Nerds Guide to FI

Whether you have just started learning about real estate investing, or have been in the game for a while, you’ve probably heard the name Felipe Mejia. Today I got to pick his brain about everything from his beginnings in real estate, what he looks for when buying a property, his personal finances, bitcoin, and credit repair (we truly talked about ALL the things in this one).

Shortly after his parents’ divorce, Felipe saw the power in real estate firsthand when his Mom converted her basement to pay her mortgage. He talks about his adventures in mobile homes and a giant flood that became a $30,000 blessing. As we walk through his journey, we get into the nitty gritty of getting started in real estate: the importance of becoming bankable, forming your LLC early and why you probably shouldn’t quit your w2 job just yet. Felipe recalls going “all in” with a cash buy in Nashville that snowballed into the 20 units he has today. He explains the moment that led him to discovering his “WHY” and how it shaped his investing decisions going forward. We discuss the benefits of leveraging a line of credit to grow your portfolio quickly without a conventional mortgage and the strategy he used to get one. Felipe runs down his list of what he looks for in his properties and shares some sage advice about plumbing that he will never forget.

Switching gears, I ask Felipe the details on how he and his wife run their personal finances AND find out that he keeps a whole lot of cash on hand. He tells me about starting his new podcast, Rat Race to Financial Independence, and how he hopes to bring more diversity into the real estate conversation.

We don’t agree on everything, but I love to hear his take on investing and cryptocurrency (I’ll stick to my long- term investing, thank you!) and how real estate and stock market investing are more similar than you think. This conversation was a fun one, and I know you’ll appreciate the wisdom Felipe shares for newbies and seasoned investors alike. Enjoy the episode!

Josiah and I became friends through Instagram-- as we quickly bonded over our mutual love of the late Rick Jarmin. I first found Rick after listening to Josiah's podcast-- the Daily Real Estate Investor.  Then, I too was able to kindle a love connection -- as I learned that Josiah, and one of my own podcast guests-- David @diy_landlord --- have eerily similar background stories that include mission work and living in Africa.  Who knew?! 

In terms of his journey into real estate, Josiah was able to raise and use private money to reach 4 million dollars of real estate, and 20 properties.  We both love all the perks of 1-4 unit homes for achieving one's FI goals.  He walks through how he started, at a big 4 accounting firm and hating life.  From there, he became an appraiser which helped him learn the market and to estimate ARV like a pro. (getting ARV wrong is a big way to mess up a BRRRR!) A big hurdle for him, in the early days, was a lack of credit score.  He reviews how he was able to get and maintain a high credit score using a line of credit.  We reminisce about our Dave Ramsey roots, but share the conviction that credit scores do matter today.  But what is irrelevant? Trying to achieve "number of doors" goals, instead of focusing on cash flow.   He also loves the rental property debt snowball method, believing that 1-4 unit homes are the ideal retirement plans.  

We talk in-depth about a lot of topics, including self-limiting beliefs and mindset.  He shares that Chris Gerber wrote one of his favorite books, called the E-myth Revisited where he talks about how you need to be working ON your business, and not IN your business.  A lesson I have been working hard on in 2020 with all my outsourcing.  He shares why he loves mortgage brokers, auto paying everything he can, and keeping no personal debt.  

I also would like to think Josiah played a role in my most recent, successful home appraisal for my house hack -- as I learned that you can supply your own comps in advance as well as a list of repairs and their associated costs. My appraiser seemed gitty when I told him I had two realtors assess the home, pull comps, and that I already had emailed all of them over to him in case it would help with the assessment of the home.  I also provided him with a hard copy & emailed a copy of the repairs and changes I did to the property.  Thanks, Josiah, my $310,000 appraised value on my house hack I bought (with private money) for $280,000 brought joy to my heart.  Hope you guys enjoy the conversation as much as I did!  Check Josiah out over at the Daily Real Estate Investor-- or on his new (second!) podcast-- Multifamily Mavericks.  

