Author Topic: Have an Opportunity, Don't Know What To Do.  (Read 5105 times)

BoxMonkeeMike

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Have an Opportunity, Don't Know What To Do.
« on: January 03, 2014, 06:24:29 PM »
Hello,
My wife and I are looking for some advice regarding a secondary income source.  Here is some information on us.

+We are currently debt free except for our house (we owe 79k)
+We are 25 years old
+our current take home pay is $4,500 per month. 
+I am in school (which we are paying for in cash) while also working full time. 
+My wife works full-time as well. 
+We do not have any children.
+We contribute 25% of our income to retirement
+We live in the Midwest and have a pretty low cost of living
+We have a 6 month emergency fund in savings

We have been given the opportunity by my parents to use their line of credit to fund or purchase a secondary income source for us.  They are willing to let us borrow up to 100k for this.  They gave my older brother the same opportunity and he was able to quit his "day job" and now runs a successful used car sales lot. 

We have been looking at many different sources: flipping houses since I am pretty handy, renting houses (which makes my wife nervous because she does not want to deal with troubled tenants), purchasing an established brick and mortar business, and purchasing established websites. 

We have been looking into these options due to our skill set.  I am good at home improvement, am somewhat software savvy, and really enjoy real estate. My wife also loves real estate and is hoping to get her realtor’s license in the next year.  I am currently in school for Mechatronics and also to obtain my Business Administration degree and hope to finish in the next two years.

We have known about this money for almost a full year and have been busy researching and trying to gain as much knowledge on these options as we possibly can.  However, we are looking for some outside opinion.  We are nervous to pull the trigger since this is a loan and we have worked very hard to become debt free over the last two years.  Quite honestly, we are nervous to do anything but we want to take advantage of this money and want to make it work for us. 

We are looking for new, fresh ideas and are open to all comments and advice.  If you had this money available, what would you do? Thanks.

Rebecca Stapler

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Re: Have an Opportunity, Don't Know What To Do.
« Reply #1 on: January 03, 2014, 06:36:54 PM »
Like you, I would hesitate to take on debt while you're living debt-free. But I understand the desire to start up a side hustle. I wouldn't approach it as "what can I do with this money?" I would approach it as "What can I do with my free time that can bring in some extra cash?" If the answer to that second question requires a capital investment, then I would consider the return on the investment based on the interest rate of the loan and a conservative estimate of your cash flow in your new venture.

gooki

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Re: Have an Opportunity, Don't Know What To Do.
« Reply #2 on: January 03, 2014, 06:50:39 PM »
I'n your situation, I'd buy a rental property. Much easier to take the equity out vs a business should you find it's not your thing. Requires minimal time investment so you can continue to peruse you current employment / education.

Eric

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Re: Have an Opportunity, Don't Know What To Do.
« Reply #3 on: January 03, 2014, 06:57:23 PM »
We have been looking at many different sources: flipping houses since I am pretty handy, renting houses (which makes my wife nervous because she does not want to deal with troubled tenants)

Then don't rent to troubled tenants.  Problem solved.  There's tons of ways to screen tenants to find the good ones.

Here's a relevant thread.  I'm sure there are a bunch more.

https://forum.mrmoneymustache.com/real-estate-and-landlording/tenant-screening/

jawisco

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Re: Have an Opportunity, Don't Know What To Do.
« Reply #4 on: January 03, 2014, 07:06:42 PM »
Do you have to pay your folks interest on the loan?  What are the re-payment terms?

Don't just take a loan because it is available - figure out if it makes sense for you.  There is nothing wrong with bootstrapping a side hustle and it makes a lot of sense to do it this way - this allows you to figure out if things are working before considering adding a bunch of cash.  Proof of concept.

Your brother might have got lucky - not everyone makes good choices (luck plays a part as well). 

I think you are in a great place financially and headed in the right direction.

willn

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Re: Have an Opportunity, Don't Know What To Do.
« Reply #5 on: January 03, 2014, 07:12:21 PM »
So this is a loan?

This sounds like an opportunity that could be good. But what happens if something goes wrong?  I'd be very wary of taking family loans.  Depending on the family, it can range from uncomfortable to disastrous if you can't pay it back.  That's a very nice offer but the fact is you don't need it to succeed. You're young, have a great start, no debt, and if you go mustache style, you could be financially free in 10 years either way.  I think your hesitation is wise--wiser than I was at your age.

I'd suggest if you do it, then be prepared to pay it back on time, even if your deal doesn't work. So if you buy a house to remodel and its value crashes, be ready to make up the difference out of your income.  That may mean living in a shithole apartment and eating rice 7 days a week.

So, maybe you mitigate the risk by borrowing only a small amount.

Or, maybe you could live now in a shithole apartment, eat rice 7 days a week, and increase your savings rate to 55% to save enough of your own money to fund your dream in a few years.

BoxMonkeeMike

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Re: Have an Opportunity, Don't Know What To Do.
« Reply #6 on: January 04, 2014, 08:55:11 PM »
Thanks for the replies. Yes, this is technically a loan. I guess in my mind it is classified as an opportunity because I could never attain a loan for that much to do anything I wanted to do with that money from a bank. I think the first post said it best in that I need to figure out what I can do with my free time that will make extra cash. I am really leaning toward buying an established website and running/maintaining it or get a rental house or two. Is anybody out there making a secondary income on their websites?