The Land Geek's Podcast #88

Welcome to the Land Geek Podcast, your resource for information and tips to making money by buying and selling land. Let the Land Geek show you how to make a passive income by working smart, not working hard. Learn strategies and tricks to make money buying and selling raw land today. And here is the man that's gonna help you do that. The Land Geek.

Hey, it's Mark Podolski, the Land Geek, with your favorite, favorite niche real estate website, www.thelandgeek.com. and today is really special because I was able to rope in one of the most popular bloggers in the world, Paula Pant, the founder of Afford Anything, a website devoted to helping people maximize their money, reach financial freedom, and live their wildest dreams. I am pleased and honored and really excited to hear from Paul Pant. Paula, how are you?

I'm great, I'm great. Thank you for inviting me on. I don't know if I'm one of the most popular bloggers in the world.

But you are in my book, Paula.

Oh, well, thank you.

Yeah. Because you know, the Langee community, everyone that I think listens to this podcast really believes in the holy grail of income, passive income, which I teach people how to get through investing in raw land. I mean, we're talking about 300% to 1,000% returns, right? However, once you start making that money, there's going to be bumps along the road. You want to maximize your money, but more importantly, what good is it to work 80 hours a week or 50 hours a week, whatever it is, and not be fulfilled with your life?

Right.

So tell me, how did you become this person that really, I guess, is like an expert in maximizing not just your money, but your life energy? How does that happen?

Well, I'm a big believer in aligning your values with your spending. And not just with your spending in terms of money, but all of your spending in terms of how you spend your time, how you spend your income.

Give me an example.

All right, so I, back in 2008, I quit my job. I had a 9 to 5 job before that. I quit the 9 to 5 and I traveled for two years non stop. And I was a full time traveler. I wasn't working on the side or making any money. I was doing nothing but just cruising around the world for a couple of years like as though I was retired. And everyone said to me at the time, I would love to do that, but I can't afford it. I heard that remark over and over and over. But the, the fact of the matter was a lot of the people who were saying that earned substantially more than I did, but they thought that they couldn't afford it because they were spending all of their money on things that society said was normal. They're spending their money on fancy cars or fancy houses or whatever it was that they were buying. And, and they thought that that was completely normal. And then they didn't have any money left over to do the things that they really wanted to do, like travel.

Interesting. Very interesting. But Paul, why is that? Why are we all sort of mesmerized with the fact of having a big car and a big house and then kind of being house poor and car poor?

I think it's. I think it's because a lot of people haven't taken the time to. To truly think about what their priorities are and find a way to align the tools that they have with the priorities that they want to match. I guess that sounds a little bit esoteric, but let me put it this way. If you live your life in a way that other people think is totally normal, you graduate from college, you get maybe a master's degree, you get a job, you get a house, you get a car, you get a white picket fence, you spend your money on, on gadgets and gizmos and clothing and restaurants. No one will ever question you. No one will say, oh my goodness, how can you do that? You're so rich. No one. No, just nobody will ask questions. Everybody will act like it's the most standard thing in the world. But if you, let's say, buy an apartment building or buy multiple rental properties or spend a month in Aruba or Bali or Cambodia or some exotic country, even though the actual cost in terms of raw dollars and cents is perhaps substantially less than what Joe Jones next door is spending, people will suddenly start to raise eyebrows and they'll say, wait a minute, how on earth could you afford to pay cash for a rental property? Or how on earth could you afford to take that month long TR. The Bahamas? So. So I suppose that's an example. People just. Some people just don't take that time. And it doesn't take any time at all. It just really. They don't stop to ponder how they want to dispense their dollars.

Yeah. You know, it's funny because I, you know, my program is all geared towards this, right, with what I call the investors Toolkit. It teaches people how to buy and sell raw land, builds up a passive income. So the eventual goal being that their passive income exceeds their fixed expenses, right? Yeah. Now, to get to that point, it sounds Simple. It's a lot of hard work.

Right.

I mean, nothing's easy, but once you get there, then you've got this financial freedom. But I can't tell you how many people email me, mark, I'd love to get your course. I can't afford it. What do you, I mean, what do you say to those people?

I mean, when a person says that they can't afford something, what they're really saying is it's not a priority.

It's not a priority. Right?

Yeah, that's functionally what they mean. Now obviously there are limits to that. Like, you know, I can't afford a private jet. But within reason, if a person is saying that they can't afford X or Y, what they're really saying is, I'm not willing to, say, skip a couple of dinners out. I'm not willing to buy clothes from TJ Maxx rather than the shopping mall. That's what they're really saying.

