How Rachel Richards made enough passive income to retire at 27

Rachel Richards is an author and real estate investor that came from humble beginnings and 'retired' at the age of 27. Rachael demistyfies the overwhelming, intimidating and complex world of personal finances to making simple, fun and accessible.   In this episode, Rachel shares her story of how she got started as a financial advisor, lauched into real estate, scaled up to 40 doors and built a diversivied portfolio. Rachel's Site: https://www.moneyhoneyrachel.com/ Rachel's free passive income starter kit: https://www.moneyhoneyrachel.com/bonus Rachel's Book: https://amzn.to/3kFzKej  --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor Podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Rachel: What's up everybody, Michael Albaum here with the remote real estate investor. Today with me I have an amazing guest, Rachel Richards, she is a best selling author, finance guru, real estate investor, former financial advisor, professional speaker just did amazing all around person. And she's gonna talk to us today about all of those topics and more. So let's just jump right into it.   Rachel Richards, thank you so much for taking the time to hang out with me today. I really appreciate you coming on.   Rachel: Yeah, thank you for having me. I'm excited.   Michael: Oh, me too. So I mean, for those of our listeners who don't know you, I know you as a best selling author, finance guru, real estate investor, former financial advisor, professional speaker. I mean, is there anything that you haven't done?   Rachel: Well, I appreciate that you make me sound really good. So I don't know.   Michael: You have seemingly accomplished so much in the financial and real estate space. I would love if you could give our listeners a little bit of background on who you are, what you've done, and then what you're currently doing in real estate.   Rachel: Yeah, for sure. I started as a finance nerd at a pretty young age. I still am a nerd to this day and proud of it. But I grew up in a household where money was always a stressor. And so at a pretty young age, I was motivated to turn things around for myself and become financially independent, and went to college, I became a financial adviser. I'm kind of giving you the high level story. But I read Rich Dad Poor Dad in high school. And that was the first thing that yeah, that turned me on to real estate investing. So I always knew that was going to be my path.   I didn't know about all these other passive income streams yet. And my eyes opened on passive income a little bit later. But I knew real estate investing was one of the key pathways for myself. So I did start investing in real estate with my husband in 2017. I also self published my first book money, honey that year. And we had these two passive income streams, rental income and royalty income. And we focused on growing those as much as we possibly could over the next few years. So fast forward to 2019. So within the span of two years, we had accumulated almost 40 rental doors, six buildings, almost 40 doors, and we've grown our passive income streams, yeah, to over $10,000 per month. So by then I was able to quit my job. We were financially independent. And that is where we are today.   Michael: Oh, my gosh, well, there is a lot to unpack there. That's incredible. So taking a few steps back, do you think that you became a financial advisor because of that angst you were feeling at home. And that's never something you never want to worry about money. So you said if I can get as educated as I can about it, it'll be easier for me.   Rachel: I think there were a few reasons I became a financial advisor. That's definitely one of them. One of them is because my parents were really struggling with money. And I wanted to help them. And for some reason, I felt like I needed to have the credibility of calling myself a financial advisor to finally be like, okay, look, I'm taking over your finances. We're going to get you out of debt. We're going to turn this around, and I'm going to finally manage your money for you.   So I did that. And we did help them and they're doing way better now than they were this was like a decade ago. So that was one of the reasons was to help them. And another reason is because I had the passion for helping people manage their money, I was obsessed with learning about how to invest in the stock market. And the third reason is because I sold Cutco cutlery in college. Have you heard of Cutco knives? By any chance?   Michael: Yeah, I've heard of it. Is that the door to door selling?   Rachel: Yeah, it's like a direct sales company. So it's high quality knives. And of course, when I when I took this job, I had graduated from high school. I was terrified at the idea of taking out student loans because I had read enough books. I knew enough to be hesitant at the thought of that. And I'd seen what student loan debt had done to other people and how crippling it could be. So I was really scared of student loans. I didn't want to take on debt. And my parents were not able to help me pay for college whatsoever. It felt like all my friends I grew up in this really wealthy bubble and I felt like all my friend's parents were paying for their school and good for them, but I was kind of having to pay for it on my own.   