Podcast: Melissa Fredette — Financial Independence via Real Estate

Melissa Fredette

Episode 51 of the NewRetirement podcast is an interview with Melissa Fredette — former President of Postgraduate Programs at Hult International Business School — and discusses what she learned during her journey to FI and as she transitions into retirement before 50 using a portfolio of rental properties.

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Full Transcript of Steve Chen’s Interview with Melissa Fredette

Steve:           Welcome to The NewRetirement Podcast. Today we will be talking with Melissa Fredette, the former president of postgraduate programs at Hult International Business School, about what she learned during her journey to financial independence. And as she transitions into retirement before 50 using a portfolio of rental properties, so Melissa just retired this past month, and we’re also going to dive into some of the lessons she’s learned from other women, based on her experience both mentoring and being mentored by successful peers on her journey. So with that, Melissa, welcome to our show. It’s great to have you join us.

Melissa:        Great to be here. Thanks for having me.

Steve:           Yeah, so it’s cool how this came together. I saw your post on ChooseFI, and I just was looking at it again, I saw you got 1.3k or 1,300 likes for your posts and hundreds of comments. Pretty amazing, right? That’s an amazing community. And it was intriguing, and I thought it would be really good for our audience to hear from someone directly how they did it. And so I wondering if you’d give us a quick recap of your post about what you built and how you’re paying for your retirement.

Melissa:        Yeah, I was blown away by the response, really exciting. I think it’s great to be part of a community, and I’ve gotten a lot of help and insights from the community over the years, so it was just important for me, I think, to put out there. I think we all struggle over the years just trying to slog away, and I think it’s great to read about success stories, so I wanted to put it out there. So my post basically was just putting out there that here I am, I’m a woman before 50, I have reached financial independence and retiring before the age of 50, on my own, without a spouse. I am in a high cost of living area and I’ve been a high earner, so that’s been lucky. And I’m doing it a little bit differently, it’s mostly through rental income, as you’ve said. I haven’t gone that traditional path of a lot of investments or stocks or anything like that, that’s just not been my path. So it’s been a little different, and certainly made mistakes along the way.

Melissa:        And I think that’s really important to talk about too, not just the yay of hit this great milestone, but you can make mistakes and take a few steps back, but still make it. So it was kind of a little bit to just say, “Hey, you can do that.” And we have down days, but you can make it and sort of forge your own path. And you’d sort of mentioned, yes, I have this passion for, I think women, we struggle a lot sometimes, so just to get out there. That even being on your own, being a partner and being female, you can get out there and do it as well.

Steve:           Yeah. No, I think it’s definitely a good story to get out there and show people that, hey, it is possible. And also, I think, like you mentioned, most of our audience is focused on traditional equity investing versus real estate. And you’re highlighting that, hey, you can do this with real estate. And I also think it’s interesting that you’re, you’ve built this to 11 doors. So yeah, and you have properties in a couple different places, and then you’re purposely slowing down. It’s not like you’re trying to keep building this thing to 50 or whatever doors like you read about some of these things. So just love to hear how you chose this path of real estate, and we’ll ask you some questions about what you’ve learned along the way, but just really how you got started on this path.

Melissa:        Yeah. I mean, that’s a great question. So it was a bit by mistake. Never thought about owning properties or rentals at all. I have worked for pretty much the same company, it’s sort of an umbrella company with different divisions, and we can talk about that later, but for the last 24 years. And at one point, I got the opportunity to work abroad in Switzerland, and I owned a condo, and so I had just bought it and I wasn’t ready to sell it, so I kind of became an accidental landlady. And that sort of scared and terrified and it ended up being a friend that moved in. So that kind of eased that for me a little bit. So I think that’s really how it started, that it was like, “Oh, this isn’t so bad.” And it isn’t so scary, right? And when I moved back, I ended up just buying a different house and keeping that as a rental, so that kind of started there. And then over time, I came back, I had… Switzerland, when you leave, they give you your pension, like, “Get out, take your pension with you.”

Melissa:        And so I had a chunk of money and so I just bought a property with that, and it just inspired me. I really like real estate, I like properties, I love design, I love interior design, so it spoke to me. And so that’s how it really started. I don’t know how far you want me to go down that, I could keep going forever, but I think the 11 doors, as we call them, real estate folk say, is unusual. A lot of real estate investors, they’re looking for scale. They want a lot. You hear different sites, there’s one called BiggerPockets, which is the main one, and a lot of their podcasts, you see how this person scaled to 100 units or 100 doors in two years, and that’s not been my journey.

Melissa:        I want enough to live on, I want enough rental income to live on, and I’m not trying to amass an empire. That’s not my goal, so I really was trying to figure out what kind of cash flow do I need to live on? So that’s been my focus over the past couple of years, is to really carve out what do I need to live on? And then what kind of rental income do I need? So my 11 doors are in one triplex near me in the Boston area, and two fourplexes in New Hampshire. So that’s the makeup. And then I live between two little condos in the Boston area and the coastal, New England area, and then one in Florida that I bought after the market crash in 2009, basically.

Steve:           Got it. And so you clearly feel like that’s enough, and you have the right hedging in terms of the right leverage on these things and to build, I guess, whether ups and downs. Is it all 100% rented out right now?

Melissa:        Yeah, so the two condos I own, they’re fully paid for, and I actually both of them are in sort of touristy areas. So what my plan is, I move between, so I’m in the New England area in the winter and I rent it out in the summer, and I get out of here, and I rent Florida out. So I have a renter in Florida right now, so it’s not ideal for me to sort of… I’m not in Marblehead, Massachusetts in the summer, I have renters here. So that’s part of it, but they’re fully paid off. And then my three houses that each have apartments within them, I do have mortgages on those, but I put a hefty down payment onto my entire portfolio. I have about 60% equity, so I’m not highly leveraged at all, I’m a very sort of, I think, moderate to low risk type person. All 11 of them are rented, all 11 in this pandemic, thank goodness, knock on wood, are paying rent.