Right, Right. So, okay, let me ask you this then, because this is one of your most popular blog posts and I don't understand it all. If I had a million dollars, I'd go into debt. What does that mean?

That was a post that, that's actually funny that you found that. That was one of the first posts I wrote when I began my blog, Afford anything. Calm down. And it was a response to the fact that in the financial blogging community, which I know very well, a lot of people have a bit of a knee jerk reaction to debt. Debt bad. Debt bad. That's kind of drilled into people's heads when they start blogging about finance. And that post, if I had a million dollars, I'd go into debt, meant to illustrate that leverage can be a very powerful thing. And so what I did was I ran through the numbers of buying a few rental properties outright in cash with a million dollars versus taking that million dollars, splitting it up into multiple down payments, and leveraging into several rental properties. Now in that blog post, I showed how leveraging into several rental properties rather than buying them in cash can actually net you more money, both in the immediate term as well as in the long run. Of course, that being said, Mark, as I'm sure you know, and as I'm sure you've talked about in previous podcasts and in your course, there's, there's obviously leverage is a lever like any tool. It can be used to build a house or to smash your thumb.

Right.

You know, so of course you don't want to over leverage. You don't want to Go too crazy with it. But, but I put that post out there for the benefit of people who are so debt diverse that they're not willing to consider even leveraging into one or two properties. You know, that post is for those people.

Yeah. You know, and I love that because really what you're doing and what you're writing about is, you know, don't have this rigid mentality when it comes to finance. Right. Which I think a lot of people, they just, like you said, you grow up hearing, don't go into debt, don't go into debt. That's the, that's bad, that's bad. But that's not necessarily the case. It depends on what you're using it for. If you're buying, or I should say you're making an investment that's going to give you a return or potential return, and there's an excellent risk reward ratio. Well, use it.

Right.

If it's going to be to buy an appreciating asset, let's say a car. Well, I don't know. Maybe not. Unless that car is going to get you to a, you know, somewhere that you need to be that is maximizing your time where, you know, if I'm a surgeon, then sure, let's, let's, let's go into debt on a car. I need that car.

Right. You know, it's funny that you bring up the car example because one of my other most popular blog posts on affordanything.com is called should you'd pay cash for a car? And it's an entire discussion. And I use myself as an example of the dilemma over whether we should take $10,000 and use it to pay cash for a car or use that same $10,000 and use it to buy some type of an investment. And so it's a very long, very like, it's a very long, detailed blog post about that question. And that post has gotten, I think, almost 150 comments. It just, it caught fire. So it's clearly an issue that's on a lot of people's minds that a lot of people want to know about.

Right. Right. So what do you think? I mean, when you, is your position still the same? Should you pay cash for a car or should you use that money to buy something that is going to get a higher return?

In our case, we decided to pay cash for the car. And the reason for that is because, first of all, we're only talking about $10,000. It's not to sound flippant, but that's not a huge Sum of money relative to taking out a mortgage for $400,000. And so part of the reason that we decided to pay cash for a car was just because that 10,000 at this point in our lives, and I should state here that I am financially free, meaning that my passive income is higher than my monthly expenses.

Congratulations.

Thank you. Thank you. And so at this point in my life, just the paperwork and hassle of having to apply for a $10,000 loan, it just wasn't worth it. Even if it just took a couple of hours, I would much rather just pay cash, get it over with, and spend my brain power, because my brain power is limited, too, on focusing on how to make money rather than how to super optimize every dollar. It's the same reason that I don't clip coupons. You know, I realized, yes, I could save some money doing that, but my. I only have a limited amount of time and more importantly, mental energy. And so it's just a matter of where do I want to direct that mental energy?

Sure, sure. Okay, so now you had a plan, Correct. You woke up one day and said, life's too short to be working in a cubicle. I. Or doing things I don't like to do, Trading dollars for hours.

Yes.

How did that happen? And what sort of motivated you to make this plan that you knew, okay, if I want to be financially free, this is what I'm going to do. This is how I'm going to do it. And you made it happen. What was your journey?

