Afford Anything

#114: This week, I answer four questions about real estate investing from the audience. Joelle asks: I own a home outright on the West Coast. I’m thinking about taking out $100,000 from my home equity, and using this money to buy a rental property. I found a community out east where I can buy a property outright in cash for $100,000 in a good neighborhood. Should I pay cash for one house (via the home equity loan)? Or should I split this $100,000 into multiple down payments on many homes? Yasin asks: My wife and I are living on one income and investing the other. We save $60,000 per year. We’re looking at duplexes in Minnesota that cost $160,000 to $180,000. Our plan is to purchase a duplex, move into one unit, rent out the other, and aggressively pay off the mortgage in about 1.5 years. We’d move out and repeat this process until we have $7,000 per month in passive income, at which point we’d be financially independent. Should we pursue this plan? Or should are we playing it too safe? Should we buy more properties upfront, rather than waiting for two years between each purchase? Anonymous asks: I own four rental properties, each of which have an average rent of $1,350 per month. I purchased all of my properties within the past 24 months, and each one has been recently renovated. My goal is to own 20 rental properties. I’d like to make sure that I have adequate cash reserves, in case of emergencies. Each of my properties have insurance with a $5,000 deductible. How much money should I keep in cash reserves? What factors should I consider? Kim asks: I own one rental property. I recently moved into a single-family home in Scottsdale, Arizona, with the intention to live here for one year and then make this my second rental property. My mortgage is $1,500 per month, and I could collect rent of $2,250 per month – or more, if I Airbnb it. The neighborhood is booming; the housing here is appreciating at an astronomical rate. However, I’m concerned about the longevity of the plumbing in my current home, which was built in 1960s. I may have an expensive repair on the horizon. Here’s my question: Should I hold onto this property, despite the looming repair bills, and turn this into my second rental property? Or should I live in this home for two years and then sell it, cash out, and repay all my student loan and consumer debt? I hold a $60,000 student loan, $7,000 in vehicle loans, and $5,000 on a credit card. My goal to own many cash-flowing properties. Anonymous asks: A year ago, I relocated to Silicon Valley. I’m thinking about buying a townhouse-condo hybrid. I like the neighborhood and it suits my family’s needs. The property will become a rental in 5-7 years. It’s in a distressed area and could see a lot of potential appreciation. What loan should I consider, given that this property will become a rental within 5-7 years? I’m debating between a 7/1 ARM or a 30-year fixed rate mortgage. Also, should I redirect most of my income to paying off the principal as quickly as possible? There are two schools of thought on this: (1) build equity and use a HELOC to buy another property in 5-7 years, or (2) make only the minimum payments on your mortgage. What do you think? Tune in for the answers! Learn more about your ad choices. Visit podcastchoices.com/adchoices

#113: Natalie Sisson was tired of the corporate world. She wanted freedom, adventure and fulfillment. In 2008, she quit her job and co-founded a tech company -- but soon she discovered that running a company felt a lot like having a day job. Two years later, she quit her own company in order to truly strike out on her own. Since 2010, Natalie has run an online business from her laptop while traveling the globe. She's visited 70 countries, living out of a suitcase while running a lucrative six-figure business. She also owns investment real estate in Portugal and New Zealand. In this interview, Natalie and I discuss: - The four phases of entrepreneurship: The Dreamer, The Hustler, The Superhero and The Freedomist. - Why Natalie transitioned from a steady paycheck to the financially volatile life of an entrepreneur. - How Natalie coped when her bank account dwindled to her last $17. - The major family crisis that reinforced why freedom and flexibility matter more than any job. - How she bought a property in a foreign country. - How she manages an Airbnb rental property from halfway around the world. - Why a minimalist attitude towards possessions is crucial for a traveler and entrepreneur. Enjoy! Visit http://affordanything.com/episode113 for more information Learn more about your ad choices. Visit podcastchoices.com/adchoices

