all right welcome back to our podcast

series the 20 minute investor where we

bring you actionable nuggets and

insights from our real estate investing

Journeys in bite-size 20-minute episodes

I’m Aaron Amin my wife and I built a

portfolio of eight cash flowing rentals

across three states while working

full-time and raising a young family and

I’m Nathan I’m a husband father a tech

executive who’s built a portfolio of

cash flowing rentals over 2,000 miles

away together we co-founded the remote

real estate Academy where we coach

investors on how to build their own

portfolios of cash flowing rentals from

anywhere in the world this week we have

a fun little Deep dive into some of the

personal finance strategies that uh Mr

Nathan here uses CU I’ve long been

fascinated by these topics and we’ve

we’ve never sat down to discuss them at

length and actually I thought it would

be fun to do it on the podcast so that

everyone can benefit from the answers

here so there’s two things that I’ve

always been struck by that you’ve done

and I think you’ve done really well and

there there’s good rationale behind them

but they’re not as obvious as people

might think so in no particular order

you tell me which one you want to jump

into first number one you have chosen to

use rental properties as a more or less

like a piggy bank or college fund using

I believe accelerated loan pay down but

I would love for you to peel back into

that and then uh second you use interest

only payments for the mortgage on your

primary residence and I’m I’m very

fascinated by both those topics so you

tell me uh which one you want to start

with let’s start with the first the less

controversial one maybe all right so the

college fund using a rental property as

a college fund how does it work and uh

why did you choose to do it so first

which unfortunately I can’t for the life

of me remember where I heard this but

this is not my idea I heard this someone

said it somewhere or I read it somewhere

or saw it on some YouTube video whatever

it is when even before we purchased our

first rental property but I heard this

person it might have been brand and

Turner I don’t know I can’t remember but

the whole idea was or what I heard was

their kid was born when their kid was

born they purchased this rental property

on a 15-year mortgage and that by the

time the kid would be you know college

age that property would be paid off and

could be used as a way to fund the kids

college tuition essentially with this

rental property either by refinancing

that property and pulling a bunch of

money out for to pay for college using

the you know free you know rental income

from that property to you know monthly

income to pay for you know college or to

maybe potentially sell that property and

you know recoup the money and pay for

school so I heard that idea and I

thought it was fantastic and that’s

essentially what we did for both of our

kids um and the way I looked at it is

like I you know I can get into a rental

property for let’s call it you know

$40,000 or $50,000 down payment and over

15 20 years whatever it is 30 years

whatever your timeline is the the

property value is going to increase the

mortgage is going to get paid paid down

by your tenant and you know by the time

my kids are college age this property

will be worth and I I pulled up some

numbers here so we can go into an actual

example but this property is going to be

worth however many hundreds of thousands

of dollars which is hundreds of

thousands of dollars that I can use to

pay for this fund but for which I only

put $50,000 down of my own money whereas

the more classic uh alternative route

I’ve never remember cuz don’t use it

529b 520 what are those accounts

something like that right 520 whatever

they yeah whatever they are but like

those well yes I understand we’re going

to debate this there’s interest that

acrs over time and it compounds I

understand that but to fund a 529 to the

tune of $200,000 that’s 200,000 again

give or take the compounding interest

over time but that’s $200,000 of my own

money that I need to find every month

every year however often you want to

deposit and contribute to it

uh to fund your your your kids college

fund right so in one scenario I used

$50,000 of my own money and I got my

$200,000 or whatever for my college fund

in the other scenario I’ve had to find

160 70,000 of my own money to get to

that same $200,000 college fund so which

is better in your opinion I mean it’s

pretty straightforward to me so that’s

the whole premise behind it basically

yeah and that’s why I kind of say it’s

like a non-obvious solution but when you

model it out next to each other it it

does make sense now with a 529 account

the best of my understanding cuz I have

one uh for my daughter but I actually

after opening it kind of decided that I

that wasn’t going to be the primary

vehicle also we had three kids and

literally it would be probably

impossible based on our current income

to seed enough money into three separate

