Q&A: Growth vs. Income, $100K of Student Loans, and the Pros & Cons of Real Estate Investing

Austin Hankwitz
Hey everyone, and welcome back to the Rich Habits podcast question and answer Edition. It's Thursday, the Thursday after Memorial Day. So if you're anything like us, you are so excited for the weekend. Robert, I feel like short work weeks are the worst because you are excited because it's a short work week, but now you have to jam pack all your work into a four day period. So I don't know about you guys, but I am dragging today.

Robert Croak
Yeah, I feel the same thing, but we're still going to have a great episode and I'm excited to share all these great questions and answer and just really crush this episode. So let's get into it. Yeah, there's going to be a longer one, so hopefully you guys are appreciating these a little bit longer episodes. We had a lot of feedback about the episodes at this 25 28 minutes mark being too short. You want us to answer more questions on the episode?

Austin Hankwitz
So this is exactly what we're doing. Now. Before we jump into that episode, I want to remind everyone to sign up for their rich habits newsletter. If you're not done that yet, what the heck are you waiting on? Robert and I have been working tirelessly to provide weekly content.

You need to stay up to date on the markets, headline news, as well as our own offerings which for example, we have a webinar coming up on June 4 with Public.com dot. It's going to be all about options, so be sure to sign up for the newsletter in the show notes below as well as register for our free webinar with public. It's going to be a blast and we can't wait to see you all there. Also, Austin, how cool was it that the Ethereum ETF's were approved last week? I know we talked about them a little bit in the newsletter, but it's so cool to see that bitcoin is now up 53% year to date, Ethereum is up 63% year to date and we're really just getting started in this bull market.

Robert Croak
So we hope everyone has been taking notes and taking action and not just with the ETF's but also cryptocurrency in general. So I'm super excited and really, really loving what we're doing with the newsletter and getting to really expand on everything we talk about on a weekly basis. So it's awesome. Dude, I can't wait to get that DM from someone or that email from someone listening that's like oh my God, I am up 10, 15, 20, maybe $50,000 with my bitcoin and my ethereum, because back in early 2023, I did what you guys said and I bought some of it at $22,000 or whatever it was back then. Right now it's at 70.

Austin Hankwitz
It's so exciting, right? And that's not just for cryptocurrency, right? We talk about these ETF's. We talk about investing all the time, right? Invest early and often is the motto over here, which means voo, qqq, vTI, vgt, mote, aiQ.

We want your money to be working for you. Full stop, end of story, period. And that's what the podcast is here to help you do. All right, before we answer our first question from Angel, I need my option traders to listen up because I want to tell you a little bit about public.com dot. But first, have you ever actually thought about all the fees you're paying to trade options?

Aside from the regulatory fees, there are commissions, and most platforms charge per contract fees as well. That's what makes today's sponsor, Public.com so interesting, because public does not charge commissions or per contract fees. Yes, and as an industry, first they offer a rebate of up to option contract traded. So check this out. If you were to trade 1000 option contracts on public, you'll get up to $180 in rebates.

Robert Croak
And if you were to trade 10,000 contracts, you could earn almost $2,000. And more importantly, the rebate means you can maximize your profits and minimize your losses. So to give everyone a recap, Robert, there are no commissions, there are no per contract fees, and you get up to $0.18 on every contract traded. See why NerdWallet recently awarded public five stars for options trading and start earning up to contract traded only@public.com. dot this was paid for by public investing.

Austin Hankwitz
Options are not suitable for all investors and carry significant risk. There's a full disclosure in the podcast description below, and this is for you members only. Alright, angel, time to answer your question. Angel says, what apps should I be using to budget with? Right now I use Microsoft Excel, but I'm trying to branch out into new apps that you all trust and recommend.

Robert, what's your favorite budgeting app? I don't have one anymore, to be honest, it was mint. But since mint is gone, I truly use our budgeting tool that we built in house. And since you're the app God, I think you should take this one. Yeah, good question, angel.

So I use a couple apps. I do use our own budgeting spreadsheet. I've got that pulled up on my own Microsoft Excel and my laptop here. But when I'm on the move and I really want to have those quick in and outs, I use a company called Copilot. They do have a monthly fee.

There's an annual fee, right? Like, it's not a free app. But what's cool about them, Robert, is you connect your credit cards and your debit cards and whatever you use to spend with, and their app will automatically see that you spent money at Target and then categorize that as a grocery spend, or they'll see that you spent money at Netflix and categorize that as a subscription. Or, you know, whatever else it might be, they categorize for literally every single thing. So if you're someone who's having trouble even making the categories, that could be useful.

But angel, fire you. I go check out copilot. We're not sponsored by them. We're not have any cool affiliate deals with them. It's just copilot on the Internet.

I think they're great. And we're here to give you our honest feedback. And that's mine. Yeah, it's a great question, angel. And that is one of the reasons why we built the budgeting tool that we did, is to get everyone to build that honest budget.

