Finance Friday: How to Keep Your FIRE Dream Alive After Quitting Your W2

Mindy:
Welcome to the BiggerPockets Money Podcast, Finance Friday edition, where we interview Amanda and talk about Lean FIRE, portfolio optimization, and life transitions. Hello, hello, hello. My name is Mindy Jensen, and joining me today is the man, the myth, the legend, Kyle Mast.

Kyle:
Thank you. I don’t know that I can live up to any of that, but it’s good to be here.

Mindy:
Kyle 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.

Kyle:
Whether you want to retire early, travel the world, go on to make big-time investments like real estate, start your own business, transition out of a job you don’t like, we’ll help you on your financial journey to get money out of the way so you can launch yourself towards your dreams.

Mindy:
I am very excited to talk to you today. I’m very excited to talk to Amanda today because she has a real estate portfolio and we are BiggerPockets, and we’d like to talk about real estate. But one of her properties in particular I don’t really love, and she doesn’t really love, and I don’t think you really love it either, do you?

Kyle:
Oh, probably not. Yeah. It’ll be a cool conversation because they’re kind of in a life transition point with their jobs, or their work life is really intense right now. There’s not a lot of family time. They’ve got some young kids. And they’ve done well with some investments, and they’re just trying to figure out what the next step is. Yeah. It should be really good.

Mindy:
Yeah. I think that a lot of times people will buy a property and then feel married to it, so they don’t ever go back and reconsider it. So one of the things that we give Amanda today is some homework to go and run the numbers for keeping the property and run the numbers for selling it outright. I am excited to see what happens with her property.
But before we talk to Amanda, I have to tell you that the contents of this podcast are informational in nature and are not legal or tax advice, and neither Kyle 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. And while Kyle is a CFP, he’s not your CFP. Kyle?

Kyle:
That is correct. I’m a CFP. I have done this professionally in the past, but I am not your CFP. I’m just trying to help and give some ideas here today.

Mindy:
Yes. He does not have enough information about your specific situation or about the specific situation of Amanda to give actual CFP-level advice. This is more of, “Hmm, this is what I would do if I had these same set of circumstances and goals.” So without further ado, let’s move on to our Money Moment, Kyle. We have a new segment on the show called The Money Moment, where we share a money hack, tip, or trick to help you on your financial journey.
Today’s Money Moment is, are you having trouble with impulse spending? Call your credit card and debit card companies and have them set a personal daily and monthly limit. Many credit card and debit card companies allow clients to evaluate their own finances and decide on a personal spending limit. Some companies that allow users to set these limits are Discover and Capital One.
Today’s guest is Amanda. She and her family have reached Lean FI through several rental properties. Yay, but they’re too lean to quit all forms of W-2 jobs. Amanda and her husband are both burned out in their current positions working at a coal mine and are looking for guidance on their next financial moves. Amanda, welcome to the BiggerPockets Money Podcast. I’m so excited to talk to you today.

Amanda:
Yeah. Thank you, Mindy.

Mindy:
We are going to jump right into it because we have a lot to discuss. Let’s look at your money snapshot. I see a take-home salary of approximately $6,200 a month after paying into 401(k) and index funds, after insurance and taxes. So that breaks down to W-2 income, VA disability income, and approximately $39,000 annually from rental income. The rental income looks like it’s about $4,200 a month.

Amanda:
We actually don’t use any of that except for back into the rental business, so far. So far, we’ve just been snowballing it into paying off the BRRRR and different expenses and then acquiring new properties.

Mindy:
Okay. I’m seeing a total of monthly expenses at around $8,800 a month. Home improvement, 331. Groceries and restaurants totaling almost 1,700. How many kids do you have?

Amanda:
I have four kids.

Mindy:
Four kids. Okay. And are any of those kids boy kids?

Amanda:
Three of them are boys.

