This week we welcome guest Lee Huffman. Lee is a banker, real estate investor, and travel hacker who knows how to hustle, and shares his experiences and wisdom earning big on the side.
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Eric Rosenberg: Ladies and gentlemen, boys and girls, children of all ages, welcome back to the Personal Profitability Podcast. I’m so excited to have you here with me for, I think this episode makes it a dozen not quite a baker’s dozen yet, but I’m so excited again, as always to have you back. My name is Eric Rosenberg, your trusty and very good looking host.
And today I have a special guest for you. Someone you might guess where I met them like some other guests, I met him at FinCon. But this guest I met little differently than the others, we didn’t meet at a networking session, we actually met at a bar. At about three in the morning, one night in New Orleans at the last FinCon, it was because my wife was up at the bar, grabbing us another round of a drinks, and saw this bald guy with a FinCon badge on. So here, you look like you’re at the same conference I’m at, and we’ve been buddy since, so I’m very excited to introduce the Huffman who is here with us, so say hello.
Lee Huffman: Hi Eric it’s great to be here. And it’s great to be with you here with all your listeners.
Eric: A little background on Lee before we dive in, he is a banker by trade that is his fulltime day job. He lives in the Southern California area. He’s an executive at the bank he works at, it’s a regional bank. And he got into the FinCon world because he has a site called Bald Finances, you might guess the name comes a little bit from his hairstyle. He has other sites as well, balddots.com, and several others that we’ll talk about as we go.
But before we get started as always, Personal Finance should be fun, so we’re going to have a beer. If you are not in the car and not at a job that would prevent that, please this is your moment to hit pause, head to the fridge, grab a beer. If you’re good and free you can grab a wine. I guess you’ll have a scotch too those are pretty good, I don’t judge. So here’s your pause moment.
Okay, welcome back. I hope you got something good and cold. I here have a Hopworks IPA. I actually live just a few blocks from the Hopworks Brewery here in Portland, it’s an all organic brewery. We call it Hub. It’s a good place to ride your bike and grab a beer. What do you have on your end, Lee?
Lee: I’m actually drinking a Heineken. Well growing up I really didn’t like that taste too much but after going Germany and picking one for the next flight fifteen and driving around Europe. We actually stopped off at the Heineken Factory, and I have a new affection for Heineken after seeing how they’re made.
Eric: I actually been, few years ago, one of my first travel hacks ever, I flew out on a trip to London, Paris and Amsterdam. And in Amsterdam I went to the Old Heineken Factory Tour in the city center. It was a really great time, I really enjoyed it.
Lee: They put a lot of effort into that tour and it’s really awesome to go visit for yourself.
Eric: And my favorite part, listeners if you ever get there, there’s a ride that you can do in the tour where you are the ingredients being made into a beer. That’s a fully interactive experience as much as they can do without boiling you. So it’s really neat and I was think of it, when I think of Heineken, I think of Las Vegas Night Clubs and European Night Clubs, coz whenever I go out to a night club with European music I wear European clothes and feel like I should drink European drinks, so that’s what I always get when I’m at a ‘boom badoom boom boom’ kind of night club. I’m almost a Heineken guy, so good choice.
Life as a Banker
Eric: Anyway, so were going to dive into the meat now. So Lee is one of the foremost experts on travel hacking that I know. And as you guys have listened before know, I’ve done a very in depth post on travel hacking, so were going to end up there and talk a little bit about travel hacking. But to start, Lee can you share a bit about your career background, how you ended up in banking and how you got to where you are today.
Lee: Sure. Even though I worked for a bank I never really considered myself as a clinical banker. To me I’m more of like a business person that’s always looking to find better ways of doing whatever is being done and trying to find a ways so dropping come down to the bottom line, while that’s saving money or increasing revenues. So it kind of fits the overall perspective, what we’re doing here on the website as well as what I’m doing with my career. I actually start working from my dad’s law firm, when I was fourteen years old doing an accounting. So that’s the, you know the exciting career on the accounting side there, but..
Eric: Did you decide after a high school career in accounting to not do that for your adult career?
Lee: Yeah. I actually took a couple of accounting classes in high school and I did so well in the first class, that I took it again the second time. Well, it was the advance course the second time, but I did so well that the teacher never even bothered me. And I would basically sleep in class and I was almost like a tutor for everybody else. They would wake me up and ask me a question and show them how to do whatever key transactions they’re trying to do, and balancing the debits and credits and I go back to sleep. And because I basically had almost a hundred per cent score in the class all the time that the teacher never even bothered me. So that was pretty awesome.
But during college, I took Information Services Class or Information Systems Class and I learned Excel for the first time. And this is obviously way back in the day probably in 1994, when computers weren’t as prevalent as they are today. And my dad was a bankruptcy attorney and he was working on a case for a client who had some documents that were due at the courthouse on Monday. And wouldn’t you know that the people who work at the company that he was representing, they went home it was five o clock, they said “See you later, I’m out at here”. And he was kind of freaking out because he needed some documents done. And so I was like, ‘I just took this accounting class and excel class I can probably do whenever you need done’. And I basically replicated the format, to basically show clients needed to repay their debts over the course of like a five year period. In the bankruptcy world it’s known as plan reorganization and a disclosure statement. And so I basically spent the weekend doing that.
