Season 3, Episode 5: How Can We Tell When It's Time to Move On From Our Good Investments?

Crunching numbers when you’re emotionally attached to the story your past financial decisions tell about who you are

Welcome to the episode where Caitlin exploits having a podcast with Sara to get Sara to tell her whether or not to sell her house. Does Sara take the bait??

In true Sara fashion, she leans into empowering Caitlin to make her own damn financial decisions, offering a framework to make big one-off financial moves.

Like, how scared are we supposed to be of tax implications? (And what is a capital gain tax and how the hell could it possibly apply to a normal person like me?) And, how can we tell if the stories of our past financial successes are standing in the way of making new decisions that make sense for our future? (Caitlin raises hand.)

Caitlin relishes the power of a “good deal” story, and how maybe those stories are worth their weight in gold (but not helpful in building a future, reality-based investment portfolio, perhaps.) Do you remember the time Caitlin found a Le Creuset dutch oven at a Goodwill in 2007? She does! And she’ll tell you all about it!

Also, along the way, some ins and outs of the consequences of investing in real estate rather than index funds, and the emotional/financial/logistical math that goes along with owning rental properties.

Listeners - what do you think?? Should Caitlin sell her house??

Ask us your dumb investing and finance questions for Season 3 on our Ask Us page!

We have the social medias!! Here’s our Instagram and Facebook and LinkedIn.

This episode was edited by our co-producer Kelly West. Music by Bad Bad Hats and Devmo.

Transcript for Season 3, Episode 5: How Can We Tell When It's Time to Move On From Our Good Investments?

Caitlin [00:00:07] Welcome to women on the verge of a Financial Breakthrough, a podcast where we're figuring out finance. One dumb question at a time. I'm the dummy. Caitlin Meredith, a coach and mediator based in the Bay Area.

Sara [00:00:20] And I'm Sara Glakas. I'm an investor, advisor and founder of Black Barn Financial and the Austin Women's Investing Group, which can be found on Meetup and Facebook. Before we start, do you know a woman who might be on the verge of a financial breakthrough? Will you text her a link to our show? Also, if you can, please leave us a review. This helps other women on the verge find us, and we read all of them and they make us happy. Cry like this one from a listener who said personal finance made fun. Really? Exclamation point. Super informative and entertaining. This podcast has helped decrease my apathy towards dealing with this topic. I'm left feeling, dare I say, empowered, to make small yet meaningful steps to improve my financial future. Thank you so much for leaving the review. Now let's get started.

Caitlin [00:01:16] Sara, I have a personal problem and I've had it for three years. It's financial and we've talked about it 147 times. I am wondering if you're up for talking about it. 148 times?

Sara [00:01:33] Absolutely. Tell me what's going on.

Caitlin [00:01:35] This is why we're friends. Either because you're so patient or you forget.

Caitlin [00:01:42] Okay. My house. As you know, I have a house in Austin, and I still own it, even though I move to California. The question that surfaces every 2 to 3 months is should I sell it or not? And of currently Airbnb being it. So I get income from that. And when Airbnb is doing well, I'm like, this is amazing printing money. And when it's going through a different period like 2023, like what happened to my amazing buffer. And it's a lot of it's a part time job to run it. And then when you're not spending time running the few reservations you have, you're just spent really anxious about whether you'll ever get them again and if it's going to pay for the mortgage. But here we are now, four years and and now I have to be afraid of something. I never thought I would even know what it meant, much less have to pay by capital gains taxes.

Sara [00:02:46] Oh that's right.

Caitlin [00:02:48] Yeah. So can you just explain to, you know, the listener that doesn't know what a capital is? Capital gains tax is what it is. And maybe just a refresher for me.

Sara [00:02:59] Yeah. So a capital gain or a capital loss a capital gain is the difference between what you bought something for and what you sell it for. So with a house, you know, maybe you buy a house at $100,000 and then you sell it for $250,000, so that would be $150,000 capital gain. And you calculate capital gains on all types of property. You calculate capital gains on stocks, on cryptocurrency, on real estate, on, you know, theoretically, like collectibles, something like that, pretty much anything that you're buying and then selling for a gain, you'd pay tax on the difference between what you bought something for and what you sold it for.

