I FIREd with Index Funds, She FIREd with Rentals: Which is Better (& Faster)?

Mindy:
Today we are settling the ultimate investment showdown, real estate or stocks. Which path will actually get you to fight faster? Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and today I am so excited to introduce you to Amber Lee Grant, who is going to be joining me as my co-host while Scott is out on his paternity leave. Amber Lee is a dear friend of mine. She was featured on episode 449 of the BiggerPockets Money podcast. She is a fire fanatic too and has investing knowledge both real estate and money and both American and Canadian because she is a dual citizen. She runs Fin Talks, which is a Tuesday evening finance discussion and she is going to be so great as a fill in for Scott. Amber, thank you so much for joining me today.

Amberly:
Mindy, what an intro. Thank you so much for having me. I’m so excited to be spending this time with you virtually and helping you co-host the BiggerPockets Money podcast. I love all things finance and real estate. It’s just been something that I’ve enjoyed for the past, actively five years but passively by reading books since I was 15 years old and I’m not going to say how old I am today. You guys can figure it out over time, but I’m a lot older than 15 years old now. I’m going to put my best Scott voice on and tell you BiggerPockets has the goal of creating 1 million millionaires. You are in the right place if you want to get your financial house in order because we truly believe that financial freedom is attainable for everyone no matter when or where you’re starting. Did I do that right, Mindy?

Mindy:
Scott’s voice is a little lower, but otherwise perfect. Excellent. Amberly to start us off, what is your current five

Amberly:
Portfolio? My portfolio is 40% real estate and 60% stock. Though that’s not always been the case, I started off almost solely investing in real estate while I was kind of siphoning some money into the stock market. So I started off in around 2019 at 75% real estate and 25% stock over time from about 2019 to 2023 before I bought my primary residence. I would say it stayed quite high in real estate but more of like a 50 50 and then I bought a primary residence so things started to move again into the 40% real estate, 60% stock because of changes in the stock market and other things.

Mindy:
So Amber Lee, my portfolio is actually 62% stocks, 37% real estate and the remaining one-ish percent is cash. The runup in the stock market over the last, well not the last few months, but the end of last year, all of 2024 actually got our stock portfolio up significantly as well as a lot of our syndications sold off. So as they sold off, we got the cash and put it back into the stock market. So it’s been kind of cycling through out of real estate into the stock market because for a while we were about 50 50 stocks in real estate, but my real estate is very different than your real estate. My real estate consists of my primary home equity because my house is an investment, it’s a live and flip. So I bought this for a low amount. I’m putting a lot of money and time into it and I’m going to fix it up, sell it next year and take all of that cash out of the real estate bucket and put it into the stock market. I do a lot of private lending. I have a couple of syndications left and I have investments in local small businesses that I have just counted as real estate because a lot of those are real estate related.

Amberly:
It sounds like over time you’re kind of getting out of the real estate game. Is that correct in regards to what you’re doing?

Mindy:
I think our real estate and stock portfolio kind of ebbs and flows, but right now it’s flowing more towards stocks. You’re right, because real estate can be more time intensive than I would like it to be. I am. I always consider myself to be the same age as everybody, but I’m not. I am significantly older than you, than Scott and I’m wanting to declutter my life, so I am taking hassles out of it and sometimes real estate can be really time intensive and I am looking for very low time commitment investments.

Amberly:
Yeah, I completely understand that and I think when we go into what we would prefer, we’ll definitely talk about passive versus active income sources for fire because they’re very different when it comes to stocks or real estate. Don’t you agree?

Mindy:
I do agree. I think that there’s this romantic notion that real estate is so sexy and you’re going to make so much money out of it, and for a long time that was true, but now we’re in this period of higher interest rates and I talk to a lot of people who say things like, oh, I have to invest in real estate, don’t. There’s a lot of people who don’t really have any interest in real estate, then don’t invest in real estate. The best time to not invest in real estate is when you’re not all that interested in it. I have always been invested in real estate, I’ve always been interested in real estate. I love the idea, but I am getting a little lazy in my old age and I just don’t want to put the time into it anymore. So we both have real estate in our portfolio, but Amber Lee, is that necessarily the best vehicle to get you to fire faster in today’s market?

Amberly:
Yes. Real estate, depending how you do it, can exponentially change your path to financial independence and it requires a lot of sacrifice and hard work if you do it the right way. Buying a primary residence won’t get you there, buying a house that you’re going to flip. If you can find an appropriate priced house with an appropriate interest rate, which that’s the big problem with today’s market, can really help you move on the path to fire. So real estate, if you are doing some sort of house hacking still or a live-in flip can definitely exponentially change your path to fire though I don’t love it because I’m over it right now.