Melissa:        One tends to pay a little bit later, but we’re working with her. We’re not pushing our luck with anything, we’re trying to work with people, but I’ve been very lucky up until now. So they’re all rented. I just had a turnover in December, it rented right away. So again, knock on wood, been very lucky.

Steve:           Great, and are you doing the property management yourself, or do you outsource that?

Melissa:        Yeah. So I think this is interesting, because a lot of people when they think about renting, oh, do everything yourself, and don’t… Do you go in and fix toilets? I don’t do any of that myself. So I’ve learned over time, and I think there’s a lot of great books on these topics. Do what you do well and pay for the rest. So I self-manage the triplex near me, just because it is very close. And by self-manage, that means I collect the rent, I take the calls from the tenants. I don’t fix toilets, I don’t fix just about anything. I did put light bulbs in, so I’m very proud of myself there, but that’s about the extent of my DIY capability. So I have a great team, I have handymen, I have contractors, and I just field the calls. The two fourplexes in New Hampshire, I have a property manager. They take all the calls, they collect the rent, they deal with the turnovers. But I have a team, quote unquote “team” down here in Massachusett that handles all of that.

Steve:           I can see once you’ve built the team, though it would be tempting to leverage the team, because that seems like the big friction cost, and buy more properties and kind of crank up the cash flow further.

Melissa:        Absolutely, and there’s a lot of people that do properties where they have almost none of their own money in the house, right? They put some money in, they get a fixer, they fix it up, they refinance it, they pull that money out, and they go on to the next. And I think that’s a great strategy. I think it’s super impressive, but that’s just not… I think if someone were to go into real estate, I think it’s really important that you’re thoughtful and you think about what is your goal? And there’s an accumulation phase, I’m not in the accumulation phase anymore. I’m in the sort of maintenance phase. And my last properties were in this last year when I knew I needed to get my final properties, because I was ready to hit the retire button, so I wasn’t really in that mode.

Melissa:        Now, having said that, those last two fourplexes, there’s both room to grow, so to speak. So both of those are properties that the units, they’re under market, so both of them I can fix up. There’s force appreciate, so to speak, so I can fix them up and definitely command more rent over time. Again, I’m not rushing anybody out the door during a pandemic, but I think over time, they will command more rent. So I think that there’s great upside.

Steve:           Nice. When you were buying these, how did you decide what was a good investment and what are some of the, I guess, characteristics and metrics that you’re looking for in a property?

Melissa:        Yeah. So you can tell I like multifamilies. Some people ask why. A lot of people do single families. What I like about multi families is a couple of things. The first one is I have one roof I need to worry about, so some of the big ticket items are shared. I like that. I sort of like that it’s kind of all-in-one, you have one property you need to go to and everybody’s sort of there. So there’s a couple things I just like about the multifamily mindset, and that’s what I focus on, is multifamily. So I primarily look at that, I look at the utilities, are they split out? So the tenants pay their own utilities to keep the costs low. The first thing that I do to analyze in real estate investing, we call it the 1% rule. It’s very quick, back-of-the-envelope math. So basically, I look at the property cost, or what I think it’ll sell for, and then I look on things like Zillow or HotPads. What is a unit rent for? What is the rent? So say, for every $100,000 of house, you should be able to command 1,000 a month in rent. So the monthly rent should be 1% of the purchase price.

Melissa:        If it doesn’t meet that rule at least, then you move on. If it does meet it, then that just means you need to dive deeper and do some more looking at the operating costs and things like cap rate, and there’s more things you can look at. But that’s a great, quick, sort of finger in the wind, is this even worth going into? There are some places where you can’t find the 1% rule. California, Boston area at this point, and some people say, “Well, I can’t possibly find the 1% rule here, so I can’t get into real estate investing.” Well, that’s why I ended up in New Hampshire. You go further afield, you go to other parts of the country. There’s places where you can find it. So that’s kind of what I look at.

Steve:           Yeah, I know. I was talking to a friend of mine who bought a condo here in a neighboring town. And we were talking to them, I was asking him how the economics worked. And essentially, it comes down to a capital appreciation play. He’s paying for the mortgage, paying for the house and taxes and stuff, but it spins. This is on a few hundred thousand dollar condo, probably four or five hundred thousand dollar condo. I think it was spinning a couple thousand bucks a year in free cash flow, not a lot at best. Just real quick back to the property management. What does that cost? Compared… So one is yourself, and one is you’ve outsourced it?

Melissa:        Yeah, so the property management… So it depends on the region. Typically, it’s 8 to 10%, so I pay them a percent a month, this particular property management. What that covers is, they basically handle rent collection processing, they actually collect all the utility bills and pay those out for me. Obviously, I pay them actual money for the utilities, but they process all that. They take all the calls from the tenants that have issues, they send the handyman out there, I pay for the repairs separately, obviously, but they’ll do things like I did completely gut renovate one unit. They oversee that, then I’ll pay them 15% of the work to oversee it, but then I don’t even have to worry about finding the contractors, overseeing the job. They’ll do all that for me, but it’s 8% if… Maintenance mode, it’s basically 8%. And then when you have a turnover of a unit, they’ll take something like one month’s rent to market it, screen the tenant, do all the paperwork, the lease, collect the security deposit, all that kind of stuff to do a turnover.

Steve:           Wow, so it’s not super cheap then? I mean 8 to 10% is a pretty significant chunk of change. Just as an aside, it feels like, is there a national business that does this? I know it feels like it’s a local business today, but this is the kind of thing that could be-

Melissa:        Franchised out or something?

Steve:           Yeah, where you could have a national call center and… I mean, you need to have local teams and maybe some local reps, but you could… All the payment processing and taking phone calls and firing off maintenance could probably be coordinated in a centralized way at scale.

