How to Build Your Financial Foundation BEFORE Investing in Real Estate

Ashley:
This is Real Estate Rookie episode 253. If you haven’t started yet, make sure you have solid personal finance foundations. This might sound a little harsh, but if you can’t quite manage your own money yet, it’s a big leap and jump to think that somehow you’re going to start managing this business or maybe even someone else’s money, whatever it may be. So track your spending, figure out some goals, reverse engineer them personally if you haven’t already done that yet. My name is Ashley Care and I’m here with my co-host, Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast where every week, twice a week, we give you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And I want to start today’s episode by shouting out someone by the username of NickHalden5621. Nick left a five star review on Apple podcast. And Nick said, I recently started listening to podcasts and I really like the way you both conduct the show. The way you ask the questions, the way you share your experiences. It really gives a lot of insight and knowledge to someone like me who is planning to buy his first investment property. Keep up the good work. Nick, we appreciate you. If you’re listening and haven’t yet left us an honest rating and review, please do. The reviews go such a long, long way of helping us reach more folks and our goal is to reach more people so we can help more people. Yeah, so Ashley Care what is up? I wish I had the book in my hand, but I got to looking last night.

Ashley:
I was just thinking that. I actually have it right there. So talk for a minute, keep everyone entertained. I’m going to go get it.

Tony:
All right. So I’m going to keep everyone entertained while Ashley runs away to go grab this. But Ashley has a super special announcement. Ashley has joined the ranks of the Bigger Pockets Elites because now she is officially a published author, the Real Estate Rookie 90 Days to Your First Investment by Ashley Care is printed in her hands and is here to be shared with the world. How you feeling, Ash?

Ashley:
Oh my God, it was so exciting. The book launched for pre-orders on Black Friday and the same day I got the sample copy. So it’s not even the edited version in here yet, but it was just marketing material and I have 13 of these to give out to people just to get a preview of it. But it was so fun. The boys and I, we did a video of us, the unboxing of it and stuff, and it was a lot of fun, but it still feels surreal. So anytime, of course, I have to always agitate, so anytime I go with Daryl or I go with the kids anywhere, it’s always like, ugh, you only want me to come because I’m a published author now. I think they’re getting really sick of it. But yeah.

Tony:
All the fame is going through your head now, huh?

Ashley:
It’s like whenever my kids want to watch YouTube, I’ll just go and put on the Real Estate Rookie Podcast. No, we don’t want to watch you.

Tony:
That is so funny. I don’t think I’ve ever done that to Sean Lowe’s YouTube also. But I should just make him subscribe to the Rookie Channel.

Ashley:
Yeah, yeah. Next time he has his friends over.

Tony:
Okay guys, I got the perfect thing for you.

Ashley:
Yeah, come on, let’s watch this YouTube video. You just have the podcast playing in the car when you pick him and his friends up somewhere.

Tony:
Well, congratulations. I’m super happy for you. I know that it was a long journey to get from nothing on the page to actual book in hand, so I’m super excited for it. I can’t wait to see how well this book does. So Ashley Care, the published author. I am humbled to be in your presence and thank you for having such a lowly person like me as your co-host now. because I’m not yet a published author.

Ashley:
And Tony, don’t feel offended that I didn’t send you one of these sample copies. My mom came over the other night and I was showing it to her and she tried to walk out of the house and I was like, no, this is for events that I’m going to. I have to give them out to Rookie Investors.

Tony:
No, actually I do have one. I have one. It’s downstairs.

Ashley:
Oh, you do? You got one?

Tony:
Yeah, I got one. It showed up yesterday. I forgot to bring it up to the office.

Ashley:
Yeah, you’ll have to thank Savannah then. She was the thoughtful one today.

Tony:
Well, we got a great episode in store for you guys today. We actually have someone by the name of Malia Gudenkauf. And that name might sound familiar because we interviewed Malia’s sister Grace back on episode 161. And they are business partners. And we got to hear Grace’s side of the story initially. Now we’re bringing Malia back to hear her side. But her approach is slightly different than Grace because Grace is really focused on scale and getting those units, whereas Malia is coming from more so of a personal finance background and real estate investing is just kind of one piece of her wealth building strategy. And she goes into what the rest of that kind of puzzle looks like and how real estate plays a role in that whole picture that she’s got.

Ashley:
I have to giggle when you said that. We’ve got this family, two sisters, we got her side of the story, so let’s bring on out. It’s like a Maury spiel.

Tony:
Yeah. And the lie detector test determined that was a lie.

Ashley:
So yeah, I love the personal finance piece that she brings to the table here and just talking about, and Tony and I harp on this, having that strong financial foundation for yourself, whether that’s before you start your real estate investing journey or building that as you are investing in real estate.

