Tag: real estate

  • Practice Strong Money Fundamentals Before Investment Dreams

    Practice Strong Money Fundamentals Before Investment Dreams

    When I teach my personal finance seminar to lawyers or law students, I typically reach out ahead of time asking about topics of interest.

    The most common response I get is something like, “I want to learn about investing.”

    The other common response is, “I want to invest in real estate.”

    I totally get it. Investing in the stock market and owning real estate are sexy topics.

    Without a doubt, these are both important topics to cover in a personal finance seminar. We spend a lot of time in my course and here in the blog talking about investing and owning real estate.

    Of course, the best way to generate wealth is through consistent investments over a long time horizon.

    So, my students are asking the right questions when they are concerned about investing and real estate.

    But, they’re skipping a few crucial steps.

    The thing is, investing is actually the easy part.

    The hard part is constantly generating enough money to fuel those investments.

    That’s why investing and owning real estate are “Day 2 topics.” On Day 1, we have to build the foundation.

    Think about it like this:

    • Before we can invest, we need excess money to invest.
    • To have excess money to invest, we need a budget that actually works.
    • For a budget that actually works, we need clear motivations.
    • Clear motivations means a strong money mindset.

    Can you spot the issue of investing without a solid foundation?

    When my students ask me a question about how to start investing, I tend to respond with a question of my own:

    “How much savings does your budget generate each month?”

    Yes, I know. It’s so annoying to answer a question with a question.

    This particular question usually leads to a double dose of annoyance from my students.

    My students are first annoyed that I ignored their question about investing. They didn’t come to me to talk about something boring, like budgeting.

    They want to know about the exciting stuff, like earning huge returns in the stock market.

    Next, after this initial annoyance fades away, another form of annoyance sets in.

    My students get annoyed because they can’t actually answer the question.

    They realize they have no idea how much money they’re saving each month because they don’t have a budget.

    That’s a problem.

    Not having a budget is a problem for anyone who wants to consistently invest.

    To be a successful investor, you need to consistently fuel your investments. There will be ups and downs in the markets. That’s to be expected.

    Your job is to stay in the game and keep feeding your accounts.

    For example, most of us can be successful investors by simply investing in an index fund, like VTSAX.

    Once we’ve selected that investment, our job is to constantly add money to your investment account.

    That means having a budget that works.

    If you skip this part of the process, sure, you may be savvy enough to open and initially fund the account. But, my prediction is you won’t be fueling that account regularly.

    Having a budget for your personal finances is even more important when it comes to owning real estate.

    Investing in real estate means running a business. Money comes in and money goes out. To be successful, you have to make sure that more money comes in than goes out.

    This is obvious stuff, right?

    The same logic applies to your personal budget: if you want to get ahead in life, more money needs to come in than goes out.

    The problem is most people have a hard enough time managing their personal finances. How are they going to handle managing business finances?

    That’s why I ask my students, “If you haven’t mastered this idea with your personal budget, are you sure you want to take on the stress and risk of an investment property?”

    It’s usually around this point when my students start nodding in understanding.

    paper airplane in a window of airplane reflecting that we need to have a plan with our money before dreaming on investments.
    Photo by Sebastián León Prado on Unsplash

    Before focusing on stocks or real estate, make sure your personal finances are in order.

    My goal here is not to dissuade you from investing in stocks or real estate.

    We all need to invest if we want to generate wealth.

    My goal is to help you avoid the mistakes that so many of us make in the early stages of our careers.

    One of the biggest mistakes I see is people wanting to jump to the final steps in the process without starting from a strong foundation.

    If you’ve been following along on the blog, you likely noticed the progression in topics we’ve covered. This is the same progression that we follow in my personal finance course.

    You’ll see links to each one of these topics featured on the top of the Think and Talk Money homepage:

    We initially covered each of those topics in order from top to bottom. First, we talked extensively about the mental side of money. Without having your money mindset in the right place, nothing else matters.

    We then spent a lot of time talking about personal finance fundamentals, like budgeting, saving, and handling credit and debt responsibly. 

    Only after having our personal finance foundation in place did we talk about more fun concepts like investing and real estate.

    There’s a reason we’ve covered these topics in this order. 

    If your money mindset is not in the right place, you won’t be able to stay on budget. 

    If you can’t stay on budget, you’ll likely fall into debt. 

    When you’re falling deeper and deeper into debt, it doesn’t make a lot of sense to prioritize investing.

    Why bother with investing if any profits are just going to disappear?

    Let’s focus on that last point for a minute. 

    What sense does it make to invest if you’ve never proven to yourself that you can use those investment gains responsibly?

    I never want to see people take on the risks of investing just to have any profits disappear because they don’t have a strong personal finance foundation in place.

    For example, imagine someone does the work to find and sustain a good rental property that generates $1,000 per month in cash flow. 

    It’s not easy to earn that much. It takes time and effort, not to mention the risk involved.

    If that same person blows the $1,000 he earned on things he doesn’t care about, what was the point? 

    Why take on the risk and do the work if the money will all be gone by the end of the month?

    Unfortunately, this is how many people go through life. They work hard, make good money, and then have nothing to show for it.

    I don’t want that to be your fate. I want you to have a plan for your money before you earn it. 

    That means sticking to a budget that consistently moves you closer to living freely on your terms.

    Most of us don’t know where our next dollar is going. 

    The reason most people never get ahead with their finances is because they don’t have a plan for where their next dollar is going. 

    Their income hits their checking account, they spend it on this or that, and pretty soon that money has disappeared. They haven’t used the money to advance any of their priorities.

    It’s just gone.

    To me, this is one of the most important money mistakes that we need to fix right away. We definitely need to fix it before we start fantasizing about big investment returns. 

    If not, you’ll just be making the same mistakes, just with more money to lose.

    Having a plan for our money, before we earn it, is essential if we want to reach our goals. With a plan, we can eliminate the disappearing dollars with confidence that our money is being used to serve our purposes.

    How do you create a plan for your money before you earn it?

    You need to have a budget.

    If you don’t currently have a budget that results in excess money at the end of each month, I encourage you to start there before thinking bout real estate.

    sign saying I feel like making dreams come true indicating that we need to have a plan with our money before dreaming on investments.
    Photo by Peter Fogden on Unsplash

    When you have strong fundamentals in place, money becomes fun.

    Being good with money doesn’t have to be stressful. Once you have the fundamentals in place, you’ll start to see how each dollar you earn gets you one step closer to financial freedom.

    Before you think about investing in stocks or in real estate, make sure that your personal finances are in order. 

    Otherwise, the effort, stress, and risk of investing is not worth it. Any dollar you earn is likely to disappear as quickly as it comes in.

    To prevent that from happening, establish good money habits before you buy real estate. 

    In the end, you’ll be so happy that you did.

    For any investors out there, did you jump in before establishing strong personal money habits first?

    Did any benefits you earned from investing simply disappear because you didn’t have a plan for those dollars ahead of time?

    What advice do you have for beginners thinking about investing?

    Let us know in the comments below.

  • Don’t Buy a Cute Condo: Do This Instead to Create Wealth

    Don’t Buy a Cute Condo: Do This Instead to Create Wealth

    Have you ever dreamed about owning a cute condo in a bustling city?

    You know, the type of place where you can have your friends over and everyone gushes over how great your condo is?

    If so, you’re not alone.

    Many young professionals follow a traditional path in hopes of buying that cute condo as a “starter home.”

    First, they spend a lot of money for an education to get a good job.

    Then, after a few years of working that good job, they think about buying a starter home instead of continuing to rent.

    These young professionals go into the home-buying process knowing that the home they may purchase will only be a temporary fit.

    Even though it may be years down the road, they tell themselves they can simply upgrade if a significant other or children enter the picture.

    For professionals living in cities, the search for a starter home typically leads them to condo buildings.

    This makes sense. Condo buildings are attractive for a number of reasons.

    I get the temptation to buy a cute condo.

    Condo buildings are usually in locations ideal for young professionals.

    Condo buildings oftentimes come with enticing amenities.

    Plus, condo buildings typically offer one or two bedroom units, the perfect size for an individual.

    Because of these features, condo buildings tend to attract other young professionals, making the building even more attractive.

    While I never owned a condo in Chicago, I happily rented directly from owners in condo buildings for 10 years before buying my first rental property. So, I certainly appreciate the allure of living in a condo.

    All this being said, I highly encourage you to think twice before buying a condo, or any other “starter home” for that matter.

    That’s because owning a unit in a condo building comes with two significant downsides: (1) the actual cost and (2) the opportunity cost.

    Instead, I recommend you think about these two alternatives to buying a starter condo:

    1. Continue renting until you’re ready to buy a more permanent residence; or
    2. Buy a small multifamily building where you can live in one unit and rent out the other units.

    Before covering these two alternative ideas, let’s talk about the (1) actual costs of owning a condo and the (2) opportunity costs of owning a condo.

    What are the actual costs of owning a condo?

    The actual cost of owning a condo is like owning any other property, with one additional cost to be acutely aware of.

    Besides the mortgage, insurance, taxes, and maintenance, condo buildings involve an additional cost that can be very expensive:

    HOA Dues and Special Assessments.

    Remember all those attractive amenities that drew you to the building in the first place?

    Those amenities come with a price. Oftentimes, a substantial price.

    On top of the HOA dues, be aware of unexpected special assessments, which can wreak havoc on your finances.

    Special assessments may be needed to cover major maintenance or renovation projects in the building. When special assessments are due, you don’t have a choice but to pay up.

    Ask any former condo owner why they no longer own a condo. My bet is most of them will blame the HOA dues and special assessments.

    exercise equipment inside a typical condo building showing an amenity that you probably won't use very often and why you shouldn't buy a cute condo.
    Photo by Point3D Commercial Imaging Ltd. on Unsplash

    The other reason you’ll hear from former condo owners?

    They outgrew their place.

    This should not come as a surprise to any single person who buys a condo while also seeking a significant other.

    You know how the saying goes: first comes love… then comes marriage… then the condo’s got to go.

    That means additional money to prepare your condo for sale, for closing costs, and for moving expenses.

    By the time you add up all these costs, you likely won’t walk away with any profit from owning a condo as a starter home because you only gave yourself a few years to benefit from appreciation.

    Even if you do make a profit, it’s a gamble. Owning any home for a short period of time is not a good investment strategy. The transactional costs are simply too high.

    Besides these actual costs, you should also consider the opportunity cost of owning a condo early in your career.

    What is the opportunity cost of owning a condo?

    While you may be OK with taking on the risk and these actual costs, don’t ignore the opportunity cost of owning a condo.

    The opportunity cost refers to what you are losing out on by choosing to buy a condo.

    In this context, the opportunity cost is that whatever you paid for the condo could have been used to invest in other assets. For example, instead of a down payment on a condo, you could have invested in stocks.

    Or, you could have purchased a rental property that generates long-term wealth for you and your family (or future family). More on that below.

    So, before you opt for the cute condo, think about both the actual costs and opportunity costs involved.

    There’s nothing wrong with renting until you are ready to buy a more permanent home.

    Owning real estate is a long-term proposition. The conventional wisdom is that you should not buy a property unless you plan to hold it for at least 7-10 years.

    If you are not planning on staying in your starter home for at least that long, just keep renting. Invest your money elsewhere.

    Save yourself the headaches of being a homeowner while building your net worth through an increased saving rate and other investments.

    This is not groundbreaking information. This is Personal Finance 101.

    Yet, many young professionals can’t resist the temptation to finally own a property after years of school and finally earning an income.

    It’s up to you to set aside your ego, keep renting, and build a strong financial foundation.

    By the way, many smart people think it’s financially foolish to buy a primary residence instead of renting.

    And, I’m not just talking about buying a cute condo early in your career.

    These really smart people think it’s almost always a better idea to rent instead of own in any circumstances.

    While it’s beyond the scope of this post, you can find an in-depth analysis on the question of buying vs. renting in this video from Khan Academy.

    I believe in the power of real estate as an asset class, especially small multifamily properties.

    Instead of buying a condo for a starter home, consider these four reasons to invest in rental properties: 

    1. Monthly cash flow
    2. Appreciation
    3. Debt pay-down
    4. Massive tax benefits

    When these benefits combine, real estate investors can generate significant wealth over the long run.

    Below is a quick breakdown of each of the four main benefits. 

    For a more detailed description of each benefit, you can read my series on investing in real estate here.

    1. Rental property cash flow is king.

    With cash flow, you can cover your immediate life expenses. For anybody hoping to reach financial freedom, it is essential to have income to pay for your present day life expenses. 

    For my money, cash flow from rental properties is the best way to pay for those immediate expenses.

    If your present day expenses are already covered, you can use your cash flow to fund additional investments. 

    That might mean buying another rental property or investing in another asset class, like stocks.

    2. Long-term wealth through appreciation.

    Appreciation simply refers to the gradual increase in a property’s value over time. 

    While cash flow can provide for my immediate expenses, appreciation is all about the long-term benefits.

    Like investing in stocks over the long run, real estate tends to go up in value. The key is to hold a property long enough to benefit from that appreciation.

    To benefit from appreciation, all I really need to do is make my monthly mortgage payments, keep my property in decent condition, and let the market do the rest.

    brown and white concrete building under blue sky during daytime reflecting you should buy a small multifamily property instead of a cute condo.
    Photo by Krzysztof Hepner on Unsplash

    3. With rental properties, other people pay off my debt.

    When I buy a rental property, I take out a mortgage and agree to pay the bank each month until that mortgage is paid off. At all times, I remain responsible for paying back that debt.

    However, I do not pay that debt back with my own money. 

    Instead, I rent out the property to tenants. I do my best to provide my tenants with a nice place to live in exchange for monthly rent payments.

    I then use those rent payments to pay back the loan.

    As my loan balance shrinks, my equity in the property increases. Equity is just another way of saying ownership interest.

    When my equity in a property increases, my net worth increases. 

    4. Real estate investors earn massive taxes benefits.

    When you earn rental income, you must report this income on your tax return. Rental income is treated the same as ordinary income.

    However, the major difference between rental income and W-2 income is that there are a number of completely legal ways to deduct certain expenses from your rental income.

    Common rental property expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs. We’ll touch on a few of these deductions below.

    With all of these available deductions, the end result is that most savvy real estate investors pay little, or nothing, in taxes on their rental income each year.

    Yes, you read that right.

    I’ll say it again, just to be clear:

    Most savvy real estate investors legally pay nothing in taxes on their rental income each year.

    I highly recommend you consider house hacking if you’d like to start investing in real estate. 

    When you buy a small multifamily property, you can live in one of the units and rent out the others.

    If you pick the right property, you can end of living for free because your tenants pay your mortgagee.

    The strategy of living in a building you own while tenants pay for it has been around for ages. Brandon Turner popularized the name “House Hacking” for this timeless concept. 

    You can read all about house hacking on BiggerPockets here.

    For even more information on house hacking, Craig Curelop wrote a book for BiggerPockets called The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom.

    My wife and I house hacked for years before buying our forever home.

    Without a doubt, there is no better strategy for entry level real estate investors than house hacking. We talked about the financial upside earlier in this post.

    Besides the financial upside, it’s like landlording with training wheels. Since you live on site, you can more easily learn how to manage a rental property, including responding to tenants and handling routine maintenance.

    The naysayers will say something like, “I don’t want to live with my tenants. They’re going to stress me out. I don’t want to be bothered at 2 a.m.”

    Ignore them.

    My wife and I lived with our tenants for five years at our first property and two more years at a subsequent property. We did this while working full-time jobs as lawyers and raising two kids (now three kids). 

    Because we didn’t listen to the naysayers, we now have four income-generating properties and our “forever home” just outside Chicago.

    Even though we’re no longer living for free, the income from our rental properties is enough to cover the expenses of our home.

    Before buying that cute condo, think about house hacking instead.

    There’s no better time to house hack than at the beginning of your career. This one decision can pay massive dividends for years to come.

    No, your friends might not gush over your cute condo.

    But, you’ll be well on your way to generating long-term wealth for you and your family.

    Even if you’re not just starting out in your career, house hacking is still an incredible wealth-building strategy.

    My wife and I house-hacked until I was nearly 40 years-old with two kids. We wouldn’t be where we are today if we instead opted for a cute condo.

    Did you buy a starter home in your 20s or 30s? Any regrets?

    What do you think of house hacking?

    Let us know in the comments below.

  • Refinance Now or Wait for Mortgage Rates to Drop?

    Refinance Now or Wait for Mortgage Rates to Drop?

    The big news this week was that the Federal Reserve cut rates for the first time in 2025.

    Naturally, those of us who bought homes in the past couple of years are starting to think about refinancing.

    In case you missed it, here’s a key takeaway from the announcement, as reported by CNBC:

    The Federal Reserve on Wednesday approved a widely anticipated rate cut and signaled that two more are on the way before the end of the year as concerns intensified over the U.S. labor market even as inflation is still in the air.

    With the rate cute, the important question people are asking is: should I refinance my mortgage now or wait for rates to drop even lower?

    Today, I’ll share exactly what I’m doing with my mortgage.

    First, let’s discuss one common point of confusion.

    @thinkandtalkmoney

    Are you going to refinance? #thinkandtalkmoney #refinance #mortgagerates #homeownership #personalfinance

    ♬ original sound – Thinkandtalkmoney

    The federal funds rate is not the same thing as mortgage rates.

    When we see news like we did this week that the Fed is cutting rates, many of us think that means mortgage rates automatically drop.

    Nope.

    The federal funds rate is not the same thing as a mortgage interest rate. That said, mortgage rates are indirectly tied to the federal funds rate.

    No need to overcomplicate things. The typical homeowner (and I include myself in this category) does not need to fully understand how mortgage rates and the federal funds rate relate to each other.

    Instead, the typical homeowner just needs to know that when the Fed cuts rates, mortgage rates also tend to drop, but not always.

    For those curious, here’s a quick synopsis from Bankrate:

    The U.S. Federal Reserve sets borrowing costs for shorter-term loans by changing its federal funds rate. This rate dictates how much banks pay each other in interest to borrow funds from their reserves, kept at the Fed on an overnight basis.

    While this rate isn’t the same as the rate you’ll pay for your mortgage, they are related. As the cost for banks to borrow increases or decreases, the cost for you to borrow tends to follow suit.

    And when the Fed doesn’t change the federal funds rate, it generally encourages lenders to maintain mortgage rates in the current range.

    The takeaway is that when the Fed cuts rates, it’s likely that mortgage rates will also drop.

    But, there’s one more piece to the story.

    Mortgage rates often drop before the Fed actually cuts rates.

    It may sound backwards, but mortgage rates usually factor in pending rate cuts before the Fed actually announces its decisions.

    To that point, look at how mortgage rates were already dropping over the past month in advance of this week’s announcement:

    The Federal Reserve’s rate cut this week is rippling through the housing market, sending mortgage rates lower and spurring a jump in refinancing.

    The 30-year fixed mortgage rate averaged 6.26% for the week ending September 18, down from 6.35% last week, according to data released Thursday by Freddie Mac.

    This is the fourth-straight week of declines as mortgage rates fell in anticipation of the Fed’s quarter-point rate cut on Wednesday.

    As you can see, mortgage rates were already declining for weeks in anticipation of the Fed’s rate cut.

    The point is that it’s not always clear when the right time to refinance is. It’s not as simple as saying “the Fed cut rates, so now I’ll refinance.”

    To help you make a good decision, I’ll walk you through my current thought process when it comes to refinancing.

    First, here is some context about my personal situation.

    person using MacBook reflecting whether now is the right time to refinance with rates dropping.
    Photo by Austin Distel on Unsplash

    I bought my home in early 2024 when rates were high.

    When I bought my home in early 2024, we took out a 30-year fixed-rate mortgage at 6.875%. At the time, we were very pleased with a rate under 7%.

    In the back of my mind, I hoped I would have a chance to refinance in the next few years. But, I didn’t hinge my decision based on whether I could eventually refinance or not.

    I’ve long been an advocate for buying a house when the time is right in your life, regardless of mortgage rates.

    My wife and I decided early last year that the time was right to buy our “forever home.”

    I was about to turn 40. We had two kids and were thinking about a third. It felt like we had started to outgrow our small apartment in the city.

    Of course, we enjoyed the short commute downtown. We liked walking to stores, restaurants and coffee shops. But, those opportunities to enjoy the city were harder to come by with two young kids at home.

    Plus, my daughter was one school year away from starting kindergarten. We thought it would be nice if she made some friends in the neighborhood before kindergarten started.

    Add it all up and the time was right for us.

    Besides these personal factors, I had a suspicion that home prices were only going up.

    For years, buyers in the Chicagoland area have struggled with a limited supply of quality homes. I had been watching the market and observed that the good houses went under contract quickly.

    I had no way of knowing for sure that prices would continue to rise, but time has proven that we were right to buy when we did.

    Since early last year, prices have only gone up in Chicagoland, despite elevated mortgage rates.

    That’s why my advice is to buy a home when you’ve decided it’s the right moment in your life to do so. Make that decision regardless of what current mortgage rates are.

    In other words, ignore mortgage interest rates.

    Here’s why.

    Why do I recommend you ignore mortgage rates when buying a home?

    There are really only three things that can happen to mortgage rates over time.

    Mortgage rates can:

    1. Stay the same.
    2. Go up.
    3. Go down.

    In any of those three scenarios, there’s no point in basing your decision to buy a home only on the current rates.

    Let me explain. 

    Let’s say you have a crystal ball and can look three years into the future. Looking into your crystal ball, let’s play out each of the three scenarios mentioned above.

    1. Your crystal ball shows you that mortgage rates stayed relatively consistent. 

    Since rates stayed the same, there would be no point in waiting to buy a home because of rates. The rates three years from now are the same as they are today. 

    By waiting, you’re likely going to experience that homes have gotten more expensive. The longer you wait, the more expensive they are going to be.

    This is exactly what has happened in Chicagoland where home prices are up more than 9% since just last year.

    On top of the recent trends, the historical data confirms that homes have become more expensive. In 2024, U.S. homebuyers paid nearly double what they paid for homes in 1965, accounting for inflation.