Mindy:
Okay. So I’m guessing they eat like linebackers, although so do girl kids. So it’s not like you’re saving a lot of money if you had all girls, because I have two girls and they eat like crazy too. But 1,700, I’m wondering if there’s anything we can do to bring that grocery budget and restaurant budget down. We’ll talk about that a little bit later. A very low alcohol budget. We have a husband work budget, and this is more like gas to get to work, work clothes, snacks, things like that, $160 a month. Healthcare, including the gym, the day care, vitamins and supplements, doctor co-pays, medications, things like that, $771.
I don’t really know that there’s much you can do to reduce that, simply because there’s six of you and we live in the United States and it’s expensive here. Automotive, $984. We are definitely going to talk about that. Utilities, $584. That seems a little bit high, and I’m wondering if that is just for your personal residence or if that is for all of the rental properties that you have combined. Kids’ childcare and small activities, $1,300 a month. Eventually, that will go away, but that looks like something that’s going to be around for a while.
Clothing, $200 a month. Shopping, $45 a month. Travel, $832 a month on average. Gifts, $50. Miscellaneous $200. Mortgage, $1,600. That’s a real win, the $1,600 mortgage. So total, 8,800. Total income, 10,400. There is a bit of a delta. But 1,700 for food, 800 for travel, almost $1,000 for auto, these three expenses make up $3,500, which is almost half of your total spending. I mean, we can’t really cut out food, but we can maybe reduce that. The travel could be cut out completely, and that money could go towards building a reserve fund or investing in a different way.
$1,000 for auto. I know we have to have a conversation about that, so we’ll do that in a little bit. But let’s look at your investments. You have approximately 93,000 in an index brokerage and 146,000 in pre-tax retirement accounts, 239,000. That’s great, but we also have a whole lot of rental properties. I counted it up. It looks like there’s eight units that are soon to be nine units, a duplex, two single-family homes, and a fourplex that’s being turned into a fiveplex.

Amanda:
Yes. The duplex, I mean, I live in one half, so it only counts as one right now.

Mindy:
Okay. So that is, then we’ve got eight total units, but seven right now that are being rented out. And so, your debt is a little bit skewed. You have zero personal debt, that’s great, but you have $563,000 in debt. That is, what, all mortgages?

Amanda:
Mm-hmm.

Mindy:
Okay. So I think that’s fair to say that you have all that debt because there’s mortgages attached to them. You have a five-year goal of doubling your rental income and a 10-year goal of $1 million in a stock portfolio. So let’s look at your money story. Where did you start from and how’d you get here?

Amanda:
Well, I came from a home that was probably lower-middle-class income, and I remember my mom doing cash envelopes and we always drove very used cars. So I grew up pretty frugal. We didn’t do any extracurricular activities, things like that. So I guess I’ve always been kind of very aware of how much I’m spending and saving. I did community college the first year to keep my student debt very low. And I don’t know. That’s kind of my background. So I did the Dave Ramsey there right out of college and transitioned out of that after, I don’t know, two or three years when I wanted to do a little bit more than that.

Mindy:
And let’s talk about your rental properties. You have a duplex that is a house hack. You’re living in one side and renting out the other side. My notes say that you have zero reserves. The property is valued at 266,000, and you have a loan balance of 264,000.

Amanda:
Mm-hmm.

Mindy:
How did you get a $2,000 mortgage on a house like this?

Amanda:
Okay. So that was a huge BRRRR project. We kind of ran into it off-market and bought it from the seller, and it took 18 months to rehab. And we moved into one side, finished the other side, and then cashed out with a 100% VA loan. When we say the reserves are zero, it’s just because it’s my personal residence and we would use our own emergency fund if we ever needed anything out of that.

Kyle:
What’s your plan for this property, this duplex that you’re living in? Is it a long term? Yeah. Are you looking to live there five years? Are you planning to move out of it, do another BRRRR? You don’t have to have the exact plan, but in general, what are you guys thinking on where you’re living right now?

Amanda:
Currently, we went ahead and furnished it since we had some experience with short-term rentals, but we’ve been doing medium term and having longer guests. This summer, I broke it up a little bit to have a few more guests with the busier season, but we’ll probably stick with one or two guests over the winter, and then probably midterm rental the side we move out of when we decide to move. We are kind of at an inflection point with life, so maybe we want to move soon, maybe we don’t. We’re not really sure what we want to do with when we want to move out.

Kyle:
And are all these properties in Wyoming, like close to you, or no?

Amanda:
No, that’s part of our struggle. We have two in Missouri, the one we live in locally, and then we have one in South Dakota, the multifamily. So they are very spread out.

Kyle:
How did you end up with the properties in the different states? Did you go visit or do you know somebody? How did that work?

Amanda:
The two Missouri ones, we lived in St. Louis for seven years before moving back to our hometown, where we both were born, and our former primary was our first long-term rental. And then back in 2018, it kind of was real slow. I think it was vacant for four months under a property manager. And that’s when we decided we got to do something else and we went ahead and furnished it, put it on Airbnb, and that’s at the same time that we bought the second one in a similar area in St. Louis, because we were real familiar with the neighborhoods, and we did both of those as short-term rentals right off the bat for our investing journey.

Kyle:
Okay. And what’s been your experience with those? Has it been a good experience with the short-term rentals, and do you plan on keeping them in the long run?

