They Turned Real Estate Into Wealth, But Still Feel Stuck | Making a Millionaire

You're now at the place where you get to make financial decisions, not so much because you have to, but because you get to or because you want to. But you have to define that. Is real estate a job for you or is it, hey, part of our financial life is that we have some real estate properties? Because those are two very different things. How do you want to approach it and how do you want to attack that? So I'm a manufacturing engineer in the aerospace industry 10 years now. Does that mean like building planes and stuff? I like to say it's we, as a manufacturing engineer, we build the Lego assembly set that gives the instructions from the design to the operator. Okay. So it's really cool stuff. And how about you? So I manage a team of associate recruiters for like a tech-enabled search firm that's based out of Chicago. Full-time remote. I've been doing it for almost five years now, and we specialize in high-impact placements and executive recruiting. So we've worked for anyone like DudeWipes to Peloton. Oh, wow. Software companies that you may never have heard of but are doing very well. Topgolf is a client of ours. That's awesome. It is fun. You've been doing that for five years? Yeah, and I manage a team internally, so I kind of like more ops, people management. I love it. So you guys have an 18-month-old little boy at home. How old are you guys? I'm 35. 35? 34, going on 35. 34, going on 35. That's kind of that progression. That's the way that works. I turned 35 in March, so I was like, if I can say 34 on air, that's great. Well, it's interesting. You guys were kind enough to share a net worth statement with us. And I'll be honest, when I saw it, I was like, holy cow. Do you guys feel like you're way out ahead of the curve and crushing it? How do you guys feel about your current situation? So when we really started looking at this, we pieced it all together and realized where we were. And yeah, it was eye-opening for sure. I don't think we expected it to be as high as it was. But I feel like we've been very diligent about it in the past couple of years. So yeah, I think it's exciting. Well, how long have you all been together? So we've been married for about three years now. And is this the first – doing this exercise or is this the first net worth statement you've done? Like a fully comprehensive net worth statement, yes. Okay. He likes to run the numbers on the back end. But yeah, we met during COVID. I like to say he's my COVID cutie. Right. Love that. Our first day was virtual. Amazing. But yeah, we've been working, but it hasn't felt like we've – I feel like we've reached more of a tipping point in the last, I would say, six months when things started accumulating a little bit more. And we felt like, oh, we need to talk to someone and figure out what our next steps are because the decisions we make could lead us in a direction pretty significantly at this point. Yeah. Well, when we look at the net worth statement, you can see that you guys have absolutely crushed it. Now, it's interesting. You said you've been married for three years. So it sounds like both of you had some success before you got together. I'd love to talk about that. But as it stands right now, total net worth of almost $821,000, like rapidly approaching the two-comma club in your mid-30s, which is insane, and a very healthy household income. You make almost $300,000 a year, $276,000. So not only do you have a big income, it looks like you've been able to turn a big income into wealth. How did you guys do it? What was the secret sauce? You said you've reached the tipping point. What were you doing before you got to the tipping point? So I think we were pretty diligent on our savings rate. Definitely, even before knowing the 25%, it was how high could we go? And not always, but certainly in my late 20s and let's say for the past six, seven years. But I think for Becca, it might have been most of your working life. I've always been a saver and I've always been a worker. So the day I turned 15 and was able to work, I walked into Burger King and was like, I need a job. I love that. And then one of my first financial memories really is of just watching my parents be very frugal in different ways, but both frugal. And my mom saying, okay, you get your paycheck. That's not all yours today. You have to pay yourself for tomorrow. So at least half of that should be saved. And so when I entered, I've always had a job. I've never not had a job, even when I was full time in school, was working as well. And when I got my first more professional job post-grad school that started my career, we'll say, at one point, the financial person that our accountant was like, do you know how much you're saving? Because it wasn't normal. I was probably at 20% at that time. Like a young person. That's wild. Exactly. Wild, wild. I do, actually, and I'm going to keep it that way. So it was interesting. She's like, not financial advice, but I just wanted to make sure some people don't save and then don't realize it's not vested. It was kind of that conversation but on the other side of the spectrum. I love it. You guys just figured it out early on that, hey, if I save and a little bit for tomorrow, it stacks up pretty quickly. So who's the person that's kind of driving a lot of the financial decisions in the house? Who's the financial person or are you all both collaborating on everything? He's the spreadsheets guy more so and more of crunching the numbers. Like he says that the – I mean he's tried to do like net worth statements and stuff like that before and like trying to calculate when we could potentially go into CoSpy or something. For me, I'm much more the person's like what's the impact on our family and what is our lifestyle actually – what does it look like now and what is it going to look like? And I think especially since having our son, that was kind of like the shifting point for us because we manage real estate and we do it all ourselves. Like we don't contract out most of the stuff. and I'm like, this is taking into a lot of time and our priorities have shifted a little bit. So, yeah. Yeah. And I think, yeah, so that's where we're here now is, I mean, we have fairly tight margins on our real estate properties. We both bought them before we were married as like owner-occupant, multi-families, and decided when we got married, we would buy a single family and keep both properties and still manage them, self-manage, right? So it's kind of like now we're looking at it, and we do a lot of the work ourselves. How much is it helping support our journey on financial independence or not? And we think it is, but this is where we'd like your take on that. So you both lived in your own houses, and you got married, got a y'all's house, and you just held on to the houses that you had. Did I hear that right? So he bought his in 2020. It's a quadplex, so it's four units. Oh, wow. And he lived in one. Yeah, so there's a lot of multifamily real estate in St. Louis. And so he has a quadplex. I have a duplex. They're ours now. I know. And y'all both house hacked it. They both lived in part of it. Oh, y'all are like prodigies. Good for you guys. He had his first, and I had just moved back January 2020 from Michigan, which was a very expensive market. And I was single at the time, and I was like, I can't afford to live here. So when I moved back to Missouri to be closer to my twin, I decided I'm going to rent for a year and then I'm going to buy. And I wanted multifamily so bad. I was actually going for a quadplex, but it was crazy COVID times, and they were just getting swooped up. So I ended up buying a duplex and owner occupying it too, like house hacking. He moved in there with me for a little bit. Brief time. And then we bought our single family. Can you imagine their first date? When y'all started talking about commonality and