Paula Pant from AffordAnything.com, is interviewed by Lucas Hall from Cozy, discussing her best practices for real estate investing, financial independence and her stress-free approach to property management.
Paula Pant: Thank you!
Lucas Hall: So, I have a few questions for Paula and I’ve been dying to interview her, and I’d love to share that with you. So first Paula, you and I are both in real estate and I’d love to hear a little bit more about your story – how you got started, and tell me about your first house.
Paula Pant: Okay, sure! How it all started from the beginning, from even before I ever got my first job, I knew that I didn’t want to be in a standard, traditional, 40 year workforce, retire the gold watch kind of thing. I always wanted freedom to be able to just spend my days as I choose. And I didn’t know exactly how I was going to get that, but from the beginning that was always my goal. And so I got my first job, I worked for a few years, I saved up some money, I quit, I backpacked around the globe. Came back to the states, became self-employed, and for a while I thought that was the pinnacle. I was like this is the best; we’re done. And then I realized that’s great, but I’m still trading time for money. And I wanted to find a way to create a source of passive income. So that money could flow in without me having to exert hours of my effort for it.
Lucas Hall: Sure.
Paula Pant: Not because I don’t want to work, but because I just wanted to break the cycle of trading time for money.
Lucas Hall: Right.
Paula Pant: And so I was renting a unit within a triplex and I noticed that the triplex across the street was for sale. So I bought it. At the time I didn’t know anything about real estate. I didn’t know how to properly analyze a property. I didn’t know how to manage, I didn’t know anything. So, that is not what I would advise. I definitely did not do my homework.
Lucas Hall: You dove off the deep end.
Paula Pant: Exactly, I jumped in the deep end. And I was like, “I’d better learn how to swim.” So then I just taught myself how to swim, basically.
Lucas Hall: Sure. So, what you did sounds a lot like “house-hacking”, where you have roommates and you were able to pay your mortgage basically through the rent that you received. I did that as well. Tell me about the numbers. What were you paying yourself?
Paula Pant: Sure, yeah! So, I moved in to one of the units with roommates, and also rented out the other two. The house was a triplex I bought for two twenty-five in total. And the total rent at the time, I believe I was getting 1,100 a month from my two roommates from my unit. And I think something ballpark around 700 and 600 from the other two, so I was getting a total of twenty-four hundred dollars per month for a house that I bought for two twenty-five.
Lucas Hall: That’s awesome.
Paula Pant: So that was how it was in the beginning, and actually then over time – and I wasn’t paying any out-of-pocket housing costs.
Lucas Hall: Oh my gosh.
Paula Pant: So, all of the money that was coming in, both through the rent as well as money I was just saving by virtue of not paying any housing costs out-of-pocket, everything that I got I put into renovating property. And eventually over time, I renovated it to the point where I was able to significantly increase the rent.
Lucas Hall: You preach financial independence.
Paula Pant: I do.
Lucas Hall: You teach lots of people how be wise with their money. So tell me about your financial goals and how passive income through real estate plays into that.
Paula Pant: Sure. So, I can find financial independence as being at the point in which you don’t have to trade your time or money in order to cover your basic cost of living. A lot of people mistakenly think that means that you never work, that you spend all your days wearing shorts, eating bonbons, watching Ren and Stimpy re-runs. But that’s not actually the point. You’re certainly welcome to do that if you want, if that’s your jam. But financial independence is having the option to do that, or having the option to spend time with your kids, or with maybe a family member who has a terminal illness, or moving to Hawaii to learn how to surf, or whatever it is that you want to do. Moving to Switzerland to learn how to eat cheese, I don’t know. So that is the point of financial independence. It’s truly the independence. I’ve forgotten the rest of your question.
Lucas Hall: Sure. So yeah, it’s to do whatever you want. So how – I know that you know a lot about 401K’s and mutual funds. So out of all the different investing platforms out there, why did you choose real estate as a primary income source ?
Paula Pant: In order to have cash flow now in my 30’s, and even in my 20’s, which was when this all began, rental properties seemed like a fantastic way to do it. Because that cash flow comes in immediately, and then it was my choice if I wanted to reinvest that into making another down payment on another property, or reinvest it into fixing up a property, or I could spend it all champagne and caviar. The whole thing was my choice and I really liked that aspect of it, the freedom and flexibility.
Paula Pant: The other thing is – and this gets a little bit more technical and a little more advanced – but when you look at the capitalization rate on property, I likened that to the dividend on a stock. And cap rates on rental properties are, generally speaking if you buy a good property, substantially higher than many dividends that you could find on solid blue chip stocks. So again, coming at it from the dividend perspective, coming at it from cash flow perspective, rental real estate made more sense specifically for the goal of passive income and financial independence.
Lucas Hall: That’s perfect. You know, you mentioned the short game of having the cash flow now, and I couldn’t agree more. But it’s also long-term game. And when I got into it, I wasn’t thinking about the initial short-term. I was like, “that’s fine, it’ll pay its mortgage, and if I can break even, that’s great”. But I wanted to create a legacy for my kids, and my kids’ kids, and I wanted to have that mortgage paid off by my tenants, and then when I’d go to sell it in 30 years or less, it’s now worth potentially double. So essentially I’m getting almost three-fold out of a property that I wouldn’t normally get three-fold out of stock.