And that was kind of like my first business was born. I started working with my dad’s bankruptcy clients, and then I ended up going out and getting a bunch of clients on my own as well. And the whole process evolved in to doing business plans for clients looking for debt and equity funding. And it was really interesting time; you know the dot com crash hadn’t happen. So everybody with a wild hair, at the booty, was coming up with all these crazy schemes and ideas of how to make money off of nothing. And you know, things were pretty good for a little while and then obviously the dot com crash happened and that business dried up like considerably. So my partner and I, we split up. He went to go work for the family business and I went to go work in the financial planning world.
I’ve always been interested in investments and I’ve always been trying to steer my friends towards spending less and investing more. So I figured okay well I’m already talking about it to my friends all the time I might as well get paid for it, right? And I did that for probably about a year. I realize that I was working more hours for that company and making less money than I was when I working for myself. And you know, I’m really tired of putting in all those hours and not really seeing much out of it. The financial services industry, they say, you need to have like another spouse who’s working with you, or you need to have pretty good amount of savings in order for you to build up your business and really be able to make a good income of out of it. You’re really need to be in it for let’s say three to five years in order to really make a substantial income. So there are a lot of washouts like me and a bunch of other people that started there. We just lasted for a year or a lot of them even less than that.
So my friend basically recommended that I go work for a bank. I never really even thought about that and I said ‘Okay let me give it a try’ and I became a personal banker where I was able to bring a lot of my clients over and still be able to provide all the investment services. But at the same time, offer more well-rounded financial plan for them by being able to help them with loans, you know, mortgage or home equity line of credit, or credit card, as well as their banking needs, like a checking account, savings etc. So I look at it like way to evolve and be able to offer better services for my client’s that I run over.
Making a Difference in the Banking Industry
Eric: Then how did you go from personal banker to the position you are in today? Did you just pick a lot of button and press them ‘were going to give you a fancier title’?
Lee: Yeah. What I did is I started, working in a branch was not for me, you know, I just didn’t want to be in that situation day in and day out, and so I said ” Okay what are the two things that make banks the most amount of money?’ And it’s the investment side and business banking side. And, coz business banking generally larger transactions, larger balances.
Eric: All these fees
Lee: Yeah, lot of fees.
Eric: If you never opened up a business checking account before and you’ve only ever done personal accounts when you start, and I’ve talk a lot about freelancing, starting a freelance business or side business, it was a wakeup call for a lot of my friends like, ‘well you’ve got to pay all these fees to have a business account’, even though I do the exact same stuff as a personal account.
Lee: Yeah. It is pretty crazy how that works. But generally you know, so what I did I focused on a business side and I did really well. I was actually, at that time I was working for Citibank and I was the number two business banking officer in the West Coast. And unfortunately, there wasn’t a career path available for me there and so I went to Bank of America. And was basically doing the similar type of thing, working with clients that were two to twenty million dollar revenue size and they had balances that are a hundred thousand dollars or more. And I think it just really at that point I was kind of burnt out on a sale side and so I wasn’t putting all my effort in, and just some other things that happened there you know, I had an assistant, it was kind of like a revolving door with a number of people that were kind of helping me out. Things just didn’t work out and I was only there for a bit over a year. And at the time the economy was improving and I really want to get more on the strategic side of banking.
And so, I was fielding calls all the time coz you know, whenever you are in the sales side, recruiters call you constantly, coz they’re always looking for a good sales people. And I, you know, every time I get a phone call “oh man, another bank? I really don’t, that’s not what I want,” And I almost didn’t return the phone call to the company I’m working for today. It’s another bank, it’s another sales job I’m sure. And I was like ” hey you know what, if you don’t try it, you never going to know, you’ll always going to question.” And so I returned the phone call, I gave him a call and started talking, started describing the position that I’m in. And was like “wow! This is fantastic!” You know, there are all these different, fancy titles for things, etc. but effectively I’m like the Divisional CFO. So I managed all the finances for the areas of the bank that I managed. And so, I’m basically the liaison on between the line of business I support and the CFO and the Finance Team. And I’ve been doing it now for the last ten years. I supported almost every area across the bank and it’s been really fun being at a bank that’s the size of we are, and the midsize verses like a conglomerate like Chase or Wells or Bank of America, because I can do things that actually matter that actually impact the performance of the bank. You know, if I was over at Chase or something like that, at a position I’m in, or even on the sales where I was before, if you did that lets say, three hundred times your goal, so it should be just fantastic right. It just wouldn’t be a blip on the radar. And they’re just so big.
Eric: Drop in a bucket.
Lee: Yeah. I’m interacting on a daily basis with the executive I support. You know, I’m one step away from the CFO. You know those types of things, so I just, I think money’s nice, but I think just kind of the personal fulfilment of knowing that you’re making a difference, really kind of head home for me, that’s why I’ve been there for last ten years.
Eric: That’s great. I can definitely feel that you like to make a difference with your job. Actually my first job at the school was at the bank. It lasted only about six months, I was on the retail branch side and that was definitely not for me. It was more than the hours, it was the culture. It wasn’t the bank I actually really enjoyed the banking part, working with clients helping them with all their needs, that was my favorite part of it which is what lead me to starting my first finance blog, was that experience. So the personal finance part I loved but the seven to seven was not fun.
Lee: Wow, I mean you got lucky with seven to seven. I would’ve actually enjoyed those hours, coz I think I just needed more hours to be able get everything done. When I first started in banking, the bank I was working kind of fell, which is now been bought by Citibank a long time ago. When I started there, I needed more hours to call all of my clients to be able to do a lot of things, to be able to help transition over to the bank, and they made a big deal ‘Okay, were going to do a calling night on Tuesday.’ so ‘okay great! Let’s do it”. And it was 5:45,’Okay, everybody wrap it up!’ and the bank closed at 5 and so we spent about 45 minutes phone calling. What do you mean? I’m used to calling until 9 o’clock at night when I was working for the financial planning company. And they were like ‘No. Sorry, we only have a limited amount overtime and 45 minutes that’s about all we can offer you.’ And so I went out to the parking lot, to my car. And between working for the financial planning company, working for myself all those years, and working for my dad, I’d never had normal hours; I never had a forty hour or work week. And so I literally sat in the car, and I didn’t know what to do.