Caitlin [00:03:47] And with the house, that can be a lot of money, because if you're selling the house, let's say in Austin, when you bought a house in 2006, when normal people could still buy houses in Austin, right? And then you're selling, you know, in 2024, you're going to have made money on that, like theoretical money. The House, I will be able to sell the house for hundreds of thousands of dollars more than I bought it for. Right. And so that means that the capital gains tax is also going to be significant. I want to put on the record I believe in taxes. I believe that people making profit I pay want to pay into the streets, the schools, the street lights or whatever. But also it's a hard number to look at when it's that big, right? And it's something that I have to take that might make it so I don't sell the house, and I can't figure out if that's one of these situations where I'm just, I'm being not too emotional, but like, I'm not sophisticated enough to understand that, yes, to make money, you have to pay a lot of money. And that I don't know. I don't know even how to describe it like that. I'll cut off my nose to spite my face, like, because I don't want to pay that tax. I'm not going to sell the house, which would actually be the best financial decision for me. Do you get what I'm saying?

Sara [00:05:21] Absolutely. I mean, people have this problem all the time when making giant one time decisions like this one. You know, when you buy and sell a house, you can't buy part of a house, you can't sell part of a house. So it's a one time huge transaction, which is kind of unique to real estate. Right? You don't have the same problem with stocks, for example, because you can sell one share of stock. You don't have to sell all of it at the same time. You can sell pieces. But what you're describing is really, really common. I mean, there are some things you could do if you definitely wanted to avoid paying the tax, and then you would have to decide whether those things are worth it or not.

Caitlin [00:06:06] Like an offshore bank account.

Sara [00:06:09] That's not what I was thinking at.

Caitlin [00:06:11] Oh, oh, I thought that might be one of those loopholes. I mean, that's what I'm really in touch with right now, is my greed and thinking that, like when I bought that house in 2006, an aid worker with $16,000 to my name and turned it into a house. If you had told me that I could make $200,000 selling that house, I would have been like, are you kidding me? Yeah. And now. But then telling me now, oh, you'll make 200,000, but you'll have to spend $50,000 in taxes. I'm still making the same amount, but I am spending. I don't have $50,000 to spend. What are you talking about? So I started to really get the people who look for the loopholes and like yacht owners who have special accountants that do sneaky things, and I don't usually relate to that set.

Sara [00:07:05] Yeah, that's how Jeffrey Epstein made his career as really sucky IRS loopholes. He was a tax consultant to wealthy people.

Caitlin [00:07:13] Oh my God. And that's how he got his millions and connections. Yeah, okay. He's their best friend. That makes a lot of sense. Okay, so now that we've established on the same level as Jeff.

Caitlin [00:07:26] Jeffrey in my brief. You know, unethical conduct.

Caitlin [00:07:32] Just kidding. How do I, as a sophisticated, educated woman on the verge. Balance that fear, which I can, like, intellectually say, is irrational. Like, if it benefits me, it benefits me. Just close my eyes when thinking about how much I'd paying taxes versus no, that's real money. Let's try to avoid that.

Sara [00:07:54] Yeah. I mean, I think you always try to give yourself 2 or 3 clear options to choose from, and then you figure out the pros and cons to each option, right. Option A is do nothing. I'm going to hang on to this house. I'm going to make the repairs. When the repairs come up, I'm going to have a lot of my wealth tied up in this house in Austin, where I don't even live. Some years I'll make a lot of income. Some years I won't, but I just don't want to. I don't want to pay the taxes. Or that the capital gains taxes. I'll pay the property taxes, but I don't want to pay the capital gains taxes. And I'll continue to do that just forever or another year, whatever you decide.

Caitlin [00:08:41] Okay. And in that option, which is off my current one because of paralysis, I'm also constantly thinking about what you say is that compounding interest. So if that same money, let's say it's $200,000 that I'm choosing not to receive right now, in order to not pay capital gains taxes, it's in a house right now, as you say, it's like this money I can't touch. Now, if I put it in the stock market today, in theory, in 20 years, how much would my $200,000 get me?

Sara [00:09:15] Right? So that would be option B, I sell it, I calculate what I receive after I pay taxes. So in this case, you know, you have a $200,000 gain. You have to pay 50,000 in taxes. Let's say you would walk away from this whole transaction with $150,000 in your pocket.

Caitlin [00:09:34] Yeah.

Sara [00:09:35] And then you decide to put it into the S&P 500 index fund.