Tony:
Malia, welcome to the Real Estate Rookie podcast. We are super, super excited to have you. Before we started recording, we’re actually talking that you and your sister are the first siblings that we’ve had on separate episodes. So if you can, tell us who your sister is first and then give us a back story on who you are.

Malia:
Yes, for sure. So my sister is Grace Gudenkauf and she is the real estate mogul of our family. I am her older sister, Malia. We’ve got one other sister. So we’re one of three girls.

Tony:
That’s awesome. So give us a little bit of your backstory, Malia. What have you been up to and then what kind of brought you to the Rookie podcast today?

Malia:
Yeah, so I will say as myself as a real estate investor, I don’t know a ton about real estate, I feel, and I don’t care to know everything there is because I found the value in partnership with my sister, which we’ll talk about. And I’ve been able to pursue those opportunities because of really solid personal finance foundations. So that’s what I’ve really been up to over the past several years is building my financial education business, which is Little Miss Finance. Started as a coaching business, working one-on-one with individuals, and now I’m really working with businesses to help employees better understand their benefits at work. So I am a personal finance guru, now turned a little bit real estate guru, and I’m excited to chat more about all that.

Tony:
Yeah, I’m excited to dive into the personal finance side of things. And before we go too far down the rabbit hole of your story, I just want to ask one question. Because you’re both a real estate investor and you’re in the personal finance space, what are your thoughts on the Dave Ramsey notion of building wealth?

Malia:
I think Dave Ramsey has helped a lot of people, and I read his book and learned some from him as I started out, because when you’re starting out, it’s kind of like you feel like he’s the only person out there preaching personal finance until you find some of these other outlets. But I will say I have different mindsets and maybe some disagreements with methods that he teaches. So I think there’s some things of value to take away from him, but I have a little bit of a different perspective now that I’ve grown in that field.

Ashley:
And before we get any further, I just want to mention that we did have Grace on episode 161 if you guys want to go back and take a listen. And Grace also is a contributor of the Real Estate Rookie YouTube channel too. So make sure you check out the YouTube channel and some of her videos. So what would be the first thing you would say that kind of made you realize that you wanted to get into real estate investing? Was the personal finance piece kind of first and then it was like, okay, I want to get into real estate and pursue that?

Malia:
Yeah. The personal finance piece coming first for me was huge and it’s kind of what I preach on as well. And it’s really what helped Grace get started in her journey too. Having really solid personal finance foundations, knowing how to be in control of what’s going in and what’s going out of your income, having some savings, paying down debt. And then you get into this world of investing. And I’m very into using your retirement accounts, investing in stocks and bonds. But then as you grow, you realize there’s other paths to build wealth as well, which is real estate. And because I had those foundations and I had saved money and I had paid off debt, it allowed the opportunity to invest in real estate be more flawless.
It was easier to enter. And I felt like I took on a lot less risk because I had those solid foundations in personal finance. So I realize I’m investing in 401ks, IRAs, which traditionally you’re not able to access that money until a long ways down the line. So kind of sifting out what are these other paths that I could build this passive stream of income. And that’s where real estate really came to light.

Ashley:
And was Grace a huge part of this as to you were watching what she was doing or was it kind of the same time?

Malia:
Yeah, definitely.

Ashley:
For a rookie investor that maybe doesn’t have a sister that’s already investing, what would you say is one kind of piece of advice you can give them that maybe you learned on your own or figured out that they can take and maybe turn into an action item to get started?

Malia:
So I think, when I think about my journey as a real estate investor, and as I kind of mentioned, I’m not an investor that’s trying to scale to 30 doors in a year or quit my job to do real estate full time. I’ll probably never be that person. I’m using real estate as a way to grow a portfolio slowly over time as just another stream of income. So for someone who might resonate with that, definitely finding the educational tools. Obviously Bigger Pockets has a huge resource of those. And one Bigger Pockets book that I really love and author is Chad Carson, because I feel like he’s aligned a lot with the small but mighty, he calls it.
People that aren’t necessarily trying to get caught up maybe in scaling so quickly. So finding those resources. But I will say, regardless of Grace being my sister, she was a partner that I found emulated a lot of things that scared me about real estate and she picked up in those areas that I lacked. So I know for me, it’s a special case scenario since it was my sister, but finding someone else out there who’s investing, maybe creating a mentorship with them or coming to the table with money and partnering with them in a way. I feel like that gave me the big hump or the big jump into real estate that I wouldn’t have taken on my own.

Ashley:
I have to completely agree with you on the recommendation of Chad Carson and it was one of my favorite Bigger Pockets books. It’s called Retire Early with Real Estate, a phenomenal book about how he talked about going small but mighty. And I think it’s super interesting for anyone to read, no matter what your goals are. But let’s kind of go over that, your goal. So you identified that you have no desire to build a huge portfolio, that you know what you want and what you’re trying to achieve and you’re using real estate to build that. Can you talk about how important it is to know what you want and then to use real estate as a tool or leverage to get you to that kind of destination in your life?