#112: How can I convince my spouse to invest in low-fee index funds? How should my fiancé and I combine our finances? If I'd like to invest in rental properties, should I also buy stocks? Former financial planner Joe Saul-Sehy joins me to tackle these audience questions and more. Thomas asks: My wife is suspicious of Vanguard. She questions how they could stay in business while charging low fees -- isn't there a catch? She's also reluctant about investing the majority of our money in a broad-market index fund like VTSAX. She'd prefer more diversification. Recently, we met with a major brokerage firm that charges a 1.75 percent management fee. How can I get my wife to see the detrimental effects of choosing this high-fee broker? Shy asks: My fiancé and I are getting married soon. We both live with our families at the moment; we'll form a new household after our wedding. Neither of us has ever lived independently before. How should we budget for this, given that we're not sure what expenses to expect? Also, any tips on how to commingle finances? Paris asks: I'd like to invest in rental properties. Should I still make stock market investments? Should I contribute to a 401k? Kristin asks: I've been DIY'ing my household's finances and taxes. So far, our situation has been simple. However, in a few years, my husband is going to retire. When this happens, we'd like to sell our home, perhaps invest in rental properties, and move either out-of-state or out-of-country. Our financial and tax situation is about to become a lot more complicated. I'd like to talk to a financial professional ... but whom should I choose? Should I hire a financial coach? a financial planner? an accountant? an investment advisor? someone else? We tackle these four questions on today's show. Enjoy! ______ Resources Mentioned: Thomas: Calculator - How do expenses impact fund returns? https://www.calcxml.com/do/inv12 Article - How a 1% fee could cost $590,000 in retirement savings https://www.nerdwallet.com/blog/investing/millennial-retirement-fees-one-percent-half-million-savings-impact/ Article - The Impact of Investment Costs https://investor.vanguard.com/investing/how-to-invest/impact-of-costs Shy: Article - The Anti-Budget http://affordanything.com/2013/03/05/anti-budget-or-80-20-budge/ Article - Three Methods for Co-Mingling a Couple's Finances https://www.thebalance.com/three-methods-for-co-mingling-a-couple-s-finances-453849 Kristin: FINRA Broker Check website CFP.net Guidevine (website) XY Planning Network Learn more about your ad choices. Visit podcastchoices.com/adchoices

#111: Tanja Hester and Mark Bunge used to have demanding but fulfilling careers as political and social cause consultants. While they loved the mission behind their work, they grew tired of the exhausting hours and grueling travel. Their home felt like a weekend crash pad. They had no time or energy to pursue outside passions like skiing, biking and volunteering. Six years ago, they read a book that changed the course of their lives. The book, How to Retire Early, set the couple on the path of financial independence. They moved from pricey Los Angeles to the more affordable North Lake Tahoe. They started automatically saving and investing huge chunks of their paycheck. They crafted detailed spreadsheets, plotting precisely how much they'd need to save before they could comfortably quit their jobs. Today, Tanja and Mark are newly-retired ... at the ages of 38 and 41. How did they progress towards early retirement so quickly? And what lessons would they share with anyone else who wants to escape the 9-to-5 grind? Find out in today's episode.   For more information, visit the show notes at http://affordanything.com/episode111 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#110: Happy New Years! We're kicking off this year on a bright and cheerful note -- with a conversation about the impending recession! Yay! The U.S. stock market is at a peak, continuing its 9-year bull run. The markets have been rising since March 2009 without any major corrections or pullbacks. We are living in one of the longest periods of economic expansion in our nation's market history. That's worrisome. Speculators with short memories are popping champagne corks thinking the good times will last forever, while those of us who are students of history know that what goes up must come down. Trying to guess WHEN the next recession will happen is a waste of time. A more efficient use of time is to prepare ourselves such that when it does happen -- whenever that may be -- we are ready. How can we prepare for a recession? That's one of the four topics I cover in today's episode. Specifically, here's what we chat about in this first episode of 2018: Thayne asks: 1) Broadly -- What are the best investments overall if you're going into a recession? 2) Specifically -- What's the most recession-proof type of real estate investment? Aaron from Portland, Oregon asks: In Episode 96, you discussed the benefits of real estate investing -- but you didn't mention the use of leverage, nor did you mention that real estate is an inefficient market. Why not? Anna from the San Francisco Bay Area asks: I've moved out of my condo, which I'm renting out. But the rent only covers the mortgage (PITI) and HOA. Should I sell the condo? If so, I could use $250,000 in equity for an alternate investment, such as buying rental properties out-of-state. Enjoy! _____ Resources Mentioned: How to Calculate Cap Rate and Cash-on-Cash Return -- http://affordanything.com/2012/01/25/income-property   Learn more about your ad choices. Visit podcastchoices.com/adchoices