So I took this job selling knives. And it was the first time I've been exposed to something where the harder you work, the more money you make. And I knew I could outwork anybody. So I sold knives my mom was less than thrilled about The idea of me selling sharp objects to family and friends, but that's what I did. I sold Cutco. I set sales records, and I paid my way through school and I graduated completely debt free, which is one of my proudest accomplishments. And because of the sales experience, and my passion for helping people with money, I figured becoming a financial adviser was my dream job. And that would be the perfect fit for me. I was wrong about that. But that was my thought at the time.   Michael: Good for you, Rachel. That's incredible. That's really, really incredible. So now you became,   Rachel: Thank you.   Michael: Yeah, you're most welcome. So now you've become a financial advisor, you are looking to help people with money, and their finances. And so I'm curious, where do you see real estate fit into that picture, because I know a lot of financial advisors and a lot of them push products that they make Commission's on or push more passive investments in the stock market. So curious to know how you blended the two for professional level as well as in the personal level, you investing in real estate and seeing how impactful it can be.   Rachel: Yeah, and honestly, that was one of the things that I found disenchanting about the financial advising industry is how financial advisors are incentivized. And they you know, they want you to sell certain products to people that maybe are not in their best fit. So I didn't last very long in that industry, I think I was only a advisor for almost a year, actually. But I always had the dream of becoming financially independent. And so I knew that working in a job where I was trading, my time for money was not the way to become financially independent. So that's where real estate investing made a lot of sense to me, I knew this was something that could be a passive income stream, if I did it the right way. You know, I always tell people, you don't want to have this huge rental portfolio and quit your job to become a full time landlord, right? That's not the goal.   So you have to do this, and you need to have a property manager, that's one thing that will help it become passive. And even with a property manager, there's always going to be an aspect of manage the manager. So it's not going to be perfectly passive. But it is a lot more passive than a nine to five job, or working a sales job or working as a financial advisor.   Michael: Yeah, nice.   Rachel: So it was always my goal to start investing in real estate. And doing that on the side. And my husband, I hadn't met Andrew yet my husband as a financial advisor, but I did meet him later. And together, we wanted to get to this $10,000 A month mark, because I think at the time, our expenses were like $6,000 a month. So it felt like we could cover our expenses and still have a lot of money to save. And just to back up, let me just define what passive income is or the way that I define it. I define passive income as money that is earned with little to no ongoing effort. There are not many things that are truly 100% passive, except for portfolio income.   Most passive income streams will require you to work a few hours a month or a couple hours a week to maintain them. But again, it's a lot more passive than working 40 hours a week as a full time salaried employee.   Michael: Yeah.   Rachel: And the epiphany that we had several years ago, is that once your passive income exceeds your living expenses, you're retired, you're financially independent. So once we realize that it was just this, this constant urge to have enough passive income to cover our living expenses. And even more because we wanted buffer room, we wanted to keep saving money. So that's why we came up with that $10,000 A month goal.   Michael: Love it. Love it. And so you started investing in rental properties in 2017, you said, and two years later, you've got 40 doors under your belt, which is unbelievable. So I'm curious to know, how did you get your start? And what led you or what allowed you to kind of take that first step? Because I think so many of our listeners, and so many beginning investors get plagued by analysis paralysis. So how did you do it?   Rachel: Yeah, that's a great question. And I'm glad you asked when people hear that I went from zero to almost 40 doors and under two years, the first thing they asked me is like, Are you a trust fund, baby. So I always like to clarify right off the bat. I'm not a trust fund baby. I never made six figures actually, from a job or a career. I started off as a financial advisor making $36,000 And my next job I was making $32,000. In my next job I was making $42,000. So by no means was I was making some huge salary to achieve this. We were kind of making average salaries, but working really hard and being frugal and being thrifty in order to accomplish what we accomplish. So always put that out there first. There was a lot of fear, for sure, in that first rental property, and there was a lot of discouraged discouragement along the way. So the first duplex we had been searching for months and months and months to find this first duplex that we invested in. We started looking in early 2016 I think, and I'll back up with a quick story of who was working for at the time.   