Real Life Investing With Jason & Rachel Wagner

57. Surpassing $1M Net Worth Through Real Estate Investing

• Jason & Rachel Wagner

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Jason and Rachel detail how they went from being worth more dead than alive, to surpassing $1M net worth in 5 years through real estate investing. 

Jason Wagner:

Welcome back to another episode of the Real Life Investing Podcast, with Jason and Rachel Wagner Going into something that we track on a regular basis, actually every month. It's our net worth and just kind of, why is it important to track your net worth? If I were to ask Rachel, do you have any idea of what our net worth is? Before I said we should have a net worth conversation, would you have had some acknowledgement of where we stood?

Rachel Wagner:

No, no, I mean I would be able to figure out a rough idea, I think, because I understand how it works. But no, I would not. No, no, I'm pretty out of our finances.

Jason Wagner:

You're out of the finances. Does that make you feel comfortable, or is that?

Rachel Wagner:

It has taken me some time to feel comfortable being out of the finances, and I don't recommend that for anybody. I think people should probably be partners in finances, but this works for us for now, at this stage of life.

Jason Wagner:

Do you want to explain, like what our finances are kind of like, or yeah, I mean.

Rachel Wagner:

Well, we actually before we got married, when we first started living together, we decided the easiest way for us to split our bills 50 50 would be to get a shared credit card. So anything that we bought together we put on the credit card at the end of the month we split it 50 50. And then all of our individual expenses we did separately. So then when we got married, it was actually pretty easy to combine everything because we were already practicing like that sort of flow. But we combined our bank accounts and everything. We had full transparency into each other completely. We were both working at the time and we just put it all in one big pot together and paid our bills together out of the one big pot. So it wasn't ever like a split and that's been the continuous practice. And then you know, we each have had our turn leaving the paycheck life. Mine's now, I think, extended years a little bit, but yeah, yeah, yeah.

Jason Wagner:

No, you know, when we we got married, we both had corporate w-2 jobs. You know, I think I was at like 60 grand a year, you were at like 80 yeah you were outperforming me pretty nicely yeah and you know, we, I oh yeah, it made a lot of sense.

Jason Wagner:

Let's just combine. I mean, we're married, let's just combine everything. So I absorbed your debt, your student loan debt. Yeah, I was in a blessed position where I didn't have to take on any student loan debt, but we absorbed all of yours. Yeah, and it's interesting, you talk to some couples and they're just like well, why should I have to pay for that if it's not under my name, or things like that? And so they just continue to have these split finances. It seems to make things very complicated.

Rachel Wagner:

I didn't have the expectation that you should have to share that student loan debt with me, but we also were just very firm in the fact that we're getting married. Everything is the same.

Jason Wagner:

Everything's ours.

Rachel Wagner:

Yeah, it's ours together as a whole.

Jason Wagner:

Just because you brought something a little different to the table. I mean, you also brought a pension that you were able to get from your employer, which is the government, so you still have some type of vesting interest.

Rachel Wagner:

I have two, two, yeah, you have two types of pensions.

Jason Wagner:

You know, should I marry you, you gotta get a pension.

Rachel Wagner:

You got some student loan debt I had a lot of student loan debt making good money, yeah so I I had a lot of debt, but I was also on a track to like keep raising my income yeah, yeah, yeah, yeah.

Jason Wagner:

So we started, we really started to. You know, from the beginning I was always into excel and just kind of tracking our finances, coming up with a budget, and that budgeting process was just so, so imperative for us Because as you decide to go from W-2 life, salaried money's always going to come in to. All of a sudden you're now your own boss and you've completely given all that up. You have to penny pinch and you got to figure out where every dollar goes.

Rachel Wagner:

Yeah, and we were doing that before we even got married, I mean the first. So we moved in together right after you graduated, which was pretty early, and we had a pretty cheap cost of living then. But like both of our salaries were pretty low coming out of graduation and I remember when we first moved to sign that first apartment in davenport the rent was like a thousand or eleven hundred or something a month. Like that was a huge decision for us. It was like can we actually jump our rent up that much and afford that?

Jason Wagner:

Yeah, because we started an apartment that we were paying what? $650?

Rachel Wagner:

or $700? Something like that. Yeah, it was very low, yeah, so it was a big jump for us, yeah.

Jason Wagner:

It was a big deal yeah. Yeah, it was a big deal.

Rachel Wagner:

So we've been budgeting the whole time, I guess is my point.

