Home Real Estate Paying Off $118K of Debt in 2 Years and Buying Real Estate (16 Units!)
Real EstateTravel

Paying Off $118K of Debt in 2 Years and Buying Real Estate (16 Units!)


Real estate investing is a popular path to financial freedom, but if you’re not careful, bad debt can get in the way. Before today’s guest could buy rental properties, she had to deal with the mountain of debt that stood between her and wealth. But thanks to aggressive saving and new money habits, she became debt-free in just TWO years!

Sarah King has been thrown several curveballs on her journey to financial independence. Just when she had managed to pay off $118,000 of debt and buy five properties, her marriage ended in a nasty divorce. Forced to liquidate her and her husband’s assets, Sarah was back at square one. Rather than giving up on her dream of reaching FIRE, she overcame her shaky financial situation and found creative ways to buy real estate. Within a few months, she was back on her feet, and today, she owns sixteen units across ten properties!

In this episode, Sarah offers some crucial advice for aspiring investors—including why you should get your financial house in order before buying properties, how to leverage your retirement accounts to buy more properties, and how to use private money (responsibly). You’ll even learn about house hacking—the real estate investing strategy Sarah uses to cover her mortgage payment each month!

Mindy:
Hello, hello, hello, and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and I am solo today. Scott is taking a much needed and well-deserved day off, so I am here to make financial independence less scary, less just for somebody else, to introduce you to every money story, because I truly believe financial freedom is attainable for everyone, no matter when or where you are starting.
Today I’m talking to Sarah King, a real estate investor and the founder of the Nerds Guide to FI. Sarah talks to us about her journey out of debt, and how she was able to find success in real estate investing after a complicated divorce. You’ll learn how to quickly get yourself out of debt, what the most important piece of education newbies should get before they get into real estate, and how to responsibly use private lending to get ahead. If you’re interested in real estate investing, but you have debt or your financial situation is unstable, Sarah’s story is a great blueprint of how to get your financial house in order before you dip your toes into real estate.
Sarah King from the Nerds Guide to FI, welcome to the BiggerPockets Money Podcast. I’m so excited to talk to you today.

Sarah:
I am pumped to be here. I’ve always dreamed of being on the money podcast. This is fantastic. I’m a money nerd by nature, so this is fantastic. And with the one and only Mindy, of course.

Mindy:
So what I’m hearing you say is I am making your dreams come true.

Sarah:
You are. Well, my dream coming true last year was to meet you, and now we’ve come so far, so…

Mindy:
Well, I love it. Thank you so much. So Sarah, let’s jump right into it. We have a ton of things to talk about. Your introduction to the financial independence space happened at a time where you were kind of drowning in debt. What year was this and how much debt were you in?

Sarah:
It was back in 2016, and we had I think $118,000 in debt. And a lot of it is what I call really stupid debt. Most of it was cars. And I feel like a lot of people think, “Oh, that number has to be student loans”, but it wasn’t. It was just really dumb behavior.

Mindy:
Cars. Okay, well thank you for sharing that. Here’s a confession. I have not heard somebody say they had $118,000 in debt on this show contributed to cars. But off the show, I know lots of people who have close to that in car debt.

Sarah:
And it was mostly credit cards from overspending, and then vehicles, which it was all the really embarrassing debt.

Mindy:
Well, so you say embarrassing debt, but you are not even close to a loan when you say that you had this stupid debt that you call it credit cards, and cars, and mindless spending kind of debt. How did you get yourself out of that kind of debt?