Robert Croak
You know, Austin and I talk about this all the time because I think I look at so many budgets monthly from clients and people in my educational program, and it's just really, it's really tough because so many of those budgets are missing key, key things. And that's why we call it the honest budget. They don't account for makeup or concert tickets, ubers, dog treats, all of these things that really add up in people's budgets. And so that's why we've coined the term honest budget, is to get people to just be honest, because the more straightforward and honest they are with themselves in their budget, the better off they're going to be able to figure out their debt to income ratio and where they're really at financially. And I think that's the key.

And the more you leave out, the worse off you are. Couldn't agree more, Robert. And shout out to angel for getting after the budget. That is something that's really exciting, because once you've figured out the budget and you sort of even write it, just write it down, right? Angel mentioned having it in Microsoft Excel, but just sitting down and writing it out and showing and understanding all the money that's coming into your bank account and leaving your bank account on a monthly basis you start to kind of feel like you got a pay rate.

Austin Hankwitz
You clearly understand what you need to stop doing to put more money in your pocket every month. And it kind of feels good to know you have that sense of control with your money. Our next question, Robert, comes from Lizzie. Lizzie says, we thoroughly enjoy listening to your podcast every single week. My husband is 59 and I am 52.

We have $200,000 we want to invest toward ETF's, but are unsure if we should focus entirely on high income ETF's or high growth ETF's considering we want to retire in about ten years. What do you two think that we should pick? High income or high growth? Lizzy? I don't think it has to be so mutually exclusive.

You all are 59 and 52, which means you're right. You have, let's call it 5710 years before you really need to sit down, retire, and kind of figure out what's going on here. The last thing you want to do is have all of your money tied up in some crazy high growth ETF's that you found on Twitter or TikTok or something. Crazy, right? So I'm glad that you all are talking about the ETF's that we've shared voo, QQQ, things that nature.

Sure, there is volatility that comes with investing into these indices. 2022 is a great example of that. But you're not going to see an 80% drawdown on these ETF's, right? Like something you might see with Kathie woods Arkk ETF. That is a volatile ETF.

But here's what I would think about Lizzie. I would think about even splitting it 50 50 on one side of the equation. If you have 100,000 into qqQ and Voo, that's great. That money is going to double every seven years on average. So that will double to 200,000.

And then the other hundred thousand you could put into QQQI and Spyi, and that's going to pay you about $12,000 a year. So let's call it $1,000 a month in monthly distributions that are super tax efficient and completely passive. And so if you want to take that thousand dollars and even redeploy it back into the same ETF's, or maybe use that to invest into the other high growth ETF's that you have in mind. Right? There's just a bunch of different ways you can play this.

But I think by having the flexibility of that income that will come with QQQi and Spyi. Is going to allow you to really hone in and give you some purchasing power on whatever you tend to like over the coming years. As you realize, wait a second, this might be too much volatility or not enough volatility, right. You're going to have a little bit of optionality with that income that comes with those high income ETF's, allowing you to really make the right decision over time. Yeah, I think you crushed it, Austin.

Robert Croak
And having both, I think, is a great strategy. And it really comes down to we have incomplete information here and there's not a one size fits all strategy here. But having that, you know, five to ten years, you know, for your husband before retirement and then you a little bit longer makes it good because you can do either or both, and it really is going to work out great for you. Like Austin said, there's so much upside for Voo and Qqq, but then there's the income and the tax efficiencies of QQQI and Spyi. So I love the question.

I would do both personally and keep rocking and rolling and set yourself up for a great retirement, 100%. Robert, do you have any piece of advice to offer Lizzie and her husband as they prepare for retirement? Anything at all? Yeah, just try to figure out now what is your Fu number? What is that?

You know, we're living free, living good. What is it? If you could figure that number out and then reverse engineer how much you need going into retirement. That's the key to it all, is trying to figure out what your freedom number is and that lifestyle number of what it's going to cost you a month to keep the same lifestyle or live the lifestyle you want in retirement, and then reverse engineer how much you have to have in retirement to be able to live that lifestyle. So that's the key for me, figuring that number out and then figuring out how to achieve it.

But it sounds like you're off to a good start. I love that you say that, Robert, because we did a whole episode about that, episode 33, how to calculate your freedom number and exactly what Robert just laid out. Right. We sit down and we help you say, okay, if that number per month is 30 00, 40 00, 70 00, whatever that is, once you figure out the monthly number, then you can backtrack and figure out the annual number. Then using some simple assumptions, you can then figure out how much you need in your nest egg, how much money that has to spit out every single year for you.

Austin Hankwitz
Right. The return of that nest egg so you can have that freedom, that you desire that financial independence in retirement. So really good question, Lizzie. Robert and I are both cheering you and your husband on, and we appreciate you listening to the podcast. Our next question comes from Casey S.

Casey says, I'm 36 years old with a late start to my retirement investing. I've maxed out my Roth IRA for 2023 and 2024. I put all of that money into SWLGX, which is the Schwab large cap fund. I'm also putting 15% of my Roth 401K, which is about $1,800 a month into the Schwab S and p 500 fund, SWPPx. And I'm also investing $500 extra per month into SWPPx on public.