Melissa:        Possibly. I mean, it’s interesting. The only reason I didn’t have one up here when I was working full time is I couldn’t find a good one. They weren’t returning my calls, and I’m like, “If they’re not returning my calls as a potential customer, they’re certainly not going to return tenant calls.” So it’s hard to find good property managers in some areas. It’s interesting.

Steve:           Yeah, it feels like it’s one of those local… I mean, when I talk to folks that do this kind of stuff, it’s like, “Yeah, I’ve got this local property manager, they have their own site, and they do this kind of stuff, but it probably isn’t as efficient as it could be.” So when you’re doing things like leasing and setting up all the legal agreements, to do that yourself, or do you get outside help?

Melissa:        Yep, so for the triplex that I self-manage, what I did at the beginning was I got a template lease for the state. Every state has its own laws, and it’s super important, if people get into being a landlord, that you are very careful about your own laws. So you can look online, there’s template leases for your state. And what I did was, I kind of doctored up my own lease, and then I have a lawyer for the state and I had him look at it. And the reason I did that was I didn’t want to pay him all the money to kind of do a lease from scratch, because that would have cost more, but I could give him something of what I wanted him to look at. And then he could eyeball it, give me a couple tweaks, and then it was cheaper, but then I knew I had a good, solid, legal lease. And so that was kind of the perfect way, but I would definitely recommend a lawyer look at it, because you don’t want to run afoul of the laws in your state.

Steve:           Got it. So it sounds like between yourself being the local property manager, and then your remote team and your lawyer, you were able to manage this portfolio of properties, and that’s what you need.

Melissa:        Mm-hmm (affirmative).

Steve:           Any other tools that you use when you’re managing this stuff and assessing things?

Melissa:        Yeah, so I use others. This online system called cozy.co. So there’s a few online tools, Cozy has a few functionalities, the main one I use it for is the tenants can do online rent payments. They set up automatic debit, basically, for their monthly rent. It sends them reminders, which is great, they can set it up for it to come straight out of their checking account, doesn’t cost them anything, which is great for a landlord that it reminds them and then the rent comes on time, which is perfect. It can do screening, applicants can apply, you can do credit checks through it. I can keep track of my expenses as a landlord, so when I send everything to my accountant, I can just download all my expenses. So Cozy is a great landlord tool that I use. So I think that’s the biggest one that I would use. So I can do payments, expenses stuff through there. It has more functionality that I don’t really use it for, but that’s a big one.

Steve:           Awesome. And then just in terms of your monthly time going into managing this, what’s that look like?

Melissa:        So if I were to average it out, I would say I’m spending probably 30 minutes a week, on average of my active time. So there might be one week where I’m hearing more from my tenants or communicating back and forth with the property manager on if, say we’re doing a renovation of one of the units, then they’ll have questions. But in general, it’s very little time. I would say two… Yeah, two to three hours a month is probably what I’m spending on hand-on time. So yeah, if I was self-managing all these units, then it would be more. If I was running over and I was fixing the toilets, it would be a lot more than that, but yeah, not much.

Steve:           Sure. Wow. Well, I could see… Actually, and what do you budget? So 8-10% for the property management, and then what do you think the blended percentage is for maintenance for everything else? So when you do aggregate all your plumbing and electrical or whatever support you need to provide to people maintenance stuff, does that like another 8-10% a year or something like that?

Melissa:        Yeah, so it depends on the property. So I kind of have it like a bottom up, but I would say it’s like 5-7% a month for maintenance, I would say is what it is. And again, it just depends, so what I’m trying to do is, before I hit the button on retirement, one of the things I did was I came up with a big chunk of a change for CapEx, we call it, which is the big stuff. Electrical, roof, HVAC, and I’m actually getting a lot of this done over this next couple of years. So all the heaters, the furnaces that are old, I’m just getting redone both for efficiency sake so I’m spending less on heat, but also just get it done earlier. And then they always seem to go on the coldest day of the winter anyway and you get angry tenants.

Melissa:        So I wanted to have all that done, but also what that did for me as well, is it frees up more monthly cash flow, so I kind of put that money aside. So what you need to think about is you’ve got your mortgage, taxes and insurance and stuff, like your PITI they call it. So you’ve got your rent, your gross rent minus the PITI, minus your maintenance, property management if you have it, and then this thing called CapEx, that big… Like the roof goes, the heater goes or if you need to renovate, so that CapEx I just basically saved a ton of money, put it aside, keep it in a high yield savings, and I’ve got that for the next 10 years and then I basically don’t have to worry about that for the monthly cash flow, then I can kind of keep that money coming in.

Steve:           I got to say, it’s kind of… I imagine for someone like yourself who’s been very successful over your career, that it would be very tempting to just keep doing this. You know the business, you’ve built the infrastructure, you’ve got the teams, could you see doubling it or more? Kind of gradually cranking it up over time and generating more for cash flow?

Melissa:        Oh, I look at Redfin every day. I mean, I look at properties every day. I go to open houses all the time. It’s super tempting, but I can’t because now I’ve left work, so I don’t have a W-2 income anymore, so no one’s going to give me a mortgage. So I’ve actually created a way to keep myself honest.

Steve:           Yeah, what’s that way? Which is the W-2 being… Yeah.

Melissa:        Well, I mean, I can’t get a mortgage at this point, unless I did sort of seller financing, or hard money or something. So no, this is it for me, but I did think about it. But that would have meant I would have had to stay working for another year or two, and it’s all those trade offs in life that you have to make the decision on what’s… Yeah, I mean, I was tempted, but it’s like, “Do I want to work another year or two and build more properties?” And then it’s just like, “How much do you really need?”

Steve:           Well, yeah. Here’s a question for you. What’s the effective interest rate that you get off of your portfolio, net, too? Only if you’re comfortable sharing that, I’d just be curious.