Paula Pant: Right, exactly. So the tenants pay the mortgage and you get the cash flow from the rental income, and it may or may not appreciate in value. I mean I like to kind of assume that it will at least keep pace with inflation. So you’ve got a little preventative inflation protection similar to being in like treasuries. I don’t like to wildly speculate on market inflation because like the weather, it’s outside of your control.
Lucas Hall: Sure. But historically the stock market has continued to go up, even if it drops. So, it’s one of the safest things in my opinion.
Lucas Hall: So Paula, you are also a Cozy customer that uses it to manage properties from afar, and they’re in a completely different state and that’s awesome. I admire you for that. I know that it’s hard finding quality tenants and that’s how Cozy makes it very easy for users to find those tenants. So how has that affected your business whether it’s finding those quality tenants or using the screening tools to get there.
Paula Pant: The benefit of the screening tools that Cozy offers is that I’ve got one centralized dashboard where, when I get multiple applicants, I can look at all of those multiple applicants from the same dashboard. So I don’t have to be like “Uh, where do I put the paper application, and here’s a paper one, and here’s something that somebody emailed to me”. I don’t have a big jumbly mess on my hands. So that makes it a lot easier during the application process to look at those various applications that I received. And to be able to fill in the gaps.
Paula Pant: Sometimes tenants don’t fill out the applications all the way, and so again when you have all of them in a centralized spot, you can look at them and say “wait a minute, so-and-so didn’t fill out these questions”, and look at it holistically in that regard. Having really quality tenants just simplifies everything. I get fewer phone calls, I get fewer emails, I just think about it less.
Paula Pant: That’s really what it comes down to, is the irony is that you and I are sitting here talking about something, that I don’t really think about that much unless somebody like you is asking a question about it. Because the whole point is that I spend most of my time reading books, writing, hiking, cleaning my living room, hanging out with my friends. I spend most of my time just traveling and living my life, and not thinking about real estate.
Lucas Hall: That’s great. Tell me more about that. So, you’re using Cozy to manage your properties from afar, and you’re still able to travel and do whatever you want. Tell me, what countries have you been to and tell me about some adventures you’ve been on while you’re collecting rent?
Paula Pant: In my life I’ve traveled to more than forty countries. In order to consider a country a place that I have visited, I require myself to have stayed there for at least one week minimum, and often two, three, four weeks. So I’ve spent a lot of time overseas. I don’t know specifically how much of that was before I became a landlord versus how much was after, but I would just say that I’ve traveled throughout my life, it’s always been a big passion of mine. Right now, at this point in my life, I travel to about five to six foreign countries a year, and probably about five to six locations in the U.S. per year. I’m on a flight usually at least once a month going somewhere.
Lucas Hall: All while managing properties and collecting rent.
Paula Pant: Yeah. I mean the thing is, I haven’t really spent a lot of, I don’t feel like I’m managing properties because I don’t really spend much time doing it.
Lucas Hall: That’s the goal. So the entire point of Cozy is to help you get that time and have that peace of mind that it’s all gonna work out.
Paula Pant: Yeah, I definitely spend more time digging through my luggage trying to figure out if I remembered to pack my iPhone charger. I spend more time doing that.
Lucas Hall: How much time do you think you’ve saved – and maybe we could do this on a monthly basis, per month how much time do you think you save by using Cozy to manage rentals.
Paula Pant: You know, it’s an awkward questions because I would say, even pre-Cozy, the biggest hassle that I felt was the attention residue. I would be typing, but I would be thinking “wait a minute, did so-and-so send in the rent? Have I gone to my mailbox? Have I checked it?” I would just be thinking about things and tracking things. And so that would always be in the back of my mind, whereas now, I just don’t think about it anymore because it’s streamlined, it’s automated, and there’s just nothing to think about. There’s nothing for me to track. If I measured time in terms of literal minutes that I’m sitting at a computer inputting something, I don’t know. But if I measure mental energy, mental bandwidth, it’s been significant.
Lucas Hall: That’s great.
Lucas Hall: One last question for Paula here. I want to thank her for coming, but the last question is really just “What’s in store for Paula?”. What does your future look like, whether that’s personal travel, adventures, or real estate or another endeavor, or your website AffordAnything.com.
So tell me more about that, and how does Cozy play into that?
Paula Pant: Sure! I’m pretty happy with what I’m doing right now, so I just want to keep doing what I’m doing. I really enjoy traveling to about five or six countries a year, I’ll probably keep doing that. Beyond that, just having the ability to wake up on a random Tuesday, Wednesday or Thursday and just decide “What am I going to do today?”, and have that day be a blank slate. I enjoy having the ability to do that. And because I like writing, and I like podcasting, and Afford Anything, I’m really into that. I want to keep working on those because those are fun and fulfilling and I feel like that’s a legacy that I’m leaving. That’s pretty much it, my future is like more of the same.
Lucas Hall: Do you see yourself growing your rental portfolio, or are you pretty content with where you’re at?
Paula Pant: Possibly I might buy a couple more properties, but I hesitate to set a goal around that because I don’t want to buy a property for the sake of buying a property. I’ll keep a lazy eye out, and if I find something that I think is really worth buying, I’m willing to do it. Right now, the properties that I have, the net income that I receive from them, after paying all expenses is enough to cover my basic cost of living, so I don’t have to worry about paying the bills. So, that’s enough. I don’t really have any goals other than to just keep it up.
Lucas Hall: Congratulations!
Paula Pant: Thank you!
Lucas Hall: Thank you Paula for coming and speaking with us, I hope everyone’s enjoyed this interview.
Paula Pant: Thank you for inviting me.