Sarah:
Yeah, so I think you almost ended up in debt, because I always tell people I was a really good box checker. I went to school for a very long time, and you get really good about you go to school, then you go to college, then you go to grad school, then you get married. And you look at this beautiful checklist, I’ve done it all in order. And then just trying to fake look successful with the nice cars, because you got the new job and all of the things and you want to look the part, and you just kind of keep up with the Joneses until you realize that everyone in the middle class has a lot of debt and is broke.
And I had a friend actually tell me about Dave Ramsey, and so I came from that camp originally before finding BiggerPockets, and real estate, and the FIRE movement, and all of that.
And so for the next year, I was just a Dave Ramsey junkie and paid it off the hard way where you wrote all your debts out, smallest to largest, and started with a little shovel, and then the shovel got bigger. And we just kind of dug our way out of debt. And I did a lot of waitressing on the side.
My Instagram account actually started because there was another girl online posting how she was paying off her debt waitressing. And so I did the same thing and would do these great, “I made X amount in tips tonight and it’s going straight to my car.” And so every waitressing tip and check I got all went to my car loan.

Mindy:
Did you say you paid it off in one year?

Sarah:
It took us two years to get the whole thing paid off and about a 50 to 60% savings rate to do that. And a lot of… I was waitressing sometimes more than I was working my W-2 job at the time.

Mindy:
I love that you were waiting tables. I have waited tables, and that’s a really hard job. That’s hard on your feet. You are walking like 100,000 steps every shift, and there’s demands from customers, and there’s demands from your manager. That’s a really hard, physically demanding way to pay off this debt.

Sarah:
I will forever be overly kind to waitresses. And even if they’re doing a bad job, I still tip them well because I’m like, “She needs that more than me today because she’s having a hard time.” I feel that to my core, and you can’t shake that once you’ve done it.

Mindy:
I’m definitely tipping more than when I wasn’t a waitress, than before I was a waitress.

Sarah:
1000%.

Mindy:
I’ve heard you say that you are not frugal. Being frugal isn’t your thing. Let’s talk about that for a little bit.

Sarah:
I’m naturally not a saver, which is interesting, because I feel like most of the people attracted the FIRE movement who really get into it… I tried one summer to bicycle from my apartment to my job, and day two of just sweating in my business outfit. I’m like, “I can’t do this anymore. I’m not cut out for this.” Which you can, but I’m like, “No part of this is sparking joy for me.” And it was just a very unnatural fit. And so I guess I always should preface it. It’s always mindset where you’re like, “Could I be and could I force myself?” Yes. But my natural state is pretty painfully spendy and I really have to watch myself. I still budget every month, and sometimes run over, and then get to save a little extra the following month and be better.

Mindy:
I used to ride my bike to work as well, and that’s something you have to plan out. You have to have baby wipes at the office if there’s no shower, you have to drive in on Monday and take all your outfits for the week. You can’t ride your bike in your outfit. Because yeah, you’re going to sweat right through that and have a miserable day at work.
But there are ways to save, don’t involve riding your bike to work. What sort of changes did you make to your spending or your savings to help you get out of $118,000 of debt in two years? And first off, let’s celebrate. 118,000 in two years is like, where’s Scott when I need his fast math? What is that? $59,000 in a year? That’s like a whole salary. Yay for you for doing that. That’s fantastic.

Sarah:
And that was definitely more than I was making at the time by far.

Mindy:
Wait, what?

Sarah:
So I was making 58,000 and my husband at the time was making I think 60. And back in 2016, I write down every year what our gross income was, and it was 109 for the year in 2016.

Mindy:
That’s awesome. So you essentially just lived off one salary and used the other salary to pay down the debt plus the waitressing.

Sarah:
And so interestingly, so 2016 we made 109. And then 2017 when we were doing a bulk of the payoff, we only made 92. And so I think when we knew there’d be more of a money crunch and that we were going to make less money that year, I did a lot of persuasion, and we ended up selling cars at that point to get down in loans, but cars we were also underwater on. So that cleaned up a big chunk of it was selling things, but my car was completely hustle, and all the credit cards were grinding it.

Mindy:
I love that. What changes did you make in your life at that time that have carried over to become permanent changes?