interest and stuff, and y'all started talking about the duplex and quadplexes and house hacking, all of a sudden I'm sure bird chirps and harp sounds started playing in the background. We deleted the apps immediately. We're like, this is it. We've done it. We found it. Yeah, we've had experience in the past with our relationships. We've learned. We really learned what we wanted in life, what kind of partner we would want in life. Sure. And we – yeah, absolutely. That's very true. We realized we click. This is it. I love it. Deleted the apps immediately. So when we look at the net worth statement, obviously $820,000 net worth. We'll love that. We have about $530,000 of liquid assets, of savings you've been done. I want to talk about that. But the real estate is a pretty big portion. If you look at just the value of the assets that you have for real estate, it's like $815,000. with debt on that real estate of a little under $600,000. Look at those interest rates. I know. Haga, haga. Well, two of the three are haga, haga. I'm talking about that on the rental property. I mean, you all have to be feeling pretty good about those. Yeah. The rental property number two, the 2.75 is the duplex, and that's actually the one we might be considering selling. And I'm like, ooh, that 2.75 is so nice. Well, walk us through it because you said you have some questions, right? Because I'm sure for a lot of people out there hearing this, like, holy cow, these two are killing it. Net worth is amazing. They have a duplex. They have a quadplex. They have the primary residence. What possible issue could they have? What could they be worrying about? So walk us through. What are the questions you have? Time, Bo. Time is the issue. Time is the issue. So we have pretty tight margins, and Christian could get a little bit more into the numbers there. But we so for our properties, all most of them, we have six units altogether. Five of the units are long term rentals and one is a midterm Airbnb. So for the Airbnb, for example, like most of the time tenants will stay from two months to sometimes six or nine months. But we flip it every time. So if someone's going in cleaning after tenant, that's us. If a pipe burst, I'm the one helping manage contractors most of the time because I work from home and we screen all of our own tenants. I'm basically the general contractor managing work that needs to be done are you good at that or have you been burned I think I'm pretty good at it actually but not without help I'm a part of like a women's investor community in St. Louis it's very strong super resourceful so I honestly like if I need a plumber the first thing I do is go onto our shared Facebook page and either ask or like search for if anyone's got recommendations because recommendations go a long way in this industry you can get burned And so I've had some mentors to help along the way in that regard. But it's still a lot of time that goes into it. Probably spend – I don't know. It depends on if there's a project happening, but probably five hours a week or something. So nothing crazy, but it's never planned. But you both work full time, right? So you're working full time, and this is an additional thing every week that's taken away from you. Yeah, exactly. Yeah, so I think we make positive margins on these properties. And so we see that and we see that we're paying off our mortgages diligently, our equities raising. And we know it's going to help in the end with our financial independence journey to break away from traditional work environments in the future. But how is it compared to our traditional retirement investments? Is it something we should swap focus on or not? And we can give you the numbers, like specifically in the real estate. I'd love to hear a little bit about the numbers and the margins because where my mind is immediately going is like, okay, you have this issue. We don't have enough time, but you have resources. What was the thought between you guys self-managing this and not having a management company or not outsourcing that? So it felt very simple when we started by owning them, right? Like if something happened, I could do it. You live there. I live there, right? Tons of sense. And then there's obviously some tax write-offs, implications to that too. And so that's why we chose to self-manage. I had thought maybe that I could transition from a full-time W-2 to managing property. So for example, we need some renovations on our quadplex. It's got four units and two sides or two units are very outdated. And so we basically have to do probably put $40,000 to $50,000 into each unit. to bring it up to current market. Current market, exactly. And so I actually think that would be a fun project to take on, but it sounds horrendous when you think about working a full-time W-2 and doing that. But we like it. I work from home, full-time, remote. I manage a team, so I do talk to people. But I actually love that I know who my tuck pointer is for brickwork. I've got a roofer. I mean, I think for us, he's not from St. Louis originally, But for me, we've all had our share of slummy kind of landlords, and I think we pride ourselves in being – Not being that. Not being that. Sure, yeah. And being a service to the community in that way too. Love that. Like if I sold, I mean obviously money matters. I'm not going to get super undercut. But I would love if it was someone who was owner-occupying and also lived in that space. Sure. So there's a values piece there. I would love to know some more numbers because there's a few things that jumped out to me is that, first of all, with rental property, Sometimes one rental property is a pain in the rear because you have to deal with it. But you all have five to six because you've done – so you start – it's not scale is not the proper word, but you at least got enough coming through. It's scale to an extent. Yeah, and then I look at what y'all's barrier – I mean your price to entry was with the debt and stuff. So I need to know the numbers to know the hassle factor. Why is it taking so much time? Is this something we can buy our way out of? because – and then also you're kind of talking out of both sides of your mouth a little bit. Okay, let's go there. Well, no, because – and I'm not picking on you, but I want to just give you the feedback. That's why we're here. Because you're telling me we have no time to do this. But then out of your breath, you're also like, but I love – let me tell you about my bricklayer that I have in my Rolodex and that I can reach out to. I mean, you're kind of giving both vibes. So that's why it makes me immediately wonder because I have – What's funny is I have some property down in Florida, and my real estate agent also now kind of helps me manage the property as well. She's fabulous. And that's why – so I'm wondering if you – if there's not an in-between here. But I don't want to jump right there until we know more of your data sets. So we'll start. I don't know where you want. So just going back 30,000 feet, I would say we make money on the quadplex, and then we kind of break even on the duplex. And that's a product of scale, right? We've got four units on that side and two on the other. And then also last year was a very expensive year for me for the duplex. Replaced the roof and was actually in the red. So in a normal year, you break in on the duplex. Last year, you were under. But a roof is more of a capital expenditure because you have to get it. I mean, hopefully you'll get 20 years out of it. So, I mean, yes, you're in the red. But if you think about it from an accounting standpoint, you made a big capital investment into it. It's not necessarily just operations. See, that's a good way to think about it because anything I spent money on is in there. So you'll see we're pretty conservative. When it's good for us, we're conservative on the low end, right? When it's bad for us, we're conservative on the