How to Retire Early with Rachel Richards | The Better Than Rich Show Ep. 38

How To Retire Early

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How To Retire Early 〰️

How to Retire Early

Psst…..

Did you hear the one about the woman who retired at 27 and now pulls in $10,000 of passive income each month?

It’s not a joke or an Instagram scam, it’s the life Rachel Richards has created for herself.

So how did this bestselling author, and frequent guest on CNBC, Forbes and more decide to find ways to generate income and be independently wealthy at a young age? It all started with growing up plagued by a constant worry about money.

Fueled by the desire to not repeat this pattern in her own life and later, to escape a wildly unhealthy work environment, Rachel developed strategies to not only invest her money but make it work for her with little to no effort on her end.

Essentially Rachel successfully escaped the traditional lifestyle of trading time for money and created loads of free time for herself and you know we are ALL about that life.

We had a great time learning from Rachel as she shared a veritable checklist of how to make the right real estate investments, how to save your money using the Bucket System, and why “boring” investments are far sexier than playing in crypto or NFTs.

If you’re interested in building independent wealth and using investments to gain time back for yourself, check out what Rachel shares with us in this episode.

Andrew Biggs 0:00
Do you want to win back 13 to 37 hours of your week, every single week? If you do, please join us we are going to be teaching the foolproof method to identifying the bottleneck in your business and teaching you how to resolve that we're going to teach you all about our three epiphanies around systems. Mike, where can people learn more and tell about the program?

Mike Abramowitz 0:18
Well, you're gonna want to go to automate delegate systemize.com. And you will learn our three epiphanies, which is automation sequencing, how to delegate and use a virtual assistant, and how to step back as a CEO using strategic retreat. So again, go to automate delegate systemize.com That's automate delegate systemize.com and get more information now.

Rachel Richards 0:43
So I think a lot of people think that money or is going to make us happy in a certain way. I do think money can make us happy. But for other reasons.

Mike Abramowitz 0:54
Welcome to the better than rich show with your hosts Andrew Biggs and Mike Abramowitz. The better than rich show helps ambitious leaders who are on a mission to leave the world better than they found it, change their perspective on what's important, increase their income and impact and systemize their life and business. If you've ever struggled with finding your purpose have felt disconnected or distracted or found yourself going through the motions. This show will remind you that what you do matters and will re inspire you to chase your highest dreams. It's time for you to become better than rich.

Andrew Biggs 1:26
Hello and welcome back to the better than rich Show. I'm your host Andrew Biggs and I'm here with my co host, Mike Abramowitz. And we have a very, very special guest here today that we're so excited to for you all to get to know. If you don't know Rachel Richards, by the end of this interview, you will fall in love with her and her content. She really is amazing. Rachel at the age of 27, was able to quit her job and fully retire and now she's living off $20,000 a month in passive income. Okay, 20,000 a month in passive income. Rachel is a best selling author of a couple books. One is money, honey, and the other is passive income, aggressive retirement, she was able to build a real estate portfolio of 38 different rental units by the age of 26. She's a former financial adviser. She's been featured on on CNBC, Forbes Business Insider, she really is amazing. She makes the topic of money management fun, entertaining and simple. For her over 250,000 millennial followers. She's really awesome at helping women as well feel capable and confident in their financial future. So you know, one of the things I'll just say about this, Rachel is I just love how down to earth you are to be honest, because I think so many people who are, you know, got their financial together sometimes think that that doesn't stink, and I just love how your approach is just so relatable and down to earth. So that's Welcome to the show, Rachael, we're so glad you're here. And I'm so glad to have you.

Rachel Richards 2:47
Thank you. Thank you, both Andrew and Mike. I'm super excited and looking forward to talking to you all for a while. So thanks for having me. I can't wait to get into it.

Andrew Biggs 2:55
Fantastic. This is gonna be fun. Yeah. And what's cool is, this is the first time we have like, a three way interview on this on this podcast. So it's gonna be super cool for us to just kind of bounce around and stuff. So, you know, as a starting point, I'd love to just kind of kick things off and say, you know, what inspired you to get going and in sort of this career and to retire by 27, like, why did you even want to do this in the first place?

Rachel Richards 3:17
Yeah, that's a great question. It kind of goes back to my childhood, the environment in which I was raised, I grew up in this really wealthy bubble in Kentucky. And just give me an idea, like my friends were, they lived in mansions. Some of the kids in my high school got brand new BMW is when they turned 16. My family was not operating that way. We were my parents lived paycheck to paycheck, we struggled with money, we weren't going out on trips, let alone going out to eat at restaurants. So I remember growing up and feeling like I didn't fit in. And that's not the way you want to feel in middle school and in high school, right. So I remember thinking, I didn't want to be like everyone else struggling with money, I didn't want to have to operate on a strict budget, I didn't want to have to borrow money from family and friends to make it to my next paycheck, I wanted to be different. And I remember thinking, what I did then would either set me up for wealth or for poverty. So I got pretty motivated. I was a finance nerd from a pretty young age. And I got pretty motivated to figure out a way to achieve financial independence so that I could take care of myself and take care of my loved ones. I read Rich Dad, Poor Dad in high school. And that's what turned me on to real estate investing. And that was kind of my way out and just learned everything I could and that's what motivated me. You know, they say fear can be paralyzing or motivating. Luckily, for me, it was very motivating to try to find a way out. That's awesome.

