2024-08-07_1046-Swapping_out_Apartment_Life_for_Van_Life_to_Save_Money
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00:00:31.000 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement
00:00:35.000 | you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less.
00:00:40.000 | We begin with Samuel in Colorado. Samuel, welcome to the show. How can I serve you today, sir?
00:00:45.000 | Hi, Joshua. Thanks so much for having me.
00:00:47.000 | My pleasure.
00:00:48.000 | I've called a few times now on career and income planning, most recently on scarcity mindset and inflation.
00:00:54.000 | We're working out a plan for all your dreams, aren't we?
00:00:57.000 | Absolutely. My topic today is inspired by your recent show on a dwelling place, so I would like to find a radical dwelling place.
00:01:07.000 | So background is my incentives for this are A, hedge against inflation, like you talked about on our last call.
00:01:16.000 | I don't currently own any real estate.
00:01:18.000 | My net worth is about 400K on a cost basis, 600K on a market basis.
00:01:24.000 | And it's primarily investments, basically all investments in cash, no real estate, nothing that's not paper.
00:01:32.000 | But also your dwelling place podcast inspired me and to reduce rent.
00:01:37.000 | My current rent situation is it's great. I'm living with roommates.
00:01:41.000 | I live in a basement. I pay about $700 a month.
00:01:45.000 | And shared kitchen, shared bathroom, but I enjoy the experience.
00:01:50.000 | I enjoy living with roommates.
00:01:52.000 | And that is well below market in the Denver area where I am.
00:01:57.000 | And I'm not willing to do housing, which makes the need for a radical solution.
00:02:03.000 | The reasons for that are A, property tax.
00:02:06.000 | I feel like property tax rapidly gets up to what I'm paying in rent right now.
00:02:10.000 | B, you become a slave to the resale value.
00:02:13.000 | And I really want to maintain freedom.
00:02:15.000 | I'm gone most every weekend and more frequently.
00:02:18.000 | I don't want to have to fix stuff when it comes up or mold or ants.
00:02:21.000 | You know, the resale value can so rapidly be lost.
00:02:25.000 | Too much maintenance.
00:02:27.000 | And then also there's a burden to fill it with roommates if I live there because I wouldn't want all that space for myself.
00:02:32.000 | And I've done a little bit of that in an apartment.
00:02:34.000 | And it's really hard to find roommates and they're constantly leaving.
00:02:37.000 | And if you rent it to others, there's a burden to keep it full, which I imagine is just as hard.
00:02:42.000 | Or property manager, which takes away all the benefits.
00:02:45.000 | So those are the reasons I haven't been willing to do housing.
00:02:48.000 | And so options I'm looking at, inspired by your podcast, all involve vacant land.
00:02:55.000 | Because vacant land doesn't have some of these issues.
00:02:59.000 | It's a lot cheaper, so property tax isn't an issue.
00:03:01.000 | So also they all they involve a vehicle on this vacant land, you know, to try to reduce the property tax and slave resale value.
00:03:09.000 | So my current car is a beat up 98 Honda Civic.
00:03:12.000 | I can sleep comfortably in it, but I can't fit nearly all my stuff in it.
00:03:18.000 | So I like your idea of a box truck.
00:03:21.000 | So for that idea, I would need a lot of vacant lot near Denver.
00:03:27.000 | You're looking at around 150K, but more likely 200 to 300K.
00:03:32.000 | And main concern with, I'd probably park a box truck in there and use my Honda Civic to do all the adventures.
00:03:40.000 | You don't have any climate control.
00:03:43.000 | You know, I could get a shower at work or at the gym.
00:03:47.000 | But main concern is I don't think neighbors would really appreciate the resale value going down just having that box truck next to it.
00:03:55.000 | The cheaper idea is I see you can rent a park or you can buy a parking space in downtown Denver around 30 to $50,000.
00:04:04.000 | That would put me within half a mile from the office.
00:04:08.000 | You could use showers in the bathroom there 24/7.
00:04:12.000 | Obvious concern is I think I can't find details.
00:04:15.000 | I don't think they'd let someone live.
00:04:17.000 | I could fit a sprinter van in there.
00:04:19.000 | I couldn't fit a box truck.
00:04:20.000 | It's a parking garage.
00:04:21.000 | I don't think they'd put up with that once they found out what I was doing.
00:04:25.000 | And then final idea is a lot far away from Denver.
00:04:29.000 | They're a lot cheaper.
00:04:31.000 | I've seen them around 50 to 100K, one to four hours.
00:04:35.000 | I'm required to work in Denver around three days per week.
00:04:39.000 | And so I would need another space to stay closer.
00:04:42.000 | So that doesn't seem very ideal.
00:04:44.000 | And then final point is funding.
00:04:45.000 | I'd prefer to pay with cash.
00:04:47.000 | 40K from money market fund, I would have to liquidate around 160K from an individual brokerage account.
00:04:55.000 | 100K cost basis, 180K market value.
00:04:59.000 | I am willing to consider financing since you're probably making more money on the brokerage account than you'd pay in interest.
00:05:06.000 | And so that's a lot of information, but that's everything on my outline.
00:05:10.000 | You're required to be in the office three days per week.
00:05:14.000 | Currently, the other few days per week, do you work from home?
00:05:17.000 | Yep, Monday and Friday I work from home.
00:05:20.000 | The requirement is somewhat flexible.