high end. And so you'll see that in these numbers. It's negative from a cash flow. You're right. Probably from a cash flow is negative. But I just thinking in analyzing the venture that wouldn necessarily be a bad thing And we did buy them and hold on to them for like we thought like maybe 20 years Like when real when our son goes to school do we just sell one and have that help pay for his school Or, you know, if we really like diversifying and being, you know, but so are do you want to know like what's owed on it and the potential equity and all those numbers? We have those. I'd love to know the rents you come in or the net margin you have on these right now. So starting with the duplex, the rent we get is about $25,000 a year. And mortgage payments, including like principal and interest, tax insurance, all that stuff, is like $17,700. So basically you're getting $1,000 a month per unit on the duplex? Yes, a little over. So that $17,000 is mortgage, taxes, insurance, all that kind of stuff. And then average operating expenses over the last three years I averaged them was like $11,000. There's another thing you have to do, right? Yeah. If you just include your whole mortgage payment, you're kind of – you're double counting, right? Because part of your mortgage every month is paying down some principal. Yeah, yes. So it's not really a cost. It's kind of like a forced saving. So you want to back that out to figure out, okay, where am I actually? Like what does my number actually look like? Yeah, and I just added all in. And then the capital investment side too because hopefully you put one roof on. We're not doing it two years in the future. And that $11,000 does include the roof. The roof is in that average. The other thing is I don't think we mentioned these – both of these homes are over 100 years old. Oh, wow. So they're old. They're beautiful St. Louis brick, old but sturdy, we like to say. I love it. So we've done tuck pointing and things like that, which again – You see our building. This is our 100-plus-year-old building. We like to say it's sturdy as well. All right. So the duplex is roughly break-even. Talk to me about two opportunities. What's the opportunity for rental increase specifically on the duplex? Meaning are you at top of market pricing right now? And then is the St. Louis market from a rental standpoint increasing every year? Like do rents go up 3%, 4%, 5% on an annualized basis or are they pretty much flat? I would say there is an opportunity to move up a little bit. It might be the middle. No, I would say like for what the amenities are. So they don't have – Central AC. Central AC. So it's window units. They're good. They work great. Radiator heat. Radiator heat. So they're like older units in that way. So I feel like I'm at the top end of rent. I probably have – like I would go up every year, and I do go up every year. But I feel like unless I've made – you guys can correct me if I'm wrong. But I feel like unless I made a significant investment to have central AC or an HVAC system, then I really probably shouldn't be at the higher end of the market. Yeah, it's not going to move super quickly. And is it the duplexes or the quadplexes that would require $40,000 per unit? Two on the quadplex. Yeah, the quadplex. Okay, cool. All right, so on the duplex, we know that the rental increase is not going to be – it's likely going to be cost of living, inflation, maybe a touch below that, something in that ballpark. So then the second question we have, if we're thinking about this from an investment standpoint, is, okay, what's the capital appreciation opportunity, right? So when you bought the duplex, right now you have it listed as worth $260,000. How much did you pay for it when you bought it? I paid $211,000. So $211,000. We bought this like at COVID, like right around that time, right? April 2021. April 2021. And since then, we've seen a rapid rise in the real estate market. We've seen it go from $211,000 to $260,000 over that time period. Realistically, what are the outlooks on this property increasing? Is there something happening in the area, the neighborhood, the geography that would cause us to become a much more highly valued property? Or is it likely that, again, it's going to be inflation, cost of living? I think they're very stable environments. Mine's a little more stable. Yours is a little bit more growing. He's in an area of St. Louis that's very close. It's like our second largest park, but he's on the periphery of that. Still in the neighborhood, but it just keeps going down in terms of development. We've both had on our streets houses that have been purchased and completely rehabbed and things like that. So signs of positive growth and development, yeah. So you think there is a lot of upward potential for that? Let's just talk about the duplex. Let's talk about them individually, just the duplex. a lot of upward potential in terms of what the price could appreciate. My realtor thinks that it could go for $300 now, so $260 is conservative. So you've been very conservative. We're trying to be conservative. Yeah. Got it. Absolutely. Yeah. So it's probably worth more than $260 right now. I think it's probably worth like $285. Realistically, let's assume for this conversation it's worth $300. Where can it go from here? Does it go from $300 to $350? Does it go from $300 to $400? Over time, yes. I don't know in the next handful of years. I think I would say I would use St. Louis as an average in terms of national growth for real estate and what real estate tends to go up. It's not – it's a pretty stable city in that regard. If we're looking at national averages of real estate increase, you know the national – on average, how much real estate increases every year? I don't know. Sands the past couple of years? Do you? Roughly the rate of inflation. Okay. It's going to roughly keep up with inflation, somewhere 3%, 4% depending on what's going on. Okay. And so we're thinking about these rental properties as an investment opportunity. Well, generally when people invest in real estate, they want one of two things. They either want cash flow, they want it to create some sort of income for it, then there's a yield to it, or they want some capital appreciation in the future. Well, what you've laid out for us right now are the mortgages on these 30-year mortgages? Yes. On these, right? They are. So you've got these 30-year mortgages, so it's not really cash flowing. It's cash breaking even in terms of duplex. And then in terms of growth on the real estate property, what do you think is realistic? Well, probably around the rate of inflation over the long term. I want to hear more about the quadplex, but I also don't want to just get bogged down only in the real estate because I think that my outside – and Bo and I will do a deep dive after this meeting and kind of come up with some thoughts. We'll probably need to get a little bit more specifics on how much of this is expenses versus capital improvements. But I think because y'all's income is so strong. Now, I heard a bird whispered in my ear that y'all might even want to change how your income is structured with both of you working. So we'll want to talk about that too. But its current status income, I don't know that it matters. It's more of the time is the most valuable thing for you guys is because y'all should probably have such a strong savings rate. These are multiple assets that are building. So we need to get to the bottom line of how much time is this really taking, and then how profitable is it, and then what are you all trying to do as a household because that all kind of interconnects. And if you – to be honest, we're flexible. I would say it's a blessing or a curse. We obviously built ourselves a lot of optionality here, and it feels a little debilitating sometimes. I'd heard – because what's your primary? If you were trying to put to one word, what are you hoping