RPF_0006_-_How_to_Afford_Anything_You_Want_in_Life_-_An_Interview_with_Paula_Pant_from_AffordAnything
00:00:00.000 | Welcome to the Radical Personal Finance Podcast. I'm your host, Joshua Sheets, and today I'm
00:00:08.400 | excited to have Paula from Afford Anything on the line. Paula, welcome.
00:00:12.480 | Hi. Thanks for having me on. I'm really glad to have you on. I'm
00:00:17.120 | really glad to have you on. I first heard about you over on the Mad Scientist Podcast,
00:00:24.000 | and then I went over to your site. I heard you featured there on that interview. Then
00:00:29.640 | I went over to your site, and I was so intrigued by the name of your site, which is AffordAnything.com.
00:00:34.800 | It's always an attention grabber. People tend to remember it.
00:00:40.720 | It really is. I think it's one of the better names. Obviously, there are tens of thousands
00:00:46.920 | of financial blogs and things out there that people can find, but I love the name of that
00:00:51.680 | site. How did you come up with that? What was the philosophy behind it?
00:00:55.320 | The philosophy behind the site speaks really well to the name. When I was about 24, I quit
00:01:06.760 | my job and went off traveling for a while. Everybody kept saying to me at that time,
00:01:12.000 | "Oh, I would love to do something like that, but I can't afford it." Those are the key
00:01:16.600 | words that they kept repeating, "I can't afford it. I can't afford it. I can't afford
00:01:21.320 | it." I wanted to smack my head against a wall every time I heard that, because I'm
00:01:26.680 | like, "Dude, you can. You can afford anything." That was where the name of the site came from.
00:01:33.640 | I share that same frustration. I know from reading your blog that I think you went and
00:01:43.240 | traveled for how long? Two years at least?
00:01:45.280 | Two years, a little over two years, yeah, nonstop, and without working during that time.
00:01:50.480 | Good for you. We're going to get to some of the strategies. I've never traveled for
00:01:55.000 | two years straight, but I have been blessed to visit ... I don't know. Let's see. I think
00:02:01.840 | I figured it out one time. I had the opportunity to visit about 25 countries by the time I
00:02:06.320 | was about 25 years old.
00:02:08.320 | Oh, that's excellent. That's really cool.
00:02:13.160 | My friends would always say, "Well, how on earth do you do that?" I would just say,
00:02:15.960 | "Do you see the car I'm driving?"
00:02:18.040 | Yeah, exactly.
00:02:19.040 | Most people spend their money on their cars. I always just figured, "Well, I don't mind
00:02:24.880 | so much a cheap car. I'd rather have more stamps than my passport."
00:02:28.760 | Right, exactly. That's the part that people don't get. They'll be talking to me with
00:02:34.600 | full manicure and pedicure and highlighted hair and a Venti Starbucks, no whip, grande,
00:02:44.120 | whatever, whatever in their hand. They're like, "Oh, I could never afford to do that.
00:02:51.080 | You must be rich." I'm like, "Really? Do you see yourself right now?"
00:02:56.880 | It's a matter of priorities.
00:02:59.080 | Exactly.
00:03:00.080 | I think there's a lot of alignment between what you write about and the focus of my show.
00:03:08.760 | My main thing is not to tell people what they should or shouldn't do, but to help people,
00:03:14.320 | to encourage people to understand what they actually want versus just simply accepting
00:03:19.040 | them what society and life throws at them and then figure out some smart ways to get
00:03:22.440 | what they want. I think you've encapsulated it perfectly in two words, far more succinctly
00:03:27.880 | than I could.
00:03:28.880 | I love that philosophy because I feel like there's a lot of personal financial advice
00:03:36.000 | out there that dictates the path. It's meant to be one size fits all. When you go online
00:03:43.920 | and you read financial articles or when you read books, it's meant for the average consumer.
00:03:52.640 | They write about buying cars and buying houses and buying this and buying that and replacing
00:04:00.480 | 80% of your pre-retirement income in retirement. They make all of these unstated assumptions
00:04:07.640 | about what you want and what kind of lifestyle you want and how much money you're spending,
00:04:12.760 | how much of your income you're spending.
00:04:14.000 | None of those assumptions need to be true. You don't need to follow this prescription
00:04:19.720 | that's out there for the masses. If you want to, if you've thought about it and that's
00:04:24.640 | the life that you genuinely want to lead, then that's great. I'm just sick of the one
00:04:30.760 | size fits all financial advice out there. I think it's just insane.
00:04:35.960 | I agree with you. Do you get frustrated like I do when people say, "Oh, you can't buy
00:04:42.640 | this car. You can't do that." I get frustrated because it's your money. Spend it on whatever
00:04:49.760 | you want to. Just make sure that you've decided it and that it's really something that is
00:04:54.080 | fulfilling to you.
00:04:55.080 | Exactly. There's a huge difference between somebody like me who, "I don't really know
00:05:02.440 | anything about cars. I don't really care that much about cars. They just don't interest
00:05:06.480 | me." There's a big difference between a person like me and a person who reads car magazines,
00:05:12.920 | hangs out on car blogs, hangs a poster of a car in his childhood bedroom. There's a
00:05:19.960 | big difference between the two of us.
00:05:21.760 | If you were to give the two of us the same kind of financial advice when it comes to
00:05:25.960 | buying a car, it just wouldn't apply. It would be like telling a person, and that goes with
00:05:33.280 | everything. It would be like telling people how much money that they should spend on travel
00:05:38.120 | or on watching sports games or anything else. Your passions are your passions. No one can
00:05:46.080 | tell you how much of your budget you should allocate towards that.
00:05:50.080 | I'm 100% with you. You write a personal finance blog. Have you always been a money person?
00:05:58.200 | Tell us a little bit about your path, so to speak. Were you always super frugal and saving
00:06:05.400 | and investing from six years old, or was it something that developed as an adult? Tell
00:06:09.200 | us a little bit about your path.
00:06:10.200 | I was always very frugal. I'm a child of immigrants. Technically, I myself am also an immigrant,
00:06:17.280 | but I came to the United States when I was a baby. My parents came here with me in tow
00:06:24.800 | when I was still wearing diapers. We started with nothing. Family started with nothing
00:06:30.800 | and built everything from scratch. They didn't have any money. They didn't have any connections.
00:06:35.160 | They didn't have any family that they could lean on.
00:06:39.200 | Throughout my childhood, we were middle class, but we were very, very frugal. My parents
00:06:45.720 | worked very hard to just get us established in the United States. I learned from seeing
00:06:52.600 | that example. Throughout my life, I'd always been very frugal as well.
00:06:57.440 | One thing that I'm just coming to grips with now as an adult is learning the difference
00:07:05.760 | between being frugal within your personal life versus investing in growing your business.
00:07:16.440 | If you try to be too – and I don't want to go off on a tangent about this necessarily,
00:07:19.880 | but there's a time to be frugal and there's a time to not be. That's one of the really
00:07:25.680 | hard things for me to learn as an adult is reinvesting in your business and taking the
00:07:29.880 | money that you've made instead of just hoarding it, spending it in the hopes of earning more.