    So, even if rates stay the same, prices are likely to go up the longer you wait. In this context, you shouldn’t sit around waiting for them to drop. 

    2. Your crystal ball shows you that mortgage rates went up.

    If rates go up, it’s easy to conclude that it’s a mistake to delay your home buying decision. Higher rates, combined with higher prices, is… not good.

    Let’s move on to the third scenario, which is the scenario people sitting on the sidelines are usually waiting for.

    3. Your crystal ball shows you that mortgage rates went down.

    This is the scenario that many people are waiting for. When rates go down, you can afford a more expensive home. That’s a good thing, right?

    Not so fast. 

    Do you think you’re the only person sitting around waiting for rates to drop? For the same reasons that you’re waiting, many other people are also waiting.

    So, what happens when lots of people are waiting to buy the same thing?

    Demand goes up. When demand goes up, you have more competition to buy that same house. That means prices go up.

    You’ll end up paying more money for the house, even with a lower interest rate.

    Take it from me, bidding wars are not fun. I would much prefer to get the house I want without the added competition. 

    If mortgage rates end up dropping later on, you can always refinance (the topic of today’s discussion).

    You may pay more on a monthly basis in the short term, but long term, you have the house you want at the best available current rate.

    So, there you have it. No matter what happens to rates, in my opinion, you’re best off shopping for a home when the time is right in your life. 

    And, this leads us back to our question of the day: is now the right time to refinance?

    closeup photo of street go and stop signage displaying wait reflecting whether now is the right time to refinance with rates dropping.
    Photo by Kai Pilger on Unsplash

    Should I refinance now or wait for mortgage rates to drop?

    We would need to dust off our crystal ball again to know exactly when the time is right to refinance. Just like everyone else, I cannot predict if mortgage rates will continue to drop.

    Rates have already been dropping for the past month in anticipation of the Fed cutting rates this week.

    Plus, in the announcement, the Fed signaled two more rate cuts this year. That means rates may continue to drop.

    Of course, there’s no guarantee the Fed will cut rates. Economic factors can always lead the Fed to change course. And, further rate cuts do not guarantee that mortgage rates will continue to simultaneously drop.

    So, am I personally going to refinance right now?

    For now, I’m holding off on refinancing.

    My guess- and it’s only a guess- is that mortgage rates will continue to drop. In my current financial situation, I’m OK with taking that risk.

    My current rate is 6.875%.

    As a general rule, I wait to refinance until I can qualify for a rate at least 1% lower than my current rate. For this decision, I’m waiting until rates drop into the “5s.”

    Besides the monthly cost savings, which could be substantial, I am excited for the potential emotional high of dropping my rates into the “5s.”

    By the way, this is the emotional side of money that has nothing to with the numbers. It will just feel good to be under 6% for the next 30 years.

    How will I know when I can qualify for a rate under 6%?

    This is why you need to have a great mortgage broker on your real estate team.

    I don’t have the qualifications or the time to closely monitor the mortgage rate market. By keeping in touch with my mortgage broker, he’ll know exactly where my head’s at.

    Then, he can keep an eye on things for me and let me know when the rate I’m personally eligible for drops below 6%.

    Never underestimate the importance of having a great mortgage on your side. The right broker can save you thousands and thousands of dollars over the long run.

    If you need help evaluating mortgage brokers, check out my post:

    How to Evaluate a Great Mortgage Broker for your RE Team

    Is there risk involved with waiting for rates to drop?

    Is there risk in waiting?

    Absolutely!

    Rates may not drop any further. They could even start to go back up.

    I’m willing to take that chance right now.

    I can comfortably afford my current housing expense, so I’m not desperate for the cost savings that might result from a refinance.

    Plus, there are costs involved with refinancing.

    Just like when you initially buy a home, there are closing costs associated with refinancing. Those costs can eat away at any savings generated by refinancing if your new rate is not low enough.

    There are also time costs involved in refinancing. If you haven’t had the pleasure, it’s not a whole lot of fun to track down and provide all of the required documents to the underwriters.

    At this point, those costs are too high for me to justify refinancing. That’s why I usually target a 1% drop in rates, which should be enough to make the cost and effort worth it.

    Are you refinancing now or waiting?

    Now you know exactly how I’m thinking through the decision on whether to refinance.

    I’d like to see a 1% drop before I commit to a refinance. That will save me enough money each month to make it worth it.

    It will also give me the emotional high of dropping into the “5s” for the next 30 years.

    On the other hand, if rates don’t drop, I’m comfortable with my current situation.

    Without a crystal ball, I feel good about this thought process.

    Are you currently thinking about refinancing?

    What factors are you weighing?

    Let us know in the comments below.

  • Don’t Give Up When Being a Landlord Feels Heavy

    Don’t Give Up When Being a Landlord Feels Heavy

    There comes a time for every rental property investor when the job of being a landlord starts to feel like too much.

    It all starts to feel too heavy.

    You’ll want to quit.

    You’ll convince yourself that it’s much easier to be a passive stock market investor.

    When that moment as a landlord comes for you:

    Don’t quit.

    The long term benefits are too good.

    @thinkandtalkmoney

    Landlord Tip of the Week! ☑️🏡 #thinkandtalkmoney #rentalproperty #realestateinvesting #landlordtips #landlord

    ♬ original sound – Thinkandtalkmoney

    Remind yourself why you bought a rental property in the first place.

    I know there are tough moments. I’ve been there. Many times.

    In fact, my wife and I had a couple of experiences recently that pushed us close to that point of quitting.

    With the passage of enough time to reflect, I’m happy and proud of us for sticking with it.

    We’re still on track to achieve financial freedom quicker than we ever could have without our rental properties.

    Today, I’ll share a couple of experiences I’ve recently had as a landlord that had me thinking about quitting.

    If you’re a landlord, I’m sure you’ve had moments just like these.

    Here’s a look back at our recent experience leasing out two apartments.

    This past lease renewal season started off looking very strong. We were thrilled that 80% of our tenants signed on for another year.

    That left only 2 apartments to turnover.

    This was great news because vacancy is a rental property investor’s worst nightmare. Every week that an apartment sits empty is money down the drain.

    Vacancy can eat away your entire year’s profits. That’s why we usually offer current tenants the chance to renew at the same rent.

    When you do the math, it almost always works out than continued occupancy beats the prospect of higher rent plus vacancy.

    When you have an empty rental unit, doubt creeps into your mind. You start telling yourself that you’ll never find a new tenant and your place will sit empty forever.

    I know, I know. A bit extreme, right?

    But, I’m telling you. That’s where your mind goes. Any landlord out there knows what I’m talking about.

    So, when 80% of our tenants renewed for another year, we were very happy. We assumed that meant we would have an easy leasing season.

    As it turns out, that was not the case.

    Here’s what happened in each of these two apartments.

    For one apartment, we received an odd request.

    Before these tenants decided to leave, they made an odd request.

    As a side note, this apartment was the unit where my wife and I lived for about five years. We brought two babies home to that apartment.

    It’s located in the first building we ever bought and will always hold sentimental value for us.

    OK, back to the story. This past spring, we actually thought the former tenants would renew for another year. That would have meant 90% of our units would have stay leased for another year, a major win.

    When we first approached these tenants about renewing, they indicated that they wanted to stay. They were great tenants, so we were happy.

    Then came a unique request.

    These tenants were students and wanted to live at home for the summer. They asked if they could keep their stuff in the apartment but not pay rent for July and August since they wouldn’t actually be living there.

    We’ve had all sorts of requests from tenants over the years. Keeping an apartment without paying rent for two months was a new one.

    I understood the request from their perspective. Rent is a major expense. They didn’t need an apartment for the summer. They liked the apartment, but it was hard to justify paying for something they didn’t need.

    The problem from our perspective is not hard to spot. If we agreed to their offer, we would be left with the equivalent of 2 months of vacancy.

    Losing out on 2 months of rent payments is the equivalent of foregoing 17% of the total rent for the year.

    We thought about it. And as tempting as it was to not have to find new tenants, that arrangement was not going to work for us.

    Elephant isolated on white background illustrating that landlord life can feel heavy but a reminder not to quit.
    Photo by Kaffeebart on Unsplash

    Turnover is a chance to make property improvements.

    After they moved out, we took the opportunity to refresh the apartment. We knew this would take some time and result in at least a few weeks of vacancy, but the apartment needed some love.

    So, we replaced the flooring and painted the entire apartment. We did some needed repairs in the bathrooms (i.e. caulk, grout, new shower rod).

    Plus, we made a point to tackle any deferred maintenance throughout the apartment.

    We used a contractor for the work, so our involvement was limited to paying the bills and supervising the projects. Not exactly time intensive, but not exactly cheap either.

    When the work was finished, we lined up a number of showings and had the apartment rented out after a few of weeks of effort.

    In total, the apartment was vacant for 6 weeks.

    What did we learn from this experience?

    On the positive side, we now have a rehabbed apartment and fresh tenants. Plus, the apartment was empty for only 6 weeks instead of 8 weeks.

    On the negative side, it was stressful to get the apartment fixed up and re-leased.

    To state the obvious, it’s not fun spending money to fix up an apartment without a signed lease in place. Every week that goes by, money is going out without any money coming in.

    During that phase, you can’t help but doubt yourself as a landlord.

    Did we make the wrong choice?

    Should we have let the former tenants stay, even if that meant automatically sacrificing two months of rent?

    If we had gone that route, we would not have spent any money this year turning over the unit.

    We also would have had a less stressful leasing season. We would have saved a lot of time and mental energy if we didn’t have to worry about this unit.

    On the other hand, the apartment would still have needed a facelift as soon as it was empty. At some point, we were going to have to do the rehab. Now, that project is behind us.

    We also have great new tenants who seem more likely to stay for an extra year or two.

    In the end, I’m happy with the decision we made. That doesn’t mean it was right or wrong, but we made it through a unique challenge.

    I’m good with that.

    a man standing in a field with his back to the camera as evidence that sometimes it's better to split up with tenants that aren't working out.
    Photo by SAJAD FI on Unsplash

    The second learning experience involved letting our tenants out of their lease after two months.

    In our other vacant unit this past spring, the former tenants bought a condo so needed to move out. They had lived there for two years and were wonderful tenants.

    This unit was located in a different building from the one we just discussed. The building is in a terrific location and the units are in great shape.

    We’ve never had any trouble finding tenants. This year was no different.

    After three showings and very little effort, we happily signed a lease with new tenants. As a bonus, the former tenants had moved out early, so we were able to fill this unit with zero days of vacancy.

    All was well… until it was not.

    Let’s just say that after about six weeks, it was apparent that the relationship with our new tenants was not working out. The tenants were not bad people, but it was clear that we could not meet their expectations.

    Instead of living through a difficult year with these tenants, we offered them the chance to break their lease, without penalty. They accepted our offer and moved out two weeks later.

    We all remained civil and amicably split up. The tenants left the apartment in good shape and we all avoided unwanted confrontation.

    We re-listed the apartment and found a wonderful new tenant after one showing.

    In the end, we lost out on three weeks of rent between leases but now have a very happy new tenant.

    Upon reflection, I’m confident this was the right decision for all parties involved.

    The tenants could find a place more to their liking, and we could start over with a new tenant.

    So, what’s the takeaway from our experiences with these units?

    As a landlord, you are running a business. It won’t always be easy.

    You have to make business decisions, even when there’s no clear right answer.

    Sometimes that means foregoing profit and dealing with confrontation.

    In each of these instances, I’m happy with how things worked out. In the first instance, I sacrificed some of my profit this year to improve my asset.

    For the second apartment, it was clear that the relationship was not working. Even though we lost some money in the process, all parties involved should now be happier.

    These are tradeoffs I would readily make again.

    Even with stress like this, I’m not ready to give up on being a landlord.

    Compared to my day job as a lawyer, this is nothing.

    Should you become a landlord?

    The truth is my wife and I know so many people who have owned rental properties but did not like being landlords. There’s nothing wrong with that. It’s not for everyone.

    If you’ve been in, or are currently in a similar boat, I hope these experiences resonate with you.

    In the end, as stressful as it can be to run a business, this is also what makes being a landlord fun.

    What do I mean, fun?

    When you are a landlord, you are a business owner. You get to make the final decision. It’s your business and you are in control.

    Having that autonomy is a nice change of pace for most W-2 employees.

    Still, you may be faced with tough decisions. You may not know what to do in the moment. It’s helpful in those moments to have people to talk to so you can make the best decision possible.

    I happen to like being a business owner. However, it’s not for everyone.

    If just thinking about making decisions like these stresses you out, I would not recommend that you become a landlord.

    If you can handle the job, you can benefit immensely.

    Landlords- have you been in situations like this before? How did you handle the stress of the job?

    Let us know in the comments below.

  • Dreaming About Rental Properties but Ignoring Money Mindset?

    Dreaming About Rental Properties but Ignoring Money Mindset?

    Do you dream about owning rental properties so you can generate semi-passive income while spending more time with your family?

    I want to hear about those dreams. What would you do with that time?

    Travel?

    Exercise?

    Read?

    It’s so motivating for me to learn what you would do with that kind of freedom.

    At the same time, it’s my job to remind you to not ignore key personal finance fundamentals while you’re dreaming about the future.

    When it comes to buying rental properties, this is especially true.

    Let me explain.

    If you’ve been keeping up with the blog, we’ve now learned how to run the numbers on potential real estate deals.

    In fact, I showed you that the analysis is not actually that hard. Your job is simply to account for the fixed costs and make informed predictions for the speculative costs.

    Then, we did the math together on an actual property in my target zone. By using a real example in Chicago, my goal was to further convince you that running the numbers should be easy.

    Finally, we talked about how to evaluate a rental property when the initial math looks bad. The truth is most rental properties are not going to immediately look like great investments. It’s our job as investors to negotiate and look for potential.

    By this point, you may be thinking that buying a rental property sounds great, except for one big problem:

    How are you supposed to come up with the money for a downpayment?

    Great question.

    It’s such a great question that it requires us to take a step back.

    Before evaluating rental properties, you need to evaluate your personal finances.

    It’s no secret that in order to buy a rental property, you first need available money for the downpayment.

    Unless you plan on taking on partners or getting the money from family, coming up with a sufficient downpayment is a major challenge.

    Yes, there are loan options available that require a smaller downpayment. We’ll soon talk about some of those options. I’ve used loans like this in the past.

    Still, a “smaller downpayment” does not mean “no downpayment.”

    So, how can you come up with a downpayment?

    For a downpayment, you need to have available money.

    To have available money, you need a budget that actually works.

    To have a budget that actually works, you need honest, powerful life goals.

    Does this sound familiar?

    It all comes back to money mindset.

    When was the last time you checked in on your money mindset?

    If you take a look at the Think and Talk Money homepage, you’ll see six main category tabs across the top of the page:

    Each one of these categories builds upon the previous categories.

    It all starts with money mindset.

    A strong money mindset is the foundation of the personal finance journey. Maintaining a strong money mindset requires constant and intentional thought.

    wooden boat on blue lake during daytime indicating what you can do with financial freedom.
    Photo by Pietro De Grandi on Unsplash

    I revisit my money mindset every week by taking a quick look at my Tiara Goals for Financial Freedom.

    It may seem overly simplistic, but money mindset is what separates people who reach financial freedom from those who struggle to get ahead in life.

    Don’t believe me?

    Budgeting is really not that hard. We all understand the basic concept: spend less money than you earn. Still, most of us can’t do it.

    The same applies to debt and credit. We all know to avoid debt. We know to use credit responsibly. So, why don’t we do it?

    Investing can seem complicated at first. Is it really that hard? Entire books and websites have been created to show you how to create massive wealth through simple index funds.

    What about buying rental properties? We did the math together. Analyzing deals is not that hard. The impediment for most people is coming up with the money for a downpayment.

    You may be in a similar boat right now. You want to buy a rental property but you’re discouraged because you don’t have the downpayment saved up.

    It’s not just about how much money you make.

    Buying rental properties is not just about how much money you make. Plenty of lawyers and professionals make a lot of money and struggle to come up with any excess money to invest.

    Sadly, the struggles don’t just relate to coming up with money for investments.

    Lawyers as a profession have long struggled with mental health issues. I first learned about these challenges during law school orientation. Today, I see it in practice.

    Being a lawyer is a hard way to make a living. When you work as a lawyer, the hours are intense and stress levels are consistently high.

    In 2023, the Washington Post analyzed data from the U.S. Bureau of Labor to determine what the most stressful jobs are. The study confirmed that lawyers are the most stressed.

    Of course, lawyers are not alone in struggling in this regard due to long, stressful hours.

    The same study showed that people working in the finance and insurance industries were right up there with lawyers as being highly stressed.

    Well, what can we do about it?

    How can we address these struggles?

    Where can we find money for a downpayment?

    I have some thoughts.

    How motivated are you to truly get ahead in life?

    Are you truly motivated to get ahead in life?

    Have you worked on your money mindset and found the motivation to actually create a budget that generates savings?

    If you’ve successfully created a budget and still need to generate more fuel, have you thought about a side hustle?

    When I mention side hustle, is your initial reaction that you’re too busy or important?

    Some lawyers and professionals reading this won’t even allow themselves to consider a side hustle. They automatically think, “I’m way too skilled or busy to even think about another job.” 

    In my personal finance class, we spend a lot of time challenging that notion.

    Very few people- and I mean very few- are too important or too busy to take on a side hustle.

    For most of us, it’s an excuse.

    You may think you’re one of those “too important” people.

    I would challenge you to assess whether you’re confusing “too important” with “too stressed” or “too tired” or “too cool.”

    Is continuing to worry about money really better than spending a few hours a week earning extra money doing something you love?

    Setting that conversation aside, the ideal side hustle is something you enjoy doing that can earn you extra money at the same time.

    Some examples of side hustles my students have come up with in class include:

    • Bartending. Entice your friends to come to your bar by offering cheap drinks. You get to hang out with them and get paid at the same time.
    • Fitness instructor. Instead of paying $48 for the spin class you love, become the instructor and get paid to lead the class.
    • Dog Walker. If you love dogs and don’t currently have one of your own, what better way to fill that void in your life while making money. The same applies to babysitting.
    • Home Baker. Make homemade treats with your kids and sell them to parents who don’t have the time.

    How about this idea for aspiring real estate investors: part-time property manager?

    My wife and I recently needed some help with apartment showings. We reached out to one of our favorite young people in the world to see if she’d be interested.

    A chance to make some money on the side and learn a new skill?

    She jumped on board without hesitation.

    We’ve known her for years and were not the least bit surprised. She’s exactly the type of person who will no doubt be successful in whatever she chooses to do.

    There is always a way to make more money.

    The point is there are always ways to make more money by doing things you like to do anyways. Even if you’re busy. You just have to exert some mental energy to figure out how.

    Then, when you make that extra money, put it to work for you. Make all your hustle worth it.

    At that point, we can talk about investing or buying real estate.

    Unfortunately, most people don’t want to go through this process.

    woman walking on street surrounded by buildings and thinking about own rental properties.
    Photo by Timo Stern on Unsplash

    Too many lawyers and professionals come to me and primarily want to talk about investing or buying real estate.

    They want to skip the foundation and jump right to the more exciting stuff.

    Most of the time, these are people who have never kept a budget. Or, they have massive student loan debt with no real plan to pay it off. Maybe they have a good W-2 job but no other sources of income.

    When I start exploring their situations with them, it’s clear they haven’t thought much about the personal finance building blocks.

    When they mention how hard it is to save for a downpayment, they haven’t considered looking for a new job that pays more or starting a side hustle.

    Before jumping right to owning rental properties, these are the personal finance obstacles that need to be addressed.

    If this sounds like the situation you are in, your ongoing mission is to generate more cash to fuel investments.

    The fun part is once you’ve discovered your motivations and established strong habits, you will consistently have money available so you can invest month after month for the rest of your life.

    My wife and I would not own five properties today if we didn’t first learn personal money wellness. 

    My wife and I would not own five properties (11 rental units) today if we had not first learned money wellness fundamentals.

    I don’t just mean we wouldn’t have had money available to invest, although that is certainly true. 

    I also mean we wouldn’t have the skills and knowledge to successfully run our real estate business.

    If you’ve ever wanted to be a business owner or investor, working on personal finance skills now is critical.

    Robert Kiyosaki put it best in Rich Dad Poor Dad, “It’s not how much money you make. It’s how much money you keep.”

    If you knew someone that made $1,000,000 per year, and at the end of the year, had only invested $20,000, what would your reaction be?

    What if you knew someone who made $100,000 per year and invested $20,000? Did your reaction change?

    How often do you think about your money mindset?

    Do you tend to think more about the “fun stuff” (investing, real estate) than the fundamentals (money mindset, budgeting, debt, etc.)?

    Let us know about your money mindset in the comments below.

  • How to Analyze a Property When the Initial Math Looks Bad

    How to Analyze a Property When the Initial Math Looks Bad

    Most rental properties that you evaluate are not going to immediately look like great investments.

    Does that mean you should just give up?

    No way.

    It’s up to us as real estate investors to research, negotiate and buy properties only at the right prices. Or, to buy properties that have untapped potential.

    Ideally, we can do both.

    The other day, we ran the numbers on an example property in Chicago that had caught my eye in.

    Through that example, we learned what costs to include in our initial analysis to quickly determine if a property was worth pursuing further.

    Today, we’ll look at the next step of the evaluation process.

    Specifically, we’ll focus on what we can do when the initial math on a potential property doesn’t look very attractive.

    Now, let’s get to it.

    Our example property is a small multifamily building in Chicago.

    Our example property is a five-unit apartment building listed for $1,800,000 and located directly in my target zone in Chicago.

    Remember, this analysis is for educational purposes only. You are responsible for running your own numbers on any potential deal.