Caitlin [00:09:39] Right.

Sara [00:09:40] So you could pretty quickly back of the envelope say, okay, we expect the stock market to double every 7 to 10 years. So my 150 would turn into 300 would turn into 600, would hopefully turn into 1.2 million. Right. And this is without at this point now you're in the stock market. The cons are the volatility, right. Which you would have to be very very comfortable with. The pros would be nobody calls you to unclog the toilet.

Caitlin [00:10:07] Oh my god no trees no hailstorms.

Sara [00:10:10] no property taxes. Yeah. Nothing really except the volatility. So that would be option B. option C could look at something like well I'm already invested in a house. Would it be beneficial financially to sell the house in Austin, do something called a 1031 exchange which is like a rollover for houses for, for investment properties like a rollover IRA. Okay. That sounds like it's another podcast.

Caitlin [00:10:43] Another episode.

Sara [00:10:44] You get to defer paying the taxes. So you would sell the house, take your 200,000. Okay. You have 60 days to find a new house and put your $200,000 into that house or into that property. It's a way that real estate investors who want to stay in real estate keep deferring, paying their taxes as long as they keep doing this. So in option C, you would be exchanging one house, one property for a different property.

Caitlin [00:11:16] Why would I do that? In my case it wouldn't give me any. Like it's not a house I'm going to live in. So I'd still be dealing with the trees and the Hvac etc..

Sara [00:11:28] I mean, really, I mean, I think in your case it would be can you find an investment property closer that is easier to maintain? Maybe it's newer, maybe the rent is better. I mean, I don't know any of these, you know, I don't know.

Caitlin [00:11:43] Okay. There's something that because I know I was thinking, oh, with the 200, I'd find. Not that this is possible in America anymore, but I could buy two houses with that $200,000 and then have rent coming from two places.

Sara [00:11:57] Something like that. There would. Some opportunity that you would identify to avoid paying the $50,000 in taxes, but you're still in real estate. You don't get to switch from real estate to stocks in that scenario.

Caitlin [00:12:11] Right? Right. So one of the things that frustrates me about this conversation with you is you've never once said, here's what you should do. And I you're a financial advisor. And it's always troubling to me that you don't see this crystal clear answer for me. And I think, well, she is removed. She doesn't have sentimental attachment to the house. She's like this cold, hard businesswoman. So she'll just see it. And each time you're like, yeah, that's a really hard one. I'm like, oh my God. It's both like validating that I'm not just like, blind to something that everyone else can see. That would be for my benefit, but also confusing. Why can't you tell me whether I should sell it or not?

Sara [00:13:04] Well, I think my strategy here is to keep coming up with options until you your eyes light up and you're like, that's it. Right. Okay. So option D now we're on option D, you move back to Austin and you live in this house for two years. Then it's your homestead. Yeah. Then you sell it and you have a $250,000 exemption for selling your home instead of selling an investment property. So you invest two years in Austin to save yourself $50,000 in taxes. Then you take all of your money and go back to California.

Caitlin [00:13:43] And then we write a book. What one woman did to save $50,000. So it seems like like I don't recall taking the long way. I mean, I'm going to be.

Sara [00:13:57] I think you and I have talked about this before, like, your predicament here is exactly the reason I do not personally invest in real estate as an investment. I, I can't it's too inflexible. Right. Like there's not enough, wiggle room for me and a flexibility for me as opposed to something like stocks. Right. You can sell one stock. You can sell ten. You can sell however much you need. You can move it around.

Caitlin [00:14:26] All or nothing.

Sara [00:14:27] Right. And so I keep waiting, I think, for you, because it sounds like the what you want is to sell it and take the whole 200 and move on.