HAPPY 2021!  I would say this is the year we all have been waiting for..... but I think it is too soon to tell.  I LOVE this episode with Kata.  She has the BEST accent, and I am so inspired by her mindset and work ethic.  I first became familiar with Kata on Instagram -- where you should totally follow her @themodelinvestor.  Then, I fell in love with her story listening to Josiah's podcast, The Daily Real Estate Investor, in her May 2020 episode entitled "Build a Six-Figure Passive Income Stream With Real Estate Investing."

We talk in detail about Kata's childhood with debt-adverse parents -- and how she always dreamed of real estate.  She shares her biggest horror story on day one of self-managing her 30 unit rental property portfolio.  She learned firsthand that cash flow trumps appreciation..... and legit has some of the best cash flow numbers I have ever seen.  ($400 per SFH!) Much to the dismay of all of my Dave Ramsey fan followers, Kata absolutely loves mortgage debt.  As the self-proclaimed queen of leverage, Kata plans to take on as much as she can -- making use of conventional loans, portfolio loans (one of my favorite things), AND seller financing along the way.  If her mindset doesn't get you excited to go crush your own dreams and makes you feel like anything real estate is possible and obtainable, I have nothing left for you (kidding.... maybe). 

We talk about section 8, being a landlord for the people, and how you can invest while also making an impact in the communities you serve.  Kata is a buy and hold investor-- but has flipped a few homes along her journey as well.  You know you are a true real estate investor when "appliances are the new purses" -- and I just could not agree with Kata more. 

Kata (and my) favorite resources: 

Stessa.com

Venmo 

I LOVE talking to Lauren & Kyle because they always keep it REAL.  They are the amazing duo behind @rentalstowealth  They used house hacking to get started in real estate... And used my personal favorite method to decide on a location: nearby FOOD.  Sounds funny, but this method can really narrow down neighborhood/area investing classes.   We chat about why it actually may be a bad thing to take a full year’s rent, upfront.  We talk Dave Ramsey, how I am now a HUGE bigger pockets fan even when it used to totally scare me, and talk through our thought processes behind personal and real estate debt.  They have the BEST tips on how they streamline estimating rehab costs -- they are serious life goals when it comes to getting their rehab budget estimates within $500 +/- at the end.  We give some shout outs to Chris & Dave over at The Stealthy Rich.  We share our favorite things about frontloading all the big CAPEX items. They break down how they used BRRRR to scale to 7 units… using conventional financing and private money lenders.  We share a great love of FB marketplace or Habitat for Humanity finds.  Lauren dives though why you should maintain cash reserves,  how their portfolio was minimally impacted by COVID, and how they find the best tenants by prescreening.  The vast benefits of automating.  And how they now automate their emergency calls with a general contractor. I love their thoughts on mindset, building systems to scale, and how they think about building their team with all the best members in the proper seat.  I think this one will motivate you to just jump in already.  It's rather fun over here.  And you do not want to miss all their amazing features with Bigger Pockets! So inspired (and ready for our business trip/vacay). 

Resources & Reading:

Jay Scott on Estimating Rehab Costs

Traction

Cozy.co

Stessa

My favorite way to prescreen tenants 

Welcome to the NGFI Podcast, episode number 12.  I am so excited to bring you alllll the investing wisdom from Oscar today.  He is the man behind Money Tip Feed.  He gets WAY deeper into the world of choosing single stocks than I ever have, and makes it seem simple with his three-prong approach.  Oscar could seriously consider early retirement, but enjoys his job and the idea of the rule of 55.  He, along with his wife and two kids, now live in a paid-for home, despite having some challenges in the real estate arena.  They prove that you can make mistakes and still achieve financial greatness.  We talk about kinds of investing "bins" -- 401Ks, IRAs, 529s.  Then, we dive through how Oscar chooses to fill his bins -- with a review of mutual funds, index funds, and single stocks.  We review the age-old debate on the importance (or lack thereof) of including international index funds in your portfolio.  We talk about college and career.  Oscar speaks about the importance of college choice, career choice, and considering working before chasing after that master's degree.  He talks about his own plans for his boys' college, and how he hopes they will have some skin in the game when it comes to paying for their education.  I love Oscar's review of savings rates, including how you can calculate yours too.   He refutes the idea that people should always have a mortgage.  We share our love of Morningstar and using free online resources to educate yourself on personal finance.   Can't wait to hear what you think of this one, and look Oscar up on Instagram and YouTube.  He is producing some killer YouTube content I know many of you would devour.  Finally, you will learn where to always keep an eye out for me, or for Oscar, IRL, after this pandemic eases.  Thanks for listening! 