Sarah:
Definitely budgeting still every month. I just feel very uncomfortable if I don’t know where I stood by the end of the month. I think that’s almost like a security blanket because I’m like even if I made stupid purchases or overspent more than I’d like to that month, I know I can take control and fix it the following month and give myself the freedom. But I always want to know where I’m at every month. I don’t want to go several months. I feel like that’s how credit card debt gets racked up, is it’s death by a million cuts. It’s not giant spending. It’s $3 on Amazon, and then $5 on Amazon, and then $3 at Taco Bell, and then every single day it racks up. And so that was a big thing. And then also just realizing… I was a big car person also, so I am super not frugal by nature I feel like. And I was huge into cars. I love cars. And getting used to the idea that cars were actually probably my enemy and I needed to think very differently about vehicles and things, that started to move the needle a lot where I decided having a life where I’m not stressed.
And I also learned that finance for me and money for me is really security. And if I didn’t want to feel unsecured and anxious all the time, I needed to do something different.
I also have very few subscriptions. I think it’s ridiculous that people subscribe to Pandora or Spotify and pay for not having commercials. You will not die listening to a commercial.
I also don’t love when people buy… These are my really random things. I give my husband crap all the time, because he buys flavored water, and I think it is the most ridiculous thing to buy beverages in general. We have this amazing source of water that is free-ish. I mean we have a water bill where we live now, but back in the day I lived in the country and we had a well. And literally your liquid needs are free. Why are we paying for soda? Why are we paying for anything?
So that is a die hard thing. Buying stuff at gas stations when you stop and get gas, that makes me crazy because I’m like, “All of this is so marked up, I can’t even.” So there’s some few little mindset things, where I feel very strongly about what to buy and not buy at the grocery store.

Mindy:
So you said that you sold cars to help yourself get out of debt and I hear people talking about, “I’ve got this truck. I bought a brand new truck, and then I discovered financial independence, but I have this $1,800 a month truck payment that I only have six more years left,” or whatever, and I’m like, “Sell the truck.” “But I’m going to lose so much money on that.” How did you reconcile the fact that you had to sell cars? Did you have to lose money on those cars?

Sarah:
So we ended up working really hard to pay… So after my car was paid off, we worked really hard to pay down the gap. So we talked a long time about whether we get a personal loan for that, or whether we take a personal loan, out or what do we do. And we ended up paying it down until we were no longer underwater on it and just aggressively paid it. And then once we were no longer underwater, we sold it and bought a crappy vehicle cash.

Mindy:
Do you have any advice for somebody listening to this in a similar situation, where they owe more money on their vehicle than it’s worth, but they have decided that owning this vehicle is no longer something that they want to do? How do they reconcile getting over the fact that they are just going to have to lose money on this?

Sarah:
I think it was one of the few things holding us back from living the life we wanted, and I knew that having a family and having kids was more important. I also read a lot of books. So lesser known, I feel like out there was… So Rachel Cruze, which is David Ramsey’s daughter, for anyone that doesn’t know, wrote a book called Love Your Life Not Theirs. I think it’s a little bit of a girly perspective, but she was 20 something or maybe early thirties when she wrote her book. And she talked a long time about cars in a way that just resonated to me.
And so after reading that, I’m like, “Oh my gosh, we have to get serious.” But again, it’s like if I want to retire before 70, you have to start doing something different.

Mindy:
When did you start getting into real estate investing? So 2016 you discovered fi, discovered that you were in $118,000 of debt. It took two years to pay off. Did you start investing before you finished paying off?

Sarah:
No, I think probably two months after getting everything paid off to really go into real estate. And so yeah, from Dave Ramsey into some FIRE people. And then I had to find my niche of who really to listen to in this space, because I knew super saving and watching my money stack up in a retirement account wasn’t really a joyous thing for me. I had been actively grinding and working really hard for two years, and to change my whole strategy to something very passive where you just focus on retirement accounts, I just feel like I needed something tangible to do with money.
And that’s kind of how real estate became my what’s next answer, because for two months I just started saving everything I could and trying to get my 401(k) growing and max out my accounts. And this isn’t tangible. It wasn’t fun for me. I mean it’s nice. I still do all those things which we can chat about, but it’s kind of a set and forget. Once you figure out how to invest, I’m like, it’s another box you check off and then you move forward, because you’re like just saving is the big thing, and making sure you’re contributing to those tax advantaged accounts. And once you check your box, and you learn about index funds, and you learn about automation and how it all works, you’re like, “Okay, well I did it. What’s next?”

