Lean FI in 6 Years, Fat FI in 10, and Quitting Your Job The FIRE Way


At twenty-nine years old, Andy Johnson had achieved lean FIRE. He had enough to survive but not enough to make his future family comfortably financially free. All he needed to do was work a little longer, make a bit more money, and intensely invest. That plan went out the window when Andy woke up one day, unable to return to work. The high levels of stress and constant demand from clients got to him. He quit his high-paying job with no plan.

Over the next year, Andy did something incredible. Even without a steady paycheck, he built a massive real estate portfolio in just ten months, bolstered his family’s investments, and now, a few years later, in his mid-thirties, has achieved true financial independence. How did he do it in such a short amount of time WITHOUT a job? His method is one only the savviest of investors would have thought of.

In this episode, you’ll hear how Andy bought twenty-one rental properties in under a year, paid just $1,500 in taxes on a $200,000 gain, and was able to move to a more expensive area, retire part-time (by choice), and reach ultimate financial freedom. If you’re stressed at your job and looking for a way out while keeping your investments and bank account intact, this episode is for you!

Mindy:
Welcome, my dear listeners to the BiggerPockets Money Podcast. On today’s show, we talk to Andy Johnson who tells us all about his journey quitting a high-powered job where he was making great money, but to the detriment of his mental and physical well-being.

Scott:
Some of you listening right now could also be itching to quit your job because you don’t love it or it’s not fulfilling or whatever reason you have. Andy is a great example of how you can plan ahead and leave gracefully with as little risk as possible. Andy’s intentionality, his strong financial position, his exit planning and strategy are things that are important in any market especially in today’s uncertain environment. Be sure to listen carefully to Andy and glean from his experience on how you might apply some of what he did to your own situation.

Mindy:
Hello, hello, hello. My name is Mindy Jensen and joining me today is the fearless Kyle Mast.

Kyle:
Thanks, Mindy. It’s good to be here with you as always. This is a good one.

Mindy:
This is a great one. Kyle and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story because we truly believe financial freedom is attainable for everyone. No matter when or where you’re starting.

Kyle:
Whether you want to retire early, travel the world, go on to make big time investments and assets like real estate or start your own business or buy a whole bunch of rental properties after you quit your job, we’ll help you reach your financial goals, get money out of the way so that you can launch yourself towards your dreams.

Mindy:
Kyle, I am so excited to bring Andy’s story to our listeners because he has an absolutely reputable, really awesome story of buying cash flowing rental properties from a position of having an educated plan and then taking action, which is really what it’s all about.

Kyle:
Yeah. It’s so good. Let’s get into it. I had a ton of fun talking to this guy today. It’s just amazing.

Mindy:
Yeah. He’s awesome. All right. Let’s bring in Andy. Andy Johnson is a real estate investor who managed to quit his full-time job in the finance industry and buy over 30 rental properties in one year. Andy, welcome to the BiggerPockets Money Podcast. I am so excited to talk to you today and I want to know how you bought 30 rental properties. Before that, welcome to the BiggerPockets Money Podcast.

Andy:
Thank you so much. Happy to be here.

Mindy:
Let’s jump right into it because I have a billion questions. What year was this? Mythical year that you quit your job and what was your actual profession in the finance industry?

Andy:
Sure. Our little company that I worked for arrange financing for physician-owned real estate. The simplest analogy I could give you is that we were a mortgage broker that you might have traditional residential properties, but it was on the commercial side. More specifically, it was niched down to physician-owned real estate. That could include medical office building, surgery centers, hospitals. They hired us as a consultant to arrange financing. I worked at that job from 2013 when I left school with my MBA and quit almost exactly six years later in May of 2019.

Mindy:
How did you discover the concept of FIRE?

Andy:
FIRE, yes. I found it pretty quickly. Like I said, I started my first full-time job in 2013. By 2014, I stumbled across it. This was a result of some Googling during work, I believe of personal finance tips, how to strengthen your personal financial position. I stumbled across Mr. Money Mustache. That was my initial introduction to the world of FIRE and it went from there. Found all of the typical sources that everyone said on here. That started with Mr. Money Mustache like so many others.

