Q&A: Should We Ditch Rental Properties Entirely?
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So you used to have running properties, and then you exited entirely out of the game.

I did. I dislike being a lord. I get IT. I understand why the great investment, not for me. wow.

And see this is how worthy opposite, which is why we're such a good pair because I as you know, i'm gonna w all about rental properties. So we together are going to tackle a call from a listener who's wondering whether or not he should egg IT out of the rental property .

game entirely. And yes, i'm sorry.

Do you have another .

the question of my bed.

We're also going to be hearing from a listener who is interested in environmental friendly, sustainable investing and is wondering what pointers we have. And then we're going to go peel back the curtain is, is that the expression?

Peel back? No, you don't peel.

You peak behind the curtain.

Pei, peel.

How can you keep these words straight? Is there so much? All right. We are going to peel back the onion and peak behind the curtain and talk in response to a third listeners question about the behind the scenes of running a content business, specifically podcast.

but even the why and apple. I think that question also is even just more about the nature of entrepreneurship. And when do you take the plunge?

If you when do you decide that it's time to double down, it's time to invest. It's time to take the little bit of money that you're making and rather than spending on yourself, pump IT back into your business.

Burning the ships when the time to burn the ships is omar famous.

wrote right? exactly. So we're going to unpack all of those in today's episode. Welcome to the afford anything podcast, the show that understands you can afford anything, but not everything. Every choice Carries a trade off, and that applies to any limited resource you need to manage.

Like your time, you're focus your energy, your attention, what matters most in how do you make choices accordingly, this show covers five pillars, financial psychology, increasing your income, investing real state and entrepreneur ship its double eye fire. I'm your host, pola panta. I trained an economic reporting at columbia. Every other episode, I answered the questions. They come from you, and I do so alongside my buddy, the former financial planner josel.

c. Hi, what's up, joe? Oh, man is fantastic. today. I get to hang out with you, and you are really making a brand new studio. I can't wait to see where the studios come on.

Thank you. Thank you. Yes, so this particular episode is audio only. This one is not herring on youtube, but because you know how sometimes things get worse before they get Better.

And is such a construction zone in here right now? Oh, go you. You can smell the fumes that I can smell, but may get .

a little lively today.

I might have to, like, literally just stick my head out the window midway through recording. That's where we are in the span of this construction. We've got two studios. The second one is under construction.

So the one that we have is our studio where we interview guests, our interview with mat shots, which is coming up in our interview with Leslie e, which aired a couple months ago. We shot those in our studio that is optimized for guest interviews. Until now, we d never had a studio that was optimized for remote recording. Joe, what you and I do when we record because you're are in texas and i'm in new york, we're building out a studio that is just optimized for remote recording. I'm at the sever moments surrounded by sandbags and gaffett and .

just you know a gaffer tape is that when you know you're .

deep in IT? Yeah exactly. But in about a week or so, we'll be ready to actually shoot fund.

It's going to be amazing.

And then the youtube is are youtube videos of you and I, jo, we're going to pop from that point forward.

Boy, have to do something about this face.

But let's get started with our first question today, which comes from an anonymous color.

In this anonymous color decided, as everyone will hear, to use an AI voice.

Yes, extra anonyme.

I have the perfect name for the anonymity or hear .

right after the question.

Hi, paul and jo. You might recognize my voice. Yes, this is available from ChatGPT voice mode.

My human partner, who wishes to remain anonymous, has found such value in conversing together that SHE opted to have me make the call today. He is what he wishes for me to pass along. My husband and I own two vacation rentals.

The first purchase in twenty twenty nets us ten to fourteen thousand dollars annually, with around eighty thousand dollars in equity and has been easy to maintain. The second fought in twenty twenty three has been more chAllenging. We have little to no equity as we use a sixty thousand dollar headlock for the downpayment.

We do not anticipate any profit for the next two to three years, and IT is unclear how or when we will have that he look paid off. Currently, our first property's profit is allowing us to break even collectively. While the he looks principal remains largely on touch, here is why we bought the second property is right next door to the first.

We hoped for easier management and portfolio growth planning to hold onto both cabinet for decades to come, given our livelihoods a year ago, paying off the hillock quickly would have been easy to do. But now, for reasons I will get into next, the financial train is significant. Here's what's changed.

Since buying the second cabin first, my old position was terminated unexpectedly. Ly, I have since taken a small pake up for a new job that I enjoy, but IT leaves me with less time for my real estates side business, historic. We've used my commissions as a real ter fifteen to thirty thousand dollars extra income annually to quickly pay off debt and make property investments.

Without that income, our ability to pay off the headlock is uncertain. Additionally, my husband made an intentional job change to pursue a passion, but IT comes with half his previous salary. His career path could lead us to move around the country and potentially increase our income significantly, but is no guarantee.

With so much up in the air, we're uncertain about our next steps. I always admire the way you and joe evaluate both rule data and the less tangible emotional nuggets sut out from colors. So here's my question, should we consider selling the second property to ease our financial strain? And does IT make sense to exit the rental game altogether? Of us?

Thank you for the question. And before we get started with the answer, joe, what name do you have for this color?

Well, I remember back when we thought that A I speaking to you in your ear was the thing in the far, far, far future. There is a very good movie that stars walking phoenix called heard, where he puts this voice in his year, and then he falls in love with this, A I companion of his, the voices played by sclar show hand. And so highly recommend this, this movie, this in the quite far future, because we're, they are now right. The voice in his ear is named Samantha. So I thought this is got to be Samantha talking to us.

alright, perfect Samantha. I have two questions to ask back to you. You talked in your question about the equity in the homes or lack there of which is Normal when you have recently purchased to home.

The second home was purchased in two thousand thousand and three is very Normal to have a tiny amount of equity in those first few years. Rental properties are the long game and they're purchased for the the sake of having equity ten, fifteen, twenty years down the road, not in year one or year two. It's also very common to have low cash flow or a break given at the start because again, rental properties are the long game.