Mindy:
Okay, well let’s talk about the very first property that you ever bought. Where was it and how much? Give me all the numbers.

Sarah:
I actually convinced my husband at the time to… We bought this house on five acres that we loved. It was super outdated. It was kind of a live and flip. So I did a live and flip kind of intentionally where we remodeled it, and then I convinced him to sell this house on five acres with a pond, and to buy two smaller properties.
And so that was our new primary residence was this postage stamp in town, which he hated because it was a very tiny lot. I thought it was perfect and beautiful. It was a little cute ranch. I’m a big fan of white rectangles. So just a very simple one story three one ranch.
And then we also bought this two bedroom, one bath rental property. And so between saving and the proceeds from the sale of our live and flip, we bought our first rental property.
I live in Indiana, so I live in the Midwest. And so everyone’s going to hate my numbers, but bear with me through this because housing prices are really cheap. This house was 86,000 when we bought it.

Mindy:
The five acre house?

Sarah:
No, this was the tiny first rental. So the five acre house I think was 210. And then we sold it and bought one house for 115, which we thought was overpriced at the time, and now it’s selling for two something. And then this little postage stamp house for 86,000, and we were jacked about it. And so that was our first foray into rental properties was that.
And I remember at the time we closed the deal. I’m a huge paperwork nerd, so that was kind of the fun part is learning how you get appraisals, and get inspections, and do all these things, and you do your due diligence on a house. And then I remember hyperventilating in the Aldi parking lot thinking, “Oh my gosh, I have to find tenants now and lease to them.” And I just had no idea what I was doing.
And so I actually got on BiggerPockets and was like, “I need lease forms, I need pet addendums, I need all the things. How do you do this?” And I kind of got hooked into BiggerPockets from there, because you just needed a direction, and you had these beautiful forums. I could read other people’s questions that I was having and get all the forums I needed to kind of get going.

Mindy:
So 86,000 was your purchase price on this rental property. What were you renting it for?

Sarah:
I think it was 900. I wonder, it was either 86 or 76, and I think we rented for a little bit above the 1% rule. So I think we were getting let’s say 86 for easy numbers, and I think we were probably at $880 a month.

Mindy:
Okay. So the 1% rule really quickly is just rule of thumb.

Sarah:
Yes.

Mindy:
Not set in stone rule. The 1% rule says that if you buy a property for $86,000, you should be able to rent it out for 1% of the purchase price, or $860 a month. So you were doing better than the 1% rule, which makes me so jealous, because that is not something that I get in my market, and haven’t been able to get in my market for decades. But that’s okay. I live in a different market, and that’s just how it works. I could still buy houses in Indiana if I chose to.

Sarah:
I highly recommend it. They’re still out there. You just have to know where you’re shopping.

Mindy:
So let’s talk about the investing process. Were you and your husband at the time together investing in these properties, or was this the all Sarah show?

Sarah:
So it was, it was a partnership. So actually he was more interested in real estate than I was. So I always tell people by far he convinced me this was a great idea, and I needed something to do besides saving and watching my money pile grow.
But I didn’t realize that my really nerdy skillset would be as helpful as it was in real estate. I figured the swinging the hammer skillset would be the most important part. And maybe I’m biased in that, but he was the handyman, and I was the bookkeeper, and I suddenly realized that 99% of the things you do for real estate involve bookkeeping, and forms, and documents. And there’s so much due diligence on who you place in your homes and how you background check them, that so much of the work was things that I was good at. And then, oh by the way, we have a toilet repair or something. When we bought houses that were more turnkey, I was like, “This division of labor is ridiculous.” You did a week worth of work. And I’m like, I’m spending an entire month trying to find perfect tenants and figuring out how the heck to do this.
But it was really good. To this day, he’s hands down the best tile guy I’ve ever had. I’ve yet to find a tile guy that quite matches his skillset. So for two years, we bought five properties together, we did two live and flips, and he was the handyman on all of that and just figured it out, which was awesome.
But definitely his wild idea. He said it first for sure. And at first I was like, “Oh my gosh, I’m not handy at all. What the heck am I going to do?” And I always tell this story. He grew up in a family of six boys and they DIYed everything. And I grew up in a family where my dad hired out a light bulb changed once, because he didn’t feel like getting the ladder out. So my dad was always older and just not handy, and my mom is still mortified that I bring this up because she was so pissed. She’s like, “Get out the ladder, it’s going to be okay. This is ridiculous.” But he’s like, “Well,” and so very different worlds, and I’ve since learned how to drywall and do all sorts of stuff, but that was kind of our backgrounds where…