Mike Abramowitz 4:41
Yeah, I think many of our listeners can relate to that where it's like, I wanted to get out of this trap of working and exchanging my time for money, but I can't say that everyone has done that. So at what point did you realize it's like, Okay, I gotta get out of this trap. And I'm going to start doing my own thing because that takes a little bit of a Ask and I think a lot of our listeners that are in, you know, entrepreneurs and starting their business and, you know, have taken that risk, but I think that, you know, hearing your story of how you were able to kind of cut ties with the past and pave way for future what did that look like for you?

Rachel Richards 5:15
So for me, I was trapped in this very toxic workplace. I don't know if you all have ever worked for like an abusive, emotionally abusive boss, maybe not because Cutco people are awesome, right. I know you're with a lot of Cutco people.

Andrew Biggs 5:29
Like we'll go we'll go is slightly emotionally abusive. But I've seen some stories on your on your social media where I'm like, Oh, holy crap, like this, this woman or whatever that was leading you is just like, literally not fit to lead. So yeah, why don't you tell? So I said,

Rachel Richards 5:43
Yeah, she was just very condescending. I mean, I could tell story after story. But she made me cry. And not just me. Okay, she made other people great deals. But I just got to the point where I kind of had my enough is enough moment. And I was like, Well, I'm not going to continue to stay in a place and allow somebody to treat me this way. I'm not going to do this anymore. So I kind of begin to think how am I going to get out of this? How am I going to separate my time from my money, because I certainly don't want to keep working from nine to five, everyday for the rest of my life. Right, I started to think about the way that we traditionally approach retirement. I call it the nest egg theory. Because what we've done in the past is we've worked for 40 years, a nine to five job, we've saved up a ton of money so that we can live off it when we turn 65 For the rest of our lives. Now that used to work really well. But times have changed and the way we've approached retirement hasn't changed at all. Right? The cost of college have ballooned, placing an enormous burden on my generation, Social Security trust fund is projected to be fully depleted by the year 2034. Pensions are a thing of the past, inflation is at a 40 year high. There's appreciation in the housing market, like there's all these factors that are making it really hard to even afford to live right now. Let alone even be able to retire at 65. So I was like, this isn't gonna work for me. And I don't want to work my butt off for somebody who's going to bully me for the rest of my life. So how am I going to separate my time from my money? That's when I started learning about this thing called passive income. Now, I know you all are familiar with this phrase, but don't you think it's been sort of misused and misunderstood? Now, like, people don't 100? Yeah, like, I think people think it's a get rich quick scheme. It's this buzzword. Passive income is not a get rich, quick scheme. So the way I define it, is, it's money that is earned with little to no ongoing effort. And that doesn't mean it's easy to do. That doesn't mean it's a get rich quick scheme, there's a lot of passive income streams that still require a couple hours of work per week, or a few hours per month to maintain. Now, some people would say, well, Rachel, that's not passive, then. And you're right. It's not 100% passive, but it's still more passive than a 40 hour a week job. And any passive income stream is going to take time or money to create the passive income stream in the first place, you don't just snap your fingers, and it's magically there. But then once you have it going, it becomes very passive, very hands off. In the long run, I became obsessed with this idea. I realized that once your passive income exceeds your living expenses, you're financially independent. And I figured, well, it's going to be a lot easier. You know, instead of having to come up with a million or $2 million, by age 65 to retire, it's gonna be a lot easier to come up with five or six or $8,000 a month in passive income to cover my expenses. So that's what I set out to do. So that's my long winded answer, Mike, of how I sort of started my journey of creating passive income so that I can leave my job.

Mike Abramowitz 8:55
I love it, I think is a great answer. In fact, when I read your book, I got my first REIT and I put five grand into it. And I was like, alright, let's just see what this does. And I get like, I don't know, maybe it pays me 25 to $50 a month here and there. But that's truly passive income. Like I literally set it up a couple years ago, haven't done anything with it. And it pays me this actual money. And then I did another deal that pays me $300 A month without doing anything. So using the exact concepts that you have in your book. And funny enough, something you might not know is I had passive income in high school. For those of you that walk listen to the show, I had a vending machine in my house and I would throw parties in my house, and that brought in a lot of passive income. So their advice, I would buy him at 2025 cents apiece candy bars and sell them for 65. So got the little extra passive income with a vending machine.

Rachel Richards 9:46
Oh my god, wait, you put a vending machine in your house?