Malia:
Oh yeah. Yeah. So many things running through my head right now. Personal finance goals in general are so crucial. Otherwise, I feel like you’re always going to be standing at the bottom of a mountain, looking at the top, seeing all these things that everyone else is doing and just have no idea how to get there. You’re going to be overwhelmed into doing nothing. So creating some goals, whether it’s saving, paying off debt or then into investing in real estate is crucial to take those goals. And I’m a big proponent of reverse engineering everything. So I was just listening to your guys’ episode with Jesse Dylan and I feel like I just wanted to say, preach, every two seconds. Everything in that episode I stan.
But for when it comes to any simple goals, reverse engineering things and taking things from, okay, I want to save 10,000 or I want to start investing in real estate. What do I need to do this month? What do I need to do this week? What do I need to do today? And it’s just so much more actionable and bite size to take a step forward as opposed to trying to get to the end goal and being so overwhelmed going nowhere. So the concept of reverse engineering is huge no matter what goal it might be.

Tony:
So I want to talk about the real world application of that reverse engineering. But before we do, can you just give the listeners, Malia, what does your portfolio look like today? How many units do you currently have?

Malia:
Yes. So I currently have four doors, which is compromised of two duplexes. Bought those in April of 2021.

Tony:
All four in April of 2021?

Malia:
All four, yeah. Both duplexes and I partnered with my sister on those.

Tony:
So, let’s talk about the reverse engineering aspect, because you have this unique approach that most of our guests probably don’t take. Most people that we bring onto the show, their goal is to go big, go fast and they want to scale, they want to do all these things. But you’re looking for a more balanced approach and obviously you have the benefit of having your sister in that partnership there. But when you say reverse engineer, what steps did you take when you made that decision to buy those four units? How did that play into that plan? What was the end goal you were looking for and how did those four duplexes fit into that plan?

Malia:
To break it down even more, to have the opportunity to get started and invest in those four duplexes, I was reverse engineering a goal of how much do I want to save in a high yield savings account that’s specified towards having real estate investing opportunities? So with my paycheck, I was investing, I was saving, I was doing all these things, but I didn’t know quite what I wanted do with real estate, but I wanted to have the opportunity to do something when it arose. So that became the exercise of saying, I’m going to save $500 a month maybe from my paycheck in a savings account that’s specific to real estate.
And that’s what really builds up. And when this partnership and this opportunity arose, again, I didn’t have to know everything. I had the opportunity with the partner who knew more and could help me along the way and help me figure it out. But I had the money to show up and say, yeah, I can be a part of this, I can bring the money to the table. So even zooming out a little bit more, that’s how I viewed my reverse engineering when it came to my first real estate goals.

Tony:
So it sounds like, Malia, before you even took the dive into real estate investing, you focused first on your own financial picture. So you talked about your savings goals. What were some of the other things that you felt you needed to get in order with your own personal finances before taking a leap into real estate?

Malia:
So hot take, and I know everyone has different opinions on the concept of being debt free before you begin investing. For me personally, it was important for me to come debt free as one of my first goals with my personal finances before even real estate. But as I think back and I see people who have invested and got out of debt, I still believe that I personally would want to get out of debt prior to investing. Because, I’ll give an example, when we bought these properties, we ended up, we didn’t take anything from it the next month, that cash flow is.
Everyone likes to talk about these big numbers of oh, here’s your cash flow, but it’s still a long term game. So we didn’t take any cash flow away because we were saving for our reserves, so on and so forth. Then we rehabbed something so we were saving back up again. So it was a while until we actually took anything away from the properties. If I had been investing in the name of, oh, I want to use this to get out of debt, I think it would’ve just placed a lot more stress on myself or I would’ve been taking the money right away and not doing justice for reserves for the property. So, one of the big things in my personal finances before investing in real estate was definitely paying off my personal debt.

Ashley:
That is definitely a huge accomplishment right there, and just how you talk about building that foundation. I kind of went through the same thing in paying off personal debt and just kind of refocused my life right there. And it does make it life changing. So besides sitting down and paying off debt, what are some other financial tips and tricks to help somebody kind of build that stable foundation?

Malia:
So, a couple things. One, if you haven’t already done this, and I know I mentioned Jesse Dylan’s episode, but you guys talked about this as well. The simple concept of tracking your spending to have complete awareness of the money coming in and where your money’s going helps you get your arms around your financial situation more than you ever might think. It’s a perfect starting place to just get that pure awareness. From there, you can move forward and look forward to decide what you want to accomplish. And, as a bigger scale, I was listening to a Bigger Pockets back when I first got into Bigger Pockets, maybe in 2020. It might have been David Green or someone in it, said something so simple, yet it was so mind-blowing to me about when you’re working on maybe saving more or cutting back, whatever it may be, focus on your big three expenses. Housing, food, and transportation.
And I think in the personal finance world, a lot of times you like to talk about, if you cancel your Netflix you’ll save $10 a month or these things. And going after those little things are important and they will add up, but also these big three is what I’ve attributed to a lot of my success and ability to save or invest a little bit, larger scale, or move the needle more than a different mindset might be. So focusing on those three things as well as in your personal finance situation will move that needle a bit more and a bit quicker.