Caitlin [00:14:40] This, like, here's here's what here are the many variables that go into this. A I'm supposed that my friend Sara tells me I'm supposed to diversify my investments. Okay, this is the biggest diversification I can do to own a house and not just the stock market. Because odds are, if I sell this house, I'm not going to buy another house. I would just invest it in an index fund. So then I'm wholly invested in the stock market that I know that I can be diverse within the stock market and get some bonds to or whatever, but that feels, risky. And just to have all of those eggs in that basket, I know that's the truth for many people, but I'm lucky enough to have had a house, so I'm automatically diversified in a way that feels like, okay, I feel a little bit more secure with that. So there's one variable which would then be likely to influence me to then buy another house with the profit from it, and then like y if I want to get away from owning a house and managing it from afar, why would I do that? That's ridiculous. So except not being as diversified as I have been and just accept that, move on, that's fine. I'm not. We're not even going to talk about the emotional attachment to the house or the neighborhood or anything. Right now. I get all of those pieces, but the other one is just the cold, hard numbers. You just said that if I theoretically, based on past results, that the future of that $200,000 in 20 years would likely be $1.2 million. Now, of course, if I cashed that out, I'd pay taxes on that at the time too. But is my house? How do I calculate how much my house will be worth then? That's an unknowable right?

Sara [00:16:26] That's that's unknowable. You're real estate agents in Austin should be able to tell you. I just so happened to talk to a client earlier this week who is pretty heavily invested in Austin in the surrounding areas, and she had a house. We were talking about how she had a house that had doubled up and like, oh, like how great it was. And then I did the math. I was like, oh, what year did you buy that? She's like, oh, 2006. I'm like, and in my mind I'm like, that's almost 20 years ago. So that's a double over. 20 years. The stock market over that time period of would have doubled at least twice, if not three times. Do you know what I mean?

Caitlin [00:17:07] So you're making it harder for me? Exactly.

Sara [00:17:10] The doubling sounds awesome. Like this house doubled in value over 20 years. Right. But you and I are always talking about if you need to. And if you're able to take the risk, can you double it faster than that?

Caitlin [00:17:25] Yes. And here we go to How Are stories? I'm just realizing the more we talk about, the more subjects, how much I integrate one piece of information and stick with it. I don't update my information very often. So for me, I'm still one of the people that got the last houses in my neighborhood for an affordable price. And so it was an incredible deal. I got into the market. It was not strategic.

Caitlin [00:17:51] Yeah. Total coincidence.

Caitlin [00:17:52] And so like, this is this gold mine, I should never I'm so lucky to have I don't know how to update that with. And then running the numbers and being like, whoa, your property. My property value one year went up by 38%. That's unheard of. That's like a growing market. And that, of course, during the pandemic, I could have printed money if I sold the house. And then now sort of catching up with what the reality is for this asset. I have felt so lucky and so lucky to be someone with a normal income that got to buy a house in Austin. The idea of selling it also seems like financially dumb, like not appreciating this incredible deal I got. And yet maybe that deal has expired and I'm not looking at it with sober eyes to see that.

Sara [00:18:42] Yeah. I mean, I think that I mean, that's really interesting. Like, as I'm listening to you say that, I'm thinking to myself, like, does that mean you need to own this house forever?

Caitlin [00:18:53] You know, I going to be buried in this.

Sara [00:18:55] House, right? You know, like, if you find one, good deal. You find like, one, like luxury designer bag in the bin at TJ Max. Like, do you have to carry that bag the rest of your life? Yes. And then tell everyone, like how much? Like. Yeah. Like when you bought.

Caitlin [00:19:09] It and how much it was. I would say that is my story.

Sara [00:19:16] Your story could be, you know, with $16,000 and eight worker bought a house in the Holly neighborhood of Austin, Texas, in whatever year it was 2006.

Caitlin [00:19:28] Same as your.

Caitlin [00:19:29] Client.

Sara [00:19:29] And then I cashed out, right. And I moved on with my life. Like, that was that was so cool that I got to do that. And it was so cool that I was so brave to do that. Single woman rolling into town with a few bucks in her pocket buys a house that's crazy. And like the benefit to you is you take the proceeds and then you get to figure out of all of the investments in the world, like, what do you want to buy next, right? It doesn't have to be like the very best bargain. Maybe that'll never happen again. But why don't you get to enjoy the decision that you made in 2006 to do that?

Caitlin [00:20:13] Yeah. We're learning so much about my weird psychology that the story of that house God, I said we wouldn't talk about the emotional attachment, but the story of the deal, the story of all that. And part of that isn't just like the emotional, but like, hey, I made a really good investment, but I'm realizing it had no expiration date. In fact, it's like my freaking Airbnb stock. I was invited to buy the stocks before they went public, so like, I'll never sell those. Yeah, this is crazy. Okay, so you think I should sell?