00:07:37.760 | I guess that's a different topic for a different day.
00:07:41.960 | Actually, I'm interested in that because it's something that a lot of times isn't
00:07:48.280 | discussed. Just to let you know a little bit about me since we haven't spoken before
00:07:51.960 | this, I'm interested in the things that nobody talks about. One of those things that
00:07:58.720 | people don't talk about is simply the difference between luxury consumption and investment.
00:08:06.840 | I just recorded a show about how to cut your cell phone bill by tons of money. I think
00:08:12.640 | it's a really valuable resource for those who would benefit from that information.
00:08:19.480 | But exactly parallel with it, if you make millions of dollars on your phone, you better
00:08:23.600 | have the absolute best phone that you can get with the best service that you can get
00:08:28.720 | and you probably should have a couple of backups. It's a very challenging transition for people
00:08:34.240 | to make and it's challenging to have a decision tree because you may have a decision tree
00:08:41.460 | for your own if you're very focused on this is what I'm doing and I'm saving money
00:08:44.920 | for this goal. Well, no, I'm not going to spend on that. But when you get into the
00:08:49.120 | world of retirement and investing and financially independent, it's much more challenging.
00:08:54.080 | Absolutely. You phrased it really well. I love the way you said luxury consumption versus
00:09:01.200 | investment. Your phone example is a great one because we've dealt with that. My boyfriend
00:09:10.240 | as an example, he runs a small business and oftentimes he is out in the middle of nowhere
00:09:18.440 | like rural Oklahoma, just out very, very far away from civilization in places where there
00:09:26.280 | is not very good cell phone reception. He's in a position where missing a call could literally
00:09:34.400 | cost him tens of thousands of dollars. So are we going to cheap out and try and get
00:09:41.440 | a $10 a month cell phone plan? No, of course not. And so I guess that's the difference.
00:09:49.000 | It's very easy to write a book or to write a blog post or to make a speech that gives
00:09:54.920 | this one size fits all financial advice that says cut your expenses as much as possible
00:10:03.080 | and do it yourself. Mow your own lawn and paint your own house and insource as much
00:10:13.360 | as possible. But that's fine if you're speaking about it within the context of luxury consumption,
00:10:29.200 | financial consumption, but there's a massive difference when you're talking about it within
00:10:35.520 | the context of growing and investing. And I think that a lot of times people fail to
00:10:41.800 | really make that distinction. Particularly if like me, you tend to be naturally frugal
00:10:48.320 | anyway. It's hard, but it's absolutely pivotal to come to grips with the fact that you're
00:10:56.120 | going to have to start paying people to mow your lawn because you know what? That's one
00:11:00.560 | less thing, not just one less thing that you have to do, but one less thing that you have
00:11:04.520 | to track. And by freeing up both that time and that mental space, you can spend that
00:11:12.560 | additional hour per week on a sales call with a client that could net you an extra $700
00:11:21.520 | a month. You know?
00:11:25.760 | Do you think that most people make financial decisions rationally or do they tend to go
00:11:32.040 | towards whatever they're accustomed to?
00:11:35.360 | I think habit is very, very powerful. I actually wrote a post not too long ago about, it was
00:11:43.400 | based on a book called The Power of Habit by Charles Duhigg. I'm sure I'm mispronouncing
00:11:48.320 | his name. One of the best books that I've read this year, and it talked about how powerful
00:11:55.920 | habit is and how most people, even if they're not conscious of it, tend to get looped into
00:12:03.880 | habits when they make decisions because the brain wants to do whatever is easiest and
00:12:09.720 | so it follows the path that it knows.
00:12:17.440 | The reason I ask that question is because the thing that you're touching on, I think,
00:12:23.040 | strikes to the heart of how challenging it is in the financial world, especially the
00:12:28.000 | online financial world, is that we all have things that, I'll pick on the mow the lawn
00:12:34.160 | example because it's a good one. It's a great one. I can think of at least four or five
00:12:40.640 | different ways to approach that decision. In fact, I'm going to be releasing either
00:12:46.640 | right before this show goes out or right after my ultimate guide to a smart person's way
00:12:52.400 | of making decisions. That's a pretty pretentious term. In that lawn example, I can think of
00:13:00.120 | at least several ways that that example could be made.
00:13:04.160 | Example one would be, let's say, I'm going to make these scenarios up on the fly here,
00:13:07.840 | and they're going to be extreme, but I think they'll demonstrate how each one of us needs
00:13:12.720 | to consider and make these decisions. Number one, somebody is not earning a high income,
00:13:18.960 | has a steady salary job where they're not going to be paid significantly more for working
00:13:22.800 | more and has a goal of saving money. That's a really great situation where somebody can
00:13:32.560 | focus on mowing your own lawn.
00:13:35.840 | On the other hand, somebody has a very high income, very stressful job, and they absolutely
00:13:39.880 | despise mowing their lawn. It's one of their least favorite things in the world. That would
00:13:44.880 | be a good candidate to just simply hire out the lawn. That could be a very simple decision,
00:13:52.160 | but the next decision would be, "Why do I have a lawn at all? Could I just simply eliminate
00:13:56.240 | the lawn and eliminate the expense and eliminate the time, or could I turn that lawn into something
00:14:01.560 | that's productive for me?" Instead of unproductive grass, could I do some sort of productive
00:14:07.000 | plants or could I do some sort of xeriscaping strategy where I just eliminate, "I still
00:14:11.080 | have the yard, but I don't have the lawn." There are five examples of different ways
00:14:16.080 | that you can turn it. One, you could spend money, and it could be completely right for
00:14:19.720 | one person to spend money on paying someone to do it because they earn income and they
00:14:24.080 | want to turn that extra time and income. The other person, it could be completely wrong,
00:14:28.120 | or both of them could make a completely different choice. That can't be simplified into one
00:14:32.480 | blog post saying, "I mow my lawn, so you should too."
00:14:35.240 | Right, right. It's funny because when you bring up the, "Why have a lawn at all?" because
00:14:40.800 | that touches on so many other factors. Do you have a lawn because you live in an area
00:14:46.800 | where single-family homes look like, based on your market research, single-family homes
00:14:53.120 | look like they're going to appreciate much better than condos will? Therefore, even though
00:15:01.080 | a lawn is an expense, the overall decision to have a home with a lawn could end up netting
00:15:06.320 | you more in the long run than the decision to have a condo without any underlying land.
00:15:12.200 | That would be an example where paying somebody to mow your lawn would be an overhead cost
00:15:19.200 | to a long-term investing strategy that you're trying to make.
00:15:25.920 | Another example would be, I own several rental properties. One of them is a multi-unit. With
00:15:32.920 | a single-family home, generally the tenant mows their own lawn, but in a multi-unit,
00:15:37.280 | it's the landlord's responsibility. There's another example. Even then, when you say,
00:15:44.280 | "Why do you have a lawn?" there are hundreds of different reasons that a person might give
00:15:51.240 | for that. Some of them could actually be the wiser financial choice, depending on your
00:15:58.240 | individual situation.
