Episode 59 | Brandon Renfro | Military Millionaire Podcast

00:00 - 05:00

David:

Hey, what's up everybody? Today's episode is with Brandon Renfro, who is a he's in the National Guard. He's done some live in flip action, which we'll talk about later on. But he deals with the distribution and retirement side of financial planning, which is a piece that is just so incredibly important that we often forget.

So we're gonna dig into the famed 4% rule, what it is, why it matters, how to adjust it, and some other key factors for planning for your retirement so that you can enjoy life once you're done, building wealth and working for a living you can actually relax and enjoy life.

If this is your first time joining the community. Thanks for listening. If not welcome back. show notes are found at Frommilitarytomillionaire.com/podcast. Now relax and enjoy the show. And subscribe.

Intro:

You're listening to the military millionaire podcast, a show about real estate investing for the working class. Stay tuned as we explore ways to help you improve your finances, build wealth through real estate and become a person that is worth knowing.

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David:

Hey, what's up everybody? It's Dave with military money and I'm here with Brandon Renfro who spent some time in the army as an officer in the infantry side of the house. And now he is in the reserves and teaches, he teaches personal finance with a specialty focus on distribution and retirement stuff. Which is really cool because I've had some finance nerds on the podcast with me, but I have not talked about the retirement piece very much. Which is I mean, that's the piece that really matters, right? You gotta have to be able to have a closing game in life or it's gonna suck.

So without further ado, Brandon, thanks for joining us. Tell us a little bit about yourself.

Brandon:

Hey, thanks for having me, man.

No, yeah, you got it. That's me. I am an army officer, actually, my entire time has been as reserves as in the National Guard. Been in for I guess 10 almost 11 years now. And as you said, my civilian career I'm a finance professor. So I teach right now at East Texas Baptist University. Been a full time Professor since guess 2015 talk for a few years at a community college and before that, but yeah, that's me I am a National Guard, teach full time. And then I have a retirement planning practice. Reggie said, uh, you know, deal with retirement issues, mainly on the distribution side is mine. You know, focus on my specialty.

And that's me, I've got a wife and two kids, a four month old boy. It's pretty awesome. And a six year old will bout to be a six year old girl here a couple of weeks. So loving it.

David:

That's exciting.

So what got you into being a professor of finance and the retirement side specifically, like you're, you're a little young to be focused on that age, but I like it.

Brandon:

Yeah, no, dude. So at the risk of losing any cool points I ever had. It's just I think it's exciting. So when I went to undergrad you know, I kind of typical thing I guess you know, knew generally what I wanted to do. You have something in business but definitely did not show up in undergrad thinking I was going to be a finance Professor one day or even a finance major.

05:00 - 10:00

Brandon:

So part of the curriculum where I went to a southern Arkansas University, there was a class that was kind of like an intro to business, but it was called American Enterprise. And part of that class was a professor for each of the areas that come around and kind of do like a round robin, you know, hey, this is, you know, my area, I'm the marketing person, you know, I'm gonna tell you kind of what marketing is today.

You know, so the finance guy came, and he, I will never forget this lecture. Dr. Ashby. And I still friends today that he did a lecture where he showed, you know, how you could very easily, you know, just investing in index funds, consistent savings, dollar cost averaging, over a career, you know, become a millionaire, if you would just save consistently, I think the number that he used was $2,000 a year from the time you were like, 18, to 65. And math on his line, you know, I went back and checked the numbers. I was like, Oh, my gosh, and I was hooked. You know, from that point on, I still didn't know that I'd be a finance professor, but definitely was hooked on finance.

So you know, explain why you like your hobby. I really don't know. It was just exciting. Which, yeah, you're right. It's not the normal 18 year old kids. No source of excitement, but I thought it was the coolest thing.

David:

I mean, I like numbers. So I get that. I will say that you use fancy words like professor and, and planner, and I just call us all finance nerds, which is probably like, no way to go about it. But I think there's a huge difference between a financial planner and a finance nerd. And I think that's, you know, people always like, Oh, that's kind of a derogatory term, like, no, it's totally not because anyone who loves numbers is like, yep, that's me.

Brandon:

Yeah.