#109: Happy holidays! I thought it would be nice to wrap up this year with a lighthearted holiday episode about the importance of keeping a positive attitude. Will Bowen, my guest on the final episode of 2017 (wow!), started a campaign to motivate people to complain less. He noticed that many people in his community said they wanted more stuff -- more possessions -- but they complained about what they already had. So he wondered if perhaps people could find happiness not by purchasing more, but rather by complaining less. In this episode, he discusses how we can move towards a complaint-free lifestyle. I thought this would be a cheerful, light interview to round out this year. Enjoy, and happy holidays! - Paula   For more information, visit the show notes at http://affordanything.com/episode109 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#108: Former financial advisor Joe Saul-Sehy joins me to answer audience questions about investing strategies, early retirement, and tax planning. Whitnee calls in with this: I'm 31, and my husband and I save half of our combined income. We've maxed out our H.S.A. accounts and we're getting an employer match in our 401k. We have $80,000 stashed as cash in a checking or low-yield savings account. We're paying nearly $2,000 per month for insurance policies, most of which is a whole life insurance policy. We have a rental property that cash flows $210 per month; we pocket $150 and use the other $60 as an extra principal payment. What should we do differently? How can we learn about investing? What funds should we focus on? Should we sell our rental property and invest the proceeds, or hold onto this? If we hold, should we focus on repaying the mortgage as quickly as possible? Kim asks about the 4 percent withdrawal rule in early retirement. When you're calculating your savings goal, do you need to account for the tax implications of this withdrawal? Any tips on how to optimize this? Susan says: I loved your explanation about how to use a Roth Conversion Ladder to avoid paying stiff early-withdrawal penalties in retirement. (Episode 94). Here's my follow-up question: How long should my money sit inside of a Traditional IRA before I convert it to a Roth IRA? We tackle these three questions on today's episode. Enjoy! _______________________________________ Resources Mentioned: Whitnee's question: Books: Investing Made Simple by Mike Piper Can I Retire? by Mike Piper The Simple Path to Wealth by JL Collins The Little Book of Common Sense Investing by John Bogle The Wealth Barber by David Chilton The Truth About Money by Ric Edelman Websites: Oblivious Investor by Mike Piper FINRA Broker Check Afford Anything article: I Don't Know How to Start Investing and I'm Afraid of Expensive Mistakes Kim's question: Two articles critiquing the 4 percent withdrawal rule: - https://www.americanfunds.com/ria/insights/can-i-retire-at-40.html?cid=sm_tw_50306 - https://www.cnbc.com/2014/11/03/the-4-retirement-rule-is-broken-and-heres-why.html Susan's question: Episode 94 - The Early Retirement Episode Learn more about your ad choices. Visit podcastchoices.com/adchoices