Eric: Did you go home?
Lee: I didn’t know where to go. I was sitting there, ‘okay I have options, I have things I could do I just don’t know what to do.’
Eric: It was still happy hour at 5:45.
Eric: Fifteen more minutes you got to have price beer.
Lee: Exactly. But not, it was just an odd, odd experience and for people like us that are used to working a lot of hours whether that’s for yourself or for the man, you know. When you’re led out to the office at five o’clock and you’re just kind of not knowing what to do it’s an odd experience. I actually figured out things to do, obviously but it was a tough transition for me at first.
Eric: I could see that going. Well then it’s a big transition I think going either way from being self-employed to having an employer, it’s probably a bigger culture shock, so the other way too, if you’d had the regular hours then all of the sudden you’re out on your own doing something. Either way you have to totally revamp your whole work lifestyle and how you do things, it’s a major shock. Yeah, its sounds like you landed on your feet, you’ve done really well, so that’s awesome.
Lee: Yeah, thank you. Now I actually have problem where I have too many things to do and not enough hours in a day so, I only sleep probably about five to six hours a night.
Eric: I wish I could get by on that. I have to, I actually have a pregnant wife right now so she is more tired than usual, but we’re generally an eight to nine hour a night sleep household. I need that to function that at full speed. I need my eight hours. If I sleep less than seven, multiple nights in a row I start to fade out. By the end of every FinCon I’m running ragged. I usually come home sick. Every big trip I’ve taken to Europe I’ve come home with a nasty cold, it’s no fun.
Lee: Now first of all congratulations to you and your wife, we just had a baby ourselves. And you know, and I know what you’re going to be going through.
Eric: I don’t know yet, I’m going to find out, in about six months.
Lee: The good thing for your wife’s energy level the, first trimester is like, obviously you got all the baby making going on down on their tummy, and you know, it really does up the energy for the first probably half the pregnancy. And then things start to ease down. And then the last couple months before the due date, that nesting phase will set in. And she’s going to have so much energy because she is going to be a motivated mommy, to make sure that the bedroom is all set up for the baby, and like everything is all set and done so that way she doesn’t have to worry about anything when she gets, comes home from the hospital. So prepare yourself. It’s going to be a hundred and eighty degree difference from where she is today.
Eric: Alright now the baby room is set up as a photography and video studio that I’m using for recording things for the website, so that’s, I’m about to lose my awesome space to the baby. But I think it’s a worthwhile trade.
Lee: Yeah. That’s a good trade.
On Being a Real Estate Investor
Eric: So, just a couple minutes ago you were mentioning how you have all of these other projects to work on when you get home from work and it’s impeding on your sleep schedule. How did you get started with your own projects on top of your day job?
Lee: Well, I think the main thing is I always try to say, you know, I want multiple streams of income, I want to figure out ways I can’t try to retire early. And so when I sold my house back in 2006 to be able to buy a house for my parents where they can somehow retire. Living in California house prices were really inflated and we’re luck actually to sell the property when we did. And it wasn’t because I knew the house price were going to fall, it was really more of my dad’s health starting deteriorate and so I said ‘hey you know lets sell the house and move here to North Carolina where my brother lives.’
So we were able to sell at a really good time, bought a house for them, and at the same time, you know I was looking around and one of the house was that we contemplated buying for them actually was a rental, and already had a tenant in it. And so you know, when I was buying their house I said, ‘well you now I wonder if I can make it work or I can actually get that house also’ and then that was my first rental house back in April 2006. And so I bought that house, had my parent’s house. My dad actually passed away, little bit over three years ago. And then, so that the next phase of that property kind of went in place, where we turned that property in to another rental.
Eric: How many rentals have you had over the years now?
Lee: Just those two at that time. And then I bought another one a little bit over a year ago. And you know how it is today, you don’t really need a realtor at many times when you’re buying a property, coz you do all the research yourself on online, whether it’s Zillow or Redfin you know, those types of websites or apps on your phone. And I was searching and somebody gave me a phone call, and they basically say, ‘Hey I can help you show houses’ and I was like, ‘Okay, whatever.’ So I signed up with her and bought my third rental cause I’ve saved up a lot of money for traditional twenty – thirty per cent down payment on a rental.
When you buy a rental it’s not like buying a house just for yourself. You know, when you buy a house for yourself you have FHA Loans, you have always like low down payment programs or even at the most, like they require you to put a twenty per cent down payment, right? If you want to get rid of the mortgage insurance premiums. But when you’re buying a rental property in most cases they want you to have thirty per cent equity. And so I saved up enough money, bought that house and I really like the presentation that the selling agent was doing. They presented the house really well, both online and on paper and things like that. The house was really fixed up really nice so I started talking to him, and my partner, they went with me to the Heineken factory, he have been badgering me for a little while, ‘Hey, let’s do some business together, lets figure things out’ and so ‘okay’.