Mindy:
Okay, so like we said earlier, Amber Lee and I are great friends. I’ve been to her house, I’ve seen that she is living through a construction zone. I’ve also lived through a construction zone. I really like this answer for a lot of reasons. The live and flip can generate a lot of money. I have made I think 700,000 tax-free dollars, I should say more than because I don’t remember the exact number more than 700,000 tax-free dollars over the course of my live-in flipping life, which started in 1996. I love this idea because I don’t want to pay any more taxes than I have to, but also this is one of the safest ways to invest because it’s your house. If the market crashes, as soon as you buy the house, you still are going to just live in it. Your exit strategy can just be continue to live there because once you sell it, you’re going to have to find someplace else to live.
Why would you sell it for a loss if you didn’t have to? So the live and flip strategy can be quite lucrative, especially if you’re coming into a period where the stock market is going up. There have been rumblings right now from the Fed saying that they’re going to think about reducing rates near the end of the year. We have stock market uncertainty and we have a new administration right now who is throwing out some different changes. So this could change the economy that we’re in right now. When the economy goes down, the fed wants to bump back up, they’re going to decrease interest rates, which will cause people who have been sitting on the sidelines waiting for rates to come down to jump back into the market, which will bring up the market. So a live and flip is a great idea on paper you just said that you are over it. Totally hear you. I am in my last live and flip my final live and flip because this is a lot of work. I don’t think there’s one wall in this house that we haven’t touched and we’re not done yet. It’s been five years, we took some time off for Covid, but it is weighing heavily on us and we just want to get it done.

Amberly:
Yep, completely understand and like you said, with changes in our environment, so stock market, whatever it might be, sometimes having that cushion of a primary residence that you’re living in, that you’re flipping or that you have roommates can really make all of that uncertainty feel a little more certain. So it’s a sense that you have a sense of control over your environment and actually over your possible profits in the future just depending on what you do with the house. I do find some people with live and flips, you have to be careful not to produce your house, make it look better than everything around you. So just keeping in mind that when you are doing this, there is a market that you’re going to have to walk back into with your house and so just ensuring that your home matches the market around you,

Mindy:
I think that’s a really great point. You don’t want to over improve because your buyers aren’t going to see that as value to them. So while we have had a lovely conversation about live-in flips, I do have to disagree with your point of view and say that for me, I think the stock market is going to be a better vehicle to get you to fi faster. So presumably we are talking to somebody who is new to the space and who wants to reach financial independence as soon as they can. Now I do have the advantage that I have spoken to about 600 people about their path to financial independence and over the course of this podcast, and it seems to me that investing in the stock market is the fastest way to get you there. So the stock market has no, you have no bearing on what the stock market is going to do.
I love the stock market because it’s a set it and forget it kind of way of investing. You put your money in and then you wait and I have seen the stock market going up and yes, I’m going to address the people who are saying, well of course it’s been going up since 2008. Yes it has, but I have been investing since 1998 and it has gone up and down and up and down and up and down, but over the course of time it goes up into the right. If you zoom in on that over the course of time you’ll see a lot of ups and downs, but I have faith in the American economy and the strength of American businesses and I do believe that the stock market will continue to go up into the right. Another thing I want to point out is that if you are just discovering the concept of financial independence, you are either young and have a long time horizon or you are older and want to get there faster.
If you’re older and want to get there faster, you probably have a higher income than our younger cohorts. You might not have so much time to put into investments like real estate, learning about real estate. It isn’t just I want to invest in real estate, I’m going to buy a house and there we go. There’s a lot more involved in that. So I think that especially if you are older, well it’s better for both people because you’ve got this long time horizon. You can just set it and forget it and then when it’s time for your retirement, there’s your money and I’m oversimplifying it. Past performance is not indicative of future gains, but I do believe that history repeats itself. My dear listeners, as you may or may not know, we have a new BiggerPockets money newsletter while we’re away, go over to biggerpockets.com/money newsletter to subscribe today. Now a quick word from our show sponsor, welcome back to the show.

Amberly:
So I understand your point. I completely get it that first of all it’s an easier way and a very for someone especially starting out whether you are higher income or lower income or you have time or you don’t have time, it’s a really great way just to get started and to actually move towards the goal of financial independence. The thing though with real estate is that we forgot to talk about the rental income that can come from real estate. If you are again renting out rooms in your house, not just a flip, and then where do you put that money? The stock market. So then what about tax benefits? So you’re lowering maybe a higher income tax that you have to a lower one and then funneling that money into the stock market. You might have appreciation in your house when you sell it, like you said, you’re going to funnel it into the stock market. So for me, I truly do see the stock market though I understand your point. A house I think gives you both.