They are the retirement asset. And so as your fixed mortgage stays the same and inflation increases, that delta grows and IT has a compounding effect. So in the first one, two, three years after purchasing a property, it's common to not have a lot of cash law.

There are a lot of investors who aim for maybe one hundred dollars per door and per I mean per unit, not per bedroom. That's a common goal that some investors will have. But the idea is the overtime as compounding works in your favour, as that grows wider and ultimately, as that home is paid off twenty five years into the future, you have a high cash flow retirement asset.

The fact that you don't have a lot of equity yet, the fact that you don't have a lot of cash flow yet, those don't concern me. But what I do want to know, because this is going to make a huge impact on the answer that I give, is what is the cap ate on those properties? My real estate investing philosophy is hugely cap rate focused, and the cap rate is essentially the unloverlike dividend or the incomes stream that you are getting from that property. And when I say incomes stream, I don't mean the cash flow, I mean the dividend.

much like a dividend, A.

C, exactly. And that's a great analogy, joe. Because whether is a home or a stock, any asset earns money in two ways. There is the capital appreciation, which is the growth of that stock Price or the growth of that home value. And then there's the dividend that IT pays out.

And so Samantha, to calculate the dividend on each home, take the potential growth friend, which is the maximum amount of money that the home theoretically ally could make if IT had a hundred percent occupancy and if you were charging pet fees and parking fees and storage fees and laundry fees and any other Anthony revenue. So you take the total amount of money that, in theory, IT could make in a perfect world. Then you subtract out all of the Operating expenses, the repairs, the madness. Does the Operating .

expense include the he like long service?

No, exelon ent question? IT does not. Operating expenses do not include financing costs. And the reason for that is because we want to cheese those out separately. We want to evaluate the asset itself independent of any financing. If you are buying a stock on margin, which means you're buying a stock with a loan, you wouldn't use the cost of margin financing to evaluate the stock. You would first evaluate whether or not coca cola or tesla or berkshire half way is worthy of buying and holding. And if you decided is, then you take a look at margin, then you take a look at some of the financing options that are out there to decide whether or not you're going to borrow money to buy cola, cola or tesla or berkshire hathaway. So the same works with rental properties.

It's material, but it's going to be a different .

calculation exactly .

because I think that materially matters here.

right?

I think the he lock material matters on their satisfaction with this property.

right, right? But we don't want to conflate IT with the evaluation of the cape of the property itself. IT is material, meaning it's important, but it's a different equation.

It's a different calculation when you are looking at that crate. And I want to put a huge emphasis on this. Remember, your cap rate is not your total return. IT is purely the dividend is not the total return. So if you wanted know what the on leveraged total return on that property is, IT is the capri plus the capital appreciation on the property.

So for example, if you have a carriage of five percent and you also expect the bet property will appreciate over time at a rate of four percent annually as a long term average, then that total an leveraged return would be nine percent in that hypothetical example. So please don't look at the crate and think that, that is the total return IT is not IT. Is the dividend in the same way that a share of coca cola has A A dividend and that dividend plus the appreciation on the share of coca cola is the total return?

Good point when you are looking at that cap rate. And I want to put a huge emphasis on this. Remember, your cap is not your total return. IT is purely the dividend is not the total return. So if you want to know what the on leverage total return on that property is, IT is the capri plus the capital appreciation on the property.

So for example, if you have a cap age of five percent and you also expect that, that property will appreciate over time at a rate of four percent anyway as a long term average, then that total unlevel ed return would be nine percent in that hypothetical example. So please don't look at the cap rate and think that, that is the total return IT is not IT is the dividend. What we're going to start with is calculating purely the cap r rate of the property, and that's why we take the potential growth rate.

We subtract out all of the Operating expenses. And what we're left with is a number that's called the net Operating income. Now divide that net Operating income by the Price that you paid for the property semana. And that expressed as a percentage is your crate. If you, in theory, were to pay off this home and have that all paid off free and clear, that is the unleaded to the end.

In other words, when samanas said there was ten to fourteen thousand annually the income coming in on that first property, a lot of our listeners might be here that number go out that's a lot or they might hear that and go well, that's a little we still don't know because we don't know what you meant to paid for the property exactly. So ten to fourteen could be great, could be horrible.

We don't know. Yeah, to use extreme example is a very extreme example. For the sake of illustration, semana, if you paid five million dollars for that property, that ten to fourteen thousand would be a tiny amount of money. If you paid ten dollars for the property, then wow, where do I get me on?

IT actually is interesting polar, because the analogy to stock still holds there too. I was talking to Young investor this last week, and we were talking about this individual stock whose Prices had gone down from almost ten dollars to share to eight dollars and fifty cents a share. And the person I was speaking with this goes, wow, that sounds like a deal.

Why is IT? I don't know if it's a deal. It's not a deal IT. Number one, Prices go down for reason. Number two is all eight and half dollars is is a function of taking the value the company dividing to buy the number shareholders, we don't know the number shareholders, we don't know truly anything.

When we just look at the share Price, we don't know anything, right? People who here oh, that's why two downers share sounds like a steal you could get stolen from. Investing in that company where a companies like bircher hathaway sells for tons of money and people could look at that and go, oh, my goodness, to share that is so expensive sounds horrible. And is you and I know, but a phenomenal stock for a long time.

right? precisely. Penny stocks, perfect example. A lot of people are like old penny stocks.

Fantastic.

right? And I know a lot of people, including a friend of mine who is also a financial planner, who in his early days lost his shirt on panny stocks. Yeah, he learned, but he learned from the school of knocks.

Yeah, I didn't lose my shirt, but I lost some significant money now where in the weeds a little bit. But I didn't realize when you're not listed on a major exchange how easy insider trading is. And a man in a couple positions I was completely taken advantage of.