Caitlin [00:20:52] My daughter, I got her, her eyes lit up. She's waiting for my eyes to light up. I'm waiting for her eyes to like, I know I.

Sara [00:21:01] I mean.

Caitlin [00:21:02] But when you are saying you can't make the decision for me, is it because you're such a good advisor and you believe empowering women to make their own financial decisions? Or if I do sell, I'll be mad at you later, which is a completely rational fear for you to have.

Sara [00:21:16] Yeah. I mean, I think it's a little bit of both, and I think it's accepting that there is value in the story for people. It makes you it makes you feel good, it makes you feel like a good investor. And that. Yeah, probably has it's empowered your whole journey here. It's how you came to my class. That's how we got to know each other. It's how you continue to keep learning. What if you made this one? I mean, again, with real estate, you have one choice to make. You sell it and then it's over. Like you're never going back to that house. It's a one way door that you can't walk back out of, right? Right. That if that haunts you for the rest of your life, could it move that investing journey or the way that. You think about how to trust yourself, could it move it in reverse?

Caitlin [00:22:02] Yeah.

Sara [00:22:02] Right. And so if the Airbnb revenue isn't as high as it was in this super awesome year, and I know there's going to be up yours, and if there's going to be down years, like is the status quo as an investment like good enough to keep it?

Caitlin [00:22:19] Yeah.

Caitlin [00:22:20] And how do I not chase this dragon? Both the the dragon of the Airbnb income in 2022. It's just like insane. Yeah. And the deal of having that house that's in this neighborhood where there's no more land, you know, all of that. How do I detach from those two things and have their real and sort of like, you know, you talk about we when you invest in the stock market, you're there, you don't overreact to dips, you stay for the cause. You know, you do all these this girding to like I'm in it for the long haul. And yet here I'm supposed to then react to the fact that the Airbnb the market is completely saturated with Airbnb's, and I'm supposed to react right away to not making as much on that for two years. Like, do I wait for two years? Do I wait for three years also with a house value? You know, it's not an interest rates like I guess I'm really curious. And I know you're not a real estate investment. Like that's not your jam.

Sara [00:23:22] Yeah.

Caitlin [00:23:23] But it seems like a completely different tool set that you're supposed to use to evaluate how long to stick in a.

Sara [00:23:30] Yeah, I mean, I do think it I do think it is a totally different tool set, right. Because like, there's other things that are specific to your house that are not applicable in something like the S&P 500. Like it's like, yes, real estate is is a diversifying asset class, but you are not diversified in real estate. You have one very specific piece of real estate, right. And real estate like the hallmark of real assets. Right. Like assets that you can touch is that they get used up over time. They things break down, things decay. Like that's the reality is that those things are breaking down and that those expenses, you know, as a real estate investor, need to be accounted for because they definitely will happen. Yeah. Whereas in the stock market, it's a financial instrument. It's it's a claim on future earnings and future ideas of 500 different companies in the stock market. There's not that same expectation that things break down and have to be replaced.

Caitlin [00:24:36] Companies go out of business and.

Sara [00:24:38] Then they get replaced by someone else automatically, right? Like in the marketplace. Whereas with a house it's like, oh, that the siding is going to fall off. And oh my gosh, you know, you're gonna have to replace the steps and the toilet is going to break for sure at some point. Like these things don't last forever.

Caitlin [00:24:53] Yes. And my psychological constraint of not updating information very often like to me that dishwasher is still brand new. Like, I can't believe I got.

Caitlin [00:25:05] Such an amazing. It was five years ago that I bought it into me. It's like the fanciest appliance I will ever. Oh, and I don't even get to use it. But I'm just realizing what a. Drag I am to up. And that's like not an Emotional attachment per se, but it was like I felt really good about investing in the house, all that. So to let go of that and this seems pretty specific to real estate, although I also just confessed that I don't want to sell my Airbnb.

Sara [00:25:40] Right. It's not specific to real estate. There's a million people. I hear people all the time. They're like, oh, I wish I hadn't sold such and such back in 1996. I'd have a gazillion dollars. I'm like, but you use the proceeds to buy a house or like, start a family, whatever it is like.

Caitlin [00:25:54] On.