Tony:
I just want to share my story, and I’ve shared this on the podcast before, but it was so effective for me when I did this. I asked about Dave Ramsey earlier on Malia and I feel the same as you, right? He’s got some stuff that I think are super sound. I completely disagree with his notion on debt, but his budgeting perspective I love. And when I was in my early 20s, I actually ordered, Dave Ramsey used to sell on his website an actual wallet that had a bunch of different slots to put all your cash in. And in 2009, you could probably get away with that, but in 2020, carrying cash is so inconvenient and I want to Apple Pay everything. So this is a couple years ago and I asked myself, how can I take the idea of the envelope system that Dave Ramsey promotes and digitize it?
And I said, well, what if I just opened a bunch of checking accounts? So when I was still working my W2 job, the way that I set up my direct deposit was that I had money set up through direct deposit to go into different checking accounts. So every month, it would be like X dollars went into the grocery account, X dollars went into the student loans account, X dollars went into my mortgage account, X dollars went into groceries and shopping and all these different buckets that you would typically have, but it happened on autopilot. And then I would carry one debit card, and when I wanted to spend for one of those categories, I would transfer out of groceries into the spending account, I would transfer out of the dining out into the spending account. So it was a way to systematize and really control my spending without having to carry around a bunch of cash and envelopes like Dave Ramsey would. So I just love sharing that because it was so impactful for me to really get my spending in control when I was looking to make that happen.

Malia:
I think something I take away from hearing your story, it’s just the intentionality behind it all. And a lot of people might hear and be like, that’s so much work. Well, would you rather do a little bit of extra work and have all these opportunities on the other end? Just the intentionality is everything.

Tony:
Cool. So Grace, let’s keep moving. So I love the idea of getting the personal finances in order first. I think that’s a great place to start. Let’s talk a little bit though about why you made the decision to partner as opposed to going after this yourself. And if you can maybe give some details of how you structure that partnership to make it mutually beneficial for both you and your partner.

Malia:
Yeah, so I will say, one, I feel like, and I still feel like especially when I’m in the Bigger Pockets world, I’m like, I don’t know everything there is to know about real estate, and I’m sure everyone would agree with that. So I feel like I didn’t quite have the full comprehension, which then translated into confidence to do it on my own, which was nice things to have in a partner. And two, I was able to bring money to the table for the partnership. So if someone’s looking for a partner, I would say, in my case, I was also like, I don’t want to manage tenants. It literally scares me. So if I bring money to the table and you bring management to the table or whatever it might be, that could be a good fit and a good partnership. At the time of our partnership, Grace was still pretty new in her real estate investing journey too.
So it was all equal. We all brought the same money and we all took away the same equity and ownership. As it’s evolved over the past year and a half and her business has grown, what we thought as roles we would all take on have shifted, and the roles I personally were going to take on have shifted to other resources under her business have been able to cover. So, our partnership has changed it a little bit in that aspect. But from the get-go, we did try to be really intentional about creating an operating agreement, which might sound really fancy, but we really, while everyone is in a good state of mind, trying to lay out how this is going to go, who’s going to own what, who’s going to do what.
It’s so much easier to try to discuss that and figure it out when everyone’s in a happy headspace, a good headspace, rather than on the other end of things. So really tried to do that first and foremost, which I think is important in a partnership to have that groundwork and that structure prior to getting into things and maybe things potentially going downhill.

Ashley:
Tony and I love talking about partnerships. That was what we did our presentation on at the Bigger Pockets conference. So along with having that great partnership with somebody, what are some of the things that you recommend maybe as you’re first starting out as a partner and then to do down the road? Okay, maybe every quarter, every year. And is everything written down or is some of it verbal? How are you kind of maintaining and keeping, I don’t know what the word is there, but liability from each other? Yeah, yeah.

Malia:
I will say some of this that I’m about to say is advice that I need to take and go do in our partnership. I think creating roles and responsibilities off the bat about who’s good at what, that’s exactly where we started. And it was written down and you can use an attorney to help check you. And I don’t know if notarized is the right word, but all of that sort of thing. Then I say down the line, open communication is everything, in real estate, in relationships, in all of life. So I think revisiting where everyone’s at, again, don’t wait until something goes wrong and everything starts going downhill to start airing maybe all of your thoughts or frustrations or whatever it be.
The upkeep that you can do checking in on where everyone’s standing, and that’s really where Grace and I got to, is everything’s been great, but I felt like, oh, things have changed. I’m not doing this, so how can we reorganize the partnership so it’s still fair for everyone? So I think that maybe quarterly, like you said, couple times a year, when you’re in a good headspace, it’s so much easier to discuss and revise as you may wish than on the backend when things are already tumbling downhill.