Amanda:
Yeah. We really like them. I prefer managing the short-term rentals and doing that. That’s kind of my job outside of parenting, and I prefer it a lot compared to long-term rental management. So I have outsourced the long-term rental, the multifamily, and I love doing the short-term rental management and my medium-term rental.

Mindy:
How is their performance? It looks like short-term rental number one, you’re making $1,000 a month. Is that net?

Amanda:
Yeah. That is net, but that’s the one that doesn’t have a mortgage on it.

Mindy:
And the short-term rental number two is $841 a month?

Amanda:
Mm-hmm.

Mindy:
How frequently are they booked?

Amanda:
They’re high occupancy. Over 85% for sure.

Mindy:
Oh, nice. Okay.

Amanda:
Yeah. I mean, I’m definitely nervous about regulations. They’re happening everywhere. I’m sure St. Louis is going to get some in the next year or two. So with that landscape change, we may have to pivot and do something else.

Kyle:
What do your loans look like on the different properties as far as the ones that you do have loans on? What are the interest rates that you have on them, or approximate? Are we talking low-interest-rate era or high-interest-rate era rates?

Amanda:
So our former primary has no regular mortgage. We do have a HELOC that we have tapped into to gain other properties. That interest rate’s low. Well, it’s about to change. I don’t know what the renewal will be, but it was at 4.5%. The mortgage we have on the second St. Louis property is around 4.4 or 4.5, so also pretty low. And it’s a $99,000 balance. So they’re both smaller homes.
So that one, when we cashed out this BRRRR house hack, got the primary occupancy rate back last fall, we took all that money and just went ahead and paid off the multifamily, which was adjustable. And I think we had a year or two left, but it was going to readjust. So we went ahead and just paid that off, and now we’re going to refinance and cash out on that at a high rate. It’s going to be like seven, but that way we get all that equity that’s grown over the last two years, plus we added the fifth unit, so it should appraise pretty high compared to the purchase price. So another BRRRR, hopefully.

Mindy:
One comment I have about this, and Kyle, correct me if I’m wrong, but if you’re going from a four-unit to a five-unit, that goes from a residential mortgage to a commercial mortgage. A residential mortgage is a fixed rate for however long you’ve locked it in, unless you have an adjustable-rate mortgage. A commercial mortgage is an adjustable-rate mortgage. It’s fixed for a set amount of time, like three years or five years, and then it adjusts again.

Amanda:
Mm-hmm.

Mindy:
Have you run the numbers to make sure that this is what you want to do as opposed to maybe opening up a HELOC? Can you open up a HELOC on a commercial property? You might not be able to.

Amanda:
Yeah, you can. I think the rates were worse in this case. I’ve talked to two lenders. Our previous loan was also not a normal residential loan because of the way the units… It’s like a large multifamily and then an accessory dwelling unit in the back. So it didn’t qualify for a traditional four-family anyway. So I’m basically going from one loan to a similar loan. The rate did increase, but we’re going to get a lot of cash as the trade-off.

Kyle:
So I’ll jump back to your short-term rentals here. I mean, you said you’ve enjoyed those ones and you’ve been pretty happy with them. I mean, for the value of the houses and what you’re getting on a $120,000-valued short-term rental, you’re making $1,000 a month on it net, after all expenses. No appreciation, just your cash flow. I mean, that seems decent.
And then your other one too, the value of 130,000, the return here doesn’t seem too bad. You’ve got some pretty… Well, let’s see. Now, you’ve got that HELOC on that first one. So is that net? The short-term rental, the first one, that net of $1,000 a month, that’s after paying the HELOC interest, right?

Amanda:
Yeah. It’s interest only. So, I mean, it’s only a couple hundred dollars a month.

Kyle:
Okay. So that’s what’s keeping the cash flowing well there. But then the other one is still cash flowing $841 a month, and you have a $99,000 loan on a $130,000 property. Is that right?

Amanda:
Right.

Kyle:
Okay. So that’s decent cash flow on a property that size with a loan on it.

Mindy:
Do you do anything when it gets closer to a time that the property is vacant? Do you do anything with the pricing to try and entice somebody to come in and rent it out? I’ve heard two schools of thought on this. Sometimes people are looking to get as many days of occupancy as possible, and sometimes people are like, “Look, I don’t want somebody who’s making a last-minute plan because those are people that are having parties.”