Melissa:        What do you mean? So you mean like-

Steve:           So if you put $100,000 into fixed income, like a bond portfolio, right? Interest rates are terrible, so maybe you’re getting 1 to 2% or something like that, it’s pretty low. Versus you have the value of your portfolio, what does that generate from a, I guess, a percent of the… I guess you could say, just the cash on cash part? Well, you lever it, right? So…

Melissa:        Well, that’s where it gets complicated, right? So real estate has… It’s interesting, it’s a little different. Your dividends, right? So my dividends are my monthly… I get rents every month, and then it’s appreciating, you hope to. So what I say when people are interested in real estate, they get greedy on both ends, right? And I’ve been lucky, because I’ve gotten lucky on the appreciation. I’ve happened to be able to yes, get the rent. So for instance, I’ve got a property that I bought for 350,000, and the gross rents are 4,200 a month, right? So that’s great. And I get a check every month for over 3,320 a month. That’s awesome, right? So that’s great, and I put 30% down on that, so great cash on cash return in a way. Plus, it’s appreciating, it’s already, in the less than a year that I’ve owned it, supposedly it’s worth 380, supposedly.

Melissa:        And I’ve been lucky, I’ve bought and sold duplexes. The last duplex, I sold, it appreciated 35% in two years. But what I say to people is, don’t expect that, right? I buy for cash flow, that’s what I buy for. And then I assume that that property is going to appreciate something like three to five percent a year over the years. So those are two ways the properties can sort of help you over time. You get the dividends and then the appreciation, but I think you have to make a decision. So I’ve gotten lucky on the appreciation side, and yes, over time you have that asset that is your tenants, by the way, are paying down your mortgage, keep it in mind, and it’s appreciating.

Steve:           Yeah, so let me run these numbers back by and make sure I understand this right. So buy a property for 350,000 bucks, it’s roughly paying 36,000, call it 35,000 a year, right? Over 10% unlevered.

Melissa:        Mm-hmm (affirmative)

Steve:           And then you put 100,000 bucks into it or a little bit more. So you have a mortgage, but from a… Is your mortgage coming out of that 3,000 you’re getting, or it’s already come off the top?

Melissa:        So the mortgages… Right, so of the 4,000, then… so of the 4,000 then, you’ve got the… Yeah, the 4,200, then you’ve got the mortgages coming out of that, and then the pm is coming out of that as well.

Steve:           Right. Wow. So I mean, that’s amazing, because… So basically, you’re getting 10% without any leverage, then you put the mortgage on it, so the cash on cash is like 36%. That’s amazing.

Melissa:        Yeah, I know. It’s-

Steve:           I mean, think about that compared to what you’re getting in the fixed income. Our audience, they’d be killing themselves to probably to find a five or six percent rate of return out there that’s reliable.

Melissa:        Yeah, so the money, the cash I’ve had to put in with real estate, and I’d have to go back and I didn’t get these numbers for you, and I could have, but what I would have had to put in to real estate, I’d never have been able to do that to kind of… I’d have to have saved so much more and put so much more into, say, index funds to get the 4% return to be able to retire. I’ve been able to do it much quickly in real estate because of that. Now, that’s just because I’m comfortable with real estate. So people are like, “Oh, I could do it quicker. I’ll do real estate.” Well, you need to think about, do you like real estate? Don’t do it if you don’t like real estate.

Melissa:        Do you like real estate enough to deal with the tenant questions and the, “Hey, this light bulb is out, will you come over and deal with it?” And you’ve got to like it enough, right? So there’s trade offs. So that’s what I say to people is, “Yes, you could do it with less of your own dollars in, but there’s trade offs to it, too. And you may not get it appreciate, you may hit it didn’t… People that bought stuff in 2006 that thought they were doing a great job, then the market crashed and some people, their property has never come back from that. It’s not a given.

Steve:           Right. Great. Well, it’s great to yeah, have that objective point of view. And also, if things go against you and you’re all in one asset class, you can get hurt. Okay, last question on this, exit strategy. So you’re approaching 50, got the nice portfolio, great financial independent. Fastforward 25 years…

Melissa:        Yeah, when I don’t want to deal with the tenants anymore, what do I do?

Steve:           And yeah, what happens?

Melissa:        Yeah, it’s a great question, so my portfolio is about 60% real estate. And then I’ve got, I would say 25, 27%, in 401k and other sort of retirement vehicles. So my thought was 10 years, 15 years, maybe I might want out. So the thought is, if I want out, what I did was I… The other thing with multi-families that I like, and these particular multi-families, I bought specifically so that I had two options. Either I sell them as multi-families, assuming the market is decent, I can sell them as multi-families as rentals the way that they are, and then just take whatever equity I have and I plow those into index funds or whatever I want to do. The other thing I can do with the configuration the way that they are is I bought ones that I could potentially condo-ize, so to speak.

Melissa:        So I could make them into condos, pretty them up, sell them as individual units in some places and some cases. The one that I have, particularly in the Boston area, would be great as condos, and that might even pay out better. So if I decide that’s a better avenue for me, then I could do that. So that that gives me a few different options. What I wanted was options. Or I just stick with it and turn over the triplex I have to a property manager as well, and then I don’t manage any of them myself and I just keep going. So I wanted something that gave me options, basically.

Steve:           Yeah, makes sense. Can you share some of the… You mentioned kind of big, quote unquote, “dumb choices” that you’ve made and the lessons you’ve learned? Can you share some of those?

Melissa:        Yeah, I mean, so we all have them, right? So I would say it’s related. There’s a few, some relate to real estate and some don’t. I would say the ones that relate to real estate, I mean, the first thing I did was, I mean, I got all excited about this rental property idea before I knew anything. I did no research, I found my first duplex and I was like, “Wow, the rents are this, and my mortgage is this, then that’s money that I’m making.” And I didn’t know about maintenance, and I didn’t know about CapEx and just didn’t know any of these cap rates or 1% rule, and I just jumped in and it wasn’t the best deal. I ended up messing it up upwards, so to speak, because it happened to be in this town that was hitting hot. And that was one that yeah, it was like… I think 40%, I ended up selling it for 40% profit in two and a half years. But still, I think what it was shame on me, I mean, I never should start any kind of investment without knowing enough about the market.