Mike Abramowitz 9:50
Yeah, my mom was my best cause

Rachel Richards 9:53
the best thing I've ever heard

Andrew Biggs 9:58
I really liked the idea. I mean Pat, I like how you define passive income, right, which is, you know, it takes little or no effort to maintain because there is a lot of misconceptions right around passive income. And I also love this financial freedom equation you have of like when your passive income exceeds your living expenses, you're financially free. So yeah, this is really helpful. I'm curious from your side, like, what are what are some of the other misconceptions? I mean, you mentioned kind of like this traditional nest egg theory, what's the new way? What's, what's the millennial the Gen Z way, right to get rich and retire early. From your perspective? What's coming up for you there?

Rachel Richards 10:34
Oh, there's a lot of ways I think the Passive Income Method is my favorite. But I think another thing that's changing in terms of ways to achieve financial independence is there's this shift from frugality Towards Abundance. You know, it used to be achieved financial independence by being extremely, extremely frugal. And a lot of people in the like nerdy financial independence world not medicine, nerdy, I claim nerdy as like a good thing, they, you know, they call that lean fire. So it's like, get my expenses as low and low and low as possible. That way, I don't have to save nearly as much to become financially independent. So if my expenses are only $1,000 a month, then I only need to create, you know, $1,000 a month in income streams to retire or have way less money saved as a nest egg to retire. I think people are kind of sick of that. They don't like to be so restricted. I know that when I wanted to retire, I wanted to travel the world, right? I wanted to live in nice places. I don't want to eat like ramen noodles for the rest of my life. Personally, some people do it fine. And that's great. Like, do whatever you want. But for me, personally, I was like, I'm not interested in that I want to be restricted. So there's this shift towards fat fire, which is how can I have like this fat nest egg, you know, how can I have really big passive income streams so that I can just do whatever I want. And that's what I went for. So initially, my goal was to get to $10,000 a month in passive income. And that was more than enough to cover my living expenses and still save a really good amount of money. And that meant I could travel the world, I can live in nice places, I can do whatever, I want to just not have to worry about being restricted or cut back on anything. So I think that's another, I guess, misconception or just trend that I'm seeing with millennials and Gen Z ers.

Andrew Biggs 12:16
Awesome.

Mike Abramowitz 12:17
Awesome. And one of those millennials or Gen Zers? How much would you say they need to have saved up or started? If they if they wanted to, like start putting their money to work? Do you have a theory or like, you hear the buckets approach, they fill this bucket? And then it fills over to this bucket? And it fills over this bucket? Like? What's your philosophy on that for someone who wants to get started on this.

Rachel Richards 12:37
So I do have a savings bucket method in my book money, honey, and really the way that my savings buckets works, and I love that you're holding up. And if you all there might be like two different covers, if you all look up on money, honey on Amazon, but so thank you, Mike, I appreciate it. So I'll give a quick overview of the savings buckets, I used to be very confused at the idea of saving, how much do I need? Where do I put my savings? You know, I'm saving for different things. So where do I allocate that? How do I do that all at once, it was very confusing to me. So that's why I thought of the savings buckets. With the savings buckets, you save according to the timeline of when you're going to need that thing. So you have four savings buckets, with savings bucket number one, this is just an emergency expense bucket, it's not really even an emergency fund, it's like save for expenses that are going to come up in an emergency. So I recommend having $1,000 in this bucket. And you want to keep it very liquid, keep it in cash, keep it in a checking account, keep it where you can access it. This is for things that come up that are unexpected, that you can't predict, you know, your dog swallows a tennis ball or whatever, you have to go to the vet something some kind of medical emergency happens. So that's what that is for. And what this does is it prevents you from going into credit card debt. This prevents you from having to use that credit card and set yourself back further. So that's what that is for. So do that first, that's the very first thing you do. Then you have bucket number two, this is for medium term expenses. And this is really your emergency fund, you want to have at least three to six months worth of expenses set in here. And another way to look at it is you want to save up for items that you're going to need in the next 12 months. Okay, save up for items that you're going to need in the next year. Now I still with this bucket, I don't recommend investing this in the stock market. You want to keep this in like a high yield savings account, something that still pretty accessible because you still are going to need it in the pretty short term. It still is an emergency fund. And if you put it in the stock market, it can be volatile, you could lose money there in the short term. Plus, if you put it in a stock market and sell it, you're going to have to pay short term capital gains taxes if you sell it within a year. Okay, so that's bucket two. Then you have bucket three, this is for long term expenses, things that are more than a year away but before retirement, this is normally your bigger ticket item them's like your wedding engagement fund, or gauge engagement ring fund house, you know, car anything big that you're going to purchase in the long term. Since this is the long term, it could be 1020 years, you can invest this in the stock market, since you have more time, and it's going to grow a lot more. And you don't want to put this in the retirement account, but just a normal tax account, you know, something that is going to be taxed, exactly a discount brokerage account. And then you have bucket number four, this is a retirement account, 401 k, traditional IRA, Roth IRA, this is where you're going to be saving money for retirement. And you really want to be saving to bucket number four consistently, even if it's just a little bit of per month to start yourself off, even if it's 20 bucks a month. But otherwise, you're gonna fill up the buckets consecutively. So fill up bucket number one first, then bucket number two, and then bucket number three. So that's the savings bucket strategy that's in money, honey, but that gives you a high level overview of how to save and invest your money.