Sara [00:25:55] Right Up. But like, have you ever have you ever heard that. I don't know if it's like a Like a trope about how as you get older, like you'll just settle into like a decade where you looked your best and then you'll never upgrade your wardrobe. It's like, this is just my wardrobe, and I'm never moving on from it. That's what this kind of reminds me of. And as you're having a conversation, I'm like, is this because we're middle aged? Are we going to become more like this if we don't keep, like if we're not able to let things go? Is that like one of the hallmarks of, like, getting older and, like, scared of things that you just can't?

Caitlin [00:26:33] Yes.

Sara [00:26:33] Let shit go.

Caitlin [00:26:34] And letting your identity evolve, I think, like, are we the football players in high school who, like, peaked. At age 16 and are like, remember junior year? And everybody was like, no, we're on to. Real life now.

Sara [00:26:48] Maybe that's like how to figure out the answer to this question is like, if you like, have you envisioned what your life would look like if you didn't have? This house. Like, who would you be if you didn't have it? Would you be like a easier version of yourself? Would it be the same? Would you not think about it? Would you be grateful that it's gone? Like, yes. Who's that person that you could be in an alternate universe?

Caitlin [00:27:13] Yeah. And I think it's so funny. My own company is called Future Focus, but I think there is something that in invariably and this is probably because it's a house that I lived in and my daughter was born when I was living there. A real life happened when I was living there. But also, I can imagine, even if it was a rental, that I had rehabbed and really put my blood, sweat and tears into that, I'd have that same attachment. But it does bring it's it's past looking instead of future looking. It's not looking at the world of possibilities for me going forward saying like, what can I, you know, still do. And I think because the mortgage is so low that it justified, like, you know, for a rich person, they wouldn't even know that's their dry cleaning Bill every month. And so they can't. Okay. But I'm not at the point Where that's just my dry cleaning bill and it just fades into the background about like, that's my big investment. So updating that and and you're exactly right. Pairing not just with the loss because that's really hard. If I'm just like even if it's just but like buying stocks like those I wouldn't touch. So it's not like I'm going to be, you know, on a yacht of my own. It won't actually matter in my material world. But imagining like you're saying, like what would be possible, I would have some money to invest in some other things. What might that look like? Yeah.

Sara [00:28:43] It's like, you know, back in my day, when milk was $5 a gallon.

Caitlin [00:28:49] You could buy a house in Austin for less than $200,000.

Sara [00:28:52] We went to the Alamo Drafthouse when it was downtown, and we stood in line. There was no assigned seating and it was $5.

Caitlin [00:29:00] Yeah, I am that person. You know, we all are. Girl, this is so humiliating. I would definitely tell everybody about my goodwill purse. I do that all the time. This is my financial story. Any deal I have ever gotten stays fixed. It has to be repeated.

Caitlin [00:29:23] Okay, so we're like, this is the brewery condo? Not literally like condominium, but like Marie Kondo ING of our the stories attached to our previous investments.

Sara [00:29:36] Yeah. I mean, and you could do, like, a side by side analysis and end up with option A if I had $200,000. Yeah. And the opportunity to buy this house in Austin, I would do it again right now.

Caitlin [00:29:50] Yeah.

Sara [00:29:51] Right. Because that's also what it is by, by not selling it, it's almost the same as choosing to buy it again. If someone gave you $200,000, is this the investment you would make?

Caitlin [00:30:01] Yeah.

Sara [00:30:02] Or would you do something different?

Caitlin [00:30:06] Right. Yeah. No, of course not. I'm not in the housing market anywhere looking for a house to buy. But I really get with the real estate investing like it's this, even if in the long term I could make $400,000 if I sold my house and put it in or, you know, 1.2 million. What about right now? If I'm getting cash flow from that, how do I balance out what it helps me with to pay my monthly bills versus this, like beautiful retirement that I could have in 20, 30 years?

Sara [00:30:38] Yeah, I mean, I think that's a very fair question to ask. What is this investment for? Because if it's to provide income today to supplement your income, then selling it and putting in the stock market is not going to do that because the dividends paid in a stock fund are going to be lower than the cash flow that you can get from renting it out. You would do a side by side, right? Like if you assume that an S&P 500 index fund, the dividend yield would be 1.7 1.8%. So if that doesn't give you the current cash flow you need, right, then it's wouldn't be a good option to sell it and put it into stocks you wouldn't be investing in order to meet the goals that you have, right? Right. So there's the growth goals like okay, we're trying to turn 200 into 400 into 800. But there are income goals for a lot of people. Right? Right I need them I need that extra money. You know whatever reason, like if that's what the property is for, then maybe it is a status quo. Maybe it is like, well, let's just keep collecting the money or, you know, try to find a 1031 exchange where we could replicate that stream of income just closer to where I live, or, in a place where I might want to live in the future. And. Turn it into my homestead and then avoid those capital gains, which, you know, was the beginning of the whole conversation.