    Here’s the listing description from my preferred listing site, Redfin:

    Fully Gut Renovated 5-unit building, a prime turnkey investment opportunity in the best Logan Square Location Possible. Double Vanities, Fully built out walk in closets, in unit W/D, tankless hot water heaters, thin shaker kitchens and full height quartz backsplashes are just a few of the features that make this building feel more like condo living. Perfectly situated just steps from the Logan Square Farmers’ Market, residents can enjoy an eclectic mix of trendy bars, restaurants, cafes, and shops right at their doorstep. Renovation done with full plans and permits, include a new roof, windows, insulation, drain tile system with sump pump, back deck, and still warrantied appliances!

    This property passed my initial screening, so we ran the numbers to see if it would be a good investment.

    Here’s what the initial numbers looked like:

    Asking Price: $1,800,000

    Monthly Rent: $13,840

    Mortgage Payment (Principal and Interest)$8,982
    Taxes$1,429
    Insurance$400
    Utility Bills$350
    Property Upkeep$200
    Preventative Maintenance$200
    Vacancy Rate (5%)$692
    Unexpected Repairs (5%)$692
    Property Improvements (5%)$692
    Total Monthly Cost$13,637

    Monthly Cash Flow (Rent – Costs): $203

    It took me less than five minutes to do this initial evaluation. 

    A few notes on the above numbers:

    • For the mortgage payment, I estimated a 25% downpayment, which is common for investment property loans, and a 7% interest rate.
    • Taxes are a major cost that can make or break any deal. Make sure you are familiar with how taxes are assessed in your market. For example, in Chicago, property taxes are reassessed every three years. That means taxes go up every three years. 
    • Many property listings will indicate the prior year’s taxes because they are lower. This particular listing has the prior year’s taxes, which I know are soon going to change for the worse. For now, I’ll run the numbers with the current taxes but would definitely account for higher taxes before moving forward with this deal.
    • Property insurance is a real wildcard these days. Insurance costs are going up everywhere. You’ll need to talk to a good insurance broker for an accurate estimate. I used my experience in the neighborhood with similar properties to make a reasonable estimate.

    The initial math on this property did not look great.

    In the end, I concluded that this is a beautiful property in a great location but would not be a good investment for me.

    The reason is simple: I invest for cash flow. For me, this property is way too expensive for only a couple hundred dollars of monthly cash flow.

    More specifically, I am not interested in shelling out a down payment of $450,000 (not to mention more for closing costs) to earn $2,400/year in cash flow.

    At a price point of $1.8 million, I would only be interested if this property had a monthly cash flow of at least $4,000 per month.

    For another investor, it’s possible that this would still be a good investment based on appreciation and debt pay-down. For me, that’s a big risk I’m not willing to take with that kind of money.

    So, what now?

    Is that the end of the analysis?

    Cross this property off the list and move on?

    Not even close.

    This is when the fun starts.

    person using laptop to evaluate a rental property using real numbers.
    Photo by Kaitlyn Baker on Unsplash

    What to do if you don’t like the results of your initial evaluation.

    Most of the time that you evaluate properties you won’t love the initial results.

    You should expect that to be the case.

    Think about it from the seller’s perspective. Ask yourself: why is the seller putting this property on the market?

    Obviously, the seller is trying to make a profit. Maybe the seller is a developer or flipper who just completed an expensive rehab. He might even have investors who paid for the project that now expect to be paid back, at a profit.

    The seller wouldn’t be doing is job if he didn’t try to find a buyer at a high asking price. He can always lower the price later on.

    Also, you can think of it another way.

    If a seller owns a wonderful property that is making tons of money every month, how motivated is he to actually sell?

    He may list the property at a high price just to see if anyone will bite.

    In our example, if the seller was cash flowing $4,000/mo, he’d probably just keep it.

    And, if he had that kind of cash flow coming in, he may just list it at an astronomical price because he doesn’t really need to sell it.

    Sure, there are exceptions. Some sellers don’t want to be landlords and others might just want to cash out. But, I don’t see very many of these situations.

    When these situations do pop up, you need to act fast because other investors will take notice.

    The point is these are just a few reasons why you will rarely find great investment properties based on your initial evaluation.

    Don’t give up.

    Your job is to figure out if a property has untapped potential that would make it a good investment.

    Now, let’s return to our example to see what I mean.

    Is the property overpriced?

    The listing price is only the start of the negotiation.

    The listing price may just be too high. In recent years, the listing price has oftentimes been too low, leading to bidding wars because of high demand and limited supply.

    Your job is to find a price that works for your cash flow needs. The seller may not accept your price, and that’s OK. You may need to move on.

    Let’s explore putting a price on our example property where it would be attractive for me.

    Keep in mind that I would want a monthly cash flow of $4,000 to move forward on this property.

    With that target in mind, I can return to the online calculator on Redfin to see at what price this property might make sense for me.

    Playing around with the calculator, I learned that I would need the price to drop to $1,100,000 to get around $4,000 in monthly cash flow (holding all other costs constant).

    That’s about a 40% price reduction.

    Do you think the seller would go for that?

    Not a chance.

    Depending on your market, sellers may be willing to negotiate the price. But, if you come in too low, they won’t take you seriously.

    If I were to move forward with this property, I would need to find ways to improve the math besides just the price. Still, I might be able to get it for below the asking price.

    For our example, let’s assume the seller would agree to knock 10% off the purchase price.

    Here’s what the numbers look like at 10% reduced purchase price.

    Offer Price: $1,620,000

    Mortgage Payment (Principal and Interest)$8,083
    Taxes$1,429
    Insurance$400
    Utility Bills$350
    Property Upkeep$200
    Preventative Maintenance$200
    Vacancy Rate (5%)$692
    Unexpected Repairs (5%)$692
    Property Improvements (5%)$692
    Total Monthly Cost$12,738

    With monthly rents of $13,840, that means this property is now cash flowing $1,002/mo.

    We’re heading in the right direction, but I think we can do better.

    Besides negotiating the purchase price, what if we can shop around and improve our mortgage?

    Start with the purchase price but see if you can further to reduce the overall cost.

    For example, can you shop around for a better mortgage?

    Let’s assume you can find a loan with a 6.75% interest rate instead of 7%.

    With a 6.75% interest rate, your mortgage payment drops from $8,083 to $7,880.

    Now, your cash flow increases to $1,211/mo.

    You can start to see how this part of the analysis works.

    The point is to reduce the costs of owning this property to improve your cash flow.

    What other ways can you reduce the costs?

    You should go through this process with each cost associated with the property.

    Maybe you can find insurance for less than $400/mo.

    Or, maybe you are willing and able to handle more of the maintenance responsibilities yourself.

    The idea is that each time you reduce your monthly costs, your cash flow goes up.

    If you can reduce the costs enough, a property may start looking appealing to you.

    two people meeting with laptops as they run the numbers together for a potential deal.
    Photo by charlesdeluvio on Unsplash

    On top of reducing the costs, can you can earn more income from this property?

    At the same time you look to reduce the costs, you should look to see if you can earn more income from a property.

    In other words, can you earn more rent per month than the current rate?

    This is where you’ll need to study the neighborhood to see what similar apartments are renting for. Your broker should be able to help you with this.

    In our example, let’s assume that you do your research and determine that the apartments are under-rented.

    In fact, you learn that each of the 5 apartments could earn $200 more per month.

    Adding that additional $1,000 per month brings our total cash flow to $2,211/mo.

    Now, this property is starting to look more enticing.

    You might be surprised how many sellers under-rent their properties.

    Over the years, my wife and I have been successful in finding properties that have been severely under-rented by the previous owners.

    We don’t renovate properties ourselves because we are busy professionals with full-time jobs and a family. We try to find properties that have bee nicely rehabbed but are currently under-rented.

    You may be surprised to learn that a property flipper doesn’t always know the local market as well as you. It could be that he is just in a hurry to get a property rented out so he can sell it and move on to the next job.

    If you become an expert on market rents in your local area, you can be the one who benefits.

    A few years ago, my wife and I purchased a three-flat in our local area. It was about a half-mile from where we lived at the time and was on our regular walking route. We took an interest in the rehab and followed its progression closely.

    When the property was completed, I saw the rental listings online. It was a beautiful property in a great location. I was shocked when I saw the units were listed for only $1,700/mo.

    This was my local area and I knew these units could easily go for $2,500/mo, if not more.

    When the property hit the market a few months later, we pounced and had it under contract the next day.

    When the original tenants chose to move out at the end of their leases, we quickly found new tenants happy to pay $3,100/mo.

    Sometimes sellers just don’t know what they have.

    Don’t fool yourself into thinking a property is a great investment by unrealistically changing the numbers.

    After reading this post, you can hopefully start to see how to run the numbers to make a potential property more attractive.

    In our example, we tweaked the purchase price, mortgage rate, and rental income to improve the cash flow enough to make this deal potentially attractive.

    After going through an analysis like this, you may be ready to make an offer. Just don’t get your hopes up too high.

    Sellers won’t always negotiate.

    Properties won’t always be under-rented.

    Many of your offers will end up getting rejected.

    Don’t quit.

    There will always be another property out there.

    If you can’t get a property with numbers that work for you, it’s time to move on to the next one.

    No matter how much you love a property, don’t fool yourself into thinking it’s a great investment if it’s not.

    Readers, have you made offers on properties that you knew were undervalued? Did you successfully cash flow on a deal that did not look great on paper at first?

    Let us know in the comments below.

  • How to Easily Evaluate a Rental Property with Real Numbers

    How to Easily Evaluate a Rental Property with Real Numbers

    For beginners, running the numbers on a potential real estate deal can seem complicated. 

    It doesn’t have to be.

    If you’ve been practicing good budgeting habits with your personal finances, this part should actually be easy. 

    The key is simple: more needs to come in than goes out.

    When you have more coming in than going out, that means you have positive cash flow.

    For lawyers and professionals acquiring rental properties to accelerate our journeys to financial freedom, we don’t need to overcomplicate things.

    What we need to know is whether a property is going to put more money in our pockets than it takes out.

    Today, we’ll look at a real example of how I quickly and easily evaluate potential deals in my primary market.

    If you haven’t already, check out my previous post on evaluating real estate deals for a detailed explanation on why I focus on the below elements.

    As a quick refresher, let’s first look at the fixed costs and speculative costs involved in evaluating rental properties.

    There are fixed costs and speculative costs involved in evaluating a rental property.

    Whenever you evaluate a rental property, there are some fixed costs and some speculative costs involved. This holds true whether you are a beginner or an experienced investor.

    It’s helpful to differentiate between the fixed costs and the speculative costs. In a lot of ways, we can control the fixed costs, but we cannot control the speculative costs.

    Fixed costs generally include reoccurring monthly bills that are relatively constant.

    The main fixed costs you’ll want to know when evaluating a rental property include:

    • Mortgage payment (Principal and Interest)
    • Taxes
    • Insurance
    • Utility Bills
    • Property Upkeep
    • Preventive Maintenance

    Speculative costs include those unpredictable, irregular costs that do not occur every month and maybe don’t even occur every year. 

    I separate the speculative costs into three main categories:

    • Vacancy Rate
    • Unexpected Repairs
    • Property Improvements

    Vacancy rate refers to the percentage of available units that are unoccupied at a particular time. When running the numbers on a prospective rental property, I recommend adding in the cost of 5% vacancy.

    When you own rental properties, things are going to break and require money to fix. If you target properties in decent condition, I recommend saving 5% of the monthly rent for unexpected maintenance. 

    If you don’t improve your property over time, you risk your unit becoming unattractive. Again, if you target decent properties to begin with, I recommend saving another 5% per month for property improvements. 

    With these costs in mind, we can now quickly and effectively run the numbers on any available property.

    Let’s take a look at a property that recently became available in my target market of Chicago.

    I regularly check available properties in my target area in Chicago.

    I have a searched saved on the Redfin app for multifamily properties within a certain price range in my target areas of Chicago.

    That makes it easy to scroll through the listings a few times every week to keep myself educated on my local market.

    I do this for a few reasons, regardless of whether I’m actively shopping for a property.

    white ceramic sink near brown wooden table indicating a nice rental property but do the numbers check out.
    Photo by Huy Nguyen on Unsplash

    First, I want to know what new properties come on the market. I’m interested to see if developers and rehabbers are still drawn to my area.

    I also check to see how much properties have sold for recently so I can stay on top of market conditions. For example, I’m curious if sellers are accepting below-asking-price offers and how long properties are staying on the market.

    I’m also looking to see if there have been any price reductions on properties that previously caught my eye.

    All of this simple research helps me move quickly when an attractive property becomes available.

    This research has also helped me develop a list of basic requirements I look for in a rental property.

    Before running the numbers, a property has to match my initial requirements.

    Before I run the numbers on any property, it has to satisfy some basic requirements. This is not an exhaustive list, but here are some of the most important factors my wife and I evaluate when considering rental properties in Chicago:

    1. Location, location, location. In Chicago, proximity to the L and social life (coffee shops, restaurants, bars, etc.) are crucial. Most of the young professionals we rent to are still in the “going out” phase of life. They want to live in fun neighborhoods so they can enjoy themselves when they’re not working. They typically stay in our apartments for 2-3 years, oftentimes before buying a place of their own and “settling down.”
    2. Taxes. Property taxes can eat away your cash flow. We have high property taxes in Chicago across the board, but taxes vary widely from neighborhood to neighborhood. I look for properties in areas that have more attractive taxes.
    3. Big bedrooms. One of the most common questions I get when I do apartment showings is, “Can I fit a king size bed in here?” People love big beds these days. This can be a challenge considering Chicago’s standard 25-foot wide lot. I look for properties with a minimum bedroom size of 10 x 10.
    4. Outdoor space. Young professionals want to have outdoor space, even if they never use it. When I was a renter, I always wanted an apartment with a balcony for my grill. It didn’t matter to me that I only used it a handful of times each year. Maybe having outdoor space made me feel more grown up?
    5. Parking. Even though Chicago is a very public transit-friendly city, people still like having cars. Because most young professionals aren’t using their cars every day, they want to keep it safe in a dedicated parking space.

    If a property becomes available that meets these requirements, I’ll then run the numbers.

    Only after confirming that a potential property meets these requirements do I actually run the numbers.

    There’s no reason to waste time on a property that may project well in a spreadsheet but will cause me nothing but headaches as a landlord.

    The other day, a new property popped up that caught my eye: 2501 N. Sacramento Ave.

    It’s a five-unit apartment building listed for $1,800,000 and located directly in my target zone.

    Here’s the listing description from Redfin:

    Fully Gut Renovated 5-unit building, a prime turnkey investment opportunity in the best Logan Square Location Possible. Double Vanities, Fully built out walk in closets, in unit W/D, tankless hot water heaters, thin shaker kitchens and full height quartz backsplashes are just a few of the features that make this building feel more like condo living. Perfectly situated just steps from the Logan Square Farmers’ Market, residents can enjoy an eclectic mix of trendy bars, restaurants, cafes, and shops right at their doorstep. Renovation done with full plans and permits, include a new roof, windows, insulation, drain tile system with sump pump, back deck, and still warrantied appliances!

    It’s not always the case, but in this instance, the pictures seemingly match the description of a beautifully renovated property. Of course, we can confirm the quality of the work when we tour the property.

    So, this property passed my initial screening. Now, I can run the numbers to see if it would be a good investment.

    By the way, I target gut-renovated properties because I have a full-time job as a lawyer and don’t have the time to dedicate to a major renovation project.

    Let’s plug in the numbers to see if this would potentially be a good investment property.

    Just because a property looks nice and is in a great location does not mean it’s a great investment. As investors, it’s our job to make sure the numbers work out so more money comes in than goes out.

    Using the cost categories above, we can pull most of the information we need directly from the listing.

    For example, Redfin (like most sites) provides a useful payment calculator where you can adjust the downpayment, interest rate, taxes, etc. for any property based on your personal situation.

    Home office vibes perfect for running the numbers on a rental property.
    Photo by Paul Calescu on Unsplash

    Here are some tips before you get started:

    • It’s a good idea to talk to your mortgage broker ahead of time to learn what mortgage rate you will likely qualify for and what downpayment you’ll need.
    • Remember, this is an initial evaluation. Before you make your final decision on a property, you’ll need to confirm these numbers with your real estate team during the due diligence period.
    • Try to be conservative with your projections. When you otherwise like a property, the temptation is real to modify the numbers so it looks better on paper.
    • You’ll notice listing agents may try to enhance a property’s value by suggesting “potential rent” or “market rent” instead of the actual rent. Don’t fall into this trap and end up with a nice-looking property that makes no money.

    OK, let’s look at the numbers on this property for educational purposes only. You are responsible for running your own numbers on any potential deal.

    2501 N Sacramento Asking Price: $1,800,000

    Monthly Rent: $13,840

    Mortgage Payment (Principal and Interest)$8,982
    Taxes$1,429
    Insurance$400
    Utility Bills$350
    Property Upkeep$200
    Preventative Maintenance$200
    Vacancy Rate (5%)$692
    Unexpected Repairs (5%)$692
    Property Improvements (5%)$692
    Total Monthly Cost$13,637

    Monthly Cash Flow (Rent – Costs): $203

    It took me less than five minutes to do this initial evaluation.

    I can see that based on these numbers, the monthly cash flow is $203. We’ll talk about what that means in a moment.

    A few notes on the above numbers:

    • For the mortgage payment, I estimated a 25% downpayment, which is common for investment property loans, and a 7% interest rate.
    • Taxes are a major cost that can make or break any deal. Make sure you are familiar with how taxes are assessed in your market. For example, in Chicago, property taxes are reassessed every three years. That means taxes go up every three years.
    • Many property listings will indicate the prior year’s taxes because they are lower. This particular listing has the prior year’s taxes, which I know are soon going to change for the worse. For now, I’ll run the numbers with the current taxes but would definitely account for higher taxes before moving forward with this deal.
    • Property insurance is a real wildcard these days. Insurance costs are going up everywhere. You’ll need to talk to a good insurance broker for an accurate estimate. I used my experience in the neighborhood with similar properties to make a reasonable estimate.

    So, what have I learned from running the numbers on this property?

    First, this is a beautiful property in a great location. If I made my decision based only on the pictures and the location, this would be a winner.

    Unfortunately, the numbers tell a different story.

    This property would not be a good investment for me. I invest for cash flow. For me, this property is way too expensive for only a couple hundred dollars of monthly cash flow.

    At a price point of $1.8 million, I would only be interested if this property had a monthly cash flow of at least $4,000 per month.

    Now, your preferences and goals may be different. Maybe you’re more focused on the other benefits of investing in real estate, like appreciation and debt pay-down. In that case, you may view this deal differently.

    So, is that it?

    Cross this property off the list and move on for good?

    Not necessarily.

    In our next post, we’ll explore ways to make this property a more attractive investment.

    We’ll take a look at how the numbers change if we can successfully negotiate the purchase price, find a better loan option, and improve the monthly rent.

    Real estate investors: let us know what you think of this property as a potential investment.

    Would you be interested in moving forward at these numbers?

  • Running the Numbers on RE Deals Should be Easy

    Running the Numbers on RE Deals Should be Easy

    For beginners, running the numbers on a potential real estate deal can seem complicated.

    It doesn’t have to be.

    If you’ve been practicing good budgeting habits with your personal finances, this part should actually be easy.

    The key is simple: more needs to come in than goes out.

    When you have more coming in than going out, that means you have positive cash flow.

    Today, we’ll discuss what information you need to forecast positive cash flow. My goal is to make this part of the process as simple as possible.

    I’ve read full books dedicated to evaluating the numbers on real estate deals. If you want to take a deep dive, I recommend Real Estate by the Numbers: A Complete Reference Guide to Deal Analysis by J. Scott and Dave Meyer.

    But, the truth is that most of us lawyers and professionals targeting rental properties as a supplemental income stream don’t need that kind of depth.

    Sure, if you’re targeting large multifamily properties or hoping to make rental property investing a full-time pursuit, you’ll absolutely want to pick up a book like Real Estate by the Numbers: A Complete Reference Guide to Deal Analysis.

    For the rest of us acquiring rental properties to accelerate our journeys to financial freedom, we don’t need to overcomplicate things.

    What we need to know is whether a property is going to put more money in our pockets than it takes out.

    In other words, we want to buy assets, not liabilities. When we’re tracking our net worth each month, we want to see that a rental property is helping.

    So, the question is: how do I know if I’m buying an asset and not a liability?

    Let’s take a look.

    There are fixed costs and speculative costs involved in evaluating a rental property.

    Whenever you evaluate a rental property, there are some fixed costs and some speculative costs involved. This holds true whether you are a beginner or an experienced investor.

    Fixed costs generally include reoccurring monthly bills that are relatively constant.

    Speculative costs include those unpredictable, irregular costs that do not occur every month and maybe not even occur every year.

    It’s helpful to differentiate between the fixed costs and the speculative costs. In a lot of ways, we can control the fixed costs, but we cannot control the speculative costs.

    Regardless, we need to account for both in our deal analysis.

    Here are examples of fixed costs when evaluating a rental property.

    The clearest example of a fixed cost is your mortgage payment. If you take out a 30-year fixed-rate loan, you’ll know exactly what your monthly mortgage payment will be for the next 360 months.

    You’re required to pay that amount each month, that’s why it’s a fixed cost. Easy enough.

    I also include insurance costs and property taxes in my fixed costs. These are fixed costs, at least for 12 months at a time, that you are required to pay each month.

    You’ll oftentimes see the acronym PITI to reflect the above basic elements of a mortgage payment:

    • Principal
    • Interest
    • Taxes
    • Insurance

    It’s safe to also include utility bills, like water, trash, and common electricity, in your fixed costs since there shouldn’t be much variation month-to-month in these expenses.

    The same goes for landscaping, snow removal, and pest control. I refer to these fixed costs as property upkeep.

    The final category of fixed costs includes preventative maintenance, like regular HVAC tune-ups.

    black computer keyboard number pad indicating how easy it is to run the numbers on real estate deals.
    Photo by Aykut Eke on Unsplash

    Yes, it’s true that the cost of insurance, taxes, utilities and other bills will go up over time. But, you usually don’t see dramatic increases in these fixed costs year over year. At least, in ordinary times. Plus, rents also go up, which offset the higher costs.