David:

I will sit around and mess with the okay. Look at me censoring myself, mess with excel docs and random spreadsheets, like the one piece of my entire, like, passive income real estate side that I have not turned over, is my bookkeeping, because I just enjoy tracking the numbers. And yeah, it's a huge waste of time. It's like an hour a month that I don't need to do, I can be almost completely passive, but I just enjoy it. And I think there's just people out there that I could see how you would get into and be like, Oh, my God, compound interest is amazing. And just enjoy that.

Brandon:

Yeah, yeah, no, so so yeah. Majoring in finance, again, at the time, I had not decided that I was going to go be a finance Professor after undergrad, I did go work for a short while as a financial planner at Wells Fargo. And during that time, I, you know, had the GI Bill and rejoined the guard. And so I was going to get my MBA simply because the GI Bill and you know, why would that go to waste, right? To get an MBA.

So about halfway through the MBA, I realized that I was kind of getting sad about the idea of school being over, you know, which, again, felt odd, right? I'm like, man, I should be happy that's over, you know, what, you know.

So I just went and talked to one of my professors about it, and thought, and like, tell me about being an adjunct, you know, what's this part time teaching thing about. And so decided I was going to go ahead, you know, get the 80 graduate hours that was needed, so that I could, you know, maybe teach it, teach a class one or two this semester, and, you know, do the financial planning thing. And taught my first class, it was Principles of Economics class, and it was during that first semester, I thought, yeah, no, just got it backwards, you know, I need to go, I need to finish this out, go get a PhD and do this full time. And, you know, I can always come back to practice and later maybe, you know, on the side, so like, I do now, you know, part time planner, full time professor.

So that's, that's what I did. I don't regret it. I just wish I would have seen, you know, I guess hindsight. 2020. You know, I would have seen the end result. Now, you know, guess what, we went more directly for it, but don't regret the path I took. And I'm glad I'm here.

David:

Yeah. So we had this like, great thing going on where we were bonding on my finances her definition. And then you said something about enjoying school? And I lost you.

Brandon:

Okay, not really anymore.

David:

I enjoy the teaching side of things. So I can see why you wouldn't. I don't think I could ever say that I got done with a class in school at any level. Is it? Hmm. I could do with some more of this. That's, that's why I have an E in front of my paygrade.

So that being said, Why why retirement?

10:00 - 15:00

Brandon:

Ah, man, I don't know. You know, I think so. Part like I said is just a, you know, the analogy I use All the time. That's right, like, so. If you're somebody that likes skateboarding, you know, have them explain why they like skateboarding. I don't know. It's just fun.

You know, so there's that part I can't really explain. It's just interesting. But then too, I think one thing that gets me stuck on it is realizing how important it is. You think about so many things in life, you know, you can get a second chance right? Or, you know, you can delay it a little bit, or you can man retirement or whatnot that way, you know, you really get the one chance to do it. And although I'm generally not a super serious guy, I think I think deep down probably that's, that's part of what's driving it is one it's interesting to, to know, it is so serious, you know?

David:

Yeah, what, uh, what do you think are some of the key things that a youngster should do from an early age when thinking about retirement? I asked that. And I know there's no right answer or wrong answer, right. But everyone's step system or strategy is different. But I asked that thinking maybe like, 25, because most 18 year olds are thinking about it. I wish they were. Because it is something that often does not get thought about until way too late. Because it's not sexy.

Brandon:

Yeah, no, it's a good question. And you're right. There really is no universal correct, even set of answers. And these are the things you should do. But that being said, that's that's kind of where you find that right answer in, you just simply start, right.

So you know, you have to save, you know, you know, you've got to start saving some money. So you could either which you know, and always kind of qualify this thing with, you know, don't hear me saying, just wing it, don't hear me say you just go blind. But if you're on the other end of that spectrum, where you're more likely to paralyze yourself with over analysis, stop and just just start saving, you know, so you get agonized all day long about how much should I say, well, how much can you say, save that? You know? Or should it? Should it be in a Roth IRA or a traditional IRA or the TSP, right?