I was working for this woman who was a very emotionally abusive boss. And I was overqualified for this job, I was underpaid. This is one of the most condescending people I've ever worked with. Like, I just I've never seen an adult person, treat another adult person this way in my life. She regularly made her employees cry. She just made people feel stupid. So it was an awful work experience. Yeah. And there was just this one time where she made me cry. And I was I went to the bathroom to clean up and I just looked at myself in the mirror, I was 23. At the time, I looked at myself in the mirror, and I just decided, I am so sick of this. And I am never going to let another employer treat me this way again. And I'm never going to be financially constrained, again, where I feel trapped in a job, and I can't leave because of finances.   And I remember feeling like I'm so sick of myself, I'm sick of talking about investing in real estate. I'm sick of complaining about this job and not doing anything about it. So it I had this enough is enough moment, where yes, it was a low point for me. But also the silver lining of that is that I finally started to take action. And I finally realized, I'm done with this, I'm going to start taking action, I'm going to get serious, and I'm going to buy my first rental property. And I share that because I think you have to almost have that moment and have that mental jump, where you just decide, okay, I'm going to do this because I'm sick of hearing myself talking about it. Or I'm sick of like living in fear or living in the what ifs or you know, what if I lose money, what if this bad thing happens? What if it doesn't go right? It's like, you just have to take the first step.   So I had that moment, I started to take action, we started to look for rental properties. It took a long time, way longer than I thought. And I think most first time investors experienced this. We put offers on properties. We had a an accepted contract on a property and it fell through. And so there were so many times we're like, this just isn't going to work. And we taught we told ourselves, Well, you know, this works for some people. Clearly, this just isn't meant to be.   Luckily, we got through that. And we kept looking and we didn't let it completely discourage us. And we finally found this duplex. And by then the great news was we'd analyze so many properties that we recognized, this is such a good deal. And we were able to take really quick action, make an offer on the property and close on it. And we were really confident in it because we you know, we made other offers on properties. We'd had accepted contracts, and it was to this day, the best deal we've ever done.   Michael: No way   Rachel: Saw it. We we recognized it. And we we took quick action. Yeah, I mean, the I think we have like a 25% cash on cash ROI or something something. It's at least 25%. So   Michael: That's incredible.   Rachael: That's how we got our first duplex. Yeah, it's crazy. Yeah.   Michael: And so you said that you were facing a lot of headwinds and discouragement and mental hurdles and physical obstacles. How did you and I imagine you're working with your husband at this point, right?   Rachel: Yes.   Michael: How did you know and how, I mean, how did you go about analyzing properties? Was it hey, we've just seen this enough times to kind of know what we're looking for. Did you have a mentor or coach kind of walk you through or somebody more experienced that was able to guide you or were you kind of figuring it out on your own?   So by then, I had taken a couple different jobs in the real estate industry. I partnered with somebody who flipped houses and I learned a lot from him. This job that I'd worked at with this abusive boss, she was a realtor and I was her admin assistant. So I did learn a lot from her as well. I read a lot of books. So one of the best books I read to help me with analyzing rental properties is the book hold by Steve Shader and then the McKissicks, Jim Melinda McKissick. Okay, that was a great book for me to learn how to analyze properties. So I was just kind of going off of what I learned myself to that point and using my own spreadsheets.   Michael: Love it. So you got a kick butt deal. That was your first one down. And then the next just started falling down like bowling pins, and it was a pretty sequential, it sounds like it happened fairly quickly over the span of two years.   Rachel: Yes, it did happen quickly. I'm happy to get into the numbers too, because a lot of people were like, how did you come up with all these down payments if you weren't doing house hacking, because we came up with 20% and down payments, one after the other, which was quick and it was a lot of money. So the first duplex was $100,000. That was the list price. We we had a few advantages going for us that allowed us to save money, first of all, so we both graduated without debt, I sold knives. My husband's a veteran and he used his military benefits for his college.   So we graduate without debt. That was a big advantage because even though we started out not making six figures and I never made six figures my husband did eventually even though We started off not making six figures, we could save a lot a large portion of our salary. Back when I was making 36 grand, I was saving 50% of my income. I was living off something like $1,500 a month.   Michael: Holy smokes.   