529 accounts over the next 18 years

exactly to cover whatever the cost of

college will be 18 years from now it

just mathematically doesn’t compute so

you almost need a Strate strategy that

has some type of Leverage like what you

mentioned in order to be able to afford

College in that sense but a 529 account

you invest in it it has almost similar

mechanism to a 401k where you the money

that’s invested in there you typically

can select some the target date funds

they’re more aggressive than a 401k

typically because the kids are younger

it has a 18-year Time Horizon a few

different reasons right but but it’s not

like full risk on growth stocks but it’s

also not CDs and um like the lowest

possible returns so the idea is that you

drive some sort of return over and you

and you let 18 years of compounding do

the trick but if you’re not regularly

contributing to it or if you don’t have

a really large initial contribution that

compounding is powerful but it’s not

going to be powerful enough to pay for

college if you only put $5,000 in or if

you only put you know $2,000 a year or

something it’s just not it it’s you’re

not going to get there with the

accelerated loan pay down you can

benefit from that and hopefully have the

property paid off by by the time they’re

in college but you also have cash flow

you know if the property is in fact paid

off they don’t have to sell the property

you know you could refy you could use

the cash flow there’s a number of

different ways that that asset can

provide value for your kid which of

course it’s a it’s a benefit for your

kid it’s also a benefit for you because

you didn’t have to save $200,000 or

whatever the whatever the cost of

college will be down the road didn’t

have to save $200,000 that’s true but

there’s also 15 to 20 years of me being

able to use the cash flow that it

generates so I’m getting money and not

having to put money aside to pay for

this college fund over 20 years so yeah

that’s the whole idea basically so

correct me if I’m wrong though right if

you want to pay it off in 18 years

you’re going to have to accelerate the

loan pay down which means probably

there’s like pretty thin thin cash flow

right yeah yeah exactly so this is a

time in the market thing where over even

if it’s 15 years let’s call it the lower

end your rents are going to go up you

know and it’s just the property value is

going to go up right so it’s actually

not that bad and like said I have an

example here we can dive into but that’s

the other thing that oftentimes when I

talk about this I hear people kind of

push back on or or be skeptical about

it’s technically these properties we

have put them on a 30-year mortgage but

we are making the choice of paying down

that mortgage faster so that by the time

they’re college aged so 18 years 15

years depending on when you buy that

property that that property is free and

clear by the time they reach College age

and that’s primarily to give ourselves

optionality and control so I could

choose to pay down over 30 years if I

want to or I could choose to pay down

over you know 10 years or 15 or 18 or

whatever it is if I want to whereas if

you have a 15year mortgage then you have

15 years to pay pay down that mortgage

not only that but obviously maybe for

for those who looked at this before but

a 30-year mortgage your monthly payment

will be lower than a 15-year mortgage so

you get more cash flow so yeah so we do

that we could jump into the numbers here

for this one if you want I mean this is

a

run it down like let’s make it real yeah

so this is one one of the the properties

that we purchased as a college fund for

one of our kids so we bought it for1

130,000 I think if I remember correctly

so roughly let’s call it $40,000 down

payment for payment plus closing costs

or whatever so $40,000 out of pocket

right now that property generates after

all reserves all expenses all everything

set aside paid the mortgage paid

property taxes paid insurance that right

now for us generates

$430 a month of cash flow is that before

or after the accelerated principal pay

down it before the accelerated pay down

so I have $400 a month $430 a month that

I could uh choose what to do with I

could pay down the mortgage $430 you

know extra every month I could pay down

the mortgage $100 or 200 I could pick

typically what I like to do is I will

let the property cash flow for an entire

year see how much it generated and at

the end of the year when I do my books

and bookkeeping and get ready for taxes

I pick a certain number of money that

I’ll pay an extra payment for the for

the mortgage that’s how I do it I’m not

saying right or wrong but what’s more

more interesting with this is uh so the

property was purchased for

$130,000 um by year 20 I’m not saying 18

because my projection and calculator

here has year 10 and 20 so let’s say

20’s close enough by year 20 that

property uh with a relatively

conservative 3% appreciation um over the

you know year-over-year will be worth