Mindy:
Okay. It sounds like employers, if you want to keep your employees, don’t give them access to Google.

Andy:
That’s right. I remember we had Facebook banned or something, but I guess they didn’t ban Google. Quick to spend my spare time researching things like that.

Kyle:
Yeah. If you can block the Mr. Money Mustache website, that would take care of half the guests we’ve had on here probably. You didn’t have to do Google. Okay. Let’s move on to the next stage of your life. You had this job, which sounds super exciting. I’m a broker for finance for doctors is actually really exciting to me. I would love to dive into that a little bit more. That niche is pretty rare, but what happened next? You found this FIRE concept and you’re doing it at work.
My guess is usually, when someone’s looking up that stuff at work, they’re thinking, “What’s my exit strategy? In case I need to exit at some point, what am I going to do?” What were you thinking? What happened next?

Andy:
Yeah. The company I work for is a very, very small company. I was the 5th employee there. It was unstable, to say the least. It was being in the financing industry, supply and demand can be influenced by outside forces. Things can slow down very quickly. I knew from hearing from the other individuals that work there that they had a very hard time during the financial crisis of 2008, 2010. That they essentially, everything stopped and they didn’t receive income for several months.
With that, even though I was a entry level new employee, my income was still very much tied to the performance of the company. That’s how the primary owner had set everything up. I had incredible fluctuations in income. I started around 48,000. The next year, 147,000. The next year, 58,000. It was very, very volatile. My personality type was always one that wants stability and security. In a vacuum, this probably wouldn’t have been the job or type of salary structure that I would have looked for.
I probably would have been someone that would have been more attracted to a job with a more consistent income. I didn’t have many options. I’m originally from England, came to play college tennis, did my MBA to stay in the country essentially. After doing my undergrad, found this job where I interned during the summer. I basically needed to find a company that would sponsor me. Sponsor, it’s a term where you basically get a work visa, specifically an H-1B visa to work for a company. You’re tied to them so your immigration status is as an employee of this company.
That was what it was for me for the first three years that I worked there. With the volatile income, with knowing that I was stuck there to an extent, I wanted to create my own stability. That was really where FIRE came in, I think. Because I aggressively wanted to start saving even with the extent of where I knew I’d have low income some years, higher other years, I wanted to set up my lifestyle at a low end. Knowing that then naturally, I’m going to save a ton during the high income years.
This was in Central Florida so it’s I would say a mid cost of living area, but with no state income tax. Some benefits there as well. Yeah. I continued to work my way up in that company fairly quickly. Started as an intern in 2012. Started full-time in 2013. By 2016, I’ve positioned myself in a way that I was offered to join the company as a partner, as an equity owner. With that came some nice salary bumps and we had some good years there. The transition, the fact that it was so quick, my responsibilities were ramping up just as quickly. That was very stressful. It was tough.
I could feel the burnout for a good couple of years there. From after I became a partner and it’s built upon itself. I had no plan to leave when I did. It was more of a mental health and lifestyle decision. In May of 2019, my body basically said, “Nope.” At this point, I should say that I had married a US citizen so I had a green card. Finally, I was released from those shackles, so to speak and could explore other options. Yeah. I quit in May of ’19 with no specific financial plan, no transition plan. I just quit and took a break for a while. That was the transition.

Mindy:
What was your financial situation in May of 2019 when you quit?

Andy:
Yeah. I would categorize it as lean FI or most specifically, I would say that we were financially independent on current expenses. I knew that expenses at that time weren’t sustainable. I knew we weren’t truly financially independent for a couple of reasons. One, I suppose I’d describe it as to negative geo arbitrage and move to Denver, which is a more expensive cost of living, so the opposite of what they preach. Also, we planned to start a family, have kids eventually. I knew our expenses would go up, but we were secure. We had a strong financial position.
Even with my wife who worked as a zookeeper and still does, we could almost scrape by just with her income. Even though it’s very much on the lower end in that profession. It certainly wasn’t a financial catastrophe, me leaving. Additionally, I negotiated my buyout from the company since I was an equity partner. I had a reasonably sized buyout coming in the early 2020. I knew that was going to provide a little cushion as well. Yeah. We were okay, but I was certainly looking at options to bolster our situation and become more financially secure.