Mike Abramowitz 16:00
Where does the passive income come into play? Is that like bucket five, or after these four are filled up? Or do you separate like two and three or?

Rachel Richards 16:07
So that's a good question. It's kind of interwoven, when you are creating passive income, I do suggest that you have a solid foundation in place, when you're creating passive income, I really would like to see that you don't have any high interest consumer debt. So you don't have any credit card debt, I would like to see that you're consistently contributing to a retirement account, that you have an emergency fund saved up already, if you have things like that you have a good solid foundation, you know, you understand the importance or the the basics of personal finance, that's when it's time to sort of take that next step and invest into creating some passive income streams. So you can almost take what you have saved in bucket number three, that long term savings bucket and start investing that money into creating passive income streams. So does that make sense? Does it answer your question? Okay, great.

Andrew Biggs 16:59
Awesome. Awesome. So I think I'm definitely curious to see how they have the passive income is interwoven with the personal finance, just sticking with the personal finance for a second, what are some of the biggest mistakes that you see people make? You know, just general, your, I think your first book was get your financial together, right? And it's like, so many people are just stuck in that they can't even think about investing in passive income streams, because they don't have their financial shit together. So what would you say are the biggest mistakes that you see, I'm just that step, just even just managing your money on a daily basis is a problem for some of the people.

Rachel Richards 17:32
Okay, this is such a great question, Andrew. So there are many mistakes. I'm glad you asked this, because I like to clarify. And a lot of these are just around a misunderstanding. So so let me just back up and say this, first, we have a financial education crisis. At no point in our lives are we taught how to manage our money. And then we're left as young adults to figure it out all on our own. No wonder we're left feeling guilt, shame, embarrassment, about the way that we don't know how to manage our money. And I hate to see that. So if any of you listening feel like, feel those feelings, it's not your fault. So I just want to alleviate you of that. It's not your fault that you weren't given the resources you need to succeed. I see a lot of misunderstanding, lack of education around this. So I just want to first approach everyone with the fact that this is a shame free judgment free space. And what I do is I just try to educate people so they can empower themselves. So none of this is coming from like judging or shaming or anything. So just putting that out there. Because I'm very passionate about this, it gets me very fired up. And I hate to see like women especially feel that way. So Okay, back to the mistakes, a lot of them that I see are around personal finance, specifically. One common misconception with credit scores and credit cards, a lot of people think that you have to carry a low balance on your credit card to increase your credit score. And that's not true. A lot of people think that it helps your credit utilization, if you have like a low credit utilization, and that you always have to carrying a low balance. That's not true at all, that hurts you, the best thing to do is have zero balance, don't carry a balance at all, on your credit cards. So you want to have a zero credit utilization, meaning that you don't have any balance, you're not really utilizing your credit. Because if you're carrying a balance on your credit card, you're going to be paying them interest. And the interest on that credit card can be 1520 25%. And that hurts you a lot. So I recommend paying down that balance. And keeping that balance paid off, set up your credit card so that you're automatically paying the full balance every single month. So that's one misconception. And then another mistake I see people make Andrew is with investing. So there's always the great debate about active investing versus passive investing and I think a lot of yeah and people get caught up in the whole like day trading crypto and lefties, buy a single stock and try to sell it at a higher price. And I know all that stuff sounds like really sexy and glamorous I do I get it. And when you see all these people making a ton of money online and bragging about it, it's hard not to get caught up in that. The thing is like that stuff is very short lived. There have been a lot of studies done that show that none of those things have consistently outperformed like an index fund, or a passive fund or the s&p 500, like study after study after study, show that none of these things just beat the overall stock market. So the best thing to do is really boring. Actually, what I do from an investing perspective, is I invest in low cost index funds, these are things that you can invest in one fund, and invest in all these different stocks for you. So it automatically diversifies your portfolio, I like to invest in ETFs index funds. Again, I know it sounds boring, but boring equals sexy in the long run. So that's what I do. And I think that is one of the best ways to approach it if you are investing for the long run.

Andrew Biggs 21:11
Awesome, boring equals sexy in the long run when it comes to your finances. I love that. And and yeah, I see that all the time. I mean, I had a client, you know, put like 50 grand into Bitcoin. And when it was at, like 60 grand, you know, it's like, everyone's making money, you know, that, that irrational exuberance, and there's like, I'm gonna throw all my money into Bitcoin. And it's like, well, maybe it'll work. But you know, we need a we need a strategy, we need to diversify, we cannot be caught up in sort of the these, you know, moves to shakes in the market. And that's why that diversification strategy is so important. So, so thanks for that. I'm gonna kick it to you, Mike. So you can talk about how to make more

