ASK MARKO: Should I Buy a House or a Tesla?

Hey everybody. Welcome back to whiteboard finance. My name is Marco and I'm here to help you master your money and build your wealth. In today's episode, we're doing something a little bit different. That's why I got the headphones on. As you can see here. Um, I actually gave out a phone number on Instagram and also on Twitter, uh, for you guys to either shoot me a text message with any financial questions or leave me a voicemail with your financial questions. And I got a lot of great questions and a lot of great feedback. Uh, so what I'm going to be doing is I'm either going to be listening to these, uh, voicemails. I'm going to be reading the text messages and on some of these phone calls, I'm just going to say, Hey, let's see if we can get in touch with these people and actually call them, uh, and obviously tell them that, Hey, this isn't financial advice. You know, I'm just the guy on YouTube. This call is being recorded. Yada, yada, yada, compliance, compliance, compliance. So anyway, um, let's get right into this first phone call. I'm not going to share the screen here cause there's really no point to do so. Uh, but this is a gentleman who has a question about, uh, real estate. Hey Marco, thank you for taking my question. It is regarding real estate. Uh, we currently own a home in Phoenix, Arizona, and I'll be leaving for the military in six months. So we're debating whether we should sell or rent it out. If we sell it, we clear about 150,000 gains that we obviously put that to either our next home or other investments, but I'm leaning towards renting it. Uh, because both the renter, the rental and housing market here are super hot. No pun intended. If we rent it out, I'm sorry. Hold on. I got to interrupt. Who else heard that? Hold on. My dude goes, they're super hot. No pun intended. Hold on. And how's the market here? Super hot. No pun intended. And, um, he hit him with that quick little half. If we rent it out, I was thinking about refinancing to a lower interest rate. Right now we have it on a 20 year note at a 3.6% APR. I was about 17 years left. So I think it refinancing. So we could, uh, clear about half a percentage point off and I would take it to a 30 year. That way I could lower the mortgage payment as much as possible and maximize cashflow. I would love to get your opinion on what we should do and whether or not we should refinance it, we're going to rent it out. Uh, of course that would be offset by having to hire a property management company since we'll be out of state. So thank you for your opinion. And I, I respect your thoughts and thank you for all you do. I love your work. I have a prosperous day. Oh, he hit him with the have a prosperous day. Nice. Okay. So in this situation, this person is basically just a quick recap. He's leaving for the military in six months. He wants to know whether he should sell his house with a ton of capital gains since he bought it. $150,000 to be exact. Uh, in case you didn't hear that, or should he rent it out? And if they do decide to rent it out, should he take his 20 year mortgage at 3.6% and refinance it into a 30 year fixed, uh, saving him about 0.5% or 50 basis points, uh, right around three, 3.1% APR. So in this scenario, um, this is one of those. This is one of those questions where it makes sense to get on the phone with him because you can't really give advice. And again, this is not financial advice, just the guy on YouTube, um, without understanding someone's long-term goals and their situation and their portfolio and their net worth overall, where it is right now. So, uh, in my opinion, just going off of this voicemail, um, it sounds like this guy really wants to rent it out. It sounds like he wants to be a landlord. However, the, there's a couple things here. If he were to sell it and incur those capital gains, um, did he use his one time exemption of, you know, living in this house a year or longer, and that way he can kind of forego, um, those capital gains taxes or the taxes on those capital gains taxes of $150,000. Um, so it depends on how long he's lived in the house. And if he can, that 150 grand, um, is appealing because that could be used as he said, as the down payment on his next home. Uh, so typically a lot of people in the country right now are going through this exact same scenario. Uh, they bought a starter home. It's appreciated a crazy amount. As you've seen, if you watch my channel over the past couple of years, uh, low interest rates, high asset prices. Right. So now these people feel like they're kind of trading up. So like, yes, their first, uh, starter home appreciated a ton, but they're just kind of horse trading and going up into the next property because those properties appreciated a ton as well. So you're kind of making almost like a lateral move, if you will. Um, when you're comparing apples to apples at the end of the day. So the only, the only yellow flags I see in this deal, because to me, it sounds like this guy does want to be a landlord. And I know from a text message that he sent me using this phone number and I will give you, I will post the phone number on the screen in the beginning of this video, uh, if I haven't mentioned it already, uh, but basically he said that he will be provided with housing when he does leave for the military in six months. So