00:05:22.000 | It's an average, so I could miss a certain week.
00:05:25.000 | But in general, I need to be there.
00:05:27.000 | Got it.
00:05:28.000 | Well, the first thing I would want to point out is let's get clear on why we're doing it and recognize that there's going to be costs either way.
00:05:37.000 | Living in a vehicle, I think, can be a really great way to enhance your lifestyle.
00:05:44.000 | Living in a vehicle can be a great way to save money.
00:05:48.000 | It's not going to be a perfect way or a perfect lifestyle.
00:05:51.000 | And I tried to emphasize that as best I could in the show.
00:05:54.000 | And so you want to be careful with whatever you choose to do.
00:05:57.000 | You want to be careful that you're managing for the downside.
00:06:00.000 | I wouldn't just rush away from $700 a month with roommates, especially if you have just a reasonable living situation.
00:06:08.000 | I think the social contact of being there with roommates and kind of having built-in socialization is worth having.
00:06:15.000 | And I think that you should prioritize that.
00:06:18.000 | Now, what's that worth to you?
00:06:20.000 | I don't know.
00:06:21.000 | Maybe you prioritize it at $300 per month.
00:06:24.000 | But I think living with other people is vastly superior to living by yourself in most cases.
00:06:31.000 | And it will help to defer some of the issues associated with being even in a vehicle if you have a regular home, regular place where you can be and can live kind of that straightforward lifestyle.
00:06:48.000 | In addition, while I think you can live in the city in an alternative vehicle, it's often not as nice as living in the country.
00:06:57.000 | So if you bought a lot outside of town and you owned the lot and you just parked your box truck on it and you lived in the box truck, then you can be totally free.
00:07:06.000 | You're not hiding from anyone.
00:07:07.000 | You're not feeling like you're on the outside of society.
00:07:09.000 | You're just camping out in your comfortable custom camper.
00:07:13.000 | In the city, it's a little different.
00:07:15.000 | You need to be a little bit more careful.
00:07:18.000 | In general, depending on what the parking space ownership would be, there may be no rule against staying in a vehicle.
00:07:27.000 | There can be rules if you're parking in a public place, in a public space, or in a public garage of some kind.
00:07:35.000 | But if you buy a parking space or rent a parking space on private land, then you probably can get away with living in the car even in the middle of the city.
00:07:44.000 | There's many people who do that, and it can work.
00:07:47.000 | But you still want to not be super obvious.
00:07:50.000 | And so one of the challenges of being in a vehicle, living in a vehicle long term, is it can often feel like you are on the fringes of society.
00:08:00.000 | And I'm not sure that's a healthy feeling for the long term.
00:08:04.000 | So if somebody was going from, say, $2,500 a month of rent to $500 a month of rent by living in their vehicle, that's going to be a big savings.
00:08:13.000 | If you go from $700 a month on rent to a few hundred dollars per month of expenses, I don't see that this is going to be a huge financial win for you.
00:08:24.000 | The first obvious lifestyle that seemed attractive to me, based upon what you've described about your situation, is not to worry so much about living as absolutely cheaply as possible, and focus more on creating an adventure mobile that will make your snow ski adventures and your rock climbing adventures much more feasible.
00:08:49.000 | If I were in your shoes, I would probably keep the apartment. I would get rid of the Honda Civic.
00:08:55.000 | I would swap out the Civic for a small pickup truck, a small four-wheel drive pickup truck, and then put in the pickup truck something like a small pop-up truck camper.
00:09:05.000 | I would imagine you've seen those or considered those, but the idea being that if you had that kind of rig, number one, all of the backcountry is now accessible to you in comfort.
00:09:16.000 | So you may be able to spend more time in the backcountry than you currently are because you have more places to go, more things to do, and your rock climbing adventures and your snow ski adventures are also more accessible to you.
00:09:29.000 | Before you go full-time into it, you spend most of your time working on basically four days in the backcountry, but with more comfort than staying in the Civic or using a ground tent or whatever it is that you do currently.
00:09:46.000 | I don't think that would be nearly as—you could do that for probably—I mean, you could do it for $20,000, a $10,000 pickup, $10,000 camper used.
00:09:56.000 | You could do something perfectly fine for that.
00:09:59.000 | If you had $30,000 or $40,000, you could buy something newer and certainly more comfortable.
00:10:03.000 | But those are reasonable options, and it would enhance your ability, and it would also allow you to test out the lifestyle in a more straightforward way to see if you like it.
00:10:13.000 | The benefits of a pickup is it should be more drivable, which, again, is more comfortable and easier to go longer distances just for a weekend or to just go higher up into the backcountry than where you're going to get with a two-wheel drive box truck.
00:10:27.000 | I do think if you're going to live in a vehicle, the box truck is one of the most attractive platforms for it because you can make it into a beautiful, custom, completely private, completely upscale apartment in the back of it, and it doesn't have to be so big that you can't park it in a standard space.
00:10:45.000 | So a standard space is either 19 or 21 feet.
00:10:48.000 | I can't remember exactly.
00:10:49.000 | But basically, if you have a 19-foot vehicle, you can fit that in there.
00:10:53.000 | So imagine yourself with something like an Isuzu truck with a 16-foot box.
00:10:58.000 | You're very close to that.
00:10:59.000 | It's still a standard space vehicle in terms of length.
00:11:02.000 | All you have is a height restriction, which makes the parking garage not work because of the height.