Well, just pick one, you know, again, don't get me wrong. Yeah, take the time, you know, parse through the detail. But barring that, or if you know, you're going to get bogged down in the analysis and do nothing, just opt for doing something so that that's huge, you know, that compound interest, if you start now, you know, it's got more time to compound than if you start tomorrow, which is more time than if you start a year from now.

So that really is the big thing is just start saving as much as you can as often as you can.

David:

Are you a tsp fan? Or is there a preferred index fund? 401k that you like?

Brandon:

No, so I am a big fan of indexing, in general. And for that reason, yes. I do like the TSP. I think the TSP funds are very cost effective, and very efficient. So no, I think the TSP is good. A good plan, a good, a good system.

David:

Let me unmute myself before I start talking.

For those of you who heard him mention earlier, the $2,000 a year, right. What I tell people all the time is like a bare minimum for your entire career in the military, anytime you're in, you should be putting 10% of it away in your tsp. If you do that, that's your 2000 a year for most of us, maybe maybe not the first year is not. But actually if you put 10% in and you get the BRS percent match, it'll be that 2000 a year. And then if you continue with that, and I would say when you get a pay, raise up your tsp 1% or 2%, every year, you know, and I botched that I had been I put 10% in my tsp, but I left that crap in the G fund for you know, and the years that I joined, you'll appreciate this, it was a so from 2008 to 2000, like 14-15, my money sat in the G fund and earned like one to 3% interest.

Brandon:

Yeah.

David:

Funds that I'm currently in earned an average of like 18 to 30% interest. So I did the math one day, and I think I'm out like 25 grand just by leaving at the wrong fund over that time. But I still have a substantial amount in there. So the time to recover it. So if you just do 10%, at least in your tsp, put it in the lifecycle funds, you don't have to worry about it if you're not if you're not a finance guy or whatever. But just do that, like before you even think about anything else. If you just do that, like you're already winning the game of finance, and you're never going to know what's missing, if you did if you started it right away.

Brandon:

Yeah, for sure.

Hey, on that note, actually, so you talked about the G fund that that has in the past been probably the biggest source of contention for me was the overwhelming number of people who because they weren't finance nerds, and because they didn't, you know, like you don't know what you don't know, right?

David:

Yep.

Brandon:

Kind of deep it and you'll probably remember better I do, historically the G fund has been the default fund, right? Like your funds were automatically invested.

15:00 - 20:00

David:

Up until I think last year was the first time within the last year or two is when it finally decided to go lifecycle is the default.

Brandon:

Yeah, that's awesome. So that I mean, that's a huge, huge, you know, improvement. Yeah, that was probably my biggest, like I said, you know, the source of banks with the TSP was that, hey, here's a 20 year old, let's stick it in the G fund. Well...

David:

You can afford a little risk.

Brandon:

Yeah.

David:

It's never lost money. Yeah. But it's not really ever made money a year doesn't outpace inflation at all.

Brandon:

Yeah, no. And that's, again, another so if yeah, the biggest thing I would tell that that young person just starting out, is just start, you know, save as much as you can, as soon as you can.

That next part is you know, what you just hit on was, you know, so there's always this backstop of, you know, don't take too much risk, you know, don't take more risks than you can handle. And so it's, you know, put yourself in a position to overreact and do something stupid when the market drops. But, you know, yeah, don't be afraid to test yourself, you know, Rod net g fund out for 30 or 40 years, is going to hurt a lot more in the long run, if you'll just accept, you know, some volatility, you know, over the course of that that time.

David:

Yeah, absolutely.

Especially, and I tell people this all the time, although risk is definitely not something to be just taken for granted. Especially for us active duty, folks, you know, a young age, you can afford to take an extreme amount of risk, more so than probably the rest of the nation. Because let's say you're a young barracks guy, like, you lose every penny to your name, investing in the stock market, or real estate or whatever, because you went all out and you just everything went wrong, you lose everything. Still in the barracks room. You still have free medical, like, you're fine. That's it. Yeah, lost your money. Okay, start over big one. Like you're not on the streets, you have nothing to worry about. Now, I say that if you have a security clearance, you might have something to worry about if you go way too far off the deep end. But usually, the people who buy the really expensive car they can't make payments on are more at risk for losing their security clearance. So the guy who dumps 80% of his paycheck in the stock market loses it because you're not in debt to anyone you just lost your money.