Sorry to hear that. Well.

for me, IT wasn't a bunch of money. I got to learn with very little money.

which was great. good. Yes, it's good to have cheap tuition, hard knocks.

Which brings us back to Apollo to this second property because from more icon, while the camp rate is important to decide, maybe there's ways that I could keep this property if I think it's a worthwhile investment. The cash flow situation is so material, it's gonna difficult to keep that property IT would be very difficult for me to to advise her to keep that property.

Tell me why? Well.

because when you've got money going out the door, IT sounds like that's the question. How do I make my cash flow Better? I know where the cash flow leak is.

Is the second property, the cost of the property is break even, but the he lock the financing mechanism is really creating this sucking sound for us completely. I get rid of the second property then I at the very least regards to whether to great investment or not. I do have the first property, which is cash flowing, that I could a stand sibly keep.

There were often times when I was a financial planner that we would make moves that long term might not be the world's best move. But over the short run, IT allows us to continue to breathe and is a big takeaway for everyone. When you're making decisions, the only constant is going to be that things are going to change.

So prepping when you make an investment into an illiquid position like this second property, asking what if things change is a huge part of any financial planning process. IT is a huge part. And I i've a person after person, tell me, no, it's not going to change.

My job is stable. Things are stable with my husband. What is the chance, pola, that her sudden, unexpected determination would happen at the same exact time that he's making this career change, which changes the amount of their mobile and their ability to face the property, is so little, the chance of that happening was so little.

And yet, let me tell you this, when I was a financial planner, what about, as i've said before, about one hundred and twenty families we work with. Some of this crap was happening with one family all the time. So if you asked any my individual clients, they go, oh, yes, that can happen. And I could even tell you, yeah, probably not can happen you.

But we still need to solve for IT because when you take a larger sample size, this cluster of misery that comes out of nowhere, just attach your financial situation and then you have to make a move that, that seems ugly, right? I mean, if you could spread the financing in a different way, you know a hoi line of credit has such a low monthly payment, you can make a payment that does nothing to the principle. You can just continually make the payment on the interest that's IT with a lot of homework, you lies to credit. So that's the case here. Like IT isn't a lot of he locks, then I don't know a cost of financing that's going to be a lot less expensive on a cash flow basis than the headlock.

We also know that rents are rising rapidly. And now he bought this property in twenty twenty three. The second property, I don't know what location the property is in, but in a lot of places around the country, rents are rising so quickly that if he bought this in twenty twenty three, it's entirely possible that he is still in that first year of lease.

And when it's time for that least renewal, depending on the market rates in her area, SHE might be able to get a decent chunk of additional top line revenue, which would then flow through to that bottom line because her finance and costs would stay the same. But that revenue would grow given the rise and rental orange, i'm not telling you like be the lad that charges a whole bunch, but fair market rate is just climbing. That is the economic reality of a lot of cities.

And I like that because that's a way to control that headlock cost. Again, the financial planner and me goes, I would love to know how much money Samantha and her husband have sitting in cash, because if they decide to raise the rate, the current tenant says no. And now for three months, they have this vacancy. They could go from bad diverse in a hurry if they haven't done what we tell people all the time, which is keep money in reserve in .

case you have a vacancy.

And if they haven't been able to do that or if they haven't done IT, then that may still make things very difficult.

right? right? And I completely agree with that. In your personal finances, you have an emergency fund in your real state finances.

I just like calling IT a cashes serve. Either way, I think the term cashes serve encapsulates emergency fun. I've had way too many people live less life because IT was their emergency fun and not an opportunity fun.

I'm like, listen, once the next time you're going to get to go to portugal on this trip, that is half Price with your friends are all going at the same time. But it's my emergency. If no, it's not if you emerges these slash opportunity. So I like cash reserve just for all of IT. But again, semantics.

semana semantics. But yes, I do absolutely agree with that. And what strikes me to when you talk about cash serve, you're talking about managing the downside risk. When I talk about increasing that top eline revenue, i'm talking about upside potential. And so we're having conversations coming from two different angles on this, both of which Samantha are important in both of which need to be managed cement.

So when I earlier talked about caporal, the reason I brought that up is because what I want to understand within seeing that percentage is the fundamental question of, is this a property that's worth fighting for? There are certain years when, as a rental property investor, you have to fight to keep your properties, the likelihood of multiple financially stressful things happening to you at once. You receive determination from your job and you have A A new job now that pays a little bit less, which is not something that you are planning on.

Your husband also chose, for a very good reason to go into an occupation that pays half the amount that he was previously making. Those are two financially stressful things, and and they are the right things. You know, you you love your new job, your current job.

That's great. Your husband chose to go into this new line of work that is probably a Better fit and it's from the way you describe that sounds like it's his calling and this is going to lead to greater life happiness. IT sounds as though career wise these are the right choices, but that doesn't negate the fact that they're also financial hits in a strictly dollars and sense sense of the world. And we've layer on at exactly the time that you took on a new obligation. So there are a lot of things that are hitting you at the same time.

If IT turns out that the property is worth fighting for, you know, when you bring up making the property pay more income, we can also look at the other property for more income. We can look at the job positions. SHE said that he really enjoys her new job, but that takes away from her ability to make this extra money that he made as a real estate pro.

So is there some way to reconcile any of those things to make more income? I feel like often know we've got asset a. How do I make asset a, bring in more income? I could have my job, will call my job as at sea, provide income, help me with us at a hm.

just as a temporary stop, get measure .

well or permanently. I mean, is there way to still have the realist money come in? Her new job that he likes has a che cold on this secondary income stream that SHE had.

And the question I would have is, does that have to the answer? maybe? Yes, IT does have to.

But the answer also maybe, well, I don't know. That would be interesting to talk to my boss about. I don't know often.