00:16:00.640 | It all goes back to one individual's goals. To me, that's where everything has to start.
00:16:07.640 | You have a good point with type of property. It seems, obviously, travel is something that's
00:16:18.040 | important to you. It may be that in one area of the country, a single-family home is a
00:16:24.520 | much better rental market to be in, but there may also be a lot more hassle with maintaining
00:16:29.880 | that. That might not fit one person's travel goals, or the person may have the resources
00:16:35.200 | and the ability to make it fit their travel goals.
00:16:38.840 | Having five condos might be easier for a landlord who wants to be an absentee landlord to manage
00:16:43.480 | than having four plexes. Everything comes down to individual choices and individual
00:16:50.480 | goals. Based on those goals, that's how we all decide what's right for us.
00:16:58.880 | Exactly. I don't quite know how we arrived here, but I think we led to this from financial
00:17:08.920 | advice that is true, one size fits all. Not my taste. Not my thing.
00:17:15.920 | I'm with you. I'm interested in ... You don't have to disclose anything you don't want to,
00:17:22.480 | but as a young person, you're under 30, right?
00:17:27.200 | Just barely under 30. I've got a couple more months left.
00:17:30.840 | Okay. Congratulations. Are you on track to hit your goal of 30 countries by the age of
00:17:35.400 | 30?
00:17:35.680 | I am. I need to go to one more country. I've been to 29 countries, and I'm 29 years old,
00:17:42.680 | so I need to go to one more before my 30th birthday, which is ... Let's see. It's July
00:17:49.840 | right now still. I guess maybe it's almost August. I'll be turning 30 in October.
00:17:56.960 | Good for you.
00:17:58.320 | I've got a couple of months.
00:18:00.360 | What's the next country you're going to?
00:18:01.920 | I have no idea.
00:18:04.520 | Well, maybe after we finish recording, I'll try to give you some ideas of some places
00:18:09.880 | that I love. There are a lot of great choices. How would you characterize as far as your
00:18:16.880 | main financial goals? Are you pursuing this idea of financial independence? I go where
00:18:23.640 | I want to. I do what I want to. Are you pursuing I want to travel the world? Are you pursuing
00:18:28.160 | I want to do work I love? How do you characterize your major financial goals? My goal is that
00:18:34.800 | this show would speak to people in their 20s and 30s about some of the things that are
00:18:39.160 | available at a young age. I'd be interested in what you're working towards.
00:18:42.000 | One of the things I'm most proud of is that I have not had a 9-to-5 job since 2008. I
00:18:49.000 | was 24 the last time that I had a traditional 9-to-5 job. That's a huge step.
00:18:57.560 | That's a huge point of pride for me because I have always aspired to not be in a cubicle.
00:19:04.560 | So far, so good. I've never been in one.
00:19:13.280 | When I graduated from college, and this was in 2001, I had the same idea that most of
00:19:24.080 | my friends had, which is that I was supposed to get a job. In hindsight, that was kind
00:19:28.720 | of a ridiculous assumption. Because once I started working, I realized that for me, it
00:19:35.720 | was so possible to work for yourself and work from home or work from your laptop anywhere
00:19:43.320 | in the world, be completely location independent. It took me three years before I managed to
00:19:53.040 | bite the bullet and quit my job. I understood it in theory, but I was scared to actually
00:19:59.160 | pull the trigger. But by the time I quit my job, I had some substantial savings. I went
00:20:04.440 | and traveled for two years without working, and then came back and started working for
00:20:09.960 | myself. I've been doing it ever since.
00:20:12.720 | When you ask about my goals, I feel like I'm very much already there in the sense that
00:20:20.400 | I'm working for myself from anywhere in the world that I want. I'm completely location
00:20:25.720 | independent. I own a handful of rental properties. My boyfriend and I together own six rental
00:20:32.720 | units. I feel like we're basically just living the life. I guess maybe more of the same,
00:20:44.880 | just keep doing what I'm doing, but more so. I guess that's the only goal, really.
00:20:51.880 | Got it. The reason I ask is, and I know maybe it's not something you've been asked, it's
00:21:03.280 | very challenging, I think, when most young people's goals are, I guess, more easily reduced
00:21:13.400 | to a checklist. They get boiled down. I want to do this. I want to go here. I want to own
00:21:19.520 | this. I want to be in this type of relationship with this type of focus.
00:21:25.400 | When it comes to financial goals, many financial goals get pushed off to a later date. I'd
00:21:30.040 | like to retire someday. It seems like it takes a lot of courage to move that date up, because
00:21:37.440 | then what you find is that instead of maybe finding fulfillment in the day-to-day work
00:21:44.440 | or the day-to-day job, you've got to find fulfillment in other things.
00:21:51.640 | I'm interested in young people who are making that transition and some of their experiences
00:21:59.040 | as far as how they make that transition and how you fill your time if it's not about,
00:22:05.120 | "I'm going to build this specific career," if you've already achieved some level of financial
00:22:08.880 | freedom. It takes the bull off the back of some people. I don't have a specific question
00:22:15.880 | there. I'm always interested in gathering people's experiences and learning from others
00:22:24.440 | who have been down the road before.
00:22:26.760 | You've chosen real estate as the primary vehicle for your income?
00:22:31.400 | No. Real estate is one of my favorite ways to invest. It's not my primary source of income.
00:22:38.400 | My primary source of income is I do freelance writing and online marketing and work from
00:22:47.360 | my laptop for a handful of clients. It's pretty great. My ambition was always to run my own
00:22:59.480 | business and work for myself. I think one of the reasons that retirement doesn't particularly
00:23:05.440 | appeal to me, financial freedom appeals to me in the sense that who doesn't want to have
00:23:10.760 | the security of knowing that you've got enough money coming in that you'll be okay.
00:23:15.760 | I don't ever want to retire because I actually really enjoy working. I really enjoy what
00:23:22.880 | I do. I enjoy problem solving and helping people. I built my business from scratch.
00:23:29.880 | I literally built it from nothing. I'm very proud of it and I want to keep it going.
00:23:39.880 | In terms of financial freedom, that's what the rental properties are for. I've got enough
00:23:49.240 | passive income coming in that I could, in theory, if there was a big family health crisis
00:23:56.240 | or something like that, if some emergency came up, I could entirely stop working and
00:24:04.120 | trim back my stop going to restaurants and I'd be all right. I'd be fine. I wouldn't
00:24:12.600 | be eating at restaurants and I wouldn't be wearing fancy Abercrombie clothes or anything
00:24:19.440 | like that, but I would totally be fine and that's a really good feeling to have.
00:24:26.440 | I've often thought that pursuing financial independence at an early age is a worthy goal
00:24:33.680 | because if you are able to achieve it or at least see yourself closer to it, you're able
00:24:40.040 | to actually look at your source of income and see if this is something that you're doing
00:24:43.360 | because you enjoy it or if it's something that you're doing because you have to do it.