Amanda:
I tend to agree with the first camp. We have had pretty rough luck with a few guests. So I have a threshold and I just will be vacant rather than have… You still pay utilities and toilet paper supplies and stuff like that. So your expenses are not zero even if there’s somebody there at a low rate, if that makes sense. So I guess I’m saying, I feel like there’s a threshold where I’m not willing to go below a certain nightly rate. So I don’t really do a whole lot to try to get… I do allow one-night bookings, which a lot of short-term rentals do not, and we’ve been okay with that as long as they have a good review prior to staying with us.

Kyle:
85% sounds great, but you might want to check on the area, because if you’re too high, if you’re higher than what the occupancy is on average for the area, you might want to look at your pricing a little bit and you might be able to price higher, make just as much or more, and not have people in your property quite as much, or if it’s low, which I doubt the occupancy is low with 85%, but you could be pricing a little bit too high to begin with. But yeah, there’s AirDNA, couple other sites that you can check to see the pricing and the comparables on that.
We’re asking you detailed questions on what’s going on with the rentals and it just kind of gives us a better idea of how you feel about the rentals and how you feel about the situation that they’re in. Maybe we’ll transition for just a little bit to see what your goal… We kind of covered the goals that you have. Maybe talk a little bit about… You guys are at what you would call Lean FI. You are not enjoying your jobs right now, or you’re ready to be done with them. Tell us what decisions you’re looking at at this point in life and what we can help you talk through to maybe have some options going forward.

Amanda:
Yeah. So we’ve been working, kind of grinding pretty intensely these last four years. My husband is the one with the W-2, and his job is pretty not quality of life-friendly. And so, my job as the full-time caretaker has also been a little bit… I’m burnt out on that because his job doesn’t allow him to help as much as, say, a typical job. So we’re both burned out after four years of that schedule as well as adding all these rentals to our life. So I manage those with my time plus taking care of the kids, and then he works this shift work that is pretty brutal as far as family life goes.

Kyle:
Yeah. Definitely.

Mindy:
Have you guys given any thought to what you would do after you leave your current jobs? Like, for income, would you consider switching employment?

Amanda:
Yeah. I think so. I think that’s kind of where we’re at. I mean, I would love to maybe transition as the full-time work, be employed full-time, and Trevor would love to be a stay-at-home dad for a while. We’re just kind of in that weird spot where, do we leave his high-paying job now? Or do we try to stick it out a little longer? His background is not as friendly. I mean, his work experience. He’s military, private contracting, nonprofit, and now at a coal mine. So it’s kind of like a weird hodgepodge of experience. Mine is in graphic design, so it maybe could be more marketable. However, I’ve been out of the workforce for a decade, so that’s also very intimidating.

Mindy:
Have you given any thought to doing anything freelance?

Amanda:
So I do have a very small amount of freelance work. But yeah, that, I suppose, would be very flexible. So that would probably be a good place to start. Getting clients is also quite a bit of work. I’ve been putting all my extra time into the rental business and growing that, and so I don’t really focus on any of my own paid employment.

Kyle:
I’m just trying to get a feel for what you guys would really want to be doing. Ideally, would you… I’m trying to think the best way to word this. Would you want to be flexibly employed, maybe managing several short-term rental properties, since you mentioned that that’s something that you enjoy, and then have your husband to work, maybe be able to come home more often, have a less stressful job with more regular hours? Would that be a solution that would kind of work for you guys or to be able to move you in the right direction? Because it sounds like we need to find a medium ground because there’s no, “We need to quit right now, go do the real estate, or quit and just go do graphic design,” but there’s some lead time for that.
So what’s a transition possibility, or how do you see… The graphic design is a good option. But when you were talking earlier, just the fact that you mentioned that you enjoy the short-term rental piece and that those are cash flowing and that you’ll probably get better at managing those over time, maybe that’s something that you basically already built clientele or maybe you have some experience and you’re not 10 years out of that workforce. You’re fresh and you’re in it right now and you know how to do it.
Is there a possibility that you could focus more on that? I don’t know, this multifamily property, how attached you guys are to it. You’re going to refinance and pull the cash out of it. Is there any option that you would want to unload that one and to do short-term rental properties? And I’m not trying to push you short-term rental, but I’m just trying to get you to think through what would your ideal situation be that’s not like, “We’re retired.” But from a working, continuing-to-make-some-income situation, what would that look like?

Amanda:
Yeah. I think you’re close, for sure. I mean, if I had a small part-time job and my husband had a small part-time job and we kind of flip-flopped and then also worked on a new property or acquiring a property. We did a lot of the work ourselves, DIY. We totally enjoy that and love it, but I think just a little more balanced where I’m not parenting to where I’m exhausted and he’s not working to where he’s exhausted.
I think the scariest part is, the cost of properties right now has skyrocketed as well as the rates. So, I mean, I’ve been watching a market in Florida for months and months and months, and none of the numbers work. And that may be just the MLS listing as my strategy. That’s not going to work. But yeah, I would love to have, like I said in my goal, double the short-term rental income, for sure.