So you're safer losing all your money in the stock market than in a Mustang. But anyway.

Brandon:

Yeah, no, valid valid point.

David:

That's to say don't don't overdo the risk, but I use that as my justification, because I'm a huge risk guy. But yeah, I've mellowed out since.

Okay, so we haven't even touched on yet. I want to touch on it, we're probably gonna spend a decent time talking about it. Could you explain the 4% rule?

Brandon:

Yeah, yeah. So that's, uh, you know, like I said, with distributions, you know, kind of my area, that's generally the kind of go to rule for how much you can distribute from a portfolio, right?

So, the application here is, okay, I retire. I have this chunk of money that I've saved up, right? And so how much can I withdraw from that? So the 4% rule says, you can withdraw 4% of that balance, and then adjusted each year for inflation after that, and you can reasonably expect that you won't run out of money, which courses, you know, kind of the significant risk in retirement, right, you know, you wind up you're, you know, at five years old, not quite dead yet, but you've run out of money, not a good condition to be in.

So that's that 4% comes from a study, a famous study in the area, for building and so he did this, this historical studies, okay, what I'm going to do is I'm going to look at rolling periods of 30 years, you know, this, this 30 year period represents normal retirement. And so said, Okay, if I roll through these 30 year periods, what is the most that you could have withdrawn in a historical context, and never depleted the portfolio in that 30 year period, and that's what just 4% comes from a play called Safe Max and the second maximum withdrawal rate, so if you had withdrawn 44% 30 years, you'd never run out of money.

20:00 - 25:00

Brandon:

And so we kind of take that rule and say, okay, that's what we can kind of plan for, you know, in retirement. So if somebody retires today, and they're using the 4% rule, we're gonna say, okay, I'll take this balance, withdrawal 4% of it in the first year, and the next year, I'll, you know, adjust for inflation and, you know, continue to take that that distribution. And so that's, you know, that's the fun note, right, it's a mobile phone built on some historical research, but you know, my statement on the personal goals. Always for one, you know, caution yourself note that that rule was developed in history, right? So the historical context, you know, it worked. But we don't know whether the conditions of the past or repeat in the future, right.

So it's, it's really only a guy, you know, just because it's worked in the past doesn't mean it will work in the future. So there's, you know, the big, big qualification upfront. But then two, you know, always think about also the different parameters that were in place in the study. So for one, the big one, the 30 year retirement, right? So if you, you know, early retirements kind of a popular thing right now, right. So say you're, you're 45 or 50 years old, you know, hopefully, you know, unless you're just the most pessimistic person, or, you know, you have some legit, you know, reason to believe that it will be, you know, hopefully you're planning on a longer than a 30 year retirement, right. So if you think about how that would adjust, you know, if we're saying we're going to hold that 4% rule, you know, use that, you know, to, to kind of look into the future there.

Well, if we need a longer withdrawal period, you know, we would have to adjust that withdrawal rate downward. So, I mean, there's no, there's no hard and fast, you know, this is how much you should, you know, reduce that withdrawal rate, you know, when you increase the expected length of retirement, there's no hard and fast mechanism. But it's the relationship that you should, you know, just keep in mind, right. So if I have a longer retirement period, and rely on this 4% rule, I'll have to adjust that down. You know, we can put that to the other side, too, though, right? Didn't work until you're 75 years old, more power to you, but you probably don't have a 30 year retirement that you need to plan.
So you can withdraw more than 4%, right.

So just always think about the adjustments that you need to make. Because again, it is just a rule of thumb, although there's nothing intrinsically wrong with the way the poll is constructed, just recognize that there are parameters that will change for each given investor.

You know, we talked about risk, too, right. So one of the things that being and looked at in the study was the composition of the portfolio. And so he tested a pretty broad range, I can't recall off my head, all different portfolios, but a pretty broad range of asset allocations. And actually, what he found was that portfolios that had 50 to 75%, or maybe was 80%, of the portfolio in equities, those were actually the portfolios that did better.