Well, I knew even before I got my job. I was a newspaper reporter up until 2008. And even before I landed that job, I'd always had the dream of traveling. Travel has always just been a huge passion for me. But of course, I logistically couldn't. I'd graduated from college like any recent college graduate, was starting from nothing. Sure. And so I got a job in order to make some money and pay the bills. But while I was working, I was saving very diligently towards this goal of travel. And then in 2008, I quit. I traveled for two years. I came back to the U.S. in 2010, and when I returned to the U.S. i realized I may have to get another job. And that, to me, sounded like the most horrible prospect in the world. The idea once you've. Once you've had the freedom of not being under an employer for a couple of years, the notion of going back just. It just sounds terrible. And so I thought to myself, well, you know, what I've just done for the past Two years has been great. I've lived off savings, but the problem with that is that those savings dwindle and eventually they go away and then you're left with nothing. And so that was what got me thinking, all right, how can I make this sustainable? How can I create a machine that will automatically generate income while I sleep so that I will never be forced to get a job again?

Brilliant. So what did you do?

So at that point, I did two things. One was I began working for myself just in order to generate enough money to pay the bills immediately. So I began freelance writing, online marketing, online consulting, things of that nature, just for immediate day to day expenses, and then anything beyond. I lived very cheaply. I've always been naturally frugal. And so as a result, I was able to continue saving that gap between what I earned and what I spent. And I took that money, that savings that I was making from my day to day work, and put it towards real estate. And it started with a triplex. And my partner Will and I, we bought this triplex together and moved into one of the units and rented out. We actually moved into one of the units with roommates and rented out the other two. So we were fully maximizing every possible square foot that we could.

I love it. Okay.

And initially, because that was our first property, we were very, as a lot of novices are, as a lot of beginners are, we were very much caught in the do it yourself trap where we were doing a lot of the repairs and the maintenance ourselves, we were doing all of the property management ourselves. But eventually we began to scale. And so we bought, I think later that year, maybe the next year, we bought our second house, which was a single family home. It was a foreclosure. And in that house we were still caught in the do it yourself loop. But at that point we were up to four units, you know, a triplex plus a single family home. And the level of work that was required to do everything ourselves on four units was, was starting to interfere with our quote, unquote day jobs. And so at that point we realized, well, one or the other has to go. So in, in our case, we both decided that we actually, for me, like, I enjoy what I do from my laptop, freelance writing, I enjoy that more than I enjoy repairing toilets or. And so I made the very conscious decision to make my real estate career as passive as possible because my dream is not to be a full time investor. My dream is to earn a full time living passively from my investments so that I can then Spend my time doing things that are more interesting to me. And for me, blogging, writing, that is a lot more interesting to me. I just, I like that better. And so then we really concentrated on making our real estate as passive as possible. We brought on property managers. We hired and fired a whole long list of general contractors until we finally found ones that were awesome. Amazing. We found great various subs, plumbers, electricians. We assembled that team. And then in the process of doing that kind of alongside it, I got a real estate license. So I became a licensed real estate agent so I could begin to search for my own properties. And then in rather quick succession, we bought houses number three, four and five. So at this point, we're up to seven units across five properties.

Okay, and I assume they're all positively cash flowing at this point.

Yes, two of them we actually bought in cash. So going back to that leverage versus cash discussion, we are, although I am pro leverage, I'm on the conservative side of pro leverage relative to a lot of other real estate investors. And so, so yes, the two of the houses we bought in cash, and all of them are cash flow positive to the tune of at least 4 to 5,000 a year per property. And the triplex nets us about 15 a year per property. Per 15 a year for the whole. You. For the whole building. So all in all, our real estate portfolio combined and. Hold on, let me, let me look this up to make sure that I'm quoting it correctly. So 15, 20, 25. So our entire real estate portfolio combined brings us close to about 40,000. Between 35 to $40,000 in net positive cash flow per year. And because we live frugally, it's just myself and Will, we don't have any children because we live frugally, that's more than enough to cover our day to day expenses.

Okay, so now you're covering your everyday expenses, but then what are you doing with the rest of the money?

Oh, well, so we invest quite a bit actually. I actually have a savings rate of between 50 to 75% of all of our income. Now that includes income that I make from my blog, from consulting, from speaking engagements, from all of that. So that's not just real estate income alone, but. But across all of our income combined, we save between 50 to 75%. And that goes into a combination of paying down the properties that we have. Because remember, I am on the conservative side of pro leverage. So it goes into a combination of paying down the properties and buying more properties.

Fantastic. Okay, well, so from a value standpoint then what are your three biggest values that you say, okay, this is really where I, this is what I value in life and this is where I'm going to put my money. So, like, do you and your partner travel once a year and go around the world once a year, or do you say, okay, you know, in 2015, we've saved this amount of money and we're going to take six months off and do this? Like, how does that, like how do you make those decisions and how do you discipline to stay within those values to be that frugal and have such a high savings rate when the average American can't save anything?