00:24:47.920 | Then when you continue to work at it, mainly because you enjoy it, you feel a lot better
00:24:54.600 | about it than being there because you have to.
00:24:56.800 | Yeah, I definitely agree with that. In fact, I'd say that it increases job satisfaction.
00:25:06.160 | The sense of liberation increases job satisfaction because every day that you go to work, you
00:25:11.920 | know that it's a choice that you're making and that you don't have to do this. If you
00:25:17.440 | just sort of trim back your lifestyle a little bit, yeah, you don't have to do this at all,
00:25:24.440 | but you like it. You like the game. You stay in it because it's interesting.
00:25:32.000 | I noticed that many of the wealthiest people in the world don't sit around and watch TV
00:25:36.400 | all afternoon. They tend to still continue working at their businesses and creating things.
00:25:41.400 | Right, exactly. Bill Gates, Donald Trump, I mean these guys don't have to work, but
00:25:48.400 | presumably they do it because they love it.
00:25:52.440 | Absolutely. What attracted you to real estate versus other forms of investing as a strategy
00:25:58.160 | for early financial independence?
00:26:00.560 | Good question. I was more interested in monthly cash flow than I was in potential future appreciation.
00:26:07.560 | By that I mean, well, I'll use real estate as the example because a lot of people when
00:26:17.720 | you tell them that you're in real estate, their first thought jumps to the value of
00:26:23.120 | the house going up over time. When I buy houses, the potential appreciation of the house is
00:26:30.800 | secondary. I mean very, very secondary. To me, I'm looking for how much cash that house
00:26:37.800 | can produce each month just because that's my philosophy. That's what I'm interested
00:26:47.080 | in is monthly cash flows, replacing that monthly income.
00:26:54.000 | To me, real estate rental properties specifically were a better way to do that than stocks.
00:27:00.560 | There are people who are really into dividend investing and collecting that monthly dividend.
00:27:07.040 | Looking at that, I mean I and maybe I'm sure there are people who are much better than
00:27:10.960 | I am who could get better returns, but when I looked into dividend investing, what I saw
00:27:15.800 | was 3% to 4% returns with lots of volatility in the underlying asset versus the cash flow
00:27:23.800 | asset versus when I looked at houses, I saw 8% to 12% returns with much less volatility.
00:27:30.800 | For me, it was a no-brainer at that point. Of course, the trade-off is that my investment
00:27:38.920 | is highly illiquid. My cash is tied up in the houses, so I can't just snap my fingers
00:27:44.640 | and sell at a moment's notice. If I'm getting really good monthly cash flow, I don't really
00:27:49.320 | want to, so I'm fine with that trade-off.
00:27:53.960 | What role did leverage play in early real estate investing?
00:28:00.960 | Leverage was important for getting into, certainly for the first property. My first property
00:28:09.000 | was a triplex, which we bought in 2010. That one was a $1,000 property. That was a $1,000
00:28:18.960 | property. That one we put some money down and then leveraged into the rest. The second
00:28:22.800 | one, however, we bought entirely in cash. That one only cost $21,000. The second property
00:28:29.800 | we bought entirely in cash. The third property, we got an investor loan. We got a loan from
00:28:39.360 | a private party.
00:28:44.000 | I guess to answer your question, we've used leverage in some deals and haven't used leverage
00:28:49.120 | in others. It's certainly very helpful in getting in. I love Dave Ramsey, but I do not
00:28:56.120 | share his philosophy of never, ever, ever, ever, ever touch debt. I tend to be a bit
00:29:08.640 | more on the Robert Kiyosaki side of believing that leverage is okay in situations where
00:29:15.640 | it's cash flow positive with a very healthy margin.
00:29:20.640 | That said, I am not like most real estate investors in that -- I shouldn't say most,
00:29:27.640 | but there are some real estate investors who get a little out of hand with leverage. I
00:29:36.680 | would caution you against that. I think it's something to be used very judiciously in limited
00:29:43.680 | circumstances and only if you've got huge, huge margins of error.
00:29:50.680 | The reason I ask is because it has often seemed to me real estate can be very attractive for
00:30:04.520 | younger people because of the ability to leverage it and buy cash flow. You really can buy cash
00:30:11.520 | flow in real estate investing. If you have the right property and the right deal, how
00:30:19.520 | many properties would you say you look at for every deal that you've purchased of the
00:30:23.440 | six that you own now?
00:30:24.200 | Oh my goodness. It's like a full-time job. It really is. It's an incredible, incredible
00:30:32.040 | time suck looking at properties.
00:30:34.680 | Yeah. If somebody does have the time to look at the properties and work through the deals,
00:30:41.320 | many real estate investors I've spoken with have often said they'll look at 100 houses
00:30:45.560 | for every property they wind up buying. If you find the right deal where the money works,
00:30:52.560 | the nice thing about leverage on real estate is generally it's non-recourse, unlike maybe
00:30:58.360 | a margin account to buy dividend paying stocks where you borrow money to buy the stocks.
00:31:05.200 | Stock value declines, your loan is callable and you got to come up with the cash whereas
00:31:09.480 | real estate with a traditional loan generally the bank can't call the loan. As long as you
00:31:14.960 | can come up with the cash regardless of what happens with the values, if you buy a good
00:31:18.680 | cash flow with a good margin of safety, it can really work well.
00:31:24.800 | Are there any specific numbers or ratios that you look at when you're evaluating properties?
00:31:30.280 | My quick and dirty back of the envelope calculation is called the 1% rule. That is that the monthly
00:31:37.280 | rental income, gross rental income, must be at least 1% of the purchase price. If you're
00:31:45.060 | buying a $100,000 house, the monthly rental income should be at least $1,000. That's just
00:31:53.840 | a quick and dirty back of the envelope calculation. It's the first step, not the last. If a property
00:32:00.840 | does not meet the 1% rule, it's out. It's gone from the game. I don't consider it.
00:32:09.720 | Running those numbers, that's at least a starting point for you to feel comfortable with working
00:32:16.920 | out the further numbers of vacancy rates and financing costs and all that and just backing
00:32:22.360 | into it. I'll explain why I feel that that rule is
00:32:25.640 | so important. If your monthly gross rental is 1% of the purchase price, then annually,
00:32:32.640 | your annual revenue is 12% of the purchase price. That's $12,000 on a $100,000 house.
00:32:41.320 | Let's say that 50% of that goes into expenses, such as non-mortgage expenses, such as management,
00:32:50.560 | maintenance, repairs, vacancies, all of that. 50% of that goes into expenses. You're left
00:32:57.560 | with a 6% return on that $100,000 house. That's pretty good.
00:33:06.120 | That's just the cash flow. If you assume that the house appreciates at the rate of inflation,
00:33:12.240 | and inflation is 2.5% to 3%, then that means that over the long term, you're getting about
00:33:19.720 | an 8.5% to 9% return on that house. That's a pretty good return on investment, or at
00:33:26.720 | least it's not bad. It's not terrible. 8.5% to 9% is certainly a rate of return that I'd
00:33:35.160 | be happy with. That is why I'm such a firm believer in the 1% rule.