Mindy:
I like that you’re funneling your real estate money into the stock market. I’m wondering about the time commitment for learning real

Amberly:
Estate. Absolutely terrible.

Mindy:
Yes.

Amberly:
Okay, I got you on that one.

Mindy:
Scott Trench has said that if you don’t have is it 200 hours to learn about real estate and real estate investing, then it’s not the investment vehicle for you. And if you are, let’s use our older new fire follower and they’re older, they’re set in their ways, they’ve got their life going on, they maybe have kids, maybe they have all these different obligations that a young single like 25 just out of college might not have the same obligations. I’m not saying that you don’t have obligations, youngsters just saying that the older you are, the more your life is already set and now you need to find 200 hours in your day to go and figure out real estate. I like to say you have more money than time. The stock market might be a better choice for them. They could have the advantage of money.
They just have been spending it paycheck to paycheck sort of situation where they don’t have a lot saved or they have the advantage of having more money that they can plow into the stock market. They have the after 50 catch up on their 401k, on their IRA and they might not, like I said before, they just might not have the time to put into learning real estate. Real estate is a lot of work. You can make a lot of money in real estate. I’m not saying it’s not a great investment. I’m saying that it is not the one that’s going to get you fastest to fire. I can see that if you’re doing it right, meaning you bought them back when interest rates were 3%, that could give you a much bigger boost than somebody who’s doing it right now. But if somebody’s starting right now, I’m going to suggest stocks also. Let’s talk again about the last few weeks. The stock market’s been up and down and up and down. There’s some uncertainty in the stock market right now. So when you’re putting your money into the stock market and you’re buying on sale, you’re buying when it’s lower, maybe you buy and then it drops a little bit, you buy again when it drops. I believe that the stock market will eventually go back up. You’re getting all of those gains without having to wait for the housing market to catch up.

Amberly:
It’s true, and I’m not changing my position though. I do want to reinforce that real estate isn’t passive. So for me, my time and attention to my portfolio has been exhausting. So when I moved into my second duplex and I did some flipping in there, I had to get HelloFresh delivered because I did not have the time and energy to even think about food or go to the grocery store. I literally had 15 of my friends on my birthday come and help out and do a huge punch list of tasks. So that was really nice. Shout out to the Denver Longmont PHI community and I find like you said, you need to have some sort of knowledge in this because one bad purchase happens all at once. The stock market, you can dollar cost average in over time. So that does make sense that you can kind of keep hitting those lows and get to a high or just continue to invest over time.
But one purchase where you buy your house 50 over asking and you can’t sell it for that amount really can sink you in real estate. So you do have to be knowledgeable and like you said, a passion for it. So I have a passion for real estate and so that’s driven me towards that and driven me towards my opinion in regards to why I think someone can replicate this though it is more difficult in this environment. It can happen if you’re doing it appropriately and that you’re finding the right place with the right realtor, the right city, et cetera. So you might not be buying in San Francisco though. My sister did just get a house there and it wasn’t that crazy. So there’s ways to do it. So I understand what you’re saying. There’s a time commitment, mental and physical when it comes to real estate and that passive part that you’ve gotten to a lot of times doesn’t happen without the knowledge to find syndications and the right people or having a property management company, but then you have to manage them. But someone starting out with a little bit of money can’t really get into that stage for a while.

Mindy:
100% agree. The money can be a big barrier to entry and there are ways around it. I’m investing in real estate right now through my live and flip. So I am in this property with a owner occupant mortgage, so that’s lower interest rate than an investor loan comment. You have to actually live in the property to get an owner occupant loan. So don’t say, oh, I’ll just get an owner occupant loan and I promise I’ll live there, wink wink. When really you’re not planning on that, that is considered mortgage fraud, which is a felony, which is up to 30 years in prison, so don’t do that. But when you are investing, there are ways around these barriers, but ultimately you are still putting at a minimum 3% down, usually more like 5% or 10% down on your owner occupant property. You have to live there for a year.
Once you live there for a year, you can move out and rent the whole property. You can rent by the room if your city allows while you’re living there as an owner occupant, you can rent out other rooms to other people that can help you pay your mortgage. We call this house hacking. There’s lots of different ways to get into real estate, but it is still a lot more expensive than getting into the stock market. I don’t know what the minimum investment in the stock market is, but it’s a whole lot less than buying a house.