happens? Is it like flexibility? Is it simplicity? Is it – what are y'all trying to focus on? I heard the post-fi a few times. I did hear that too. So I think actually both flexibility and simplicity are something that we're absolutely looking for, especially into the future. As our son gets older, we'd love to be able to spend time with him and build memories with him. I mean, I know you all make plenty of money and stuff, but do you all feel like you lay your head down and you're like, there's just not enough hours in the day? I think we did a few years ago. I think today and last night, not as much. It depends on the season. Like if we are – like seasonality of like what's happening. So for example, like this is future looking, but like when something happens with the property, it's pretty all-consuming and you have to think about it because you're managing contractors and doing all that. Looking at – like honestly, we normally lay our heads down and are like pretty peaceful. night. For me, my work can be very consuming as well. And so if there's something happening at work that's all-consuming, then it's harder to sleep at night. But in general, we recognize that we're in a really good spot and then we've worked hard to get to where we are. And if worse comes to worse, we sell a property and we'll be fine. Or we'll make it work because even on one income, we would be okay. It's not necessarily where we want to be, but yeah. Well, that's kind of what I'm getting. When I said it doesn't matter, it's more of I'm trying to get you to choose a side. Yeah. Because, like I said, back to speaking out of both sides. Do you want to be a real estate investor? So I think she had stronger opinions before. I mean, but it's a matter of because that's the thing. When you're talented at multiple things, you know, I'm watching some documentary and, gosh, I'm horrible with names. But I found out this NBA player who's on Netflix's five that they do, he was like an all-star baseball player too. And he's like, I could have done either one. And he's like, I chose basketball. And I think sometimes when you're gifted, you have to make choices. And you all have good income. You have good assets, the other things. But do you want to be a real estate investor? So I think I'm open to what it looks like because I do like the aspects of like – and work. I'm a project manager and the real estate investing and managing projects, whether that's flips or, you know, in our case, like a rehab for units is very much like that. So I see potential in that. And I had thought about that very deeply. But now that we're like a little closer to where our investments are at, like over five hundred thousand, I'm like, do I need to do that? Because to be honest, like if I'm if I told you like what my ideal day would be, it is not sitting in front of a computer all day. So real estate investing definitely has that draw of flexibility. but also like after having my son i had some health complications or health flare-ups we'll say and right now i feel like i don't have time to like build in gym time which sounds so simple but it's either like before 6 30 in the morning or when i'm you know when i'm feeding my son for dinner things like that and so to be honest like a little more flexibility in my day which real estate investing would lend to but it also can be all-consuming as well tell me a little about your savings i wonder about your savings rate right like tell me outside the real estate where's your money going right now right so so we are pretty firmly at 25 i do 401k match and i do get 10 match so i i do that minimum right now um but then we max out ira max out my hsa so we kind of both throw into that bucket effectively um and then we kind of just started if you look we just started our brokerage. I saw it on there. I was like, man, it's step seven. It sounds like they're thinking about the three buckets. Yeah, we were kind of like, I think we should do this. We should probably start. And then go ahead with your savings. Yeah, I'm at 25%. He runs what I should be putting everywhere. So that's what I do. You max out your 401k, 24.5 for both of you in your 401ks. Right. And then you said you're maxing out the HSA. So that's like, what, 87. 50 this year or something like that. You wouldn't let me bring my tax guide in. No more papers for you. And then I have a 3% match for work. Awesome. And then you said you're doing IRAs as well? Yes. Just putting money in traditional IRAs, non-deductible, and building that up? Got some ideas there. Yeah, no kidding. Well, I do see a big – it's not a huge, but I see a rollover IRA. Yeah, well, I see some 401ks. Where are each one of your 401ks at? 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Your time is valuable. Don't let paperwork eat up your day when you could be focusing on growing your business. So try Gusto today at gusto.com slash money guy and get three months free when you run your first payroll. That's three months of free payroll at gusto.com slash money guy. One more time, gusto.com slash money guy. I'm at one nine. No, no. Who's the custodians? Oh, mine is through – oh, wait. Hold on. Mine's through Fidelity. Okay. Yeah, I know. I love that. Mine's through a census right now. Okay. So, Christian, you could roll that IRA rollover over to your Fidelity 401k, and then you would be magically delicious available for doing backdoor Roth contributions. Right. Is that the lucky charm? Who doesn't want to be magically delicious? This episode brought to you by lucky charms. That's hilarious. Yeah, so that is something that I mean I'm aware of, but I'm not too familiar actually how to do that. And it's something that I've kind of told myself that I'd like to learn and understand more because I think it's something – yeah, it's like are we at that point even? I'm not sure. And I know in the future, absolutely, this is something I need to do before 40, 50, something at that age. Well, it's just an easy thing. You all have enough income, and it would just be another thing. in the financial world of operations that allow you to boost that tax-free bucket. Because y'all are still so young that the compounding growth on that, it would be incredible. I mean it would make you think like a leprechaun. Keeping it on the theme. Sorry, Bo. We're running a real serious financial show here. Okay, so duplex is breaking, and we've talked about that. Let's talk about the quadplex a little bit. What are the numbers in the quadplex in terms of net margin? So, yeah, you can see what I value it now is $270,000. And I think that's conservative. Is that real or are we doing the Beckett game? That is conservative. You can notice your trend here. And, again, potentially up to $300,000 today, right? Would you pay for it when you bought it? So I bought it at $205,000, April 2020. And honestly, it was literally as everything was shutting down, I thought this was either the worst or the best idea I've ever had. Right. I have no idea. Right. Let's go with it. Roll the dice. But I knew I wanted to do it. So I was like, it's now or never. I can do it. Y'all made the most out of the pandemic. You bought real estate. You found love. You found duplexes. Oh, really? Keep it going. I didn't mean to interrupt. No, okay. So I think I've right about $40,000 rent for the year. And again, one of the units is an Airbnb, so it's a little more variable, but it's pretty average. And then I think it mortgage annually with taking in mortgage and insurance taxes is a year And then it operates about a year utilities and everything that we put into it average So it's netting you about $5,000 a year? Yeah. And then, like you said, if we took out the actual principal payments on that, I bet it's even better. So this one seems pretty sweet. These two do not seem the same to me. No, it does require. It sounds like it's going to have an $80,000 capital expenditure if they have to rehab it. If we kept