If I have the extra money, am I doing this right? I feel like I'm behind 36. I just need some words of encouragement and some guidance on these investments. Okay, I'll take a first stab at this one, Robert, if that's cool. Yeah, go for it.

So, Casey, I did some quick numbers, right. If you're maxing out your Roth IRA and you're putting away eighteen hundred dollars a month through your Roth four hundred one k, and you're investing for $500 a month into this public account you've got, you're at about $2,800 a month that you're investing across your Roth IRA, your Roth four hundred one k, and your public account. Now, assuming this money is invested into the funds that you're talking about, which are large cap and s and p 500, you should average a return of ten to 12% over the next 30 years on average. And if that's the case, assuming you have 14,000 in your Roth IRA right now, because you said you maxed it out for the last two years, you're going to retire in 30 years with over $10 million. If you keep this $2,800 per month investing pace, that's a lot of money every month to invest.

Don't get me wrong. If you want to slow down a little bit, be my guest, because you are just crushing it right now. But think about that $10 million over the next 30 years to enjoy in retirement, with it all being except that public money, tax free, right? This is invested through a Roth IRA, through a Roth 401K as well. And so you're going to be sitting at 66 years old here in 30 years with 10 million.

If you keep at this pace, it's. Really good when we see these questions of people that are crushing it and sometimes don't even realize how well they're crushing it. And that's why I love this type of episode of the podcast, the Q and A, just because we get to dig deep into people's situations and really give our opinions of what we think is best and the strategies to implement. And so, Casey, you're in a great spot. Both of these funds are crushing it.

Robert Croak
I looked it up, actually, and the SWPPX is around 28% for the last year and 37 for SWL GX, both really doing well. So you're just in such a great spot. And like Austin said, you keep at it, you're going to have $10 million in retirement, which is a great number even for 30 years from now. So congrats on everything you're doing. Keep doing it.

And if you need to and want to look into further diversification down the road, that's another good strategy we can look at later on. But right now, I wouldn't change a thing. I'd keep doing what you're doing because you're setting yourself up for the future, which most people don't do. Let's talk about that diversification. Robert.

Austin Hankwitz
Let's assume Casey's been investing for ten years, about 30,000 a year. After ten years, you're looking at five, maybe 600,000 invested across their retirement accounts. So when they're ready to diversify, they're going to be in their mid forties here. Are you thinking about real estate? What would you recommend, Casey, to consider when they are kind of going over their options?

Robert Croak
First comes to mind for me is I'd probably, at 36 years old, get a piece of this into cryptocurrency. You know, I tell everyone that's working towards a bright financial future that I would love to see them own one bitcoin and ten Ethereum, because I feel like if they can achieve that, they're going to guarantee themselves a million, $2 million in the next ten years in that sector of investing, you know, and then we want to see them have a well rounded portfolio with some chain link and some XRP and stuff like that. But then also, yes, real estate, you know, look at maybe getting that first duplex or quadplex and, you know, house hacking, maybe for that. And if not making it just an investment part of the investment, because the other aspect of this is we don't know how Casey's making the money. If this is w two income, then by getting this real estate, that would be a way to offset some of the taxes being paid from the w two earnings.

So, yeah, I would definitely look at other options to diversify over the years for sure. When someone is looking to get into real estate for the first time, Robert, how do you sort of help them navigate the market, the specific geography? Are there reports that you read that help you better understand migration data? Is it, you know, new job openings? How should someone, for the first time, who's trying to get into real estate in a meaningful way, call it a duplex, a triplex, or a quadplex?

Austin Hankwitz
How are they navigating the geography that they should choose? Well, I would say your question is much more advanced for the average person that's just getting started in real estate. Buy what you know, buy in a neighborhood that's gentrifying, that's nearby where you live. You know the area, you know the bars and restaurants, you know the parks, you know the schools. That's the easiest way.

Robert Croak
Buy what you know. Then as you get more advanced, there are so many different studies. Like you said, where it's incoming job growth, where is the next Amazon or FedEx hub getting placed? Where are the new Home Depot, Lowe's and Starbucks being built? All of those can come into play later on.

But in just getting started, just buy what you know I think is the best strategy because then you're not going to get any surprises and you're not also going to be sitting on a property where maybe you bought too early and it takes a few years to really come to fruition. So in the beginning, just buy what you know and buy within your means, and I think you'll do great. I think it makes a ton of sense now. This week's episode of the Rich Habits podcast is also brought to you by Yahoo Finance. Robert, did you know that Yahoo.

Austin Hankwitz
Finance's website, yahoo. Finance.com, just went through a complete redesign? It looks incredible, and here's why. I've been now a user of Yahoo. Finance for literally six years, since I graduated college.

Drumroll, please. The portfolio management tool Yahoo. Finance makes it incredibly simple to securely log into your existing brokerage account, public Schwab, fidelity, Robinhood, whatever you use, allowing them to then instantly pull your transaction data. They then present this data to you in a very intuitive way. I'm looking at my total investment portfolio right now, and they break it down by asset class.