Tony:
Yeah, Malia, I love the idea of revisiting the structure because just like you said, when you enter into a partnership, especially a new partnership, there are a lot of assumptions that are made around who’s going to do what and how the workload may be balanced and who takes on what responsibilities. But once the rubber hits the road and you actually start doing the thing, the reality doesn’t always quite match up with your initial expectations. And if a business partnership goes unbalanced for too long, that is the recipe for disaster. So it is super important to make sure that both partners, A, have clarity at the beginning around what they feel that partnership should look like, but also have an understanding that maybe what we’re agreeing on today might not make sense six months from now or a year from now or two years from now.
And we both need to be willing to come back to the table and have a discussion around what’s fair and what isn’t. So one of the things that we started adding into our partnerships with other investors is an end term. So every new partnership that we enter into, under the joint venture agreement that we sign, it lasts for a predetermined period of time. And the only way that that partnership will continue to exist is if both partners agree to extend that partnership. So there’s a natural end date, just in case, for whatever reason, we can’t come to an agreement on what’s fair and reasonable for both parties.

Malia:
Yeah, that’s so good. I was just going to say the same thing. If you’re uncomfortable maybe with bringing up the conversation on your own down the line, add that as part of your agreement from the get-go. So that end date or even just we will check in every so often. Because in Grace and I’s situation, we were both kind of new to it. We were creating these roles and responsibilities, but at the end of the day we were still new to it, we didn’t really know what we were doing. So it’s important to create that structure and those expectations on the front end to just avoid any miscommunication or downfall.

Tony:
So Malia, at this point, would you say that you’re completely passive on those four units?

Malia:
Yes, so that’s exactly where I’ve transitioned to. The things that I thought I was going to be able to bring to the table, I haven’t so much. I have helped paint and do some rehab and stuff, but I’ve realized as a real estate investor and as a partner, I through and through want to be someone who can bring money to the table, partner up with someone who will manage, do all the other things, and be truly more of that passive real estate investor.

Ashley:
Do you plan on doing any more partnerships at all besides just with Grace building on and using that as a tool to build your small but mighty portfolio?

Malia:
I foresee myself, unless I was to purchase my own home and do a house hack or something like that, I believe that my journey in investing in real estate will continue to be partnerships that I will bring the money and be that passive person. Most likely with Grace just because it’s worked and we work well together, all of those things. But as income levels increase, savings levels increase, I’ve already had opportunities with family members who are looking almost to me maybe as a hard money lender or something like that. So I’ve seen the opportunities, perhaps they’ll be there down the line and I’m open to it if it feels right. But I’ll definitely continue to partner in several ways down the line.

Tony:
So, one follow-up question. It seems like you’re leaning towards partnering with folks that you already know. But let’s say that maybe you’re approached by someone that wasn’t already in your circle and they know that you like playing the role of passive investor, you have the funds or the balance sheet. What kind of things would you be looking for to say, okay, this is the kind of person I’d want to partner with?

Malia:
Oh, that’s a really good question that I haven’t thought too thoroughly about. But obviously someone who has a track record of being a good landlord or real estate investor on their own. The numbers are everything. But I think someone that, it’s hard because I have worked with people I know, so I know all the soft sides, the soft skills of everything that is going to work well. So I think I would want to see just a little bit of a track record that they’ve been able to successfully invest on their own before and they’re just looking for someone to put up some money for them to continue to do that.

Tony:
Yeah, I think it does definitely get tricky when you start working with the folks that you don’t have as much experience with. And again, that’s why we like the idea of having that timeline around, okay, here’s how long that partnership lasts for. Because sometimes you pick the wrong person. They might seem great up front, then you actually start working with them and you maybe see a different side. So it’s always good to have that out if you need it.

Malia:
For sure. Yeah.

Tony:
Malia, I want to transition just a little bit. So obviously you come from more of a personal finance background versus real estate. What are maybe some of the negatives of real estate investing that you’re not super fond of, that you kind of like the stocks and the other types of investing more than real estate?

Malia:
Everyone loves to say, in the shiny object syndrome of real estate is this passive income stream, right? And so we all think we’re going to start investing in real estate to have this monthly cash flow and you’re not doing anything, when we all do know deep down that is a little bit more than that. So that’s my biggest downfall and why I really love to pair investing in retirement accounts, investing in stocks and bonds with real estate, as it truly is passive. You are automating things you can put in the account every month and there’s really little to no maintenance. I’d probably spend an hour or less a year on my investment accounts. So that’s the major downfall that comes to my head right away is just, and like I said, I’m scared of tenants, I don’t want to do all that, which has led me to kind of that passive partner, is that just not so passive. But there’s several different upsides when you compare it to the stocks and bonds and retirement accounts that make them pair so well together as an investment strategy.