00:11:11.000 | I think you should, as is the theme of our multiple calls, I think before you focus first on the money, you should think about the lifestyle and be most focused on what is the lifestyle that I want to live because as we've discussed for quite a long time, you're earning plenty of money.
00:11:27.000 | You have potential for advancement at your job.
00:11:31.000 | You want to continue to pursue aggressive early retirement.
00:11:34.000 | Excellent.
00:11:35.000 | So we're not going to lock in some kind of very high-cost living lifestyle, but you really should be focused on building that lifestyle that's going to be most appealing to you.
00:11:44.000 | And so I would see having the pickup truck or something that's small off-road capable or kind of back road capable, something that's small, that's nimble, that's four-wheel drive, I would see that as far preferable from a lifestyle perspective versus having the box truck.
00:12:00.000 | I haven't talked now about investments, which we'll get to in a moment, but what are your thoughts on those comments?
00:12:06.000 | Well, thank you so much.
00:12:08.000 | I actually have thought of that.
00:12:10.000 | I haven't spent much time on the pickup truck idea because I've just heard this on so many of your shows and I've thought it myself.
00:12:17.000 | I think the minivan is the perfect vehicle.
00:12:19.000 | You could throw a mattress back there, so much space.
00:12:23.000 | And I think it's ideal for stealth camping, maybe even more ideal than the truck, which I do a lot of stealth camping in the winter because a lot of the dirt roads you can go on in the summer are snowed over, so you have to avoid getting stuck.
00:12:37.000 | You're camping in places that probably you're not allowed to, but in my Civic, I can typically get away with it.
00:12:43.000 | I think in a minivan, I could too.
00:12:45.000 | In a truck with an obvious camper or like those big sprinters, that becomes more questionable.
00:12:50.000 | The four-wheel drive, I don't have, but most of the time, I don't need it.
00:12:55.000 | The reason I've been kind of keeping the Civic for as long as it lasts, it's a '98, so it won't last forever, it's got such good fuel mileage, 35 miles per gallon or so.
00:13:05.000 | And I frequently do very high-mileage weekends, even from Colorado to Salt Lake, like a thousand-mile weekend.
00:13:13.000 | And once you have a truck or a minivan, that can increase by 50 or 100%.
00:13:18.000 | Sure.
00:13:19.000 | But I could probably afford that.
00:13:20.000 | It would be a lot more comfortable.
00:13:22.000 | Is the Civic a sedan or a hatchback?
00:13:24.000 | A four-door, I believe, sedan.
00:13:29.000 | Okay.
00:13:30.000 | So what you can do with a sedan, if you took out your seats, you could build a sleeping platform in it and use that fairly comfortably.
00:13:38.000 | Have you thought about taking out the front seat and putting in a flat sleeping platform, going back with your feet in the trunk and your head up by the front glove box?
00:13:48.000 | I haven't.
00:13:50.000 | What I do now is I fold the back seats down and I got an $80 Walmart 3-inch mattress topper.
00:13:57.000 | I used to do this like a camping pad, but the mattress topper is incredibly comfortable.
00:14:01.000 | Sure.
00:14:02.000 | Because there's this little thing that's not completely flat when you fold the back seats.
00:14:06.000 | But the mattress topper, you basically can't feel it.
00:14:09.000 | And yeah, my head is now in the trunk because I'm a little too tall.
00:14:13.000 | So the bottom six inches of my feet hang over, but that's no big deal because my head is well supported in the trunk.
00:14:19.000 | And then if you're in a Walmart parking lot, the trunk blocks out all the light, which is really nice.
00:14:24.000 | The other downside I'd be concerned about with removing is the big benefit of a Civic, even compared to a van, is I have expensive skiing and climbing gear.
00:14:33.000 | The climbing gear can be totally hidden.
00:14:35.000 | When I'm done sleeping in the Civic, I can fold my mattress topper.
00:14:39.000 | All the sleeping is totally hidden in there, so there's no evidence that someone's camping or living in there.
00:14:45.000 | And I think you might lose that with a permanent thing, but consider it.
00:14:50.000 | Everything is a trade-off between cost and comfort, trying to figure out where is that optimal balance of comfort versus cost versus capability.
00:15:00.000 | To your point of a minivan being able to stealth camp, absolutely you can.
00:15:04.000 | And you can stealth camp in almost any place in a minivan or in a small vehicle.
00:15:11.000 | I spent almost a week one time in a parking garage in a downtown American city for a conference that I was attending where I arrived early and left late, and I couldn't find any kind of reasonable accommodations.
00:15:26.000 | In that one, I was in a Prius.
00:15:28.000 | Sorry, I'm mixing two stories.
00:15:30.000 | So one time, I stayed in a minivan on a surface lot right in the middle of a downtown city, just a paid surface lot.
00:15:38.000 | And we stayed there for four days, I think.
00:15:40.000 | Nobody saw me.
00:15:41.000 | Nobody noticed anything.
00:15:43.000 | Another time, I stayed in a Prius inside of a parking garage in a casino parking garage in another downtown city.
00:15:51.000 | And again, I was there for about four or five days.
00:15:54.000 | And so you can stealth camp in those kinds of vehicles all the time.
00:15:58.000 | Again, I just go back to this thing that what happens is mentally, you feel like you're living on the edge of society.
00:16:04.000 | And I don't think that most people are designed to function really well in that.
