expenses pop up, right? My partner’s general surgery is going to be seven grand. I know we’re replacing our car soon. We’ve been without a car payment for the last three years and it’s been a wonderful, it’s just I guess keeping that motivation going, because every time I reach a milestone and it’s like, oh, here’s something else. Oh, here’s something else.

Scott:
Hmm. Well, I think you’re probably not budgeting for those. Right? So in your budget, you need to have a miscellaneous reserve fund. That’s like 500 a month or something like that, that says, hey, every 10 years, 15 years, depending on you’re going to need a new car, right? There’s going to be a health situation every five, seven years, and that could be molars, it can be break your leg while hiking, or I don’t know, what’s a gardening injury you can get. But those are the kinds of things you got to prepare for inside of your budget, I think. And so I imagine that, are you comfortable with the concept of CapEx with your rental properties?

Tiara:
No.

Scott:
Okay. So maybe this is a good framework for you, how much does it cost to replace a roof?

Tiara:
Like 15, 20 grand, right?

Scott:
Yep. So let’s call it 20 grand. And how often you have to replace a roof?

Tiara:
Once every 20 years.

Scott:
Once every 20 years. That’s that means that once every 20 years you spend 20 grand, that means you 1000 on average, every year for your roof. That means you spend on average 80 bucks every month for your roof. Right? And that was one of the things I pointed out to you and your cashflow. That’s not being calculated inside of your rental property. You got to the same thing that happens in life, right? The new car, all that kind of stuff, and that has to be budgeted for. And you need to make up a monthly guess as to what that number is. For a rental property I always assume it’s about 250 bucks because I got $80 for the roof, the kitchen needs to be updated every 30 years.
And some capacity, the electrical system, whatever, right? Like all those things together will be 200, 250 bucks for CapEx for the rental property. And that same stuff will come up in life. Right? My car insurance, I pay once every six months in, a six month installment, and so on and so forth. So I think that’s that. What do you think does that resonate, do you think that that’s not being included in your cashflow right now in your budgeting?

Tiara:
Oh, 100% it’s not, and it puts it into a different perspective too.

Mindy:
Yeah. Your 100 dollars a month, positive cash flow. If you take Scott’s $250, you’re actually losing $150 a month by holding onto the rental property. I did some very rough, very quick math. You had submitted a list of debts that you had when you applied to be on the show. I added that up and I got $42,715. If you sold this at profit at 120,000, you would have, after paying off all your debts, you would have $77,285. So your gap year is ready as soon as you close on this house, you funded it, because you make 50,000 a year right now. So you and you have six months left when you come back from your gap year. I mean, you’re going to have expenses, so probably not, but you have funded, oh wait, no yet. Sorry. I’m not thinking straight. You have funded your gap year.
You have $50,000 to just go off and do whatever. Plus you can come back and take six months to find a job before you need to really start looking probably more because that’s income, not expenses. So sell that house is my suggestion. And of course your mileage may vary. You should definitely talk to an agent, but that seems to be the easy win here, that doesn’t even get you back to zero that pushes you way over to additionally positive net worth. And all of this, all of your dreams can come true. You can just continue to own this house.

Scott:
Yeah, well, and I would say you get all that cash, but remember the danger. I think another danger that you’re in with this is just, you could pay off all those debts, but if you don’t change your budgeting and your management strategy to account for what we just discussed, then you’re going to constantly find yourself losing yet again, for reasons that you don’t understand without making a very conservative CapEx allocation. So if you think you’re saving $1,000 a month right now, you’re probably only saving 500 because of the stuff that’s coming up with the bowlers and all this other kind of stuff. Right.
And so just make sure you’re using that same framework when you’re estimating how much do you need for the gap year and for all those other types of things as well, if you decide to sell a property and keep those proceeds. But I think that’s that and the concept of capital allocation and this bogey in your budget, the CapEx thing are the two root causes here. I think of why you’re doing well, but you don’t feel like you’re doing well because it’s not showing up in your bank account and your freedom quotient or your financial runway.

Tiara:
That makes perfect sense. And so was it by saving so much the last three years for my retirement account, not giving me a clearer picture of how much it really costs to live. Is that what you’re saying?

Scott:
No, I’m not saying that I’m saying more. I think that money in your retirement accounts, isn’t really helping you feel free right now. And I think that over the last three years, you’ve probably deferred capital and things that haven’t been accumulating for, or haven’t been budgeting around the fact that you’re going to have these one-off large events that require $7,000 in cash. And so because that’s a monthly expense that shows up once every three years in a huge expense and it all comes at once, right? It’s never like you have just $170,000 expense every five years, you have all three hidden and at the same time for 20 grand. And then that just completely erodes everything. That’s why you got a budget for that, pay off your debts, keep it emergency reserves so that, hey, you’ve got a six months emergency reserve.
That’s what, 30 grand? Great. And you just dip into that and then you rebuild it and then you’re good to go. Whenever these items do come up. No one likes spending all that money on these types of things, but the plan for it, I think is the key. So I would say that your biggest issue is that you haven’t been putting into your budget, a solid [inaudible 00:58:17] like, “Hey, that’s my $500. That just is for the unpredicted thing that will come up.” And then the next one is that instead of paying off the high interest debt and building your emergency reserve, I would say, in my opinion, you’ve been putting too much into the 457 plan which is not giving you freedom right now and is not helping you feel better about the situation advance you towards some of your goals, all four, but the 457 plan. Once we’re in a better position with the debts. And we got a solid emergency reserve.