So as you look at portfolios that had less than 50%, in equities that are more conservative, you know, a higher percentage of bonds, those portfolios weren't able to sustain as high of a withdrawal rate as portfolios that had a little more risk. You know, you can go the other direction, too, though, right. So above that 75-80%, in equity, we started to see that the risk was, you know, you kind of didn't make up for the risk, right, so that the fluctuation in the portfolio kept you from sustaining such a, such a high withdrawal rate.

So, you know, think about your risk tolerance and how you plan to invest, that's gonna affect the withdrawal rate. And usually what I tell people, there's two others, so there's risk tolerance, but that's kind of driven in part by education, you know, so if you think you're uncomfortable with a given asset allocation, sometimes you can educate yourself into a level of comfort. So in the context of that 4% rule, you know, I think if, if you're coming into retirement, and you're thinking, well, you know, all bond portfolios, that's all I can stand it. Well, if you've learned that, you know, okay, great. Again, don't overextend yourself, don't take the risk you're not comfortable with. But if you're just doing that, without any base of education or experience, you know, just the idea of risk. And that's it. Well, you know, hey, maybe you can kind of educate yourself really on what that risk means. And see that, you know, in a lot of cases, really, you're taking on more risk, once you flip into that retirement period, by the, you know, all the bonds, no equity. So, you know, something to think about.

David:

Yep. And, you know, I mean, obviously, like you said, it all depends, it all fluctuates, there's so many factors, but I happen to know a guy, I'm not gonna name him on here, just because, you know, it's finances personal, but he's been retired now, I think 17-18 years from the Navy, right. And he did the 4% thing. His portfolio is grown every year. I mean, not maybe not every year, but over that time period, much outpaced what he's been withdrawing and then man lives in a very expensive place in the world. No problems. And honestly, like, he's in a position where it just keeps growing faster than he needs to pull money out. And he's been gifting money, you know, like, like his inheritance earlier, whatever to say, oh, hey, here you go. And and like, it's really cool to watch because it's like, oh, there's a proof source. And obviously, it could depend, but be we're saying 17 years in 2019, which means that oh, that's right, there was a huge crash that the world ended and everybody lost their shit. And he made it through that during the withdrawal thing without freaking out. So, yeah, doable, if you budget, right.

25:00 - 30:00

Brandon:

Yeah, and to actually you kind of hit on another point there that, you know, might be a little deeper, but but it's worth mentioning. Um, so think about again, then what that 4% even represents, right? It's the, it's a safe withdrawal rate.

So if you look at all of the withdrawal rates, you know, that you could use, what we're saying is from this study that being in did 4% was the safe withdrawal rate, you never depleted the portfolio.

Well, if you think about, you never depleted the portfolio, think of all of the other instances where you really never came close. And so in fact, in most cases, you would have started with more money, or you would have ended with more money than you even started with, because you're not, you know, depleting that portfolio. And so there's some trade off to think about there too, right? You know, if you look at, like, obviously, that's a good position to be in, you're not running out of money. But the other thing like for your friend that you're thinking about, you know, that also means he could put out 20. Right, that's the whole reason you're being saved here, because you don't know what's gonna happen. But in hindsight, he could have lived, you know, a much snazzier lifestyle than he did.

So I'm not saying that's even a goal. I'm not saying push for that. But just that is certainly one of the byproducts, you know, of, quote, unquote, the 4% rule or the safe withdrawal rate is, yeah, it's by nature, it's going to be a relatively low withdrawal rate. Because that's where you get safety from, is that lower rate.

So yeah, no, that's, that's actually a very good, good point, and very relevant, especially in the 4% rule.

David:

Yeah, I mean, let's just think about the magnitude of that, for those of you who are worried about retirement or who have parents are worried about retirement or helping your parents survive retirement. I mean, it's a very real possibility that things go wrong all the time. And a lot of people get ready for retirement and realize crap, we're not there. Now what?

So just think about the magnitude and how powerful it would be for you to have a retirement account. I've always withdrawn, right, where you're able to survive off the money that your account is providing for you. And then Holy shit, you die. And it's worth more than when you retire, like talk about a nest egg to pass on to your kids, your grandkids, your favorite charity, the government and taxes like whatever, you know, however you choose to do that.