Ashley:
I think there’s probably a lot of real estate investors listening to this episode and agreeing with you on some of the nicer things of investing in stocks that things you don’t have to deal with. So I think everyone can relate a little bit to that. What about the people that say though that, well, real estate, you’re in more control. When you’re investing in the stock market, it’s a CEO, it’s a board of directors when you’re investing into their company really that have control of that asset. So what’s your opinion on that?

Malia:
So I do agree, when you’re investing in real estate, you’re in more control. You can scale quicker, you can really often access the funds quicker and it can often allow you to retire earlier than this traditional route of investing in a 401k that traditionally you’re not able to touch until 59 and a half. But to that, I just think having both of them together creates such diversity and a solid investment platform. So, it’s not something that I look into too much. I feel like there’s a track record also in the stock market of having success. So I don’t know. If someone said that to me, I probably wouldn’t really argue. I would just say, okay.

Tony:
Malia, are you an index fund? Isn’t that what you buy? You buy index funds?

Ashley:
Yeah, that’s really the only stocks that I invest in are index funds.

Malia:
Yeah, me too. Team index fund. And I think if someone’s listening and it’s like, oh, investing in stocks is so complicated. I’m a basic financial literacy gal, so I only invest in index funds and that’s often what I try to educate people on. It’s the perfect route to go.

Tony:
Can you just define index funds for folks that aren’t familiar with it?

Malia:
So an index fund, you could buy a single stock like Apple or you could buy basically a basket of stocks. So an index fund we talk about a lot is the S&P 500 index fund. That’s just the list of the 500 biggest companies all being in that basket that you can purchase.

Tony:
So instead of trying to pick the right stock and time the market and do all these other things, you’re just going to put a little bit in every single bucket and then you get the ups and downs balance out hopefully to still give you a net positive.

Malia:
Yeah, in my investment journey, I’m a long-term investor. I’m not a day trader or any sort of thing. I don’t invest in crypto. Long term buy and hold, just like probably my real estate journey. Buy and hold for the long term and keep that zoomed out perspective.

Tony:
Malia, I think it’s interesting because you said you started this journey a few years ago and that would put you in your earlier 20s. I feel like most people in their early to mid-20s aren’t quite thinking about index funds and building wealth long term. What do you feel sparked that in you and where do you see other people who are in that same demographic, those early to mid-20s, where do you see them making mistakes?

Malia:
So for me, the fire lit inside of me when I was a senior in college and I went to free online, or not free online, this was before COVID. In person, there was financial literacy classes on campus and I was just like, wow, that’s a part of life that’s going to be part of my life for forever, yet we’re not talking about it. I didn’t really grow up talking about it at home, I wasn’t talking about it with my friends, and I was just kind of mind blown. I was like, wow, this is really important. So that’s what just got me passionate about learning all of this stuff and it was prior to having a job and earning money. So I really took the education and then put it into practice and quickly realized by this solid foundation education, the decisions I was making were really adding up quick and propelling me forward a lot quicker than I would’ve expected.
So, that’s kind of where my journey started and why I got passionate about it, because it also provides so much opportunity. When you have a solid financial foundation, I was able to start investing in real estate. I eventually left my job to create a business out of it. It just provided opportunity and me to make a choice. And I feel like a lot of people when they’re younger, we just all fall into this YOLO state of mind. And since we’re not talking about it, we think that everyone just lives this way. Maybe with credit card debt, paying off their student loans through the next 20 years, whatever it is, because it’s not being talked about. So how are we supposed to know? That’s so valid.
But I think when I can get in front of young people especially and tell them, I’m so passionate about young people because you are shaping the trajectory of your financial life right now. And a couple years, a couple decisions can make that trajectory so much different. So, for young people, I would just encourage them to better understand what investing $100 a month, what that could truly be over the long term. And taking that bigger zoomed out perspective as opposed to just YOLO today or this year or whatever it may be.

Tony:
Malia, one follow-up question. So when you went to that financial literacy class as a senior in high school, what were some of the topics they were talking about? Was it just like, hey, here’s what the stock market is, or here’s what it means to have a 401. What did you hear that was like, oh man, everyone should be talking about this?

Malia:
I feel like so privileged in hindsight, and I was a senior in college, and the guy, he was just passionate about it as well. So he really had two classes, if you will. One was investing 101 and one was the world of money. So we were talking about buying a car, credit card debt, buying a home. Just all of these decisions and what they mean down the line. And then investing, he was really educating, here’s how you can use these retirement accounts, 401ks, IRAs, invest in index funds. Here’s how you can actually understand it on your own and do it on your own as opposed to maybe thinking you need a financial advisor, all this sort of thing. So he really covered it all. It was several weeks. Each class was like 10 weeks and it was probably 90 minutes a night. I always laugh looking back, because my friends, I was a senior in college. They were like, let’s go out, let’s go to social house.
And I’m like, sorry I can’t. They’re like, oh yeah, Malia has her money class. And they would make fun of me. I’m like, this is important to me, okay? Yeah.