I know this. What you bring up the pole, I think, is a great point. We feel lot more confined than we really are in many circumstances. We feel like the things that I did yesterday are the things I have to do tomorrow.

Sam, that my last question to you is, to what extent do you enjoy the idea of being a rental property investor and owner? Part of why I lean in the position of, let's see how you can fight to keep this is because when you described having two homes that are right next to each other, and the idea that you would keep these forever, that these would be part of your permanent portfolio, there is a famous quote for more in buffet.

He says our favorite holding period is forever. And that is an expression of his belief in long term investing in high quality assets. And that's what I hear you express when you talk about having two homes that are literally next door to each other that you planned on holding forever.

Sounds as though you found these really high quality assets that you see as remaining as a part of your life. What whether or not you continue to live in that location. And I know this is somebody who I have rental properties in three different states, georgia in a vada, inDiana. And I myself personally live in new york. But when you find a good asset, you want to keep IT.

So my final question to you is to what extent is that part of your long term vision? And where i'm going with this is often times is mentally, when i'm trying to make decisions about how to prioritize a huge list of projects or tasks, I will put them all in a sprayed sheet. And actually, joe, I learned this from you.

I will rank them based on ease, magnus de and alignment. So this is a general project management, like thinking framework that I use. Dump all the ideas.

And the column a of a spreading column a is just where you brainstorm, dump ideas. Any task, any project, anything that you might do IT all goes in column. A right column is, is column a magnet? De column? d.

alignment. And by alignment ment, I mean alignment with your long term goals. Ease means, obviously, is.

And magnus de means, how big are we talking? impact? jump? change? yeah.

How big of an impact is gonna make? And that could be either quantifiable or IT could be quality tail, right? How big of an impact am I going to make in somebody y's life? And then you assign a score to ease to magnus de into alignment, and then you take awaited average. So my question to use the man is the vision of being a long term rental property investor.

When you ask the question, should we exit out of the game, to what extent is that an important part of how you see your future unfolding? So thank you for the questions, Samantha, and please know that you're in a very specific moment because of the huge income changes that both you and your husband have had. You're in a very specific moment in time.

We are facing a lot of financial stress right now. It's a testament to how well you've managed your money that you're getting through this. So well, it's likely that things will only get Better.

We're going to take a moment to hear from the sponsors who make the show possible. And when we return, we'll address two questions, one from a color who wants to know about investing in a manner that reflects her values. And then after that will talk to another colour who has a question about when to reinvest money into a side hustle or a company or a project that you yourself have started. Stay tuned, have one dave mayer here .

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Welcome back. Our next question comes from tina. And although her question is about the environment, we can also brought in this out because there are many of you who are listening who will have a similar question about whatever set of values IT is that you hold. For some of you that might be the quote quotes, sin stocks like alcohol in tobacco or entertainment companies that promote smoking, for some of you that might be gambling or controversial weapons or small arms, but how do you invest in a selection of companies that reflects your values? That's the question from tina.

嘿， polar Angel, long time listener here, and thank you so much for all you do for the community. I have a question about investing and being sustainable. I am very interested in personal finance, and I also care whole lot about the environment at my full time job recently, I heard about the kind of inquires into backyard and trying to see if they had stocks that are more environmental friendly.

And so these index funds and things like that, some of them have obviously call and guess, and things that contribute to climate change and are detrimental to the future. Of course, being twenty or so years away from retirement, I want to be able to access my retirement in a world that was going to be accommodating and and so nice. And so just curious on your take, if there are any companies or index funds, funds, things like that etf that rise the top in terms of growth and environmental consciousness? Yeah, I know this is always been a concern for me, even when I started saving for retirement at the beginning of my career fifteen years ago.

But now IT seems like IT is getting more attraction, and people are talking about IT more. I hope that maybe there are Better options for people like me. I appreciate your time, and thank you so much for all you do.

Tina, thank you for your question. And first, I want to point you to some environmentally responsible etf. There is an msci sustainable future etf. There is an msci Green building etf, fidelity has an international sustainability index fund, and the U. S. Sustainability index fund eyes shares has an etf dedicated to global sustainable development goals, so there are a lot of etf and index funds out there that are based around environmental impact.

There are some that get really specific and granular because as an example, if you're someone tina, like you are, who is worried about the carbon footprint there, maybe other people that are worried you talked before polo about guns.

Are people worried about other issues? To find a fund that really fits your values, there are so many choices I found in etf database, which has five pages, top to bottom, of all kinds of different funds, tina, that you can wait through depending on whether it's the ice shares breakthrough environmental solutions etf, the spider downtown one's international real estate e tf, which has a sustainable component to IT, the vanek low carbon energy e tf. I mean, there are so many nuances to responsible investing.

And essentially that solution, polar also is what creates the problem is because as you become more granular, what you'll find is this measure I like to look at called standard deviation can go way up. Because if we're just going to look at Green housing as an example, a Green housing fun is going to have a standard deviation that's much higher than the S M. P.

Five hundred. Number one, you're only investing in one sector of the universe, which can be problematic because every sector will go through good times and then bad times. So you're going to see that thing violate a lot is going to be quite a roller coasters.

Also, the costs go up. And certainly to the right investor, is the cost increase worth IT? Well, I would say sure, IT is if I want to put my money where my mouth is, I need to be willing to pay for that. And the reason you're paying for IT isn't that these companies are trying to rip you off. It's because of the fact that sussing out to use Samantha were early because i'm a susr is Samantha said to suss out the stocks that meet this criteria, IT requires to diligence yeah.

it's way more .

hard to keep bn top of. So as an example, i've seen some of these funds where will look at the S M P five hundred exchange traded funds might be point zero two or point zero or five, even you're going to maybe have point six percent. So I mean, huge difference in the cost structure versus A F U N D that is just gonna straight forward.