But that's, I mean, that's really, really cool to think that you could be retired for 30, 40,50 years. And say you retired with $2 million in a bank account, which is doable. I'm not saying like, that's not an absurd number guys. you retire with 1million, 2million dollars in a bank account, and then 30 years later is worth 5-10 million dollars or 3-$4 million, or whatever, and you're like, this is a great problem to have.

Brandom:

Yeah.

David:

What uh, what do you think Ooh, and I'm gonna flip this and this is gonna be one of those questions. It's like totally not answerable. But is that opinion one, so just a forewarning. For those. This is an opinion, I'm gonna say for him.

What do you think's the biggest mistake you can make in retirement planning? Hmm. I have no idea what you're gonna answer on that. I just...

Brandon:

No, no, we did not.

David:

Like, oh, that's a flip script. That's gonna be a fun one.

Brandon:

Yeah, the biggest.

David:

Or a huge, whatever. Obviously, not saving is a pretty bad one. But...

Brandon:

Yeah, okay. So one, I think, is not thinking about that transition period hard enough. So and I don't think it's, you know, some people do it, you know, without, you know, they kind of make their own bed, right. Like, they know, they're just being irresponsible, and they don't think but to some extent, you know, I don't think that we, we, we collectively, we don't know, either educators or finance industry or whoever, put enough emphasis on that transition period.

So you know, if you think about your life, you know, we spent the first several minutes of the artist's session talking about you're saving you're saving you're saving you're saving. Well, when you flip the script to okay, I'm retired now and I'm withdrawing, withdrawing, withdrawing. You know, you're reversing the flow you're reversing. I mean, you're you're pulling In that coin right to the other side.

30:00 - 35:00

And so I think a big risk that people take is they they get used to saving, saving, saving for, you know, decades, right, you know, 20,30,40 years of a career, and they don't stop and think about that transition period, you know, their tax allocation and think about there's budgeting to think about, you know, there's some pretty key risks, which one of the ones that always interests, the sequence of return.

So when talking about asset allocation, you know, as you get kind of near retirement, and then shortly after the point of retirement, right, so, you know, maybe five or 10 years before or five or 10 years after, you know, you can kind of define that range. You know, it varies, right, but that kind of period around retirement, you're very, very susceptible to the market. You know, so if the market takes a big hit shortly before, shortly after, and again, shortly being, you know, kind of broadly defined as several years before, several years after that as a very outsize effect on you know, your retirement.

So like, you know, you you mentioned the O8, you know, market a moment ago, so if you retired, say, O7, O8, O9, somewhere around in that time frame, or, you know, even, you know, as far back as O5, you know, whatever, that O8, crash kind of hits you a lot harder than it does for somebody who's, you know, even if, you know, you you were invested during O8, you know, you're you're still working now, and you're not retired. Well, you know, you recoup you know, you didn't start taking distributions from that portfolio, especially those early distributions. You know, conversely, if you've already been retired for 10 or 15 years, and then that O8 market hit, you know, it didn't affect you as badly as those people that hit that critical moment.

So that's, I guess, if you asked me on the spot rate, or one single mistake is not adequately prepared for that sequence risk, either late in late career, or early retirement.

David:

I like it, I'm gonna throw another curveball at you. Because it was fun. And I came up with I thought of something while you're talking, saying, this is something we definitely didn't talk about. And I'm genuinely curious. But if you don't have an opinion, we don't have to talk about this.

This is something I'm noticing as a trend these days. So I'll just do it, we'll play that role play game, I'm 65 or 70. And I'm retired and maybe I have enough money, money, maybe I don't have enough money, maybe I'm just totally SOL. But I own a house free and clear.

What do you think about pulling a reverse? a reverse mortgage?

Brandon:

Yeah. So I'm not categorically opposed to reverse mortgages. You know, I do think they have a place. It's not something I generally, you know, suggest to people immediately.

One just because, you know, there is right now kind of a general state of people don't probably don't understand them, you know, average Joe, average Jane out there probably didn't really understand it. And I'm always weary of, you know, having someone try something that they're, like, don't understand. And they aren't comfortable with it, but no, I'm not an anti reverse mortgage guy by any stretch.