over

$315,000 so if you pay it off in 20

years with like those additional

mortgage payments uh you know monthly

annually however you want to do it you

essentially have a a piggy bank quote

unquote of

$316 316,000 sorry dollars that you can

use for a college fund that’s a pretty

sweet college fund and it’s cash flow

and it’s it’s cash flowing absolutely

and I’m going to get to that in a second

but when you get to those paid off you

know properties

$315,000 you could sell it and yes

there’ll be taxes and fees and all that

stuff so whatever’s left becomes your

college fund you can refi pull out you

know 80% of that refinance and now you

have essentially your your college fund

through the refi because your your keep

the property and your tenants continue

to pay down this new you know loan that

you’ve taken out through the refi uh or

what you could do as well is just use

the cash flow and like right now uh cash

flow is what do I say 430 bucks a month

by the time it’s paid off in 20 years

let me do the math real quick here it

would cash flow

approximately let’s say $2,000 a month

so that’s with the with no principal and

interest anymore and um yeah so the

gross 24 yeah so gross future rents

would be400 but then take you know

property taxes Insurance you’re still

going to have to pay those Property

Management fees things like that uh so

roughly it would be net $2,000 a month

of cash flow which maybe use that for

the college fund right to pay for

college so um and all of that is $40,000

out of pocket not 250 or whatever would

be needed to compound to the 315 that I

said um and all while you know getting

20 years of cash flow right on this and

you’re not having to contribute money

out of your paychecks every year to

continue to grow and acrw the money that

you know would go into that piggy bank

that’s the thing with the 529 if you

don’t continue to contribute to it in a

meaningful way doesn’t matter the

compounding 18 years or not and how well

the those positions perform if you have

$2,000 in your 529 it’s not going to be

worth $300,000 in 18 years it’s just not

so um yeah it’s a pretty strong AR yeah

the other way I look at it is basically

having you know tenants pay for kids

college I like that idea yeah while

providing them a nice place to live and

maybe also your kids this is a whole

separate episode but your kids might be

inclined towards at least learning or

understanding the power of real estate

investing if they see that this one

single house paid for their entire

College whether or not they’re

interested in becoming landlords or

20-minute investors or not at a minimum

they’ll understand or Draw some parallel

between this asset and this outcome

which is a cool yeah my seven-year-old

has already started asking questions

about this stuff CU he sees me do this

thing sitting next to them in the

morning while I drink my coffee and they

have their breakfast and I do my 20

minutes a day of real estate stuff and

um they ask me questions so they’re

already getting exposed and you know I

can explain and talk to some of this

stuff so absolutely right that I love

that all right well we only have 5

minutes left for what you call the more

controversial topic which is the uh only

payments on the primary residence so

let’s see what we can unpack in five

minutes yeah I mean I think because it’s

primary residence every situation is you

know different it’s individual to the

person the family the situation or

whatever this is what we chose to do not

right or wrong it’s just our preferred

uh or our choices and our preferred way

to go about this and it’s actually

pretty straightforward like there’s a

few things that went into our you know

ultimately deciding to go about it this

way is one we’re my wife and I are very

confident that this is not going to be

our forever home where we retire where

we live forever so in that sense owning

a house you know um you know flat out

maybe not the best thing to do uh I was

say maybe more importantly I don’t know

if it’s more important or not but one of

the things that we were trying to do is

to minimize and lower as much as we

possibly can our monthly expenses so

that we can take whatever’s left and put

it into rental uh real estate so Buy in

you know more rentals and more real

estate to ultimately give ourselves a

better future so instead of having a

super high mortgage because I’m in the

Bay Area you know expensive homes and

all this stuff uh much rather have a

lower one for a property that we’re not

going to you know spend the rest of our

lives in but in the meantime buy more

rental properties and the way I thought

about it is like you know we’re buying

more rental properties that are

generating cash flow with the what we

are not putting towards an AM iing

mortgage that if we change our minds in

you know 5 10 15 years and be like no we

absolutely want to stay here forever we

have a rental portfolio that we can

leverage to pay down this primary

residence of ours or sell a rental to