it long term, we would really like to do that. Absolutely, yeah. Because I think the rents would probably double on that side. Yeah. It's possible. Up to – yeah. Oh, man. We're getting somewhere. Yeah, I know. It's almost like you could – and I don't know. I mean we'll have to crunch numbers, but it's almost like you could take the proceeds from the duplex, roll it into rehabbing, double your rent. There's some magical things that could happen here. Get some cash flow. Oftentimes we'll sit down with folks, and they'll be doing real estate, and we'll be like, hey, you're kind of missing the mark. You're focusing all your effort and all your attention over here when you're missing some stuff over here. With you guys, it's really tough because you're not missing the stuff over here. You're doing the 25%. You are building for the future, and that's what Brian was diving into. What is it that you want? Exactly. Do you want to be doing – because, like, yes, we could objectively look at the duplex, and we could objectively look at the quad, and we can provide some analytics around the best cost of capital. And I could likely say for the duplex, if rents are going to be dead break even so there's no cash flow and capital appreciation is only going to be at the rate of inflation, there's a really good chance that a brokerage account will outperform that over the long term if you're just buying low-cost indices. So that's like a use of capital conversation. But you're already saving really, really aggressively. And so if real estate is something that you enjoy, that you find fulfillment in, that you want to have, you're kind of in that step seven of the financial order of operations where you get to do what you want to do because you want to, not because you have to. So that's what – we don't know what you – if you're thinking about maximization and optimization, we can talk through that. But I don't know what you want. What do you want? I think we're at that crossroads, really, where it's just like, you know, we like your take on like, how can we build more flexibility into our lifestyle? I mean, maybe a little bit more today, but certainly more and more as we age, as our son grows up. Yeah. So for me, we're both very risk averse, too. So like, for example, if you ask him, when would you? He's like, 55 is the latest that I'll work the full time. For me, I would love to transition out of a W-2, full time W-2, like ideally, like in the next five years. Okay. For me, and I do see real estate as part of our futures. Obviously, we bought it. We're not going to be like commercial developers by any means. But if we had a few more units, we would love that. That would be great. Down the line, maybe. How's the income differential between you two? We're fairly close. Fairly close. So if you went hard stop, no W-2 to real estate, there's a big chasm to make up. It's like almost $150,000 you'd have to figure out how to make up or budgetarily live off of one income. I do. You just said something. I'm slowly getting information, and I love it because it helps me paint the picture. Because you laid out that – because one of the things I don't want – I threw out the suggestion. You could potentially sell the duplex, take the proceeds. But y'all's income is so strong. Now, I would challenge you. We'd still want to do a lot of the basics on the financial order of operations with your 401K, with your Roth funding once we get the backdoor structure set up. But if you all could fund – because I hate for you to sell a duplex. Now you're telling me we might want more real estate. You see how you're kind of sharing different visions? And I don't want to tell you to take away something that you won't be able to reproduce because you bought something for $211,000 that now is over $300,000. So that's why part of our job as financial advisors is because it depends is a word that carries a lot of weight is because you guys are quickly realizing you've made such good decisions at a young age. There's not just one path to success and victory. There's actually thousands, if not even multiple thousands, because you've made such good. But now the problem with people who defer and procrastinate, the thousands turn into one, into zero. Y'all are the opposite. You're like my favorite books as a kid, The Choose Your Own Adventure. And we just have to help you figure out what gets you the intersection of both the mathematics but also the mindset as well as the happiness that when you lay your head down at night, you go, I spend my mornings and my days doing exactly what I want to do. And I think for me, it does mean like eventually going away from a nine to five job. Okay. Like I'm a very tech and computer focused in my day to day work. And I'd love more flexibility throughout my day to like, I mean, I have nephews and going to their going to their stuff. If real, whenever our son has field trips, doing that. Like now it's like, okay, I have to like, I could find time to do that. And I have a remote job, so I could. But it's just like anytime I do something like that, I feel like I'm taking away from the work that I'm doing. and so building in a little more flexibility. But the Choose Your Own Adventure book, my problem was I read every adventure. She just did them all. Go to page 48 and then she went right back to page 27. Having a thousand chats is hard for me because I like them all. With the Duplex specifically, how recently was it your primary residence? We moved in 2023. So up until fall of 2023. So it was your primary residence in 22? Yeah, 21. Two of the last five years. You're picking up all that. Yeah, okay. We've thought of that too. Because again, okay, if you're going to do real estate, similar as you do any investments, not all real estate is created equal. Some opportunities are more attractive. Some opportunities are less attractive. Some opportunities are a better use of capital. Some opportunities are a worse use of capital. With the duplex, one of the things that I'm seeing is you bought it for $211. It's worth $300 now. So you saw roughly a 50% run up in price over a very short amount of time. And you've already said not a whole lot is going to improve on this duplex over the near term because of just the way it's structured. So you kind of like – Warren Buffett always uses the analogy. He used to walk around looking for cigarette butts that had one puff on it, one puff on it, one puff on it. Cigars. I can't remember. Cigarettes or cigars. Your duplex had a really good puff on it, and you got that puff from 2021 to 2025. The question is, does it make sense to continue holding that, or might that capital better use somewhere else? Because you just said if we were to have some sort of capital infusion into the quad and improve it, we could roughly double rent on that one. And it's also one that was bought for $205,000 and turned into $300,000, a 50% rate of return, and yet it does have upward mobility. So if you're going to turn into real estate investors and folks that want to invest in real estate, you have to figure out, okay, well, how do I analyze each property in that sort of way? And you also have to recognize when opportunities exist, like, okay, if I'm going to do something with a duplex, man, I might need to do it pretty quickly because there's a clock ticking on me to be able to take advantage of this huge issue. Because it was your primary residence, so there's a chance we could exclude a portion of the game. And the other thing – now, look, you also – even if the timer ran out on us, you could do a like-kind exchange potentially too where you have 45 days to designate and then 180 days to close on properties. And by the way, when you do those like-kind exchanges, don't choose one property because real estate is so shaky. You need to go find three to five potential properties to name in that 45-day period is what I always recommend to people. But you have options