That includes cryptocurrency. That includes everything that I can manually add, if it's collectibles, artwork, real estate, anything I want to add to this breakdown, it is so intuitive. And I can easily see that, for example, 18% of my stock investments are in technology, and the other 13% or so here that are in consumer cyclicals. I can even click into that information to see what my holdings are as well as any recent news that might be impacting the price action of those holdings. Yes, Yahoo.

Robert Croak
Finance is definitely a resource that every single listener should be taking seriously if you're trying to level up your portfolio management in 2024. I use Yahoo Finance when I'm researching new stock ideas and their website offers key financial data across the income statement, balance sheet and cash flow statements. And if you're into trading options, they have a simple breakdown of every stock's option chain. So what's my favorite research tool? Their holders tab.

I can see what investment firms and hedge funds own, how much of what stocks, allowing me to follow the big whales when needed. So be sure to check out Yahoo Finance.com dot. Not only is their new website awesome, but their portfolio management tool is top notch. Everyone should connect their brokerage accounts to this tool and unlock the insights you need to stay on top of the markets. All of this is for free.

But if you also sign up for their bronze account at dollar eight a month, and I think this is the best deal that is out there. There again, that's Yahoo Finance.com dot. Wow, that was a mouthful. But thanks for listening through that. They are a great product and we are happy to have them as one of our sponsors.

Austin Hankwitz
Yeah, I love Yahoo finance. They have an awesome feed. I just look here, I'm clicking on it right now. Nvidia leaps above $1100 for the first time. Everything I'm looking at, man, it's just, this is such great headline news.

It's really one of my favorite places to check out on a daily basis to just stay up to date on my portfolio. Now I might be down $8,000 for the day but that's because the market's a little red. But it's okay. It's okay. Yeah.

Shout out to Yahoo Finance. I mean, these guys are incredible. And poking around their website right now, I see headline news here in consumer confidence unexpectedly rebounds. I mean, everything I need to know to step to date in the markets. Robert Yahoo Finance has my back now.

Our next question comes from Brandon M. Brandon says, hey guys, been a longtime listener of the show and I want to thank you all for the call out about maxing out my solo four hundred one k. I was actually able to contribute 66, $6,000 to my retirement through Kerry.com and it's going to grow tax free for the next few decades. Thank you so much. I know this wasn't a question, Robert, but I wanted to include this call out in the episode because, one, I am positive we have a ton of small business owners and side hustlers who are kind of left on the sidelines because they can't participate in the 401K like you can if you're like a salaried worker.

So they kind of feel like, wait, what am I going to do? Right? Here's what you can do do, you can go to carrie.com dot. There's going to be a link in the show notes below of what that website looks like. And essentially you can open up your own 401K through your own solopreneurship journey of a business, right?

You don't need to be salaried with an employer. You don't need to go work at a big company. You can contribute to your own retirement beyond the Roth IRa through cary.com dot. I've done this myself. It's called a mega backdoor Roth solo 401K.

It's a mouthful, but I've got about $100,000 in my solo 401K over the last two years. I also have another $50,000 I've got from a sep IRa, which is another form of that, you know, self employed retirement. So everyone who's self employed or they're a solopreneur, whatever you want to call yourself, go do what Brendan did here and go learn more about the solo four hundred one K and the Sep Ira. Yeah, I love it. And I love this question.

Robert Croak
Well, it's not even a question, but this statement, because it really speaks to what we try to accomplish every single week, week on the Rich Habits podcast and in our community and our lives. And that is, it's not what you make, it's what you keep. And us uncovering these nuggets for all walks of life, of how they can better serve and better earn with the money they're making. Because so many people do feel like they have to sit on the sidelines when they're a solopreneur or they run a small business on their own and they don't know what their strategies that are available to them are. And that's why I just love the Sep IRa, the solo four hundred one K, the solo Roth, you know, IRA, all these different strategies that we talk about week in and week out because it helps people like Brendan uncover these tax strategies that they might not have known existed.

So I love this statement and that we got to cover this and help somebody find a way to create more wealth for themselves. It's so incredible and you mentioned the tax strategies, Robert. I want to encourage everyone to ask their CPA. Right. If you are a self employed individual, go ask your CPA about.

Austin Hankwitz
About the tax strategies that come with contributing to a solo 401K or a Sep IRA. Not the Roth versions, just the normal traditional versions. Because how I understand it, Robert, is if Brendan contributed to their solo 401K, not the Roth version, but just the solo 401K, they can actually write that $66,000 off of their taxable income for that year. Which means if they're in a 20% 30% tax bracket, they're saving nearly $20,000 by investing. Like, how cool is that?

So listen, go check this stuff out. Ask your cpA. We're not cpas. You go talk to your tax accountant or whoever is your professional in your life and learn more about these strategies. If you are a small business owner or a solopreneur, there's a ton of stuff out there to check out.

So major shout out to Brendan for sending that to us on Instagram. Our next question comes from Anthony. Anthony says, I have a question about investing. I live a frugal life, and I save anywhere between two to $4,000 every month after paying all of my bills. This includes investing toward my employer's pension.