00:33:44.000 | It makes sense. It gives you a convenient ... Those round numbers and those simple rules
00:33:49.920 | like that really help to make quick judgments. I think it's valuable for people who haven't
00:33:56.920 | invested in real estate to think about numbers like that, just so that when deals fall across
00:34:03.920 | your lap ... Because if I remember, your first deal just fell into your lap.
00:34:06.480 | It did. We were literally renting the house across the street, and we saw the for sale
00:34:13.040 | sign in the yard. We just did a very, very rough and dirty calculation in our head, and
00:34:20.040 | realized that this would just be a golden opportunity. We just jumped on it. It was
00:34:25.840 | sort of an impulse buy. Are you not somebody that's affected by fear?
00:34:31.560 | Yeah. I was definitely scared before we did it, but my solution to fear is to just recheck
00:34:38.320 | the spreadsheet and run the spreadsheet 100 different times using a bunch of different
00:34:45.320 | scenarios, like best case, worst case, every iteration of medium case. If the spreadsheet
00:34:54.360 | works out, if the math works out, I think that's the best antidote to fear.
00:35:04.360 | Also, understanding the worst case scenarios, right?
00:35:08.560 | Yeah. Understanding the worst case scenario from a mathematical point of view. You hear
00:35:13.600 | a lot of naysayers who love to give anecdotal information about, "Oh, rental properties
00:35:20.600 | are terrible. Your tenants are going to drive a motorcycle through your house, and start
00:35:27.280 | a meth lab, and raise a pig farm in the middle of your attic," or whatever they say.
00:35:35.280 | You can't let those anecdotes scare you. I find it best to just sort of ignore the
00:35:42.280 | naysayers. If you're getting advice from people who aren't in the industry, then you're not
00:35:52.760 | listening to the right people. Go to the people who actually do it day in and day out, and
00:35:59.440 | listen to what they have to say. Don't listen to Cousin Eddie.
00:36:06.040 | Good old broke Cousin Eddie. I'm going to pick on some of my favorite articles, because
00:36:11.960 | I'm interested in just hearing you talk about a couple of concepts that I read on your site.
00:36:18.520 | Pretend that you're speaking to either a young person or a young couple in their 20s or 30s
00:36:27.600 | that has a significant amount of debt, regardless of why it's there and what it is. You wrote
00:36:34.480 | an article called, "Forget Your Debt. Just Forget About It, Really." It doesn't sound
00:36:39.080 | like very good financial advice. Walk us through what your thoughts are and your philosophies.
00:36:46.080 | I really enjoyed the way that you thought about that.
00:36:49.560 | When I first started writing about personal finance, one of the things that shocked me
00:36:54.560 | was reading people who were in debt. Many of them had this ... They were so consumed
00:37:01.240 | by the idea that they were in debt. All they could think about was getting out of debt,
00:37:08.240 | getting their personal balance sheet up to zero. They almost spoke as though once they
00:37:16.080 | were debt-free, they would be free. I've never had consumer debt. I've never had a debt-free
00:37:23.280 | debt. I've never had a credit card balance. I've never had a car loan. I've never had
00:37:27.040 | any of that. But I never felt free because I always have to buy groceries and keep the
00:37:34.040 | electricity on. Those are still very real bills that need to be paid. It baffled me
00:37:48.560 | for a moment how people would talk about being debt-free as the goal when really that's just
00:37:55.560 | one piece of the puzzle. I wrote this blog post called "Forget Your Debt" in which I
00:38:02.720 | said, "Listen, it's not about whether you have debt or whether you don't. It's about
00:38:09.720 | at all points in your life making the most financially sound choice. If you have a dollar,
00:38:17.800 | what's the most financially savvy way that you can spend that dollar?" Now, if you've
00:38:23.600 | got a credit card with an 18% interest rate and you have a potential investment that's
00:38:30.600 | going to pay you 8%, which one of those two options would you choose? You would choose
00:38:39.000 | the guaranteed payoff of something that's costing you 18% versus an investment that
00:38:46.920 | may give you 8%, not because you want to get out of debt but just because the numbers make
00:38:52.560 | sense. It's a subtle difference, subtle mental shift. But you stop identifying as a person
00:38:59.560 | who has debt and just start identifying as a person who makes financially savvy choices.
00:39:09.360 | So what if my choice is, how would you talk me through if I said, "Oh, you know what,
00:39:14.880 | Paula? That makes all the sense in the world. I'm going to think from abundance and financial
00:39:20.320 | independence, and tickets to Europe right now are only a thousand bucks. How would you talk
00:39:26.760 | me through it? I have a lot of consumer debt. How would you talk me through that then?"
00:39:30.760 | Paula Bruggerman Well, so, all right. Yeah. Okay. A ticket
00:39:34.760 | to Europe.
00:39:35.040 | David Altman I know it's hypothetical, but it's an interesting
00:39:38.400 | – I hear it a lot.
00:39:40.200 | Paula Bruggerman So a ticket to Europe right now is $1,000,
00:39:44.960 | and you've got a credit card with a, what, let's say an 18% or a 20% interest rate on
00:39:50.840 | it. And that interest compounds upon itself. So if you took that trip to Europe and didn't
00:39:57.840 | put that thousand towards paying off your credit card, how much longer would it take
00:40:02.120 | you to pay off that credit card? Crunch the numbers on that. What additional amount of
00:40:09.120 | interest would you pay? Let's say – I'm just pulling numbers out of thin air. Let's
00:40:15.200 | say that you would end up paying an additional $800 in interest over the added amount of
00:40:22.200 | time that it would take you to pay off that credit card. Okay. Well, so, how much is the
00:40:27.600 | current discount for tickets to Europe? Is it normally a $1,500 ticket, and now it's
00:40:33.600 | $1,000? Because if that's the case, you still end up $300 in the hole. You're better
00:40:40.600 | off paying the higher-priced ticket to Europe later in this particular scenario using these
00:40:47.120 | hypothetical numbers.
00:40:48.520 | Jay C. Harness Yeah. You're exactly right. And the interesting
00:40:53.920 | thing – ultimately it always comes back to what someone wants, right? So it does come
00:41:00.200 | back to kind of what someone's goals are. And the thing I did like about – I loved
00:41:04.560 | about your article is that at the end of the day, the only way to get out of debt is just
00:41:09.480 | to pay payments on the debt. That's really it. And you could talk about what order to
00:41:16.480 | do it in, and that's where most people get bogged down. But to me, what I find more powerful
00:41:22.560 | than the order is the reason, which is what you touch on with freedom. Thinking like a
00:41:29.760 | financial – coming from a term of place of financial abundance, and most goals are
00:41:36.760 | – most financial goals are more challenging to achieve if you have a heavy ongoing monthly
00:41:42.080 | expenses or if you have an extra heavy cost of a ticket added on by just simply the financing
00:41:48.160 | cost. But it doesn't have to be this terrible thing where, "Woe is me, I'm in debt,"
00:41:55.160 | because I've seen lots of people get totally focused on paying off their debt, and they
00:41:59.120 | achieve this magical milestone of zero debt, and six months later, they're right back
00:42:04.840 | in it. It's not for something. If it's not for a reason, at least my observation
00:42:11.120 | is it tends not to last. But if that reason is clear, you can enjoy the process all the
00:42:17.880 | way out even though you may be working very hard at it.