Amberly:
I mean the minimum is five bucks if it allows it, right? If you can buy a fractional share. So depending on what platform. Well, Mindy, if you were to redo your journey, like you said, you made 700,000 in a flip and so let’s just say

Mindy:
Over a bunch of flips.

Amberly:
Over a bunch of flips, sorry. Yeah, yeah, of course. Yep. Let’s just say not from today, but if you were to go back, would you go the same route you did today or would you have taken a more passive route?

Mindy:
Oh, way to put me on the spot. I’d probably do the same thing.

Amberly:
Yeah, no,

Mindy:
The live and flip is such a great way to generate funds and it comes with rules. You have to live in the property for at least two years. You have to live in it and own it for two out of the last five years to get the tax-free capital gains. Like I said, I have made $700,000 over the course of, and that’s not even counting this house. I haven’t sold it yet, but I’m going to make another 300 at least on this house when I sell it simply because I put the time into it. I lived in a dump. I mean it’s not glamorous. I live in a construction zone. My house is not finished. My kids are sometimes embarrassed of the way the house looks, which makes me sad because it’s a great house, it just doesn’t have any trimmer on the windows. That’s not a bad thing.
But I have lived in a house where I didn’t have a wall I a plastic wall because we were building and had opened up the ceiling on the back half of the house and it was rather cold. My washing machine pipe froze. I have done a lot of dishes in the bathtub because leading over, I’m not washing them as I’m taking a bath, but I’ve done a lot of dishes in the bathtub and made a lot of crockpot meals in the basement because my kitchen was undone. I’ve done 10 kitchens, we remodeled 10 kitchens, which is not super fun when you’re in the remodel, but you know what is a lot of fun cashing that big check and writing $0 of it to the Uncle Sam.

Amberly:
And I think one of the things that we are not touching on is that labor, the mental and physical labor doesn’t necessarily have a dollar per hour cost. So it can be really difficult to find where you are spending your actual money. It might be time that you’re spending. And for me, the reason why I say real estate may be the best way for someone to go, but in my situation now with two young kids, having a construction zone isn’t feasible anymore. So I need to pause on that. As I mentioned, stick all my money in the stock market that I’m generating and then ride that train for a little while

Mindy:
Live in flipping. Might not be appealing to some people. I totally get it. I don’t want to live in a construction zone anymore either. Another option for taking advantage of the lower interest rate for the owner occupant is house hacking. Either buying a house with more bedrooms than you need or a small multifamily, a two unit, three unit, four unit can all be purchased with a residential owner occupant mortgage again, so long as you’re planning on living in the property for at least one year. But then in a perfect world, the rent that you collect from all the other people should cover all of your expenses, but even if it doesn’t cover all of your expenses, you’re still reducing your living costs simply by sharing your space with other people.

Amberly:
Yep. That’s how I started out essentially, but it was something I turned into an up down duplex and had other people, specifically short-term rentals pay my mortgage. That was really helpful. I don’t know if you’ve invested outside of the state, outside of your primary residence and bought an investment property somewhere else. I have inherited investment properties outside of my local area and inherited meaning I pay the mortgage but inherited in the sense that I wouldn’t have gone and bought these properties. But I do have them and they’ve worked out quite well to be a long distance property manager, but again, more work and they were bought and I took them over when interest rates were lower. So I don’t know if it’s interest environment, if I would go out and buy a house outside of my current area or outside of a primary residence as a realtor. Mindy, would you?

Mindy:
I might, but in a much less expensive area. So Amberly and I both live in Longmont, Colorado, which is in the Denver suburbs and it’s expensive here. It’s so awesome, but it’s expensive to live here. The house prices I think are like five or $600,000 median home price. Some places like Indianapolis or Kansas City or even in Minneapolis, you’re seeing much lower housing prices than what you’re seeing here. And I can see why somebody would want to get into real estate. They can’t afford where they are locally, so they go to one of these lower priced areas and buy real estate there. The Ohio rental market is really, really strong and housing prices aren’t that expensive. So I can see why somebody would want to go someplace else. I would just caution them to first visit the property and visit the area. Make sure that you know what you’re buying. I have heard some less than savory stories in the BiggerPockets forums about how somebody didn’t go out and see the property ahead of time when they finally hired somebody to go and check it out for them. They were horrified at the state of the property. So just make sure you know what you’re getting yourself into

Amberly:
On the note of stocks because we’ve gone through the different ways that someone could invest in real estate. And again, I think I’ve outlined what I think is the most beneficial way to get to fire. Let’s talk about your stocks. What type of portfolio, this is not financial advice, but out of curiosity, what do you think about the different portfolios that someone could have in the stock market to get them to fire? We have to take one final ad break, but we’ll get into what we think is the perfect fire portfolio after this. Thanks for sticking with us.