Mindy:
Do you see any way to double it without doubling your rental property counts? Let’s look at the short-term rentals that you do have. Are they close to any of the attractions that are in St. Louis? Could you make them into a destination? There are some really great short-term rentals out there that have… They cater to bridesmaids or, what is it, the bachelorette parties, or they cater to hunting or they cater to football games or they cater to all these different things. Can your unit cater to something, or several somethings, that would make people want to go there and, even better, take pictures while they’re there so other people can see them too and want to go too?

Amanda:
I don’t know that the two houses that we have in St. Louis could gross much more. They’re pretty small, so they’re limited with number of guests we can have. We would not advertise for parties at the house or big groups. I mean, my husband and I love that idea. We would love to have these really unique Airbnb rentals to basically entice people, but I think more rural is going to be where that’s at, like getting away out of the city where there’s not going to be all these regulations and neighbors to make those unique stays. And we would love to invest in that. We just, I think, feel maxed out on our time to explore how to acquire a property that could do that.

Kyle:
How much equity, this fourplex, fiveplex… I’m just zeroing in on this. Not that I want to eliminate it, but I want to make sure. So I was talking to Mindy and Kailyn before we got on here that I had had a few bad experiences with some fourplex properties. They were bad investments, I’ll just completely say that, and where there was a lot of cash that went into them.
So when you have less control of a property, which it sounds like you have a property manager doing this property, it allows for some of the expenses to creep up a little bit more and maybe you can’t force as much equity, although you’re adding the fifth unit on this one, right? You’re bringing it from a four to a fifth, or you already have?

Amanda:
Yeah. It’s nearing completion. So it should be filled in the next couple months with a tenant.

Kyle:
So how much cash are you expected to pull out of this when you refinance it?

Amanda:
Well, I have not had always the best luck with appraisals, but I am certainly hoping for around 300,000 out of the property. So a value of around 375. We bought it for 205. So basically, I want all my original cash out plus what we put in to make that fifth unit.

Kyle:
So 300 in cash. So let’s say 250. Let’s round it way down to 250, which is not ideal, but that’d be great if you got the 300. So now, what are your plans for that 250? Do you have any plans for that?

Amanda:
I mean, I wanted to go ahead and pay off the HELOC for now and just use that as a backup. I mean, no reason to pay interest on that when I’m paying high interest on the property. And then, yeah, we basically want to do another short-term rental. We were hoping for warm climate, so that’s why I’ve been watching Florida, because we have very long winters. They’re about 10 months long where I live, feels like it. And I also just want a rental where it’s going to be safe, not going to be shut down when the neighbors decide they don’t like them anymore. So we wanted a vacation destination. So that’s where I’ve been watching, and then just having some leftover as flex to possibly look for opportunities to buy another property.

Kyle:
I think the thing that I’m seeing maybe is just like, maybe if we look at your situation currently of not enjoying the jobs, as far as where life is sitting right now, the burnout in parenting and the burnout in work and the days and nights the husband is working, I would probably focus more or try to think more about, what can that 250,000 do to change that situation? Does that allow for a better job to be taken to make it through a… I mean, your kids are, you told me earlier, two, four, seven, and nine, some awesome ages for kids, young, precious ages, and maybe these funds are funds that you use to bridge a gap of taking some employment that maybe pays less but allow some sanity and some family life back in.
And if we come all the way back to your house hacking currently, correct, in a duplex where you’re living in one side and rent out another one, maybe you make it something as simple as you move out of that one, you turn that into a midterm rental, like you were talking about, and maybe you do another house hack. But because you do these little stacks and you have this big chunk of cash, you can get a better employment situation, better family life, and, at the same time, slowly build a couple doors, not necessarily taking that 250 and throwing it just towards another short-term rental somewhere in Florida, which would be a good long-term investment, but you’ve got some more family lifestyle needs right now, which are important.
I mean, and you guys have done a good job. You’ve got some real estate here. You’ve done a good job of building some stuff up. You really have. And maybe it’s time to take care of your young family for just a little bit and not focus so much on FIRE, “Let’s get financially independent.” Maybe you need to just become like, oh, I don’t know what you would call it, time-independent a little bit or give yourself some more breathing room so you can feel like a family and make good plans. And maybe you move a little slower, but you’re sane and happier along the way.