If you are a newer investor starting out, or in a high cost of living market, THIS episode is for you.  Mark shares it all, and isn't afraid to dive through several losses over his career.  Despite million-dollar losses, losing it all in 2008, investing in a high cost of living markets -- Mark and his wife have over a 3 million dollar net worth, and much more is to come.  I LOVE Mark's advice on using private money as an alternative to the BRRRR strategy, aka a leverage strategy.  Mark and his wife, who also is a successful real estate investor in her own right, have navigated the changing markets to grow their empire all while raising 3 boys.  He shares how his deal-finding career evolved from buying mobile homes to finding all their early deals on the MSL to driving for dollars, cold calls, and automated texting.  We talk about how, finding "non-typical" multiunits also works in his market-- as he walks me through how accessory dwelling units, or ACUs, can make some properties in high cost of living markets cashflow.   Mark really epitomizes the idea of work ON your business, not IN your business.  He shares how he has built up a team to run all parts of their real estate empire.  He has some great philosophies on getting started, as well as on never giving up.  He thinks the best kind of real estate investor starts out broke, or at 0.  And that, this position in life may just be the best place to be-- even if it doesn't feel like it at the time.  

I also thoroughly enjoy the care he takes to manage his properties, and help his tenants.  He reviews steps he, and Rick Jarmin from Real Estate Old School, took to be proactive with their tenants as COVID-19 developed.  They even offered to assist tenants with obtaining unemployment benefits.  You will also hear Mark's predictions as to what the fallout from COVID will look like, when it comes to the "frothy" real estate market today.  By the end of this episode, I felt like old friends with Mark, and I hope you will too.  For sure a guy I would love to share a beer with, as he drops one inspiring story after another.  

Shang (pronounced "shUng") is a badass stock investor who hit FI at age 31 in NYC.  Shang bravely shares their IVF journey to have their beautiful baby boy. Shang has taught me so much, from how to negotiate to ways to keep the #igetto attitude despite all the changes life WILL throw your way.

We open by talking life in COVID. She makes me greatly appreciate NOT having to deal with the rules and regulations of real estate in NYC. We deep dive into how to always negotiate when considering a new job. Shang shares that you should always negotiate (especially the ladies), always be interviewing and that negotiating a better bonus may be the way to go. We both strongly agree that choosing a career field based on passion is simply a bad idea, even thought permeates our culture today.

Shang dives into who should and should not use a financial advisor. She gives us some amazing books to read -- my personal favorite, The Simple Path to Wealth by JL Collins, The Broke Millenial’s Take on Investing and Boggleheads Guide to Investing. And how, for the average investor, getting an average rate of return is WAY more simple than you think.  While financial advisors get all the hype, we think the real MVPs are good CPAs, aka tax people. My FAVORITE part is our deep dive into expense ratios. I pick Shang’s brain on using traditional vs. Roth retirement accounts  Shang gives us her take on paying off the mortgage vs. investing in real estate (hitting on the classic 5% rule of personal finance … and we agree that, in America, your primary residence tends to be a terrible investment (and may not even be a true asset!)  Here is my all-time favorite explanation of why the home you live in may not be AS great as an investment as it seems) We wrap up talking about FIRE as a lifestyle, not just a buzz word.  Plus how to choose gurus who truly have your best interests in mind.  I hope you all enjoy Shang as much as I always do, and I bet she will have you googling something after this podcast.