Things just kind of aligned where I met the real estate agent, my partner was ready to kind do some investing with me, and so we end up of buying our first two flips that started. We closed on them in July of last year and basically kind of how our business was born, so to speak, for doing flips and rentals. Coz with that you can buy a house that’s really cheap. The one that we turned in to rental we bought that one in January. Bought it for fifty three thousand dollars, we put seventeen thousand dollars into it. It appraised for a hundred thousand, so we forced thirty thousand dollars’ worth of equity and now it’s rented for eight hundred and fifty thousand dollars a month.
Eric: That’s great. so have for any of your fixed ups, have you sold any of them yet to see what you can get on a profit, or you hang in on to them and do the cash flow thing?
Lee: We kind of do both. We buy some properties that we know that we’re going to sell, and then we buy other properties that we know we’re going to keep for a rental. Coz we do a flip for a rental or a flip for sale, it’s two different types of rehabs that you’re looking at doing, you know. If you’re doing something that’s for sale, you want to be lot prettier, and things like that. If you’re doing for, to keep it as a rental, you’re not going to be as quite as flashy and you’re more focused on sturdiness. You want to make sure that it’s going to last at the several tenants , or several years, so that way you’re not having a constantly do more repairs whenever somebody moves out or every couple a years that things just wear out after a little bit of wear and tear. We did sell our first two, earlier this year, the first was sold in January, the second one closed in March. And unfortunately, we didn’t make that much money off them at least we were positive, we made money on both of them.
Eric: That’s good. Did you get, what was your hourly pay rate? For all the work you put in?
Lee: Not very much. Probably, for the amount of hours I put in, probably could’ve work probably could’ve got paid more working in McDonalds. But, well of its, you know as you’re familiar, when you’re first building up your business there’s a lot of things that, I was looking for the project, but there’s also lot of things we’re just doing for the general business and strategy of how were going to make this a long term business. So I didn’t really segments out which hours are which but my partner and I, we meet once a week for three to four hours at a time. Just talking about strategy and talking about what we’re going to do as far as being able to rent up business even more, so
Earning Through Flip Properties
Eric: Where there any huge lessons learned on these properties that you will take forward into the next one?
Lee: Yeah. We’re actually almost finished with our second set of flip properties that’ll be closed this year in June and be up for sale hopefully before the end of the month. But the main thing is like anything in real estate or any of the type of business you make a lot of your money when you buy in. We just didn’t have enough experience at that time, to really know what was the right price to buy those two properties. And you have to be diligent, you have to take the emotion out of it. And if the numbers don’t work, even no matter how much you may love that house, if the numbers don’t work it don’t work. This is business this isn’t romance. And you know what, looking back at it, we may or may not have actually done one or both of those properties if we had known. If we used the same philosophy we used today that we used back then.
Eric: It’s good to know. So for your next two are you thinking, how are things looking you think you’re going to be like those guys on TV, making seventy thousand house? And where do you think, what’s your gut telling you?
Lee: We have a lower threshold partly because we’re not buying houses that are two, three, four hundred thousand dollars, you know. The houses that we buy are generally like the forty to sixty thousand dollar range.
Eric: Where do you find that forty to sixty thousand dollar house?
Lee: North Carolina.
Eric: That’s say I know you live in Southern California, so say I don’t know of anything in your part of the country that you can find for forty thousand dollars.
Lee: No, you won’t be able to buy a room on somebody’s house for forty thousand dollars.
Eric: You’ll make it a shed in a backyard for forty thousand a year and rent.
Lee: Exactly. So we’re doing well on those. We actually have three properties that we’re doing at right now. There are two that were doing for flips, that we getting bottom forty to sixty thousand dollar range and they’re going to sell for any more for reaching like a hundred to a hundred and thirty thousand.
Eric: That’s a good return on investment.
Lee: You have your rehab cost and so like that so I mean our target is in like a fifteen to twenty thousand dollar range. And you know, as far as the amount of capital we had to put in it’s actually a pretty good rate of return. So when you factor in the financing from the bank, and those types of things.
Eric: Is your business partner out there in North Carolina, managing the day to day?
Lee: No, he’s actually here in Southern California too. But my brother lives out there and so if I ever need somebody to go drop in on a property he’s more than willing to do that for me. We built a really strong team between our insurance agent, our realtor, property manager, attorney, mortgage broker, a contractor, things like that, so you know, I think we have a pretty solid team now. And I think we’re going to do well on the two flips that were doing. And the rental which would be the second rental that we’re on together, and fifth one that I own in total, that one again we’re buying it, I think like fifty seven thousand, something like that, that we put in eighteen thousand in rehab, so that’s seventy five thousand total and it’s going to be worth about one fifteen. And when we’re done it’ll rent for about nine hundred bucks a month.
So really your goal when you’re doing a rentals, is between like a one hundred and two hundred dollars a door. So for every door, when and they say door because sometimes you’re buying a multifamily housing, you got duplex, triplex, fourplex or even something that’s bigger than like an apartment building. There’s a certain per door number that you really want to achieve and in the market where in one hundred or two hundred dollars door is pretty favorable. Out here in California if you’re buying something that’s you know, five, six, seven, eight hundred thousand dollars, a hundred dollars really doesn’t do much for you. So you have to obviously scale the numbers based on the market you’re participating in.
Eric: If you were going to talk to somebody who is ready to their first ever flip, what would you tell them by the steps to get started?
Lee: Main thing is, having a good team that you can trust, coz obviously you are putting in a meaningful amount of money into that even with the bank financing, like we have financing a lot of times where the bank would finance seventy five per cent. So you put in twenty five per cent of the project cost. So you obviously need a good team that you can trust. And most importantly like I said earlier, don’t fall in love with the project. The numbers are the numbers, and so if the numbers don’t work, then you have to pass, no matter how beautiful the house is.