Tiara:
Okay.

Mindy:
I’m excited for what is going to happen for you in the next couple of months, because I see your eyes lighting up and like, “Ooh, Ooh.” And I think this is going to be a super awesome time. I would caution against just like jumping in with both feet, definitely think through. And “What can I do with this rental property? Is it, can I still qualify for this section 121 exclusion? Because then that $77,000, and that’s not a quote, I don’t know the market, but that’s $77,000 is yours. And you pay zero to uncle Sam, which is the best amount to pay to uncle Sam. In my opinion, I do much better with my money than he does.

Scott:
You’re saying she’ll clear 120 grand and 40 some odd will go to the debts. And the 77 is what’s left over. Is that right?

Mindy:
Yes. Yes. The 120, and that’s ballpark numbers. You still have closing costs? So real estate fees and title insurance and all that random stuff. But right now is a really great time to be a seller. So maybe somebody will write you an offer and offer to pay some of those expenses for you. So definitely start doing research and look into the numbers, get a quote from your agent. “What do you think this will sell for? And I have $100,000 leftover,” so that’s on the mortgage. So once that’s paid off, there’s just, I see a huge opportunity here for you. And then when you’re trying to decide which offer to take, go for the one that has the most chance of closing. So the person who’s putting the most money down or has the best credit score, or their lender sends a letter that says they’re so approved, blah, blah, blah. Rather than the person who’s putting 3.5% down, and they’re barely qualified for the loan, but yeah, you can always come back and buy this house again later once you’re a millionaire.

Scott:
Yeah. Or once you’re accumulating 30 to $50,000 a year, 20,000 a year in cash that you can place towards it. And you buy a property like this every other year, according to your system or all that kind of stuff, you don’t have to be a millionaire to buy this property.

Mindy:
No, when she’s a millionaire, she can go back and buy it. So she continues to own it because it was her first house.

Scott:
Oh, for all the happy memories. Yes.

Tiara:
[inaudible 01:01:15]. I have goosebumps and I’m definitely wanting to research and consult my CPA and my old agent still works. And so I reach out with him too, and I’m like, oh my gosh, just all that felt so far away. And now like, it’s possible.

Mindy:
That’s the whole point of this show, because when you’re in the middle of the slog, you’re like, “Oh, this is the way I’m going to go.” Well, not necessarily. There’s other ways that you can go, but it’s hard to see options. So that’s what we’re here for. I’m so excited. You have to send me another note in three or six months after you’ve made the decision on what you’re going to do and have progressed a little bit more. I want to follow up with you and see what’s going on. because this, oh, I have so much excitement for you.

Tiara:
I appreciate you all so much. Thank you.

Scott:
Yeah, thank you.

Mindy:
Oh, Tiara, I’m so glad you reached out. This was wonderful. Thank you so much for sharing your story with us. This is going to be a fabulous, fabulous episode. Yay.

Tiara:
Thank you guys. Oh my gosh.

Scott:
Yeah. Thank you.

Mindy:
Scott. That was Tiara with her fantastic story. What did you think?

Scott:
I thought it was a great story. I’m really grateful for her to coming on and sharing all of that. And I think, like I mentioned in the intro, there’s a lot of really good lessons to be learned from her story and what’s happening to her financial position. I think by opening it up, looking through it, dissecting it, there’s a lot of really powerful lessons that maybe a lot of folks listening can apply it to their own lives and see if they’re having capital allocation issues or missing CapEx as part of their budgeting process in their personal life or rental property investing.

Mindy:
Yeah. Or sitting on a rental property that really isn’t quite cashflow in what you think it’s cash flowing. I think branded set on a property are on the BiggerPockets Real Estate Podcast one time he’s like there’s some properties that never make sense as a rental in order for you to cash flow, they would have to pay you to buy the property. And I think that’s true. There’s some properties that just don’t work. So we’re here at BiggerPockets. We promote real estate investing all the time, but not every property makes for a good rental. So I like that she’s open to the prospect of selling it. I think that laying out some numbers and again, not a hard quote on those numbers, but I think laying out some numbers can really open your eyes to the possibilities.
So I am super excited. I really hope she comes back in three or six months to tell us all the fabulous things that her life has had happened once she started looking with a more fine tooth comb at her expenses.

Scott:
Yeah.

Mindy:
The contents of this podcast are informational in nature and are not legal or tax advice. And neither Scott, nor I, nor BiggerPockets is engaged in the provision of legal tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal tax and financial implications of any financial decision you contemplate. Okay, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
That’ll before we do, Scott and I absolutely having a blast with these finance review episodes. Some of these scenarios are really making us flex our mental financial muscles. And we’re super excited to continue this. If you have a quirky situation or a situation that you haven’t heard us talk about before, please apply to be on the show at www.biggerpockets.com/finance review. Okay. From episode 192 of the BiggerPockets Money Podcast, he is Scott Trench. And I am Mindy Jensen saying, may the force be with you.

Scott:
And I guess, as the Catholics say, and also with you.

 

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