Caitlin [00:32:03] Yeah. Well, and what I just realized, and this is all frickin déja vu, is there's the diversification of your investments, and there's also, as a freelancer or someone like you and me, that depends on clients in coming a diversification of your income stream right now.

Sara [00:32:21] Absolutely.

Caitlin [00:32:23] And so if Airbnb or whatever short term rental is not providing that, that changes the game completely. But if it is, it's a that's where we get to the much more complicated algorithm of being able to reliably replace that income. In a consistent way. So that that part, the rent part isn't part of the deal. Yeah. Because I keep thinking, okay, if I knew I wasn't going to make any money off of rent, you know, the rent would just pay for the property itself. It seems very clear. I don't think this was always very clear to me. And maybe this is too much in the weeds, but that I shouldn't keep it then. That like, no, sell it because I'm going to have to buy a new roof one day. I'm going to have to sell this, and it's very easy. Just put that money in the stock market. If I'm just breaking even every month on it, then there's no way. If I'm making money every month, that's a more complicated scenario. Am I right about that?

Sara [00:33:29] Yeah, I definitely think so.

Caitlin [00:33:32] Oh, jeez. Listener. We're back where we just heard from.

Sara [00:33:42] But we did get away from the tax question. We got away from like, the what is it that, like the tail wagging the dog, right. Like the tax tail wagging the dog right back to. Is this the right investment for Caitlyn.

Caitlin [00:33:56] Right. So fear of taxes or fear of the financial consequences, the costs of making a forward move, they just can't weigh so heavily that you are paralyzed and don't do anything because of it. Right. We've talked about intergenerational wealth and how that happens. And often when we see it portrayed, it's like people inheriting land or the homes or whatever. And so I know it also happens with people's stock market portfolios and trust accounts and, you know, actual money parts. But like, I think, like, do I leave this house to my daughter? Like, is this.

Sara [00:34:38] Like a legacy?

Caitlin [00:34:40] Yeah. There is a sort of feeling like this is a legacy and it's it's tangible. And so aren't we supposed to think about intergenerational wealth in terms of people getting houses when we die or. No.

Sara [00:34:53] I mean, I'd like to me it turns something that is financial into something that's no longer financial. It's completely emotional. Yeah. Right. And so like, I don't know, I think like you can you can kind of pick one, right. Like, sometimes something is a great financial investment and like a great story and a great legacy. Right. Yeah. But but sometimes it's not. Sometimes it's just like, like a ratty old house that has been in the family for years.

Caitlin [00:35:27] Worse, like a Victorian that cost.

Caitlin [00:35:30] So much to. I don't have this personal experience, but there are many in my neighborhood and I just think like, oh, what a mixed.

Caitlin [00:35:37] Blessing to get that house and to have to update that and maintain it.

Sara [00:35:42] And oh yeah, or with stocks, it's like, well, I worked at this company in the 70s and I, you know, they gave me this stock when I worked there. And then you see like people inherit it or getting ready to inherit it.

Caitlin [00:35:54] You're like okay there's this company still terrified face everybody. Does this company still exist?

Sara [00:36:02] Like, why are we hanging on to this? What is happening? Right. I don't.

Caitlin [00:36:07] Think human psychology was prepared for investing.

Caitlin [00:36:10] Or money long term.

Sara [00:36:12] No, I mean, it's why I mean, there's like a it I guess maybe the best investors are, like, purely analytical, right?

Caitlin [00:36:19] Yeah.

Sara [00:36:20] But most of us are not that there is this emotional component and always like this underlying fear of doing the wrong thing and living with that regret for the rest of your life.

Caitlin [00:36:28] Right? Right. And thinking about the 50,000, we talked about this, thinking about the 50,000 you paid in taxes instead of the 200,000 profit that you made from whatever. Yeah, I it's not my that that piece is one of my least favorite parts about my own psychology like that. I could be so petty. It seemed just so petty. And not only because it's taxes. And I believe in investing in the greater good for community and society, but also just like, oh my God, like I'm so lucky to have this in the first place. Like, that is obnoxious to want to be like even luckier. And the chosen one that like, got away with not having the same consequences than anybody else did.