Kyle:
Wow. I have 17 questions. The first one, I will make a comment maybe and we don’t need to dive into it. I just find it really interesting this visa situation and being tied to an employer. That’s a variable that a lot of people don’t have to deal with. People feel like they’re tied to their employer, but you actually were. This is the real thing. Maybe just flesh that out real quick. Along with that, were you thinking and planning, as soon as you realized you were tied to this employer and somewhere in those years, you realized maybe I don’t want to be here forever.
What’s your planning mindset? Because I’m picking up from you you’re making some smart decisions. You’re thinking ahead. You’re reading online. You’re an intentional guy. I know you’re thinking about something. Maybe there’s role models. Anybody you’re looking at out there that is an example that you’re looking at. This is where I want to transition my life to so that when I have a family, what was your mindset when you’re in that? I wouldn’t say golden handcuffs. Maybe just immigration handcuffs or something.
I don’t know what you’d call it, but what were you thinking? How were you planning for that?

Andy:
Yeah. Great question. I think it really transitioned from immigration handcuffs to golden handcuffs. Actually, it did make that transition. Initially, when I was interning there, like I said, I was dating my now wife. I really wanted to stay in the country. It’s not easy. It’s not easy because 95% of your typical companies, your S&P 500 companies are not going to sponsor an immigrant on an H-1B visa, especially if they can source those recruits from US citizens. It’s just more costly. It’s more complicated, etc.
As soon as I started interning and realized that this is a good opportunity, I targeted the H-1B visa. I did that by trying to make myself hard to replace. I brought a Bloomberg terminal on to our team that we used with our financing deals. I took the lead on how to use that. I was the only one who could use it. When the time came for me to present this option, because they’ve never heard of it. They’ve never sponsored anyone before. I could present it in such a way that I would take care of all the complicating immigration aspects.
I really made it somewhat of a no-brainer for them. That was the first part was getting there. Once I had it, like you said, I was very much tied to the company. I would say my mindset at that time, especially after finding Financial Independence Retire Early was raised to FIRE. For better or worse, even after I got married in 2017, early 2017, I didn’t really contemplate switching employers so much because I really did think I had a very good thing going with this company as it related to opportunities for advancement.
I saw a path to earning a very high income in the sense that my primary boss there was really targeting me to take over the company one day. He was in his 70s so he’s already older. I felt I had that opportunity and it was something that I couldn’t pass up. At the same time, I felt the stress of the responsibilities that had escalated quickly and I struggled with that. When it transitioned tomorrow financial handcuffs, in addition to the golden handcuffs, I would say there was a fear of letting down the other employees. We’d grown a bit at this point.
We had eight or nine employees. I perhaps foolishly thought that if I would leave, I’m going to screw all of these other individuals. Of course, everyone’s replaceable. It’s not nearly as dramatic as your mind leads you to believe. That was the thought process that I had at that time. I knew I didn’t want to take over the company. I didn’t see another path to earning what I was earning at that time. I was planning to carry on for a good few more years. I felt like I just had to dig it out for a few more years and I would be very comfortably financially independent. That was the plan.
Like I said, in May of ’19, my body said no. I was so stressed that one day, I had to call up my boss and say, “I can’t come in today and I’m not coming in again.” I wasn’t able to really give any notice, but he totally understood. He gave me three months to consider if that was truly the path I had to take. We communicated during that time, but ultimately was, I did have to leave. I was thankful that I was no longer tied on the immigration side so I could take that step. That was the plan. The plan didn’t work out quite.

Mindy:
Let’s dive into that a little bit. What was your body telling you? What was going on at work that made your body feel like this?