Well, for one thing, I definitely don't live like the average American. Like the, the shirt that I'm wearing right now, I'm pretty sure that I've owned it for about, geez, probably, probably. I've owned this thing since I was 16.

16 years old, Paula.

Well, I guess that's a testament to the quality I tend to buy. Not, I don't buy a lot of things, but what I do buy is high quality and durable so that I don't have to replace it very often. But the point of that is that to me personally, clothing and fashion is just not a priority. And so I don't spend money on it. It's just, and I'm not criticizing people who do, if it is consciously and deliberately a high priority for you, then go ahead, spend your money on clothing. But I've, I've reflected on where that fits into my life. And fashion is just not a big priority in my life. And so I don't put my money there. Travel, on the other hand, is. And so in 2014, I, I was on the road for roughly one out of every three days. I was gone for more than 100 days out of, out of the 365 day year.

Wow. Where'd you go?

Everywhere. Well, let's see. I've got a list. I can't remember it all off the top of my head, but let me pull it up so I can. You know, everybody always asks me that. That's like picking your favorite child, like picking your favorite pet. All right. Oh, here's my, here's my 2014 list. All right. Las Vegas, Austin, Hilton Head Island, Savannah, Georgia, New York City, San Diego, Costa Rica, Destin, Florida, Ireland, Nevada, San Diego again, New Orleans. That was New Orleans for the first time that year. Austin, Texas again. Then I went to Miami. And in December, I was originally going to go to Hawaii, but it turns out that I'm going to go back to Las Vegas.

Wow.

Wow.

Well, Paul, what do you say to couples? Because, you know, I'll give you an example. Like, I'm a saver. My wife loves Nordstrom and Neiman Marcus. She likes to shop. Now, if she's listening to this podcast, I love you, you know, it's okay. But that's, but that's what she likes. She likes nice things where I'm more on the side of, you know, I'd rather do things than have things. So there's always a sort of built intention. Let's go out for a big dinner tonight. Do we have to go out for a big dinner? Let's cook. It's like, oh, come on, live a little, you only live once kind of thing. So there's always this ongoing tension. And how do you kind of reconcile that or help people reconcile that?

So what I recommend doing, and I refer to this as the easiest budget ever, is to skim your savings off the top and then just go wild with the rest.

Skim your savings off the top and then go wild with the rest.

Exactly, exactly. So first decide what savings rate you want. Let's say that you decide that you want to save 20% of your income. The moment you get paid, yank that off the top right away. And then go nuts with the rest, totally guilt free, because you know that you've already shoveled away those savings. So if in the remaining 80% of your income, you have enough money to shop at a fancy clothing store or go out to dinner or whatever it is that you want to do, go do it and don't think twice about it.

Okay, that's great.

So that's actually exactly what Will and I do. But we just do it with a higher percentage. We do it with somewhere between 50 to 75% and then the remaining money that's left over, we don't budget it at all. We spend it on whatever we want because we know that we're saving a minimum of 50% of our income. So if we want to drop $100 on a fancy dinner or, or $500 on plane tickets to New York or New Orleans or Las Vegas, we don't think twice.

Okay, that's great. So, so you're not using any mental bandwidth at all. There's really no sort of, you know, ringing of the hands going back and forth, checking kayak, doing this, doing that when you're making any kind of purchase because you're, you've already saved the money for the month. You can just do what you Want like you, you don't have to go through that, that mental checklist, if you will. Like, should I do it? Should I not do it?

Yeah, yeah, exactly. We just, we make it as, as easy as possible by automating the whole thing because passive. I mean, and for people who are interested in passive income, I think that the rule applies. The more passive something is, the more awesome. And you know, that's true of passive income, like income that just comes in while you sleep. That's also true of a passive saving strategy. I don't think about saving my money. It just happens automatically.

Right.

And then one day after several months go by, you check your account and you're like, hey, that's interesting. I've just built up $70,000. What should I do with it? Hmm, I guess I could make a gigantic payment towards one of my mortgages. Or I could go buy a house in cash. Or I can max out every retirement account, sep, ira, traditional Iraq, hsa. I can max them all out in one big go.

Yeah, I mean, December must be a fun time of year for you.

Really? Really? January is the fun time of year because that's when typically what I'll do is by December, I've got enough money to max out every retirement account for the following year. So between me and will, that's, that's two four one Ks, two IRAs, two HSAs. So I've got all the money set aside for every tax advantaged retirement account and then it's all just sitting there in December and I'm like, oh my goodness, I'm so antsy. Why is this all in cash? And then January hits and I'm like, yes, I get to put this in the market.