Mindy:
You really couldn’t have much different backgrounds when it comes to investing. So you have alluded to several times that you are no longer married to this man. How did your divorce affect your real estate investing?

Sarah:
So we pretty much liquidated everything. And so that’s actually why that house I loved got sold is we decided it was… Or I decided, I guess. I’m like, “I cannot go to mediation one more time and talk about what house. I don’t even care at what point, what house, who gets, I just want it done.”
So we ended up selling everything and just starting over with a clean slate. And so we had five properties together when we got divorced, and we sold off all the properties.
We talked a long time about dividing up the assets, and decided to burn everything down and start over. And at the time, I was super upset about it, because by the time we got divorced, I was pretty much managing all the property. He didn’t know half the names of the tenants we had by then, and he wasn’t really involved in the day-to-day operations.
I remember the first time I had to go meet and HVAC guy or a plumber and I’m like, “I don’t know why I’m going. This is the blind leading the blind. He could be swindling me into a new furnace and I have no idea.” I didn’t know anything.
And so you just had to find tradesmen that would educate you because I’m like, “I am very eager to learn. I love real estate, but I need to find someone at the heart of an educator to walk me through this.” I knew nothing. And the first plumbing leak, and the first maintenance calls we were getting, and I was very clear he wasn’t going to go to those. I ended up taking on everything.
So by the time the divorce was done, I was feeling a little more confident that real estate is something I could actually do on my own, versus needing to have a handy spouse to do it with you. And I think that was my great aha moment through the divorce process. First of all, it chilled me out a little bit, because I’m very type A person, and it really calmed me down. And then it really taught me that I could do this. And I think without that experience, I would’ve never been like, “Oh yeah, I should take up real estate on my own.” And now it’s really my passion, which is cool.

Mindy:
So how did you pick up and start over after you have liquidated everything? I’m assuming that you split the proceeds in some way, so you had some funds to be able to start investing again.

Sarah:
Yeah. So we ended up going through this process. So essentially, it ended up being a bad situation. So we had our daughter, so she is running around behind me if anyone can see the video on this. So we had our daughter, and about when she was three months old, he became addicted and developed this really bad addiction problem. And so I was kind of left with a three-month-old and figuring out what the heck to do with my life.
And so by the time we got divorced, he was not really with the program on what was going on, but he would really fight it in mediation. So when we decided to sell everything, it actually took over a year to get any settlement from that divorce process. So the judge ruled, “Yes, we’re going to sell everything,” and then we sold all of it, and then it was held in an escrow account for over a year until it got dispersed.
So I thought it was going to be kind of quick. We sold the houses in 2020, the summer of 2020. And then the following summer, I finally got that money and I just always thought it was coming and it didn’t. And it made me very scrappy to try to figure out how do you… I think we both ended up getting over $100,000 from the proceeds for the sale of the real estate. I think he got 113 and I got 140, because I was also supporting all of the mortgages at the time, because he just stopped paying all of them. And so I was able to save my credit by paying all of those. And then I had to hold all these mortgages, the five houses and the five properties for a year.
And so it was really just a year of being like, well, I literally have negative amounts of money. You felt like these were so strapped with all these loans all on your own.
And so I actually ventured out into the world of private money and private lending, just kind of out of necessity. I was like, “If I want to keep this going, I have to figure that out and a different way to fund deals.” And so I learned two really valuable lessons out of just never getting that money. It was the best thing that’s ever happened to me, but it was really painful.