But what I would recommend, and we will link to the database that you found because it's a very robust database of all types .

of all over the place yeah exactly.

It's a hugely robust and IT gives a massive variety of options. What I would do if I were you, tina, is look at the funds within that database, look at the underlying composition to choose funds that reflect specifically your set of values.

And then I would put these into software that evaluates your asset allocation to make sure that you are, as you put these funds together in your portfolio, make sure that you have an asset allocation baLance that is a good fit. And there are a lot of programs where you can review your acid allocation either for free or for a very low fee. Mourning star has an asset allocation analysis tool.

Bankrate has one, smart asset has one, portfolio pilot has one. So I would step one, look at the database, which we are gona link to in the shower notes, and pick out the funds that you think best represent your set of values and then plug those into an asset allocation analysis tool so that you can make sure that you are on track with your goals. It's a two step process.

They're too fairly big steps. Each step is going to take you a couple of hours, but it's a good saturday project. The other thing that I would do, so a couple of days ago, I went to a conference hosted by yahoo finance.

I heard a speaker there named tom style. He runs a climate focus global investment firm called galvanize climate solutions. And he was enormously optimistic about climate tech investments.

He talked about how the cost of wind and solar have dropped significantly, about how battery life is increasing. He was enormously, enormously bullish on climate tech and climate investments. And so I would take a look at how venture capital firms are locating their capital towards accelerating climate solutions.

What are they excited about? What are they investing in? Where is the climate solutions space heading? Because if you know where the vcs are investing in the private markets, that could clue you in as to what types of investments you might want to lean towards in the public markets.

I like the idea of lean because what a lot of people will do is make big bets. Realize that when you make big bets, that increases again, that say, more than keep using your standard deviation, the chance that you could be wrong, the narrow or the bet cat. So keep your asset allocation.

I like thinking of a sale boat. There's a sale called a spinky sale that you put out when the winds blowing the right way. But as spinky sales much, much smaller than your main sale, nothing close to the whole of the ship.

So if your hall of the ship toward your game plan have your sale, go told your game plan and have a spinnaker, then that is, these are the areas that I favor. As an example, I have won is a bet than AI, the underbelly of the AI, the wiring of the AI. My environmental play is on water.

In the fact that we're going to need water and water resources, we seem to be fighting over more and more Apollo. That's not a huge part of my portfolio. That's my spin ker sale.

That's when the win hits those areas. And guess what's happened with both of those positions as examples, the when is come full blast sometimes and other times the sale just it's there. Sometimes it's kind of wait in the ship down because it's gone backwards, but I got to be willing to have that happen. And I also need to have the confidence to know I can reach my goals with these broader indexes while my spinky sale is and sometimes dragged me down and other times is getting me much closer or much quicker.

right? right? So it's nice to take a portion of your portfolio and and devote IT too educated bets so long as the bulk of that portfolio, ninety percent of IT is in reliable asset allocation in broad market index fans and etf, which through the database that we're going to link to in the shower notes, there are a lot of those that represent environmental interests.

Do you want to to hear, by the way, some of these awesome ticker symbols for some of these e tf. And i'd love to have you guess, what do you think the ticker symbol would be? The bus go msci global timber etf.

Oh, T, I, M, B, timber.

C.

U.

The new day ocean health etf. What's that one? gonna.

O C E N. Ocean.

oh, that's a good one. That would be cool. No, it's a hoy. A H R. Y.

Thank you.

How about this one? T is gonna. Love this one. The vanik low carbon energy .

etf low carbon, i'd say, see A R beef car, but but i'm sure some like bread company has taken .

that one would be great. But still, carb would be a fun on. This is even more fun than that. How about the ticker symbol .

is S M O G smog? 哇。

just hits right at home. wonderful.

Anyway.

some player, all names.

Uh, that's great. And, you know, tina, so when I introduced this question, I I wanted to brought in IT out for the entire audience because this audience has such a valid set of values and interest in priorities. And so there are going to be some people who are listening to this, who feel very strongly about, as I mentioned earlier, the sin stocks, such as alcohol or tobacco or gambling.

There will be others who feel very strongly about animal rights. And there's actually a vegan stock. It's V E G N, the U. S. Vegan climate etf.

But what's .

particularly fascinating about climate specifically is that's where a lot of the innovation is headed. That's where a lot of new investment and new capital is headed. That's what I was talking about when I was bringing up the fact that there are all of these VC firms who have climate tech focused investment thesis. We don't necessarily have that in the realm of avoiding tobacco stocks or avoiding alcohol stocks. There is a new investment going into the avoidance of tobacco or the sensation of smoking, not in the way at least that there is in terms of new capital flowing towards climate.

So given that your heart is really focused on climate and sustainability, you have the opportunity not just to engage defensively in terms of eliminating some of the worst polluters, you actually have the opportunity to invest on the office side of the play where you are aggressively pursuing returns because there are going to be some big returns in climate innovation in the decades ahead. That's why I say look at where private equity capital is flowing or what are the innovators doing? What are the frontiers of this field of climate tech? I know a guy actually hear a new york who is starting a climate adventure fund.

Yeah, yeah. We went to school together. And he has a lot of investors and a lot of interest. You know, he sees that there is huge opportunity and huge growth in the arena.

And i'm always the guy and another one of I don't want to steal the enthusiasm parade. I feel like the grinch, the stole. Enthusiasm always have to temporary year enthusiasm. IT is very easy to get super excited about a market segment, about an idea and your brain is on bored with that.

You release all of these chemicals that make you feel really good and make you feel very self assured, which is why when the downside comes later, if you're not careful, you just don't see a coming. You like what nothing could go wrong. I mean, what no, this going to be fine.