00:16:09.000 | No matter how iconoclastic you are, you kind of always feel like you're on the edge of society.
00:16:14.000 | And it's one thing if you've got a shower and you've got your gym that you go to and you've got your routines.
00:16:21.000 | But at the end of the day, it requires a significant level of commitment.
00:16:25.000 | And I don't think it's free.
00:16:26.000 | I don't think that the mental benefits aren't free.
00:16:29.000 | So if you ask me of spending $700 a month on housing to live in downtown Denver and to kind of feel like a normal person,
00:16:37.000 | being able to save a huge amount of my significant income versus, say, cutting your expenses down to whatever they wound up being, $300 a month,
00:16:46.000 | I'm not sure that $400 a month savings is worth it to go from being fairly standard to being weird and feeling like you're on the fringes of society.
00:17:00.000 | It's going to make it harder for you to date.
00:17:02.000 | It's going to make it harder for you to just interact with most people normally.
00:17:06.000 | And it's something that I don't think is a great long-term move but is a good kind of plan to get you somewhere.
00:17:14.000 | But from what I understand of your situation, you don't need – what's the difference if you save just this little bit of money for the next two or three years?
00:17:21.000 | Then what?
00:17:22.000 | If that's the quitting point and you just need this two or three years to push you over the edge, that would be a reasonable thing.
00:17:29.000 | But you're pretty established.
00:17:31.000 | You're earning quite a lot of income.
00:17:32.000 | You're not sure you want to quit your job for sure.
00:17:34.000 | You're looking for opportunities.
00:17:36.000 | So I just wouldn't run in this direction.
00:17:38.000 | I think focusing on having your adventure mobile locked in will be more useful to you.
00:17:44.000 | And I concede all the points that you said about the Civic being inexpensive.
00:17:47.000 | And if you've worked out a comfortable sleeping situation in that, then you don't have to change it.
00:17:52.000 | It would just seem to me that the extra utility of having a four-wheel drive vehicle when you're in such an outdoor paradise like Colorado would be probably worth it.
00:18:01.000 | But certainly you can decide for yourself.
00:18:04.000 | Let's talk briefly about the concept of investment.
00:18:08.000 | Have you ever owned a piece of real estate?
00:18:10.000 | Have you ever owned a house?
00:18:12.000 | Never.
00:18:13.000 | Okay.
00:18:14.000 | I think you should – before you say, "I don't want to own a house because of property taxes and roommates," things like that, I think it's worth it for you to try it at some point.
00:18:28.000 | Now, you feel free to reject what I'm saying if you're confident that, "I've done this. I know what it's like."
00:18:35.000 | But I think that you're probably overselling the problems and underselling the benefits.
00:18:41.000 | I think that you're owning a house, just a standard house, maybe a three-bedroom or a four-bedroom house, would almost certainly be financially a significantly better outcome than the other ideas that you've described.
00:18:58.000 | It would require you to do work, certainly.
00:19:01.000 | You would have to go and find the house.
00:19:03.000 | You would have to buy the house.
00:19:04.000 | You would have to finance the house.
00:19:06.000 | You would have to find the roommates and fill that in.
00:19:09.000 | But I don't really buy this idea that for a smart, employed, young, single guy that it's all that hard for you to find two roommates, two other guys that want to pay you $700 a month for a bedroom.
00:19:23.000 | I don't think that's that much difficulty.
00:19:25.000 | And if six months from now one of the roommates moves out, it's not that hard for you to go and find another roommate or two.
00:19:31.000 | And in addition, if you did do that, then now everything changes with regard to your box truck.
00:19:38.000 | So the best place for you to be parking your box truck would be in the side yard of the three- or four-bedroom house that you own.
00:19:45.000 | And now you just stay in the box truck and you've got all the bedrooms rented out.
00:19:49.000 | I think it would go so much -- there's so much more potential for appreciation of a house as compared to vacant land.
00:19:57.000 | There's so much more potential for growth and for impacting your investment value than anything else.
00:20:03.000 | And I think in the long run, most people are not going to be content with the vehicle lifestyle for the long run.
00:20:10.000 | So as I stated in the podcast, the main point I was trying to drive across is you should have some place that you can go that you genuinely own.
00:20:18.000 | And you could consider that to be your civic.
00:20:21.000 | You're already camping in it.
00:20:22.000 | Okay, if I got kicked out and I lost my job, I would move into the civic.
00:20:26.000 | That's reasonable.
00:20:27.000 | But in the fullness of time, you wouldn't want to live in a civic for 10 years.
00:20:31.000 | That would be very unusual for anybody to want to do that.
00:20:36.000 | Some people will go and live in a box truck for 10 years.
00:20:38.000 | That's fine, but it's a higher level of comfort.
00:20:42.000 | But most people in the fullness of time are going to want to have a house of some kind.
00:20:46.000 | And so even if you don't want that now, if you go and you get a house now, you finance the house now with your normal income,
00:20:54.000 | and you put your tenants in there and they start paying off the mortgages for you -- the mortgage --
00:20:59.000 | 20 years from now, when you're done living in the vehicle or done being kind of a dirtbag rock climber or whatever it is that you're ready for some change,
00:21:06.000 | now you actually do own the house and you have the asset that's there for you.
00:21:11.000 | So I acknowledge that the vacant land plan could work, but I don't think it's a good long-term solution,
00:21:19.000 | especially when compared to the many, many benefits of buying the house.