    To recap, the fixed costs you’ll want to know when evaluating a rental property include:

    • Mortgage payment (Principal and Interest)
    • Taxes
    • Insurance
    • Utility Bills
    • Property upkeep
    • Preventive maintenance

    If your goal is monthly cash flow, there’s no excuse for ignoring any of these fixed costs when evaluating a rental property.

    Here are examples of speculative costs when evaluating a rental property.

    Speculative costs are, by definition, harder to forecast. Even for experienced investors, the best we can do is guess at what these costs will be.

    I separate the speculative costs into three main categories:

    • Vacancy Rate
    • Unexpected Repairs
    • Property Improvements

    What is vacancy rate?

    Vacancy rate refers to the percentage of available units that are unoccupied at a particular time. Obviously, vacancy is bad for rental property investors because we are not collecting rent from the unoccupied units.

    To calculate your vacancy rate, simply divide the amount of weeks (or days or months, if you prefer) in a year by the amount of weeks (or days or months) your rental unit was unoccupied.

    Then, multiply that number by 100 to see your vacancy rate as a percentage.

    If you have multiple rental units, add your units together to get your total vacancy rate, like I show you below.

    Vacancy Rate = (Weeks Unoccupied / Total Weeks) x 100

    For example, I have 10 rental units in Chicago. This past spring, we had eight lease renewals and two leases end.

    We filled one of the two units without a single day of vacancy. The other unit resulted in six weeks of vacancy so we could tackle some needed repairs. More on that below.

    This means that I had 6 weeks of vacancy spread over 10 rental units. To calculate my vacancy rate, I can take 520 (10 rental units x 52 weeks in a year) and divide that by 6 weeks:

    (6 weeks of vacancy / 520 weeks) x 100 =1.154%

    Now, what do we do with this information?

    This is where the guesswork comes in. That’s because there’s no guarantee that next year I will have a vacancy rate of only 1.2%. In some years, we have 5 or 6 units to turnover. We may have 24 weeks of total vacancy instead of 6 weeks.

    The best I can do is speculate what my vacancy rate will be moving forward.

    I wish I could tell you that a 1.2% vacancy rate is a good forecast. In reality, predicting 5% vacancy is a better idea. That allows for about 3 weeks to turnover a vacant unit, reasonable estimates in decent markets.

    So, when running the numbers on a prospective rental property, be sure to add in the cost of 5% vacancy.

    As an example, if a potential property brings in $6,000/mo in rent, subtract $300/mo to account for 5% vacancy.

    What are unexpected repairs?

    Remember the leaky toilet?

    When you own rental properties, things are going to break and require money to fix.

    Predicting how much money you’ll need for these unexpected repairs depends on a variety of factors.

    If you are handy and don’t have to pay a plumber to fix the leaky toilet, you’ll save money on these kinds of repairs.

    Likewise, if you have a new construction property instead of a 100-year-old property, you’ll likely need to do less repairs.

    The bottom line is you’ll have to make educated guesses how much you’ll need to save for these kinds of repairs.

    This is actually one of the main reasons I recommend beginner investors don’t quit their day jobs. It’s a powerful advantage to have income coming in from your primary job to help cover any major, unexpected expenses.

    If you target properties in decent condition, I recommend saving 5% of the monthly rent for unexpected maintenance. With our prior example of $6,000/mo in rent, you should deduct another $300/mo for unexpected repairs.

    You shouldn’t need to use that 5% every month, so that balance should build up until you need it.

    What are property improvements?

    I mentioned above that we took 6 weeks to improve one of our vacant units. The floors were in rough shape and the apartment needed a full paint job.

    By the way, these are two relatively easy jobs that can add a lot of value to a property.

    Since we were in great shape with our other units all being occupied, the timing was right to spend a bit of money and lose out on a bit of rent.

    In the end, we spent about $5,000 and have brand new floors and a nice looking apartment. We didn’t have to spend that money, but we risk our units becoming unattractive if we don’t keep them fresh.

    white and red love print box with numbers indicating it's not too hard to run the numbers for beginner real estate deals.
    Photo by Elena Mozhvilo on Unsplash

    How should you account for this type of property upkeep?

    Again, if you target decent properties to begin with, I recommend saving another 5% per month for property improvements. That’s another $300/mo subtracted in our deal analysis based on $6,000/mo in rental income.

    Too many beginner real estate investors skip these speculative costs in their deal analysis.

    It’s tempting to ignore these speculative costs when you otherwise like a rental property. You might see monthly rents of $6,000/mo and fixed costs of $5,000 and convince yourself that this is a great deal.

    By ignoring the speculative costs, you’ve ignored the additional $900 for vacancy, unexpected repairs, and property upkeep that this property will cost you.

    Those extra costs might make this property unattractive.

    You can easily find most of the information you need to run the numbers online.

    It has never been easier to access the key numbers you need to know when evaluating a rental property.

    Sites like Redfin and Zillow typically have all the information you’ll need for your initial evaluation.

    One of the most useful features of these sites is the mortgage payment estimator. You can quickly see whether the PITI payment is going to exceed the amount of rent you can reasonably expect.

    Because of high interest rates and high property costs, most deal analysis I’m doing today ends right there.

    Of course, if the PITI payment is too high, you can play around with the asking price to see at what cost the property might be worth pursuing. Just don’t forget to take into account the other costs discussed above.

    Note: above, I specifically wrote “initial evaluation.”

    Before closing on a property, you’ll want to confirm the numbers in the property listing are accurate and not being exaggerated.

    For example, you’ll want to get verification from the seller on the actual monthly rent. As part of the due diligence process, sellers are required to turn over the current leases.

    Sometimes you’ll see listings where the rent is listed as “maximum monthly rent” or “potential rent.” That means the seller is suggesting the apartment could rent for that much, but there is no lease in place for that amount.

    I’m always skeptical of listings like this. If it was so easy to obtain the maximum monthly rent, why didn’t the seller get leases for that amount? If they did, they could surely expect a higher sales price.

    Always confer with your real estate broker on what the rents are in your market. And don’t forget, a five-star real estate broker should be able and willing to teach you how to run these numbers.

    Likewise, you’ll also want to verify with your mortgage broker exactly what your monthly payment will be based on current rates and your qualifications. The same goes for verifying what your actual insurance costs will be.

    Did you notice that I did not include a cost for property management in the above?

    If you are pursuing your first rental property or have a small portfolio, I recommend you self-manage.

    Most importantly, you need to learn how to be a landlord.

    There’s no better training than first-hand experience. If you do end up hiring a property manager someday, you need to know how to “manage the property manager.”

    There’s another good reason why beginner investors should self-manage.

    Unfortunately, it’s hard to find good property managers who are willing to work with small investors. It’s a near certainty that your property manager will not care about your property as much as you do.

    Plus, because of the cost involved, a property manager will likely suck up most of your monthly cash flow.

    While it varies by market, in major cities you can expect a property manager to charge between 8% and 10% of the monthly rent. It’s hard to cash flow with that kind of drag on your profits.

    If your portfolio grows or your circumstances change to the point where you can no longer self-manage, be sure to factor in this major cost to your deal analysis.

    Buying a rental property does not require an advanced degree in math.

    If you’ve been reluctant to buy your first rental property because of that math involved, hopefully you now see that it doesn’t have to be that complicated.

    You need to account for certain fixed costs and predict some speculative costs.

    There are countless online calculators to help with the math. You can also use a basic spreadsheet.

    Plus, your real estate team can help you with running the numbers.

    In an upcoming post, we’ll run through some examples of how I run the numbers on potential rental properties.

    Experienced real estate investors: what did I miss?

    Beginner investors: what else would you like to know about running the number?

    Let us know in the comments below.

  • Stop Fearing Toilets with a Good Handyman on Your RE Team

    Stop Fearing Toilets with a Good Handyman on Your RE Team

    “You really want to be a landlord? You don’t want to fix leaky toilets at 2 a.m.!”

    If you decide to invest in rental properties, this is one of the first comments you’ll hear from the haters.

    Mind you, these haters who are so scared of the imaginary leaky toilet are not landlords. I’ll go a step further and would wager that none of them have ever even seen a leaky toilet before.

    Instead, they probably heard a story one time and decided that being a landlord was too hard.

    The sad part is that they have shut themselves out from one of the best asset classes (and my personal favorite) for achieving financial freedom.

    The other comment you’ll regularly hear?

    “I can’t be a landlord. I’m not handy.”

    Guess what?

    I’m not very handy either. And, I have 11 rental units in two different states.

    @thinkandtalkmoney

    You don’t need to be scared of leaky toilets when you have a good handyman on your real estate team. You’ll also learn that you don’t need to be handy to be a landlord. #thinkandtalkmoney #handyman #realestateinvesting #realestateinvestor #financialfreedom

    ♬ original sound – Thinkandtalkmoney

    The truth is that you do not need to be handy to be a landlord.

    In reality, you don’t need to be handy to be a landlord.

    And, you definitely don’t need to fear the 2 a.m. leaky toilet.

    Oh, this is not to say that things aren’t going to break and need attention at the most inconvenient time.

    Every landlord has those stories. I’ve certainly had my fair share.

    One example seems on point.

    A few years ago, my family and I were living in one of our rental apartments.

    One evening before leaving for vacation the next day, we were sitting around when my sister-in-law pointed at the ceiling and exclaimed, “What is that!?”

    Well, “that” was a huge, previously undiscovered, water spot in my ceiling.

    Turns out the toilet in the unit upstairs was leaking. (See, on point.)

    The water gradually spread into the wood floors of the upstairs unit and the ceiling of my unit. It also dripped all the way down the plumbing stack to the lower level carpet in the bedroom where my two little kids slept.

    What did I do about this catastrophe?

    I called my handyman and got on a plane the next morning.

    By the time we returned, the wood floors, ceiling, and carpet had all been repaired and there was no sign of damage.

    When you have a good handyman on your real estate team, you don’t have to worry about things like this.

    One of the biggest myths of being a landlord is that you need to be handy.

    Have you noticed that we’ve been talking about investing in real estate for a couple of months now and I haven’t once mentioned leaky toilets or the need to be handy?

    That’s because there are so many other parts of being a landlord that are more important than your skills with a hammer.

    To name just a few more important skills: running the numbers on potential deals, selecting good tenants, keeping good records, dealing with tenant complaints, and paying the bills on-time.

    Plus, for most of us lawyers and professionals who want to own rental properties, we have other time commitments. Even if we have the skills or enjoy doing repairs ourselves, it still makes sense to hire a professional.

    That’s why every good rental property investor has a good handyman on his team.

    Before we talk about what to look for in a handyman, let’s take a look back at the other key members of your real estate team.

    Your Spouse is the Most Important Person on Your RE Team

    The most important person on your real estate team is your spouse. Make sure you each understand the financial, time, and emotional commitments involved.

    Owning rental properties should not be a solo adventure. The entire experience is better when you have someone to share it with.

    Isn’t that true for most things in life?

    If you’re considering your first rental property, don’t fool yourself into thinking you’ll be earning passive income.

    Before you buy a rental property, I encourage you to talk to your spouse first. Make sure you both are on the same page. 

    No, you do not have to have an equal division of labor. 

    Yes, you each have to commit to the good and the bad that comes along with owning rental properties.

    If you both can make that commitment, you have the best shot at owning your properties for a long time and reaching that ultimate goal: financial freedom.

    a pile of white toilet paper indicating that being afraid of toilets as a landlord is silly.
    Photo by Colourblind Kevin on Unsplash

    Build Out Your RE Team Starting with a Five-Star Broker

    Once you and your spouse are on the same page, it’s time to start building out the rest of your real estate team.

    Start building your real estate team by finding a great broker. Your broker is like a five-star hotel concierge who can make your entire experience so much better.

    During your search for a great rental property, a good broker will:

    • Educate you about the market you’re investing in.
    • Send you properties that match your goals.
    • Tour properties with you to help identify any red flags.
    • Negotiate on your behalf to ensure you get the best possible price.
    • Connect you with other key members of your team.
    • Steer you away from making poor choices.

    But, you don’t just want a good broker. You want to work with the best brokers as a rental property investor.

    The best brokers will do all of things for you during the acquisition process. But, that’s just the beginning.

    The best brokers are in it for the long run and will help you navigate challenges as they pop up. That might mean helping with marketing and showing your property.

    More importantly, that means continuing to give you advice and tutelage as you learn to be a landlord.

    How to Evaluate a Great Mortgage Broker for your RE Team

    With a five-star real estate broker on your team, it’s time to find a great mortgage broker.

    A great mortgage broker is like a tour guide who is the local expert and knows the ins-and-outs of the neighborhood. She has an intimate knowledge of the local food scene based on years of experience. 

    She’ll show you the hidden gems and recommend what to order at each restaurant based on your personal preferences. She can educate you as to what’s in certain dishes and why you may like to try them.

    She’ll also steer you away from the tourist traps and prevent you from going to the wrong places to ensure you have the best experience possible.

    Recommendations? Education? Preventing mistakes?

    Love all those things.

    And, this is exactly what a good mortgage broker will do for you.

    A good mortgage broker will:

    • Recommend the best loan for your goals.
    • Stop you from borrowing more than you really can afford.
    • Help get your loan approved. 
    • Explain the numbers.
    • Not let you refinance until the time is right. 

    Take your time finding a good mortgage broker. It’s important to work with someone who does more than just promise the best rates and terms.

    With your spouse, a five-star real estate broker, and a great mortgage broker on your team, it’s now time to fill out the rest of the key positions.

    Be Sure to Have an Experienced Accountant on your RE Team

    I invest in real estate for the massive tax benefits. 

    In fact, the massive tax benefits are one of the four main reasons why I invest in real estate. The other three reasons are cash flow, appreciation, and debt pay-down.

    I’ve previously written about how I earn rental income and legally pay close to nothing in income tax on my rentals each year.

    How is that possible? Am I some type of tax wizard?

    Of course not.

    But, I do have a tax wizard on my real estate team. 

    OK, more accurately, I have a Certified Public Accountant (CPA) on my real estate team.

    Your accountant is so integral to your financial success that he is the next person you need to have on your real estate team.

    The federal government has long encouraged investment in real estate. People need places to live, work, and socialize. The government long ago decided to reward investors who take on the risk of providing these opportunities.

    These incentives come largely in the form of tax benefits.

    The challenge for real estate investors is to actually take advantage of all these tax incentives.

    That’s where your accountant comes in. 

    Because I work with an accountant, I don’t have to be a tax expert. I just have to know enough to have intelligent conversations and make decisions when the time comes.

    My accountant makes sure I get all the tax benefits for owning rental properties.

    man standing in front of a miter saw reflecting the next most important people on your real estate team are your accountant, lawyer, insurance advisor, and handyman or general contractor.
    Photo by Annie Gray on Unsplash

    What to look for in a good handyman.

    Here are some of the things I look for:

    1. A handyman who responds to my messages promptly.

    The last thing you want is a handyman who is flakey. When something needs fixing, you need someone who answers your call or messages you back right away.

    Most repairs are not urgent, meaning your handyman does not need to drop everything right away to tend to the issue.

    But, it’s important that you let your tenant know that you’re on it and someone will be around in short order to address the problem.

    2. A handyman who Is not too big for a small job.

    It’s much easier to find a handyman to do a full kitchen renovation than to replace just the kitchen sink. Obviously, the bigger the job, the more money to be earned.

    As a landlord, you need someone who can handle the small jobs. These come up more frequently than the bigger projects and are often necessary to keep tenants happy.

    We recently had a tenant message us that the kitchen sink was leaking. My handyman got over there the same day and fixed the leak for $80.

    This is the type of guy you need on your team.

    3. A handyman who makes a good impression with the tenants.

    Your handyman will inevitably have to interact with your tenants. You want someone who makes a good impression. That means someone who is professional, courteous, and respectful of the tenant’s space.

    It is also very helpful if your handyman can explain to the tenant what the repair involves and what to do if there are still any issues.

    4. A handyman who does not run up the bill.

    Handymen tend to charge by the hour because they don’t usually know the extent of the repair until they begin working.

    While there’s nothing wrong with charging by the hour, you can imagine how someone untrustworthy might take advantage of this billing arrangement.

    With more experience as a landlord, you will start to have the same type of repairs come up regularly. Based on that experience, you’ll know when a handyman is running up the bill on you.

    5. A handyman who comes recommended from other landlords.

    Like anything else in life, a good recommendation goes a long way. It is always a good idea to work with someone who people you trust can vouch for.

    The trust factor works both ways, too. If your handyman knows that you are reputable and come recommended, he is more likely to take your calls and go into business with you.

    6. A handyman who has worked on rental properties.

    When we first started shopping for a rental property, our real estate broker taught us about “condo quality” vs. “rental quality.”

    Condo quality is nicer, more expensive, and tends to be for people buying a home for themselves.

    Rental quality is more affordable and comes with the expectation that things will break and need to be replaced.

    When it comes to a handyman, you want some who understands the difference. It makes no sense to overpay for quality that you just don’t need in a rental unit.

    This has nothing to do with the skill of the handyman, just the wherewithal to make “rental quality” repairs in rental units.

    How many would-be rental property investors have been scared off by the imaginary leaky toilet?

    If you have been reluctant to become a landlord because of the hypothetical leaky toilet, hopefully this post has given you something to think about.

    Being a successful landlord has nothing to do with being handy.

    Don’t let your fears about potential repairs stop you from exploring this powerful asset class.

    If you’re a landlord, what is your best “leaky toilet” story?

    Was it enough to give up on being a landlord?

    Let us know in the comments below.

  • Use Common Sense to Help Identify Good Rental Properties

    Use Common Sense to Help Identify Good Rental Properties

    If you want to be a successful rental property investor, you need to buy good rental properties.

    Good rental properties equal good tenants.

    Good tenants equal less headaches.

    Less headaches equal a longer holding period.

    A longer holding period equals more cash flow, appreciation, debt pay-down, and tax benefits.

    Add it all up and that equals more financial freedom.

    And, it all starts with buying the right property.

    How do I know if I’m buying the right property?

    One of the biggest mistakes that beginners make is buying bad rental properties. The reality is that most properties that hit the market are not good rental properties.

    I typically look at hundreds of properties online before finding any that are even worth walking through. Of the ones I walk through, less than 10% are worth buying.

    Don’t waste your time by running the numbers on every property that hits the market. The numbers only tell part of the story, anyways.

    Instead, the first step is to develop and commit to specific criteria for attractive properties in your market.

    If a property does not meet your criteria, move on.

    This will save you precious time, especially important if you are still working a full-time job.

    It will also save you from the disappointment of visiting properties that looked good on paper but failed to meet your other requirements.

    So, how do you develop a set of standards for quality rental properties in your market?

    Use common sense and your own life experiences to develop criteria for your market.

    Obviously, every market is different. Don’t believe anyone who tells you they have a one-size-fits-all solution for evaluating properties. What works in Chicago won’t necessarily work in Los Angeles.

    However, regardless of what market you’re in, you can and should use common sense and your own life experiences to evaluate rental properties.

    Don’t overcomplicate this part.

    Before you do anything else, think about what you would personally want in a rental property.

    Forget about complex formulas and deal metrics. We’ll get to the numbers soon enough.

    Start with a basic question:

    What would I want if I were a renter in this market?

    Before anything else, write down a list of the most important features that you would want in an apartment. Then, use that list as a guide to finding the right kind of properties.

    By the way, using your own common sense is one of the best parts about investing in real estate. You don’t need an advanced degree or a background in real estate.

    We all have some idea of what makes a neighborhood a good place to live. The same goes for what makes an apartment a good apartment.

    We may not always agree on what those things are, and that’s OK. It may be for a simple reason, like we are not targeting the same potential tenant pool.

    The bottom line is you should absolutely use your common sense and life experiences to help formulate your investing strategy.

    Ask yourself what you would want in an apartment. Don’t waste your time running the numbers on any property that doesn’t match your criteria.

    I prefer to invest in properties that make sense to me.

    Warren Buffett has famously said that he does not invest in companies or products that he doesn’t understand.

    We can apply that same logic to rental properties. Invest in properties that inherently make sense to you.

    If you are a buy-and-hold investor like I am, you are going to be dealing with a certain tenant pool in your market for years to come. You want to make sure that you understand that tenant pool so you can buy properties that will be appealing to them.

    You also want to be able to effectively communicate with prospective applicants and current tenants. The best way to ensure that happens is by investing in markets that you understand.

    @sawyerbengtson picture of the Chicago Bean which is where I invest in rental property because of location, location, location.
    Photo by Sawyer Bengtson on Unsplash

    Work with a real estate broker and don’t be afraid to ask for help.

    If you’re having trouble identifying the key factors to look out for in your market, ask around.

    Talk to your colleagues and friends about what people in your target demographic look for in an apartment. Most of us tend to want the same things.

    Of course, don’t underestimate the importance of working with a good real estate broker.

    A good real estate broker can help you come up with a list of the most desirable features for renters in your market.

    My wife and I have worked with the same broker for almost a decade now. He’s been a mentor to us and helped us come up with our list of key factors. More on that below.

    He also knows exactly what we want in a property and doesn’t waste our time with properties that don’t match our criteria.

    Having a good broker on your team is essential if you want to be a successful investor.

    How I’ve used my life experiences to target rental properties in Chicago.

    I invest in a Chicago neighborhood that typically attracts young professionals in their 20s and early 30s.

    Why do I target young professionals in Chicago?

    Well, I am one.

    OK, fine.

    I used to be one. Oof.

    As a young professional in Chicago, I rented apartments throughout the city for nearly 15 years. Based on my own experiences, I have a good idea of what that demographic is looking for in an apartment.

    I believe that gives me an advantage in targeting the right kinds of properties.

    Plus, I teach nearly 100 law students each year and work with young professionals at my law firm. It’s a demographic that I’m comfortable with and still have a good understanding of what matters in a rental apartment.

    Besides my personal experiences, why else do I target young professionals?

    Generally speaking, young professionals earn consistent paychecks, are respectful to apartments, and are too busy to complain about minor issues.

    All good things, as far as I’m concerned.