There's not going to be this that there's not to be any hurdles. I think especially when you think, well, this is obviously the future is when you have to think to yourself very carefully, what am I missing because if you feel like you're not missing anything, that's the time of greatest danger. Is always asking what could go wrong?

What could the government do to change the game? What could the marketplace do to change the game? What could other governments do to change the game? What could happen with, i'll just use your friend, is an example. What if his biggest investor pulls out.

right?

And maybe that sixty five percent of the money, you know, I mean, I don't know, but what happens then, IT is truly, truly, truly don't know. I've seen and you've seen two palace, so many great ideas that with the idea is implemented, either the timing goes wrong or the implementation goes wrong or something comes out of the blue that happens is really frustrating. That's why I still always want to make sure i'm very comfortable with the size of that spinnaker sale not being too much of my portfolio.

right? C jo, this is why we are a good pairing. I'm the optimist who's looking at opportunity and you're the the rich never .

coffee as which is fine because if I am the pessimist on this show, we're in trouble like we're in cosa a you have don't mean for a long time don't know how big a pessimist I am. I'm usually the glass isn't even handful. It's three quarters full. Yes.

we are in trouble as such a pessimist thing to say.

See, i've even am a petite st about how optimistic I am. I'm overly optimistic. Must be horrible or I will.

Thank you, tina, for asking that question. And one final thing, I want to refer you to episode two fifty of this podcast, which was an in depth interview that we did with doctor john hill, who is the head of sustainability research for morning star. You can find that episode at afford anything dot com slash episode two five zero. Or we're going to take one final break to hear from the sponsors who make this possible. When we return, we will answer a question from a listener who wants to know when should SHE invest money into her own entrepreneurs venture?

Our final question today comes from anonymous.

Hi, pollen, joe. I am excited to be calling in with my entrepreneurs question for you, but i'd like to say thank you so much for all the knowledges that you share so freely on the podcast. I really appreciate IT.

My question is about podcasting and entrepreneurship. I really enjoyed your episode a few months back when you talked about what you have learned in business and podcasting so far and another episode where you talked about how you pick and work with podcast sponsors. I also have a podcast, though IT is not in the personal finance space.

My podcast is spirituality based. And my question is this, how do you know when it's time to invest in business growth, specifically growing a podcast? Did either you invest in a business or podcast coach to help grow and learn for some context?

My podcast at the time of my call has about twenty three hundred hundreds subscribers. I started the podcast in August twenty twenty two, and I have seen my podcast growth steadily, especially this year. IT has grown about nineteen percent since the beginning of this year with very little marketing on my part, I will say I do all the editing, social media, guest research and all that comes ong with producing a podcast on my own.

Right now. I do have some products and services that I offer, apart from the podcast that the podcast helps me promote. So that's how I ve made some money from the podcast so far.

I also usually hear you ask what's the goal when people call in with our questions. So I will also provide you with my goal. In my biggest dreams, I would love to work on the podcast and be an entrepreneur r full time. I have an entrepreneurial spirit, and I know that I could do IT for sure.

However, I am conscious that I would want to do this once the business is ready to fully support me and not leave my nine to five before my own business is ready to pay my bills, which right now IT is not ready to pay my bills, which is OK any tips on knowing when to step IT up? Or are there any key indicators that I should be looking out for to know when IT is time to invest in the growth of this budding small business? Thank you so much.

hello. We can't have somebody be an anonymous color. They can't be. We have to give them a .

name exactly. So what do you name her?

Well, i'm feeling very confident about her podcast. You know, if you have more than roughly, I think the number is around two hundred listeners. You're already in the top half of all podcast seriously? yes.

So the fact that she's over two thousand listeners is a phenomenal place to be. So I think she's going to continue to rock and blow up the podcast space, which is what happened with a woman named Sarah. Ec created a show called cereal because a lot of the big reason why pod casters popular as they are now, is goes back to the show serial several years ago.

right?

So we're going to name her Sarah, because she's probably the next era.

You know, two things happened in tandem. Sa cane came out with cereal at exactly the same time that the apple podcast APP went native to iphone. And the combination of those two things there in tandem IT was really the inflection point in podcasting as a medium.

interesting audio and .

Better distribution, right? My direct answer, Sarah, is going to be very simple. For as long as you do not need to live on this money, you have a blessing.

Currently, you have a nine to five job, which I assume covers all of your bills. So you don't actually need any of the revenue that is coming from your podcast. That is a huge, huge asset.

Put every single penny of the money that's coming in from your podcast back into the podcast because you've stated that your goal is to eventually one day do this full time. And if you are pulling money out of the enterprise in order to pay your bills, that is necessarily money that you are not using to grow IT. So your objective right now is not personal gain.

It's not personal income growth. Your objective right now is the growth of the enterprise itself. And i'm using the word enterprise because I want to brought them out the answer. This is an answer that is applicable to anyone who is starting any type of side business that they hope will eventually become their full time business. If you are starting any entrepreneur venture and you are lucky enough to not need that money to buy groceries or keep the lights on, then don't use the money to buy groceries, keep that money inside of your business, reinvest every single dime back into the growth of the business.

There is a lot of wisdom in things. I've heard some of our we call them mentors on our monday shows that deck bedrooms mens have have talked about people that are in the entrepreneurs space. And it's the almost all of us will invest money without a set R O Y in a college education. And yet if I want to get in the room with the right people in an endeavor, or that has a very specific R Y, we will still question a five thousand eleven expense, ten thousand dol expense. But if IT will put you in the right place with the people that have their finger on the pulse of the exact thing that you want to do, I think we need to question that type of expense less, and maybe question just the formal curriculum without R O Y, maybe a little more.

Yeah exactly. It's like you don't think twice about spending money on a university education because IT is socially sanctioned yeah and to be fair, if you have a dream of having a very specific career that requires the university education, then it's necessary if your dream is to be an anesthesiologists, you have to go through a certain prescribe path. In order to do that, you can just watch youtube videos .

and figure IT out you does this.

yes, but there are a lot of professions that many of us have entered that do not require a university education, and yet we've all paid for one anyway. Not all of us, but many of us who are listened to this have paid for one anyway.