on this because you really – it does intrigue me, Beau. In some ways, I know we'll kind of talk about plan of actions later and share that, but we've already heard from Eka that they want to do more real estate. So now it's like where's the most bang for the buck and what's the biggest opportunity in this moment? I think quadplex tend to outperform duplexes anyway, and we have to upgrade the one that he has. So we see ourselves having more real estate in the future, but I think before we were to buy another property, we would fix up. I want to shore that one up. Let me ask you a lifestyle thing. You'll have one child. Any more kids? So that's something we've talked about. That we don't know the answer to yet. Okay, because the reason I ask that is because also I noticed on your cash flow, y'all spend, what is it, $1,500 a month on – So that goes into the cash flow analysis on how much income we have to replace. It's not necessarily $130,000 or $140,000. $20,000 of that might come off. And if you have another child, now you're quickly realizing now there's even – maybe this thing gets below six figures. Now how do we maybe build that up somewhere else? Or if it's even necessary because you're not spending every dime you make. You're very disciplined with your savings rate already. You've mentioned Coast Fire a few times. Walk us through some numbers. If you were to actually be able to coast, have you done any of the number? Like, hey, if we could save this much by this age. I'll put a Christian on this one. So I think – yeah, I've tried to look at it from a lot of different ways. Listening to advice from yourselves and from others that I can find. We've read several books as well. And I really think especially as we age and as we pay off our primary mortgage and reduce daycare. I mean, if you look at what our spend rate is now, I mean, I think we could reduce it to like 4,000 a month, right? Four to five would be fairly comfortable. And I think even looking at retiring as early as 50, I mean, if I were to see, I think, the number of like 2 or 2.5 million, I mean, that would be to me an indicator like I think we're here. We hit our number. But I mean, that's also something that I feel like is a little speculative. I feel like the horizon, our time horizon is still a little further out that things could change. We might have another child. I don't know. And so it just feels like there's too many variables to like firmly say. But I think that at least is a good base for us to start with. Got it. Yeah. And Coast Fire for me doesn't mean like not having an income at all on my side. Like I could do a part-time job, but also very flexible there, which is helping and hurting this conversation, I guess. Yeah. She said, I don't have to do – I can do these other things. I got all these – I can do anything. I can do all these things. I love it. I've already got some homework for you. That's what I've already – I've got ideas too because it's one of those things. We're already saving 25%. You could – if we backed into the numbers, a lot of people think Coast Fire has to mean – and maybe technically it does if you're going to follow it to the definition. You go from saving 30%, 40% of your income down to zero. So I always say, but somebody like you guys, you could go from 25% to your changing lifestyle where you go off of one income. Because none of it says that you can't just save 10% to 15% to maximize the employer match and other things and still get some growth in there but still fulfill your goals of being financially independent between 50 and 55. Yeah. What other questions do you guys have for us? I mean, my mind is already kind of racing on that. Because here's what it's going to be. I already know what we're going to do. So we're going to be like, well, they could do this or they could do this or they could do this. And she does really good with options. If we give her a bunch of options, odds are she's not going to do all of them. We'll be amenable to all those options. Yeah, I guess not necessarily a question but things to factor in and prep for the show. They're like, what are some expenses that you anticipate? So the house that we're in now, its interest rate is more on par with where interest rates are today. We may – like buying another house may be an option. So in St. Louis, we may buy to be in a better school district for our son. Which we have a few years to determine that, but it's something that's on the back of our mind for sure. We wouldn't really do a major – I don't think a major upgrade. We just really want a second full bathroom because we host family for multiple times a week. It's like seven people. And you would sell the existing home because it's not really – it's not rental-type property. Yeah, we thought about it, but we decided I think – Yeah, we would sell that one. And then in the next five years, we do anticipate we'll need another new-to-us car. I drive a lovely Ford Fiesta that wasn't made to go forever. Well, we both have 10-year-old vehicles paid off. I drive a Tacoma. It's also 10 years old. But her Ford Fiesta, putting the baby in the baby seat in the back, it's pretty tight. Especially facing backwards. He's really upset now. Is there a reason why you say new car in the next five years as opposed to in the next five months? We still have the mentality of we like to run them to the ground. Basically. You heard the part where you said your son's like crying when you put him in the bag. Did y'all hear that? Rewind the tape real quick so they can. Face forward eventually. But by the way, I love because I don't think this is public. Bo won't mind me sharing. I found out that Bo was putting on – he was telling me my child's diapers keep getting – Had blowouts every day. They're blowing out. And I'm like, Bo, you realize. Look, this is years ago. He's now a veteran. He has three children. This was on the first one. So we all love to mentor each other. And I was like, you realize that is indicator one that you're putting on two small diapers. I was like, nah, man, I got a whole box. I got a burger. That's exactly right. The tightwad side of him is, and that's what I would tell you guys. I can already feel from you. Y'all aren't going to die broke. You're not going to die penniless. So you have to. We both, by the way, we were card carrying tightwads ourselves for the very beginning part as we're growing. But there was a time that I was like, my income is at a point in the way I'm living my life now. I'm still very good with money, but I'm definitely not a tightwad anymore. And I think you guys are probably in that transition phase right now. And when I meet tightwads that are financial mutants that are kind of trying to figure out what money cannot do for them, I would challenge you from a safety standpoint, from a quality of life. If your child is crying because the car is – this is an exercise and not good for the family, let's figure it out. You can buy a nice used car and probably solve that problem sooner than five years. I do think there's definitely a mental mindset shift in that regard to being less frugal. You're still good with money. Look, I'm telling you, it's just that I've seen so many relationships where a lot of those, there's a fine line between financial mutant and financial miser. And you just have to navigate that. A lot of those good behaviors that you're rewarded when you're younger of being a miser, it's great because it builds this awesome foundation. But as a couple, as y'all are making these big decisions on who stops working, when do we buy a new car, do we go deeper into the whole real estate investor? you're going to quickly realize that all of this also has this umbrella of quality of life. And it who do we want to be and what gives us fulfillment and happiness from this tool of money Because that all it is It just a tool You going to find out when you reach million million It doesn feel any