Mindy:
I really love that perspective, Kyle. And it has taken me a really long time to embrace this stepping-back mentality. And I hope that Amanda at a younger age can figure that out way earlier than I did. I’m looking at these numbers for the fourplex, and it looks like it was bringing in $1,420 a month when it was a fourplex. But because you’re pulling money out because you’re refinancing into a higher interest rate, adding that fifth unit is going to reduce your income to $400 a month. If you sold this property outright, you would owe taxes and depreciation recapture. Have you done the math to see if it’s worth keeping versus letting go?

Amanda:
I don’t think I have really, because in my mind, it’s a BRRRR. So if it exists and it pays for itself, it felt like keeping, because we’d be getting out, I guess, maybe 50,000 more to sell it outright. But no, I haven’t. I don’t think I’ve tossed that around too much because I was like, “Well, if I don’t have to deal with it and it didn’t cost me any money, why not just keep it, and then someday I could refinance and cash flow a little better?” The property manager is raising the rents a lot compared to what I did. And so, that will help. They’ll continue to go up. But yeah, we should think about it because I definitely don’t love it.

Mindy:
I would just look at the numbers. It could be an emotional decision, “Oh, I bought this. I’m going to continue down this road.” But numbers are facts. There’s no emotion involved in numbers. And maybe the numbers say, “No, you should keep it,” or maybe the numbers say, “Now is a great time to get out, go down to Florida, buy a duplex down there and house hack down there, and medium-term rental the other side of your duplex.” Maybe you’re making more money that way, or then you’re getting out of the 10-month winter. I used to live in Wisconsin. I totally understand not wanting to be in that winter.
You get the sun. You get time back with your husband, because now he’s not working those crazy swing shifts, which are horrible, and whoever invented them, I hope they had to work them too. He could look for a job because you’ve got this cash from the sale of the multiplex that you are taking down there. It’s not an immediate need to go get a new job.
On the other hand, the numbers might say, “It would cost you money to sell this property, so don’t do that.” So just taking a look at those numbers, running them, having a conversation with your husband, “What do you think of these two options?” could give you more clarity on what your decision should be. But you don’t love the property and it’s got a lot of money sitting in it. So something to consider.

Kyle:
You said you purchased that property because of COVID, because short-term rentals made you more nervous. So you just maybe also keep in mind your decision-making. There’s some emotion involved in that decision. I don’t think that’s bad emotion. I actually think that’s pretty smart because that’s diversifying. But if you ended up selling that property, you could diversify and house hack more and have more long- and midterm rentals but in a slower process.
And your logic is right as far as if you’re BRRRR’ing it and you can pull the property out, and it makes sense numbers-wise to just leave it there. It’s almost like a free property, but not technically, because if you can get more cash out and do something better with that cash out by selling it, but there are also expenses to selling it, so take all that into account. This is a question that I should know the answer to. Is there a limit on the number of VA loans that you can have?

Amanda:
Yeah. And I have tried to understand that a little bit, but I don’t know that we could do another one, maybe. There’s a threshold, and it depends on where you live, about how many you’ve taken out. And each time you take it out, it applies to that threshold. It’s called eligibility. And also, you can’t keep houses that you have used the VA loan on.
So I think if we tried to do another one, we would probably have to sell all of the houses. But it may be dependent on the lender. It maybe depends on the VA person that they’re connected to. It’s like the most complex, complicated… I don’t know. I don’t know that I could use it again unless we got rid of our first house, the first short-term rental, and the duplex.

Kyle:
Okay. Yeah. This is the question. It’s a product that is very unique and only some people can use it. So if you can use it more, that would be a whole nother house hacking thing to check into, but I really don’t know the rules behind it.

Amanda:
Yeah. I mean, but if you were to live and flip and snowball that two or three times, that would be the smartest way, I think, to build a real estate empire, to keep rolling your equity into a new property and then a bigger property. But because we did buy and holds, I think it was not the best strategy, and you just don’t know that when you’re 25 and getting your first house.