pay for part of our mortgage so we have

optionality again whereas if we were

maxing out our monthly expenses because

we had an advertising mortgage and not

be able to purchase rentals on the side

then we wouldn’t have the optionality so

that’s really what it is I think it’s

pretty simple at the surface when you

explain it like that one question about

the these products I think most people

don’t even consider or think about the

idea of an interest only payment on a

primary residence is this a common

product is this how long is the interest

only period is this something anybody

could go find at their local credit

union or how how does it work very

common uh you can find it anywhere banks

credit unions you know mortgage brokers

you ask you just tell them that that’s

what you want it’s nonobvious to people

right this idea of doing interest only

pay so like is there a certain period

fixed period of time that you have

interest only yeah so so you could

choose there’s you know 3 years 5 years

7 years 10 years 15 years you can find

whatever they don’t typically do 30 that

I’ve seen at least they don’t typically

do 30-year like interest only you know

mortgages or loans uh but you have other

options 10 7even five you know I think

I’ve seen three as well so you could

pick and choose yes you take the risk

that you know whatever that length of

the term is if you’re still in the

property you need need to either need to

refinance to another interest only loan

and the interest rates will be whatever

they are then uh or you sell or you move

or whatever so that’s a risk you’re

taking but I think it’s

also and maybe because both my wife and

I grew up in Europe so my wife’s French

I grew up in Switzerland and I think

there’s a very different mindset in

Europe as well around all this stuff and

what I’ve noticed like

culturally in the United States it feels

very much like for most people a goal in

life is to pay off their home home and

own their home you know flat out in

Europe it’s diametrically opposed it’s

like nobody ever cares or wants to own

their home the bank always they have

payments their entire lives uh and you

just pay your mortgage and it’s pretty

much interest only the entire lives and

they don’t you know own the house flat

out ever just refinance you know every

every time you need to so I think we

also grew up getting accustomed to that

maybe which makes it easier for us to do

here I don’t know no it’s it’s it’s

interesting to think about the different

perspectives people have across the

world my family’s from uh my dad’s side

of the family is from Bangladesh same

thing home ownership is thought about

completely differently there and the

idea of appreciation and all these

different like leveraging loan products

is just not it’s not part of the way

people think and if it is it’s different

it’s it’s a different attitude so

there’s that perspective element and

then also I ran this numbers two days

ago I looked back at 2024 and I looked

at the principal pay down on my rental

portfolio and tenants had paid down

$33,000 in principal in 2024 and when I

think about that the idea of okay well

like I I think I only paid down

something like $2,800 of principle on my

primary or something insane because

we’re at the year one of a new loan at a

high interest rate and um I’m like okay

well which one’s more powerful in the

long run and would it actually be to

your point more impactful if we didn’t

make those those smaller principal

payments it had a lower monthly payment

that we could then use to reinvest back

into things that we already know how to

do so I love the logic behind it I think

it’s the theme of this is that it’s

actually simpler the math behind both of

the things we talked about today are

actually simpler than most people

realize it’s just not obvious these

aren’t obvious things that are talked

about openly they all come with their

risks for sure and they all come with

like different downsides to consider and

be aware of but at the end of the day

the math is pretty is pretty it speaks

for itself yeah and I’m sure somebody’s

going to you know comment or you know

take the opposing opinion and that’s why

I said you know fine I’m not saying

right or wrong but it’s personal and

individual right that’s what works for

us and then for somebody else something

else might work right but it is I think

to your point of what you’re saying it

it is an option that people should be

aware of so that they can think about

their life finances goals you know

holistically yeah 100% well thanks for

peeling back the curtain and letting us

see a little bit behind the logic of

these decisions I know they’re like you

said they’re personal finance decisions

but I learned a lot you know when we

first talked about it and I learned even

more from this conversation so

appreciate it and uh we will see

everyone again next week sounds good

take care thank you for making it to the

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