Rachel: Yeah, in Louisville, Kentucky. I mean, it was very bare bones, I was very, very frugal. So because of that it only took me a few years to save up a decent chunk of money that I could invest into real estate. And then obviously, Louisville, Kentucky is where we invested, it's a great place to invest low cost of living. It's an affordable city. So the duplex we found was 100 grand. So those were some of the advantages that we had. And that's how we came up with the downpayment for that first duplex by 2017, we both had $10,000, we saved and we pulled together to get to the $20,000 downpayment. That's how it started.   Now how we scaled, we did a couple things. First of all, we did not give into lifestyle creep. So those few years leading up to that we were very frugal, we made a lot of sacrifices, we weren't going out to eat with friends, we weren't partying on the weekends. I mean, we were working full time jobs, we were acquiring rental properties. On the weekends, I was starting to write my book in the evenings, we were just working and hustling. It's not like we had these really cool lives or anything. So we made a lot of sacrifices. And after we bought that first property, and we were cash flowing $500 a month in profit, it would have been really easy for us to turn to each other and high five and just decide, wow, now we can really live it up, we have $500 a month, we can increase our quality of life, we could get a new car, we could do whatever.   But we didn't, we decided we're gonna save 100% of this cash flow. And we're gonna reinvest this into the down payment for the next property. So that was one thing we did, we didn't get into lifestyle creep. And the second thing, this is really the key for us. We I had my real estate license, I did not have it for the purpose of having clients. But it was just for my own purposes and representing us as the buyer's agent on the deals. So we would deplete our savings completely to buy the for the downpayment and to buy the property. But then I would be the buyer's agent on the deal, we would represent ourselves. And I would immediately get a commission check back for 1000s of dollars, sometimes it would be 10 grand depending on how much the property was.   So that would be an immediate boost that would help us save for the down payment for the next property. And by then to by 2017, my husband was making six figures. So you think about a 50% savings rate on our combined income. And those other three things that cashflow we kept generating from every successes, successive rental property, the Commission's from the real estate license, we were able to have some very, very fast momentum where we could come up with down payments, one after the other and scale very, very quickly. So that's how we did it.   Michael: That is so cool. That's so cool. Rachel, a question for you kind of about mindset. And how do you square saving so much of your income and being so frugal when it sounds like a lot of your friends and circle may not have been? I mean, it was that hard, like just emotionally to get through?   Rachel: It was definitely challenging. It was definitely challenging. I think from a young age, though I've always had this mindset of, or I always recognize that doing the opposite of what most people do tends to be more successful, I guess I don't know if that's the best way of putting it. But I always was like, I'm going to do the opposite of what most people are doing.   Michael: Yeah.   Rachel: And I was always able to, I guess delay gratification or just keep that motivation in front of me and stay very, very disciplined. So it was difficult. I remember there were times working when I did work in corporate finance eventually. And I remember my coworkers would invite me to lunch. And I always packed my lunch. And so the first few times they invited me out to lunch, I would eat my lunch first and I would join them because I didn't want to miss out, I would want to network and I would want to go to lunch with them because I liked them. And so I would say yeah, I'll go to lunch. And then I would go and just drink water. And so I would explain to them, you know, sometimes I would say I'm just trying to be healthy, or I'm on a diet or sometimes I'd be like, I'm just trying to save money. I would always tell the truth, whichever it was, but…   At first I think they probably thought it was weird. Not that they ever said that. Right? But then they got used to it. And they knew that if they invited me to lunch, I was gonna come and not eat and they were always supportive. And luckily, I've always had very supportive people in my life that helped me along the way. But yeah, I mean, you just have to get used to kind of being the oddball out because it is kind of weird. You're not getting the new car and you're not getting the new house but you know that in the end, you're going to have a lifestyle that's going to be freedom and travel and way different than than what anybody else can experience. until you know that it's going to be worth it. And if you can focus on that, it'll make all those sacrifices in between a lot easier.   Michael: Totally. I forget who said the quote, but it's something to the effect of live like no one now. So you can live like no one else later.   Rachel: Yes. That's a great one.   Michael: Oh, that's awesome. And I totally hear you. Because I mean, coming from a guy who lives in a van with his dog and wife, I totally get the doing the opposite of what everyone else does.   