David:

Fair enough.

I think there's, I mean, I think it depends on your situation, but I think there could be some use to it. I mean, it's like, like, you were saying, it really just depends. Because, you know, if you're trying to leave your house to all your kids, it might not work out for you. But if you're an older couple, who doesn't have anyone to give their inheritance to like, screw it. But...

Brandon:

Yes, and to you know, I think so.

So reverse mortgages, you know, annuities fall in that category, too. There's, there's good ways to use them. And there's really bad ways to use them. And fortunately, I think there has been a propensity in the past to use them in really bad ways, and sort of just kind of get that connotation. Now, from an academic standpoint, you know, you know, throw out all the, you know, unscrupulous actors out there. And we're just talking theoretically, yeah, no, reverse mortgages. I think there are times when it makes sense. So I'm not, I've never done one with someone before, but I'm not fundamentally opposed.

David:

Cuckoo.

For those of you listening who don't know, the reverse mortgage is essentially like some kind of crazy backwards version of like a HELOC, where you're essentially taking the value of your home and chipping away at it by taking paychecks from the bank and then you that you're like eating equity away from the property, but you're living on it.

So if you have a million dollar home, it could basically act as a million dollar retirement and you're just pulling bits of equity out. So unless I hope I explained that at least somewhat, okay but...

35:00 - 40:00

Brandon:

Yeah, no, I think that's yeah, that's the basic idea there and like you said, you know, you get to live in the home until you, you know, pass away. And at that time your estate can either settle the balance or the bank owns your home, you know, so.

David:

Which honestly could make probate way easier depending on. I mean, if the bank just says, yep, that's ours, like, I don't know, maybe that makes probate easy because probate is not a fun process for a lot of people. And honestly, probate seems to be like, I have several friends who probate their exit strategy for real estate because they know how expensive the taxes are. And they're like, well, you know, if I die and it goes to probate, like, nobody has to pay the taxes on it.

So I don't know. I mean, maybe that's anyway.

Alright, so I know you had a quick real estate story. I want to touch on that because that'd be fun. And then we'll dig into some of these questions and kind of wrap things up.

Brandon:

Cool. Yeah. Yes. My favorite.

I don't consider myself hey, are you a real estate investor? No. I bought a couple of real estate, you know, houses. Got some rentals, but uh, you know, I don't really consider myself super involved in it. But my favorite real estate story is my wife and I. We lived in an apartment the first I don't know like five years we were married or something like that. And we bought a real small duplex and continued to live in our apartment. A little duplex and you know rented it for several years and then when she got pregnant with our first kid said okay, we got to move out of the one bedroom apartments let's start looking for a house right?

So did the whole house hunt thing and we finally can of course you know be one of the finance nerd that I am you know, definitely I was not looking for you know, the nice fancy house you know, I was I was looking for you know, an opportunity to build some equity. So, we were looking for foreclosures, stumbled across one it was kind of one of those you know, all the houses in the neighborhood are the same kind of deal very homogenous, you know, this one looks just like that and then so I say that to say you know, all of those houses in that neighborhood had you know, within a couple thousand dollars the same value so, you know, we knew what this house you know, it was not a very good indication of the value that it would have in the market well, the foreclosure value was slightly less than half of the HUD program so you know, I had like slightly less than half of what we knew the house would appraise for once we got it all fixed up moved in so you know, we we got it and of course had a place to be the realtor and all but uh, we lost the bid the first time the number was good, it was like, I don't know how familiar you are with the HUD foreclosure process.

They they're real picky about their paperwork and all that kind of victorious for rejecting bids that they they're willing to accept but because the paperwork isn't right you know, so it got rejected in the realtor even said something like you know, hey, this is gonna be a terrible process are you sure you want to like try this again? I was like finding out that you understand like, you know, instant like doubling of my value yeah, you know, you don't want to do it that's fine but I'm certainly gonna put this bid back in you know, and so it put it back in got the bid and yes, we got the house and it was somewhere around so this is in southwest Arkansas Northeast Texas texture Canada straddles the state line there so when the Arkansas side into the house side, the right side of course guide side.