Mindy:
So when you say you ventured into private money, were you borrowing private money or were you lending to other people?

Sarah:
I was borrowing it because I think I was back at a negative net worth with $100,000, $130,000 pending in some imaginary account somewhere. And so the first money I ever borrowed was friends and family. So I actually approached my parents with this business plan, and now I’ve talked private money many times where I’m essentially asking other people to invest in deals for a specific interest rate. And I brought spreadsheets. It was a terrible pitch. It was not user-friendly. My dad’s like, “I’m not reading these Excel spreadsheets with you.” And so I did the worst business pitch ever, but it worked, and convinced them to invest in my house hack with me.

Mindy:
There’s two different types of house hacking. There’s the buy a really big house that has more space than you need and rent out rooms, and there’s buy more units than you need and rent out the other units. So you and your daughter were living in one of these units, and you were renting out the other unit?

Sarah:
Yes. So we were doing the quintessential house hack, so essentially house hacking a duplex. But when I found this house, because there’s very few duplexes where we live. We lived in the country, and so I started looking for houses with walkout basements, which not everyone knows what that is, because depending on where you live is a plus or minus on the walkout basement. But where we live, essentially it’s a house built up on a hill. It looked like a one-story ranch, but it had a full kitchen, like a mother-in-law suite in the bottom.
But it was mostly unfinished. It was kind of a giant room with the kitchen in it. And so we walked in. I immediately fell in love and I’m like, “This is going to be the house that I put a second rental unit in the bottom,” and I had no idea what I was doing. I had to learn about fire code and electrical code, and putting together a bathroom and adding walls, and all sorts of stuff. So I just decided to jump in with both feet. I think my parents were very concerned about me, but thought somehow it was a good investment.
But I was really solid in my comms. I knew what the rental data was, and I did my homework on that, and I think they were impressed and just kind of excited to get us going on the right foot.

Mindy:
How much of the expenses did the tenant pay when you were there? Did their rent cover the entire mortgage?

Sarah:
Yes. It didn’t pay 100% of the whole upkeep of the house because I was kind of dumb. And the house was ideally perfect, but it was on an acre, and an acre is just a lot to maintain because I had the lawn mower because I’m like, “I’m trying to do real estate and be a full-time mom and all of the things,” and so something had to give. And so I got really good at outsourcing everything I do. And so lawn maintenance, and utility bills, and things, it ended up not being 100% living free, but the mortgage was completely covered. And then a little bit,

Mindy:
Hey, that’s winning in my book because I’m paying 100% of my mortgage.

Sarah:
So for two years, I paid no mortgage, which is really I think how I got my feet back under me to be honest.

Mindy:
That’s awesome. So did you wait for two years before you bought your next investment property?

Sarah:
No. I waited one year. Sp I actually refinanced the house I did. So I converted the basement. The goal was to move pretty quickly to show my parents proof of concept on this whole money lending thing. And so I got it remodeled, I got it rented out. I was able to show rent income, go back to the bank, refinance the house, and pay them back in full. And then I left with the biggest check of $1,000 from closing and I’m like, “Holy cow, people really do leave closing and make money.” Granted, I had just taken out a giant loan, but at least I had done it where I had paid off 100% of my private money that I borrowed, and then was able to own that house myself finally. And it felt really good to be able to do that. And then it gave me that really nice pitch to kind of go into the next deal and then say, “Hey, I found a duplex. Do you guys want to invest again? I just paid you back and you saw that it worked.”
And so they were my first and second lender. I think my fourth one more time after they got paid back the other time. But then since, I’ve kind of branched out and gone a little faster.

Mindy:
So how many rentals do you have now?

Sarah:
I have 16 units and 10 properties.

Mindy:
And they’re all local to you, local-ish to you?