Mike Abramowitz 21:49
money. Yeah, I want to know these money making vehicles so so I think our audience ultimately a lot of our message Rachael, on the veteran rich show, and a lot of what our audience is following us for is how to free up some of their time. And this passive income is a really great gateway to help them free up their time, where they're not so strapped to work inside their business so much where I have to like work 24/7 To make cash flow. It's if I have cash flow from my business, and I take that cash flow and put it to work, where it's producing more cash flow. Where what are some what are some ways to do this? Again, I know what I've taken from your tutelage with the REITs with some of the real estate, like passive real estate investments. I have a conversation coming up with your referral about syndications. I would love for you to riff on some syndications. I'm listening to some of his content. I'm like, you know, storage units syndications and, you know, apartment complexes and I don't even I don't even know how to spell syndication, I'm still really not equipped to even talk about it at all, because I'm learning but you know, these are some things that I would love for our audience to get exposed to, of truly taking, okay, they're already established in their business, they're making close to six figures or more. What do I do with this capital? How do I make my money and put it to work for me, so I can free up some of my time where I don't need to exchange my time for

Rachel Richards 23:09
Okay, cool. I love this topic, I outlined 28 Different passive income streams in my second book, so trust me, when I say there is something out there for everybody. All you need to do is find one, I love Mike, that you're selling the book, all you need to do is find one that'll work for you. And I really look at it in terms of different categories. There's royalty based income streams. There's like affiliate and E commerce, income streams, portfolio income, coin operated machines, and then real estate investing. Now my personal favorite is real estate investing. And I can tell why I can explain why for several reasons. And if you're trying to figure out which category or which income stream to start, I always narrow it down from a time versus money perspective. Which do you have more of? Do you have more free time? Or do you have more money? If you were like me a few years ago, you would say I have neither right? I don't have any time and I don't have any money. So the next question to ask yourself is which which is going to be easier for you to create right now is it going to be easier for you to free up a little more time, or to generate some extra income, because you need one or the other to create a passive income stream? Some of the royalty based income streams like creating and selling an online course or self publishing a book, those require a lot more time than money. The portfolio income streams like investing in the stock market to make dividends. Those require a lot more money than time and then all the different real estate investing ones, it just depends. Some of them you need times and then you you need money. It just depends. But Mike, I'm happy to talk about syndications. Let's just start there. And then you can ask me about whichever other ones sound interesting. So syndications, let's just start with what are they because they're pretty new. Not a lot of people know what they are. A syndication is when an investor goes and finds let's say As an example, a $10 million apartment complex, she can't afford to buy it on her own. So she formed something called a syndication. What this syndication allows her to do is raise money from private investors and pull this money together to buy this apartment complex. So you and I are the private investors, we can invest into the syndication. Now we're not just lending the syndicator our money and earning interest. We are actually equity owners in this apartment complex, we own a small piece of it. What that means is we are entitled to a share of profits. So we get a share of the cash flow each quarter. And if the apartment complex ever sells, then we get a share of the profit when it sells. What I love about syndications is that we as the private investors were like silent partners, we don't have to do any work. We're not managing tenants, we're not doing renovations, we're not finding the property, we just send our money in. And once we do that, it's completely passive. This is a 100% passive income stream. After that point, we are just collecting a quarterly distribution. So for that reason, it has become one of my absolute favorite passive income streams. Because you own real estate, you get all these benefits, it's completely passive. Now there are some barriers to entry. Normally, the minimums for these syndications are around 25 to $50,000. So for me, I was like, Oh, I don't, I don't have anywhere near that much money starting out. So this wasn't something I could do starting out. This is something that I just started doing in the last couple of years. Also, for some of these syndications, not all, you have to be an accredited investor. So you have to have a certain net worth or income in order to invest in them. But that's a high

Mike Abramowitz 26:42
end. So we have that it's 200,000, individual 300,000 household or a net worth of a million dollars

Rachel Richards 26:48
and net worth of a million dollars excluding your primary residence. Yes, so that's correct. But yeah, that's high level overview, what questions do you have?

Mike Abramowitz 26:55
So as far as a rate of return, so if, if the market hypothetically gives that steady eight to 10%, let's call it over time, but then you could go like cash value life insurance, which I know we've had exchanges on, which is like that four to 11%. And then you could borrow against it. And then right now, I just put 50 grand into a real estate deal where they just pay me 8% annual with monthly distributions. So it seems like a lot of these passive income deals are around that eight to 10% Is that what you're finding, too are these indications of much higher return because there is a little bit of a risk there or since it's minimal risk, it's not as high of return like what what is what is a good rate of return for our money to be working for us for creating some of these passive income streams.

Rachel Richards 27:41
So it's, it can be pretty complex with when you're talking about the cash on cash ROI versus the annualized ROI versus like, there's all these different terms that syndicators used in general, when you're looking at both the cash flow you're going to be making during the term of the investment, plus any profits when it sells a lot of these syndicators projects that you'll make in the mid teens to low 20s as a as an ROI on an annualized basis. So that's kind of spreading out all the profits that you'll make total just spread out over an average per year.

Mike Abramowitz 28:18
And they usually create a term that, hey, we're planning on selling this apartment complex within this many years, or is it like because if they buy and hold it, then great, I'm sitting there waiting for that return or or that cash out?