with that being said, uh, in my opinion, if he does have the housing, uh, provided to him by the military and he wanted to keep this as a rental, the other yellow flag is that it's going to be an out of state rental with an out of state property manager. So, uh, two things there. So I'm kind of unpacking these things piece by piece. So a, I'm not really a fan of out-of-state rentals unless you're working with, you know, a bulletproof property manager who you've worked with, uh, in the past, and they have really good credibility and they have good ratings. Um, and then also if he's going to refi this from 17 years left to 30 years left, as he mentioned in this voicemail, um, you know, yes, he's doing that to give him more cushion and provide more cashflow, um, because you're stretching the payments out over 360 months, as opposed to 17 years where it's at right now. And also the interest rate is going down by half a percent, as he mentioned. Um, however, how much more in cashflow is that out of state property manager going to take up and eat into this cashflow or eat into this deal? Um, so those are the only two yellow flags that I see here. I, again, as I mentioned, I'm not really a fan of out of state rentals. Um, if you're going to be managing this stuff, you have to be managing it either with a partner that has equity in the deal, so maybe like a property manager partner, so they have skin in the game. Um, otherwise a lot of these mom and pop property managers, some of them aren't really incentivized to provide great service and actually they're incentivized for stuff to break and for tenants to leave with a lot of turnover, because that's typically how they get compensated. I'm not saying all are like that. Um, but with the smaller operations, if the property isn't like, I'd say 150 units or bigger, you're not really going to get that, you know, top level property manager. So I know all the mom and pop property managers out there that do do a good job or kind of mad at me for saying that, but that does seem to be the case just based on my experience. So, um, I'm not going to give this guy a definitive answer because it sounds like he wants to do this, but if it were me, you know, where's he say, I don't have him on the phone. So where's he going to come up with the rest of the money once his stint in the military is over and he needs to buy that, you know, second home or forever home, if he does decide to keep this as a rental. So, um, what I will kind of want to do here is I actually want to call him cause I have his phone number right here and I probably could do that. Um, I just don't, I didn't really give him a heads up and I'd feel weird about it, but I'm going to do it anyway. Let's see what happens. If he doesn't pick up, I'll go to the next question or the next voicemail. He may not even know it's me too. So I'll leave him a voicemail. Okay. So I'm not going to leave that on the recording, so I'll probably bleep that out, but yeah, I went to voicemail. I'm not going to leave them one just cause just for compliance reasons. So that's kind of like my take on it. Um, you know, if you don't have money to move into the second home, where are you going to get it from? Um, you know, are you doing a cash out refi? That's another thing that I didn't touch on. If he's pulling any money out of this deal, um, I know he's doing this to get the lowest payment possible. So he's probably not doing that. Um, but if his interest rate goes down enough, he mentioned half a percent and his payments are low enough. Maybe he is pulling some money or some equity out of this house. So, um, if, if that's the case and that's tax free money. So, um, all in all, not a fan of out-of-state Reynolds, unless you're working with a partner with who is a partner in the property, or unless you're working with like 150 plus unit commercial building, uh, working with a super reputable property manager. Uh, and then also, um, you know, where are you going to get your money for the next forever home? So what are you, what is your guys take on this? Um, leave it down in the comments below. Maybe I'm missing something cause I'm kind of just doing this on the fly. Uh, but with that being said, let's get into the next one. Hey Marco. My name is Jeffrey and I've been watching your content for a while. It's really helped me a lot. So my question is, um, do you think it'd be wise to buy a Tesla model three to save on gas and possibly insurance? Um, the main reason that I would want to, uh, buy the cars, you know, to save money and, um, to use the car for like third-party companies like Uber lift, uh, and then, you know, just companies that pay me to use my car by the mile, um, I have 40 K saved up in the high yield interest account, and I really don't like the idea of using it all on the car. So I was thinking of starting another, how you things account to fund the car. Um, yeah, so I'm, I'm, I really kind of like candy like wall here. So that 40 K just, you know, a bit of the backstory is for, um, my future home that I want to pay, I want to put down a minimum of like 30%, like I saw your, um, your mortgage one-on-one video. And then, um, I saw some of the, uh, spreadsheet. So yeah, so I want to do a minimum of a hundred K or 30%. Um, hopefully you can reply to it. Thanks bro. Okay. Uh, thanks Jeffrey. Thank you for your voicemail. Um, so