Rachel: Yes, I try to still live by that, especially with investing in the stock market, too.   Michael: Oh, okay. So that's actually a really great segue for something I wanted to chat with you about. So what is your take on the stock market? I mean, is that is that an asset class that you believe in that you invest in to get diversified? Talk to me about that?   Rachel: Yeah, for sure we invest in a stock market. I think the more diversification, the better. So we invest in the stock market, we invest in real estate. And within real estate, we do all kinds of things multifamily self storage, you know, we own direct rental property. And then we have syndications. And then we have REITs, and other types of real estate investments. So I always think the more you can diversify yourself, the safer your portfolio is, stock market investing, I think is an absolute must for everybody. My husband still works a W2 job, even though we're financially independent, he loves his job, he loves what he does. So he has a 401k that we max out every year. And we still have old IRAs that are invested in the stock market.   I am a big believer that what is boring, ends up being sexy in the long term. So we invest mostly in index funds and ETFs. And long term investing, most of the time, I'm not caught up in how the Dow has performed today, or how the S&P is performing or what's going on in the stock market, because I don't look at it. The way I approach the stock market is that it's none of my business. I know that in the long term, it's going to take care of me and that in the long term, the stock market has always gone up, it's going to be volatile, day to day, week to week, month to month, year to year, but over the decades, my money will go up as long as I keep it invested. So I don't think I've ever sold anything I've invested in. And I've started investing at the age of 18. So I'm like 11 years in now.   But that's how I've approached it. I don't invest in crypto, it's not because I don't believe in it. It's just that I haven't had the time to fully educate myself on crypto, and to fully understand it. And if I don't 1,000% understand something, I don't invest in it. It's as simple as that. And I would tell anybody that if you don't understand something completely don't invest in it.   Michael: That's a great tip. That's a great tip. So Rachel, I'm curious to know, because you used to work as a financial advisor, what did you see your really successful clients doing? And where were they investing?   Rachel: Yeah, the I would say the successful clients. I mean, I was a fee only advisor, first of all, so I was advising my clients differently than what other people were doing. I would say that my most successful clients were doing what I told them to do.   Michael: For someone who might not be familiar with the financial advisement world, what is a fee only advisor? And how is that different than some of the other fee structures out there?   Rachel: Yeah, it's really important that clients understand how their financial advisors are being paid. So if you're looking to work with a financial advisor, you definitely need to advocate for yourself and ask, Hey, how are you being paid, what's your pay structure, there's three ways financial advisors are paid. Number one is commission based, that means they're being paid a commission based on the products that they sell to you. That's not a good thing normally, because that means they might be incentivized to push products on you that might not be in your best interest. Number two would be a fee based advisor, which means they could be paid still commission some of the times and fees other times.   And then number three is a fee only advisor. And this is the best way. This would be somebody that is paid, for example, 1% of the assets under management. So they're paid based off of like a fee of your portfolio, or it could be an hourly fee. And this is the one that's the most in alignment with with your values, because the more money you make, the more money they'll make. So that's something you want to ask them, you also want to make sure that they're a fiduciary, that means that they are obligated to act in your best interest and look out for your best interests as your advisor.   Michael: So what you're saying is that there can be licensed and registered financial advisors that are not fiduciaries.   Rachel: Correct.   Michael: That's mind blowing.   Rachel: It is, isn't it and people don't know that. I didn't even know that until I was a financial advisor.   Michael: Wow.   Rachel: And so yeah, there you can have all these certifications and licenses and still not be upheld as somebody that is legally obligated to act in your clients best interests.   Michael: Wow. Okay, well, you have just armed all of our listeners with a Fantastic question. If they're chatting with financial advisors, and it's as simple as argue a fiduciary   Rachel: Mm hmm, that's right.   Michael: That's great. That's great. Okay. And then so getting back to to what you were saying previously about that the most successful clients you had were the ones that listened to your advice, what advice were you giving them?   Rachel: It was, it came down to the same things that I do with my own portfolio, investing in the long term, investing in the, you know, the boring things that I say in quotes, index funds, ETFs. But the thing is, when you invest a lot of your money in the stock market, it can be very scary and emotional. The most successful clients were the ones who did not panic and sell at the wrong time. Because when the stock market's going down, your instinct is to sell and you want to get out and you want to make sure you're not going to lose any more money.   