00:21:23.000 | I will do, in either one or two more episodes in that show, I will do a show all about buying a house,
00:21:30.000 | and I specifically cut them apart to try to deal with dwelling place versus house.
00:21:35.000 | If you do want to own just the land, then I think at the very least you should try to build a small cabin on it.
00:21:44.000 | And of course you're going to get into permitting questions, things like that,
00:21:47.000 | but you should have a place that you could be comfortable actually living in through the winter
00:21:53.000 | as compared to just focusing on exclusively the mobile option.
00:21:56.000 | Mobile option first, sure, for all the reasons we said, go for it.
00:21:59.000 | But then you should actually have the goal of having a place that you could be comfortable year-round.
00:22:04.000 | And so a remote cabin that's small, that's kind of a single bachelor cabin with a Starlink dish on the roof
00:22:11.000 | probably is going to give you a lot more of what you're looking for than just a piece of raw land
00:22:16.000 | in the middle of town for you to park your box truck on long-term.
00:22:20.000 | So I don't think you should be so dismissive of the many benefits of buying an actual house
00:22:25.000 | without actually going through and doing it and trying it and being honest about what it actually takes.
00:22:34.000 | That's really inspiring and helpful. Yeah, I had pretty much given up on it,
00:22:38.000 | mainly because of the freedom piece.
00:22:41.000 | It's like if I'm gone for two days on a weekend and then it gets mulled,
00:22:45.000 | is your whole investment destroyed?
00:22:47.000 | But maybe these things take longer, and you can have more coverage from insurance
00:22:52.000 | and defend yourself from those kinds of things.
00:22:55.000 | What you're saying sounds like the way that somebody who doesn't own a car would say,
00:23:01.000 | "Well, I'm just going to be in the mechanic every weekend, and then I'm not going to have any time
00:23:04.000 | because all my time is going to be spent going to the mechanic,"
00:23:07.000 | especially if it's a '98 Civic.
00:23:09.000 | You would say, "Well, listen, it's a car. It's going to have issues.
00:23:12.000 | You're going to have to take it to the mechanic."
00:23:14.000 | So is it true that you're going to spend time taking your car to the mechanic?
00:23:17.000 | It absolutely is true.
00:23:19.000 | Is it every weekend? No, that's hyperbole, and it's not that big a frustration.
00:23:24.000 | So clarifying that what it actually is, for most people, I understand that it's a car,
00:23:34.000 | and it's going to require repairs, and there's going to be time invested into it.
00:23:38.000 | But that's not the same as every weekend.
00:23:40.000 | Similar with a house, are there going to be problems? Yes.
00:23:43.000 | Are you going to have a plumbing leak? Yes.
00:23:46.000 | That's all normal. Stuff like that happens with a house.
00:23:49.000 | But on the whole, it's not as constraining as I think you're making it out to be,
00:23:55.000 | and it's much easier to deal with most of the things that go wrong
00:23:58.000 | than I think you are describing it to be.
00:24:01.000 | And the financial value of it is so enormous that especially when it's financeable,
00:24:08.000 | and it's financeable very safely, and you have this income,
00:24:12.000 | and you're at the stage of life where you're single,
00:24:15.000 | so you can fill it up with roommates, and you can do the house hacking thing,
00:24:18.000 | there are so many other arguments that I think really will take priority
00:24:23.000 | over just finding the reasons not to do it.
00:24:28.000 | Yeah. So as a rough estimate, I haven't priced it specifically,
00:24:31.000 | but all my friends and coworkers are all trying to get houses,
00:24:35.000 | and the market is really high, so I would estimate $600,000 to $800,000
00:24:39.000 | for something in the size you're describing.
00:24:43.000 | So it would be well over my current net worth.
00:24:46.000 | Of course, like you said, it's easily financeable.
00:24:49.000 | Does that change the picture at all?
00:24:51.000 | The other thing I would say that's unique about the Denver market,
00:24:54.000 | in my experience, even raw land has an extreme value.
00:24:58.000 | I had a great aunt who had a piece of property in central Denver,
00:25:04.000 | a nice house she'd lived in for 30 years, but the style was slightly older.
00:25:08.000 | And when she passed away and sold it, it sold for $700,000,
00:25:13.000 | and the purchaser immediately destroyed the whole house,
00:25:16.000 | split it into two lots, and put new fancy properties on it.
00:25:20.000 | So that was always my indication.
00:25:22.000 | Land is worth way more than the actual property
00:25:25.000 | when you're really close to town.
00:25:29.000 | Yes, it is, and yes, it is, but property is also valuable.
00:25:35.000 | So I don't have a beautifully prepared speech
00:25:37.000 | to kind of go back and forth on them.
00:25:39.000 | Land is valuable, and it has the benefits, as you described,
00:25:42.000 | of no tenants, all that stuff, but land doesn't create rental income.
00:25:46.000 | So if you buy a house, the huge benefit of buying a house
00:25:50.000 | is, number one, you have utility value. You can live in it.
00:25:53.000 | Number two, you have rental income, and so your roommates
00:25:56.000 | can pay off your mortgage for you.
00:25:58.000 | So you have the ability to go out, and let's say you borrow $600,000.
00:26:02.000 | You can borrow $600,000, and your tenants can pay off
00:26:05.000 | the $600,000 for you over the next 20, 30 years,
00:26:08.000 | and as your tenants pay off that $600,000, you're left with the asset.