different than it did when we were getting our first million We just got to now shape our life to understand our why and be the people we want to be It's very helpful to hear from you because I feel like we feel that, but we're still getting around to it. You're doing great. I feel like I'm a coach here just chiseling barely around the edges because y'all do so much stuff naturally good. Now, y'all are a financial planner's dream. I will tell you, I mean, after this is because I see so many opportunities for you guys to fine tune this. And you also and what's cool is it's not just a one off. Come on, making a millionaire. You guys have every year you're going to have. Hey, but we wanted to do we're thinking about doing this. Let's go run the numbers. That's why I love what we get to do for a living is because we get to work with our successful clients and kind of build this together. It's not just a one off thing. And so what we're going to do is we're going to come up with some of the quantitative stuff. We're going to come up with some options. We're going to crunch some numbers. And, hey, here's some stuff that you ought to think about that you should look at. But I've got some homework for you guys, and it's more on the qualitative side. I was just kind of jotting down some notes. If I were you guys, between now and the time that we kind of send you some of our thoughts, I'd do some research on both of your 401Ks. You said yours is a fidelity. Yours is a dissensus. How good are the investment options inside the 401K? Are they robust? Are they diverse? because there might be a strategy where it makes sense to roll your IRAs into your 401k, zero them out, and open up a backdoor Roth opportunity. So now all of a sudden, instead of y'all just doing 7,500 into regular IRAs every year, you get to do 7,500 into Roth IRAs every year, and you can start growing some tax-free money. That's a boom shakalaka. That's a boom shakalaka is the technical financial term for that. The other thing is you guys really need to sit down and talk about what is it that we want. You're now at the place where you get to make financial decisions, not so much because you have to, but because you get to or because you want to. But you have to define that. Do we want to do real estate? Do we want to manage this? Do we both want to work? Do we – so you need to have some conversations around that. And in those conversations, you figure out how deep you want to go into real estate. Is real estate a job for you or is it, hey, part of our financial life is that we have some real estate properties? Because those are two very different things. How do you want to approach it and how do you want to attack that? And then I just put the last thing here. I think it would be worthwhile for you guys to sit down and calculate the cost of frugality. At your income, at your savings, at your assets, you could go buy a new car tomorrow. You're at the place where you could do that. But you have this mentality that we want to drive it all the way until the wheels fall off. And that's okay. Again, money is nothing more than a tool that allows you to accomplish the goals that you have. But are you doing that because it's what you want or are you doing that just because something's hardwired in you guys? Because if there are things, would being in a newer automobile give you more peace of mind, make family road trips more fun? Whatever the thing is, is there a cost that you are paying unnecessarily, needlessly to be as frugal as you are? Because it's okay to graduate and grow out of that. So a lot of conversations for y'all to have and a lot of calculations for us to do. Yeah, I just – the big thing is because I love – immediately, I mean, kudos to y'all, y'all superpower. I was in love with y'all the first five minutes. I mean when I heard about – when I heard the way y'all met and then the conversations of what y'all own, I'm like this is the coolest couple out here. So you guys are crushing it. Thank you. Also, the like is mutual, so thank you. You guys are great. We can delete that. We're happy to be. It's great. Awesome. Thank you, guys. Thank you. Thank you. Brian, what a great conversation we had with Becca and Christian. For two folks in their mid-30s, they're kind of crushing it. Well, I didn't even hide the fact that I thought I loved these people. I mean, the fact that the way they met and then they started talking about personal finance and they both had rental properties, these are my folks right here. It kind of all went together nicely. Now, I will tell you what I think is amazing about them is not only did they have a personal finance focus, but they got into real estate and sometimes it's better to be lucky than good. Because man, oh man, did things go a little different once you and I crunched the numbers than what we even kind of laid out in the show for them about their rental property. Yeah, it was interesting. As we were recording, I was kind of, I don't want to say like soured on them, but there was not like an incredibly compelling story to both those rental properties. But then we began to peel the curtain back a little bit and actually run the numbers. And what we found was absolutely fascinating. So what we did is we took the information they shared with us. We kind of went back to the drawing board. And if you remember, they told us total rents coming in for the duplex, it was just a hair under $26,000, $25,800. And for the quadplex, it was just a hair under $40,000, $39,900. And they said that realistically, they were kind of just about breaking even. And while that may have been true from a cash flow perspective, I would not describe either one of them as break-even investments. Yeah, I mean, what I think is interesting, if you were to ask me while we were recording in real time with them, I was like, we're going to tell them to sell the duplex. I kind of knew that they need to invest more into the quadplex. If we can double the rent, let's make some magic happen here. But also, we couldn't definitively say that because there was a lot of cloudy or muddy water there because they didn't know how much was their mortgage payment that was just paying back the mortgage. They didn't know how much of their capital improvements, like when they put roof on or any of the repairs that were going to, in the long term, be better for the investment. They weren't getting a clear reflection on what the actual cost or operating expenses were or what the return on their equity really was. But when we kind of looked at this, it was like, I mean, it kind of blew my mind on how good, not only, because remember, let's focus on this is unique. Where they live, there's actually duplexes and quadplexes. When they brought this during around the COVID era, they got super low interest rates. They've gotten really good rents compared to what their initial low cost purchase. This stuff is kind of amazing when you actually peel back the numbers. Yeah. When we stretched back and looked at the numbers, this is what we found. When you pay a mortgage, part of your payment goes to principal and part goes to interest. When you're thinking about the cost, it's really just the interest cost you want to factor in because principal payments are sort of like a forced saving mechanism. You're saving it inside of the equity of the property. So when we just look at the interest expense on the duplex, remember the rate was 2.75%. They were spending about $5,600 in interest. And for the quadplex at a rate of 3.625%, they were spending just a hair under $6,500 in interest. So the money going towards of principal, sort of like this forced saving. So even though they weren't necessarily having a ton of cashflow come their way because the mortgage payment, the rental payments were roughly equal, it was looking pretty good. So from there we said, okay, well, let's look at what the average operating expenses are. Let's take