#107: Scott Harrison spent 10 years as a New York City nightclub promoter, partying until sunrise every morning and ingesting almost every substance imaginable. But when he was 28, he realized his life lacked meaning. "My tombstone might say, 'here's the guy who got thousands of people drunk,'" Harrison said. Feeling lost, he decided to volunteer for a medical charity in Liberia. Harrison spent the next year-and-a-half in West Africa, where he encountered people with diseases he'd never seen before -- such as cholera, typhoid, dysentery, and fatal cases of diarrhea and dehydration. He smelled the yellow-brown parasitic dirty water that millions of people were drinking. He discovered that unsafe, unclean drinking water is the world's leading cause of death. When he returned to New York City, he couldn't bring himself to sell expensive bottled water at nightclubs anymore. Instead, Harrison moved into a tiny closet and launched a nonprofit, Charity: Water. Today, Charity: Water has funded more than 24,000 water projects that have brought safe, clean drinking water to more than 7.3 million people. That's the good news. The bad news? There are still 663 million people without access to clean water. That's around double the population of the U.S. And water-borne diseases kill about 16,000 people each week, almost half of whom are children under age 5. There's still a long way to go. Today, Scott joins me on the podcast to talk about how he started and grew a major charitable organization. - How does a nightclub promoter with zero business experience launch a massive nonprofit organization? - What mistakes did he make? - How did he differentiate his organization from the thousands of other charities out there? - Who did he first hire? - What advice would he offer to anyone who's goal is to create a nonprofit? Learn the answers to these questions and more in this excellent episode with Scott Harrison, the founder of Charity: Water. _____ Resources Mentioned: Charity Water -- Short Film http://charitywater.org/thespringfilm Charity Water - Projects https://www.charitywater.org/projects World Health Organization - Drinking water fact sheet http://www.who.int/mediacentre/factsheets/fs391/en Learn more about your ad choices. Visit podcastchoices.com/adchoices

#106: How do you search for rental properties out-of-state? Should I offer a lease-option contract to my friends? How can I estimate repair and maintenance costs? And can you deep-dive into bookkeeping and taxes for rental real estate? I tackle these four questions in this episode of Ask Paula - real estate edition.   Saul from Salt Lake City asks: I'm converting the first floor of my home into a two-bedroom, one-bath apartment. My "hacked duplex" will soon be ready for my first tenant. Can you deep-dive into the taxes and accounting? How should I keep records of my expenses, and what should I file?   Terri asks: I'm analyzing real estate deals, but I'm getting stumped about how to estimate the repair, maintenance and capital expenditures. It seems like everyone has a different approach for calculating this. Should I estimate a percentage of the purchase price? A percentage of the rental income? A flat amount per unit? Or something else? How can I estimate costs accurately?   Kirsten from Madison, Wisconsin asks: My husband and I recently moved to Madison, but we've kept our old home in Oshkosh, Wisconsin. The home is worth $120,000, and we have a 15-year note. Our friends would like to purchase that home, but their credit is bad. They'll need two years to improve their credit situation.   We're considering renting to them through a lease-option contract. Our mortgage is $950 per month; we're thinking of charging them $1,100 - $1,200 per month on a rent-to-own lease. Do you think this is a good idea?   Chrissy from North Vancouver, Canada asks: I loved your description in Episode 92 about building a team in a different state. Could you please further flesh out the steps that you use when you're searching for a rental property in a different state? I tackle these four questions in today's episode. Enjoy!     For more, visit the show notes at http://affordanything.com/episode106  Learn more about your ad choices. Visit podcastchoices.com/adchoices

#105: A.J. Jacobs is the Editor-at-Large of Esquire Magazine and the New York Times bestselling author of multiple books. His three TED Talks have collectively garnered more than three million views. He describes himself as "a father of three, husband of one, and cousin to millions." And he's probably your cousin. Twice removed. AJ joins me on this episode to chat about motivation, habits, and living life as an experiment. Here are some of the stories we cover: - Why AJ divulged his entire sexual history to actress Scarlett Johansson. - How AJ successfully and frequently changes his behaviors and habits. - AJ's experimental approach to life. - Why the adage "fake it 'til you make it" -- or rather, "fake it 'til you become it" -- is essential for developing habits. - How gratitude at extreme levels can become a mindset game-changer. - How healthy living nearly killed him. - AJ's quest to demonstrate the idea that we're all related -- and throw the world's largest family reunion. Resources Mentioned: A.J.'s Books: It's All Relative My Life as an Experiment A Year of Living Biblically Drop Dead Healthy The Know-It-All A.J.'s TED Talks: My Year of Living Biblically https://www.ted.com/talks/a_j_jacobs_year_of_living_biblically How Healthy Living Nearly Killed Me https://www.ted.com/talks/aj_jacobs_how_healthy_living_nearly_killed_me The World's Largest Family Reunion https://www.ted.com/talks/aj_jacobs_the_world_s_largest_family_reunion_we_re_all_invited   Learn more about your ad choices. Visit podcastchoices.com/adchoices