Melissa:        That was not a good move, I shouldn’t be a landlord without doing enough research. I’m a little embarrassed that I just jumped in that way. I also made a couple of emotional decisions about tenants. They weren’t meeting the criteria that I have. You have criteria when you have tenants about their credit ratings and their ratio of income to the rent, and I allowed myself to get swayed by some stories that they had, and you want to be… I think it’s important as a landlord to be a human being as well and work with people, but I also think you have to use your common sense, and I think the times that I didn’t sort of think of this. You have to have a human being, but you also have to be a business person. The times that I wasn’t making smart decisions, it bit me and just ended up being stupid. Not tragic, but just not smart situations that I got myself into.

Melissa:        And then I guess the third one that I can think of is I have bought and sold a lot of properties, and not only the rentals but my own private residences that I have fixed up, which is partly where I’ve gotten some of the down payments. I’ve done some renovations and lived in them for two years, and I work with a contractor and he’s amazing. So I don’t tend to do inspections, he comes along, and he’s taught me a ton, and he’s great. And this one duplex, I was getting ready to buy and he happened to be away and I got a little too big for my britches. And I was like, “No, I got this. It’s a renovated property, and it’s a great deal.” And I bought it and it was a little bit of a shoddy duplex.

Melissa:        And when he came back, he didn’t say much, but his face said it all. Yeah, I didn’t make a good decision. So don’t get too big for your britches and know your place, I think, a little bit there. So yeah, so those are some of the lessons. But otherwise, outside of real estate, I didn’t start investing in a 401k until way too late, stuff like that, I think. Just, if I could have gone back when I see people on some of these communities saying, “Oh, what would you give advice to? I’m in my 20s.” And I’m like, “Put money in your 401k as much as you can possibly do.” Stuff like that, I think, I wish I would have done earlier.

Steve:           Well, and I think be educated, right? And be curious. Like you were, right? And looking around and being open to these different ideas and hearing.

Melissa:        Yeah, and every mistake we make, it teaches us for next time. So I guess that mistake I made, that first property I bought, I definitely learned. I just smacked myself in the head, but it taught me to… Everything teaches you for the next time. So I guess you learn the hard way, but yeah.

Steve:           Yeah, I could totally see on the emotional side in being a landlord. It’s tough, right? You want to help people out and also…

Melissa:        Yeah.

Steve:           So actually, back to my friend. He was like, “Yeah, we have these tenants, and…” But then he kind of got into some of the drama. He’s like, “Yeah, but it actually turns out there was this couple, and then there’s a baby, and then one more person has a substance abuse problem, then suddenly, she’s out and this other guy’s on the lease.” And it’s like, “Wow.” He was kind of rolling with it, and I was like, “That sounds like a lot.” And that’s one property. And you could see how that could go sideways. Also, I think, in certain states, and also with a pandemic, how if someone’s not performing, right? They’re not delivering the rent, at what point do you say, “Okay, we have to evict somebody.” And what does that look like? Do they trash the place on the way out? You’ve got to be careful with that stuff.

Melissa:        Well, it’s interesting. That’s another reason why I like multi-families, right? If I’ve got four units under one mortgage, and one somehow isn’t paying their rent, I’ve got three others paying that rent under that roof. So it’s another reason why I like the multi-families, is I’m not reliant… Single family, you’ve got one person paying the rent for that property, and you’re pretty reliant in that situation. So it’s another reason why I like the multi-families.

Steve:           Yeah, makes sense. Okay. Well, this is awesome. So I’d like to move on to your own background, and lessons you’ve learned from people as you’ve gone through your own life. Can you just give us a little bit about how you came up, and how you ended up with Hult and any highlights from your career, and takeaways from your career there, and how that may have shaped where you are today?

Melissa:        Sure. Yeah, so I’m a bit of an anomaly. So this company that I worked for, so Hult International Business School, was founded by this guy who, Swedish entrepreneur. He sort of took over this failing business school, he founded a very big private travel company called EF Education. So I started with EF Education back in ’97, so I worked for different parts of that organization. It’s kind of an umbrella company with different divisions, different businesses within, so I worked for different businesses within that for many, many years. The founder, sort of rescued this business school, eventually ended up working for that business school. Over those years, so I started entry level and worked my way up over time. The founder is Swedish, and I think it’s a very international organization, all of the divisions and companies I worked within under this umbrella organization. Very international, lot of women, very young, and so I was very lucky to have a lot of exposure to different people.

Melissa:        I worked in Switzerland, I mentioned for four years. I moved to London twice, I’ve got a lot of exposure to different people, different ways of thinking. I’m very, very lucky, and just was able to understand a little bit about… I think, as a woman, you come in a little later to what you bring to the table and who you are, and I had some great mentors, both male and female. And I think just really was very lucky to also be entrusted with more and more responsibility. So I started entry level, I ended up being the head of the postgraduate programs there at Hult. We had business schools, four campuses in three different countries. We had schools in San Francisco, Boston, London, Dubai. So super fun, crazy, lots of responsibility. It was very interesting this last year with the pandemic. I was supposed to retire in the summer and stayed a little longer to help them get over the hump there. And just yeah, worked with amazing people, the best people you could ever imagine. Staff and then students, we had international at the school. It’s all international students, so basically, in a campus, Boston campus would have 1,000 students, and of that it’s 100 different nationalities. So it’s just a really cool, vibrant group that we worked with. So I was very, very fortunate for my career. Loved every second of it, and yeah, excited for what’s-

Steve:           Was it hard to step away?