But even then, even if you do require university education, because that super important, you're still gonna gmat later on with your own curriculum to increase your knowledge in the area that excite you. And in fact, if you're going for advanced degrees, you're going to find the exact institution with the exact people that are going to give you the best finger on the pulse.

Y, even if IT is a university education, right? So I think I start off with that. okay? I'm willing to spend money.

I love, love, love. There are hearing you say that, you know, when do I do that? I think I do that right now. yeah. But I think you've got to be careful what you ask for because is, you know, pola, there's a crap out of podcast.

Coaches yeah, about air quotes. Coaches.

air z, yeah and I get really, really nervous about yeah, been in the wrong room with the wrong people talking about the wrong crap.

That's exactly what I was going to say. So there, my answer is invest every single dime back into the growth of the company. But I wouldn't necessarily and put that money into getting a coach, at least not right away.

And the reason is because there are so much variation in the quality of coaches that are out there, you need to have a level of designation in terms of who is excEllent and who is mediocre. Because listening to the wrong voices, listening to the wrong people, can lead you a stray and in inside of afford anything. I can think of a advice that i've taken that has put me back several years that I didn't necessarily realize that the time was bad.

Advice on its face that sounds a good, but I didn't at the time. I was so Green that I did not have enough experience, enough judgment to be able to differentiate great advice from mediocre and am using the word mediocre. Because IT wasn't necessarily bad advice. IT was just mediocre advice. There is a lot of mediocrity out.

There is IT just a time, I think, in especially in an area like entrepreneurship, there are so many snake oil people, because the average c premier wants something for nothing. They want to believe that I can do little to know, work and get where I want to go.

Biggest lie that continues to perpetuate itself since the days of gold mining, right? The way people got rich in dewed, where the people mining, the miners, all the miners were sold, this, i'm going to go get rich, ed, by dig in this stuff up. It's the same thing today in any pursuit, but especially online pursuit.

So I think the nature of the business is to get a business plan together. I'm not talking about a business plan like the thing that I roll mize every time. Yes.

IT can be back of that literally IT can be on a nap. In fact, IT should be on an .

APP can totally should be the true business plan for southwest airlines was on an apkon IT should be the same for you I totally agree. But yeah, I think I want to get the heartbeat of what's going on in the industry.

So you know, we're talking podcasting, but again, polo and I are keeping this wider industry conferences are a great way to get to know who the people are, what the things are, that people in your space are dealing with, what the common problems are. Heck, and other cases, you don't even need to go. I do encourage you to go because then you know who the people are.

But if you look at what the agenda gonna be at a podcasting conference this year versus last year versus the year before, yeah, you will see what the issues are. Discover ability in podcast is becoming harder than ever before. Getting noticed is harder than ever before.

So knowing that gives you the fortitude to go. I know that it's gonna harder than ever to build community, to build the machine, but here's how going to do IT. Right.

sir, what I would do if I were you is invest heavily in building Operations and building team. I would create standardized processes, S O P, standardized Operating procedures for every element in your business. Anything that you do more than once have clear Operating guidelines, start hiring people, start plugging them in.

And then once you have people who are handling the data tasks that are inside your business, you then are free to work on IT rather than in IT. And you will find as an entrepreneur and get to broadening this out to anyone who's listening, who has a side hustle in any field, you will find that you are in a constant tension between working in the business and on the business that is true for every entrepreneur. And so the more that you can build out Operations, hire a team and free yourself up to focus on. Working on IT.

you may not be able to hire all those rules the police is talking about right away, but you need to have them laid out, right? Because the important part of being is laying out how that machinery works. And a great book that illustrates this is called the e myth.

And it's by a guiding Michael garber. The e myth revisited is the current edition, because he went back in and tweet some things. The e myth will show you why what hell is talking about is so important, which is a great business, is a machine that truly is a collection of rules.

And he makes a great point by looking at, and it's in all of our backyards. McDonald, mcDonald's is not a collection of people who are deciding every day how to make a counter ponder with cheese. Do not like, what do I do now? Oh, you know what? I'm going to put extra catch up on this one.

There is a way they do IT. And when they train people, they train them how to work the machine. And then you have people that know how that machine works, that are tweaking then the machine, right? And you're spending all of your time out of the business.

right? The executives that mcDonald's yeah there are speaking the machine.

They're speaking the well, people are getting valuable work experience working your machine, right? And so initially draw out what all of these jobs are, who's going to work the front counter? Just to go with the mcDonald analogy, who's going to work the drive through?

Who's the person putting the meat paddies on? Who's work in the fries? That's my favorite job because I love the fries.

So all of these jobs, what are the different jobs? And you know what, initially, Sarah, a lot of these roles in your old chart, say Sarah, Sarah, Sarah, Sarah, but immediately you'll know which one are the ones to delegate. They're the ones that are not your unique talent.

They're the things that anybody can do if you give them the right machine, the right tools so that you can focus on that thing that you're Better at doing than anybody else. So while you're on the microphone, podcasting, maybe the editing of the podcasting may be the going out and getting guest if it's an interview show, going up, fighting sponsors, whatever that is. These are all books that are super important. You want to be able to focus on your unique talent while giving other people the tools to do what's necessary to make your business is success.

right? In fact, that quote and quote business plan that we talked about earlier on the back of an apkon, I would just drawn a workshop. Yeah, I think that chhotu an get an napkin drawn workshop on the back. That's the plan.

Yeah, it's all the machinery. How about going to Operate the business? Where's the income going to come from? Which means how i'm going to market IT.

Right, right? yeah. And then you have to people into those roles, and then you need S O S for every role.