I have a Roth IRA as well, and I max that out every single year. I also have an emergency fund, and I've got literally everything figured out from that perspective. My question lies what I should really be doing with this extra money. Should I be investing it into the stock market on public? Should I use it to save for a multifamily here in Chicago?

I'm currently house hacking, and I really enjoy real estate, but I'm just not sure. If I try and do both, I'll be spread too thin. What do you guys think about this? Robert, you kick us off. Anthony, great question.

Robert Croak
And the answer is, I don't think you're spreading yourself too thin. I love this strategy that you have all the bases covered, and I do think you could do both. I think you could get more in the stock market, and I love the fact that you're using public. But I also think having some real estate, I'm not sure about Chicago because I don't invest in that market. I'm guessing it's very competitive.

But maybe there's an up and coming tertiary market outside of the main part of Chicago that you could look at. But I think you should do both, because, you know, when you look at the real estate side, you get the capital appreciation you get the depreciation. You get the buy down on your mortgage from the tenant if it's an investment property. But you can also look at bonus depreciation strategies, which could offset your income and create some cash flow in the first year. So there's a lot of different ways to do this.

In your instance, I think you should just do both, and I think it's an incredible addition to what you're already doing. I couldn't agree anymore, Anthony. You said you're saving about $3,000 a month, so let's call it $36,000 a year. I mean, geez, think about Robert. You know, we've got this 5% Fannie Mae mortgage that, you know, we've been talking about here for several months.

Austin Hankwitz
I mean, there's a lot of buying power out there with a $36,000 down payment, assuming that 5% even save for two years, right now, you're looking at $70,000. You want to get in the multifamily. You can really get into multifamily with that kind of money. So, Anthony, I'm right here with you, man. I think that as long as you are doing what you said, you do right, maxing out the Roth IRa, investing toward your employer's pension, which, by the way, I would not rely on that 100%.

I would not rely on that to be there. So I appreciate that you're doing the Roth IRa alongside of that. But assuming you're doing these things and you have the emergency fund and you've kind of figured all this stuff out, besides the additional investing, and you said you really liked real estate, you're already house hacking. Like, pour some gasoline on that fire, right? If you're good at this, and you know it very well, take what you've learned over the last couple of years of house hacking and go pour that gasoline and buy one, two, three more properties over the next five years.

Right? Give yourself a goal and a timeline of saying every 18 months or every 24 months, I'm going to go buy, buy this type of real estate and this type of market for this type of price. I'm going to just do that and do that and do that, and, gosh, I wish I was in your shoes, man. That is a really cool place to be. Yeah, I love it.

All right, our next question comes from Griffin. Speaking of real estate, Robert Griffin says, can you please break down the differences between the passive income generated with Spyi and real estate? I want to hear the pros and cons of each. So I'll start with the pros and cons of Spyi because I know that pretty well. And I'll let you rally behind me with the pros and cons.

Cons of real estate, sir. So the number one pro, in my opinion, of Spyi, is you are making passive income by doing literally nothing. You don't have tenants, you don't have a mortgage. You have nothing. We're talking about.

You buy something for dollar 50 a share, and it pays you money every single month to your brokerage account. Right? So by just waking up and living your life and just owning this stock, well, this ETF, rather, you will get paid passive income. So that's thing number one. You do nothing for this money.

Thing number two is this money, this passive income you're getting is very tax efficient. I think it's 93 or 94% of it is categorized as a return of capital, which means you don't even have to pay taxes on it. And the other, call it five, six, 7% is considered section 1256 contract capital, which means that this sort of distribution that you get is taxed at a long term capital gains up to 60%. And the other 40% is that short term capital gain. So it's super tax efficient.

In the third pro, Robert, is you are tracking an index that has been around for 90 plus years, right, the s and p 500. So Spyi aims to perform one to one with the s and p 500. But, of course, there's a little bit underperformance there because you're trading that future capital appreciation for income today. So you can think about it there. Griffin.

So those are the three pros. A couple cons I'd give you for Spyi. Kind of alluded to it there. It has underperformed the s and P by a little bit over the last, call it year, year and a half. But that, again, is to be expected because you're trading capital appreciation for income today.

It is a great addition to a well diversified portfolio. Another con, I would say, for Spyi is if you're someone who's really high octane and you want to see those big up and down swings, you know Spyi isn't going to three x, right? Nvidia could three x. It has three x'ed. Spyi is not going to three x.

Okay, so just so we're on the same page, there a con to Spyi could be, you know, you're not going to see that crazy up or down. It's just a very steady kind of climbing up and to the right and a way to generate some income. So those are my three pros and two cons that I can identify off the rip here with Spyi. Robert, give us some pros and cons about investing into real estate, specifically the passive income that comes with it. Yeah, I would say the pros are you're going to have capital appreciation, which in most markets is going to be between four and 15%.

Robert Croak
There are some really high growth markets in the country that reach close to 15% capital appreciation per year. But on average, across the country, you're going to find four to 6%. So that's nice. Secondarily, a pro is you're going to have depreciation. So you can do traditional depreciation, which is going to be three, three and a half percent a year, or you can do bonus depreciation, which you can speed up.