Melissa:        Yes and no. Yes in the sense that, especially the people. I think the people, the pace, I mean, it’s just hard to describe. I mean, the people are… Again, I worked there for 24 years, you cannot imagine a more hard working, funny, well traveled, I mean, really, kind of twisted sense of humor, just killer group of people. Just every single person works hard, every single person is committed, every single person’s all in. And that’s just exciting, it was exciting from day one. Your entry level, they give you total ownership, and that’s addictive. And it was right up till the end, and I think for me, it’s just also the realization I’m turning 50, I love travel. That’s how I ended up with the company, right? And I moved overseas, and it’s just like it also, the last several years, I started thinking about, I don’t have kids and it’s like, “What’s next for me?”

Melissa:        I want to see more of the world, I want to experience more, and it was a little scary to think about what’s next. And I knew that the fact that it was that scary kind of meant that it was right. I could work at this pace till the end of my life, but I don’t think that’s what I’m supposed to do. I feel like there’s something next. And it scared the hell out of me, and I kind of felt like I was an explorer trying to figure out if the earth was actually flat and I’m going to fall off the edge, but I think that’s good for me. So yeah, I decided to figure out what’s at the edge of the earth.

Steve:           How do go about thinking about this? So you’ve had this career, you’ve met all these interesting people, you’ve accomplished a lot there. Then you’ve built this portfolio that lets you be financially independent, so you’re completely free, it doesn’t take a lot of time. Two to three hours a month. That’s amazing. So what resources are you using, and how are you approaching thinking about this next phase and budgeting your time?

Melissa:        Oh, I love that question, because I think there’s so much in the financial independence space and the retirement space that focuses on the money piece, right? And actually, a lot of what I’ve been thinking about the last two years is the rest of it, right? Especially because I don’t have a partner, right? It’s like, get a cat and then you need another cat because it can play with each other. What am I doing with my time? So I read this really great book, it’s very outdated, but it was called something like, Retire Wild, Happy and Free, right? And it’s thinking about the rest of retirement. Okay, you’re thinking about the financial piece of it, but what about your social life, and what about your feeling of self-worth and your… So I’ve got a ton of hobbies that I love, that I just… My work has been so all consuming that I just haven’t had time. My last two years, I basically was traveling 50/50 between the US and London. I mean, it was just insane. So I’ve done photography, I’ve done interior design, I want to do upholstery, I want to… I’ve loved this real estate, and not flipping but renovation. And I’ve done painting and art and there’s a whole creative side to me that I haven’t explored.

Melissa:        And there’s all of these interests plus travel, so my plan has been spend… My plan before COVID, was a third of the year near my family in Boston, a third of the Year in Florida, and then a third of the year, pick a place in the world and explore it. So there’s that, and then I’ve got four nephews and a niece that I’m addicted to, so there’s them as well that I want to spend more time with, that I’m excited to do that. So I’ve got notebooks, maybe you can tell I love lists, I love spreadsheets. I’ve got all kinds of stuff I want to explore. But I also realize, right now I can tell I’m swinging to these pendulums of, I’ll spend a day that I’m watching Netflix, and then I’m repainting my cabinets, and I’ve got seven other orders of upholstery stuff. And I can tell that I’m going to need time to recalibrate, right? I’ve gone from this very intense career, and I’m okay with that. I think it’s going to take me months to find the new normal. I want to figure out what fitness is and figure out my health, and so there’s a long list. And I think it’s okay that that’s going to be a journey, and I think that’s healthy. So, yeah.

Steve:           Well, it’s good to have that perspective. I’ll tell you from our community, we definitely get that question a lot. How should I use my time? What’s next? I think many people don’t think about it that much until they’re out. And I’ve seen people in the FI world, they get depressed, they’re very focused on I’m marching towards this FI number and they got it all figured out, but once they get, they’re like, “Okay, I’ve been engineering my life to do this.” And then they’re like, “Okay, now I don’t have enough direction and purpose.” I talked to JD Roth about that.

Melissa:        And I think being single, it forced me to, right? I don’t have a partner to distract me, right? So I had to really think about it. And my friends all work, I don’t have anybody to play with. So I had to really think about that, but I think it’s really important to think about that. And yeah, I’ve got a whole list, and that book was helpful. It gave some frameworks to think about almost interest trees. And also, how do you keep your brain engaged? Because my job, it was very intellectually demanding, so how do I make sure I’m keeping my brain engaged and learning? So I think those are important things to think about.

Steve:           Yeah, I feel like more people are going to be running into this. We’re getting more and more efficient at doing things, more and more stuff’s getting automated. There are people like you that are leading edge, okay, I’m financially independent, and then there’s more and more talk of universal basic income and like, “Okay we don’t need so many factory workers, we’ve got robots. Not need that many delivery drivers, or people in call centers.” If those things get highly automated, we’re going to have millions of people that are like, “Okay, I’ve got more time. How do I spend my time?” Is that throwing it in. There’s lots of distractions, but could be more intentional about where you’re applying that scarce resource.

Melissa:        Yeah, and then volunteering, right? How can I mentor? I think about the budgeting in the FI space, budgeting for… I’ve got a couple of tenants who are single moms who are struggling, and I’m talking to them about do you want some help putting a budget together? I’m happy to help you. And then interviewing for some of the… I’m going to be helping some of the… There’s a couple of programs for teenagers who are trying to get jobs in some of the towns nearby where these kids, they’re really struggling, and they’re trying to find jobs, and they need some interviewing skills. I’m like, “I work for a business school. I’ll help you do mock interviews.” And so, how can I be of service? I think that’s exciting as well.