Ashley:
And look at how it’s paid off, right?

Malia:
Yes, yes. I’m very thankful.

Ashley:
Okay, well, Malia, did you want to go through one of the numbers of one of your properties for us?

Malia:
So I can share high level the numbers of the two duplexes that we bought. So at the time we bought the four doors, two duplexes for 250K. I would say at that time they were probably valued at 300K, so we got to buy into a lot of equity. At that same time, Grace was working on our VP of our local bank to say, because of that, can you allow us to put 10% down instead of 20? So there was actually Grace, her partner and myself into the deal.
We each put about 9K at the closing table into the deal. And funny story, I always laugh looking back at this, because I was brand new. I don’t know what we were doing fully and all this stuff. I was at the closing table with my checkbook and they were basically like, okay, we’re good to go. And I was like, we were getting up to walk out, and I nudged Grace and I was like, “When do we pay? When do we write the check?”
We almost got up and left without putting the down payment down. We all started laughing, but I was so confused. I was like, at what point do we pay the money? So, we bought those for 250, four doors, we inherited all the tenants, and we turned one into a midterm rental, which basically doubled our rent. They were all renting for about 750. The midterm rental is now 1600. And I will be completely honest. Grayson, her CPA does all the numbers, so I’m not exactly sure what the cash flow is on all of them, but it was definitely, it was good. I want to say six or 700 bucks a month per unit.

Tony:
That’s awesome.

Ashley:
Yeah, that’s great.

Malia:
That’s probably the least thorough numbers has ever been shared on the Rookie podcast.

Ashley:
This was the first one you bought or the second one you bought, even though they were both at the same time?

Malia:
We bought them both at the exact same time. Yeah. Yeah.

Ashley:
Awesome. Well, congratulations on that.

Malia:
Thank you.

Ashley:
So what is one piece of advice that you could give to somebody that is starting out and they’re a rookie investor, maybe they have already started their personal finance journey. What’s something to maybe overcome analysis paralysis or to actually take that action, take that leap, take that step for someone who’s a similar path as you? Because you’ve been paying off debt, you’ve been saving money, and now to throw it into some investment that maybe you don’t know a lot about yet. How do you kind of overcome that?

Malia:
So, if someone that’s listening has resonated with some of the things I’ve said, I probably still would not be started investing in real estate if I was doing it on my own. So if you feel like you’re someone that’s in that analysis paralysis, you’ve got the good personal finance foundations, maybe you’ve got some money. You’ve got the knowledge, but you just haven’t done it yet. I obviously am a huge advocate for finding a partner and maybe someone who’s a couple steps ahead of you who’s maybe a little bit more ballsy and willing to do that and kind of take you along the way or take your money and allow you to be a little bit more of a passive person. So I am completely victim to analysis paralysis.
And like I said, probably still wouldn’t be starting. So for me, my biggest recommendation is, if you feel like that’s you, then start with a partnership deal. It can be pretty simple. It doesn’t have to be so complicated. It’s also kind of scary thinking about a partnership. But you share the risk, you have someone else share the knowledge, and then from there on, nothing’s permanent. The next deal you could do, maybe now you have that confidence to go do it on your own or whatever it may be. So I’d say consider a partnership if you’re ready, but you’re just still kind of scared. You don’t want to mess up, you don’t want to do the wrong thing, whatever that is.

Ashley:
I think that’s a great piece of advice right there.

Tony:
All right, so we’re moving to our rookie exam?

Ashley:
Yes, this will be way harder than the personal finance.

Malia:
Oh, I’m scared.

Tony:
All right, so these are the three questions we ask every single guest, and these are the most important questions you’ve ever been asked in your life, Malia. So question number one, maybe you touched on this already a little bit actually with what you just said, but I’ll ask it anyway. But what is one actionable thing Rookie should do after listening to your episode?

Malia:
If you haven’t started yet, make sure you have solid personal finance foundations. This might sound a little harsh, but if you can’t quite manage your own money yet, it’s a big leap and jump to think that somehow you’re going to start managing this business or maybe even someone else’s money, whatever it may be. So track your spending, figure out some goals, reverse engineer them personally if you haven’t already done that yet.

Ashley:
Love that. Okay, so the next one is, what is one tool, software, app, or system in your business that you use?

Malia:
I use, this may be very basic. I use this scheduling app, it’s called Acuity. In whatever business, if it’s personal finance, maybe real estate, maybe life. It’s so nice to have a calendar to send people to and say, hey, we want to connect, just go on here. Instead of wasting all this time saying, when are you free? Where are you free? Does this work for you? So my calendar scheduling app has been with me from the beginning and it’s the best $16 a month I spend.