Kyle:
I think you have a great opportunity in this asset that you have of this fiveplex that you’re either cashing out or selling. Say there’s 250 to 300,000 that you can do something to change your life situation. Most people would not have that option right now. They might be in a situation similar to yours, and like burnout. I’m 38, so I’m right in the same age bracket. And this is the age when the kids are little, the jobs are busy, and it just is intense.
So if you have a way to mitigate that, be careful with this little nest egg that you have and really think through what decision with that will make your life better and improve your long-term goals. You can buy another good property somewhere that cash flows and you reinvest it in that property and it builds for the long-term. That’s great, but that doesn’t do anything for your current situation. Try to think through a way that you can use this money to improve your current situation, whether that means that you live off of 10,000 of it for three years. You put 10,000 towards your budget each year from this 250. That is not a crime. It’s totally fine to do that, and you invest the rest of it in something.
Say you take 50,000 of it and use that to live three years plus some part-time jobs. You can do a lot of different things. Don’t think that you have to use all that money to reinvest it to build your wealth, and then otherwise it’s not going to be okay. Your kids are… Some people say you’ve got 18 summers with them, and you don’t get those back, so if you can invest some of that.
You guys have done a good job of investing these properties and have built some things up, and the fact that you BRRRR’ed something and you’ll be able to pull out this amount is really good when you’re at age 39 and 40. That’s awesome. So take that opportunity to make some decisions that will change maybe the course of your life for the next 10 to 20 years for both you, your husband, and your kids.

Amanda:
So we don’t need to obsessively look for a high-ROI property at this moment is what you’re saying?

Kyle:
A CFP, but I’m not your CFP, so I can’t give you specific advice. But that’s what I would do. If I was in your situation, I would be looking for a way to relieve the stress on the family, because the other stuff, you already know how to do the other stuff. You’ve been doing it. You’re not perfect at it, but nobody is. And that stuff will come, but try to think through, “How can I knock both of these goals forward at the same time?” But at 10 or 20 years from now, you’re not going to be like, “Oh, I’m glad I just burned out for another 10 years and invested in this Florida property. That was great.” You’re not going to say that.
You’ll be glad, “I spent more time with my four kids and we got ourselves in a better situation mentally and physically.” That’s where you’re going to wish you had done that. If you don’t do it, it would be… That’s my personal opinion. If you can’t tell, I feel a little strong about it.

Amanda:
Okay. No, I love it. I think that’s helpful. Thank you.

Mindy:
Yeah. Kyle, that’s coming through loud and clear, and I love it. You’re absolutely right. I saw something online the other day. It said, “Your boss won’t remember that you worked late and missed your kids’ recital, but your kids will.” And I was like, “Oh my God, that makes me feel so horrible.” But absolutely true. And if we look at changing jobs, if we look at a Florida move, this pie-in-the-sky idea where he quits, you quit, you move to Florida, he gets a new job, you’re now staying at home full-time, or you get a full-time job and he’s staying home with the kids full-time, that gets rid of childcare, which is a $1,300 expense.
Maybe you get better health insurance and that reduces your healthcare plans. Maybe you get different grocery shopping. When you are high stress and everything is always last minute, you’re going to the grocery store and just grabbing something. You’re going to the restaurants and just grabbing dinner out. The travel. You’re already in Florida. You just drive to the beach. Every day, you drive to the beach. It’s awesome.
I can see a lot of opportunity to reduce some significant expenses on a monthly basis. I can see you cutting out 1,500, $2,500 easily. If one of you didn’t work, so you don’t have the childcare issue, because you don’t work, you have more time during the day to get to the grocery store and do meal planning and cut back on the restaurant expenses you have. Well, your utilities will be the same, $584, because you’ll be spending a lot on air conditioning.
And again, this doesn’t have to be a decision you come to right now. This is a conversation. This is a math problem. This is a what if. Talk to a CPA who can look at your specific set of numbers and say, “Hey, based on this, you’re going to have to have a depreciation recapture of X number of dollars. This would be your tax burden if you sold the property.” And that can be something that is considerable. That’s something to keep in mind. Maybe you bought it so recently that you don’t have a huge depreciation recapture. You just have a lot of gain.
Maybe there’s a 1031 option. You should speak to somebody who has a lot of experience with the 1031, but you could 1031 into a duplex. I don’t know if you can 1031 and into a duplex if you’re going to live in one half of it. So that’s something to talk to CPA and a 1031 expert about. But I think there’s a lot of options out here. You don’t love this multiplex. I don’t really love this multiplex either just based on the bare-bones numbers that I see. It’s out of state where you don’t have any other rentals. It is costing a lot of money for this refi. How far into the refi are you?

Amanda:
I mean, I’m just waiting for him to get the appraisal back and tell me what my numbers are.

Mindy:
Okay. So you’re pretty far down the road with the refi.

Amanda:
Yeah, but it’s not a commitment until we sign.

Mindy:
Right. You would only have to pay for the appraisal.

Amanda:
Mm-hmm.