    Location, location, location.

    We’ve all heard the number one rule in real estate:

    Location, location, location.

    While a number of factors combine to make particular locations attractive, I’ll highlight one factor that’s very important to me in the Chicago market.

    First, for a bit of context.

    As mentioned earlier, I target properties in Chicago that would be attractive to young professionals.

    Traditionally in Chicago, young professionals commute to office buildings in The Loop (Chicago’s downtown, central business district) via public transportation.

    Yes, even in the “work from home” era, most young professionals living in Chicago commute downtown at least a couple days each week.

    Since I know my ideal tenant likely commutes downtown, I look for properties that make commuting easier.

    That means targeting properties near public transportation.

    More specifically, I target properties within a half mile of the L (Chicago’s train system, short for “elevated.”)

    Young professional enjoying a night out reflecting one of the most important factors in buying rental properties.
    Photo by Pablo Merchán Montes on Unsplash

    I target properties close to public transportation because of my own experiences as a renter and because of what I’ve learned from potential tenants.

    When I was renting apartments in Chicago, I always wanted to be close to the L. There’s nothing worse than walking 20 minutes to a train when it’s 10 degrees or 90 degrees outside.

    It makes sense that now as an investor, I should target these same types of apartments close to public transportation.

    Having done hundreds of apartment showings over the years, I’m confident that young professionals want to live close to public transportation.

    I believe that the most desirable properties for young professionals are the ones close enough to an L station that people can walk there in 10 minutes or less.

    Plus, coffee shops, restaurants, shops and other attractive offerings tend to be located near L stations.

    So, in terms of location, proximity to the L is one of the most important factors for me.

    No matter how attractive a property looks online, I’m not interested if it doesn’t satisfy this requirement.

    What are some of my other top requirements for a rental property?

    What I look for in a rental property may be different from what you look for. Use your own life experiences and common sense to decide if these elements would be beneficial in your market.

    My wife and I have relied on our own life experiences, coupled with advice from our real estate broker, to come up with this list.

    It’s not an exhaustive list, but here are some of the most important factors we evaluate when considering rental properties in Chicago:

    1. Location, location, location. See above. Proximity to the L and social life (coffee shops, restaurants, bars, etc.) are crucial. Most of the young professionals we rent to are still in the “going out” phase of life. They want to live in fun neighborhoods so they can enjoy themselves when they’re not working. They typically stay in our apartments for 2-3 years, oftentimes before buying a place of their own and “settling down.”
    2. Taxes. Property taxes can eat away your cash flow. We have high property taxes in Chicago across the board, but taxes vary widely from neighborhood to neighborhood. I look for properties in areas that have more attractive taxes.
    3. Big bedrooms. One of the most common questions I get when I do apartment showings is, “Can I fit a king size bed in here?” People love big beds these days. This can be a challenge considering Chicago’s standard 25-foot wide lot. I look for properties with a minimum bedroom size of 10 x 10.
    4. Outdoor space. Young professionals want to have outdoor space, even if they never use it. When I was a renter, I always wanted an apartment with a balcony for my grill. It didn’t matter to me that I only used it a handful of times each year. Maybe having outdoor space made me feel more grown up?
    5. Parking. Even though Chicago is a very public transit-friendly city, people still like having cars. Because most young professionals aren’t using their cars every day, they want to keep it safe in a dedicated parking space.

    There are certainly other factors we consider, but these are some of the first things I’m looking for when I look through listings on the internet.

    These factors were important to me when I was a renter and are still important to the young professionals I rent to today.

    While I don’t invest in other cities besides Chicago, I imagine these factors would also be important for young professionals everywhere.

    What is your specific criteria for rental properties?

    The fist step in purchasing good rental properties is having a set of specific criteria that match your needs and market.

    Don’t overcomplicate it. Use your common sense and life experiences as a framework.

    Run your criteria by your real estate broker and other investors in your market.

    Only after you have come up with a list of important features should you worry about running the numbers.

    Whether you currently own rental properties or are hoping to get started, what factors are most important in your market?

    Let us know in the comments below.

  • Invest in Real Estate and Other People Pay Your Debt

    Invest in Real Estate and Other People Pay Your Debt

    Imagine that you have the chance to own something that might be worth a lot of money down the road.

    To buy this thing, you will need to pay 25% of the purchase price. The other 75% of the price will be paid by someone else.

    Your job is to take care of that thing and keep it for a long time. It won’t be easy, but if you can handle it, you’ll wake up years from now owning something outright that is very valuable.

    So far, this sounds pretty good, right?

    Of course, there’s a catch. That person paying for 75% of the item will want to be paid back. He’ll want to earn interest, too.

    You might be thinking that this opportunity doesn’t sound so promising anymore. Having to pay off that debt might be enough to convince you not to move forward with buying this thing.

    You’re smart to be thinking about the debt. I could understand if the prospect of paying back a debt like this didn’t appeal to you. Who really wants to use their own hard-earned money to pay off debt anyways?

    Fair enough.

    But, what if I told you that other people are going to pay back that 75% (plus interest) on your behalf?

    Even more, while those other people are paying back the debt, you still get to benefit from owning the item.

    Does that change how you’re viewing this opportunity?

    Maybe now you’re thinking that this is too good to be true?

    Nope.

    This is exactly how real estate investors generate long-term wealth. They buy a property using a loan and then pay back that loan using other people’s money.

    This example leads us to the next main reason I invest in real estate:

    Other people pay off my debt.

    When you acquire the right rental properties, your tenants will pay monthly rent and that rent can be used to pay off your loan.

    That means you can pay off that loan without using any of your own money.

    As your loan balance shrinks, your net worth increases. As your net worth increases, you are creating wealth for you and your family.

    Along the way, you can reap the benefits of monthly cash flow and appreciation. That means your net worth increases even more.

    That’s a powerful combination to generate long-term wealth.

    If this concept sounds like something you may be interested in, read on.

    Before we talk more about debt pay-down, let’s review two of the other main reasons I invest in real estate.

    1. Rental property cash flow is king.

    With cash flow, you can cover your immediate life expenses. For anybody hoping to reach financial freedom, it is essential to have income to pay for your present day life expenses. 

    For my money, cash flow from rental properties is the best way to pay for those immediate expenses.

    One of the hottest destinations in Spain is Costa Blanca, these luxury homes are situated in Villamartin, Campoamor, Torrevieja, Orihuela, located near to the coast, golf course, and shopping center, an example of other people paying my debt through rent.
    Photo by Frames For Your Heart on Unsplash

    If your present day expenses are already covered, you can use your cash flow to fund additional investments.

    That might mean buying another rental property or investing in another asset class, like stocks.

    2. Long-term wealth through appreciation.

    Appreciation simply refers to the gradual increase in a property’s value over time. 

    While cash flow can provide for my immediate expenses, appreciation is all about the long-term benefits.

    Like investing in stocks over the long run, real estate tends to go up in value. The key is to hold a property long enough to benefit from that appreciation.

    To benefit from appreciation, all I really need to do is make my monthly mortgage payments, keep my property in decent condition, and let the market do the rest.

    Now that we’ve reviewed how cash flow and appreciation work together to generate long-term wealth, we can look at the additional benefits of debt pay-down.

    With rental properties, other people pay off my debt.

    When I buy a rental property, I take out a mortgage and agree to pay the bank each month until that mortgage is paid off. At all times, I remain responsible for paying back that debt.

    However, I do not pay that debt back with my own money.

    Instead, I rent out the property to tenants. I do my best to provide my tenants with a nice place to live in exchange for monthly rent payments.

    I then use those rent payments to pay back the loan.

    Each time I make a mortgage payment, part of the payment goes to interest on the loan and part of the payment goes toward the principal. This concept is known as amortization.

    By the way, this is how real estate investors use Good Debt, also know as leverage, to generate wealth.

    You may be totally against debt of all kind. That’s OK. Debt certainly carries risk. I’m not here to convince you that debt is a good thing or a bad thing. I’m just showing you how it works.

    For more on the difference between good debt and bad debt, check out my post here.

    What is loan amortization?

    Amortization is the process of paying back a loan over time in predetermined installments. While your payment amount remains the same, the composition of that payment changes over time.

    In the early years of paying off a mortgage, the vast majority of your payment goes to the interest. With each additional payment, more of the money goes towards the principal.

    When you take out a mortgage, your lender will give you an amortization table that shows you exactly how much of your monthly payment goes towards interest and principal for the duration of the loan.

    For example, if you take out a 30-year mortgage, you’ll receive a chart that shows 360 payments (12 monthly payments for 30 years). You can then look at any month in that 30-year period to see how much of your payment goes to interest vs. principal in that month.

    We hung that art piece by Tekuma artist Lulu Zheng, and I particularly loved how Lulu combines architecture and organic forms. Even if it is in the background, her 3D elephant brings the focus of the viewer towards her work, representing how renters can make a home feel like their own while they pay off my real estate debt.
    Photo by Naomi Hébert on Unsplash

    If you’re so inclined, you can also use an online calculator, like this one at calculator.net, to create an amortization chart for any loan you have.

    I’ll admit, looking at the amortization chart is the least fun part of any real estate closing.

    Seeing debt payments as far out as 30 years is a bit scary. It’s hard not to think of all the things that can go wrong during such a long time period. That’s why I prefer to think of amortization in general terms instead of specifics.

    Generally speaking, I know that some of my monthly payment goes to interest and some goes to principal. The longer I pay back the loan, the more of my payment goes to principal. That’s good enough for me.

    With a fixed-rate loan, your monthly payment remains the same.

    When you have a fixed-rate mortgage, your payment remains the same for the duration of the loan.

    At the same time, because of inflation, rents tend to go up over the long run. Rents may also go up if market conditions improve or if you have forced appreciation through enhancements to your property.

    When your rental income goes up, and your debt obligation remains constant, that means more cash flow for you.

    For example, say your monthly mortgage payment is $2,500 each month for the next 30 years. And, let’s say you currently earn $3,000 in monthly rent payments.

    Over time, your rental income should gradually increase. Some years in the future, you may be earning $4,000 or $5,000 per month in rental income. All the while, your monthly mortgage payment remains $2,500.

    You can use that extra income, after covering all other expenses, to pay for your immediate life expenses, pay off your loan faster, or invest in other assets.

    It’s for these reasons that having a fixed debt payment over a long time horizon is one of the biggest advantages to investing in real estate.

    Think of it this way. Just like with your personal Budget After Thinking, you can make significant strides towards financial freedom when your income increases and your expenses remain fixed.

    What do you think of investing in real estate so other people can pay off your debt?

    Now, you know three of my main reasons for investing in real estate: cash flow, appreciation, and debt pay-down.

    Regarding debt pay-down, each month my tenants pay rent, I can use that income to shrink my loan balance.

    As my loan balance shrinks, my equity in the property increases. Equity is just another way of saying ownership interest.

    When my equity in a property increases, my net worth increases.

    So, on top of monthly cash flow and appreciation, debt pay-down is another way to generate wealth through real estate over the long run.

    That’s three ways to make money off of a single investment.

    Not bad, huh?

    If you’re a real estate investor, let us know how you’ve used debt to increase your net worth.

  • Invest in Real Estate Because Cash Flow is King

    Invest in Real Estate Because Cash Flow is King

    You may be wondering whether it’s better to invest in real estate or the stock market.

    It’s a valid question. We all have limited dollars (some more than others) and need to decide what to do with those dollars.

    The debate between investing in real estate or stocks is a good one. There’s no doubt that both asset classes can provide significant long-term growth.

    @thinkandtalkmoney

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    There are also advantages and disadvantages to both types of investments. Advocates on either side of the debate can be very passionate about their preferred asset class.

    I personally invest in both asset classes. I have 10 rental apartments in Chicago and a rental ski condo in Colorado. In addition, I invest in the stock market primarily through index funds.

    Both asset classes play a key role in my journey to financial freedom. From my perspective, you don’t have to choose one asset class over the other. You can invest in real estate and own stocks.

    We’ve spent a lot of time in the blog already talking about the significant long-term upside of investing in the stock market. If you need a refresher, check out my post on investing early and often to benefit from the magic of compound interest.

    Today, I want to discuss one of the main reasons to invest in real estate. The reason comes down to a simple term:

    Cash flow.

    When investing in real estate, cash flow is the money left over each month after paying all your bills.

    There’s an old saying, “Cash is king.”

    For me, “Cash flow is king.”

    My goal is to use real estate to accelerate my journey to financial freedom. To that end, I invest in real estate primarily for the cash flow.

    Let’s dive in.

    Stocks and real estate will each provide incredible long-term benefit.

    Both stocks and real estate can provide significant long-term upside. Besides that upside, I invest in real estate for the immediate benefits of cash flow.

    In terms of your Budget After Thinking, your Later Money is for future expenses. Your Now Money and Life Money are considered immediate life expenses.

    Let’s talk about the Later Money category for just a moment. We can hopefully agree that both the stock market and real estate investments can generate incredible long-term wealth.

    The S&P 500 has historically provided an average annual return of 10%. While not guaranteed to continue in the future, 10% average annual returns represents a powerful wealth generator.

    With real estate, the long-term prospects can be harder to sum up with one simple number. There are a lot of variables at play, not least of which are the type of real estate and the geographic market.

    For example, I primarily invest in small multi-family properties in Chicago. According to Redfin, residential home prices in Chicago were up 9.1% compared to last year.

    Certain neighborhoods in Chicago have fared even better. In the neighborhood I invest in, prices are up 11.1% since last year.

    Those are nice short-term trends.

    On the other hand, in the past 25 years, home prices in Chicago have only doubled, which actually lags the national average. That’s not so nice.

    By the way, you can find data like this for most markets across the country so you can do your own homework on your market.

    So, what’s the takeaway?

    For me, it’s quite simple:

    If you hold real estate for long enough (think decades, not years), it will go up in value.

    Given enough time, like the stock market, real estate always goes up.

    How much your real estate will increase in value is hard to predict.

    My expected long-term returns in Chicago are different from somebody who invests in condos in San Francisco. Likewise, my Chicago rentals are different from my Colorado rental ski condo.

    I don’t expect my Chicago properties to increase in value at a rate of 10% over the long-term. I certainly hope the value of my properties beat the historical average in Chicago, but I’m not expecting that either.

    The point is, whatever happens long-term, I’m OK with it. The reason I invest in Chicago rental properties is not really about the long-term upside.

    It’s about the cash flow.

    For me, cash flow is king.

    Cash flow is king because it can cover present day expenses.

    To be truly financially free, you need to cover immediate life expenses at the same time you are saving for future life expenses.

    My definition of being financially free means not being dependent on the income from a primary job to cover your life expenses.

    My goal is to be truly financially free. That means I need money to pay for my life now, not just decades from now.

    African lion photography by Bisakha Datta symbolizing that cash flow is king when it comes to financial freedom.
    Photo by Bisakha Datta on Unsplash

    We just talked about how the stock market and real estate can both help with the future life expenses.

    For me, the primary benefit of investing in real estate is to help with those present day, immediate expenses.

    In terms of your Budget After Thinking, that means helping with your Now Money and Life Money.

    This is where cash flow comes in.

    I can use the cash flow from my rental properties to help cover my present day expenses. By having cash flow available in this way, I have accelerated my journey to financial freedom.

    In fact, I’ve been hard-pressed to find any other asset class that provides as many benefits in the here-and-now, while also providing benefits in the future.

    Let’s explore that point next.

    I prefer cash flow from real estate over stock dividends for my current expenses.

    Don’t get me wrong, you can certainly reach financial freedom by investing in the stock market. As we just talked about, the stock market provides significant long-term upside.

    Plus, you can certainly cover your current expenses with dividends from your stock investments.

    However, I think cash flow from real estate is a better option.

    Here’s why.

    In order to fund your current life with your stock investments, you either need to withdraw some of your earnings or even sell some of your stocks.

    When your stock portfolio is growing, you can leave your principle untouched and live off of the earnings. That’s pretty nice.

    But, what happens when the market drops? You still have bills to pay and a life to fund. To cover those expenses, you may need to sell some of your stock assets.

    Selling assets is not a great way to sustain long-term wealth.

    With real estate, you can live off of the cash flow without having to sell the asset.

    While your property may go through periods where it decreases in value, if you keep it long-term, the asset will increase in value. During that time frame, you can use the cash flow to fund your life.

    Let’s explore this concept a bit further with an example using the popular 4% Rule.

    What’s better for monthly expenses: cash flow from real estate or dividends from stocks?

    Let’s say you just received a windfall of $250,000. Pretend it’s a bonus from work or an inheritance from a distant relative.

    Your goal is to achieve financial freedom as soon as possible so you are not dependent on your W-2 job.

    You are considering two investment options.

    Option 1: You invest the $250,000 into a total stock market index fund, such as Vanguard’s popular offering (VTSAX).

    You’ve done your homework and know that based on the 4% Rule, you can safely withdraw 4% of your money in the first year and then 4% plus an adjustment for inflation in subsequent years. If you do so, your money should last 30 years.

    That means you can safely withdraw $10,000 in the first year year, and a bit more each year after that. For simplicity, let’s just look at the first year when you can safely withdraw $833.33 per month ($10,000 / 12 months = $833.33).

    Remember, your goal is to leave your primary job. With this investment, you can assume you’ll have $833.33 per month available to cover your monthly expenses. Not too bad.

    One important note: the 4% rule contemplates that your original investment should fund your lifestyle for 30 years. Importantly, there’s a chance your portfolio may be completely depleted after 30 years.

    There’s also a chance your portfolio may be worth more in 30 years than when you started withdrawing.

    Your results in large part depend on the percentage of stocks you own in your portfolio. If you are interested, you can read more about the 4% Rule and successful withdrawal rates here.

    One of keys to remember is that while the market does not always go up every year, you will still be making withdrawals every year.

    There may be a year where the market drops by 5% on top of the withdrawals you made that year. When that happens, your account balance drops. If you are not flexible in your withdrawal rate, this could lead to problems.

    True, when the market goes up, your account balance goes up. The 4% Rule attempts to factors in these up-and-down cycles over a 30 year period.

    However, when you are making constant withdrawals over a long enough period, there’s a chance that your account balance will eventually drop to zero.

    Keep this in mind as we consider our next option.

    Option 2: You use the $250,000 for a down payment on a rental property valued at $1 million.

    We will soon learn how to evaluate rental properties. Countless books have been written on the broad topic, and it’s beyond the scope of this post.

    Humor me for now since this is only a hypothetical scenario.

    Without getting into specifics, I am willing to bet that any decent real estate investor could generate more than $833.33 per month from a $1 million property.

    Personally, if I had $250,000 to invest in Chicago, I would not settle for anything less than $2,000 per month in cash flow. And, that would be the bare minimum for me to even tour a property.

    With an initial investment of $250,000, my focus would be on finding a rental property with at least $3,000 in monthly cash flow.

    For now, you’ll just have to trust that cash flow like that is possible with rental properties. I’ll soon show you how to do the analysis and manage your properties to target returns like this.

    Photo from Zach Angelo created for his church symbolizing that cash flow is king when it comes to financial freedom.
    Photo by Megan Watson on Unsplash

    To recap, with the same $250,000 investment, you should be able to earn more monthly cash flow in real estate than dividends from stocks.

    It gets even better.

    If you hold your property long-term, your monthly cash flow should increase over time. Over those 30 years, inflation will naturally cause your rental income to increase.

    At the same time, if you have a fixed rate mortgage for 30 years, that major expense stays constant. The difference between your increased rental income and constant mortgage payment results in more cash flow.

    So, if you are hoping to sustain financial freedom without a primary job, which investment gets you closer to covering your monthly expenses?

    Investing in real estate offers so much more than just cash flow.

    Don’t stop reading yet.

    On top of the monthly cash flow, real estate provides so much more.

    Here’s a sneak peak continuing our prior example:

    After 30 years, you will own an asset without any debt. In our example, even without any appreciation, you would own a $1 million property debt-free. And, that debt was paid off entirely by your tenants.

    Add in appreciation, another major reason to invest in real estate, and your property will likely be worth $2-$3 million debt-free after 30 years.

    Compare that to the example with stocks using the 4% Rule. After 30 years of depleting your investment account, your investments may be gone.

    To put a bow on this point:

    With stocks, you can earn $833 in monthly dividends and possibly have no money left after 30 years.

    With real estate, you should reasonably earn $2,000-$3,000 per month (improving over time), and after 30 years will own an asset worth $2 million-$3 million, debt free.

    When you look at it this way, the choice is really not that hard, is it?

    On your journey to financial freedom, are you convinced that cash flow is king?

    I’m not saying it’s bad to invest in stocks or you should only invest in real estate. I personally invest in stocks and real estate.

    I see a place for both asset classes in my future.

    If you haven’t previously considered investing in real estate, maybe you’ll now think about how that monthly cash flow can fit into your overall investment portfolio.

    If you’re striving for financial freedom, are you convinced that rental property cash flow can accelerate your journey?

    Let us know in the comments below.

  • Real Estate has Accelerated my Journey to Financial Freedom

    Real Estate has Accelerated my Journey to Financial Freedom

    I invest in real estate for one reason and one reason only:

    To accelerate my journey to financial freedom.

    Through monthly cash flow, debt pay-down, appreciation, and tax benefits, I’m convinced that owning rental properties is the fastest way to reach financial freedom.

    We’ll soon discuss each of these advantages in more detail. For now, here’s a quick overview:

    • Cash Flow: After paying all the bills each month, whatever is left is considered cash flow. You can use this cash flow however you want.
    • Appreciation: Real estate tends to increase in value over the long-term. If you hold real estate long enough, you should benefit from appreciation. This also means that your net worth grows.
    • Debt Pay-down: If you have a mortgage on a rental property, your tenants are the ones paying down that mortgage each month. That means your net worth grows because your debt is shrinking.
    • Tax Benefits: The tax code favors real estate investors. Whereas W-2 income is heavily taxed, many real estate investors pay little in taxes (and sometimes nothing in taxes). Some of the biggest reasons for this are depreciation and lower tax rates for capital gains.