The depreciation is what that means. So then that way you can create more depreciation on parts of the asset in the early years, like year one. You hear that term all the time, a bonus depreciation. That's a nice pro as well. And then the cash flow part of it can some beat times be a pro and a con, because right now money is expensive to get.

So the cash flow is a lot less than traditionally known in really estate. So just keep that in mind. The cons of real estate are always going to be illiquidity, because when you put money in real estate, it's very difficult to get it out, unless you do like a heloc or, you know, something else to get your money out of your equity. But otherwise, being illiquid is one of the cons. And then also unknown factors.

You might buy at the top of the market and then have that market crash. And you could see yourself being upside down on the property in the beginning maybe, or for a few years, years. But all in all, I think the pros are definitely outweigh the cons in real estate. And there's a lot of different ways to make money in real estate, whereas in many sectors of investing, you only have one revenue stream of that investment, whereas in real estate, you have multiple ways to make money. So I think it goes both ways.

I like Spyi as a way to make passive income, and I love real estate to make passive income as well. So I think it's a both. For me, it's always going to be a both. I don't ever put all of my eggs in one basket. You're going to hear some of the people out there that say, oh, if you know, one thing, and you want to build wealth, you have to go all in on one sector.

I think that's bullshit advice, because if that sector goes sour and goes bad for a few years, you're starting over. And I just don't want anyone on my watch to ever have to start over. So for me, it's always about finding diversification among sectors that I like, especially in passive income. I love that answer, Robert, and I'm right there with you. Right?

Austin Hankwitz
I own about $900,000 of real estate here in Nashville. Obviously, it's not paid off yet, right? But it's like, I've got my real estate portfolio, and I also have my spyi and QQQI portfolio. I've got tens of thousands with them. And so, you know, I think diversification and just sort of building those different types of income streams is really important.

Robert, I heard a quote, and I want to get your perspective on it. I forget if I mentioned this to you in the past, but you're the real estate guy, so I feel like you might be able to give me some added color here. I was listening to some podcast, and this real estate investor said they aim to achieve 14% to 17% annual returns with their real estate between appreciation, depreciation, tax benefits, and cash flow. Is that 14% to 17%? Is that realistic?

Is that too high? Is that too low? Is that pretty, you know, standard on an annualized basis of what someone could potentially, if they play the cards right and the right market could see? I think it's definitely realistic and is it's happening every single day in the market, even right now. And the key understanding and distinction here is for people to realize that if you go to invest in a REIT or a syndication, you might not see those kind of returns as a newbie just because you don't know what you're paying in fees most of the time to these syndication and these reits, but you're still likely going to see good returns.

Robert Croak
But when you're a smaller group or you're an individual investor or with a group where, you know, you're managing the project yourself, then seeing 14% to 17% is very real realistic, because it alludes to the gross net income as a percentage that you can make based on all of the different ways to create revenue for a project, because it's not just money in, it's depreciation. It's, you know, the buy down. Because the goal is to have these tenants that pay down your mortgages. So there's so many different ways, and that's how they come up with that cumulative IRR, that internal rate of return of 14% to 17%. So I think it's very real realistic.

Austin Hankwitz
And can you, I know you just said IRR internal rate of return. For the people listening who might not know what that is, can you just quickly explain that? Yeah, it's exactly what it sounds like it is. What is the total internal rate of return based on all of the variables of the project? That's the simplest way to put it.

Robert Croak
Most people don't realize because you're hoping that every single door you own also cash flows. Not always is everything going to cash flow right now because the markets are pretty tight and cash is expensive because of interest rates being so high. But in a good year, you're also going to have that four or $500 per door in cash flow as well added into that internal rate of return. So definitely, yes, it's all of the above. Very cool.

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So make sure to reserve your seat now. I love it. I can't wait for that webinar. Robert our next question comes from Christine. Christine says, I love listening to your podcast on my drive to work every day.

Austin Hankwitz
I'm a 23 year old nurse and I have $100,000 in student loan debt. My monthly payment on this debt is $900. On top of that, I financially support my mother by helping her pay rent, and I also pay for everything I own. I need some serious guidance. Do I pick up a second job?

Do I work more hours? What should I do with my money? All right, Robert, I'll take a stab at this one. First, Christine, you are in a wonderful position. You are very young, which means you have a ton of energy, and you work a job that allows you to work so much overtime you will pass out before you die.

Right. I mean, being a nurse, you have so much flexibility. With your schedule, you can work a ton more hours. You can work the night shift, you can work holidays, you can work, you know, double pay. There's a bunch of different ways and different ways you can make a ton more money as a nurse.

Right now, if it's travel nursing like, there's a ton of different things you can do to really ramp up your income. I would guess you're making 55 to 65,000 a year right now, working full time as a nurse. And you mentioned, you know, should I pick up a second job? I think your second job is the job you have right now, except you're working an extra 20 hours a week. Right.