Rachel Richards 28:29
Yeah, with a syndication they'll normally say this is a three year five year seven year 10 year, most of them I've seen are about five years, some of them are 10 years as well. So it is a longer term play. And these aren't that you can't invest and then two years later decide I want my money back. That's not how it works. It's It's It's illiquid, you can't just sell your share so and there's there's risk. Also, there's risk with any investment you make, whether it's in the stock market, whether it's your own rental property or whether it's in a syndication you can lose all the money you invested. So it's very important on the syndications that you are doing due diligence on the syndication but more importantly on the syndicator the person putting this investment together because they are the ones who are ultimately going to be operating this managing this they need to have the experience the knowledge they need to know what they're doing because they're they're really the ones in charge.

Mike Abramowitz 29:23
Well the gentleman you recommend me to his book is awesome. I devoured it already as audio was that Chris that? I didn't know like if he worked with you, you know publicize? Oh, yeah, yeah,

Rachel Richards 29:32
I talked about all the time if anyone listening wants an intro to some of my like favorite syndicators that I've personally invested with, I'm happy to do that. So just you know, message me email me. I'm happy to help.

Andrew Biggs 29:42
Yeah, I love what you said. It's all risky. Right? You know, and it's reminds me that Jim Rohn quote, right it's all risky, right? You think investing is risky. Wait till you get the bill for not investing. Right. And you know, it's everything is risky as we as we're approaching things, and I've seen some people who sit on cash and I'm like, have you What's an inflation like you are losing money sitting on, you know, 50 grand in cash because you're afraid to put it in the market? You know, what are you going to do? You need to put put it somewhere where it's going to work for you, I want to talk about real estate in general, you're somebody who is big into rental property, let's say there's a listener listening, they're doing pretty well, they've cleared off all their debts, and they have, you know, a small, you know, 1020 3050 50, grand sort of saved up that they want to throw at real estate. How do you start thinking about that, like, guide them to start thinking about how to look at rental properties, how to evaluate them? What are your go to sort of ideas around this?

Rachel Richards 30:39
You're asking me my favorite questions about real estate investing? So I love it. Okay.

Mike Abramowitz 30:44
And why real estate? Well, what are the benefits?

Rachel Richards 30:47
Okay, let's do why. And then we'll talk about how, so why real estate, this is my favorite passive income stream, because it's not just about the passive income, there are all these other financial benefits that go along with it as well. So about a month ago, I came up with this acronym, I think it's pretty genius. If I do say so myself. It's called elite, okay, II li te. And it outlines the five benefits for real estate investing. So when you invest in a rental property, you get E. So you get, I'll probably forget this as I go, but you get you get the equity build up. So when you invest in a rental property, you're paying a downpayment, and then you have rental income, that is covering your mortgage payment for the entire time that you own the property. So after 30 years, you own a property free and clear, having only paid the down payment. And now you own a property free and clear, because of all this equity buildup that's happening. So that's one, then you have L, which stands for leverage, you can buy a rental with other people's money with bank financing with a mortgage, you don't have to have 200 grand to buy a $200,000 house, you just have to have a 20% down payment, that's huge, you can do that with a lot of other investments, then you have AI, which is for the income, the income stream that you get. So your rental income minus your mortgage, and all your other expenses, leaves you with a monthly profit. To me, this is the most valuable part because I wanted to create passive income streams so that I could retire early. So that is the income part of it. Then you have t which is for tax benefits. You have a lot of tax benefits depreciation, a lot of other things that are great for you as a real estate investor, and that can help you offset active income as well. The final E is for expected appreciation. And I put expected there because we can always count on appreciation to happen appreciation is when the price or the value of the property goes up over time. It doesn't always happen as we saw in 2007 2008. But when it does happen, it's sort of an extra bonus. So that's expected appreciation. Those are the five benefits. That's why I think it's one of the best ways to invest and to build long term wealth, I really do think that every young person should own a rental property because it can do so much towards creating a really solid financial future for you. So that is why. And then to get to your question, Andrew, you said what should we be looking for? How do we get started? So what I would say there's a few things to decide on first, in terms of your strategy to take when you want to invest in a rental property. So first, it's about deciding, for example, between do I do a short term rental or do I do a long term rental. To me, this is a time versus money trade off. With Airbnb, short term rentals, there's a lot more money to be made. Like my friends that do I don't do Airbnb. But my friends that do this, they make way more money than me. But they work harder for it, right, you have more tenant turnover, you have to schedule somebody to clean the property every few days, you have to be available for people, even if you have a property management, you're going to be managing the manager, so you do have to be more hands on. So that is a time versus money trade off. If you have a long term rental with a tenant that's there for a year, you're just not going to have to do much. I spend maybe a couple hours a month to manage my long term rentals. But my tenants never call me they never need anything. So that's the difference, then you have to also think about the condition of the property. Do you want something that's moving ready? Or are you willing and able and ready to do a full renovation? And if you're a new investor, you know, it is easier to just find something that's moving ready or you know, that just needs a coat of paint or whatever. You have to think about price, right? How much money do you have, with most investment properties. If you're not going to live there, you have to come up with a 25% or 20% down payment. Now there's a lot of creative ways around that. There's a lot of things you can do. So don't let that be an obstacle. You can live in the property and house hack. You can do the burr strategy, you can find a silent partner. There's a lot of ways, but price is a factor and you kind of have to figure that out. And then the last thing and this is a question Should I get all the time is location? Where do I invest? What's the best market to invest in? I used to think, well, I need to invest where I live, right? Like, that's just what you do. But then I learned that might not make the most sense, I got lucky. And I invested in Louisville, Kentucky, which is where I lived, and that that place happened to be a very good market. But people who live in California, or Austin, Texas, or Denver, where I live now, or Washington, DC, those markets are really, really expensive. So you might not be able to invest there. There's a few factors that I look at when I'm considering location. The biggest one is how affordable is the market? It's a big difference when you're buying a million dollar property in California, versus a $200,000 property in Indiana. Okay, so how affordable is it? And then I really suggest that you look at how landlord friendly is the city or state. Now what does that mean? I like to look for states that have property taxes that are about 1% or lower. So like average property taxes are lower. Also, you want to have rights as a landlord, you want to be able to evict your tenants, if they can't pay, you want to have rights over your own property. And like without getting too political. Okay, this is kind of normally the states that are read. Okay, that's normally the more landlord friendly states if you're wondering, and then the last factor is, is am I familiar with the city? And yeah, if you live there, you're gonna be familiar with it. But you can also think about things like, did I used to live there? Did my family used to vacation there? Do I have friends there? Do I have networks there? If you have anyone in that city, it's just gonna give you a leg up and just, you'll have boots on the ground, you have somebody there that can point you in the right direction. So and if anyone just wants the easy answer, okay, I'll give you some of my favorite states, my favorite states to invest in from an affordability, cash flowing perspective, are Kentucky, Indiana, Tennessee, and Ohio. I think those are a really, really solid market. So so what else I know that was a lot of information. But I hope that's,