Eric: Have you bought any of those super cheap foreclosures at auction or have you always gone up and upside of houses and look for houses that were on the market from a regular seller?
Lee: Everything we bought so far has been on the MLS. There’s a term called whole selling, and we’ve been approached by couple of whole sellers, they said they find people that are looking to sell their property. That’s basically there’s not a realtor involve and so they’re looking to sell their property, and this person kinds of acts like a realtor, but just takes like a flat fee from the buyer. And so a couple of them have approached me, we haven t found anything yet, has been too good of a deal, and so, but so everything so far we bought off the MLS. But were going to kind of ramp up more efforts towards buying something directly from somebody because you know there’s a lot of times people just need help. They’re in a bad situation, they want to get out of the house and for whatever reason it’s just not in a good enough condition where a realtor really want touch it because in some of these houses you buy, you didn’t really want to walk in them, you know, they’re in such bad shape and a realtor, that’s worth a salt, isn’t going to want try to market house that looks like something you see on the episode of Hoarders.
Eric: Those could be the ones where you get the really big returns, too.
Lee: Yeah, exactly. Because again we can go in there and fix them up and enforce the equity. And anybody else can do that too. It’s just, most people don’t have the resources or the one take on the risk, you know, or they’re busy with their life, they’re busy with their family, they’re busy with their job, busy with their kids, and they don’t want to time away from that. And so we provide the service where we find the house that needs some TLC, and we’re going there to fix that up and make a really a nice home for somebody to make some great memories. Our kind of our motto is a better community one home at a time.
Eric: That’s great. That’s a really nice way to think about it. Not thinking about it as let’s say, how many dollars I can grab but helping the community and making a few bucks as you do it, [exactly] that’s an awesome philosophy, I like that.
Lee: You want to be a win, you know, for everybody
Eric: You don’t want to be a slumlord. If you’re having a rental property you want them to have a nice place to live.
Lee: Yeah. Especially with the rental properties, the philosophy is, I really make them just a little bit nice than I have to, because the last thing you want to have in a rental property is vacancy. Because if there’s a vacancy, you’ll have all the expenses and none of the income.
Eric: Right. My in-laws they have done a lot of real estate, that’s been there career. They actually have an out of state multi-unit building that they haven’t, I know when they got it, they were able to get a better deal on it coz it have so many vacancies and they put into the time and the work and got a great property manager out there. And now it’s totally filled up. So it’s a story that any real estate investor could hopefully find a good real estate investor. You find something and increase the vacancy or decrease the vacancy, increase the value and you’ve earned both equity in your property and some cash flows.
Lee: Exactly. So I do a lot of real estate stuff on the side, you know obviously that takes a quite a bit of time. Like I’ve said earlier, I have a baby girl that was born in March and so she’s eleven weeks old now. And I have a four year old son. So its great being able to spend time with them. But one of things that I also do is, like you mentioned earlier, is the BaldThoughts.com, is my website. It really started out initially as my kind of my thoughts on everything, whether it would be finance or sports or travel, coz you know I have a lot of interest that way. But I realized that maybe not everybody wants that, not everyone wants to hear all the different topics and so I basically kind of segment to this sites at some point, and that way my Bald Thoughts is more of my travel, Bald Finance is the personal finance and then Flight to the Game is focused on sporting events and codes to be able to get pre-sell tickets for different events whenever I can get those.
Full-fledged Travel Hacker
And so really, I’ve been involved on the travel hacking side for a long time, I thought that I was sitting on telecode, and having the Southwest, J Southwest Card and the American Express SPG card. I’ve had a companion pass for about eight years now, nine years. Pretty much the entire time my wife and I have been dating and now married. So we travelled all the time, and it’s been fantastic, coz with Southwest card you can easily earn the companion pass. And it’s great, wherever you fly your companion flies for free. Now all you have to do is pay the nine-eleven fee, so basically five or ten bucks.
Eric: I think its five fifty per leg now, that’s how they do it. And my wife, we have that one too. For those who have not heard of this still, there’s a really cool trick you can do to get all of these Southwest miles all at once. Which we’ll get more on how these bonuses work in few minutes, but for this specific deal, the way Southwest works which is different than a lot of the other airlines, the miles that you earn from the credit card including the bonus, are qualifying miles towards the companion pass or towards the premium status. So if you can earn a hundred and ten thousand miles within a calendar year for the entire calendar year complete, plus the next year, you get a companion pass. You designate one person, you can’t just every flight pick a different friend to go with. You can change it two, three times a year, so you can change it, but it’s not how it’s really designed. But there are two credit cards you can get at the same time both the personal and the business Southwest card, and each come with a fifty thousand mile bonus if you spend two thousand dollars within the first three months. So right there if you spend four thousand dollars within three months, you have a hundred and four thousand miles, and to get the companion pass you only need a hundred and ten thousand, we say only, but at that time point it is only coz your six thousand miles away. And you can do that through credit cards spend. You don’t have to spend real dollars to spend those dollars, you can do something that’s called manufactured spending, and actually Lee’s an expert on this as well so rather than me haggle the conversation, let’s dive in.
Advice for Newbie Travel Hackers
Let’s say so, so Lee if you were brand new travel hacker, the side of this Southwest deal is the one you want to try to get started, I’m into this, a hundred and ten thousand miles, so Southwest is easily a five six round trips flights, plus you got to bring your companion along. So that’s twelve round trip flights. That’s real money that we’re talking, two three hundred dollars a flight you can do the math that adds up quick, that wouldn’t be expensive if you just paid for it. But we don’t have to pay for it coz we’re smart travel hacker. So, Lee if you were doing this deal and you wanted to figure how to spend that last or let’s say the whole ten thousand dollars you have to spend, what would your strategy be do that?