Mindy:
So Scott and I have been talking recently about the 4% rule, the original Bill Benen study back in 1996 where he talked about what is the safe withdrawal rate and he said based on a 60% stocks, 40% bonds portfolio, you can pull out 4% adjust for inflation every year and continue pulling out. You should not run out of money in 30 years. And I think there had a 96% success rate. I don’t know very many people who have a large or significant bond portfolio. I know people who are 90% in stocks and 10% in bonds or bond like structures. So Scott is very recently sold 40% of his stock portfolio to turn it into real estate cash flowing real estate that is acting as his bond. He is not 60 40 stocks bonds yet or stocks bonds slash real estate, but he is making his way there. I am probably not going to be going into bonds very soon just because the stock portfolio keeps performing so well. But ideally I think that, I mean Bill Benen is much smarter than I am and he said 70 30, 60 40 stock bond split is what you should have. So I think people should start thinking about this, especially as they’re getting closer to retirement.

Amberly:
When it comes to stocks too, I always think of the book The Simple Path to Wealth, and when I think about that one, the recommendation there I think is more of a 90 10 stocks to bonds and no international because the idea was JL column thought that large companies that we are investing in, if you invest in the s and p 500 are already touching international because they’re global companies. But I know that advice has recently changed. So the idea also is your stock portfolio can comprise of not only some sort of s and p 500 index fund, but possibly some international now because like we said, past performance doesn’t necessarily indicate future performance though I don’t imagine the top 500 companies in the US going all under. So I think we’re safe there, but that international piece is something we haven’t considered in the past and has been outperforming the s and p 500 and doing well. So I’m curious if you would start to move any of your portfolio into a more international fund to even that out.

Mindy:
Personally, no, but I can see why somebody would want to touch into international funds because they have been doing so much better. Again, we are in a period of uncertainty right now with the stock market and I honestly don’t know enough about international funds to speak intelligently on them. I would defer to the jail Collins comment of he doesn’t go into international funds because these global companies are already kind of touching internationally. So I would probably not do that, but I could see how somebody would want to and if they have interest in it, I would encourage them to look into it further. Do a lot of research. This is a fun show where we’re talking about money, but ultimately it’s your money, so you should be doing research and educating yourself outside of just listening to what Mindy said on that show that one time.

Amberly:
Agreed completely.

Mindy:
Yes. I have an interesting statistic here, Amber Lee. I think it’s really, really fun to note that 87% of upper income Americans own stocks followed by 65% of middle income Americans and 25% of lower income individuals. It’s the classic and proven way to accumulate wealth, higher risk maybe because you don’t have any control over what’s happening with your stocks, but also higher passive rewards.

Amberly:
I would agree with that over time.

Mindy:
Okay. Amber Lee, it sounds like we both appreciate both aspects, real estate and stock market, but we have a difference of opinion where to start If you are starting from scratch and I think that’s okay, I think your opinion is valid. I think my opinion is valid. What I want to encourage our listeners to do is whoever you agree with, whichever path you choose to go, start from a position of education and understanding what it is you’re getting yourselves into For the real estate biggerpockets.com or biggerpockets.com/forums is a great place to start. Read through some of the questions people are asking, look and see the problems that they’re having. Are you going to be able to handle those problems yourself or are those going to make you say, Ooh, real estate’s not for me, then come over to my side and check out stocks.

Amberly:
Yeah, I think that’s a great thing. Education first, take action afterwards. And there are some horror stories about real estate out there. I don’t know many horror stories about stocks except for if you’ve pulled out the wrong time and never went back into the market. So just make sure you can deal with someone having a full on brawl in your basement smashing coffee tables and TVs. Yes, that has happened to me, but hey, it was worth it

Mindy:
For that sweet cashflow and coffee tables can be

Amberly:
Replaced. That’s exactly it. Yep. So it was definitely worth the journey for me and it may or may not be worth the journey for you and as Mindy said, the stock market is a wonderful place as well. You can’t go wrong either way.

Mindy:
Amber Lee, this was so much fun chatting with you today. I am so excited to have you slipping into Scott’s space and being my co-host over the next few weeks.

Amberly:
I’m so happy to be doing this with you, Mindy, and though we can disagree on things, we are still friends.

Mindy:
We are still friends. Yes. Alright, that wraps up this episode of the BiggerPockets Money podcast. She is Amber Lee, grant. Amber Lee. Where can people find out more about you?

Amberly:
Amber Lee grant.com.

Mindy:
And I am Mindy Jensen saying, see you soon. Blue Moon, I.