Steve:           Well, that is the key to happiness, it’s having… I mean, you want to have control, I think. Taking care of yourself and your body and fitness and sleep and all that stuff, but then working on something that’s bigger than yourself is essentially the key to it. It’s not having lots of money, you get bored of having lots of money if you have lots of money, pretty quickly. Wow. So this was great. Can you share maybe a couple of the big either lessons you got from people that are mentoring you, that helped you think about this stuff? And also people… You mentioned you’re starting to maybe help some of your tenants, or you’re thinking about volunteering with younger people and folks where you’re kind of paying it forward.

Melissa:        Yeah. So, I think probably one of the best things that I ever was told, it’s funny… I don’t know, I guess, career advice or life advice. So one of my bosses, he’s funny, he’s a Swedish guy as well. He’s lovely, he was giving me a job that I was supremely unqualified for, I thought. I’d started, I’d been doing something for three months, and he wanted me to then give me the boss’s job. And I said, “You do know I don’t know what I’m doing?” And he’s like, “Yes, I know.” And he said, “You fix things, you’re organized, you’re a good manager, you’re a good leader. You’ll learn the knowledge of this particular area of the business. What I’m hiring you for is your core skills.” And it was such a great moment for me. It was like he saw and articulated about me what my core skills were, which I didn’t really understand before.

Melissa:        And I think from that point I was able to really understand what it is that I’m fundamentally good at. I see a lot of people go through life like, “What do I want to do when I grow up, and what do I want to do at my next job?” And I think we’re so focused at what do I do with my myself? And what he gave me was a fundamental understanding of I’m good at efficiency, I’m good at organizing, I’m good at… What are the key components? And those tend to be, of course, the things we love, right? And I can apply that to a lot of different things, and I’ve been able to do that successfully at work, but I think I can also do that successfully in my after work life as well. And I think that was a real gift that he gave me. And I think that that helps us, once we understand what we’re sort of fundamentally good at, I think that’s a real key moment to unlock our confidence as well, not just our career or success, but also our confidence. So I think that’s really important. Yeah, no. What were you going to say?

Steve:           I think there’s this Japanese term, I think it’s ikagai, I don’t know if I’m getting it right, but you’re trying to find that Venn diagram of what am I good at? What am I interested in, and what does the world need? And then if you’re going to operate in that area, get that visibility.

Melissa:        Yeah, the Venn diagram. Yeah.

Steve:           And for so many people, I think are also, since you’ve been in education, it’s like what the world needs is changing quickly, what people are good at it, we’re getting a lot more visibility into what… I think historical education has been about like, “Okay, we have these raw humans, we’re going to educate them all the same way, and we’re going to try and make them good at math, science, reading, writing, or whatever.” And some people are good at art, and some people are good at math, and some people are good at… But we’re like, “Well, we’re going to be good at everything.” And the reality is only the top 2% that go to the top schools are either good at everything, or they got the work ethic to kind of get there. But there’s other people that are like they’re maybe left feeling like I’m not good enough, right? And then that sticks with you.

Melissa:        And it’s very rarely the job description, or the job title, that is what we’re good at. It’s usually a fundamental thing. You’re usually… I’m really compelling with people, and so you can translate that to sales, or you can translate that to customer service. You can translate that to different things, but it’s just like, “What is that thing?” So I think that was the thing that helped me. In terms of my mentoring, I think, where I find I gravitate towards, especially with other women, but I think with people in general, is I find that I over and over and over talk to people about the sense of… I just find that people stop themselves up all the time, and this sort of confidence, or imposter syndrome, or difficulty in having difficult conversations. And I just find that we as humans get in our way about a million things.

Melissa:        And I just think if we could all just have the lives that we are meant to have, without the hurdles we put in our own way, we’d all have these amazing lives. So I find that confidence that we need to have is what I tried to… I see all these people who are amazing people, who have amazing skills, who just stop themselves up all the time. And I find, especially women do that. I think women in particular are held back by worry about hurting someone’s feelings or worry about not being enough, or what have you. And so I think a lot of my conversations are just around, why is that your fear? And kind of helping them over that and helping them find the language to maybe have a conversation that they need to have. So I think, just yeah, helping people battle those demons that they’re feeling on the inside, and just kind of get over it a little bit. And even just this whole…

Melissa:        I just had a doctor’s appointment this morning, and the woman that gave me my flu shot was like, “What do you mean, you’re retired? How old are you?” And I said, “I’m turning 50 in three months.” And she’s like, “What?” She’s like, “I could never do that.” I’m like, “I didn’t think I could either.” I’m like, “Listen.” And we had a conversation, and she wrote down some notes, and she’s about to look up the F.I.R.E Movement, and off she goes. She left with a smile on her face. I’m like, “Why can’t you?” Why do we think we can’t? We put all these limiting beliefs in front of ourselves, and yeah. So I think it’s a lot about that.

Steve:           Yeah, it’s very true. I mean, there’s a lot of folks that they don’t know where to start, and… Our lead designer, who’s female, lives in Brooklyn, she was telling the story of how she, I think… Anyway, was talking to her hairdresser or something like that and was like, “What you think about this retirement idea?” And the person’s like, “Retirement, that’s just not for me.” That’s where she stopped, and she’s like, “I don’t have a 401k, forget it.” And then-

Melissa:        Why even try?

Steve:           Yeah, don’t even think about it. And so yeah, how do you help people realize what’s possible? And so was there anything for you that was like, “Hey, here’s this catalyst that made me think, discover F.I.R.E and kind of dive into it? Told that story about how you started buying houses and everything else, but…

Melissa:        Yeah, so I mean, my story, it’s interesting because I grew up… I mean, I think for me, we grew up… My mom was a single mom, I was the oldest of four kids, I grew up in a situation of we were lower middle class. I grew up very worried about money. So for me, it came from first, a place of scarcity mindset, of I don’t want to worry about money. So for me, it was always living below my means, because I wanted to make sure I had enough, right? So that’s where it started. So I just always wanted to kind of protect and make sure I had enough, and so live below my means, be careful, be frugal, and then learn how to budget. And then I’m very self competitive, so it’s like, “How much can I save?” And all this kind of stuff. And then I started working with, back in 20… Let’s see, 2012. I started working with a fee-based financial planner.