Lee: Well first off, you put everything on the credit card, whether be your utilities, your auto insurance, your home insurance, all these other things, cell phone bills, all those things. Realistically those add up to be a pretty significant number, you know, when you actually put it on a credit card. One of my friends say, about a year and a half ago, I got him in to doing the travel hacking and he only want to do one card at first because he was really concerned about hitting a minimum spend of about two thousand dollars. And I said just put all your expenses on there but everything you spend, whether your gas for your car, anything you normally spend with cash or your credit card.
Eric: Groceries, that’s a big one
Eric: Bar tabs if you’re a young partier.
Lee: Or what you do is you pay for the tab and get all the cash from your friends and then you take the cash and pay off your card.
Eric: I figured that one out earlier. I had to go with these dinners with ten friends, and rather than split the bill I’d make everyone give me money and I’ll put in my card, and all of the sudden that was five hundred bucks.
Lee: Yeah, coz most of your friends if they’re not in on the travel hacking or the personal finance side, most of them are carrying balances, right? And so last thing they want to do is put more money on to their credit cards. So that’s why they’re using cash a lot of times. And so, you know, if you’re smart, you’re paying off your credit card every month. And so you’re like, ‘Hey just give me the cash, you know that you’re going to be responsible enough to pay off the balance.’ And everything works out great coz you’re getting all the points not only for your meal but everybody else’s meal. And so it works out pretty fantastic. But realistically, like my friend, he was really concerned about being able to hit that minimum spend. And after about a month he’s like, ‘Oh my God, I have almost hit the entire minimum spend and I still have two more months to go.’ And so I said, ‘See that’s what I was telling you, maybe you need to do two cards, or even three.’ So realistically, it is pretty easy even without having to do manufacture spend to be able to hit minimum spending on one or two cards over the course of three months.
Eric: Yeah, the one that I’ve ran into trouble with, I’ve done a lot of manufactured spending, I think my record was five credit cards in a day, four credit cards in a day. One card I got was the American Airlines Executive card, they have a one point a hundred thousand mile bonus. But if I remember it was ten thousand dollars in three months you have to spend. I’ve got one card for myself and one for my wife. So all of a sudden we had to spend twenty thousand dollars in three months. That one was a little bit trickier, put some live work in on that.
Lee: Yeah, exactly. And we do multiple cards like that, or do these cards with this really high minimum spend limits. At that point in the manufacture spending really is having been official for you. And so like Eric was talking, what you do is you go to like your, a gas station, like sometimes they’ll have them, on grocery stores, things like that, or even the mall, there’s a mall near me, the Brea Mall, where they have the gift cards for sale as well. You go up there with your credit card, you buy the gift cards, unfortunately they’ve been raising the fees they’ve been having too many travel hackers buying their gift cards. It used to be $3.95 and now its $5.95. So you’re spending about a little bit over of one per cent of the cost of the card. But if you’re doing it towards a big bonus like that, it’s definitely worthwhile. So, you’re spending a little bit of money on the transaction fees. And then what you do is you take your gift cards and there’s a product that’s free, it’s called the American Express Blue Bird Account. And you can take your gift cards that you buy, that are like the Visa gift cards from a certain company. You take them and you go to Wal-Mart, and basically you can load the gift cards on to your American Express Blue Bird card at the financial counter. And you can do that, I think it’s now only a thousand dollars day sometimes you can do up just like, twenty five hundred in a day.
Eric: Just a little tidbit for people who don’t have or if you have a Wal-Mart near you or Neighborhood Market, it’s another Wal-Mart store. You can, they often have that financial counter that Lee was just mentioning, if they don’t, coz not all stores do, some have a Finance Kiosk, that is the easiest place to do the unload out of the Blue Bird card, so it has all the same functions and features. You don’t have to explain to someone what you’re doing. But a lot of people like ‘what do you mean you want to put two hundred dollars on to this card five times?’ You know, that some of that stuffs seem so kind of funky, so you can do it yourself. If they don’t have that, which I’ve run in to, any cashier at a Wal-Mart can do it. They won’t all know how but sometimes they all have the ability at every Wal-Mart register.
Lee: Exactly. The most important thing is don’t tell them that you’re using a gift card, tell them it’s a debit card. Because those gift cards that you buy are effectively a debit card. And if you tell them that it’s a gift card, sometimes you know that kind of, the alarms go off in their head like “Hey wait a minute, maybe this guy is trying to do something weird”.
Eric: But by law, all Visa and Master Card gift cards that, they can’t just be a store card, like an American Eagle card can do this, coz you can only spend it there. But the Master Card and Visa debit card gift cards by law, have to be pin number-able, that’s not the word I made it up. They have to be pin eligible. So you could potentially go to an ATM and type your pin number and get some cash out though. There’s usually fees and sometimes there’s locks on that. But because of have the debit card system works, you can use that pin number just like you had on ATM to or, when you use your debit card buy gas or groceries whatever you chose to buy which now you just turned you don’t do that, here’s the credit card to get the miles, as long as you won’t carry your balance and you’re responsible, coz that totally washes out that value of the free miles if you’re spending, you know fifty dollars a month then interest. But you can take those, you can use that debit card pin numbers so just like Lee said, you tell them it’s a debit card and swipe it, but you do it in incremental dollars and knowing the balance on the cards, you don’t, obviously you can’t over draft the card, it would just decline it.