what I'm hearing here is that you have 40 grand put away. Um, it's in a high yield, you know, high yield savings account, probably making 0.5%, right. Um, while interest and inflation is way higher than that. So he's got 40 K saved up. Uh, and he's talking about the idea of, Hey, you know, I want to drive, you know, Instacart, Uber, Lyft, you know, using this car that has very low maintenance compared to other cars, um, which I'm going to get into here in a second here, perceived low maintenance, um, because there's no gas, it's just electricity, things like that. Um, and I want to use it for a side income. However, in the second part of the voicemail or the second part of the question, you know, it gets kind of scary here because he mentioned that it's for a future home and it's for a down payment and he wants to put down like 30% on his next house. So I'm not sure, you know, how old he is or what kind of properties he's looking at, but 30% in this current market, you know, if you're not looking at like, you know, a hundred thousand dollar condo, you know, somewhere in the Midwest for, you know, a hundred grand, 30% down payment, $30,000. Um, you know, this could get kind of ugly pretty quickly here. So what I don't want to see him doing is taking his, you know, hard earned money, his nest egg, and just blowing it on a car that he thinks is going to make him some money, um, which in the beginning it will, but I'm going to get into a depreciation and stuff here in a, in a second. Um, but you know, I think that. A primary residence is going to be more beneficial than having a Tesla. I feel like the Tesla is maybe something that he wants, um, as opposed to, you know, really needs, and he's kind of using the side income stuff as maybe, you know, an excuse. And I don't mean that as an excuse, but I mean that just maybe it's like an incentive or as a benefit. Um, but let's without further ado, let's actually get into some numbers here. So if you look at the screen here, um, the IRS for 2020 tax filings, uh, self employed can actually claim 57 and a half cents per mile per business mile driven. So a, this car is most likely not going to be, you know, 100% dedicated for business. Um, he can probably use a log tracker on a mobile app. And if he's, you know, enabling Uber or enabling Lyft, he can turn that on while he's giving people rides. And that way all his miles are tracked for the year. And he can take that 57 and a half cents per mile as a deduction. But the question here is the reason I'm bringing this up right here is why is it 57 and a half cents per mile? Well, typically that's because cars have maintenance. Okay. They have oil, they have fluids, they have moving parts, internal combustion engines. I know that this is a Tesla. The maintenance is a lot less. However, if you dig into insurance on Tesla's, he mentioned that he's getting a model three. And basically what this is, is coming out to be an average of $3,600 per year. So although the maintenance costs are a little bit lower, and I'm talking about the regular maintenance costs of a Tesla, they're a little bit lower than an internal combustion engine car. Um, the insurance costs are a lot more, so I pay probably less than a thousand bucks a year for insurance. You can see here that this Tesla model three on average, depending on where you're at in the country is $3,600. It's three times as much. So not only that, you're going to have to pay taxes on your income from these ride sharing services, um, which is going to eat into that profit margin even more. So in my opinion, this sounds like it's more of a want than a need. Um, and if you want to move out of the current house that you're in and save it for a home, like you mentioned in this voicemail, um, I'm planning to leave lean more towards the house. Okay. So at the end of the day, um, I think this person, you know, really wants this Tesla, but I think the house will be, you know, something that appreciates in value over time, uh, even though Tesla's do hold their value pretty well. So, uh, those are two voicemails we went through. Uh, maybe I'll go through one more text message here. Um, there's a person asking me, uh, Hey Marco, love what you do. Here's my question. Uh, do you ever use theta gang strategies with your stock portfolio, like covered calls or cash secured puts? Okay. So this, this is a very good question. So I'm going to open up a Robin hood real quick, and I'm going to go into, I'm going to try and explain this very quickly for those of you that aren't familiar with a theta decay and theta strategies when it comes to options. Um, so say for example, I'm someone that's interested in owning a spy. So this is the S and P 500 ETF. It's probably the most traded ETF on the planet. If not the most traded security, um, definitely ETF. The volume is huge. Average volume is a 51.3 million, which you can see right here. Now, if I want to trade options on this, what this person is alluding to, uh, is, uh, basically writing options or selling options. This isn't buying options. This isn't like buying, uh, thinking that the spy is going to go up a month from now. So I'm going to buy options on that and think that, Hey, I'm buying a call option. It's going to go up or I'm buying a put option thing. He's going to go down. This is actually the exact opposite. This is, uh, being the