Jason Wagner:

We've been budgeting since day one. Yeah Right, and so it's not just the budgeting part that I think is really effective, because you get awareness into where your spending is. That's very obvious. If you track it where every dollar is going and you compare it well, how did I compare it to last month or last year? And you start doing that on a regular basis, obviously you get more visibility into your finances, the better, and so I just took it a step further, and then we just tracked what our net worth was. And what is net worth. Can you give me the definition of net worth? Do you know the formula?

Rachel Wagner:

Assets minus liabilities.

Jason Wagner:

Nice Wow.

Rachel Wagner:

Yeah, so it's an asset, something to value that you own outright. So cash is an asset yep, what else equity in a property? So you can't count the full value of the property because you gotta less your liability on it.

Jason Wagner:

Obviously, obviously, 401ks, pensions, some, some types of property stock stock yeah, yep, bonds, yep, Yep, cool Yep, exactly. So what's the liability?

Rachel Wagner:

Something you owe. It's like a loan. So student loans is a big liability, a mortgage, a car payment credit cards. Um yeah.

Jason Wagner:

Yeah, and the obligated expense you have to pay, pay back yeah. So you take your assets minus your liabilities. Actually, just to clarify your assets, you said for real estate it's only equity. That's really more of like the net of the two.

Rachel Wagner:

Well, I guess, yeah, I guess that's already doing the calculation. So if you're doing a big whole piece, you'd put the entire value right, the value of the asset, and then minus your mortgage. Minus your mortgage, yeah, yep, the loan balances too. That's a good clarification.

Jason Wagner:

Yeah, yeah. So so if you live in, a, $500,000 goes into that comment or into that column, for that's what I have in assets, and then, well, but I owe 490. Well, you really only have $10,000 into the house, right?

Rachel Wagner:

so yeah unless I just bought it right, you just bought it exactly.

Jason Wagner:

Yeah, so, anyways. So then you get down to your net worth, which is basically your assets minus your liabilities, and you know when you're first starting out as a married couple. And you know you're 25, 26, back in 2015,. I guess that's what was our age at 2015?.

Rachel Wagner:

I think I was 27. I think you were 26. We had both just had our birthdays.

Jason Wagner:

Well, you got married in 2015,. Right, so I was 25.

Rachel Wagner:

When we got married? Yeah, oh, then I guess I was 26. Are you sure?

Jason Wagner:

Oh yeah, Anyways, we can do the math. Oh no, you're right, I was 26.

Rachel Wagner:

Yeah, I was going to say I'm pretty sure I was 27. All right, cool All right, good math.

Jason Wagner:

Okay, so I was 26. You were, yeah, in 2016, which isn't bad, because I had like 80 000 in student loan debt. Yeah, yep, yep, in 2016. So this is like when I left my job, somehow we had a net worth of 17 000. Yeah, well, yeah it's very possible that I was gambling in the stock market during that timeframe.

Rachel Wagner:

Well, you were. Yeah, I had a. I had a pretty significant raise, yeah, Yep.

Jason Wagner:

I lost my income but I'm pretty sure that I still had. I had some gambling earnings. That was happening there in that year.

Rachel Wagner:

Yeah, I mean higher earnings paid down some debt. Yeah, I mean I think we also probably paid down like some debt from the wedding yep, and then in 2017 we went from.

Jason Wagner:

So in 2016 we were positive 17 grand, 2017 we went negative negative 25 000. Yeah, this is when, when Jason really lost his money in the stock market, started buying houses.

Rachel Wagner:

Well, that was the first time he lost money in the stock market.

Jason Wagner:

Yeah, when I had lost $40,000. No, that was in 2018.

Rachel Wagner:

Oh, 2018 was when I lost Okay. We're getting to that number Because it was my 30th birthday. Yeah, okay.

Jason Wagner:

We're getting to that number. My 30th birthday, so in 2017, I started flipping houses on the south side of chicago and, whatever phase we were at then, we had a negative twenty five thousand dollars it's because we were putting materials for the house on the zero interest credit card loans yep, we were being a little bit more creative in terms of how we were going to finance that project. Yeah, and. And in which that drags down your net worth, if you got to owe all that for sure.

Jason Wagner:

And depending on, like, the timing of that sale and whatnot, and so, anyways, yeah, so we were. Here's the joke that we always used to make we're worth more dead than alive.

Rachel Wagner:

Yeah.

Jason Wagner:

When you got a negative net worth of 25 grand 2018, okay, combined the big $40 40 000 loss of money, I lost that much money in one day.