Andrew Biggs 37:12
that's awesome. I mean, it's such so detailed. So if you didn't catch all that go back and and make sure you take notes on what Rachel just shared as you're listening here today, because there's some really good nuggets in there, both the elite strategy and then looking at short term versus long term moving ready versus a fixer upper price, you know, location, etc. By the way ratio, you gotta check out Fayetteville, Arkansas, I'm telling you, it's college town, you know, landlord friendly. I'll give you the give you the scoop on Fayetteville if you want to check it out. Awesome.

Rachel Richards 37:41
From the list. I love it. That's right.

Mike Abramowitz 37:43
Yeah, I was just curious if you know, Where Did someone find good one of these deals like if they so they did they check all those boxes? That's cool. I looked in these places. Like, is there a database that they should that we could look at? Selfishly, I'm asking for myself, I mean, realistically, listeners, you know, no go for you. But like, if I wanted to go find some of these deals, I'm sitting on, you know, 50 to 75, grand, maybe 100 That I could invest and I want to go find one of these deals. What do I do? Where do I go to go? You know, Can I Can I just pay someone to go find this for me is that is does that exist? There's a lot

Rachel Richards 38:17
of ways and that's a good question. I think the mistake a lot of people make is looking on the MLS looking on Zillow working with an agent, I shouldn't say mistake, it's just that it's what everyone else does. So it makes it more difficult to find a good deal. Yeah, that makes it more saturated if you want to find a good deal in this market. Because this markets incredibly difficult, it is cooling down a little bit. But it's still really hard. If you want to find a good deal, you have to do what other people are not willing to do. So one of the things I teach a lot is how to find off market deals. And I'll just kind of list them because we don't have time to get to get into it right now. And I'm happy to if you want me to. But just to give you some ideas that you all can Google research or I talked about this on my Instagram too. There are things like looking at pre foreclosure leads, short sale leads, driving for dollars, bandit signs, foreclosure auctions, tax deed auctions, probate leads networking, those are most of them. So there's a lot of different ways you can find off market deals. And that's where you're going to find deals that give you you know $200 A month in cash flow per door or 12% cash on cash ROI so that's what I would recommend doing.

Mike Abramowitz 39:24
And this does anyone who's have a specialized place in the marketplace where that's all they do is they find these deals and then you could just pay them to yes I've access to those deals like that because the time to go find them and go look at all them up. I don't have time for that. But if someone has already has that hold that space in the marketplace, there's that's

Rachel Richards 39:41
called wholesaling. So there are people that wholesale deals and they do exactly what you just said. So they will go out and they'll find these off market deals for you and then they'll sell the deal to you and normally you pay them a fee could be 510 15 grand but a good wholesaler is obviously worth his weight his or her way in in gold because cuz you're not gonna have the time to do it. And there should be plenty of margin left for both of you to make a lot of money on this deal. Now the trick is finding a good wholesaler, because a lot of people call themselves wholesalers. But they don't really know what it takes to find a good deal. They might think it's a good deal, but it's actually only okay. So don't just take somebody's word for it, you have to make sure you're doing your own due diligence and agree with the numbers, and do your own estimates and your own projections on the deal before just buying it from

Andrew Biggs 40:25
them. Yeah, absolutely. So one of the questions, Rachel that we ask every single one of our guests is, what does it mean to you to be better than rich?

