255: Financial Independence with REI and Other Great Side Hustles

SHOW NOTES FOR EPISODE 255: FINANCIAL INDEPENDENCE FROM REI AND OTHER GREAT SIDE HUSTLES

Right out of college, she landed her ideal job as a newspaper reporter.  Unfortunately, that “ideal job” ended up barely paying the bills and she eventually quit and traveled to Southeast Asia to figure out her next step. When she returned to the states, she did a little freelance writing and eventually ended up buying a triplex, renting out two units and living in the third — rent free.  Her “house hacking” adventure prompted her to acquire other rental properties, which eventually resulted in her total financial independence.  In this podcast episode, writer, podcast host and entrepreneur Paula Pant shares her story of how living frugally and investing in rental properties helped her to become a millionaire in her early thirties.

What You Will Learn

• How to own a rental property and live there rent free
• How to travel cheaply
• Why most people don’t think bigger
• What are the two ways to increase the gap between how much you make and how much you spend?
• Why you sometimes you have to be willing to let go of the good to make room for the great
• How to find additional income opportunities in the fun things you love to do
• The importance of having a real estate investing niche
• How you can get paid for doing things you enjoy

About Our Guest

Paula Pant

Paula Pant is the host of the Afford Anything podcast, which talks about real estate investing and financial independence, and the founder of AffordAnything.com.  She owned 8 homes by age 31.  Her investment properties bring in enough rental income to cover her living expenses.

More About Paula

• Graduated from college in 2005
• Her first and only job was as a newspaper reporter for a small newspaper in Colorado
• Worked there 3 years and quit in 2008
• Her top salary there was $30,000
• Has not been employed ever since
• Realized she could make more money working for herself
• Began thinking as an entrepreneur, even though she was not “wired that way”
• While she was at the newspaper, she met different people who were freelancers and self-employed

Traveling the World

• When she quit, she decided she wanted to travel
• Lived primarily in Southeast Asia (places like Lao and Cambodia where the U.S. dollar was very strong) from 2008-2010, living very frugally on a budget of $1,000 per month
• While traveling, she lived off off of her savings and would write freelancer to earn extra income
• She came back to the U.S. in 2010 and moved to Atlanta, Georgia
• Found a 3 bedroom apartment on Craigslist to share and rented out one of the rooms with her boyfriend
• Her share of the rent was $200.  Her boyfriend also paid $200
• While living there, she noticed a triplex across the street from where they lived that had been for sale for 16 months.

Venturing into Real Estate

• They called the real estate agent about the triplex but found out it was already under contract
• She told the agent to take down her name as a back-up should the deal not go through
• The agent called her back in a few weeks because the deal feel out of contract
• Paula and her boyfriend bought the triplex with a $26,000 down payment (they each had at least $13,000 in their personal savings they had saved while working W2 jobs)
• Two units had 2 bedrooms and one bath each.  The third unit was also a two bedroom but they figured out a way to convert the living room into a third bedroom
• They rented out two of the units and moved, with their then current roommates, into the third unit, each renting out on of the three bedrooms rooms in that unit.  Because of the rent paid by all the other renters, their housing expenses were covered and it allowed Paula and her boyfriend to live there for free
• Here primary goal at that time was to protect herself from having to work a 9-to-5 job
• She wasn’t initially thinking of becoming a real estate investor.  Her primary goal was to keep her living expenses, and in this situation, her housing expenses, as low as possible

Today

• Her rental properties pay all her living expenses
• Rental income grosses $125,000
• After all expenses, they net $43,000 (which is more than the highest salary she had ever earned)
• Her current net worth is over $1,000,000

Living Frugally and Saving Money

• She was able to keep her personal monthly expenses down to $1,500 to $2,000 per month
  • $0 – rent
  • $100 – utilities
  • $200-300 – health insurance
  • $200-300 – food
  • $50-100 – cell phone
• She’s still lives very frugal today (drives an 11 year old Honda Civic)
• Grew her freelancing writing gigs to bring in more income
• It took about 18 months, doing freelance full-time before she was making a good income (five figures per month – $10,000 per month)
• Busy researching, writing and managing her freelance assignments
• She had to identify a “niche” in order to get the attention of editors
  • She began to research various topics
  • She thought being a “wine writer” would be fun
  • Someone recommended that she find her niche by writing about something that she loves to read about
  • Ever since she was in high school, she loved reading Money magazine and Kiplinger publications
  • She read the book, “The Millionaire Next Door” when she was in high school
  • It looked like “Personal Finance” would become her niche
• Her writing took on the aspect of writing as if to give advice to a “younger version of herself” – as if she could go back in time and talk to herself when she was in her early 20s