LEARN:

Investopedia 

Morning Star

Save My Cents: Backdoor Roth IRA

Mega backdoor Roth IRA with The Mad Fientist

Rich Dad Poor Dad

Suzie Orman

Dave Ramsey

I am coining a new term with this one -- REFI! Financial Independence by Real Estate! This podcast set the record for my longest EVER.  Carve out sometime ( or get your steps in) because listening to David crush it on a 54K salery will amaze you.  He talks through his early days of finding deals all the way from Africa. with the help of his father and business partner.  David and I also share a love for Facebook marketplace deals, live-in flips, and using smart-key locks.  Despite carrying the most business debt of any person I have interviewed to date, David is very debt aware on the personal side.  He was always raised to be wary of debt, and if you must use debt like student loans, you best pay it off fast. He even worked 30 hours a week through college.

We cover the importance of living on less than you make and learning to be personally financially disciplined, and that you do not need a ton of properties to be financially independent.  A portfolio will look different if you want financial independence vs. want to build a business.  And David was here to build a business.  

We review two ways David protected himself during COVID.  The first, and everyone's favorite: stacking cash.  The second is access to cash.  You will also hear how David celebrates every deal, and our favorite things on the taco bell menu.  Listen to David scare me strongly away from investing in commercial real estate during COVID.  Also, I have a new life goal of owning an entire street of duplexes now (to avoid “apartment complex” mentality).   And I am hype to learn how he got not one but TWO whole streets of duplexes.  Perhaps you too will learn a new term: elevator (or escalation) clauses.   I love our talk on tenant screening methods, section 8, and all of the benefits of networking local.  David dishes on how he bought his newest primary residence/house hack/live in flip (with FOUR kids, mind you!).  David continues buying but cautiously with COVID.  Finally, hear what David is OUTSOURCING (hint: it is the same sucky task I recently hired out!) to someone else, to buy back his own time.

Learn:

BRRRR.  Or a whole book on BRRR.

Buildium.

Why David should stock up on 7 layer taco bell burritos while they last. (RIP also loaded grillers)

Classes of property: my fav article on the topic.  

Elevator clause, or Escalation clause

My Automated Tenant Screening System

The book that saved him $120,000: Never split the difference. 

This episode kicks off another one of my podcast dreams, interviewing INVESTORS.  Specifically talking about how it is NOT scary or hard to save and learn to invest your own money.  Jeremy and I have very similar brains, so this one was super fun for us.  He talks about his early days, how he learned to invest via reading, and how he has developed a passion for helping people better understand investing though his Instagram and Blog, the Personal Finance Club.  He dishes on how he too thinks the idea of “FIRE” makes the movement sound lazy which is untrue (so we both prefer the idea of “work optional” life), how he loves a 50% savings rate and how one of his claims to fame is dressing up as a giant, scannable CVS receipt.  Jeremy has been “work optional” since age 34.  He talks about how to avoid the world of monthly payments, how the obsession with credit scores in our country is crazy, and how everyone should know and track their net worth instead.  We even dive into Dave Ramsey’s investing advice, and how we choose a slightly different path. I enjoyed Jeremy’s take on financial advisors, mutual vs index funds, the market today, and the beauty of a SIMPLE financial plan. You will also hear how I am the LEAST fun person to invite to your child’s birthday party, because I can’t even with bad investment advice, and why I have decided to stock some additional canned goods in my pantry.  OH -- and don't forget to see that CVS receipt costume (there is a VIDEO!)

Learn more:

Why your net worth is WAY more important than your credit score. 

The ONE book to read: The beginner’s guide to investing (100 pages WITH charts). 

The millionaire next door. 

Why Michael Burry’s Index Fund bubble prediction does not matter. 

What is a stock

How do I buy stock

FZROX vs. VTSAX: The hidden cost of Fidelity’s zero-fee index funds. 

My top 3 quotes from this episode: 

I really feel like, with 30 minutes of my time, I could make someone a millionaire 30 years from now.  I could change someone’s financial future, and that really pumps me up.

The mantra of the broke, the rat race people get caught up in, is the world of monthly payments.

People are then super concerned about their credit score, which is crazy to me.  The credit score is just this metric of how banks make money off of you.