00:42:23.080 | But it's challenging because I think people have to find little tricks that work for them.
00:42:28.880 | They have to find the little reasons why, whether it's the trip to Europe or whatever
00:42:35.880 | their specific focus is. But it's the favorite topic of the financial world.
00:42:44.680 | >> Yes, debt is certainly a very popular topic.
00:42:49.680 | >> My other article, favorite article from you, "Stop crying that there are no jobs.
00:42:56.680 | Create one."
00:42:57.960 | >> That one, I was surprised to see how popular that one became. There are two on that site
00:43:03.360 | that surprised me with their popularity. One was that one, and then the other was "Quit
00:43:09.160 | your job and travel." "Quit your job, travel, and live remarkably," I think was the full
00:43:16.160 | title. But yes, those two were really runaway hits.
00:43:19.760 | And the one that you referenced, "Stop crying that there aren't any jobs. Create one,"
00:43:24.760 | that one, so that one I wrote, it was a really interesting time because I was a journalist.
00:43:31.760 | That's my work background. So the one office job that I did have, if you could call it
00:43:38.560 | really an office job, was as a newspaper reporter, which sounds fun and exciting and glamorous.
00:43:45.560 | And it was. There were definitely moments of it that were fun and exciting and glamorous.
00:43:53.160 | But the newspaper industry was declining when I entered. I started full-time in 2005, and
00:44:00.160 | the industry was already in decline. Craigslist had already decimated most classified ad revenue.
00:44:10.160 | All the major papers had hiring freezes. Big papers like the Seattle Post-Intelligencer
00:44:16.240 | and the Rocky Mountain News were in the process of shutting down. So yeah, it was sort of
00:44:23.240 | the equivalent of entering the typewriter industry right at its end.
00:44:31.000 | I went to a journalism conference, and everybody was gloom and doom, and everybody was so upset
00:44:38.880 | about the Internet and how the Internet had just destroyed the industry and destroyed
00:44:44.400 | newspapers and destroyed opportunity and this and that and the other. And then, coincidentally,
00:44:51.280 | I happened to fly directly from the journalism conference to a blogging conference. And at
00:44:58.280 | the blogging conference, everybody's in super high spirits. And everyone's like, "Isn't
00:45:04.840 | it great how the Internet has created so much opportunity and there are all these new ways
00:45:09.400 | to make money, and there's all this opportunity that wasn't there before."
00:45:13.080 | And it was funny because at both conferences, the conversation was sort of fundamentally
00:45:20.080 | around how the Internet has changed the way we work and the way that media works, but
00:45:27.340 | the tone of the two conferences were so, so different. And so that was what inspired that
00:45:35.480 | blog post. And I wrote about how at the journalism conference, when I told people that I was
00:45:42.760 | a freelancer, everyone was like, "Oh, I'm so sorry. Oh, that's so awful. And you don't
00:45:48.480 | even get benefits. You don't get paid time off." And whereas at the blogging conference,
00:45:55.480 | everyone's like, "Man, that's awesome. You don't have to show up and report to a boss.
00:46:05.800 | You can work in your underwear. That's sweet." So yeah, it very much highlighted how just
00:46:12.800 | a shift in mentality and a shift in thinking can literally change your fortunes.
00:46:26.680 | >> Joe: Yeah, I love that. I think there's such a massive shift going on. You know, I
00:46:34.920 | am not a journalist, but I see it in journalism very clearly. There's such a massive... Do
00:46:41.920 | you read any of James Altuquer's work?
00:46:44.840 | >> Ashley: Yes. Yeah, yes, yes.
00:46:46.640 | >> Joe: Okay, so he wrote a book called, which I just finished, called Choose Yourself. I
00:46:52.480 | think it's called The Choose Yourself Economy. It's his latest book. And he launches into
00:46:59.360 | it in a very strong way, but his whole point is that job security is a thing of the past.
00:47:06.360 | The only people, all of us work for ourselves and are going to work for ourselves. And he's
00:47:12.320 | pretty strong about it. I'm not quite as strong as he is, but I see that shift happening all
00:47:15.840 | throughout the... everywhere. You know, as a journalist, let's say you are a newspaper
00:47:20.280 | reporter. If you're not building up your own personal following that will go with you from
00:47:26.080 | whichever... I don't know what they're called in your business. The masthead, is that what
00:47:30.960 | they're called? Whichever name is at the top of your... above the fold?
00:47:34.360 | >> Ashley: Yeah.
00:47:35.240 | >> Joe: If you're not building up your own following, you're going to have trouble. I
00:47:38.640 | mean, because all of us ultimately have to take responsibility and ultimately we all
00:47:42.640 | work for ourselves. It's just that some of us admit it by having our paychecks come from
00:47:48.560 | multiple employers and some of us don't realize it until we're forced to realize it by our
00:47:55.920 | employer and we realize, "Yup, I actually still do work for myself because now this
00:47:59.120 | employer is not paying me anymore."
00:48:00.560 | >> Ashley: Right, right, right.
00:48:02.160 | >> Joe: But I love the kick in the seat of the pants. I've seen so many ways that people
00:48:09.160 | can make money on their own and they can, instead of having to wait, you know, you don't
00:48:14.840 | have to wait until you're a millionaire to be financially independent or to live independently.
00:48:19.080 | All you got to do is... there are tons of ways of doing it. One way is to be really
00:48:23.840 | wealthy and live off of dividend income. Another way is simply to create a job for
00:48:28.240 | yourself, create a business for yourself. One of my new favorite websites, I'm hoping
00:48:33.360 | to interview the author soon. Have you ever heard of the website, reedcraigslist.com?
00:48:36.960 | >> Ashley: No.
00:48:38.520 | >> Joe: Fascinating. If you ever want content for your article saying, "Hey, stop crying
00:48:48.200 | and create a job," the author of that site, he was a contractor. I think he had three
00:48:55.200 | or four kids and he had a bunch of debt, was really struggling financially, but decided
00:49:00.040 | the contracting business wasn't going to work for him. So he decided he was going to make
00:49:05.200 | his living on Craigslist. For the last number of years, has made his entire living buying
00:49:12.200 | and selling things on Craigslist.
00:49:14.360 | >> Ashley: I have interacted with plenty of people who have done that. As a landlord,
00:49:21.360 | I'm often on Craigslist looking for a used washing machine or a used this or a used that.