casino. If you will, you're writing the options contract and in return, you get a premium or a credit for doing so, meaning you get paid instantly the second the option contract goes through. So, um, a common strategy for this is the wheel strategy. So if you don't know what the wheel is, let's say that, uh, every options contract is 100 shares of the underlying security. So this is spy. So right now, if spy is trading at $440 and 38 cents, uh, what you would do is you'd move the decimal place over to, so it'd be 10 hundred shares would cost you roughly $44,000, right? So if I had $44,000, uh, sitting in this, uh, Robin hood account, I can write a cash secured put, meaning I'm selling an options contract, uh, as a put, and I have the money to back it up if that strike price gets met. Okay. So right now the current share price is $440. So let's say I'm going to go a month out from now. Uh, I'm going to go to, let's call it September of, or September 20th of 2021. And I'm going to look at these different strike prices, AKA the price of the underlying security. So if I want to do this, let's just say, I think, Hey, a month from now. Um, and I, and I didn't want to own spy. Let's just say I wanted to collect premium. Let's say a month from now, I really don't think that spy has a chance of getting to $398 per share. Um, the strike price of 400 plus your credits that you collect for this transaction, I'm going to sell one contract of this, uh, September 20th, $400 put, and it's going to be cash secured because I have $44,000 sitting in my Robin hood account. So if I sell one of these contracts, um, I'm going to receive a credit instantly once this contract is purchased by a counterparty, and I'm going to receive $190 in my account. Okay. So let's just say a month from now, it's September 19th and spy actually falls to, let's call it $380. So the person that bought this contract is actually going to exercise on that. And I'm going to have to purchase 100 shares of spy using that $44,000 or so sitting in my Robin hood account. Okay. So now I own 100 shares of spy. What I can then do is I can then sell a covered calls. So what a covered call is, is basically. Marco owns 100 shares of spy. So what I'm going to do is remember I am the casino. I am the house I'm selling these calls. Okay. So once I do that, I can find the share price. Uh, let's say it's four 39. Let's just pretend it's four 39. I'm going to go out a month from now. Let's just say September 20th. Um, just bear with me here. Pretend I owned a hundred shares today. And what I can do is I can go and say, Hey, you know what? I think that, uh, spy is going to reach. Let's just say four 40, for example. And what I'm going to do is I'm going to sell, um, whatever my break even is. Let's just say own these things for $447. I would go up to the next place where I make a profit, whatever that profit is. Let's just call it four 48. And I would sell a cash covered, excuse me, a covered call. Meaning I have the underlying shares of spy. I own 100 shares of them. I'm writing one contract. Um, and I'm going to collect $745 for doing so. Now, if this actually goes above that, uh, strike price of let's call it, you know, uh, four 44 or whatever that number was, we decided to sell at, um, I'm going to sell my shares at that strike price and not only receive the minimum credit right here of 740 something dollars. It's changing because I didn't execute this. Uh, not only did I receive the 700 something dollars, but I'm also receiving, uh, 100 shares times, whatever that strike price is. So then I'm making a profit on that trade. So this was super complicated. If you guys don't understand options, you probably didn't understand one thing I just said. Uh, but for this person who asked this question, thank you so much. Um, yes, I have used data strategies in the past and I have wheeled, um, a number of different underlying securities. I just don't have those pulled up right now. Uh, so I answered these three questions. I'm not sure how long this recording went. It's probably a little bit too long. Um, but I'm going to try and edit it down. Uh, if you guys like this style of video, uh, please let me know. Uh, if you guys want to leave me a voicemail or give me a call, um, I can tell you the phone number right now. It is 4 4 0 6 7 3 3 5 8 0. Uh, please don't send me pictures of your private parts. Um, I'm just going to block the number anyway. Please don't spam it. I have a spam filter created anyway. Uh, send me a voicemail, uh, send me a text message, uh, send me your questions. I'll try and get them answered on this show. Thank you so much. Everybody as always have a prosperous day. Dude, by putting that number out. Oh, I'm going to get the nastiest stuff, dude. I'm just ready. My eyes are ready. I'm going to have to go in there like this. I'm not going to be able to sleep for a week from all the nightmares that I see in those texts. Um, hopefully you guys like this style. Uh, I'm going to try and stick with more of maybe live phone calls in the future. Uh, and then also, um, more voicemails just cause reading the text message is kind of boring. Uh, so hopefully you got value out of this. Hopefully you learned a little bit more about, um, you know, write-offs, um, capital gains, and then obviously some of these are the wheel strategy with the theta decay. Thanks guys.