00:26:12.000 | So all the debt is gone. It's paid off by your tenants.
00:26:15.000 | You're left with the asset in your hands,
00:26:17.000 | and then the asset can appreciate, and ordinarily,
00:26:20.000 | you have more appreciation that comes from the fact
00:26:23.000 | that it's a livable house, even than just the raw land,
00:26:26.000 | and if you don't, you still have the raw land appreciation.
00:26:29.000 | So are there good reasons to invest in land?
00:26:32.000 | Yes, absolutely, but for a first investment,
00:26:34.000 | first piece of real estate, I think it makes much more sense
00:26:37.000 | for you to buy an actual house that you yourself can live in,
00:26:40.000 | that you yourself can put roommates in,
00:26:42.000 | where your tenants can pay down your debt for you.
00:26:45.000 | As far as the cost, the cost is what the cost is,
00:26:49.000 | and we shouldn't be cavalier about it.
00:26:51.000 | It's got to be affordable.
00:26:52.000 | So you have to sit down with your savings,
00:26:54.000 | sit down with a mortgage broker, see what you can qualify for
00:26:57.000 | in terms of mortgage financing based upon your income,
00:27:00.000 | based upon your expenses, all those things.
00:27:03.000 | You're going to need to put money down on the property
00:27:05.000 | in order to have the deal work, and then you want to make sure
00:27:10.000 | that you can handle the cost.
00:27:12.000 | At the end of the day, though, the cost is indicative
00:27:15.000 | of the long-term potential of it,
00:27:18.000 | unless you see some countervailing trend.
00:27:20.000 | So does land cost more in Denver than it does in western Kansas?
00:27:25.000 | Of course it does.
00:27:27.000 | But that's because Denver is a much more highly demanded place
00:27:31.000 | than is western Kansas as a place to live.
00:27:34.000 | So as long as you're buying a property that's in a great location,
00:27:39.000 | I think that's the best way to insulate yourself against other problems.
00:27:43.000 | If you go out to some rural town in Colorado or Kansas or Wyoming
00:27:48.000 | and you buy a cheap house, that cheap house can provide you with utility,
00:27:54.000 | and that can be wonderful and be a perfectly great plan for you.
00:27:57.000 | It could be a great thing to do seven years from now.
00:28:00.000 | You decide I'm done with the job, I'm going to sell this house in Denver,
00:28:03.000 | I'm going to take $200,000 of equity,
00:28:05.000 | I'm going to go buy a cheap house in rural Colorado,
00:28:07.000 | and that's going to give me access to the slopes
00:28:09.000 | and access to the cliffs that I'm looking for,
00:28:12.000 | and that's a perfectly reasonable plan.
00:28:16.000 | But in terms of finances, I think the safest real estate investments
00:28:21.000 | are often going to be the most expensive because what we see,
00:28:25.000 | especially as populations collapse around the world,
00:28:28.000 | to the extent that we can extrapolate from other places
00:28:32.000 | what's likely to happen in the United States,
00:28:35.000 | it means that the urban areas are more important than the rural areas
00:28:40.000 | in terms of their safer investments,
00:28:42.000 | and we want to buy the very best neighborhood that we can afford within the town.
00:28:48.000 | So first figure out what you are financeable for.
00:28:52.000 | Think about what you can afford based upon how much of your income
00:28:57.000 | you're willing to devote to property payments.
00:28:59.000 | Think about what the rental income would be
00:29:01.000 | if you had various bedrooms in that particular property that you're looking at,
00:29:07.000 | and then what you want to do is as quickly as possible
00:29:11.000 | purchase the house that's in the nicest neighborhood that you can
00:29:14.000 | because it's all about location,
00:29:16.000 | and the nice neighborhoods in the desirable cities
00:29:19.000 | have the best long-term appreciation potential
00:29:22.000 | and the best safety of your money now.
00:29:26.000 | That's perfect because location is really important to me as well
00:29:29.000 | just for prime access to the mountains being on the west side of town.
00:29:33.000 | So that works well. I totally agree. Thanks for those points.
00:29:37.000 | One more thing on this topic.
00:29:40.000 | I think one way people I know, including my brother,
00:29:43.000 | who bought real estate, got in kind of at a cheaper price than average,
00:29:48.000 | the way they had done it is by sacrificing
00:29:52.000 | probably both on the quality of the neighborhood like you're talking about,
00:29:54.000 | but also on the quality of the house itself.
00:29:58.000 | My brother has had to do so much work on his house and the deck
00:30:02.000 | and even hazards and nails and all this stuff.
00:30:06.000 | I think in my situation, I just shouldn't be willing to deal with that
00:30:10.000 | because that's what's going to take away my weekends and all the time.
00:30:14.000 | So I think I'd have to be on the higher end of the range,
00:30:16.000 | I think more like $700, $800 or higher,
00:30:19.000 | if you want something that's not already totally broken down
00:30:23.000 | and needs a bunch of work.
00:30:24.000 | But it's interesting because I'm just listening to your series on
00:30:28.000 | buying a car way back, but this is the completely different thought process
00:30:32.000 | because it's an asset that increases in value.
00:30:34.000 | Right. And the nicer the asset, the more it increases in value.
00:30:38.000 | You can go out today and buy yourself a $120,000 Range Rover
00:30:42.000 | and the thing's going to be worth $30,000 in eight years.
00:30:44.000 | Just everything destroys.