The thing is, though, when the stock market's going down, you don't actually have a loss, right? It's a theoretical loss, you don't actually have a loss until you sell and then you've actually realized that loss, you make that loss real. If you don't sell, the loss isn't real yet. And if you look at the stock market over time, you see that it's always gone up. So if you can just hold out, you just if you can suppress the panic and the fear. And if you can hold out and keep your money in the stock market, even invest more in the stock market, because the stocks are on sale if the stock market has gone down. And if you can just wait that out, it will go back up, it always has in the long run. So the clients that were able to manage their emotions Well, during those times of panic and fear. Those are the ones who did the best in the long run.   Michael: Yeah, that makes total sense. So Rachel, would you say that it's a fair expectation of someone to have have their financial advisor to have the advisor help them manage their emotions and kind of coach them through the highs and the lows of those emotional roller coasters?   Rachel: I think so. Yeah, I think a good financial adviser would do that. And when you're looking for somebody, that's another question to ask. I've seen good financial advisors who set expectations helped manage their clients emotions through the when the markets very volatile. So I think absolutely, and again, this all comes back to the concept of doing the opposite of what everyone else is doing. So when you successfully invest in the stock market, if everyone's hopping on the latest trend and buying the latest crypto, then it could be a signal not to do that. Or if everyone's panicked and selling in the stock market is going down. That could be a signal not to sell. If you do the opposite of what everyone else is doing that can end up being very successful for you.   Michael: Okay, I want to shift gears entirely here and talk about the book that you wrote. Because again, just another notch in your belt, another accolade you have, it's called Money Honey, why did you write it? Who did you write it for? And what can people expect to get out of it if they end up purchasing in a reading it?   Rachel: Well, thank you for asking money, honey was a complete surprise for me because it was it was something I was just doing as a passion project. And when it took off the way it did, I was shocked. But I started writing it in 2017, because I was a former financial advisor and all my family and friends came to me for financial advice, which I loved. And I also began to wonder, well, why aren't they reading books like I did? You know, why aren't they learning on their own? And then I had this aha moment where I realized, oh, yeah, personal finance is boring. It's overwhelming. It's intimidating. It's complex. No wonder, no wonder people don't like to learn about it.   So I thought to myself, How can I make this topic sassy, and simple and fun. And that's where the idea for money honey came from. And the words kind of poured out of me at first, it was something I was really excited to do, just something I felt compelled to do. So I self published the book in September of 2017. And like I said, to my surprise, it just took off immediately. It really resonated with female millennials. And it teaches the basic topics of personal finance, budgeting, savings, stock market, investing, debt, it touches on insurance and taxes as well.   So that is what somebody would get out of it. And it's yeah, like I said, it's done well has over 1100 Amazon reviews now and it just sells more and more every year. So it just blows my mind.   Michael: Right on. And where's the best place for someone to pick up a copy of the book?   Rachel: It's on Amazon, and it's in ebook paperback and audiobook formats.   Michael: Right on, Rachael, this has been so amazing. I really, really appreciate you coming on here. And you're just like a Swiss army knife. Like you just got so many facets to you and so much experience that I love and I know our listeners will love. If people want to learn more about you find out more about your story. Where can they get ahold of that type of stuff?   Rachel: Thank you. I appreciate it. My website is Money Honey, Rachel calm, and my Instagram is money. Honey Rachel and what I would love to do for your listeners is, if anyone wants to download my passive income starter kit, I will give that for free so you can go to moneyhoneyrachel.com/bonus to download that.   Michael: Amazing. Thank you so much. We will definitely link to all of that in the show notes here. Who Rachel, thank you again. This has been so much fun and I wish you the best of luck and hope to stay in touch.   Rachel: Thank you so much for having me.   Michael: Already, everybody that was our episode a big big, big thank you to Rachel. It was so much fun as super insightful. We covered a ton of topics. I am definitely gonna be getting a copy of her book here shortly. If you enjoyed the episode, feel free to leave us a rating or review wherever you listen to your episodes. And as always, we look forward to seeing the next one. Happy investing