Rachel Richards 40:34
That's a beautiful question. I have thought about this a lot over the years. And one of the things I just was thinking about the other day, actually, as, as I was putting together another social media post, is that, you know, a $500,000 house and a $100,000 house hosts the same amount of happiness or loneliness, a Michael Kors watch and forever 21 watch both till the time, the same way, a smartphone and a flip phone both allow you to call your loved ones around the world. So I think we get caught up in a lot of materialistic things that we think are going to make us happy. And personally, I have found that those things don't add to my happiness. So I think a lot of people think that money or is going to make us happy in a certain way. I do think money can make us happy. But for other reasons. Because money can allow us to escape a toxic workplace. Money can allow us to feel financially secure. Money can allow us if we're going through a really difficult time to escape, and go to Europe and heal and not have to worry about a paycheck hanging over our head, or financial stressors or paying our next bill. Money can allow us to be healthy, and to get the medication and the healthy food that we need. So I think money can buy us happiness, but just through things that maybe most people wouldn't think about. To me being wealthy is about like happiness, and health, and relationships. And when you really think about those things, those things aren't something that money can even buy. So at the end of the day, we all want the same things. And that's what being better than rich means to me.

Andrew Biggs 42:25
It's beautiful. I love that.

Mike Abramowitz 42:26
It's beautiful. Yeah. I have a follow up question. What do you think the world needs most of today?

Rachel Richards 42:33
Love? That's it.

Mike Abramowitz 42:38
And what are 123 books that you think people should read through?

Rachel Richards 42:43
My favorite all time book is can't hurt me by David Goggins? Have you heard the either you're at that.

Andrew Biggs 42:50
So yeah,

Mike Abramowitz 42:51
I'm listening to the audiobook.

Rachel Richards 42:52
I'm, like obsessed with him. And I didn't realize this, but people are just catching on to that. I'm a big fan of David. And so they'll just send me stuff all the time. They'll be like, Oh my gosh, I know. You'll love David, like, Look at this. And I'm like, I love that people know that. I'm a David Goggins fan girl. So that's one. Also, as you both know, I'm a big fan of Hal Elrod. So the Miracle Morning was definitely life changing for me. And gosh, there's so many these are just more life books. There's a lot of finance books to the Millionaire Fastlane by MJ DeMarco was a big one for me, Rich Dad, Poor Dad that's for so I'll stop there. I could name books all day long.

Andrew Biggs 43:27
But thank you, we appreciate it. And David Goggins. If you if you're listening, you haven't read can't hurt me. The audio book is amazing, because it's even. There's like interviews with his editor and all sorts of things. So well, hey, I know that we are about to close up. Rachel, where can people learn more about you? And what can you kind of leave the audience with here today as we depart here today?

Rachel Richards 43:48
Yeah, thanks, Andrew. Both of my books, money, honey and passive income, aggressive retirement are available on Amazon, and ebook audiobook and paperback. And you all can follow me on instagram money, honey, Rachel is my username. And what I'd love to do for your listeners is for anyone out there listening, if you would like to download my passive income starter kit, I will give that for free. So you can go to money honey rachel.com forward slash passive income to download that.

Andrew Biggs 44:21
Awesome. So money honey rachel.com backslash start forward slash passive income, passive income. So make sure you check that out. Thank you so much for extending that to our audience. We really appreciate it and we appreciate your time. I know it's valuable. And I know that someone listening to this is going to have their life changed because of this interview. So thank you so much, Rachel, for your kindness, your generosity, and your authentic authenticity. We really appreciate it. Mike, anything else you want to say before we leave for the exits?

Mike Abramowitz 44:51
Just thanks, Rach. I appreciate you for making the time and listeners obviously you know, go follow Rachel. She puts out awesome content on Instagram as well. Oh, and she has an awesome Facebook group to the money honey Facebook group. So as soon as help episode helped you, please turn around, share with others help a friend. We have lots of really great content on our better than rich show so you can subscribe to our YouTube for more. We always appreciate the rating and reviews on Apple and Spotify. So, you know, thank you for that. And Biggs. Here it is. You want me to say the closing line are

Andrew Biggs 45:22
you go ahead, take it away.

Mike Abramowitz 45:25
And remember, leave today better.

Andrew Biggs 45:28
We'll see you next day.

Mike Abramowitz 45:32
Thanks for listening. If you enjoyed this episode and you'd like to help support the show, please share it with others post about it on social media or leave a rating and review. To catch all the latest from us. You can follow us on Instagram at better than underscore rich and join our Facebook group at the better than rich show. Thanks again for listening. We look forward to seeing you next time and remember, leave today better than you found it