00:30:46.000 | With real estate, as long as you're buying in the nicest neighborhood,
00:30:49.000 | the most attractive neighborhood,
00:30:51.000 | then while certainly an individual house is going to require investment
00:30:57.000 | to fix up and keep nice, the neighborhood is ultimately what counts.
00:31:02.000 | And so you have to decide what you're willing to do
00:31:08.000 | and what not willing to do and then make those decisions eyes wide open.
00:31:13.000 | I would rather buy an older house in the most desirable neighborhood
00:31:18.000 | and know that I'm going to have to put some time and money into it
00:31:22.000 | rather than going out to the east side of town
00:31:25.000 | and plunking down for a brand new tract house
00:31:27.000 | in just some random new suburb that's going to be made.
00:31:30.000 | The most attractive neighborhoods are going to be your best long-term,
00:31:35.000 | safest investment and also the best long-term potential
00:31:38.000 | because those are the neighborhoods that are going to appeal to the rich people.
00:31:41.000 | So in your situation, look around and see if you can find it.
00:31:46.000 | And if you find a house that's too rough
00:31:48.000 | and it has a biohazard in the backyard, don't buy it.
00:31:51.000 | You can be picky. You can take your time.
00:31:53.000 | We're talking about a concept, and the concept that I'm defending
00:31:57.000 | is that the idea of you're buying an actual house that you live in
00:32:01.000 | that you fill with roommates is going to be better for you.
00:32:05.000 | 20 years from now, you're going to be glad you did that
00:32:08.000 | versus just going for what is the cheapest,
00:32:11.000 | which would be to move into a box truck and park it around the city.
00:32:17.000 | I could see you making an alternative decision based upon lifestyle
00:32:20.000 | for the reasons that we've said,
00:32:22.000 | but when it comes to the investment perspective,
00:32:25.000 | I think that's worth doing, and I think it'll be important for you,
00:32:30.000 | again, even to things like your dating life.
00:32:33.000 | You indicated in previous calls, "Okay, I'm probably not going to get married,"
00:32:36.000 | but if you meet a great woman that you could see yourself marrying,
00:32:41.000 | it's going to be easier for you to present yourself as an attractive husband
00:32:46.000 | if you have the ability to live a straightforward-looking lifestyle
00:32:51.000 | and then invite her out to the rock cliffs with you on the weekend
00:32:54.000 | and do the tent-on-the-ground thing.
00:32:56.000 | Hopefully she's adventurous enough to do both of those,
00:32:58.000 | but if my daughter comes to me and she says,
00:33:00.000 | "Well, I'm interested in this guy who lives in this car,"
00:33:03.000 | and that's all he does and that's all his ambition is
00:33:06.000 | and he's not working for something else,
00:33:08.000 | then I would question where the long-term plan is.
00:33:12.000 | If he has built a stable life and all of the standard things
00:33:16.000 | and he also is super adventurous, then now we've got a winner
00:33:19.000 | because we can go back and forth between those,
00:33:21.000 | but I don't think you should just totally ignore those aspects as well.
00:33:26.000 | Right. Yeah, so I'll wait for that podcast you do.
00:33:30.000 | That'll be really helpful.
00:33:31.000 | The one other thing I can think of, hearing people on the periphery,
00:33:35.000 | people talk about the horror stories about how hot the market is
00:33:39.000 | and the price goes up by 200K by whatever it's listed,
00:33:44.000 | that's what it sells at, but ultimately the same things hold true.
00:33:48.000 | If that's true, then the value is there.
00:33:50.000 | So it's still worth playing that game as long as I can afford it.
00:33:53.000 | So probably what I should do, find out, like you said,
00:33:55.000 | what I'm qualified for and then lower that a little more,
00:33:58.000 | just expecting that 20% increase in what it's actually listed at.
00:34:03.000 | I make no prognosis or prognostication, excuse me.
00:34:07.000 | I make no predictions about the real estate market.
00:34:09.000 | Every single prediction I've made on the real estate market
00:34:11.000 | over the last 10 years has been completely wrong.
00:34:14.000 | So I have zero confidence in my ability to make predictions.
00:34:17.000 | I don't think that you should try to make predictions
00:34:20.000 | as a basic fundamental component of your planning.
00:34:24.000 | If you see something, you see something happening,
00:34:26.000 | you should know whether your town is increasing in popularity or not.
00:34:30.000 | Are people moving there? Are people moving out of there?
00:34:32.000 | You should be able to see that stuff for yourself
00:34:34.000 | and you should be able to see the direction that a particular neighborhood is going
00:34:41.000 | based upon your own just on the ground comments.
00:34:47.000 | So those kinds of local predictions I think you can make.
00:34:49.000 | I can't make big national level predictions.
00:34:52.000 | What I can say is at the end of the day, housing has a floor underneath it
00:34:57.000 | because of its utility.
00:34:59.000 | That's what people are looking for.
00:35:01.000 | And the desirable housing is in an urban area.
00:35:04.000 | We're living in a time of enormous urbanization.
00:35:07.000 | Other than what happened during the pandemic
00:35:09.000 | of people moving from Los Angeles to Idaho,
00:35:11.000 | basically nobody's living in the rural areas.
00:35:14.000 | People are all moving to the cities and everyone wants to move to the cities.
00:35:17.000 | So with all the things we've said, buying a good quality neighborhood,
00:35:20.000 | a desirable neighborhood in a city,
00:35:22.000 | I think you've got a strong foundation underneath your long-term plan.