Andy:
The funny thing is, I did not work long hours. The hours were very reasonable. I did not work too much more than 40 hours a week, which I know is great. Some people work much, much more than that. When I was home, I could not switch off. I had ownership of a lot of these large financing transactions where I was the individual that knew what was happening, had to solve the problems, had to get to the closing table. We only got paid when we close. We weren’t paid during the term of these deals. It was a lot of pressure, I suppose.
I was stressed all day and night. It was affecting my sleep. It got to the point where shortly before, I’m pretty sure I had a panic attack about it. I think it was when one of the other partners was going on vacation or something and I had to take on some additional load, mental load of these deals. Yeah. I was trying so hard to push through and I think that had been going on for a couple of years, honestly. I don’t think this happened all of a sudden. I think I was pushing myself for quite a while there. Yeah.
When I was just sitting there on my couch thinking about the problems and the deals and not being able to switch off from work, even though I wasn’t physically there, it just became overwhelming.

Mindy:
I’ve been in that same position. I’ve been in real estate transactions that don’t allow me to sleep because I can’t shut off my brain because there’s so many problems happening and I take them personally. Even though I’m not the one causing them, I’m still freaking out that my client’s going to lose their earnest money. My seller isn’t going to sell their house or whatever. I can’t even imagine on an even larger scale such as buying a medical office or something. I totally hear what you’re saying. I also heard you say that you were supposed to get a payout in early 2020.
I don’t know if you paid attention to other news in early 2020, but there was a little thing called COVID happening. Maybe you’ve forgotten because it was just a blip on the screen and then it went away. Did you actually get your payout in 2020?

Andy:
I did. It worked out well. Our operating agreement had some prescribed buyout over a three-year period based on the performance of the company. Honestly, that stressed me out, knowing that, especially when I had no control over the performance of the company. This was well before COVID was on the horizon because it was back in May of ’19. I negotiated that buyout. I took by projections would be a lower buyout over those three years, but I would get it in one lump sum. It was $200,000. It was a fairly meaningful chunk of change.
Basically, my tax optimization, which is always a fun hobby of mine that I pursued throughout my professional career said, “Hey. I want to get that on January 1, 2020,” when I had no other income. That was why I asked for that. Because even though I only worked five months in 2019, we actually had a very, very good five months. 2019 income wasn’t dissimilar from 2018 income. Yes. I received that on January 1st, 2020.

Kyle:
So good. Listen, everybody. This is huge. The amount of taxes that he saved just by doing that is incredible. Were you married at that point?

Andy:
I was married. I got it on January 2020 and because it was a capital buyout, that’s a long term capital gain. Now, my basis in it was zero because I didn’t have to actually put up change to buy in. It was a very large capital gain of that full amount essentially, but we really tax hacked that buyout in the sense that I maxed out a solo 401(k) that I’d been using for some time. I took advantage of the COVID draw down and did some tax loss harvesting, which directly offsets the gain by taking the capital loss on my brokerage account.
We even set up a donor-advised fund that made a big charitable contribution. I think I’ve paid about $1500 in tax on that. It was a very good effective tax rate.

Mindy:
What? Whoa, whoa, whoa, whoa, whoa, whoa, whoa.

Kyle:
You’re speaking my language. This is what I’m talking about. Okay. There’s a big one in there that he threw out there. This is when people miss. I stalled my firm in 2020. The bottom of COVID was a huge opportunity to convert to Roth IRA’s or do a tax loss harvesting. Basically, you can tax loss harvest. There’s some waiting that you got to do with your investments to buy back into it. Because he had such a huge gain, 200,000 and he said zero in bases, that means that whole 200,000 is taxable.
He took some of these losses that we saw on COVID to offset that and then I’m guessing probably reinvested it in a very similar investment, but different enough that you don’t run into the wash-sale rules or you can’t buy back the exact same thing. You get all the run up with COVID afterwards on the market. You’re essentially invested in the same thing, but you get the tax loss to offset your income and then you got the solo 401(k). You crushed it. That’s good stuff. I love it.

Andy:
Some of it was a natural rebalancing as well. I sat down to rebalance off because I did have some bonds in my portfolio as well. I rebalanced in March of 2020, which is just luck that I chose then. I basically rebalance when I see that there’s a five plus percent difference in my asset allocation. At that time, I saw there was. In addition to intentional tax loss harvesting, some of it was just natural rebalancing that I did with my portfolio as well. Yeah.