    With these four major advantages in mind, you can hopefully start to see how investing in real estate will accelerate your journey to financial independence.

    Additionally, you may have noticed that investing in real estate provides both immediate and long-term financial benefits. 

    Let’s focus on that point for a moment.

    Investing in real estate offers immediate and long-term financial benefits.

    To be truly financially free, you need to cover immediate life expenses and prepare for future life expenses.

    In terms of your Budget After Thinking, your Now Money and Life Money are considered immediate life expenses. Your Later Money is for future expenses.

    Rental properties can help you in each budget category. The monthly cash flow and tax benefits will cover your Now Money and Life Money needs. Debt pay-down and appreciation offer significant upside for your Later Money.

    I’ve been hard-pressed to find any other asset class that provides as many benefits for both for the here-and-now and the future.

    There’s another major reason I believe in the power of investing in real estate.

    It has to do with one of my ultimate life goals: to create more time to spend with my family. This is one of my major life goals, in part, because of what I’ve learned in my career as an attorney.

    What I’ve learned about time and family as an attorney.

    I graduated law school at age 24 and spent the first couple of years of my career clerking for an appellate court judge.

    To this day, I tell my students that clerking for a judge is the best job for recent graduates. I recommend that all my students apply for judicial clerkships.

    When my clerkship ended, I joined my current law firm where I continue to represent people with mesothelioma, a rare and terminal cancer caused by asbestos.

    If it wasn’t for what I’ve learned from my mesothelioma clients, I would have never started investing in real estate.

    Let me explain what I mean.

    I’ve learned invaluable life lessons from my clients with mesothelioma.

    Most of my clients are in their 70s and 80s. That’s because mesothelioma is a disease that takes decades to manifest. A person can be exposed to asbestos in his 30s and not get sick until his 70s.

    A significant part of my job has been meeting with my clients in their homes after they have just found out they have incurable cancer. Before we ever get around to talking about the case, we inevitably end up talking about life.

    During these conversations, I do most of the listening. You can imagine what I’ve learned about life in these moments. It is not a stretch to say that many of my core beliefs have been shaped by these powerful experiences.

    When I listen to my clients talk about life, certain themes continue to surface.

    One major theme I hear from my clients is the importance of family. They’ve taught me the importance of creating experiences and memories with loved ones, usually involving family vacations or time spent with friends.

    Summer in Paphos representing creating more experiences with family.
    Photo by Natalya Zaritskaya on Unsplash

    Like my clients, I want to create as much time as possible with my family and friends. When I look back on my life, I want to look back on all the experiences and memories I’ve created.

    With rental properties, I can earn money without being physically present. And while investing in real estate is not completely passive, it provides tremendous upside without requiring all of my time.

    That means I can spend more time with my wife and three kids while still making money.

    Because of what I’ve learned from my clients, there’s nothing more important to me.

    I started investing in real estate in my mid-30s.

    By the time I reached my mid-30s, I had paid off my student loan debt. I had successfully saved up for an engagement ring and a wedding. Newly married, my focus shifted to saving up for a downpayment on a home.

    At the time I started saving up for a home, I had no idea that I could use my savings to invest in real estate.

    It wasn’t until I went to a Cubs game with a good friend of mine, The Professor, that I learned about real estate investing. This is when my journey to financial freedom really accelerated.

    See, The Professor had a beautiful condo with an incredible rooftop deck near Wrigley Field. During the game, he told me he was selling the condo and moving into a 4-flat with his fiancee in an up-and-coming part of town.

    Huh?

    Why on earth would you give up your amazing condo? And move to a random neighborhood I’d maybe been to one time in my life?

    I thought The Professor had lost his mind. Back then, I had no idea what a 4-flat even was. I couldn’t even point to his new neighborhood on a map of Chicago.

    The Professor set me straight.

    door key symbolizing how investing in real estate can accelerate your journey to financial freedom.
    Photo by Maria Ziegler on Unsplash

    He walked me through the numbers. He explained that he was going from paying $3,000 per month for his condo to receiving $700 per month on top of living for free in the 4-flat. That’s a $3,700 difference per month!

    I immediately thought about the experiences and memories that I could create with my wife if we had an extra $3,700 per month to spend.

    I already knew what my clients would say about the opportunity to create such memories.

    It almost sounded too good to be true.

    I did my homework and bought my first investment property less than a year later.

    During my talk with The Professor, he introduced me to BiggerPockets.

    If you haven’t heard of BiggerPockets, it is a treasure trove of online resources to help real estate investors of all levels.

    At BiggerPockets, you can listen to podcasts, read blog posts, and ask questions on the forums. You can also choose from a wide selection of incredible books on real estate investing.

    One of my favorite BiggerPockets books is Chad “Coach” Carson’s book, Small and Mighty Real Estate Investor: How to Reach Financial Freedom with Fewer Rental Properties.

    Coach Carson’s message is right there in the title: you can use real estate to efficiently reach financial freedom. He makes a compelling argument to use real estate to build a life, not the biggest bank account.

    Being introduced to BiggerPockets was a game changer for me. I believe in the motto, “Trust but verify.” With BiggerPockets, I could do my own research and decide for myself if real estate investing was for me.

    Over the next few weeks, I read everything I could about investing in real estate. When I wasn’t reading about real estate, I listened to podcasts.

    It didn’t take long before I was convinced that I wanted a 4-flat of my own.

    I am using real estate to accelerate my journey to financial freedom.

    To me, investing in real estate is all about fast-tracking my journey to financial freedom. It has not always been easy, but it’s definitely been worth it.

    I’m fortunate that my career has introduced me to so many wonderful people.

    I am convinced that I would not have been as motivated to act if it weren’t for my conversations with my mesothelioma clients. If nothing else, I know that talk with The Professor about real estate would not have resonated with me the same way.

    Fast forward to the present day, I now own 10 apartments in Chicago and a rental ski condo in Colorado.

    Coming up in the blog, I’ll share with you everything I’ve learned about investing in real estate along the way.

    As always, reach out if you have any questions or leave a comment below.

  • How to Use HELOC to Buy Investment Property

    How to Use HELOC to Buy Investment Property

    Have you ever wondered how successful real estate investors seem to acquire properties so quickly? The answer is usually related to “OPM”, or Other People’s Money. In today’s post, we’ll discuss how I’ve used a common form of OPM, a Home Equity Line of Credit or HELOC to buy investment property.

    The best part is that you can use and repeat this strategy to acquire multiple properties. On three separate occasions, my wife and I successfully used a HELOC to buy investment property.

    Besides acquiring properties, as a real estate investor, you can also use a HELOC to update a property. My wife and I have done both. We’ve used HELOCs to help with the initial downpayment to acquire properties. We’ve also used HELOCs to improve properties after we’ve purchased them to increase its value.

    Read on to learn what a HELOC is and how to use a HELOC to buy investment property.

    What is a HELOC?

    A Home Equity Line of Credit (HELOC) allows you to borrow money, in the form of a loan, against the equity in your home. Equity is the value of your home less what you owe on a mortgage.

    Think of a HELOC as a second mortgage on your property that works like a credit card. That means you will be charged interest when you use your HELOC funds.

    Just like with a primary mortgage, when you open a HELOC, the bank is protected by the equity in your home.

    Just like a credit card, you can choose when and how to use a HELOC. And, you can use your HELOC over and over again, as long as you pay down the balance. Use it, pay it off, use it again. This is what my wife and I have done.

    Of course, this is one of the best parts about HELOCs. Whether you want to use a HELOC to buy an investment property, or for any other purpose, you can tap the funds repeatedly and don’t get charged any interest until you use them.

    This point is worth repeating. You can open a HELOC and not use it right away. You won’t be charged interest while you wait for an opportunity to present itself.

    That opportunity might be using your HELOC to buy investment property.

    Or, it might mean using your HELOC to renovate your home or buy a car. This is what my wife and I did recently. When we bought a new car last year, we decided to use our HELOC funds instead of taking out a new auto loan.

    Extract equity or obtain funds from your property using a home equity loan or a HELOC to buy investment property.

    Keep in mind that when you decide to use your HELOC, you will be charged interest until you pay it back, just like a credit card. This is a major consideration to keep in mind if you’re thinking about using a HELOC to buy an investment property.

    To recap, a HELOC is really just a form of credit card, available to you for a set period of time, secured by the equity in your home.

    You can use those HELOC funds for any purpose. You can choose to use your HELOC to buy investment property, renovate your home, buy a car, or for pretty much any other purpose.

    What to know about paying off a HELOC.

    If this all sounds too good to be true, don’t forget that you do have to pay off your HELOC, with interest. Just like any other debt, whether it’s Good Debt or Bad Debt, a HELOC needs to be paid off.

    HELOCs are generally broken out into two phases, the “draw period” and the “repayment period.”

    The first phase is known as the borrowing period, or draw period. You can continue to use your HELOC funds for the duration of the draw period. Most HELOCs have a draw period of 10 years.

    During the draw period, your loan balance will accrue interest. Generally, you are required to make minimum payments during the draw period.

    These payments are usually referred to as “interest only” payments. This means you must pay the interest accrued during the previous month, but you don’t have to pay down the principle owed.

    At the close of the draw period, the repayment period begins. During the repayment period, you can no longer borrow from your HELOC.

    The repayment period typically lasts 10 or 20 years. Your lender will set a schedule for monthly payments to pay off the balance in full, similar to a mortgage.

    Four advantages to using a HELOC to buy investment property.

    Here are the four main reasons why I’ve used a HELOC to buy investment property. These same advantages apply to any other major purchase.

    1. You can use a HELOC as you would use cash, including for a downpayment.

    Once your HELOC is open, you can use the funds as you would cash. All you need to do is link your HELOC account to your primary checking account. You can make transfers into your checking account, as needed, up to your full HELOC credit limit.

    With a HELOC, once the transfer hits your checking account, you can spend that money just as you would any other money.

    This is a huge advantage if you want to use a HELOC to buy investment property.

    That’s because lenders heavily scrutinize where you are getting the funds you plan to use to close on a property. HELOC funds are almost always allowed to be used for a downpayment.

    On the other hand, cash advances from credit cards are typically not allowed for a downpayment on a conventional loans.

    2. HELOCs charge lower interest rates.

    The interest rate charged on HELOCs will typically be lower than the interest rate charged by credit cards and other personal loans.

    Interest rates on HELOCs are similar to prevailing mortgage rates, but typically charge about 1-2% more. This is to compensate the HELOC lender for the added risk of being the second mortgage on a property.

    According to Bankrate, here are the current average interest rates:

    As you can see, if you need to borrow money for any reason, using a HELOC usually gives you the best rate. This is a major reason why people generally use HELOCs.

    It’s also the primary reason why I have used a HELOC to buy investment property.

    Keep in mind that HELOCs generally charge a variable interest rate that may change monthly depending on market conditions outside your control. This is again to protect the HELOC lender, and is a factor to consider before you use your HELOC funds.

    In fact, this is one of the key risks with using HELOCs. You may apply for a HELOC when interest rates are low, but that can change. You may be faced with a significantly higher rate when you pay off the balance.

    From a real estate investor’s perspective, a higher interest rate may end up eating into all of your cashflow. Before using a HELOC to buy investment property, make sure the cashflow on the property can cover the higher loan payments.

    3. You only pay interest on HELOCs during the draw period.

    As discussed above, you typically only have to pay the interest on a HELOC during the draw period. That means your monthly payment is lower. As long as you make the minimum payment, the overall balance will not grow month to month.

    Then, during the repayment period, you have 10 to 20 years to pay off the balance. This lengthy period helps spread out the balance over time, which keeps the required payment lower each month. This long payoff period is extremely beneficial when paying off larger purchases, such as a home renovation.

    This is also another key reason why a real estate investor would use a HELOC to buy investment property.

    Spreading out the payments over the long term, and only paying interest during the draw period, means more monthly cashflow. Some real estate investors think differently, but to me, cashflow is king.

    4. You may have access to a larger sum with a HELOC.

    Because a HELOC is secured by the equity in your home, it’s likely you will be eligible for a larger sum than a typical credit card or other personal loan.

    While credit cards also allow cash advances, they are typically capped at a relatively low amount and come with higher interest rates.

    A larger available balance comes in handy when you want to use a HELOC to buy investment property.

    For conventional loans, you’ll typically need 20-25% of the purchase price as a downpayment. That is a lot of money to come up with on your own, even if you are great at fueling your savings.

    The same is true for funding any other major purchase. For example, just the other day, I spoke to a friend who opened up 12 different credit cards to launch his software business.

    If he had access to a HELOC, he would not have needed 12 separate credit accounts. The HELOC would have provided him enough funding.

    How I’ve used HELOCs to scale my real estate portfolio.

    Using HELOCs can be an effective way to scale your real estate portfolio.

    As mentioned above, you can use your HELOC for a downpayment on another investment property.

    This is one of the ways my wife and I scaled our real estate portfolio. We primarily invest in an area of Chicago where properties can get expensive. The same can be said about our vacation rental in Colorado.

    Coming up with a full downpayment in these markets on our own would take years of savings. We’ve made the choice to take on additional debt and added risk to scale more quickly.

    We purchased our first investment property in 2018. After making some improvements and paying down the mortgage, we applied for a HELOC in 2020. We then used those HELOC funds to help with the downpayment for our Colorado ski rental in 2021.

    After a couple years of unexpected appreciation on our ski rental, we took out a HELOC on that property in 2022.

    We then used that HELOC to help purchase a third rental property in Chicago in 2022 and our primary home in 2024.

    As you can see, we’ve used our equity gains in our earlier properties to take out HELOCs to help acquire additional properties.

    Along the way, we have worked on paying down the balances of each of those HELOCs. This way, we reduced our debt and increased our net worth. We can also now repeat the process and again use a HELOC to buy investment property.

    Besides a downpayment, real estate investors can use HELOC funds to make improvements to their properties.

    Real estate investors also use HELOC funds for improvements to their properties. These improvements can lead to equity gains through appreciation and also more monthly cashflow.

    We’ve used HELOCs in this way on multiple occasions. For example, we used our HELOC to install washers and dryers into three of our apartments.

    We then paid off the HELOC balance with the increased rental income generated by those three improved apartments.

    Don’t ignore the biggest risk of using a HELOC to buy investment property.

    With all the advantages of HELOCs, there is one major risk that cannot be ignored. This single risk is so important that is should outweigh all of the advantages for most people.

    HELOC equals debt.

    Like with all debt, if you abuse the privilege, you are going to get yourself in trouble.

    This is why Dave Ramsay is adamant that debt should not be used as a tool to build wealth.

    In his bestselling book, The Total Money Makeover, Ramsey walks you through how to build wealth without relying on debt.

    If you decide to tap your HELOC funds, remember that the loan is tied to the equity in your home. If you fail to comply with the loan terms, your home is at stake.

    That’s a huge risk.

    Before you consider using a HELOC, be sure to have a plan in place for paying back the loan. This is where your Budget After Thinking can really help.

    I would not use a HELOC as a beginner investor.

    While there are upsides to using HELOCs, it is a potentially risky strategy that I would not feel comfortable with as a beginner investor.

    I say that for good reason.

    When you hear HELOC, you should immediately think about debt. For many of us, debt is problematic and leads to negative emotions.

    I’ve experienced these negative emotions associated with debt. I only got comfortable with taking on debt as I learned to trust myself again with the responsibility.

    While I’ve used HELOCs to scale my real estate portfolio, my primary money goal this year is to pay down these HELOCs. I’m tired of having those debt balances hanging over my head.

    If you have proven to yourself that you can responsibly handle debt, using a HELOC may be a worthwhile strategy.

    By responsible with debt, I mean:

    If you have satisfied all of the above, you can then make an informed decision about using debt to scale your real estate portfolio.

    How do you apply for a HELOC?

    Applying for a HELOC is just like applying for a mortgage. The bank will review your finances and determine if it will lend you money against the equity in your home.

    HELOC – Home with a Dollar Sign and Line Graph Symbolizing Borrowing Against Home Equity, which illustrates that using a HELOC to buy investment property can be a useful strategy to scale your real estate portfolio.

    If you’ve ever applied for a mortgage, you know this is not a fun process.

    The key to qualifying for a HELOC is that your home equity needs to have grown in value, either by paying down your primary mortgage or through appreciation.

    Let’s look at an example of using a HELOC to buy investment property.

    Note, you’ll never have to do this math yourself. This is for illustration purposes in case you want to estimate the amount you may be eligible for before you start the application process.

    For easy math, we’ll make some assumptions in this example. Always confer with your mortgage broker or lender for precise calculations.

    In this example, let’s say you bought a home five years ago for $500,000.

    • You put 20% down ($100,000) when you bought the home, so your original mortgage was for $400,000. This means your equity in the home when you bought it was $100,000.
    • For the past five years, you’ve paid down the principle on your mortgage every month. For easy math, let’s assume your remaining mortgage is now $350,000. Because you paid down $50,000 of the mortgage, your equity has increased by $50,000.
    • Not only have you been paying down the mortgage for five years, your home has also appreciated in value and is now worth $600,000. That’s another $100,000 in equity you now have in your home.

    Add it all up and you started with $100,000 in equity (your original downpayment) and now have $250,000 in equity.

    This is because you have paid the mortgage down every month and your home has appreciated in value.

    In this scenario, you may be eligible for a HELOC to buy an investment property.

    How do lenders calculate the amount of your HELOC?

    Each bank may have different standards for qualification and how much they will lend you. Generally, banks will use a metric called Loan-to-value ratio to calculate the amount of your HELOC.

    What is Loan-to-value ratio?

    Loan-to-value ratio is a complicated name for an easy math formula:

    LTVratio = Mortgage amount / Property value.

    In our scenario, your current mortgage amount is $350,000. Your property value is $600,000.

    So, your LTVratio is .5833 ($350,000 / $600,000). In terms of percentage, that’s approximately 58%.

    A typical HELOC lender will allow you to borrow up to a combined LTVratio of 70%.

    That means your existing mortgage plus the HELOC can only add up to 70% of the value of your home.

    The bank does this to protect itself by requiring you to maintain 30% equity in your home.

    To carry out our example, using a combined LTVratio of 70%, you may be eligible for a HELOC of $70,000:

    • Value of home = $600,000.
    • First mortgage = $350,000 (approx. 58%)
    • HELOC = $70,000 (approx. 12% of value of home)
    • Combined mortgage + HELOC= $420,000 (70% of home’s value).
    • Remaining equity in home = $180,000 (30% of home’s value).

    Again, you don’t need to do this math yourself, but it’s helpful if you want to understand what size HELOC you may be eligible for before starting the process with lenders.

    Have you used a HELOC to buy investment property?

    Using a HELOC to buy investment property can be an effective strategy. My wife and I have effectively used this strategy multiple times.

    Before you decide to use a HELOC, be sure to understand the risks associated with taking on additional debt.

    • Have you used a HELOC to buy investment property before?
    • What about using a HELOC for any other purpose?

    Tell us about your experience in the comments below.

  • Buy a Home Now or Wait for Mortgage Rates to Drop?

    Buy a Home Now or Wait for Mortgage Rates to Drop?

    In today’s Q&A, we’ll address two great questions from readers about shopping for a home in today’s environment. We’ll also talk through how to know if you have enough Parachute Money.

    As always, please continue to reach out with your questions on our socials or by replying directly to our weekly newsletter emails. I personally read and reply to every email.

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    Should I wait for mortgage rates to drop before buying a home?

    This question has been on people’s minds for a few years now. Ever since rates started climbing from the all-time lows during the pandemic, people have been hoping they might significantly drop again.

    In my humble opinion, that ain’t happening. At least not anytime soon.

    Google “Are interest rates going to drop” and you’ll find that nearly every major news outlet and mortgage lender has a prediction. Most predictions right now are about the same. US News summed it up just about perfectly:

    Analysts expect the 30-year fixed mortgage rate to stay elevated between 6% and 7% for the next two years. Just two months ago, economists thought it would fall into the 5% range by the second half of 2025. With such wild fluctuations in the forecast, you’d be just as likely to get a satisfactory mortgage rate outlook from a Magic 8 Ball: Cannot predict now. Ask again later.

    Nobody knows what’s going to happen with rates. Just two months ago, US News thought rates would drop. Now, they’re expected to stay elevated. What are you supposed to do with that information?

    I recommend you ignore it.

    My advice is to buy a home when you’ve decided it’s the right moment in your life to do so. Make that decision regardless of what current interest rates are.

    Why do I recommend you ignore mortgage rates?

    There are really only three things that can happen to mortgage rates over time:

    1. Stay the same.
    2. Go up.
    3. Go down.

    In any of those three scenarios, there’s no point in basing your decision to buy a home only on the current rates. Let me explain.

    Let’s say you have a crystal ball and can look three years into the future. Looking into your crystal ball, let’s play out each of the three scenarios mentioned above.

    1. Your crystal ball shows you that mortgage rates stayed relatively consistent.

    Since rates stayed the same, there would be no point in waiting to buy a home because of rates. The rates three years from now are the same as they are today.

    By waiting, you’re likely going to experience that homes have gotten more expensive. The longer you wait, the more expensive they are going to be.

    The data shows that homes have become more expensive historically and in the recent past. In 2024, U.S. homebuyers paid nearly double what they paid for homes in 1965, accounting for inflation. More recently, in Chicago for one example, home prices are up more than 9% since just last year.

    So, even if rates stay the same, prices are likely to go up and you shouldn’t sit around waiting for them to drop.

    2. Your crystal ball shows you that mortgage rates went up.

    If rates go up, it’s easy to conclude that it’s a mistake to delay your home buying decision. Higher rates, combined with higher prices, is… not good.

    3. Your crystal ball shows you that mortgage rates went down.

    This is the scenario that many people are waiting for. When rates go down, you can afford a more expensive home. That’s a good thing, right?

    Not so fast.

    Do you think you’re the only person sitting around waiting for rates to drop? For the same reasons that you’re waiting, many other people are also waiting.

    So, what happens when lots of people are waiting to buy the same thing? Demand goes up. When demand goes up, you have more competition to buy that same house. That means prices go up. You’ll end up paying more money for the house, even with a lower interest rate.