00:35:27.000 | So what happens if you buy a house and then the house declines in value by 20%
00:35:32.000 | over the course of two years?
00:35:34.000 | That would be very unusual but not unprecedented.
00:35:37.000 | That would be very unusual.
00:35:39.000 | What's a decent chance, though, is you still have rental income
00:35:41.000 | as long as you can make your payments.
00:35:43.000 | Ten years out, there's a pretty decent chance that your house has regained in value
00:35:47.000 | because the house is valuable for those underlying characteristics and features.
00:35:53.000 | I wouldn't make any of this same commentary in other contexts.
00:35:56.000 | I think we should be looking at Italy, we should be looking at Japan,
00:35:59.000 | we should be looking to see what's happening in those places
00:36:02.000 | where you have declining populations and they're right in the midst of it.
00:36:06.000 | And what you can see is that houses are not always worth something.
00:36:10.000 | Look at Detroit, places where we've had population collapse in the United States.
00:36:13.000 | Houses are not always worth something.
00:36:15.000 | But the property market in Rome is still very strong.
00:36:18.000 | The property market in Tokyo is higher than it's ever been.
00:36:21.000 | It's just on the outskirts.
00:36:22.000 | So the thing that's different about the United States than many other countries,
00:36:26.000 | in the United States we have 50 different cities, 70 cities,
00:36:30.000 | that can all be kind of top-level attractive cities.
00:36:33.000 | So if you're in one of those cities, which Denver certainly is,
00:36:36.000 | and you're in a good neighborhood, which you can find, and if you can afford it,
00:36:40.000 | and if you can afford it based upon your income and then also make it
00:36:44.000 | even more affordable by renting out rooms,
00:36:47.000 | then it should work out in the long run.
00:36:50.000 | And it should be a pretty safe move all the way through.
00:36:54.000 | So I think it's worth doing.
00:36:56.000 | Enough for today?
00:36:59.000 | Is there someone else on?
00:37:00.000 | I always have infinite amounts, but I'm happy to interrupt if there's others.
00:37:03.000 | Go ahead. Go ahead with your next question.
00:37:07.000 | So I'm sure you've addressed this somewhere,
00:37:10.000 | but like you just said, you can't predict the market.
00:37:13.000 | So I'm in no real rush, like you know.
00:37:16.000 | And we don't know when it's going to be,
00:37:18.000 | but you could probably say in one of the next two decades,
00:37:21.000 | there's going to be another 2008, 2009.
00:37:24.000 | I can just hold the capital aside, be ready to go, buy low.
00:37:29.000 | But you could probably make the dollar cost averaging case that
00:37:32.000 | if it takes 15 years for that to happen,
00:37:34.000 | you would have just been better off getting it now.
00:37:36.000 | Would you agree with that?
00:37:38.000 | If we're talking about real estate, it's even more than 15 years.
00:37:41.000 | It's even more than dollar cost averaging.
00:37:45.000 | If we're talking about real estate,
00:37:46.000 | we're talking about 15 years of mortgage payments made by your tenants
00:37:50.000 | that don't get made otherwise.
00:37:52.000 | So I'm not arguing that you should buy a big fancy house,
00:37:56.000 | live in it yourself.
00:37:57.000 | That's not the plan that seems right for you.
00:38:00.000 | I'm arguing that you should buy a house that you can afford
00:38:03.000 | and then fill it up with tenants.
00:38:05.000 | You might even fill all the bedrooms and park your box truck in the backyard.
00:38:08.000 | If you do that, then regardless of what happens with the value of the property
00:38:13.000 | over the next 15 years,
00:38:15.000 | you will have 15 years of mortgages paid down by your tenants,
00:38:19.000 | and that's the really valuable thing that we're looking at.
00:38:22.000 | So no, I don't think that you can just sit around and wait for 15 years,
00:38:26.000 | and that's assuming that the crash even ever does come.
00:38:29.000 | I'm so skeptical of crashes coming at this point
00:38:32.000 | because I've spent my entire life listening to people who said,
00:38:35.000 | "Well, a crash is coming. A crash is coming any day now.
00:38:37.000 | It's always a year or two away."
00:38:39.000 | And any time I've ever made decisions in my life
00:38:42.000 | based upon the idea that a crash is coming,
00:38:44.000 | I've kind of wound up on the worst end of it.
00:38:46.000 | So what I've chosen to do,
00:38:48.000 | and I'm trying to be very transparent about this
00:38:50.000 | because I think it needs to be discussed,
00:38:52.000 | is at any point in time I assume that a crash can come,
00:38:56.000 | and so I need to be prepared for a crash.
00:38:58.000 | So that's where we want to have a good amount of prudence,
00:39:00.000 | financial conservatism.
00:39:02.000 | I want to be prepared for a crash and expect that a crash can come.
00:39:06.000 | I don't want to be in a dangerous place and exposed when a crash comes.
00:39:10.000 | But I'm going to make decisions that are right for me
00:39:12.000 | based upon where I'm at in my life now,
00:39:14.000 | and I'm going to make these decisions
00:39:16.000 | purely through the lens of my personal finances,
00:39:19.000 | not by looking at the market out there for my solutions.
00:39:24.000 | Yep. Thanks so much. That rounds it out for that topic.
00:39:28.000 | Good. My pleasure.