Kyle:
We talk on this show and a lot of good personal finance advice is not about timing the market. This is not timing the market. This is financial planning. He knew he had income in the year. $200,000 and he’s looking for opportunities to offset that. Tax savings is one of the few guaranteed income things you can do out there. There’s tangible things that you can do. You’re not playing the market. You’re not playing chance with things. He saw an opportunity when the market went down.
It could have gone down further from March when he happened to sell it, but his goal is still the same. He still would have harvested some. That still would have helped him. When we’re saying this, people may, “Oh, he’s lucky.” Yeah. The timing is lucky, but that was not the goal. The goal was financial planning. You just happen to get a cherry on top, a very big cherry. That’s awesome. That’s good stuff. I love it.

Mindy:
I want to know if you did this yourself or did you get advice from a tax professional? You said that your tax planning is your big thing.

Andy:
Yeah. More or less myself, yeah. I had a fairly robust taxable brokerage and fairly minimal comparatively retirement savings. Because for the first four, I think it was five years. Between four and five years that I worked at this company, they had no 401(k). This was a tiny company. They didn’t offer one. The only opportunity I had beyond IRA’s, Roth IRA’s to contribute to retirement savings was once I set up my solo 401(k) when I was a partner, when I was receiving K-1 income.
It was actually self-employment income that I could then create that vehicle to protect myself from taxes. Before that, everything was taxable brokerage. That meant that I knew I had a larger opportunity the most to optimize my taxes through things like tax loss harvesting. I did it myself. It was through research in all the normal FIRE blogs. I think Physician on FIRE had one of the very good ones about tax loss harvesting. Yeah. I’ve just done a lot of research through blog articles and did it myself in Vanguard at that time. Yeah.

Mindy:
In the beginning of this episode, I alluded to the fact that you bought 30 rental properties in one year. Did you use some of this $200,000 payout to invest in real estate?

Andy:
Yes. First of all, that’s slightly overstated. It’s not 30. I acquired 21 units in 10 months. That was at this time, yeah. I did use the buyout towards those purchases. I had bought a rental property in 2015 locally to me in Central Florida. That was it. I’d owned that and my primary residence. I went about six months after I quit my job in May of ’19 without doing anything that could possibly be classified as work. I just decompressed, went for a lot of bike rides and it was great.
It really cleared my head and got my gears turning about possible opportunities that I could take advantage of going forward. It was right towards the end of 2019 that I decided there was a good opportunity here to basically, I was very much aware of how ridiculously cheap that was at that time. This was before it got down to its low lows in COVID. I had some little experience with rental real estate. I knew I had the time and I knew I had the experience from my professional job, which is basically managing transactions through a bunch of teams.
I knew I had the ability to buy these rental properties. The reason I did it very quickly was very intentional because I knew I had a ticking clock of how long I could qualify for mortgages. I had income in early 2019. It’s K-1 income so it’s not like I’m getting a monthly paycheck or anything like that. I knew I had this big buyout in 2020 so I could show income in 2020 as well. I then wasn’t getting another cent after January 1st. I knew once the lender realized there wasn’t monthly income coming in after that, it was going to dry up for me as the borrower.
I wanted to take advantage of that. Yeah. I basically did a ton of research on possible markets. I knew I wanted to go out of my market in Central Florida. Essentially, through BiggerPockets, did a lot of research on what the best option was for me. I basically did a toned down version of the BRRRR Method that I’m sure many listeners are familiar with and bought distressed properties in cash, which was a mixture of using that buyout that we discussed. I had a hillock on my primary residence and I used margin on my fairly robust brokerage account.
It’s essentially my own hard money lender is how I thought of it and would take these short term loans from my hillock or use cash or use margin to buy distressed properties. Started with a lot of HUD foreclosures. I started in Birmingham, Alabama. That was the first market and tried to build teams of property managers, contractors, the agent to acquire these. Simultaneously, I was then researching other markets because I had a desire for geographic diversification, which there’s a trade off there because you lose scale that you have in a particular market.
That was the choice I made so I then ventured into Tallahassee, Florida, Columbus, Ohio. I’ve got one in the outskirts of Cleveland, Ohio as well. Just looking for landlord-friendly states where I could get a good cash flowing return. Yeah. I bought them. I had come across the concept of, I believe it’s called delayed financing where you can buy a property in cash and then you can cash out refire the next day essentially or in my case, once I’d finished my renovation. Because otherwise, I believe you had to wait six months. I didn’t have that time to continue to qualify for loans.
Yeah. I did that multiple properties at the same time. Renovating, renting, refinancing and then doing it with other properties. When my lending capacity dried up in maybe May or June of 2020, it was when I got cut off, we switched to my wife being the lender on a few as well. Yeah. We acquired them rapidly that way. We achieved that.