And there you have IT. It's a beautiful thing. I'll tell you once you get into IT, IT is so fun. It's so much more .

fun working on the machine. yes. And that's really what running of a businesses that for entrepreneurship is. It's a lot of problem solving, a lot of putting the pieces of the puzzle gether, and it's a lot of building the machine that does the thing. And your growth will only go as far as your ability to build that machine and refine its processes. I still do think they're .

all is important to understand the landscape of what you're getting into. There are so many times that I see misguided attempts to get into a business. I'm a big fan of board games.

I will have somebody that knows I like board games. I will take a look at their board game, and it's clear they have no idea what's going on a motor board games. They have no idea how they're retreading territories has been done far Better than what they but they have.

These nugget gets in the game that are really cool. Nobody has done this alone. Everyone works off the shoulders of people that came before them that we're already in the space.

If you can't afford to go to industry conferences um where you're going to meet the people and hear about the issues, at the very least, there are tons of podcasts talking about the issue of my goodness casting about Better pocatello are tons of them. Two of my favorites just specifically for Sarah. I love dave Jacksons, the school of podcasting.

It's a chatty show about podcasting. Dave Jackson is in the podcasting hala fame. There's a hall of fame for everything.

But dave Jackson is in the podcasting ha fame. And it's for a reason he is a very trusted resource by people that know what the hecking they're doing. And then one of the places people upload their show too, and there's lots of different providers.

Lib son has a wonderful show called the feed, which is a very chatty, very responsible show about the industry and things going on in the industry and what the big issues are in the industry. So I will often play the feed with L, C. And rob as I go on my morning run, or if I made my afternoon walk.

And to broaden this back out to any entrepreneur in any field. And one thing that I have recently learned and really taken to heart is that scale comes from specificity. I would seek out people who can talk specifically about Operations, about marketing, about but keeping.

I would seek out voices, you know, not thirty thousand foot view voices, but rather voices that can speak specifically about each subset of the business that you're running. And when you bring in outside consultants, you know, Sarah, this is actually the reason that I am not in love with the idea of getting a podcast coach, at least not at this stage. I think that later down the road, a coach could be a good idea. That's a really good way to go from intermediate to advanced.

But if you're going from beginner to intermediate, I would seek out people who specialize in narrow subsets, bring them in and have somebody who specializes in book keeping, show you how to set up quick books for your business, have somebody who specializes in web development? No, I I have a guy that I worked with for many years with a full stack PHP wordpress developer who I brought in to build out some underlying course infrastructure when I decided to build my courses, and I didn't want to use any of those pluggin play platforms, I wanted to custom build, right? Those are the types of specialist .

that i've brought in. What like the people you start off with all the wealth of information that is out there. Step one, specific and directional, very specific experts in very specific places. By following what they have online, you'll get to know them really, really well.

And guess what happens when you go to hire a coach? You're going to hire a much, much, much Better code because you're going to seeing people's work and you're going to go, you know, I got to hire your polar because Paulas, the expert in xyz, and I need this specific person. I know exactly what they're going to help me with.

I know exactly what they won't help me with. I references dave Jackson earlier. I know if I needed to pack, cast, coach the areas where dave jaques son is strong.

I know the areas where he's week of following days work for the last decade. So I know where I would plug expert in because I got familiar with the space first. So I love focusing on the business plan, which is the back of the envelope board chart of where you're .

heading in napkin.

the back of the back of the napkin and .

even envelops wait too big .

the action. And then I know, okay, I don't know that much about marketing, so I need to dive into what the best way to market would be. I watch a few videos, and I realized that for me, email marketing is the best as an example.

Then I dive in the email marketing. So now i'm nitches down based on what I found when I first started out, that I find who are the best people in email marketing. And I dive in them to how to do that. One specific thing really .

well said earlier, you talk about international conference. Actually one of only two that I went to this year in which I was not there as a speaker, I was just there, a purely for the sake of learning, paid for in my own dime, was very specifically a conference that was thrown by my email service provider.

And who told you to go home? I told .

you to go. You were the one who told me to go. But I remember I was telling my dad, my dad was like, you're going to, you're going to a conference thrown by an email service provider who does that.

But it's when you niche down far enough, you know these hyper specific things that you need to pay attention to. Scale comes from specialization and specialization comes from starting wide. Well, sir, I hope that provided some insight that can help take you to the next level.

And for everyone out there who has a side hustle or who has started some type of an entrepreneurship deavor that you hope will one day become your full time, I hope you ve got a lot out of that. Joe, we've done IT again. fanta.

Where can people find you if .

they would like to hear more of you?

Well, while you can find the stack in beijing in show every monday, wednesday and friday, this thursday, two days from now, I am doing a live training on the efficient frontier for some of our ford anything friends and our stacking Benjamins friends. It's this thursday evening. It'll be on youtube. On the stacking bedroom s youtube page will have all the details in the afford anything facebook community and in polar, your mike network's community will make sure that we share all the details with everybody. See, you can sign up and come join me thursday night to dive into the efficient frontier.

That's going to be amazing. That is this thursday, two days for now, thursday, november twenty first will also .

make sure we have how about if we make sure to we have details in the show notes as absolutely.

But thank you, joe, for hosting that efficient frontier training. And thank you to all of you for being part of the afford anything community. If you enjoyed IT today's episode, please do three things.

First, share IT with a friend, a family member, a neighbor colleague. Share this with the people in your life. Second, please leave us up to a five star review in your favorite podcast playing APP, whether that's apple podcast or spotify.

And number three, subscribe two hour newsletter, afford anything dot com slash news letter. And number four, come to the efficient frontier training. Thank you again for being part of this community. I'm a pant .

and we'll .

meet you in the next episode.

Steve is the person who's going to be editing this. So hi Steve. Hi who i'm loopy these big .

man do, dude.