20, maybe 30 hours a week. But I want to remind you, Christine, this isn't something that's going to happen forever and be around forever. This is just going to be a season of your life, maybe from 23 to 26 or 23 to 25. Right. However long you need to squirrel away some extra cash so we can do the things we're about to talk about.

But just remember, this is a season. This is not the rest of your life. So now that we're on the same page, that you can absolutely work an extra 2030, 40 hours a week for a small period of time to stash away as much money as possible. Let's talk about what to do with some of that money. You mentioned you have $100,000 in student loan debt, a $900 per month payment on that student loan debt.

You're probably going to be paying that for the next like 30 years or something. Unbelievable. Unfortunately, because of just how much you ended up borrowing, I have no idea what your interest rate is. You didn't include that in the question. But I'm going to assume it's around the four and a half, 5.5%.

That's about where most student loan debt is right now. So, Christine, there's two ways to go about this. Hundred thousand dollars of debt, right. Dave Ramsey would tell you to go on a twelve to 18 month, maybe 24 month, just working spree. Put the extra $100,000 you're going to make toward paying off this debt, and you will then save $900 a month on that.

So let's call it, I don't know, twelve grand per year. That's cool, right? We want to get there eventually. We don't want you to have $100,000 of student loan debt, but I think you should do that after you have a little bit of wiggle room between you and life. And by that, I mean an emergency fund.

Go open a high yield savings account on public.com, comma. It's called a high yield cash account, and it'll pay five and a half percent or so and put 5810, maybe $12,000 in that account, because that account is going to be the reason why you don't go into credit card debt. You don't go borrow against a 401K. You don't go take out a payday loan or do something very silly, right? This is your insurance against silliness fund, is how you should think about it.

And if an emergency happens, right, you pop a tire, the dishwasher breaks, you know, whatever happens here, like, you need to come up with $800. Like, this is what that fund is for. So again, work your ten off for 12, 18, 24 months here, extra 2030, 40 hours a week. You're going to be piling up cash like crazy in this process. In your 1st, 810, $12,000, I want you to put into an emergency fund.

After that, I want you to max out your Roth Ira, $7,000 for the year of 2024 or 2025, whatever you are at that time. I don't know how long it's going to take you to do this stuff. And then only after you've sort of started building a little bit of investing portfolio, do I then want you to start thinking about the student loan debt. Because, again, the goal is to get rid of the debt. The only way our net worth is going to go up is if we pay down our debt.

But we don't want to sacrifice our time in the market to pay off a debt that's always going to be there with just simple interest, right? If we can get 714, 21, $28,000 invested into a Roth IRA over the next couple of years and then let that grow, grow tax free for us, and then we can say, all right, time to get rid of some of the student debt, that's a great place to be, because by the time you pay off that student loan debt, that $20,000 in your Roth IRa is going to be worth 30, 40, 50, $60,000, right? So that's the whole thing that Robert and I are trying to do with this podcast, is let people understand, like, it's not just about getting rid of the debt, but it's about building portfolio income. It's about building income while you sleep in portfolio income, aka investing in the stock market, especially at 23 year years old, is a really good place to be. Yeah, I couldn't agree more.

Robert Croak
Austin and I think too many people now live in fear because of debt, like student loan debt. And it's a really bad place to be when you're so concerned with it. You're not thinking about your future, and you're not squirreling away money for down the line or an emergency today. So I love this hybrid of working on getting the Roth set up, get a little bit of money into this emergency fund through, you know, a high yield savings account. Doing all of that in conjunction with paying down the student loan, but not in lieu of.

So I love this hybrid formula because at the end of the day, you know, at 23 years old, you know, we say you want to invest early and often, compounding is your friend. And by getting money in and getting that positive arbitrage in your favor, gives you that cushion for years and decades to come, while not just paying off a debt that, like you said, Austin is going to be there anyway. And again, Robert, great example of this. My girlfriend, she has 35,000, $37,000 of student loan debt. She put that on the back burner.

Austin Hankwitz
She's like, okay, I'll get to that eventually. First, let me go get my emergency fund. She's got $10,000 now in cash in a high yield savings account. Second, let me go get my retirement investing started. She has $20,000 invested into her Roth IRA.

And so she's 25 years old, with this much money working for her at 65, if she doesn't even touch this $20,000 in her Roth IRA for 40 years, it's invested in the s and p 500, 500. It'll do ten to 12% a year. That's $2.3 million at 65, because she did this one thing at 25 and, like, did not do anything else. So, Christine, that's what we're trying to help you realize, right? We, of course, want you to get rid of your student loan debt, but we want you to do it from a place of power, a place of.

I have more to me than just this thousand dollar starter emergency fund that Dave Ramsey tells everyone to have. Right? We want you to get rid of the debt, but we want you to do it with investments behind you, so that once that gets rolling, it's really going to start compounding on itself. Oh, and then Christine, download copilot. You know, I'm sure at your age you're definitely going to want to start budgeting in a serious way.

Copilot can help you do that. We also have our own budget. There's a template in the show notes below. You're definitely going to want to get on a budget. All right, our next question comes from Alex v.