Melissa:        And I kind of put my hands over my head and said, “Okay, tell me the bad news. I’m going to have to work till I die, right?” And he’s like, “Well, no. I mean, you’re not going to have to work till you die.” So he’s like, “Well, what are your goals?” I’m like, “I don’t know. I mean, could I stop at 70?” And so we ran all the numbers and he’s like, “Well I don’t know, I’m seeing 62, 63. How does that feel? I’m like, “Wow, that’s awesome.” And I’m like, “Okay, well…” Then of course, self competitive kicks in, and I’m like, “Well, maybe I could do below 60.” And so what was great was we set up a yearly meeting, and again, it was just fee-based, so I just paid him a yearly fee. And every year I’d come in, and I’d refine the plan, and I kept knocking time off, right? And so he was like an accountability partner, right? Every year I’d come in, and here’s what I did, and he’d be like, “Holy crap. Yeah. Oh, great. You sold that house and you made what? Okay, good. Yeah.” And so this year we just said our goodbyes. I’m like, “I did it, Sebastian.” And he’s like, “That’s amazing. You’re the youngest person I’ve had, good for you.”

Melissa:        And so I think that was helpful just to also have some context, I had no context for it. And then what really kicked it also into higher gear was I heard about the F.I.R.E movement in 2018. And that also helped with just tangible tips and tricks as well. So then I incorporated that into my tactics that I would bring to my financial advisor every year and like okay, here’s some little tactics to help accelerate it. And things like YNAB, I actually found YNAB to be incredibly helpful in terms of accelerating a lot of my savings and budgeting. And then what I did as well, was I built up my retirement budget and I lived in that for a year before I actually pulled the trigger, to know I could live within it.

Steve:           That’s great. That’s awesome. Yeah, I had Jesse, the YNAB founder on the podcast, and he was pretty interesting. We talk about that company a lot, what they’re doing.

Melissa:        I mean, we’re a cult. I mean, everyone rolls their eyes. We’re a cult, but it’s amazing. Once it latches on to you, it’s like no going back. It’s amazing.

Steve:           Yeah. I also think Choosify, well, these F.I communities are great, because you see people being successful, and you see them, there are people like, “Hey, I’m 100,000 in debt. I just paid that off.” Or, “I saved my first 50,000 bucks. I got my first 100,000.” And how they get there, and I think hearing those stories is very reinforcing.

Melissa:        Helpful.

Steve:           Yeah, for sure. It’s so interesting to hear about the planner too. And it’s good that you did a fee-based one. We talk a lot about the cost of fees. I mean, 1%, not that bad. Well, you save up 2 million bucks, you’re paying 20 grand a year.

Melissa:        Yeah, right?

Steve:           And then if you’re drawing down 4%, you’re giving up 25% of your yearly to the advisor.

Melissa:        Correct.

Steve:           It’s a lot.

Melissa:        Yeah.

Steve:           Cool. Well, look, and one other thought for you would be, you could raise a fund. I mean, instead of like, your income to do this, but I’m sure people would be like, “Hey, I’ll give you some money to help buy more properties, you manage them and then spit me out the lower… You take a rake off the… Become a.

Melissa:        There you go.

Steve:           You could clearly do that.

Melissa:        I’ll put it in my notebook as another idea, keep myself busy and out of trouble.

Steve:           All right, awesome. Okay, well, I think this is really good. Any resources? I mean, so we’ve talked about BiggerPockets, I think, and Choosify. I think you mentioned Paula Pant, you liked her a lot as a resource.

Melissa:        Yeah, I like Paula Pant a lot. So she has a podcast and a blog called Afford Anything. So if anyone’s interested and just sort of beginner and intermediate, I would say, like my level, real estate investing or just any of the FI stuff, I think she’s a great resource. She’s kind of my level, she’s more the conservative side, real estate. She does both. She has other investments as well, but I found her resources very accessible and down to earth. So those were helpful for me, so I liked those. And I mentioned that there’s a book called Landlording on Autopilot, which I thought was good just for a lot of systems. And just I think a good mindset for landlording, so I liked that as well. So you can find that on Amazon, so that’s another one that’s helpful.

Melissa:        Yeah. BiggerPockets, you can cherry pick some good stuff there. I mean, obviously, it’s all good stuff, right? And actually, they’ve got an amazing resource. Their website is fantastic, their podcast, but there’s a lot of stuff of 200 units and storage units and all this kind of stuff. So there’s also a lot of stuff in there that’s a bit overwhelming, but you can definitely dive in there and find some good stuff and good stories in there for sure.

Steve:           Awesome. We’ll have to do a follow up in another year or so and see how you’ve…you’re like a month into your retirement, right? Well, a lot happens.

Melissa:        Yeah, I still think I’m on Christmas or like New Year’s vacation from work, so it’s still very new. It still hasn’t quite sunk in, so yeah. Some point after a year, we’ll see where I’m at.

Steve:           Okay. Well, Melissa, anything else you want to share with our listeners?

Melissa:        No, this has been great. Thank you so much for having me. It’s been super fun.Steve:           Okay, awesome. Well look, I’ll just close it out here. So thanks, Melissa, for being on our show. And thanks, Dado Robison for being our sound engineer. Everyone else who’s listening to this, appreciate your time and hopefully you found this useful. Our goal at NewRetirement is to help anyone plan and manage their retirement so they can make the most of their money and time, like we discussed here. And if you made it this, far please check out our private Facebook group, and you can find us on Twitter at NewRetirement as well. We actually are having pretty active dialogues with people in this and learning a lot with our community on those platforms, specifically Facebook. And then finally, any reviews are welcome and appreciated. We are reading them and getting feedback and trying to tune how we do this based on that. So thanks again and have a great day.

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