Starting AffordAnything.com

• Started her blog/website when she was 27 years old
• Writing personal financial advice to a 20 year old Paula Pant – “writing the advice that she would have wanted to have heard” at that time

Growing Your Income From the “Fun Things” You Enjoy

• If you have a fixed income, your basic living expenses are covered to you therefore can experiment and explore other “fun” ways to generate additional income
• Anything you create beyond that fixed income can help you do other things
• Think creatively about the things you really enjoy doing the most and explore ways to monetize it
• For example, if you love animals
  • Look at Rover.com and walk dogs in your spare time for extra money

Her Approach to Real Estate Investing

• After he triplex purchase, she has always set out to purchase more small multifamily properties but always ends up buying a great single family deal instead
• She only buys residential rental properties only – no commercial, flips, house liens – because she would rather be an expert in one thing than be mediocre are many others
• She likes small multifamily properties because you can consolidate so much of the overhead in one property
• When she started investing, she was living in Atlanta, Georgia, so all of her properties purchased at that time were located in the metro Atlantic area
• Three and a half years ago, she moved from Atlanta to Las Vegas, making her an out-of-state investor
• She is now looking at purchasing in Birmingham, AL and Cincinnati, OH next, even though Las Vegas is booming (15.8% year-over-year growth)

Biggest Mistakes

• Not thinking big enough earlier on
• Early on, so focused so much on frugally and savings that missed the need to focus more on earning more
• When she bought her first triplex, she wasn’t thinking of passive income, financial independence or investing
• In her earlier years, she was more focused on “downside protection” rather than “upside potential”
• Today, she writes more on “Thinking Bigger”
  • Ultimately, there’s what you earn and what you spend and savings is the gap between the two
  • There are 2 ways to increase that gap:
    • Spend less
    • Earn more
    • Or do a combination of both
  • You can’t think your way to greatness
  • And you can only live so cheaply before you realize that you need to increase your income
  • When you can increase your income and still live frugally, that gap between income and expenses will grow at a greater pace so you can then buy real estate and make your income grow more and then you just “lather, rinse and repeat” again and again and pretty soon you’re a millionaire
  • A tip for those in retirement: every bit of additional income you bring in will help increase
• She also made the classic accounting mistake thinking that if she did the work (made the repair, etc.), she would increase her profits because she didn’t pay herself for the work.  She now knows that it makes no sense to price her own time at zero.  You math, when it comes to your property expenses, needs to be “identity agnostic.”

Biggest Successes

• Unlearning some of her biggest mistakes (haha)
• Identifying and sticking to a real estate investing niche (residential rental properties)

Advice for Old Dawg’s Considering Real Estate Investing

• Earn more
• Find some work that you enjoy, that’s meaningful, fun, has a social component to it and is flexible
• Doesn’t have to be related to your career
• As long as it’s fun and makes money
• Some people who pet sit through Rover.com can make an extra $75 a day
• You can only be so frugal, at some point, you need to boost the other side of the equation – your income
• Do not take on an inappropriate level of risk within your investments to make up for lost time
• If you buy real estate, pay for it in cash, so as not to create new debt at 50 plus
• If you must borrow, borrow the smallest amount possible and pay the loan off as soon as possible

The Future of Her Business

• Focusing primarily on AffordAnything.com – the website and podcast – right now
• Had a content marketing company that was very successful but it caused her to spread too thin, so she closed it down
  • “Sometimes you have to be willing to let go of the good to make room for the great”
• Also has a new rental property investing course called “Your First Rental Property” for beginning real estate investors that is coming out soon
• She also wants to continue buying more properties

Rap-it-Up

• Favorite real estate book: From 0 to 130 Properties in 3.5 Years by Steve McKnight
• Favorite business book: The 7 Habits of Highly Effective People by Stephen R. Covey
• Most valuable web site for success (other than your own): WaitButWhy.com
• Favorite app: Instagram and Twitter
• Favorite quote: “Life is pretty easy if you just relax.”
• If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? Buy a laptop and start freelancing.

How to Reach Paula

• Podcast: Afford Anything
• Website: AffordAnything.com
• Mailing List: https://affordanything.com/vip-list

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher or GooglePlay and Subscribe, Rate & Review our podcast.  This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.

Episode Sponsor: Meno Studio – menostudio777@gmail.com