Lee: Exactly. Sometimes, like you said, sometimes not everybody has a Wal-Mart nearby. There are certain places like a grocery store or like the small Mom N Pop liquor stores, they will actually use the gift cards and you can buy money orders with them.
Eric: I have done that. My most recent travel hack manufactured spend we did that, and our local chain grocery store let us do that and that was no problem. They were very nice about it, doing it with the, doing it there the money order cost I think was a dollar per five hundred dollars, so we had to do couple of it, cost two – three bucks to unload them all and we were good to go.
Lee: Exactly. So when I do the manufacture spend, coz the Bluebird card will only allow you to do the maximum of five thousand dollars per card, per month, sorry. And whenever I do my runs, I show up with $3000 worth the gift cards. I have a thousand for my wife, a thousand for my card, and then a thousand for a money order. So I hit up all three every time I go so that way it makes a little bit more worth my time than just showing up for one thousand dollars.
Eric: Can you open a card under your sons and daughters name, not credit cards, I’ve heard of people doing that fraudulently, I think you can open Bluebird cards for them.
Lee: Now the Bluebird card, you have to be eighteen I believe to do that, but you can you know, your aunts your uncles, your mother in law, your parents, and those types of things, they’re obviously easy to do. Obviously since you’re putting your money on that card, don’t give them access to it. Coz obviously some people like to spend your money and you don’t want that to happen. But if they’re getting some of benefits, maybe you’re planning a trip and you’re going to use your miles to take you and your family and like, I’ve taken my mother in law some trips, if they’re going to receive some of the benefits, hey this is their contribution to helping you be able to get enough miles and points to be able to book that really nice trip.
Eric: My friend who first taught me about travel hacking and how it all works, there used to be a trick, that Amazon shut it down, you can use Amazon payments to set one thousand dollars between two people each way using a credit card for free each month. And he had Amazon account under his name, his wife’s name, his kid’s name, both of his parents’ names, I think his sister’s name and some of his wife’s family, but yeah, eight, nine, ten accounts. Because he did at that two thousand dollars just initially per pair and with a web of eight accounts he was making like twenty thirty thousand miles a month on that, he took his whole family to Israel, first class.
Eric: That was pretty sweet.
Insider Tip for Effective Travel Hacking
Eric: So if you’re interested in all this, before we go, we had this idea before we got on, to do the first ever live podcast without much planning, App-O-Rama plan. So with an App-O-Rama is I mentioned one time I got four five credit cards in a day, there’s a trick with this travel hacking credit cards stuff if that’s the route you want to go to get all the miles which is what I’ve done, what Lee’s done and many other people. We can’t tell everybody in the world about it, coz then everyone’s on to it and they’ll shut it all down, so be judicious I guess I’m sharing on the podcast so a few people hear it. I hope all of my listeners really do value this and enjoy this and get some good value from it.
So there’s the way credit reporting works, the banks that you get credit cards from report to the big credit bureaus, there’s three of them, usually once a day. At the end of the day, they do a big batch, so they’ll say these are all of the applications we had today and that’s considered a hard hit on your credit’s score so that your credit report so, when you go on your credit report, other lenders will say, ‘Oh they just applied for a loan from Chase’. You know, they don’t know what it does but it’s a credit card, it will show application some Chase, that’s what they’ll see. You can go on your credit report and see that all of your applications in the last two years, you’ll see that. So if you do one a day, by the third or fourth day, the banks will look at your report and say “so you’ve just applied for three credit cards in the last three days why did you do that, why should we give you a credit card, that’s a risky activity.’ So what people do is they applied for all of the credit cards in one day before it hits the system, not that you’re doing anything bad, this is legal, some people might say its gaming the system, but it’s within the rules and confines of the systems so you’re not breaking any laws or doing anything wrong. But if you apply for them all and get approved on the same day, they won’t see all the other applications. And as long as you’re not going to go trying to get a new mortgage in the next six months two year, it won’t get funky, it won’t hurt you in any way. It lowers your credits score a tiny bit but not materially having all these hits happen and all the new accounts.
So I have been in the market for a new App-O-Rama, have not done one and it’s been a while my mileage balance is running a little low after going to Spain. I think I had six trips right now, I actually booked one today to Chicago, so my miles are running low. Lee, what would you do if you were me today , I haven’t told you what credit cards I’ve already have or have had, how would you approach this today if you wanted to a big App-O-Rama and get tons of miles?
Lee: Well, the number one thing before you know, you start is you want to know where you want to go. Like what’s your goal with the travel. Some people want luxurious travel, some people want just economy. They just want to be able to go to this many places as possible. So kind of knowing how you like to travel and where you want to go are two different questions we really need to kind of understand. Personally I do a lot of domestic travel, so Southwest is fantastic for me especially coz with a companion pass. But I every so often I like to do a really nice international trip and whenever possible do it business class and so what are your thoughts on that?
Eric: Sure. So my original plan for this Spain trip was to go business class but we booked it a little too late and all those seats were already taken so we had to go coach. But let’s I wanted to do a Europe trip business class from Portland, where I live, or we don’t have a big hub which is really sad, we have an Alaska hub, pretty small.