Sarah:
Yeah, local-ish. I bought a lot in rural areas when I lived up north, and since then I’ve moved to Fort Wayne, which is my primary market and where I live now. And so this area, I bought a lot more because it’s actually more affordable than small town Indiana, which is fascinating. I got priced out of my little small towns I was buying in, and so now I mostly invest in Fort Wayne.

Mindy:
So let’s talk about private lending for a moment. I know that a lot of people are super excited to use private loans, because they might not be able to qualify for a traditional mortgage. Do you have any tips or things to look out for, for people who are considering using private loans?

Sarah:
So using private loans as a person taking out the debt, me taking out the debt, or the person actually doing the lending?

Mindy:
Yes, because there’s unfortunately no shortage of scammers in real estate.

Sarah:
The biggest thing for me looking for the person is they need to obviously show proof of funds, and we just have to align on our business goals together. I like someone that’s really hands off. I just want someone that is truly the money provider, that really just wants something very easy, a set and forget. They want their 8 to 10% in interest, and they want to get their check every single month on auto-pay and get that all set up.
And it’s kind of a know/trust relationship. What I usually do is I don’t secure it with any formal deed of trust at all. So it’s usually just a promissory note between me and the person, so there’s an extra layer of trust I feel like with how I’ve used it in the past, but I hear that’s pretty common lately. But I think the rate of people scamming people on social media has gone up.
And then also, it’s hard to say would I’ve lent to myself in the beginning? Probably not, because I was so unexperienced, and only use the bank of mom and dad. And as someone using private money, you have to be such a good steward, because to me it increases the risk when you use private money. And I think a lot of people look at private money as this way to just get a bunch of money super easy, and avoid the banks. And it’s been a goal of mine to eventually get away from bank lending and to use exclusively private money, because it is easier, and there is a power to being able to buy a house all cash. But again, you just feel like you have this immense level of ownership to the person that you’re taking that money from, because this is their savings, this is their retirement, this is their maybe self-directed IRA you’re using.
And you really have to… It almost increases the anxiety level for me using private loans. I don’t like to have a lot of them out at one time. I paid off three this year and it was the best day ever. I just don’t like having private money for very long, and I’ve been trying to think about how to restructure what I do, just because you want to make sure you’re a good steward of that person’s money.
Nowadays too, I always tell the people that are actually doing the lending to make sure that the person they are lending has shown that they can pay money back in multiple ways, because I think that was my huge eyeopening lesson where I saw a lot of people get kind of kicked in the teeth this year is when interest rates shot up. A lot of people that were like, “We’ll just do a cash-out refinance,” could no longer do a cash-out refi on anything. Or their cash-out refi was so skinny, deals became so thin that you really had a hard time pulling out all your money. I think a lot of people struggled to pay off debt.
And you saw the people that were credible and the people who would figure it out. I became a house flipper this summer, because I wanted to pay off these three loans and not do an extension. And I was hell bent determined to make that happen in a time where I didn’t want to refi my 5% loans. I could have, because I have this lovely W-2 and I’m bankable, but I didn’t want to lose my 5% loans that I got back when interest rates were good. And so I’m like, “I’ll do what it takes to get there.” And that’s kind what I look at when I’m analyzing other people’s deals.
I’ve gotten to the point where I’ve had people send me deals now and I’m like, “I don’t know if a deal will ever be good enough for me to break up with one of my IRAs and make it a self-directed IRA.” But it’s fun to look at them and kind of see if they have plans to actually do a payback on a loan, if they have multiple ways to pay you back. I think that’s really vital, and definitely something you’d include in your pitch if you’re asking for money, is the myriad of ways you can pay back private money besides a cash-out refinance.