    Take it from me, bidding wars are not fun. I would much prefer to get the house I want without the added competition.

    If mortgage rates end up dropping later on, I’ll refinance my loan into the lower rate. I may pay more on a monthly basis in the short term, but long term, I have the house I want at the best available current rate.

    So, there you have it. No matter what happens to rates, in my opinion, you’re best off shopping for a home when the time is right in your life.

    Forget about the rates. If rates do end up going down in the future, you can still benefit by refinancing.

    My wife and I are considering buying a home that would be the most expensive home ever sold in the neighborhood. Is that a bad idea?

    This is another great question. Opinions will certainly vary, so I encourage you to talk to your inner circle to get a variety of perspectives.

    Personally, I have no problem buying the most expensive property in a neighborhood, under one condition: I plan on holding that property for at least 10 years.

    Like the data above shows, home prices tend to go up historically. Since 1990, home prices nationally have appreciated on average at a rate of 4.4%.

    If you’ve done your homework and are shopping for real estate in good neighborhoods, it’s only a matter of time before another home sells for a higher price.

    The longer you hold the real estate, the more home appreciation works in your favor.

    Appreciation is one of the best reasons to invest in real estate, after all.

    When we bought our first rental property in Chicago in 2018, we paid the highest price for any 4-flat in our neighborhood. At the time, we were a bit concerned that we were overpaying. Those worries were short lived. With seven years of appreciation working in our favor, numerous properties have sold since then for significantly more money.

    Family walking into new home just purchased illustrating it's not always a bad idea to buy the most expensive home in neighborhood as learned on Think and Talk Money.

    Yes, there are always going to be dips in the market. Do not expect your home to steadily appreciate every year. This is why my one condition is to hold the property for at least 10 years. When you hold property (or any investment) for the long run, time is on your side. You can wait out any dips in the market.

    As long as you’ve done your homework and are willing to hold a property for the long run, I would have no hesitations in buying the most expensive property in a neighborhood.

    I’m fascinated by the concept of Parachute Money. My question is: how will I know if I have enough Parachute Money?

    The idea of Parachute Money is one of my favorite concepts in personal finance. Check out our post here to learn more about how empowering Parachute Money can be.

    To know how much Parachute Money you need, look back at your Budget After Thinking. All you need to do is add up your monthly Now Money and Life Money to figure out how much Parachute Money you’ll need to maintain your current life.

    For example, let’s say your budgeting process taught you that you need $6,000 of Now Money and $4,000 of Life Money each month. Your Parachute Money target is $10,000.

    If your goal is to walk away from your primary job, you’ll need to create $10,000 of income streams not counting that primary job. That could be from any combination of investments and side hustles. Once you hit $10,000 in parachute strings, you should be able to safely walk away from that job.

    Note that for calculating your Parachute Money, you can ignore your Later Money goals. The reason why relates back to the purpose of Parachute Money.

    The purpose of Parachute Money is to be able to choose to walk away on your own terms while continuing to support yourself.

    Presumably, choosing to walk away from a bad situation accomplishes one of your primary goals for saving and investing money in the first place.

    At this phase of your life, it’s OK to temporarily set aside your Later Money goals. If and when you choose to seek new sources of income, you can start fueling your Later Money goals again.

    The exception to this rule is if you have debt obligations that are not accounted for in your Now Money. If that’s the case, be sure to include your debt obligations in your Parachute Money target.

    One last thing about Parachute Money: achieving true Parachute Money is hard. Just remember, the payoff could be extremely valuable to you: not having to work your primary job if you choose not to. That’s the definition of financial independence.

    Thanks again for all the great questions!

    If we didn’t get to your question this week, we’ll do our best to get to it in an upcoming post.

  • Great Talk: Money, Friends and Cheeseburgers

    Great Talk: Money, Friends and Cheeseburgers

    Talking money is not taboo.

    The only thing that’s taboo is avoiding your personal finances.

    To help flip the script and convince you that talking money is not taboo, I plan to regularly post about the current money conversations that I’m having. Through my examples, I hope to encourage you to have similar conversations.

    In our first “Great Talk” post, we’ll discuss what my wife and I decided to do with our Later Money throughout 2025. We’ll also talk about how really smart people I know have started budgeting. We’ll conclude with an empowering conversation I had with a friend about what you can do with your time if money wasn’t an obstacle.

    What I’m doing with my Later Money in 2025.

    Later Money is what you are saving, investing, or using to pay off debt. This bucket includes long term goals and investments, like retirement and college savings. It also includes emergency savings, paying off debt, or any other shorter term goals, like saving for a wedding or a downpayment for a house.

    Later Money is the key category that fuels your ultimate life goals, like financial independence.

    The more you fuel this category, the faster you can reach your goals.

    So, what are my wife and I doing with our Later Money in 2025?

    We recently had a great talk about our options and came up with a plan that will guide us throughout the year. Before we talk about our 2025 goals, it’s important to keep in mind that your Later Money goals will change over time. That’s perfectly fine.

    Our goals in 2025 are not the same as they were between 2016 and 2024. Prior to 2025, my wife and I were focused on expanding our real estate portfolio.

    We purchased our first rental property in 2018, a four-flat in an up-and-coming Chicago neighborhood. Less than a year later, we bought a three-flat in the same neighborhood.

    In 2021, we invested in a Colorado rental ski condo. In 2022, we purchased our fourth rental property, a three-flat, in the same (now booming) neighborhood in Chicago.

    After living in our rental properties since 2018, we purchased a single-family home just outside Chicago in 2024.

    During this timeframe, any spare dollar we earned went towards acquiring more real estate. We contributed towards other financial goals, like retirement and college, but our priority was investing in real estate.

    Knowing when enough is enough.

    Our goals have changed in 2025. We started talking about revamping our goals towards the end of 2024. I owe a lot of credit for our new goals to Chad “Coach” Carson and his excellent book, Small and Mighty Real Estate Investor: How to Reach Financial Freedom with Fewer Rental Properties.

    In his book, Coach Carson makes a compelling argument to think about when enough is enough. His message was about acquiring more and more real estate, to no end, but also applies to any pursuit in life. You can learn more about Coach Carson and his incredible journey on his website.

    Reading Small and Mighty Real Estate Investor helped my wife and I conclude that at this point in our lives, we have enough. If anything, we’re closer to having too much on our plate. We self-manage our 10 units in Chicago and work closely with a property manager in Colorado. With our full-time jobs and kids at home, we’ve bitten off as much as we can chew.

    Our portfolio generates enough income to help fuel our current goals. If we were to continue expanding, the headaches could end up outweighing the financial benefits.

    We want to build a life full of experiences and memories. That means we need more time, not more money. Acquiring and managing more properties right now would take up a lot of time. That tradeoff is not currently worth it to us.

    So, if we’re not pursuing additional properties in 2025, what are our goals?

    After talking it through together and weighing all our options, my wife and I came up with these three goals for 2025:

    1. Our first goal is to continuing paying down our mortgage debt. We used HELOCs (Home Equity Line of Credit) to help us acquire some of our properties. Now that we’ve determined that “enough is enough,” we’re focused on paying back these loans.
    2. Our second goal is to build up our emergency savings. We mostly ignored our emergency savings between 2017 and 2024. It was risky and led to some touch-and-go moments that we’d like to avoid moving forward.
    3. Our third goal is to boost our contributions to our kids’ college savings accounts. We use what’s called a “529 college savings plan.” 529 plans are state-sponsored, tax-advantaged investment accounts. We use Illinois’ 529 plan because we receive a tax break as Illinois residents. Just about every state offers a 529 plan. They are a great way to save for college.

    With our plan in place ahead of time, we now know where every dollar is going before we earn it. This takes the anxiety out of trying to figure it out after the money has already hit our bank account.

    At the end of each month, all we need to do is make our Later Money transfers to each account. We can rest easy knowing that we’re making progress towards our personal finance goals.

    How Budgeting is Helping Very Smart People.

    One of my favorite moments since launching Think and Talk Money occurred just last week. Walking down the hall in my office, one of my colleagues called me over.

    She was very excited to share that she started tracking her spending so she can create a Budget After Thinking.

    We chatted for ten minutes. She’s been reading the blog on her commute to work every Monday, Wednesday, and Friday. She used Think and Talk Money vocabulary, like “Now Money” and “Life Money.”

    She showed me the app she’s been using to track her spending, one I wasn’t familiar with and am now looking into. The best part was that she’s been telling her friends about Think and Talk Money because she’s already learned so much.

    This is exactly why talking about money is not taboo. She taught me something new and helped me think about my own budgeting process. She gave me new ideas to think about.

    How could this type of conversation be bad?

    We didn’t need to talk numbers. We talked strategy and habits. That’s what talking money is all about.

    What would you do with your time if money was not an obstacle?

    I had lunch with an old friend last week at a downtown Chicago lunch spot that’s been serving up epic burgers since the 1970’s. My friend and I are both balancing careers as lawyers in Chicago with young families at home.

    In between bites of a massive BBQ-bacon-cheeseburger, I asked him a question I like asking smart people:

    “What would you do with your time if money wasn’t an obstacle?”

    Without hesitation, he answered that he would work with his hands. He likes working on projects around the house. He gets immediate satisfaction from completing a repair or making an improvement.

    Two men eating out in cafe or restaurant talking about financial independence as learned on Think and Talk Money.

    His answer was great and very relatable. My years as a landlord has taught me the same feeling of satisfaction in completing a project.

    What stood out to me the most was how quickly he answered the question. He knew exactly what he would do if money was not an obstacle.

    This simple question helps illustrate what I mean when we talk about financial independence. It’s not an easy goal to accomplish, but I can’t think of a better goal to strive for.

    You are financially independent when money is not an obstacle.

    When you are financially independent, you can spend more time doing what is meaningful to you.

    You can spend more time with people who are meaningful to you.

    Whether you want to work with your hands or represent clients or teach kids, the choice is yours when you’re financial independent.

    That seems like a goal worth striving for.

    What could ever be better than that?

    So, let me ask you:

    What would you do with your time if money was no obstacle?

    Please share below!

    And always remember, talking money is not taboo.

  • Why You Need to Track Your Net Worth Every Month

    Why You Need to Track Your Net Worth Every Month

    On the first of every month, I wake up at 5:15 a.m., brush my teeth, and put on my robe.

    I walk downstairs, pour a cup of coffee, and head to my favorite chair in the living room.

    I then power on my laptop and open an Excel file called “Adair Family Balance Sheet.” Using this basic spreadsheet, my wife and I have been tracking and discussing our net worth for years.

    It takes me about 20 minutes to update our family balance sheet each month. The hardest part is remembering all the passwords for our accounts.

    When I finish entering the new account values, I study the spreadsheet for about two minutes.

    I hope to see that our money efforts that month resulted in our assets increasing in value and our debts decreasing.

    When I’m finished with the updates, my wife grabs her coffee and sits with me. She will likewise study the family balance sheet for about two minutes.

    We’ll then spend about three minutes talking about the changes from the previous month.

    And, that’s it.

    It takes us less than 30 minutes each month to track and discuss what I consider the most important metric in personal finance.

    That’s all the time it takes to know if we are progressing towards our most important goals. By tracking our net worth, we can quickly see if we are making good money decisions or need to make adjustments.

    I recommend everybody, no matter where you are in your financial journey, track your net worth.

    Just like budgeting with two simple numbers, tracking your net worth is the best, and easiest, way to measure your money progress.

    There’s no better way to learn how much money you’re keeping after a month of making money.

    In this post, we’ll talk about what “net worth” means, how to track it, and why it’s so important.

    Let’s start with what net worth means.

    Going into hiding straight from a London pub.

    One night when I was studying abroad in London years ago, my good friend, Kais, and I were talking in a pub. I don’t remember what we were talking about when he offered:

    “If I was in trouble and needed to go into hiding, I could sell everything that I own, pay all my debts, put the leftover money in the bank, and be fine for a couple of years.”

    Uhh, OK…

    At the time, I had no idea what he was talking about.

    Still, I had to admit that it seemed pretty cool that he had that kind of financial flexibility. I knew I couldn’t survive for a couple of weeks, let alone a couple of years.

    People in an english pub talking about their net worth as learned on Think and Talk Money.
    Photo by Luca Bravo on Unsplash

    Looking back years later, I now realize that he was talking about his net worth.

    Kais, if you’re reading this, drop me a line to let me know you’re not hiding.

    So, what is net worth?

    Your net worth is simply all of your assets less all of your liabilities.

    Net Worth = Assets – Liabilities

    Yup, you only need those two numbers to calculate your net worth, the most important number in personal finance.

    There’s no complicated math involved. Just addition and subtraction, which couldn’t be easier in a basic balance sheet (or spreadsheet).

    Let’s start with understanding what counts as an asset.

    What are assets?

    An asset is anything that has economic value and can be owned or controlled.

    In even simpler terms, an asset is just about anything you can think of that could be exchanged for money.

    My family’s current assets include:

    • Retirement accounts for both me and my wife
    • College savings accounts for each kid
    • Health savings account (my favorite account… we’ll revisit)
    • Checking accounts
    • Savings accounts
    • Cars
    • Jewelry
    • Properties
    • Cash on hand

    Other common examples of assets include:

    • Collectibles (artwork, coins, designer bags)
    • Furniture
    • Household goods (TVs, appliances, rugs, etc.)
    • Clothes
    • Tools
    • Recreational gear (bicycles, golf clubs, boats)
    • Toys

    It’s up to you to decide what assets to include in your balance sheet. There is no strict science to it. That said, there’s no point in overstating (or understating) your assets. You (and your family) are the only ones who will be reviewing your balance sheet.

    I personally don’t include all of our household items, but you are certainly welcome to. For me, it’s not worth the time and effort to determine how much I could earn by selling my TV or snowboard.

    a closet that is organized and neatly arranged with clothes, shoes, and accessories, illustrating items that could count as assets learned on Think and Talk Money.

    It’s perfectly acceptable if you want to tally up the value of your items. I think it makes sense to do so if you have a lot of nice things. If you choose to do so, aim for estimates, rather than precise values, to make your life easier.

    Why it is so important to acquire assets.

    Assets can, but don’t always, appreciate (increase in value) over time. For example, a property may appreciate over the long term, but a typical car will do the opposite and depreciate (lose value over time).

    Assets can also generate income, but don’t always. A good rental property should generate monthly cashflow. A stock portfolio can generate dividends (payments from companies to investors).

    On the other hand, a designer bag won’t generate income, unless you charge people to borrow it. Even so, a designer bag is still considered an asset because you could exchange it for money.

    To state the obvious, owning assets is a very good idea. Especially assets that appreciate and assets that generate income.

    When you own these types of assets, your net worth will increase over time without much extra effort on your part. You don’t have to specifically trade your time for money with these types of assets.

    Think of it like this: the best way to achieve financial independence is to own assets that increase in value over time and generate income.

    By tracking your net worth each month, you’ll know how your assets are doing.

    Does my home count as an asset?

    Some people, like personal finance legend Robert Kiyosaki, don’t think you should count your home as an asset. The argument goes something like, “You can’t really sell your home because then you wouldn’t have anywhere to live. So, you shouldn’t count it as an asset.”

    I couldn’t possibly disagree more.

    For many of us, our homes are our most important purchase in our lives. Over the long run, most of our homes will appreciate in value, even if not as much as we hoped.

    We spend years working to make money so we can pay down the mortgage. Each payment we make reduces our debt and increases our equity in the home, thereby improving our net worth.

    Don’t overcomplicate it. Include your home as part of your net worth. Just don’t forget to include the mortgage as a liability (we’ll discuss below).

    How do you determine the value of your home for purposes of tracking your net worth?

    Make it easy on yourself. The goal is to obtain a reasonable estimate. If you’ve worked with a real estate broker, ask her for the current value of your home. She will use recent “comps”, meaning similar comparable properties in the area, to come up with a fair value.

    You can also make a decent estimate of the value of your home by studying comps yourself. Platforms like Redfin or Zillow make it easy to see what homes have sold in your neighborhood.

    Look for homes as similar to yours as you can find. Focus on size, the number of bedrooms and bathrooms, and the quality of the finishes.

    Remember, this is not an exact science. We’re aiming for an estimate of your home value only for the purpose of measuring your net worth.

    On our family balance sheet, I only update the estimated value of our properties once per year. That’s good enough for me, and all you really need to do.

    Now that we know what assets are, we need to figure out what liabilities are to calculate our net worth.

    What are liabilities?

    A liability is any debt or obligation that you owe to someone else. Liabilities are most commonly found in the form of loans.

    Unlike assets, liabilities diminish your overall net worth.

    To speed up your path to financial independence, focus on reducing or eliminating liabilities.

    Closeup image of a woman holding and choosing credit card to use, which she knows counts as liabilities from Think and Talk Money.

    My family’s current liabilities include:

    • Lines of credit
    • Mortgages

    Other common examples of liabilities include:

    • Credit card debt
    • Student loan debt
    • Auto loans
    • Personal Loans
    • Consumer loans

    When you are beginning your career, it’s common for your liabilities to be greater than your assets. This is usually because of student loan balances.

    Remember our real life, really lost boy? He had a negative net worth for years.

    Don’t let that discourage you from tracking your net worth. Even if you’re in negative territory, each month is a chance to shrink that negative number, which means your net worth is increasing.

    Whether you are paying down debt, or adding to your savings or investments, the result is the same: your net worth increases.

    The reason for tracking your net worth also remains the same: individual progress, over time.

    Now that we know what assets and liabilities are, we can create our balance sheet and determine our net worth.

    Creating your own net worth balance sheet is very easy.

    I’m happy to share the spreadsheet I currently use to track my net worth. Subscribe to our weekly email newsletter, and send me a reply to the next email asking for my net worth spreadsheet.

    Subscribe Here to Join our Newsletter!
    Name

    On the top of my family’s net worth spreadsheet, each row represents an asset, or something we own.

    On the bottom of the spreadsheet, the rows represent the debts we owe.

    Each of the 12 columns (one column for each month) in the spreadsheet indicates the value of each asset at the end of the month.

    The reason I add a new column for each month, instead of just updating the values in a single column, is so I can easily see how our net worth has changed over time.

    Once all 12 months for the year are filled in, I start a new sheet and repeat the process. This helps us track how our net worth has changed over the long run.

    Since your balance sheet is for your eyes only (or your family’s eyes), feel free to design it however you want.

    On our family spreadsheet, I use different colors to illustrate the different types of assets we own and liabilities we owe:

    Turquoise for securities (stocks and bonds). Orange for checking accounts. Purple for savings and objects (like cars and jewelry). Green for properties.

    I like color coding because it helps me quickly visualize what we own or owe in each broad category.

    Here’s what a simple balance sheet looks like:

    If you want to create your own balance sheet, here’s what it might look like:

    AssetsJanuaryFebruaryMarch
    401(k)
    Roth IRA
    529 College
    HSA
    Checking
    Savings
    Car
    Home
    Rental Properties
    Total
    LiabilitiesJanuaryFebruaryMarch
    Credit Cards
    Mortgage
    Student Loan
    Auto Loan
    Total

    Once you input the amounts for each cell in the appropriate column, use the “sum” function to total your assets and separately total your liabilities.

    Then, all you need to do calculate your net worth is create one final row labeled “Net Worth”.

    In the “Net Worth” cell, simply use the “sum” function again to subtract the liabilities total from the assets total.

    JanuaryFebruaryMarch
    NET WORTH

    That’s all there is to it. Now, you know your net worth.

    Tracking your net worth is the best way to measure your personal financial progress.

    By now, you should be thinking that it’s not too difficult to track your net worth.

    It takes my wife and I less than 30 minutes each month to track and talk about the most important number in personal finance.

    How can we spend so little time on the most important number in personal finance?

    Because we’re only looking for progress compared to what our net worth was previously.

    We’re not interested in anyone else’s numbers. We only care about making personal improvements for our family.

    If our net worth is increasing over time, it means we are heading in the right direction.

    It means that we are continuing to fuel our Later Money goals. We’re paying down debt. We’re letting our investments do their thing.

    If our net worth is decreasing, it means we need to consider making adjustments.

    Sometimes our net worth decreases because the markets are heading down. If that’s the case, we don’t do anything. At this stage in our lives, we can afford to wait for the markets to tick back up.

    If the issue is that our debt is increasing, or we haven’t fueled our investments that month, we make adjustments.

    By studying our net worth each month, we can catch these setbacks before they become a continuous problem.

    That’s all there is to it.

    All before the kids wake up.

    Do you currently track your net worth?

    Have you found it useful to measure your overall financial health?

  • Better at Making or Keeping Money?

    Better at Making or Keeping Money?

    When people learn that I’ve been teaching money wellness to law students, I usually get a reaction like, “I need that class! I know nothing about investments and the stock market.”

    It’s a fair reaction. Investing in the stock market can be complicated. Most of us never learn basic stock market principles, let alone how to manage an investment portfolio.

    It’s also a reaction that has always fascinated me. Yes, wanting to learn about investing is important. But, it’s not where money wellness begins.

    I often wonder, why do people automatically assume that money wellness means investing? There are so many things that we need to get right before we can focus on investing.

    Learning about the stock market wasn’t going to help me when I was struggling with debt. I needed to first figure out how to make better spending choices and get out of debt. I needed to play defense before I could go on offense.

    Yes, investing is important.

    No, it shouldn’t be the first thing we think of when we hear money wellness.

    We’ve hardly mentioned investing so far in this blog.

    Have you noticed that so far in the Think and Talk Money blog we have hardly even mentioned the word “invest”?

    That’s because in order to invest, we first need available money.

    To have available money, we need a budget that actually works.

    To have a budget that actually works, we need honest, powerful life goals.

    Are you starting to see why we first talk about money mindset? Then we moved on to budgeting?

    We will talk about investing once we have a plan to continuously generate money to invest.

    We will soon talk about investing. A lot. Don’t worry. In my money wellness class, we discuss in depth the importance of investing to create wealth.