00:49:30.040 | There are plenty of normal, regular everyday people who are selling their appliances on
00:49:38.320 | Craigslist, but every now and again I'll stumble upon an ad. From the way it's written, the
00:49:45.320 | way that they give you the model numbers and the dimensions, and just from the way that
00:49:50.600 | the ad is written, you can tell right away, "Oh, this is somebody who does this for a
00:49:54.640 | living." I'll actually call the person who's offering that appliance, even if I don't want
00:50:01.640 | the particular appliance that they're offering, because I can tell that they're a professional,
00:50:06.920 | I can tell that they do this for a living, and therefore they could become an ongoing
00:50:13.920 | contact and an ongoing supplier. As someone who's managing six property units, I'd much
00:50:21.560 | rather have a Rolodex of ongoing suppliers.
00:50:29.240 | I know plenty of people who make their entire living off Craigslist. It's a very, very simple
00:50:36.240 | way to do it. I love watching them. I love their example. They've literally done it.
00:50:43.240 | They've created a job for themselves.
00:50:50.600 | Using a resource that is completely available to all of us, and yet so many of us don't
00:50:57.000 | have a job. I can't create one. You would enjoy that guy's site. Go check it out. He
00:51:03.600 | actually just wrote a post that I enjoyed very much called basically "How to Start
00:51:09.120 | from Zero." If I had zero dollars and didn't have anything to my name, how I would start
00:51:14.520 | on Craigslist. He walked through, literally from zero dollars, how he would get a bike
00:51:20.200 | off of Craigslist by working for one, trading some odd half-day's work or a day's work
00:51:27.200 | for a bike, and use Craigslist at the library, and kind of walk through this formula.
00:51:33.320 | To me, that's such a valuable resource. I don't plan to go and make my living on Craigslist.
00:51:38.800 | Once you change your mentality and you start thinking like an entrepreneur, that I don't
00:51:42.840 | have to necessarily go and work in a cubicle. There are millions of things that I can do.
00:51:49.320 | I start seeing the options and the opportunities everywhere, absolutely everywhere. You've
00:51:56.080 | got to change the mindset. You've got to think like an entrepreneur and not like someone
00:51:59.960 | who's looking for a paycheck.
00:52:01.760 | Exactly. One thing that was very powerful for me was just sort of learning where jobs
00:52:10.080 | came from. I think a lot of people aren't taught to think that way. People sort of grow
00:52:16.680 | up believing that jobs are just there. Then when you hit that point where you realize,
00:52:23.120 | "No, wait a minute. Somebody made this. Someone created this, literally out of thin
00:52:30.040 | air. Here's how they did it." Then it's not a big step to go from that to, "Wait
00:52:35.960 | a minute. Now, here's how I could do this for myself. Oh, and wait. Now that I've
00:52:41.000 | done it for myself, here's how I can expand that into doing it for myself and other people
00:52:48.120 | as well."
00:52:49.120 | Exactly. I'm with you. It's been fun, Paula. I enjoy your writing. I hope you'll
00:52:58.360 | keep it up.
00:52:59.360 | Thank you.
00:53:00.360 | Is the blog a creative outlet for you? Is it something that you make money on? Why do
00:53:05.520 | you blog?
00:53:06.520 | Geez, for a number of reasons. I guess it's everything. It's a creative outlet. I do
00:53:19.280 | make money on it. I hope that I help people with it. I meet some amazing people through
00:53:26.560 | it, amazing readers who will come to me with questions or with stories. I love interacting
00:53:34.400 | with readers. For me, I guess my primary benefit from the blog is creating a community
00:53:45.120 | that's based around these shared principles and values and ideals and hopefully creating
00:53:55.960 | just a supportive community of people who believe in ruthlessly prioritizing and living
00:54:05.720 | a life that is simultaneously ambitious and yet unconventional and just writing the script,
00:54:15.960 | writing the story of their own lives rather than just going with the flow and doing what's
00:54:20.120 | expected of them.
00:54:21.120 | It's exciting to be around a community of people who think like that. To me, that's
00:54:28.880 | been a huge value of the Internet is no matter how you think, you can find some other people
00:54:33.880 | that think like you do.
00:54:35.520 | Exactly.
00:54:36.520 | Sometimes that's challenging to find in your own local area, but online you can meet
00:54:44.840 | those people. It's exciting to be around those people, especially if you can build
00:54:49.440 | it around your ideas. It really is.
00:54:52.600 | I remember one other thing I wanted to ask you about because I had first heard, for whatever
00:54:59.360 | reason, I wasn't aware of this one, but I thought it was a really useful tip. Save
00:55:03.840 | an instant 8% on everything. How do I do this?
00:55:11.880 | There are these websites. There's this industry that's called the secondary gift card market.
00:55:18.080 | What that is, basically when a person, when Uncle Joe gets a gift card for Christmas that
00:55:23.360 | he doesn't like or that he doesn't want, typically what used to happen is that gift
00:55:28.280 | card would fit in a drawer collecting dust. These websites popped up, but they're called
00:55:34.480 | secondary gift card markets. People who have gotten gift cards for stores that just don't
00:55:39.160 | interest them go online and they'll sell those gift cards at a discount off the face value.
00:55:46.000 | They might sell a $100 gift card for $90. If that's to a retailer that the buyer is
00:55:53.600 | interested in buying from, then it's sort of a win-win because the buyer gets a $100
00:55:59.680 | gift card for $90 and the seller gets $90, which he would way rather have than this card
00:56:06.440 | to a store that he doesn't care about.
00:56:10.600 | I actually buy gift cards for a lot of the stores I shop from, Home Depot, Lowe's,
00:56:18.720 | Target, Trader Joe's when they're available. The places where I just normally do everyday
00:56:25.560 | regular shopping, I'll just go online and grab a gift card for it. It's just a really
00:56:33.400 | great way of saving anywhere from 5% to 15% depending on the retailer. Typically, more
00:56:42.120 | popular retailers like Target, they're more in demand, they're more popular. So on a Target
00:56:48.600 | gift card, you might only get 3% to 5% off, which is still worth doing. Whereas a more
00:56:57.880 | specialized retailer like Sephora, like a store that sells makeup, you could get 15%
00:57:05.480 | off.
00:57:06.480 | The thing I like about this strategy is I hadn't previously thought about it, but once
00:57:14.040 | I went and looked in Plastic Jungle and things like that, if they have the cards available,
00:57:19.960 | the thing that's beautiful is this strategy can be stacked with some other stuff, other
00:57:24.200 | strategies. So if you say, someone like you, you probably do a good bit of business at
00:57:28.480 | Home Depot and Lowe's. If you can buy these gift cards, you can buy them online and you
00:57:37.640 | can pay for them using a rewards credit card of some kind with additional cash back for
00:57:44.560 | the cost of that. You take that, you buy the gift cards, which gives you a discount there.
00:57:51.480 | Then I find it pretty simple and easy to find 10% off coupons with Lowe's near me. So you
00:57:57.800 | get an additional 10% off with a quick web search a lot of times. And then, even better,
00:58:05.040 | you're doing all of that for your real estate business. So then we're using deductible dollars.
00:58:10.560 | Right, exactly. You've just told the story of my life for the past couple of years.