Rachel Wagner:

yeah, dude, like that's, that's a problem he told me the night of my 30th birthday because we threw like this big octoberfest party and we were gonna have like an open bar tab, which we did. We did have an open bar tab, but you closed it, and you close it kind of early and I was like, oh, come on, let's like just keep it open for like another 30 minutes or whatever. And you just gave me this look and you were like, no, we can't. And I was like, oh, okay, what happened? We'll talk about it later. You were so afraid to tell me.

Jason Wagner:

It's so funny I was just like oh okay, well, don't do that again of your demise there you.

Rachel Wagner:

I handled it very well.

Jason Wagner:

I mean, I had shown you. I'm like hey look, I'm doing quite well trading stocks. Look, I can do this.

Rachel Wagner:

Oh yeah, you were so proud, I don't need to go back to the corporate world.

Jason Wagner:

I'll just trade stocks, yeah.

Rachel Wagner:

And I did make a good amount of money and it was all the money that you had made from your first house flip. You put in the stock market, yeah, and then you lost it.

Jason Wagner:

Yeah, all In a day. How about that? It's like putting it on black.

Rachel Wagner:

Yeah, seems like a good idea. 40 grand in a day yeah, that's bad, like you're an idiot. Straight freaking idiot.

Jason Wagner:

Yeah, but I didn't say you were an idiot. Somehow you were just like okay, don't do that again. And I was like wow, she took that incredibly well.

Rachel Wagner:

Yeah, I mean we had no like when we talk about this, like with our net worth and like being in the negative or whatever. Like we didn't have any kids and we didn't have any plans to start having kids at this stage of the game. Like we were just trying to start your business. So like it was very understood that times were going to be hard, we were going to be living thin and this was the time to make the mistakes. And if we lost it all?

Jason Wagner:

we weren't really losing that much. Yep, so Yep. And then in 2019, everything really kind of turned around. Here we bought another property. This one ended up turning into our first rental, where we had bought a cheap condo in Wicker Park. We upgraded it. We were originally going to sell it, but then we turned it into a rental and so now we have a good amount of equity that's in that property, because we kind of essentially flipped it without selling it. Now it's a cash flowing property for us. And then at the same time, I was also starting to really get into the sales side of things and selling homes, helping my friends buy and sell real estate at that point mostly buyers at that point. So we went from a negative $34,000 in 2018 to 166 grand positive 2019.

Rachel Wagner:

Well, we bought two properties that year because we bought Sunnyside December of 2019. But Sunnyside right at the and that was significant.

Jason Wagner:

Well, we bought two properties that year because we bought Sunnyside December of 2019. But Sunnyside right at the end of December. So that does certainly kind of put a little piece in there. But we were still leveraged on it because we did a 3.5% loan. There's really not a whole lot that's actually in there.

Rachel Wagner:

Yeah, but there's still some Sure Because it was a huge value property.

Jason Wagner:

Yeah, yeah, yep. And then 2020, we went from 166 in 2019 to 317. Wow, yeah.

Rachel Wagner:

So the income from Claremont continued and the income from the multi-property really started to blow in Well.

Jason Wagner:

The value of the property ended up going higher because we increased one of the we had to renovate. We renovated one of the units, and this was the COVID era. 2020 is when we started to see home values really start to take off, and so we had two properties at that point, and in 2021, we bought our third property actually two properties that year single family home and then we did a partnership.

Rachel Wagner:

So this is when the real estate and this is when the real estate really starts.

Jason Wagner:

Yeah, yeah, you really see an acceleration here, which is really cool. So in 2020, we ended with 317, in 2021. Now we've got 576. And we just kind of keep going here 2021 to 2022. We really didn't add a whole.

Rachel Wagner:

There was there's a slight game, oh in 2022,.

Jason Wagner:

You left your job Okay 2021.

Rachel Wagner:

I left my job after Layla was born.

Jason Wagner:

So we kind of have more of a flattening, that's a that's happening here 576 to 604 in 2022. And then in 2023 we go up to 842 and then in 2024, we have crossed the million dollar mark and we are at 1.1 as and that was in like may of 24 yeah, oh, excuse me, this is august. This is now august 2024. We crossed, we crossed the million dollar mark in in may. Yeah, after now, we own six, six properties. Essentially, the secret here is it. What's what's really funny is like if you, if you think about any like bigger pocket stuff, um, which is real estate investing, or anybody that's like into real estate investing, becoming the millionaire is kind of like the uh, that's the big target, it's, it's it felt really good to cross that mark because, if you actually look at it, it didn't take very long. It went from in 2018, we were negative $34,000 and now in 2024, we're millionaires.

Rachel Wagner:

And we bought the first property that we held was in 2019, so in five years.