Mindy:
Yeah. When your husband has those seven days off, day two or three, let’s have a conversation, “Here’s all the numbers that I’ve gathered. Let’s discuss the different options. Here are some cities with some houses available that we can go and check out,” or if you’re still able to travel right now, take a quick pop down to Florida and look at some houses and see, “Oh, wow. This is really great,” or “Oh, this is what you can get for this price? Never mind. We’re going to stay put.” Being in a property is way more eye-opening than just seeing pictures. You can’t smell a picture.

Kyle:
And you don’t have to move to Florida right away too, or if that’s even a goal of yours, you can always dial things back but not make too many life changes at once, is maybe the thing that sometimes people will say, that maybe you dial back the job and then you move, but you can do it all at once too. I saw in the notes here, roadschooling the kids or something is potentially a goal.
Yeah. Get out of Wyoming, take a year trip, and live off of some of your savings. This is terrible financial advice, but it sounds wonderful. And then end up in Florida. There’s all kinds of things that you can do, because you have this financial… I’m not going to say windfall, because it’s not. You’ve built this, but it’s coming to you, and this is a good opportunity at a very specific point to make some decisions that could change the next 10 to 20 years.

Amanda:
Yup. Okay.

Mindy:
Awesome. Well, Amanda, I really appreciate your time today. I appreciate you sharing your numbers with us and sharing your rentals and your situation. I think you have some homework to do and I think you have a couple of conversations with your husband to have. Pop a movie into the TV so that the kids have something to do when they’re not asking you for things all the time. But having an uninterrupted conversation with your husband or series of conversations with your husband about your options is really key. The most important thing is that you’re both on the same page. This is what we want. Maybe even have a goals conversation first. It could be several conversations.
Scott and I have an episode 157 where we talk about having a money date with your spouse. That episode gives some parameters for things to talk about. It’s more from the perspective of a conversation with a spouse who isn’t on board, but it gives you a lot of things to discuss during a money date. So maybe listen to that episode together, talk to each other about your big goals, your small goals, what he would really like out of life, what you would really like out of life, and just work together to find a solution that makes you happy, that makes him happy, and that allows you time with the kids that you have.

Amanda:
Yeah. Definitely. I love it.

Mindy:
Awesome. Amanda, thank you so much for spending time with us today, and we will talk to you soon.

Amanda:
All right. Thank you so much.

Kyle:
Thank you, Amanda.

Mindy:
All right, Kyle, that was Amanda. I have to say I really loved your advice to consider pulling back, consider selling this house or taking the refi and living off of it for a little bit. So many people that we talked to are so, “Rush, rush, rush to the end. I can’t wait to get there. I can’t wait to get to the end.” And what I’ve discovered is that the journey is just as important as the end result, and I’m really glad you brought that up.

Kyle:
Yeah. I mean, it’s only because I have been guilty of the same thing. In the financial independence community, it’s really easy to get fired up about saving every last penny, optimizing everything you can, having both spouses work, when there’s the opportunity to make the money, save it fast, and get out of the grind as fast as you can. The problem is, you get a few years down the road, or even a few months potentially, and you realize the priorities might be a little skewed from what they should be.
But at the same time, the nice thing about being so aggressive in a financial independence journey, like Amanda has been recently, is that you are saving so much so that if you do get burnout or you do need to make a life change, you now have the option to, or if you do need to slow it down because you’ve done well for the past few years. You weren’t not paying attention. You were trying really hard. You have more options than if you had not thought about it or planned at all. So that’s kind of what gets you to where you need to be, but sometimes it’s time to take a pause and just back up for a moment and see what’s really important and then decide which direction you need to go going forward.

Mindy:
Like you said in an earlier episode that we recorded with Joe, the personal trainer/cop, flexibility is key. And when you have amassed a plan, a pile of money, investments, and a cushion, you have more flexibility. And I’m hoping that they can look at their flexible situation, look at their flexibleness, their flexibility options, and decide on something that really gives them some peace and enjoyment out of their life.

Kyle:
Definitely. Me too. I hope they’re able to use what they’ve built to bring, like you said, some peace to their young family, which it sounds like they could really use a rest right now, really. So hopefully, they get it.

Mindy:
All right. Well, Kyle, thank you so much for joining me today in place of Scott, who’s out gallivanting around doing who knows what. I appreciate you showing up today. Should we get out of here?

Kyle:
Always fun being here. Yup. Let’s get out of here.

Mindy:
All right. That wraps up this episode of the BiggerPockets Money Podcast. He is Kyle Mast, and I am Mindy Jensen saying out the door, dinosaur.

Speaker 4:
If you enjoyed today’s episode, please give us a five-star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Mindy:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.