Fantastic. Fantastic. Well, I mean, that's really admirable. So this is the point, the podcast now that I absolutely love, especially with mug acids, because I get to put you on the spot. I get to ask you, what is your tip of the week? What is a, you know, resource or something that the listeners can go and implement right away that, that you recommend and that will benefit them in their lives?

Sure. Do you want it to be related to budgeting or real estate? What, what arena should this be around?

Whatever you think, you know, you, you know, hey, you know, your mom calls you Paula.

Uh huh.

What's your tip of the week?

What should I do? All right, all right.

What can I do to improve my life?

So if you go to afford anything dot com.

Okay.

There's a blog post recently published called take the 1% challenge and this is my, my call to action, my call to arms for anyone who's having a hard time saving or who wants to save more than they currently are. And this 1% challenge says in January of the new year or really anytime. I mean, people, you can pick a new year because New Year's resolution, but next month, whatever that next month is, save one additional percent of your income beyond what you're currently saving. So if you currently save 0, save 1%. If you currently save 5% of your income, save 6%. So next month, save 1 extra percent. The following month, save 1 more percent. The month after that, save 1 more percent. And so after a year of doing this, you'll have increased your savings rate by 12%.

Phenomenal. I love it. I love it. Now, I'm going to ask you another quick question. Where do you recommend I save that money? I mean, I'm at Bank of America. It's like.04%. So I put it on like capital 1 360, but then I started doing some research and that was like 0.75%. There's one at like 1%.

Yeah. So, so EverBank and I, I discuss it at length on, on that same blog post. EverBank is a very high yield relative to savings accounts. That's where you get the highest yields because they, first of all, they, at the current time, they're giving a 1% return. And more importantly, they take what's called the top 5% pledge, which means that no matter how savings yields fluctuate in the future, they will always be in the top 5% relative to all other banking institutions. Financial institutions, Major financial institutions. So you know that no matter how interest rates change in the months and years to come, you can reliably have your money in a bank that's within the top 5% of yields.

All right. That's a phenomenal tip. Everbank.com yes.

And if you, if you go to my website, I have a. I'm a bit of a geek, I'm a bit of a nerd. So I like doing breakdowns and analyses and things like that. So you can see that all there. I had a, there's another blog post on there called, It's. Does a Monkey throwing darts Beat the Market? I literally blindfold myself, throw darts at a list of stocks and invest in the ones that I hit. And, and then I put a bunch of money into an EverBank account and I see how the two compare. And so if you go to Afford anything dot com, you'll, you'll see that Entire breakdown as well.

I'm gonna read that post as soon as we hang up. Really? I'm really excited to read that.

Well, it's pretty cool. I've even got the YouTube video of myself blindfolded throwing darts at a list of stocks.

This is awesome. Well, listen, my tip of the week is for everybody to go to Afford Anything Dot Com. Learn more about Paula. She's got tons of free resources in there. And really, if you're listening to this podcast, I know for a fact passive income is near and dear to your heart. And the fact that land investing, you know, and Paul, I don't know if you know about this, but, you know, I help people invest in land without renters, renovations or repairs or rodents. So it's very. It's a simple method using raw land. And so, yeah, I mean, I think it's just a perfect mix for the Land Geek community to maximize their time, maximize their money and their knowledge about really getting to the next level, not just financially, but also, you know, aligning your values with spending your money. And Paul Pan, are we good?

Yeah. Yeah. Thank you for having me on.

Thank you so much. Are you going to come back? Because this is a huge topic. There's so much more to talk about. And now that I'm looking at some of your other blog posts, like the Airbnb experiment, there's just so much to talk about. Paula, you gotta come back.

Sure, sure, I'd love to.

All right, fantastic. Well, thank you so much. I want to remind all the listeners, go to www.thelamegeek.com and download for free the Passive Income Blueprint. Get the ebook how to Avoid the Three Fatal Land Buying Mistakes. And of course, get this always informative and engaging podcast delivered each week to your email inbox. And look, give me some love. If you're looking to acquire some wholesale land, go to frontierpropertiesusa.com I've got stuff there as well. And give myself and Paul a little love. We have a comment on itunes. Let us know how we're doing. And you know, from myself and for Paul Pant, I want to thank everyone for listening. And Paul, thanks a lot.

Thank you.

Hope to see you again. Thanks, everybody.

Thank you for listening to another episode of the Land Geek. Join us next time for more tips, secrets, and information that will help you succeed. Stay connected with the Land geek on Facebook. Facebook.com thelandgeek.