Mindy:
Knowing that you have this super tight timeline, why real estate and not just the stock market?

Andy:
It was because of leverage. Because I was confident that if I could find properties with a certain … The way I analyzed it was with cap rates. I was from the commercial real estate world where you look at un-levered return on a building and that’s its cap rate. I compared that to the cost of my debt. My analysis showed that if I could get debt, which now, it averages around 4% through my debt.
If I could get debt, let’s just call it 4% for everything, but find properties that had a cap rate of 6 or 7%, you’re going to get a good return on that if they truly are cap rates of 6 or 7%. I realized that my analysis told me when I was buying these properties that even if the properties cash flowed zero and appreciated zero over 30 years, I will still get about an 8% return just from repayment of principal. I considered that somewhat of a worst case scenario. It was still comparable to the returns of the stock market.
My goal with this venture was to going back to early on, was to bolster our financial position beyond being a lean financially independent on all then expenses to be truly financially independent. I wanted to accelerate it. That’s how I view real estate. I honestly do not like real estate. I do not like owning things that slowly fall apart. It’s stressful, but I knew that this was an opportunity that I had that I might not have again if I never get traditional employment again. I knew that debt was so absurdly cheap.
I just thought it was something I couldn’t pass up. I had the time. Although this was quick, this is all I did, right? This was all I did for work. It wasn’t overwhelming to do it at this pace. Yeah. I was pretty confident that I could get some pretty attractive returns over the long term just based on the cost of capital that I had.

Kyle:
Let’s do a little bit of a no investor left behind here. We’ll back up just on some of these awesome terms that Andy’s thrown out here. He’s saying cap rates. It’s a commercial real estate phrase for yield or dividend. These are similar things, interests that you would get on something, but it’s essentially what a property will earn after all expenses are paid. He talked about pre-leverage, which means no mortgage, no debt on the property. Leverage is debt that he’s putting on these properties. I just want to call something out, too.
When Andy’s talking about putting all these debt on all these properties and then refinancing and pull the money back out, it can sound risky having debt, when people have this very risk view of debt. That’s a real thing to be aware of, for sure. Debt can be very risky if you deploy it really not in a good way. What Andy’s saying, too, is there were these historically low mortgages that we all wish we had put on everything like Andy just did back then that were historically below the rate of inflation sometimes. That’s just huge.
If we’re talking about a risk versus reward trade off, Andy’s thinking in his mind, we’re going to lock in his amazing 30-year mortgages. The example that you gave, Andy of worst case scenario, I got no cash flow. I get no appreciation, which over 30 years, I don’t see any scenario where you don’t get appreciation with the way global governments print money. That’s impossible. Even in that scenario, you’ve got it paid down. You’ve got this very cheap mortgage that just sits there for 30 years, which is a very unique thing to the US compared to a lot of other countries, too.
Good stuff. I just want to make another comment about the planning that Andy did through all this. He just deployed things so fast and it can maybe seem like Andy had experience. He had this job or he was doing this all the time, which is very true. You get questions from people. Should I invest in the market now? Should I wait until next year? Should I have done it? I should have done it last year. That’s what everyone says. You need to look at your situation and just make a plan for what is best for you. That’s what Andy did here.
He knew that he couldn’t get these mortgages anymore on normal conventional financing. There’s other products out there that you can pay higher interests on that investors do. He just executed a plan and it was going to work out in the worst case scenario and it happened to be a lot better. Because these are properties that I’m sure with the timing have appreciated really nicely. You’ve locked in this amazing debt on it. Where are you at right now? What’s life look like today? What are your plans for the next five years?
One more thing I was going to say. I’m going to ask you for your age. How old are you, Andy?