Alex says, I love the podcast. My kids and I listen to it together. And here's my question. I live in Florida, so there's no local or state taxes to consider with the interest I earn through high yield savings accounts. Therefore, after fees, would I be better off by saving my money through publix high yield savings account or their t bills product?

I think public charges a 0.6 per year fee on their t bills, which would make it a lower net to me after their high yield savings account. Which one should I consider? Robert, I know we both know the answer to this, but I'll let you say it. Yeah, I mean, it looks like you've already done the math for us and made this a really, really great question. But I would say the high yield savings is the way to go.

Robert Croak
If overall, because you live in Florida, you don't get anything from the state and local tax, you know, omission that you would get otherwise in t bills, then I think it's great to just stick with the high yield savings and keep going that route. I couldn't have said it better myself. Robert and Alex, I just want to remind you here what we're talking about. We're talking about a 0.4% difference. We're splitting hairs to make nickels.

Austin Hankwitz
Right? Like, that's like, this is great, right? But no one became a millionaire off of trying to figure out the 0.4% extra on their savings. I mean, you probably have, I don't know, 1020, maybe $30,000 saved in these accounts accounts, which, if you do the math, is like an extra 60, 80, maybe $100 a year. So just so we're on the same page here, it's totally cool to choose whatever you want.

Again, we're splitting hairs to find nickels in our accounts here, so don't overthink it. Alex, as long as you're using your emergency fund as a way to not go into high interest credit card debt, you're doing it correct. So congrats. Yeah, I just love the line of thinking of actually going that detailed into it really speaks to what we coach and what we educate on every single week. And that is, you know, positive arbitrage with your money, and this is a really, really finite one that I love.

Robert Croak
So great job, Alex, but Austin's right. There's bigger fish to fry here. But I love that you're thinking that deep on how to maximize your revenues. I really appreciate that. So our last question comes from Brandon B.

Austin Hankwitz
Brandon says, I've been investing monthly into voo on Robinhood for my early retirement fund. My question is this, does anything change with the price of an ETF if a stock inside of it announces a stock split? I would assume no. But with Nvidia's recent stock split announcement, I wanted to reach out to you all and confirm this with you. Robert, you're the Nvidia guy.

Obviously, you've been an Nvidia investor way longer than me, and you've probably ten x your money by now. So I'll let you answer the question. Is there anything that happens to an ETF if there's a stock split? No, not at all. Brandon, love the question, but you have nothing to be concerned with.

Robert Croak
That stock split is not going to change the price of the ETF, and it's not going to change your holdings one single bit. All it's going to really do, if you look at it just as a reference to Nvidia, is with that share, it's a ten to one split for Nvidia. So let's say at the time of the split, in two weeks, let's say Nvidia is at $1,100. That would mean each share is then going to go to, what is that? Dollar 110.

So it just means that more and more people, people are going to feel that Nvidia is accessible to them to buy the shares, which I think is great for the retail market. And so overall, it's not going to change anything for you. It's just going to make it better overall for Nvidia and the ETF that it's inside. Totally, yeah. I think the reason, I mean, there is no reason why any stock needs to split now.

Austin Hankwitz
Now, 2030 years ago, sure, right before we had fractional investing, it would make sense, but now it's like, I think stocks or companies rather just kind of do the split for who knows what reason. I really don't know why. Oh, oh, options. Options. I think they make it easier to trade options because when you have 100 shares, you can.

Yeah, you can afford shares more easily there with the options, but I mean, beyond that, it's just like they just kind of do it. So, Brandon, to reiterate what Robert said here. No change to the ETF. Good question. Really cool of you to stay up to date on your portfolio.

Very smart question from you, Brandon, and we very much appreciate it. Robert and I received so many photos of recent graduates at their graduate graduation gunning for that hundred dollars to start investing to their first hundred k, which we're really excited to choose from. So stay tuned to Monday's episode. We'll be announcing the winners in that episode. But keep the questions coming, keep the grad picks coming.

We love to see all of our awesome listeners taking action and getting really excited about the show. Don't forget to subscribe to the Rich Habits newsletter every Thursday you will get an email. An email just went out this morning. You're going to love it. And also, don't forget to join us on June 4 for our public.com options trading webinar.

It's completely free. We've got about three or 400 of you guys that have already signed up for it. It's going to be great Q and a time with an options expert to talk about these insane strategies. Not just make money with options, but also hedge your portfolio using option contracts. Yeah.

Robert Croak
I'm so excited. And we just want to thank each and every one of you for following along every week with the Rich Habits podcast. Now the Rich Habits newsletter. We have so many incredible things in store for each and every one one of you, and we appreciate you following along each and every week, giving us those five star reviews and sharing the podcast with friends, keeping us at the top of the charts. So thank you all and we'll see you next week.

Austin Hankwitz
Thanks everyone.

Q&A: Growth vs. Income, $100K of Student Loans, and the Pros & Cons of Real Estate Investing

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1. Introduction

2. Personal Finance Q&A

3. Investment Strategies

4. Real Estate Investment

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