Jason Wagner:

First, property we bought was in 2019, yeah yeah so in five years, first property we bought was in 2019. Yeah, yeah. So yeah, in five. In five years, we went from essentially zero to 100 or to a million in five years. Yeah, like what and that's, but what's the secret here? The secret is is not a secret, it's just buying real estate yeah and finding ways to buy real estate.

Jason Wagner:

Buy at least one property every year, and that has always been the goal. If I could just buy one property per year, I guess we didn't buy one in 2020.

Rachel Wagner:

We bought two in 2019, nothing in 2020. Two in 2021. Very kind of technical. Basically, we didn't move in until 2020 because it closed, yeah, but we owned it yeah.

Jason Wagner:

Yeah, very technical here.

Rachel Wagner:

On average one a year.

Jason Wagner:

On average, we just bought one per year and when you understand what's happening with the market in general we have low supply. We bought when interest rates were incredibly low. We took extreme advantage of that and we continued to buy even when we had interest rates that were high. I mean, we bought a property this year and the interest rate on it is 6.75. We bought a property last year which was our house, and we did some tricks with the interest rates and whatnot, but we just continued to buy and it was a good thing that we bought our house when we did, because all of a sudden our real estate market here in Arlington Heights has allowed our. Let's see what did we buy this for $765?

Rachel Wagner:

$765?

Jason Wagner:

$765. Yep, you're right, $765. In our neighbor's house Just sold for $840.

Rachel Wagner:

The exact same thing.

Jason Wagner:

Absolutely the exact same property, and it's a good thing we bought last year, because now we've just recognized that the market has gone up that much.

Rachel Wagner:

Well, that's been true for every property.

Jason Wagner:

Yeah. So the secret here is not that we just made a killing with you know, our jobs or whatnot. I mean, the secret is all the accumulation of market appreciation. It's the fact that every month our tenants pay down our mortgage, every month our tenants pay down our mortgage, and that has just really grown the net worth big time. And so it's kind of fun to kind of like look at that because we really don't have, you know, we don't have a lot of stock investments, or you know we don't have these huge.

Rachel Wagner:

Don't contribute to 401ks or anything anymore.

Jason Wagner:

We do very little because we don't have a ton like, like leftover. You know, because my whole mindset has been like, well, if I've got extra money here, I'm going to put it into another deal. And we kind of look at it as like, well, one of these properties could be our kid's college fund. Just from the difference between the market value and the loan amount over the next 18 years, if we hold on to one of these for that long, there's going to be enough money for college out of that. So you start thinking about it from that perspective. It's like shit. Real estate's really powerful.

Rachel Wagner:

Yeah's really powerful yeah, yeah, yeah. I mean obviously none of that's liquid. So yeah, you know I did right and none of it.

Jason Wagner:

None of it's liquid and literally it could all go away.

Jason Wagner:

It could all go away if we had a crash in the market and we're not going to have a crash on market, because I look at the data very, very closely and like I'm very confident in that and I advise people that you should be buying now because we're still going to have a crash on the market. Because I look at the data very, very closely and like I'm very confident in that and I advise people that you should be buying now because we're still in a low inventory environment and I'm going to continue to take my own advice and, you know, keep trying to buy more properties if I can, and you know. Then it comes down to like the question is always like well, how can I, jason, I don't have job that I got all this extra cash? It's like well, then you got to find people. You got to find business partners, and that's exactly what I did. What we did is that we found business partners. Well, what if the business partner doesn't have a lot of cash? Well, what could they do? Could they be an owner-occupant in one of these multifamily properties and then, all of a sudden, house hack it, allowing you to get a lower down payment opportunity to buy that property? That's exactly what we did where we bought our house hack. We only needed 3.5% down. Then we partnered with another guy who was the house hacker and we only needed 3.5% to buy that property. Then we partnered with another couple who were the house hackers. At the time. We needed only 15% instead of a 25% down that a regular investor would need. And so you find ways to do low down payment strategies. We bought this house with only 5% down. We bought our last house with only 5% down. And so what are the low down payment strategies? How can I buy real estate every single year for the next 10 years? To really set me up straight, you think about the low down payment strategies, you think about who's in your life that you could partner with, and then you just do it.

Jason Wagner:

I wrote a post when we did cross that line, because I thought it was very monumental for us. Here's what I wrote, and this was in April 20th. Actually is when we did it. So this month, my wife and I achieved millionaire net worth status. We did this at 34 and 35 years old, with two kids. I'm the only one that works and my wife stays home and manages the household.