So we the house got what $45,000 put a roughly $5,000 into it, and it was you know, gonna appraise for you know, we figured in the 90s and it ultimately it did appraise would check it out. And it was essentially just cosmetic issues. Right. So a hole in the wall, but you know, no serious issues. Yeah, you know, just kind of fix this up, and we're good to go.

So while we're over there working on the house, the neighbor comes over and starts talking to my father in law. And I've never verified the story, but he said it's hilarious to me. So it's part of the story now whether it's true or not. He said that the couple that the house was foreclosed on, it was a lady and her husband and her ex husband that all live there in the house together.

So understanding that the condition of the house became less surprising to me. There was a middle bedroom and a three bedroom house and middle bedroom. They used it as a dog kennel.

David:

Oh, God.

40:00 - 44:12

Brandon:

Okay, yeah, so I'm not talking about cages and crap in there. I'm talking about like, shut the bedroom door. I almost threw up pulling the carpet out of that room.

So you can imagine right away, looking like the husband and ex husband. Terrible thoughts in there. But we gotta fix that and work on it for about a month. And sure enough, he lived in it for two years, and then we got refinanced and the cash out refinance and bought two more small rentals.

And so, you know, worked out great for us. I would 100% you know, do that over again. But, you know, as you know, finding deals like that is, you know, not something you're gonna do every week.

David:

Yeah, it's getting more difficult as the market rises. But I mean, that's the fundamental rule of real estate, right. Money's made when you buy and you knew you had to steal when you bought it.

Brandon:

Yeah. Yeah, no. So I yeah, it was, it was awesome. Still have that house. So just just keep it as real now.

David:

Now you have a place to reverse a mortgage in 40 years.

Brandon:

There you go.

David:

And they'll probably have some like, whole life insurance, reverse mortgage on the, I don't know, some other somewhat complex strategy thrown together with a huge commission check for someone.

Brandon:

Right, right.

David:

Anyway, not to condone any of those. There's good and bad strategies to use all of those. But they are the ones with the bad name out there because people buy into the bad ones because they're shiny.

Brandon:

Yeah.

David:

All right. Hey, so I always like to ask this. But what is one resource, book, course, website, whatever that I usually ask for real estate. But I told you, I wouldn't do that, besides make it right for finance or retirement strategies that you really enjoy?

Brandon:

Yeah, there you go. Awesome.

The book I always suggest when I'm asked that question is Random Walk Down Wall Street. hands down my favorite book on investing and saving. There are some sections in there that talk about retirement plans. Just overall a good book to start with. And it's a tip it's a I don't know what edition is in now. But several originally published. I think in the 70s sometime, so we have updated throughout the years. And you know, a couple books on Amazon but phenomenal book, A Random Walk Down Wall Street.

David:

I will have to check that one out. I have not yet.

Awesome.

Before we wrap this up anything you'd like to add any parting advice or big ideas?
Brandon:

No, I don't guess so. Just uh, like I said, you know, do something. You know, certainly learn. I mean, I'm a professor. I'm not telling you don't learn. But I know that that message is often unheard. Right. You know, go learn everything you can. Sure you know. But if you're not going to do that, learn a little bit and then just start doing something and start saving.

David:

Yeah. There's a lot of power behind just taking action. So..

Awesome.

Well, hey, Brandon, where can people get a hold of you?

Brandon:

So you can go to my website, just BrandonRenfro.com

I have a blog there. I wrote about retirement. Most of the articles that are right are going to be on distribution issues, or taxation. So not not the not generally going to be the hey, did you say an IRA or 401k on the back end, but curious.

David:

If you're not interested in it, you should be because that's gonna be your future. Whether you like it or not.

Awesome. Brandon, thanks very much for joining us today.

Brandon:

Yeah. Thank you buddy!

David:

Awesome. It's been fun. Have a great day.

Brandon:

Yeah, you too.

End:

Thank you for listening to another episode about my journey From military to millionaire. If you liked it, be sure to visit Frommilitarytomillionaire.com/podcast to subscribe to future podcasts. While you're there, we'd love for you to rate the show. Give us a review on iTunes. Now get out there and take action