    Here at Think and Talk Money, we will also talk extensively about investing, including in the stock market and in my preferred asset class, real estate.

    Investing is not as hard as generating money to invest.

    For now, our goal is to establish sound habits so we have real money to consistently invest over time. It doesn’t make sense to learn how to invest until we have a strong foundation in place.

    I think you’ll also find that investing is really not that hard. If learning how to do it on your own doesn’t sound like something you want to do, there are professionals that can do it for you. Whether it’s a good idea to go that route is something we’ll discuss so you can make an informed decision.

    If you do hire a professional to invest your money, you still need to know enough so you can talk to this person.

    Plus, this person will likely tell you that your ongoing mission is to generate more cash to fuel investments. That’s what we’re focusing on now.

    The fun part is once you’ve discovered your motivations and established strong habits, you will consistently have money available so you can invest month after month for the rest of your life.

    You could be a terrific investor. If you only have $1,000 to invest a single time, your upside will be limited. If you continuously generate $1,000/month of Later Money to invest, your options (and your wealth) will grow exponentially.

    My wife and I would not own five properties today if we didn’t first learn personal money wellness.

    My wife and I would not own five properties (11 rental units) today if we had not first learned money wellness fundamentals. I don’t just mean we wouldn’t have had money available to invest, although that is certainly true.

    I also mean we wouldn’t have the skills and knowledge to successfully run our real estate business. If you’ve ever wanted to be a business owner or investor, working on personal finance skills now is critical.

    Maybe that’s not your path. Still, these skills are critical whether you are a consultant, a writer, or a teacher. Would you agree that having money issues and stress at home can distract you from performing your job at the highest level?

    How many hours per year do you work to make money?

    Lately, when people ask me why I’m so passionate about money wellness, I respond with a question of my own that goes something like this:

    “Let’s say we work 2,000 hours per year to make money (40 hours per week, 50 weeks per year).

    We won’t even count all the hours we spend getting dressed and commuting to our jobs.

    We also will pretend we’re not looking at our emails in the evening and on weekends.

    We definitely won’t count the hours we’re staring at the ceiling fan because we can’t sleep.

    OK, so that’s 2,000 hours (plus) per year, to make money.

    How many hours per year do we think about what to do with that money?”

    Let that sink in for a moment.

    How many hours do you work every year to make money? 2,000? 3,000? I’m guessing a lot of those hours are stressful.

    Now, how many hours do you think about what to do with that money?

    Do you spend any hours at all talking about what to do with that money?

    This is why I am passionate about money wellness. Most people spend the vast majority of their lives worried about making money and practically no time at all thinking about what to do with that money.

    No, I’m not suggesting that you need to think about money for 2,000 hours per year.

    What I am suggesting is that even that little bit of time each week spent thinking and talking about money is just as important as the time you spent earning it.

    Think and Talk Money is about encouraging each other to make purposeful money choices.

    Robert Kiyosaki put it best in Rich Dad Poor Dad, “It’s not how much money you make. It’s how much money you keep.”

    If you knew someone that made $1,000,000 per year, and at the end of the year, had only invested $20,000, what would your reaction be?

    What if you knew someone who made $100,000 per year and invested $20,000? Did your reaction change?

    Multicultural group of women stacking hands together - Female community concept with different girls support each other - Girlfriends hugging outdoors encouraging each other to visit think and talk money.

    Think and Talk Money is all about actively thinking and talking about money so we can help each other make informed choices with our hard earned money.

    Whether you make a lot of money or a little money, it doesn’t matter. What you choose to do with that money is up to. It’s your life.

    All I want is for you to make those choices from a position of informed confidence.

    One response to “Better at Making or Keeping Money?”

    1. Kevin Avatar
      Kevin

      Great insight! The foundation is so important!

      Reply

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  • Help a Professor Out: Ask Your Money Questions Here

    Help a Professor Out: Ask Your Money Questions Here

    Think and Talk Money’s motto is “Money Wellness Together.” The more we all talk, the more we all benefit. The best way to keep the conversation going? Ask questions!

    I’ve learned through teaching in law schools for the past 15 years that most of us prefer seminars with questions and answers to long lectures. Thanks for all the great questions so far! I’m hoping we can do a Q&A post like this just about every week.

    Please keep the questions coming in the comments on any post, by responding to our newsletter, or on Instagram.

    In our first Q&A post, we’ll cover my favorite personal finance books, whether you should keep your condo as a rental unit, and the most important question of all: what is Italian beef?

    1. Do you have a favorite personal finance book that you would recommend?

    What a great question. I always recommend starting with books that focus on money mindset. Like we always talk about, the first step is getting our money mindset in the right place. I would start with:

    1. Rich Dad Poor Dad by Robert Kiyosaki. There’s a reason this is the best selling personal finance book of all time. If you read Rich Dad Poor Dad, your entire money mindset will be changed. Kiyosaki brilliantly shares the stories he learned growing up from his Rich Dad (really his best friend’s dad, very successful real estate investor/business owner) and his Poor Dad (his actual dad, highly educated/traditional career path). Using these two role models in his life, he makes a very compelling and easy to follow case that most of us go about life and money all wrong.

    Read Rich Dad Poor Dad. It will light a fire under you like no other book I’ve read.

    2. Think and Grow Rich by Napoleon Hill. Another longtime classic that will shift your money mindset. I first read this book in college when I learned my friend’s dad offered him $50 if he read this book. $50 to read a book? I’m in.

    Originally published in 1937 and recently updated, Think and Grow Rich, will convince you that we can all be successful. Hill studied innovators like Henry Ford and Thomas Edison. In the updated version, you’ll learn about modern figures like Bill Gates and Mary Kay Ash. To translate the title into my own words: Wake up! Use your brain! You can be successful in any walk of life if you just stop sleepwalking through life like everyone else and do something!

    Read Think and Grow Rich. You will be motivated to do that thing you’ve been saying you would do, but haven’t yet.

    3. The Richest Man in Babylon by George S. Clason. A third classic originally published nearly 100 years ago. Clason wrote a simple collection of fables set in the ancient city of Babylon to illustrate the power of fundamental money habits: earn, save, invest, protect. Through his stories, you’ll see how you can get ahead in life by practicing strong financial wellness habits.

    Read The Richest Man in Babylon. You’ll understand the building blocks of a healthy financial life.

    4. Your Money or Your Life by Vicki Robin and Joe Dominguez. Vicki Robin and Joe Dominguez are often credited for laying the groundwork for the Financially Independent Retire Early (FIRE) movement. They have a lot to say about the relationship between money, work, and time.

    Most of us are doing it all wrong. We chase money at the cost of our precious time. By making good choices about how to earn money- and as importantly what to do with that money- you can get the most out of your money and your life.

    Read Your Money or Your Life. You will start to value your time for what it’s really worth.

    5. Die with Zero by Bill Perkins. Perkins makes a strong case that many of us are saving too much for retirement. We work too many hours and save more money than we’ll ever need. Instead, we could be using that money during the best years of our lives to create lifelong memories.

    Perkins also questions the conventional wisdom of waiting until we die to pass money onto our kids. He suggests helping our kids earlier in life when the money will be more meaningful.

    Read Die With Zero. You won’t wait any longer to book that vacation you’ve been putting off for no good reason.

    If you have read these books already, but it was some time ago, read them again. I didn’t fully appreciate all the lessons until I was years into my career and knew what it felt like to work for money.

    2. $500 Challenge? I could never do that! 

    In Part 3 of our series on budgeting, I gave you 10 of my favorite tips to help stay on budget. One of the tips involved a game my wife and I play called the “$500 Challenge.”

    Part 3: How to Win the Budget Game

    If $500 is a nonstarter for you, increase the amount of the game. Whether you play with $750 or $1,000 or more, the point of the game remains the same. If $500 is too much for you, pick a smaller number that works. The amount doesn’t matter. The point is to set a number for yourself that will get you back on track after overspending in the previous month. January is a great time to play the game.

    3. When I’m creating my budget categories, does my health club membership count as Now Money or Life Money?

    When I said I‘m not a fan of a rigid budgeting framework like 50-30-20, this question illustrates exactly why. Elizabeth Warren popularized 50-30-20 in her book, All Your Worth: The Ultimate Lifetime Money Plan, first published in 2005.

    In a 50-30-20 framework, you must choose what category to put your health club membership in. Same with every other borderline expenditure. What if you think working out should be Now Money, but it pushes you over 50%? OK, just move it to Life Money. Wait, now I’m over 30% in my Life Money. Why is this so hard?

    men and women biking in gym, spinning in health club, thinking about their money and their lives.

    Take it from me and my students who have attempted 50-30-20 budgeting, making these choices gets to be very frustrating. What is the point in agonizing over decisions like this?

    So, what should you do with your health club membership?

    It doesn’t matter! You saw in our really lost boy’s budget that I counted it as Now Money. Today, I’d actually probably count it as Life Money. How’s that for an answer!?

    Instead of agonizing, pick a category and leave it there. The whole purpose of our budget is to generate fuel for our Later Money. Whether that fuel comes from adjustments to Now Money or Life Money is irrelevant.

    In our Budget After Thinking, we’re not limiting ourselves by rigid frameworks and agonizing over spending categories. We’ve got better things to focus on, like creating more fuel for our dreams.

    4. Do I need to actively budget forever?

    Nope! I’m going to do a post soon on what I recommend for people that have done the budgeting thing for a while and have a pretty good idea what their spending is. If you’re at that point, and are relatively responsible, you won’t need to track your spending anymore.

    Let’s look at a quick example. Say you learned that your Budget After Thinking includes $1,000 of Later Money. That means each month, your top priority is to put that $1,000 of fuel towards your financial goals.

    In this plan, you’ll need a “cushion” in your checking account to make it work. In this example, let’s use $5,000 as our cushion. At the end of the month, after you’ve made your Later Money transfers out of your checking account, and you’ve paid all your bills and credit cards, you should have $5,000 left.

    If you have less than $5,000 left, compensate the next month by spending less so you get back to $5,000 at the end of month 2. If you’ve way overspent, that’s an indication you are not ready to stop budgeting.

    No matter what, don’t short your Later Money. Do the $500 challenge if you need to. If you have more than $5,000 left, transfer the surplus to your savings account so you can use the excess to cover budget busters or top off your checking account if you overspent a little the previous month. 

    This budgeting process is similar to zero-based budgeting, a concept that’s been around for a long time. I find this method takes almost all of the anxiety out of budgeting. The key is you just have to be disciplined enough that if you have less than $5,000 left at the end of month 1, you course correct in month 2 so you’re back on track. 

    5. I am thinking about either selling my condo or keeping it as a rental unit. What should I do?

    I’m a real estate investor, so my mind always goes first to keeping the condo as a longterm rental unit. Based on the question, it seems this reader is interested in real estate investing, too. If that’s true and your financial situation permits, I would consider keeping the condo as a rental unit.

    It could be a great way to see if you like being a landlord without putting time and resources into acquiring a different property. Best case scenario, you hold the condo for many years and it turns out to be a great investment. Worst case scenario, you sell it in a year or two if being a landlord isn’t your thing.

    Of course, there are so many factors that go into real estate investing. You need to do your homework first on whether your condo is a plausible rental unit. Leave a comment below or reach out on Instagram if you need some help deciding if your condo might be a good rental unit.

    6. What is Italian Beef?

    This person, I cannot help.

    Fortunately, there’s a current Emmy winning show out there about Chicago and Italian beef!

    Thanks for all the questions! Please keep them coming in the comments on any post, by responding to our newsletter, or on Instagram.

  • Why Personal Finance for Lawyers is so Important

    Why Personal Finance for Lawyers is so Important

    I founded Think and Talk Money after years of teaching personal finance for lawyers and law students. 

    My purpose is to share these principles of personal finance for lawyers with all professionals striving for financial freedom.

    I like to think and talk about money. To help us achieve financial freedom, we can’t be embarrassed or afraid to talk about money with our friends and family.

    That’s why I’m on a mission to convince people that talking money is not taboo.

    I like thinking and talking about life and money.

    “If you want to get Matt talking, bring up life and money.”

    My wife knows me better than anyone.

    I like thinking and talking about life and money. That’s why I started teaching financial wellness to law students in 2021 and started this blog in 2024.

    But, I wasn’t always like that. 

    When I graduated law school in 2009, I never thought about money. Within a year, I had racked up $20,000 in credit card debt ($30,000 in today’s dollars), on top of my student loan debt.

    My salary at the time was $62,000. This was a problem. 

    How did that happen?

    Well, I wasn’t thinking about money. I certainly wasn’t talking about money.

    Of course, I later learned that I had made every money mistake in the book.

    Rented a fancy apartment I didn’t need?

    Paid for Cubs season tickets I couldn’t afford?

    Traveled coast-to-coast? Traveled overseas? Put it all on credit cards?

    Check… check.. and check.

    Woman taking out US dollar bills from her pocket wallet because she learned personal finance for lawyers and professionals.

    It’s not that I intentionally decided to get into debt. I generally wanted to make good choices. I am a relatively smart human. You are, too. You’re reading a blog about financial wellness with the entire internet at your fingertips.

    Maybe you’re like me, and it hadn’t occurred to you that money was a thing you needed to think about. And to talk about. Preferably with people impacted by your money choices.

    I dedicated myself to learning about money.

    Since 2010, I’ve dedicated myself to learning about money and its role in crafting a healthy life.

    First, I read all the personal finance books and listened to podcasts.

    Along the way, I kept a money journal. Plus, I talked to people I trusted.

    In the end, I started to make choices with my money that matched my values.

    Years into my own money journey, and now teaching personal finance for lawyers and professionals, here are a few things to know about me:

    I work for clients with mesothelioma, a cancer caused by asbestos.

    Since 2011, I’ve represented hundreds of people suffering from mesothelioma, a rare cancer caused by asbestos.

    Most of my clients are in their seventies and eighties. A significant part of my job since I’ve been in my twenties has been meeting with individuals in their homes after they had just found out they have incurable cancer.

    Before we ever get around to talking about the case, we inevitably end up talking about life.

    I do most of the listening. You can imagine what I’ve learned about life in these moments. Many of my core money beliefs have been shaped by these powerful experiences.

    I am a real estate investor and own rental properties in Chicago and Colorado.

    In 2018, my wife and I bought our first rental property in Chicago, a 4-flat in an up-and-coming neighborhood. We lived in one unit and rented out the other three.

    I’ll never forget riding my bike with my wife and a buddy, heading from the fancy part of the city where I had been living to my new home. I could tell my buddy was skeptical about my new neighborhood.

    Finally, he saw something he recognized and said, “Hey, nice! A spin studio!” He saw a sign that read “Cycle Spin.”

    It was a laundromat.

    A row of industrial washing machines in a public laundromat illustrating why it's important to learn personal finance for lawyers and professionals.

    He wasn’t the only one who was probably thinking, “what is Matt doing?”

    Well, that 4-flat allowed my wife and I (and eventually two kids) to live for free for six years.

    See, the rent we collected covered our mortgage, insurance, taxes, maintenance, and then some. 

    With the money we saved, we bought our second rental property in 2019, a nearby 3-flat.

    In 2022, we purchased another Chicago 3-flat, where my family lived for about two years before moving to our permanent home.

    My tenants are doctors, lawyers, engineers, TV personalities, pilots, and other young professionals. 

    In 2021, we bought a rental condo in Colorado ski country. This had been a dream of mine hatched at The 1800 Club in Evanston during college.

    Back then, I amused my friends on many a ski trip by cartwheeling down the mountain as I learned to snowboard.

    To pay for flights and lift tickets, I took a couple part-time jobs in local offices. I told myself one day I would “Get that Mountain.”

    While my wife and I were contemplating life during the height of the pandemic, we determined that a ski condo fit perfectly with our desire to be with family, to be active, and to be outdoors as much as possible.

    So, we delayed buying our “forever home” for another investment property, this time one in Colorado that we could rent out and use a little bit ourselves.

    I started a money journal in 2010.

    I started a money journal in 2010. It has been a lot of fun to look at as I launched my financial wellness course and as I’m writing this blog.

    I’ll refer back to these entries as I share my lessons about personal finance for lawyers and professionals.

    Some entries are just scribbles while I worked through that month’s money question.

    Some entries go deep.

    My favorite: I wrote in 2011 that someday I was going to marry the girl I had been dating at that time for the past few months.

    That girl became my wife in 2017. 

    I encourage everyone to keep some sort of money journal. It doesn’t have to be a daily log or a detailed memoir. Use to help you think. It will also reinforce the idea that we all need to think about money continuously.

    Some of the same challenges I had in my 20’s, are resurfacing today, like paying off debt. Then, it was student loans. Now, it’s mortgages.

    I am more confident today because I can look back at how I  handled those obstacles back then.

    I have taught personal finance for lawyers since 2021.

    Since 2011, I’ve taught law students how to research, write, and communicate in the courtroom. We work on finding answers to difficult questions.

    Oftentimes, there are many possible answers, and we have to think and analyze which is the best for our situation. 

    I regularly have coffee with students who want to talk about what comes next after finishing school. I learned that, just like me in 2009, my students didn’t typically think or talk about money and life. They never really thought about learning personal finance for lawyers.

    I wanted to help them avoid the money struggles that I had experienced at the beginning of my career.

    Male speaker giving presentation on personal finance for lawyers and professionals.

    That’s why in 2021, I designed and launched a course focused on personal finance for lawyers.

    My goal with that course, and this website, is to help us all think about using money as a tool to build a life that conforms to our personal values.

    The point is not to get rich. Though, you will if that’s your goal and you follow along. The point is to live your life on purpose where you actively think and choose what happens next.

    Think about why money matters.

    The first step is to think about a simple and powerful question:

    Why does money matter?

    For me and many others, money is about financial independence, which translates to the power to choose. When we have the power to choose, we have the power to live a life that conforms to our personal values.

    That means we can live on purpose, not on auto-pilot.

    We can choose to spend our working hours doing what is meaningful to us.

    We can choose to spend more time with the people that are meaningful to us.

    And it all starts with using money as a tool to do what we want with our lives.

    My favorite part during my personal finance for lawyers class is when my students share their motivations with each other. We all learn so much from these honest conversations.

    It’s why I believe talking about money is so important. We all benefit from knowing that we’re not alone in our money worries. It is inspiring to hear what our friends want from their money and their lives.

    If nothing else, I want you to think and talk about money.

    As a lawyer, I’ve been trained to build upon the work of those who have come before us.

    Think and Talk Money is my contribution to this essential field of personal finance, building upon what I was so grateful to learn. Not just from authors, but from all the people in my life who talk with me about life and money.

    In teaching personal finance for lawyers, I’ve learned that most of us are facing the same challenges. Maybe my voice and my experiences will resonate with you. Maybe not. And that’s ok.

    I will be honest about the mistakes I’ve made and the lessons I’ve learned. We’ll talk about motivation, habits, and fundamentals. We’ll talk about careers and goals. Of course, we’ll talk about investing in real estate and managing rental properties.

    I’ll share my thoughts on key news and developments. I don’t expect you to agree with everything I say. Not every post will be immediately helpful for you. That’s not my goal or even realistic. 

    Think just a little bit about money every week.

    My goal is to help you think even a little bit about your money choices every week.

    That way, your money life remains in balance with the rest of your life, and you can continually evolve and adapt your choices as your life changes.

    I want to encourage you to think, and to talk, and to choose. If all I do is help you and your loved ones think more purposefully about your money, this website will be a success. 

    Maybe your goal is also financial independence, or the power to choose. The power to live on purpose.

    Maybe it’s something else entirely. Whatever it is, discovering your motivation is the crucial first step. 

    It’s so important that I’ll encourage you to think about that motivation every day.

    I’ve learned that money is something that we all need to think about as a regular part of our lives. Not that we should only think about money. Or that we need to obsess over money. Simply that we can’t ignore money.

    How sad is it when we realize our hard earned money has just vanished?

    That at the end of each month, we have less money than at the beginning?

    You’re not alone. There are a lot of smart people who need somewhere to turn learn about money. Or, maybe just a reminder to actively think about their money.

    Most of us could use someone to talk to or something to read to help us learn about personal finance for lawyers and professionals.

    I hope Think and Talk Money can be that place for you.

    I can’t, and won’t, tell you what to do with your money. It’s your life, after all. But, I will strive to help you think and talk with purpose about your money.

    Here we go.

    12 responses to “Why Personal Finance for Lawyers is so Important”

    1. Bill Molander Avatar
      Bill Molander

      Well written, Matt! Best wishes to you in future endeavors.

      Reply
      1. Matthew Adair Avatar
        Matthew Adair

        Thank you, Bill!

        Reply
    2. Clarke Nobiletti Avatar
      Clarke Nobiletti

      Excited for the valuable advice!

      Reply
      1. Matthew Adair Avatar
        Matthew Adair

        Thank you, Clarke!

        Reply
    3. Laurie Avatar
      Laurie

      Hey, I think your ideas are very interesting. Thanks for your thoughts. Maybe keeping money journal is a good idea for me too. A fresh outlook and clean slate for starting out the new year makes sense too.

      Reply
      1. Matthew Adair Avatar
        Matthew Adair

        Great attitude, Laurie! Keep me posted on your money journal!

        Reply
    4. Jeffrey Tallis Avatar
      Jeffrey Tallis

      Smart young man! He listens to people! He takes what he hears and learns from it! Great stuff here! Your law students are lucky to have you as a money mentor!

      Reply
      1. Matthew Adair Avatar
        Matthew Adair

        Thank you, Jeff! Glad you enjoyed the first post!

        Reply
    5. Diana Avatar
      Diana

      This was a great read — thanks for sharing!

      Reply
      1. Matthew Adair Avatar
        Matthew Adair

        Thank you, Diana!

        Reply
    6. Nicholas Faklis Avatar
      Nicholas Faklis

      Matt What are your thoughts on index funds vs individual stocks ?

      Reply
      1. Matthew Adair Avatar
        Matthew Adair

        Great question! I invest in index funds and think that’s the best choice for many of us. We’ll have to revisit this topic in a future post. Stay tuned!

        Reply