Jason Wagner:

In 2016, I left my corporate job to pursue a career in real estate, had no idea what I was doing, but I had a strong desire to learn and take a risk. It is no secret that our net worth took off because we found ways to buy property every single year since 2016. You can't buy property without money, though, but the secrets I discovered was that we didn't need a lot of money to get started, and we utilized low down payment strategies to get our foot in the door. I also realized that a salary will never get me the result I was seeking. I needed to be in sales and earning money directly related to the activities I was doing, with no cap on those earnings.

Jason Wagner:

The combination of sales mixed with buying one income producing property every year is the blueprint to success. Sales fuels investments. Sales are short-term gains. Investments are long-term wealth building tools.

Jason Wagner:

So my advice one get a sales job and become a subject matter expert. So the reason I say get a sales job is because you can have unlimited income potential. You can have really good years. You can also have really bad years, but when you don't have a cap on what you could earn, there's way more upside, way more upside than a salary. So that's my number one piece. Two have one spouse, maintain a W-2 job while you become a subject matter expert to help you qualify for loans. Three buy income-producing property with low down payment strategies. Four once your sales pick up, reinvest that money into more property. Five have your spouse leave their job to assist in your sales business or run the household. Six continue to sell and buy property until you don't have to put so much focus on selling because your investments have gained in value and provide you with income. And finally, dedicate 10 years for this result. You might achieve it in.

Jason Wagner:

I say eight, like we did, I guess it had been eight years since I had left my job by the time we reached that millionaire status. And so I guess, back when I was in April, when I was thinking about that was that if you got somebody in the household who has the ability to capture upside through their job, which is through a sales environment, really leverage that. At the same time you also really need to qualify for loans and the only way you can do that is with W-2 earnings. Even if you're both decent W-2 earnings, you can really leverage that too. And maybe you find somebody who's in a sales job who has some extra cash and they might have a harder time qualifying for loans because they're not W-2'd right. They might be peer commissioned or 1099 contractor. It makes it harder for somebody who's self-employed to qualify for loans. So it's like, well, hey, we've got stable salaries, you have, you know you make more money. Or like, could we partner, we take on the debt type thing? You know you can work out arrangements.

Rachel Wagner:

So it's just finding people that are willing to do some of that stuff did you look back over the last five years, or maybe even more than that, like when we were in the the negative net worth area time frame? Is there anything you would do differently?

Jason Wagner:

I wouldn't have wasted I don't know, because I feel like I wouldn't have gone in. Like I don't advise people to go into the flipping stuff. I tell people to go straight to the house, hack stuff and then kind of ease your way If you've got to update some things, like it's a lot easier, a lot less risky to do that and you're doing it in a building that you already live in type thing, and like it's just, it's just, it's just easier. So yeah, I would, I would have totally skipped the whole flipping part of part of it. But at the same time that was a that was a real crash course of housing and real estate and learning, construction and contractors and, I'll be honest, majority of real estate agents never even touch any of that. They never touch any of that.

Rachel Wagner:

It's out of their ballpark yeah, I mean, that's actually what's given you the skills and the resources and the contacts it's yeah, gone through that experience, so it made you a more valuable real estate yeah, and that's why it's it's hard for me to say, oh, I wouldn't have, I wouldn't have done like.

Jason Wagner:

I don't advise people to do that. Let's just put it that way I don't advise people to do. Would I have changed anything that I had done in the past? I don't necessarily think so, because that that put really hard shit on my shoulders and once you realize that you can get through the hard shit, then it's like you can do anything.

Jason Wagner:

And you know it just actually made things easier by going through the really hard stuff. But I don't advise people to do really hard stuff like that. Like stress yourself out, max out your 0% interest credit cards, go into the worst credit and net worth perspective ever Like. I would never advise anybody to do that. That's terrible advice.

Rachel Wagner:

Yeah, that's the lowest I've ever seen you.

Jason Wagner:

Yeah.

Rachel Wagner:

Yeah.

Jason Wagner:

Yeah, that's terrible advice. But when you think about the school of hard knocks and like, yeah, did I? You know, did I kind of earn where we're at now? Fuck yeah, I did, Fuck yeah.

Rachel Wagner:

Yeah, yeah, I agree.

Jason Wagner:

Yeah, so so it's cool to talk about and hopefully it's inspirational because it doesn't take that very that long. It just takes focus. We're just average people, nothing special. But if you live in America and you understand that real estate is the ticket to change everything in your life, you can have a job, do whatever you want. You can be a plumber, be in the trades, be a teacher. Everybody has access to real estate. People say that they don't, which is total lie. Everybody has access. You just don't know. If you think you don't have access, you just don't know the right person. And you can find the right person by Googling. Where can I learn about real estate investing? Where can I buy a book about real estate investing? And I can give you all kinds of books. Start with some of Brandon Turner's books. They're so freaking great.