Mindy:
That’s a great tip. Yeah. When you are asking someone for money, you don’t want to give them any reasons to say no. You want your pitch to be so awesome, that they can’t wait to say yes. “Oh wait, you’ve got 17 different ways to pay me back. What do you even need my money for? Of course. Have it. Have it. Have it.”
I love lending to people who don’t need my money. I don’t lend to people who are desperate to borrow my money, because I worked for that money. I worked really hard for that money. I want it back. I want to lend it to you, but I want it back. So yeah, I end up only lending the people that I really know well.
Okay, so Sarah, we are all nerds here and your brand is the Nerds Guide to FI. What do you think are the most important pieces of education, like numbers, or calculations, or concepts that newbies need to understand and become experts in before they get into real estate investing?

Sarah:
I think definitely learning, getting into debt is very easy. Getting out of debt is very hard. And it’s ridiculous. You can frivolously not pay attention at all and end up in a ton of debt. And so I think learning to be a good steward of your resources, the more money I earn, the better I feel like I’m doing with it. Because I taught myself very early how to save and invest and learn the foundational principles.
But just learning that muscle of saving, and actually building your budget, and tracking your spending, and knowing where things go. And I think your budget can evolve over time where your categories get really broad. For a while, it was just save, spend, and invest or something. I did three budget categories for a period of time because I was sick of the details, and I’d gotten pretty good at spending pretty consistently. And then if I get more spendy, my budget gets much more detailed, and so I kind of evolve it over time.
But I think just keeping aware, and I like keeping my personal finances very clean so I can do cool stuff on the side like real estate, because real estate is a huge money suck. And I always thought this is the quick way to FIRE. And real estate is very similar to index funds in a way, where it’s a very slow and steady burn. You’re a crockpot versus an instant pot, I guess, where it’s just extremely slow. And the fact that people think they’re going to retire in two years, I used to be one of those people. Where you can if you want to super save, but real estate is a very slow grind because you have so many CapEx items you have to pay attention to, and so many things that can go wrong with tenants, and evictions, and all of that.

Mindy:
Okay. Sarah, where can we find you and the Nerds Guide to FI?

Sarah:
So I’m on Instagram. About a year ago, I actually changed my handle from Nerds Guide to Fi, but I had a very neglected podcast for a bit and still have a website under Nerds Guide to FI. But I changed it to sarahkinginvests on Instagram, mostly because I was trying to network locally, and every elderly gentleman was very confused by what Nerds Guide to FI was, and I got really sick of spelling it for people while I was networking with the older generation of real estate investors. It became easier to just be sarahkinginvests. And so that’s where I spend a bulk of my time is on Instagram. And then I think I also have it on Facebook, and a TikTok that’s also neglected too. Trying to keep up with the youth but doing a terrible job of it.

Mindy:
Awesome. Okay. Well Sarah, this was so much fun talking to you today. I really appreciate your time. Thank you so much.

Sarah:
Yes, thank you. This was great. I appreciate it

Mindy:
And I will talk to you again soon.

Sarah:
Sounds good.

Mindy:
Okay. That was Sarah King, and I had such a good time talking to her today. My biggest takeaway from Sarah’s story is that you need to get your financial house in order as soon as possible. $118,000 in debt prevented Sarah from investing for two years, but only because she was able to laser focus on paying off her debt. It could have taken her even longer to pay off her debt, further pushing back her investing journey. As Scott always says, you want to invest from a position of financial strength.
That wraps up this episode of the BiggerPockets Money Podcast. Scott will be back next week, but until then, I am Mindy Jensen saying take care, brown bear.

Speaker 3:
If you enjoyed today’s episode, please give us a five star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpockets money.

Mindy:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.

 

 

 

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds. Thanks! We really appreciate it!

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Check out our sponsor page!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.



Source link

Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Articles

Real EstateTravel

The 25 Best Sunbelt Markets for Cash Flow—And a Closer Look at the Top 4

In this article Jazz icon and Los Angeles native Roy Ayers once...

Real EstateTravel

Partnering Is a Great Way to Invest—As Long as You’ve Worked Out These 13 Details

In this article In the last 16+ years, I’ve worked with many...

Real EstateTravel

Full-Time FIRE and Traveling the World…All Thanks to Rentals!

Could real estate investing help you reach financial freedom much sooner than...