the capital expenditures out and only look at the operating expenses. And what we found was for the duplex, it was operating on a year over year basis with about $11,000 of expenses. And for the quadplex, it had about $16,500 of non-capital expenses. So when you continue following that down and you look at how the numbers played out, the actual net profit on the duplex came into just under $9,000 a year. And then the quadplex came in at $16,900. And so when you look at these properties, now we know what the actual dollar figure of return is, we have to compare that to the actual capital investment or the equity they have in the properties. And if we adjust the values of the properties closer to market value, because look, me and you love being conservative. We do it all the time, but I would argue in the world that they were living, they were perhaps even a little overly conservative. Agree? Disagree? Want to fight? For sure. I mean, I already see the numbers here, but being a math nerd, I mean, we're going to do this off of return on their equity, not their initial investment. The number would be even bigger if we base this off of just what the down payment was on their initial property because this was levered debt. But they have $100,000, like the duplex, $100,000 of equity right now. And by showing right here, they're making profit of close to $9,000. 9% yield on their cash. 9% yield on that. That's pretty incredible once you strip out what's capital investments, if you strip out all the principal payment on the mortgage, and you look at the quadplex, I mean, they've got $125,000 of equity. You can quickly see that they've got profit of $17,000. That's like a 13.5%. And here's what's even so wild for me. As I already alluded to, I would have told you we were going to say sell the duplex. But after seeing these numbers, we can't do that. You can't. It's too good. But they told us – because there's something that we need to at least address is that they said, hey, if we invest in this quadplex and we put approximately $80,000 into this, we could double our rent. So I want you to kind of internalize what that means is that this thing that already is at 13.5%, if we could just put a little bit more money into it, we could double the rent, which would easily put their rate of return on equity over 20% a year. Well, you're $16,000 into an $80,000 investment. That's unbelievable. It's a 21% rate of return on that. They're like a credit card company. They have to do it, right? It's too compelling. They have to do it. And so the question that the homework that I would give for them is they need to have a conversation. Okay, what do we want? Obviously, we were wondering if there was a lot of merit to either one of these properties. We have now discovered that when we actually look at the numbers, they are both incredibly compelling investment opportunities. They don't sell either one of them. So it doesn't make sense to sell them. They need to figure out, okay, well, what do we want our lives to look like? Do we want to add on to our real estate? Do we want to be real estate managers? Do we want to hire some sort of management company? Because I would argue at the numbers that they have, they kind of have the freedom to choose. They can pick and choose how they want to interact with this and what they ultimately want their wealth building journey to look like. Well, not also, they ought to go ahead and try to figure out if they can come up with a plan to do the improvements. That's right. But I think the good news is they have a big shovel. They have a really good income coming in. They have a lot of margin separation from what their living expenses are, from what they bring in. I think that within less than a year, they could pay for those improvements on the property, on that quadplex in the first year, and then get all the fruit, all the yield off of those improvements. So super powerful stuff. I thought it was valuable. I think there was another question, Bo, and I want to know what we put together on this. What does their retirement look like? Well, so again, one of the things we say that makes a lot of sense is they ought to figure out how did they come up with a capital to improve the quadplex. That makes sense. And one of the ways they had talked about potentially doing that was backing down their savings, kind of doing like a little bit of Coastify thing and saying, okay, what if all we do is just the 401k? And if I put in 10%, I get a 10% match. What does that look like? How does that play out? Well, what we found is if they do that and they only save up to that 10% and then they get a 10% match, that's going to be a total of about $22,000 a year going into the 401k. Well, they already have $527,000 of liquid investment assets saved up. Just saving that, and if we assume an 8.5% rate of return from now until they get to retirement, by age 55, they'd have almost a $4 million portfolio, not including the real estate, not including those assets. If they did this all the way out until age 60, it's over $6.2 million with just Christian saving that 10%. So again, they've done a lot of the heavy lifting early on that gives them tons of flexibility and margin to figure out how their future should look. Well, if you look, even for my inflation trolls, that's still for 55 present value of about $89,000 a year. It's 60 years age, the equivalent of today's dollars of close to $120,000 a year. That's $10,000 a month. I love it. I mean, they have – talking about poster child for why if you get in early and do it often on saving and investment, you get lots of flexibility, lots of opportunities. So they are going to be a good definition of good decisions on real estate, good decisions on investing early. It's going to allow them to have this coast opportunity and still check all the boxes on what they want to do financially. So a few pieces of homework items I have for them. number one figure out how we come up with the capital for the $80,000 to improve the quadplex number two figure out when it comes to real estate what do we want our life to look like how actively involved we want to be how much do we want to expand how much we want to add to it and then number three I think that would really be helpful for them to think about is they're going to have options earlier on in life we've already said the way that they're going to be saving from a liquid standpoint is in their 401k so if they leave the workforce before age 55 or before age 59 and a half, they are going to have to figure out how do we bridge that gap, right? If we're saving all in qualified assets and we want to leave at 50, we might need something to get us from 50 out to 59 and a half. Maybe that's real estate income. Maybe that's some sort of other passive income, but I think they are so far ahead of the curve at this point, they ought to begin thinking about what that looks like. Yeah. Those taxable brokerage accounts is going to probably be able to create a nice bridge account in there too, but what an awesome couple. I mean, I think I led with it. I quickly knew I loved this couple just from hearing how they met and so forth, and I just can't wait to see what the future builds for them. If somebody else wants to come on Making a Millionaire, where do they apply? Yeah, if you'd like to be a guest on Making a Millionaire, you can go to moneyguide.com slash apply, or if you want to check out any of our tools and calculators, you can go to moneyguide.com slash resources. Becca, Christian, thank you. This was an absolute pleasure. We loved creating this content for you. And hopefully many out there in our financial mutant universe are going to get a lot of benefit of this. I'm your host, Brian, joined by Mr. Bo Money Guy team out. Making a Millionaire is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners at Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of Abound Wealth Management.