Rachel Wagner:

Oh, I thought you were going to say Rich Dad, Poor Dad.

Jason Wagner:

Oh, Rich Dad, Poor Dad is a great mindset book. Yeah, that is one of my best and favorite. I mean that changed it all for me. Rich Dad, Poor Dad by Robert Kiyosaki is like everybody needs to read that book. I should actually read that one again. But Brandon Turner is like the King at like making real estate investing very simple, and he's got the what's called the multifamily millionaire, which I think is a very tremendously well-written book, and I highly recommend reading that one, because he does. I'm pretty sure he talks about house hacking in there, but it just like the simplicity of like what it means to buy a two flat or two unit duplex, Like that's all the same same terminology, and so you can.

Jason Wagner:

You can learn these things. You just have to dedicate some time to do it. The problem is is that when people get older in age, they just they've got kids, they've got responsibilities. They can't learn to really prioritize their time, and so learning new skills like that or taking risk is certainly a lot harder the more mature you are in life. We did this when we were married. No kids. Is it impossible for people to do it? Who's married with kids?

Rachel Wagner:

Partially. No kids. I mean, we hadn't bought a property to live in until we had Scarlett. Oh, you're totally you're totally right.

Jason Wagner:

You're totally right, we had. We had in 2020, when what was our net worth in 2020? We had just bought two properties, or we had two properties under our belt, and in 2020, we were worth 317 by the end of that year, but prior to, because scarlet was born in 2019. 2019, oh shit.

Rachel Wagner:

Yeah, in 2019, okay yeah, so the year we bought the first rental and then the december we bought the sunny side property. So yeah, we really we had only done flips, because when I was pregnant with scarlet, you were still in the hole, mad ada yeah, all right.

Jason Wagner:

So you got no excuse, you got kids, whatever. We still did it.

Rachel Wagner:

Yeah, I mean, I think I think there has to if you have kids. There's like a willingness. I guess it depends on how you do it, because you don't have to house hack, but I think for us there needed to be a willingness to be a little bit inconvenienced and uncomfortable for a while. Right, cause we have we've moved with Scarlett three times, right, and she's five. So you know that was it was hard and it was it was hard to have, you know, all the baby gear and all the baby stuff on the third floor, right, you know it's like when we I cause I remember when we had the conversation about buying Sunnyside it was like, well, we could go buy like our first, like traditionally, it makes sense to just go buy your first family home in the suburbs that you're going to live in for like the next five years or whatever.

Rachel Wagner:

Right, and instead we were buying a multifamily and it was like okay, well, eventually we got to get to that, right.

Jason Wagner:

So there's like this I know, and people looked at us crazy. Man, People looked at us totally crazy. It was like why would you buy? Why would you buy an apartment building Like, yeah, and a neighborhood we hadn't lived in? Don't you need a yard?

Rachel Wagner:

from all of our friends Right. And then we moved away from everybody, so it made everything more complicated and yeah make commute to work for me much more difficult, and yeah, I mean it was, it was worth it.

Jason Wagner:

Yeah, oh, of course, it was one year of sacrifice. It was a year and a half that we lived there for right, and that's, that's the power of these, you know, these house hacking strategies yeah, you only have to live there for a year because why?

Jason Wagner:

what if? If we didn't do that, we would have had to buy that property with 25% down? There was no freaking chance that would have ever happened. We never, ever, had that kind of money ever, and we still don't. In terms of liquid cash, we still don't. Putting 25% down on a property is not really possible.

Rachel Wagner:

Yeah, I don't even know what that is, but Right. Yeah.

Jason Wagner:

And that's just. The reality is that if you don't know about these lower down payment strategies and how you can utilize the people that are in your network, Again, I just found a guy that I went to high school with and told him about my house hacking strategy and said we could do the same thing with you. He was like all right, let's do it, and that has really worked out. Did the same thing with another couple.

Rachel Wagner:

Yeah, and the first guy you were talking about he's already moved out of that property too. He was there for a year, and then he moved out.

Jason Wagner:

Right, and it's just. It sets you up. It's one year, it's one year of sacrifice. So even if you do have kids, could you sacrifice your family for one year to set you up?

Rachel Wagner:

Sacrifice your convenience, not your family.