Tony:
I love that. I have Calendly that does the same. And Calendly is cool because it actually has a Gmail integration. So if you have a 30 minute slot or a 45 minute slot or an hour slot, you can just click the button inside of your Gmail and it’ll automatically add the link for your Calendly there. So totally agree. I don’t know why it took so long for people to come up with that, the whole back and forth round. When are you? Anyway, yeah. All right. Last question on the rookie exam, Malia, where do you plan on being in five years?

Malia:
I will say this question always scares me a little bit because I’m scared of commitment and so I’m scared. It’s just hard for me to think. Grace and I, we will go on walks every day and we’ll have a different grand life plan every day. I kid you not. So for me to think five years in advance, I’m like, oh my God, I have no idea. But I would like to continue building my business, Little Miss Finance, and create a really sustainable business model that allows me to do it longer term. In real estate, I’ve bought that one property in 2021. I plan to continue buying real estate. Again, as I’ve made very clear, I’m not trying to scale quickly. So it’s really more of when an opportunity arises financially, I’ll make sure that that opportunity, I can pursue it. So purchasing perhaps another property, maybe two, and growing my financial education business to a really sustainable manner that can continue long term.

Ashley:
And help a lot of people build that strong foundation.

Malia:
Yes, absolutely.

Tony:
Yeah. And for those of you that are listening, if you’ve resonated with Malia’s story on the whole personal finance journey, obviously we have the Bigger Pockets Money podcast with Scott and Mindy as well as the YouTube channel. So be sure to check those guys out because all they do is talk about personal finance all day every day. And Ash and I have both been guests on that podcast, you guys can go back and listen to that and they’ve had a bunch of amazing guests come on that show as well. All right, well, Malia, I think you passed the exam with flying colors. We appreciate that. Before we get you out of here, we want to give a quick shout to this week’s Rookie Rockstar. And if you want to be highlighted as a Rookie Rockstar, get active in the Real Estate Rookie Facebook group or you can post your success in the Bigger Pockets forums.
But this week’s Rookie Rockstar is Rekia Waller Vasquez, and she says, my goal was to get into real estate this year. I refinanced my first house for $225,000. It rents for 1,800. Purchased home number two for 201,000 and it rents for 1,650. Then purchased home number three for 208,000 and it rents for 1,700. So she got in and really just kept moving. And she finished off by saying, I’m a single mom to three kids, ages four, three, and two. Anything is possible. I hope 2023 brings everyone success. Rekia, thanks so much for sharing your story and congratulations to you. That is absolutely amazing. We’re happy to see your success as well.

Ashley:
Yeah, super cool. And thank you so much for sharing. If you guys have a win, we would love to hear it. If you guys could leave it in the Real Estate Rookie Facebook group or send a DM to Tony or I. If you guys have a question, you can always call us at 1-888-5Rookie, and leave us a voicemail. We may play it on the show for a guest to hear. So Malia, thank you so much for joining us today. Can you let everyone know where they can reach out to you and find out some more information about you?

Malia:
Yeah, so I’m most active on Instagram and TikTok at Little Miss Finance. You can find me there. And I appreciate you guys having me on. It’s been a lot of fun.

Ashley:
Yes, thank you so much for joining us and taking the time to share your journey with everyone. And I love that we had the personal finance piece. Actually, before you go, I’d love to pick your brain on what are some good book recommendations? I love reading personal finance books even more than real estate books sometimes.

Malia:
I love books and I’m team books over sometimes YouTube or podcasts when it comes to personal finance too. So I feel like a pivotal book in my life was Your Money Or Your Life by Vicki Robinson and Joe Dominguez. That’s a huge one. I will also say, if you want to get more into investing, one of my favorite ones is A Little Book of Common Sense Investing by John Bogle. So those are two at the very top of my list.

Ashley:
I’ve read that second one, the Little Common Sense Book of Investing. That one is a really great one. The one that I also add that I’m sure you’ve probably read too is The Simple Path to Wealth. I feel like that’s the pretty common one. But yeah, I really enjoy that one.

Malia:
Yeah, that’s a great one.

Ashley:
Okay, well thank you so much for joining us. I’m Ashley @Wealthfromrentals and he’s Tony @Tonyjrobinson. Actually, Tony just got his account suspended for 90 days.

Tony:
I’m back from Instagram purgatory.

Ashley:
He may or may not be on there if you search him, but that’s Tony @Tonyjrobinson. If other ones come up, there’s like 20 other people trying to copy Tony because he’s too cool. So make sure that it’s actually @Tonyjrobinson and spelled just like that. Thank you guys so much for joining us and we will be back on Saturday with a Rookie reply.