Andy:
I’m 34.

Kyle:
34. He’s a spring chicken.

Andy:
Yeah. I was 29 when I quit.

Kyle:
29 when you quit. That’s another thing, a contingency plan. The worst case scenario, Andy has built himself a skillset, too. He can always go back to work if he really had to. There’s this possibility of going back into an industry where he has a specialty. As you’re on this financial journey, having these contingency plans of the real estate, building it up, building up your savings, build your brokerage account, building up your skillset.
If you get burnt out and you need to go out for a few years and say you spend through to just recover, but you can go back into the job at that point. I just wanted to pick up on that a little bit because that’s a asset that you have that’s not financial that people need to think about. Especially if you do this in the 20s or 30s age bracket, it really makes a difference. Sorry. Back to the question. What are you up to today? What’s coming in the next few years?

Andy:
From a financial perspective, I’ll start with that. My goal actually is probably to downsize my real estate portfolio. I haven’t bought a property since October 2020. I don’t plan to buy another rental property going forward. I actually really like how Scott talks about, Scott Trench, obviously. Talks about portfolio composition and what you want your future portfolio to look like. I thought a lot about that. My ideal future portfolio has a lot less real estate.
Although I have property managers for all of them, except for one legacy, my 2015 property that still has the same tenant and is no work at all. Despite that, some of them are annoying and have hassle that you have to deal with. I actually especially with having more equity now, so the return on that equity not being as attractive as it was when I bought them, I’d rather deploy that equity elsewhere. I’m planning to transition my portfolio into more … I’ve started the last couple of years doing more private lending and other ways to produce fixed income.
Because that’s really what the real estate was for. It was to produce fixed income and benefit from cheap debt. I plan to downsize some of that portfolio. Deploy more into private lending because I would just love to never have to sell index funds and create a fixed income portfolio that covers expenses. That’d be really nice psychologically even though it’s not necessary. You can sell stuff to create the income you need. In terms of just general, we’re now in Denver, Colorado. I consider myself having maybe three, maybe four part-time jobs at the moment.
One, I’ve been doing Rover, which is dog walking fairly prolifically the last couple of years. I do a lot of that. It gets me out of the house even in the cold winter months. We’ve been dog-sitting some dogs at our house as well. It’s been a great side hustle. Additionally, I mentioned how I left my prior employer on good terms. We had a very good conversation throughout the whole process of me leaving. In early 2022, he had reached out, see if I wanted to help him basically form a little private equity fund that provides equity for those same physician-owned properties.
Instead of arranging debt, injecting equity and so I’ve been doing that. It’s only a few hours a week because we’ve yet to deploy money. It’s been fairly hands off from my perspective, but it’s been a very interesting educational experience on real estate private equity for me and scratches my intellectual itch, I suppose. I’ve been doing that a few hours a week. We had our first order in May of this year.

Kyle:
Right.

Andy:
It has been another big part of this. We’ve been privileged enough to both be able to stay home for a lot of these first few months and just intermittently working part-time. Yeah. We’ve been doing a lot of that as well. I guess the other part-time job is still managing the managers of my rental portfolio. Yeah.

Mindy:
Downsizing your real estate portfolio will come with tax obligations. You can mitigate some of those tax obligations with a 1031 exchange, which is the selling of a rental property and then taking all the money and putting it into another rental property. Do you have plans to do that? Do you have plans to … You could just pay the tax. You’re such a tax master, Mr. $1500 on 200,000. What are your plans to mitigate your tax burdens when you sell your rental properties this time?