Jason Wagner:

But yeah, thank you. Yeah Right, sacrifice your convenience for one year you and your family's convenience for one year to set you up, right. Your kids will probably be very upset about it at the time, but you know, it's I don't know. Here's the blueprint. It's clearly been effective for us. So when you know that this is something that works, then you know, and it's something you want to go after, then there's tons of resources out there for you. You know, and all it takes is just education and spending time to learn it. So it's, it's not rocket science, it's it's. This is a great thing about real estate and this is why so many people get into it. Is you can be an expert in whatever field so many people get into. It is you can be an expert in whatever field.

Jason Wagner:

Real estate is always still very simple. It is like oh, there's a house, what could I buy that house for? What's going to be my monthly payment? What could I rent it for? Let's factor in a few more estimates for things breaking every month. Let's factor in an estimate for well, if I don't have it leased, I'm waiting for somebody to rent it. Let's factor in an estimate for well, if I don't have it leased. I'm waiting for somebody to rent it.

Jason Wagner:

Let's factor in an estimate of might have to potentially replace the furnace, some other big capital expenditure repairs. And then what's it look like? And is it cash flowing? Great, we got a little bit more rent than all the expenses and the mortgage Great. If it's not, is it in an appreciated market that's expected to go up in value in the next five years? That's a big one. Let's not forget that every time you do have somebody in there and they're paying you, every month you're paying the mortgage. That mortgage balance gets smaller and smaller.

Jason Wagner:

There's so many great things about real estate and for us, because we are real estate professionals, because I'm a real estate agent and I don't understand why majority of real estate agents don't take advantage of this, but when you're a real estate professional status, you can buy a property. You can then write off a lot of that property against your earned income. You don't pay a lot in taxes. Now, there's a skill set there, right, there's a cost segregation study that you have to do on the property and then you can take a big chunk of that and offset a lot of your earnings that you've had and all of a sudden, your tax liability is much, much less than somebody.

Jason Wagner:

That's a W-2 person and that's kind of the cheat code, I guess, but it's there in the tax law. So anyways, long story short, I think the big takeaway here is that real estate's the ticket you got to get in. If you buy one property per year for the next 10 years, I think that's going to do really well for you. So and we're still on our way on to that we are on year six, 19?.

Rachel Wagner:

Year five.

Jason Wagner:

Year five.

Rachel Wagner:

Year five yeah.

Jason Wagner:

We're only at year five. One, two, three, four, five. Why do I count?

Rachel Wagner:

six bars here, because this is a year One, two, three, four, five.

Jason Wagner:

I see Year five. Yeah, you're five. Yeah, all right, cool your big takeaway.

Rachel Wagner:

Yeah, I mean, I think you were right back when we were having all these early discussions about you leaving your job and you going into real estate and look what it could do for us, and now this is the ticket and all those conversations you were right, yeah, and I got sold by so many gurus you did, you did and I think you know it's a good nugget to say that you wouldn't recommend getting into flipping because I was. Those are high stress, high stress, uh the thing is?

Jason Wagner:

the thing is is that the market is really good for flippers right now. Like we were in a very balanced market when we were doing it, we were in a low inventory environment. It's actually pretty hard to screw up a flip opportunity right now. If you underwrite it well, it's just more stress.

Rachel Wagner:

Yeah, it's a lot of work. It's a lot of stress.

Jason Wagner:

And the biggest thing that just kind of went off where I had the aha moment is like, dude, you put in so much time and effort into doing one of those flips, why the hell do you sell it? Why don't you just keep it? You put in all that time and effort, why would you sell it? There's so many other components too, because, like flippers, you have to pay capital gains taxes on all that stuff.

Rachel Wagner:

That's a really good point.

Jason Wagner:

When you're holding these properties, you're only paying taxes on like the cashflow that you're earning per the IRS and if you do it right, you get depreciation that you get to basically offset it, like when you make $50,000 from rental income. It's not the same as making $50,000 from your W-2 job. It is not even close to being the same, because I can take that $50,000 that we just brought in from rental income and I've got all the expenses I've got.

Rachel Wagner:

Yeah, and that's what Rich Dad, poor Dad really explains. Well, I think, is that difference.

Jason Wagner:

Right and I've got all the expenses to write off against it. I've got the mortgage interest, I've got this thing called depreciation, which is basically taking the property, saying that it's only going to last about 27 and a half years and coming up with a monthly figure that you can write off against any income that you have on that property. And then if you do this thing called a cost segregation analysis and you are able to, instead of saying that the kitchen sink is going to last 27 and a half years, you know that the kitchen sink is only going to last five or seven years, Well then you can accelerate that depreciation much faster. What Trump brought in, where you can take a lot of the lower useful life items that are in a property and you could take it all in year one as a major loss, this is where you can kind of come up with $100,000 worth of stuff can offset your income because you could have that big of a loss that you identify through bonus depreciation.