00:58:19.640 | You're going to like my new show that's coming out on smart ways to spend money because there's
00:58:24.400 | little things like that that I think make the difference. Most people that are starting
00:58:29.880 | out and kind of building it themselves, all of these little tips and tricks, when you
00:58:33.640 | start stacking them together, are so beneficial. You can just wander into the local big box
00:58:42.720 | store and pay retail or you can think about your purchases. You may still buy from the
00:58:47.640 | big box store, but if you do it in some intelligent ways, you can get the same value for a much
00:58:53.080 | lower price.
00:58:56.120 | You might have just inspired a new blog post. I should explain exactly my method for buying
00:59:01.840 | things at Lowe's because it's very similar to what you described, actually.
00:59:08.200 | I think you could do it in everything. And that's where, kind of going back to the rational
00:59:14.160 | consumer, it's stupid to say, "Oh, always buy things." Stupid is a strong word. I don't
00:59:21.680 | think it's the best idea to say, "Always do this, always do that." I think it's a better
00:59:25.960 | idea to teach people, "Here are some of the strategies that you can use," and then allow
00:59:29.680 | people to pick and choose.
00:59:30.680 | Because one time you may buy a washer and dryer off the guy off Craigslist, but the
00:59:35.000 | next time you may go ahead and just buy it at Lowe's because of the value that you find
00:59:39.280 | there and the strategy you're able to put together. And you'll do it differently in
00:59:43.320 | each situation.
00:59:44.320 | Right, right. Exactly. It's all about crunching the numbers. Going back to that mowing the
00:59:49.320 | lawn thing, there are any number of different ways that you could crunch the numbers on
00:59:55.240 | that, any step of the process, whether it's whether or not to have a yard, where that
01:00:03.240 | yard is going to be located, how big it's going to be, what you're going to do with
01:00:09.960 | it. Yeah, there are so many different options and variables and iterations that it's just
01:00:15.680 | – you just can't make any blanket statements one way or the other. There are just way too
01:00:21.720 | many variables that all need to be weighed.
01:00:24.000 | If you can just think clearly about your situation and find the best – find the thing that
01:00:32.720 | really works for the situation that's in front of you, that's the way to win the
01:00:38.920 | game.
01:00:39.920 | Absolutely. Were there any additional steps to your Lowe's strategy I missed?
01:00:44.920 | Yeah. Go on upromise.com. If you go on upromise, set up an account there and then go through
01:00:52.920 | them to make a purchase at Lowe's, you'll get an additional 5% off. And so what I'll
01:00:59.360 | do is I will buy a discounted gift card for Lowe's, then I'll log on to YouPromise.
01:01:12.280 | Through YouPromise, I'll connect to Lowe's. So then when I make the purchase, I get 5%
01:01:17.160 | off, but then I'm paying with a gift card as well. So that gift card gives me another
01:01:22.360 | 10% off. And then I'm paying with a credit card that gives me frequent flyer miles, which
01:01:27.840 | by the way, allowed me to fly to Paris for free the last trip that I took, country number
01:01:33.240 | 29.
01:01:34.240 | I like it. And don't forget, obviously for most of this, this will be a business, you're
01:01:41.160 | paying it through.
01:01:42.160 | Yeah. And it's all a business expense.
01:01:46.960 | And then hopefully I won't – hopefully then you also do a good job of keeping separate
01:01:56.360 | receipts marking your improvements versus your repairs so that you can fully deduct
01:02:02.400 | most of them as if possible, the repairs as repairs, and then you have to amortize the
01:02:06.400 | improvements on a rental property. But that's another little thing that I've observed that
01:02:10.120 | a lot of real estate investors aren't aware of.
01:02:15.080 | Yeah. We have a CPA who gets burdened with all of our receipts once a year.
01:02:22.680 | Good. So just a little trick that I've talked to people about is always make sure if you're
01:02:28.880 | buying $100 worth of things at Lowe's and let's say 50 of them are to make an improvement
01:02:33.200 | on your property and $50 is for something that is classified as – let's say it's
01:02:39.400 | $10,000 worth at Lowe's. $5,000 of it is something that's classified as an improvement
01:02:44.240 | and $5,000 of it is for a simple roof repair. You want to make sure you get separate receipts
01:02:50.120 | for all the things that you're buying for repairs versus improvements and you want to
01:02:54.520 | keep that separate accounting. Most people don't do it. They just check out everything
01:02:59.000 | and it's kind of all mixed up. But just for those who don't know, it's real estate.
01:03:04.800 | You can fully deduct all repairs to a property on rental real estate. You can fully deduct
01:03:09.440 | all your repairs to a property in the year that you make them against your earned income
01:03:15.240 | whereas your improvements have to be amortized out over the IRS tables. So that's the exact
01:03:21.760 | opposite of what you want to do for your personal house. So on your personal house, if you're
01:03:25.200 | spending money at Lowe's, if things are for repairs, you can't do it. That's not
01:03:30.800 | deductible because it's for your personal house. But if things are for an improvement
01:03:36.440 | on your house, that will increase your tax basis for when the time comes that you can
01:03:40.840 | sell it. So I got a little technical there, but it's all these little things, they
01:03:45.840 | add up when you start adding them up.
01:03:49.200 | They do. They definitely do.
01:03:51.840 | I like it. I like the "you promised" angle. And it could probably be even stacked
01:03:55.680 | on that you could find a, I don't know, can you do some kind of price match strategy?
01:04:00.120 | "Hey, Home Depot's selling this for this much. I wonder if Lowe's does that." I've
01:04:04.920 | never looked into that, but I bet they probably would.
01:04:08.400 | Yeah.
01:04:09.400 | Very cool. Anything that I missed? Anything you'd like to add?
01:04:11.960 | No, I think we're good.
01:04:13.960 | Cool.
01:04:14.960 | Yeah.
01:04:15.960 | I appreciate you taking the time out of your schedule to do this. And let's see, where
01:04:21.000 | can people find you on the web? Affordanything.com? Where else?
01:04:24.240 | Affordanything.com. I'm on the web in a bunch of different places, but that's my
01:04:28.360 | primary site, so come visit me there. And if you do want to hear me on another podcast,
01:04:34.720 | I do make an appearance every week on the Stacking Benjamins podcast. It's a very
01:04:43.080 | long podcast. It goes on for more than an hour, but there's a brief moment at the
01:04:47.840 | end of each show where they do a roundtable discussion with four bloggers, one of whom
01:04:53.040 | is me. So I'm the token girl on the show. So you can tune in and hear me there if you're
01:04:59.920 | more into listening to podcasts than you are into reading.
01:05:02.320 | I'll find a link to that. I haven't listened to their show, but I'll find a link and
01:05:06.320 | put it in the show notes.
01:05:07.320 | Cool.
01:05:08.320 | Thank you, Paula.
01:05:09.320 | All right. Thank you. Yeah, thanks for having me on. This has been fun.
01:05:14.320 | All right. And with that, this has been the Radical Personal Finance Podcast with Joshua
01:05:19.200 | Sheets and Paula from Affordanything.