Andy:
Good question. I actually was talking about this a little bit last night. I’m a member of this thin talks group. I know you’ve had [Ambley 00:40:15] on the show. I was talking about this with them because I have to get over the fact that I can’t let the tax tail wag the dog or whatever as it relates to this. Yeah. I have known tension of 1031 exchanging into it anything. It would just be about strategically selling the properties over a period of time. I’m not going to sell them all in one tax year, for instance.
Actually, because we did a lot of accelerated depreciation early on, we have a fairly big loss that I can use against one property. It’s not going to cover a lot of sales, but yeah. That will along with some carryover loss from harvesting losses in my brokerage account, that will offset some of it. Yeah. There’s going to be again, I’ll have to pay. That’s tough for me to take because I still arrange our finances in such a way that neither of us gets benefits through either of these. My wife still works part-time at Denver Zoo, but doesn’t get any healthcare benefits.
We buy healthcare on the exchange. I’ve arranged it in such a way that we get strong subsidies for that. We’ll lose that the year I sell the property, really any property because we’ll blow through the last that I captured. We’ll have to pay some capital gains, which will be tough to do, but it will be okay. Because I think it will make sense for how we want to design that ideal portfolio. I’m not considering the 1031 exchange because my ideal portfolio contains less real estate. Yeah. I wouldn’t consider that as an option.

Kyle:
Andy, it has been really cool having you on here. I’m going to let Mindy wrap this up because she does it way better than me, but it’s been a pleasure talking to you and hearing your story. Thank you so much for coming.

Mindy:
Yes. This was fantastic. I learned a lot. I’m super excited for your next steps. I want to hear what you decide and how you handle the tax burden of your sales. I wonder if seller financing could be an option to help spread it out over several years. I’m excited for what the future holds for you because you do your research. You dive deep into it and then you take that educated plan and execute it. That’s exactly what I want all of our listeners to do. Thank you so much for sharing your story with our listeners today. It was fantastic having you on the show.

Andy:
Thanks so much. It was really, really enjoyable talking through it all. Appreciate you having me.

Mindy:
Andy, where can people find you if they’re looking for you online?

Andy:
Gosh. Not long after when I quit, I remember I deleted my LinkedIn profile. That was actually a cathartic moment. I don’t have much of an online presence, but maybe we can put my email address in the show notes. Yeah. Anyone who wants to reach out to discuss anything, I’d be happy to chat about this. I can talk about this stuff all day.

Mindy:
You can always email [email protected] and I can connect you with Andy as well.

Andy:
Great.

Mindy:
All right. Andy, thank you so much. We will talk to you soon.

Andy:
All right. Thank you.

Mindy:
That was Andy. That was so much fun. Kyle, what was your favorite part of that episode?

Kyle:
You can’t get away from the financial planning. For me, this guy was speaking my language the whole time. He had contingency plans. He had tax planning. We talked after the call. We found out he actually wants to buy a hobby farm at some point. This guy is just pushing all my buttons. I really, really had a good time talking to him. People can learn so much from how he did so much in a small amount of time, but it was not by the seat of his pants. He really did his research.
He really made educated planning decisions as Mindy pointed out when we talked to him. It was great.

Mindy:
He didn’t have analysis paralysis. It is one thing to do all of the research and then just let it sit. It’s quite another to do all of the research and then take action. It may not work for you to take the massive action that he took buying 15, 19, 21 rental properties in one year, but he had a reason for it. He did it on purpose, educated. He knew what he wanted to do and he took action after doing the research. That is my favorite part of his story is that he didn’t let himself get paralyzed with fear.
He’s like, “I’m going to do this. I feel confident that I have done my research and now, I’m going to jump in.” He did and not every property is a home run. Grand slam home runs don’t happen very frequently in real estate. All those people telling you about all their grand slam home runs, those were purchased in 2010 at the very bottom of the market. Don’t look for those. Look for great properties that are cash flowing well. That’s what he did. Now, he’s got some awesome properties.
I’m so excited to see what he does with the properties that he wants to now sell because he’s held them for a while. I’m excited for this future. You can bet we’re going to check back in with him in a few months. All right, Kyle. Should we get out of here?

Kyle:
Yeah. Let’s get out of here.

Mindy:
That wraps up this episode of the BiggerPockets Money Podcast. He is the fearless Kyle Mast and I am Mindy Jensen saying, TTFM, little hen.

Scott:
If you enjoyed today’s episode, please give us a 5-star review on Spotify or Apple. If you’re looking for even more money content, feel free to visit our YouTube channel @youtube.com/biggerpocketsmoney.

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.


Leave a Reply

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