Rachel Wagner:

Isn't Kamala Harris proposing an increase on taxes for capital gains?

Jason Wagner:

I don't know, I don't know. She brought up the unrealized capital gains and taxing unrealized which is what? Which is owning stocks, and just because they've gone up 20% but you haven't actually sold it and realize the gain in your pocket, she's saying that you could be taxed on that.

Rachel Wagner:

Right, that's right, that's right.

Jason Wagner:

No, I think there's stipulations on all like, like and I don't. I don't know all the rules and it might only affect people that are like a million there's or more. I don't. I don't want to misspeak, so I don't quite know it.

Rachel Wagner:

Okay, yeah, I don't know, either there's something there with the capital gains tax, but I don't remember.

Jason Wagner:

But yeah, she might be doing something with the capital gains tax too. So yeah, long story short, that's where you see $50,000 in your W-2 job, because most people they only bring home. You know, if you bring in $50,000 a year, you know like half of that goes to the government. So it's just a lot different. So this is why buying income producing properties is one of the best things that you can do and why it's better than just buying the stock market, because you have these other components that investments don't have. Right, A stock isn't going to get you a tenant that's paying down your loan balance. That's like risk-free. You got a tenant that's in your property, they pay you rent every single month and you are paying down a portion of your loan balance. I actually have a stat here. I'm pretty sure I do here.

Jason Wagner:

How much in principal pay down did we gain last year? Just principal pay down, meaning we were able to write down the balance $41,000. Just last year, from tenants paying our mortgage, we were able to earn $41,000 in equity because the tenants paid us rent. It doesn't count the cash flow, it just says we paid the mortgage, we took the money that you paid us each month and we gave it to the bank and the bank wrote down the loan a little bit less and in total, when you have six properties one, two, three, four, five, six, oh, seven, seven properties that was $ one thousand dollars that we wrote down from principal pay down. That is it's huge, it's huge. And then I also did kind of break this out, which is another interesting as you take it from. I also have another interesting one which is like okay, well, that was the principal pay down effect, but then we have the market appreciation effect and just last year in our property values we earned over $125,000 in market appreciation.

Rachel Wagner:

So I guess, where are you pulling the market value of homes, right?

Jason Wagner:

I run it as an agent.

Rachel Wagner:

Okay, so you look at comps.

Jason Wagner:

So I'm super confident that I could sell these properties for these prices.

Rachel Wagner:

So you're pulling comps.

Jason Wagner:

Yes.

Rachel Wagner:

Okay, yep, yep. How would somebody who doesn't have access to the MLS do something like that? Use your Redfin. So, like those estimates, yeah, the Redfin estimates.

Jason Wagner:

Yeah, I mean because those are like a good ballpark to kind of figure that out. Or just call your agent, figure it out. Just say, hey, just running my net worth, can you give me a quick update of what you think my house is worth? An agent would do that for you. So yeah, do you have the Cybertruck in here as an asset? Of course I do. Oh, it's probably another. Yeah, it's in this bucket. Of course I do yeah. There it is. There you go. Well, good conversation, big takeaway.

Rachel Wagner:

I gave mine.

Jason Wagner:

What was yours again?

Rachel Wagner:

That you were right.

Jason Wagner:

Oh nice, I just wanted to get it one more time.

Rachel Wagner:

Oh, there you go. What's your big takeaway?

Jason Wagner:

I didn't ask you trust your husband I thought you were gonna say trust your agent.

Rachel Wagner:

But or actually I was like oh, he's gonna say buy property now well, that's that's true.

Jason Wagner:

Yeah, no, I'm just kidding. If your husband is interested in buying real estate and he heard this podcast, you should trust him in terms of looking into it more. I think that's that's a good one. If your wife is interested in buying real estate she heard this podcast you should trust her instinct to look into it more.

Rachel Wagner:

I was going to say, cause it's not always. It's not always the husband. We've had it the other way around, where people have come to us.

Jason Wagner:

Oh plenty, yeah, the wife is a bit sick and the husband's a little more risk averse For sure.

Rachel Wagner:

There's always one partner who is willing to take the risk and one who's more risk averse.

Jason Wagner:

Yep, yeah, yeah, it's a good balance. Good, it's good balance to have, but you have to take risk, otherwise you will, without risk, I mean, you'll just go at a snail's pace. So real estate seems very risky. If you were to be flipping houses, obviously very risky. But there's other, non-riskier assets or past activities, which is the house hacking, which is just buying a rental property. It's not as risky as you think. So, anyways, let's turn this one over and we will catch you on the next episode.