Sara [00:37:10] Did you ever. This is a I think this is kind of related. Have you must have lived in places and worked in places where there was no tax, there's no taxation and.

Caitlin [00:37:20] No public security? No.

Sara [00:37:23] Yeah. Was it awesome?

Caitlin [00:37:25] Awful. And that's what I say all the time. Like if you don't want to pay taxes, I have so many amazing places for.

Caitlin [00:37:31] You to live.

Caitlin [00:37:31] Congo, Somalia, northwestern Nigeria, like you do not have to pay taxes unless they catch you. And also you won't have roads straight. Like, you know, if you're rich, you can pay your own. Right of way. Yeah, but like, a lot comes with the taxes that we pay. So I just, I think when you're used to not. It's sort of like, I feel like if someone told me to pay 50,000 tax, I look around to who they were talking.

Caitlin [00:37:59] To, like, it's like, what? I know it can't be me. Like, I don't I don't, I don't know. There's no way that you could think that I would have $50,000 to pay you.

Caitlin [00:38:12] Yes. And whereas the rich people in my mind are just like, wheeling and dealing so much that yes, they hire people like Jeffrey Epstein or someone even ethical to help manage that. But like, it's the price of doing business and they're not going to stay up at night worrying about that because they see the bigger picture.

Sara [00:38:30] And they're like, they're moving on.

Caitlin [00:38:32] They're moving up and making more money. So they don't are they're not dwelling on that.

Sara [00:38:37] I mean, on that tax front. Now, I'm remembering a story that a client told me a couple weeks ago about how he was working at this company, and he said one of his coworkers gave one of his other coworkers the advice to not accept the raise they were going to give him, because he would have to pay more in taxes.

Caitlin [00:38:59] It'll bump you up to the next bracket. Well, don't do it. The next tax bracket.

Sara [00:39:05] You'll get killed on taxes.

Caitlin [00:39:08] It is. We're not, I don't think we were built for this. I think it's it's hard, but it's so hard.

Caitlin [00:39:16] Well, thank you for going down this path with me again. We'll do it again in two months.

Caitlin [00:39:22] And hopefully you won't remember anything I asked or you said, and so I can just do it again.

Caitlin [00:39:27] I keep waiting for it to be so obvious. I could imagine holding onto it for another 40 years, because I could have gotten over $1 million during the pandemic, and it'll never go it. It might go up to that, but it'll be in so many years. But like in order to make it okay that I didn't sell, then.

Caitlin [00:39:49] I have to never sell. I just I can't even articulate it. I know it's so ridiculous.

Sara [00:39:54] I know it's like you have to sell it all time highs. Like you have to get back to the all time high, even if it takes ten years or 15 years or three years, whatever.

Caitlin [00:40:04] Yeah. At which point it is not working in your favor at all.

Sara [00:40:08] Yeah, yeah.

Caitlin [00:40:10] Oh my God. Okay, Sara. Thank you. So do you think I should sell or not?

Sara [00:40:16] I mean, I will just say like on the record that I, that I do think you should sell. This. And or move back to Austin.

Caitlin [00:40:25] So if it's now we have to get into asking the financial advice from a neutral.

Caitlin [00:40:31] Party. I think that that'll be our next episode.

[00:40:34] We need a mediator.

Music transition by Bad Bad Hats

Sara Did you have a question about finance or investing? Send it to us in an email or voice memo on our website. Womenontheverge.com.

Caitlin Hey, we want our listeners to know that economic abuse can be subtle, but it's a serious form of control. Watch out for partners who limit your access to money. Sabotage your job or rack up debt in your name. If this sounds familiar, know you're not alone and there's help available. Please learn more at the hotline.org or call 800 799 safe.

Sara This episode was edited by our co-producer Kelly West, with music by Bad Bad Hats and Devmo.

 Music outro by Devmo

Devmo I know the first thing you notice is that I'm covered in gold, the flick of the wrist it could turn a hot bitch cold, to get what you want in life girl you gotta be bold. Now Imma die rich, and I know...

Sara This podcast contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this podcast will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.