Lee: Sure. So whether you’re from Portland or anywhere else with American Airlines they’re probably one of my favorite airlines to use for international trips, because they have really good availability for their, we call it the Mile Saver which is their discounted reward flights. So if you want to go to Europe, and I did this few years ago, with me, my son, my wife and my mother in law, we went just at the tail end of the off peak, so it was at the end of April, and the American Airlines off peak for Europe is from October 15th to May 15th. So really big window for those off peak awards and essentially everything is half price. A normal one way ticket is forty thousand miles, during the off-peak is only twenty. Same thing with the business class it’s normally a hundred thousand miles, you can get it for fifty thousand miles. And so fifty thousand miles is definitely easily achievable through a number of different credit cards from Citibank, on the American Airlines side, and so that’s one of the ways I would go to earn the miles.
Building Your Mileage Balance
Lee: There’s actually kind of a handful of cards also which really helps if you’re trying to build with your mileage balance. Let’s say, you want to be able to take you and your spouse and maybe children or like a mother in law, something like that. There’s an American Express version from Citibank, there’s a MasterCard version, and there’s the card we’re talking about earlier which is the Executive Platinum version. And so each one of those generally will offer about fifty thousand miles. I’m not sure right now if they are running the promotion you can get to two thousand miles sometimes it bumps it down to thirty thousand, so you may want to look on the website to see if there are any offers for fifty thousand miles on the App.
Eric: So if you are new travel hacker, like Lee just said, sometimes they’re lower sometimes they’re better. So look, there’s a bunch of blog all about travel hacking, so you can easily go out there and find what historically has been available and what’s available today. And if you see a big difference, negatively today from what has been, you might want to be patient, wait, coz some of those deals come back, sometimes they’re annually or quarterly. Sometimes if you jump on a deals really high, they were just a deal all of it that ink cards from Chase we’re doing sixty thousand mile bonuses instead of that regular fifty, its perfect time to jump on and try it.
Lee: So if you get one of the Citibank American Airlines, whether it’s a MasterCard or a Visa version, those generally will offer anywhere from thirty to fifty thousand miles and they’ll waive the annual fee the first year. It’s generally the offer that’s available. The executive platinum one, which has a really nice perks, that one has a really hefty fee of $450.
Eric: Yeah. I paid that. Only one year.
Lee: But the good thing is you can actually use some things to offset that $450. Which, what I did is, I bought I went online or even called and I bought gift cards in the fifty dollar increments from American Airlines. And then I called up and used that as a critical back fee or a lot of times you don’t have to tell them just call up and say, ‘hey, I have a fee on my account from American Airlines, would you mind waving it?’ and coz with that Executive Platinum card you can actually get a $250 per calendar year, waived.
Eric: They call them Statement Credits.
Lee: Yes. So, that’s the way to offset that $450 on that card.
Eric: Great! Yeah so that’s you guys have, that’s one strategy out those American Cards, it’s awesome.
That One Travel Hacking Card You’ll Need to Keep
Eric: We’re running low on time so before we go, one last question, if you had only one travel hacking credit card, you had that get rid all of the others, you only have one to keep forever, what would it be?
Lee: I’m a big fan of Southwest so I would keep that one. The reason for this because I save so much money on all the flights by having the companion pass. Like for example at the end of this month we’re going to Puerto Rico for a week. My wife is going to fly for free. We’re going to Isla Mujeres like in Cancun, and on Labor Day weekend, so my wife will be able to fly for free. Later that month I’m going to switch and actually my partner is going to be my companion and we’re going to fly to Boston on our way to Dublin and London, so that flight would be for free. And then, we’re probably going to go to Aruba or any of the other kind of new international destinations that Southwest is offering. After they bought AirTran, their international offerings went from not existent to, now they have probably ten to twelve different places.
Eric: In Mexico, the Caribbean, and expanding. It’s great.
Lee: Exactly, so that’s the card I would keep. And that’s the card I’ve actually had for probably twelve years. There’s a lot of other values, there’s a lot of other ones but that’s the one that’s near and dear to my heart.
Eric: And my favorite, which was my second card I got for the purpose of miles is the Sapphire Preferred from Chase. That one you get double miles at restaurants, double miles in bars, included the restaurants which at the time I got this card was a lot of miles. My bars spend has gone way down but there was a point it was a lot of miles. There’s a lot of bonus opportunities there. There’s transfer partner so it’s cool with that. If you get a hundred and thousand miles there you can transfer instantly to Southwest which I do sometimes; United, there’s a whole list of Airlines and Hotels that you can use those miles for. For me that one’s been a kind of my favorite and longest I’ve had.
Eric: It was great for me. So thank you so much for being on. This has been totally interesting. I’ve loved hearing all the real estate stuff. If people want to know more about you, they want to connect with you, they want to find you, where should they go?
Lee: I’m all over social media. I have a Facebook account, Twitter account, Instagram, etc., under BaldThoughts.com. BaldThoughts.com is the website, Bald Thoughts is the handle on Facebook and Twitter and Instagram. And for anybody that kind of have some questions as for as what cards to get or how to get places things like that, I do offer a free consultation for people as far as helping them trying to figure out which card to get, it’s gonna help them achieve their travel goals. So there’s a link on my website for that if somebody wants to reach out to me there.
Eric: Great! So if you missed that site that we mention earlier that’s Bald Thoughts.com and Lee Huffman has been our guest. He’s been totally interesting and fascinating and we could go talk for hours and hours but it’s getting late and we have to call it a night. So thank you again so much. This has been fun. Here’s a virtual cheers through the internet webs of us clinking our beers. Thank you for speaking with everyone. Thank you, listeners for making it this far. And if you have any questions for Lee, if you can’t find that link or you’re having trouble with the spellings, I will link to him from the show notes for this episode, so you will be able to find him that way. And until we speak next time, stay profitable.
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