Based on what you have shared it sounds like you and your wife have very different ideas how to achieve your financial goals. This overall fuzziness needs to be addressed.
This is somewhat accurate. We are on agreement with regard to our big picture goals. I think the difference is more one of personalities. DW is on board theoritically, and I do believe she is trying, but she is not naturally frugal and doesn't have the same delayed gratification tendencies that I do. When I read other case studies and the struggles some people have getting their spouses on board, I am grateful that she is as accepting of my frugality as she is, and that she sees the big picture. She is happy to drive a 14 year old hybrid, but isn't going to turn off the A/C on the way to work to save gas. She doesn't mind sticking to the grocery budget, but if there is room she isn't going to forgo a kombucha at the grocery store so we can come in under budget and throw more money at student loans next month. Frugality is a spectrum and we aren't in the same spot on that spectrum.
As I understand it you are both very young in your life and careers with tremendous responsibilities and limited retirement savings. One thing that helps me is to carefully assess all known options by objectively weighing (all the logical pros and cons) before taking any actions. Because your wife has no idea how to develop her career, or even what direction to move towards, wouldn't it make sense if she first honestly clarified her own life goals, hopes, and fears? This exercise will help her focus on careers more aligned with her values and enable both of you to work towards shared goals.
We have attempted this before. I am very much a sit down and weigh all the logical pros and cons type of person. She is not. She doesn't know what she wants her life work to be, or how to get there. We have talked about it a lot, but it hasn't produced much in terms of answers or direction.
OP you mention how you and your wife use to sit down together and write down your short, mid and long term goals. Since you have not done it recently, do you feel it might be helpful to sit down now?
I do think it would be helpful, and I will try it again. The main reason I stopped is because it was too hard to get her engaged in the discussion. But I need to at least do it for my own benefit even if she doesn't contribute much.
For example you mention your family can survive on just your income when your wife quits and becomes a SAHM, but there would not be much left for savings. In this situation does it sound prudent to place the full responsibility for your family finances on your shoulders? Another exercise is to imagine how will your finances be impacted in the next five, ten, and fifteen years if you both continue on your current path.
We talked about this the other night, and I was surprised to hear that she plans to continue doing real estate and would be willing to find someone to watch the little one as needed. I'm not sure how much time and energy she wants to put into real estate, whether she would be actively pursuing new leads or just waiting for referrals to slowly roll in. So there is definitely more for us to discuss here.
Also examine how either or both of you will be impacted if one should pass. This is another strong recommendation for you to set up a living trust, legal guardian, and obtain more life insurance.
We definitely need to address this. I have a hard time thinking about diverting money from savings/debt paydown toward a recurring insurance bill, but I know it's the right thing to do.
I think your property management expectations are overly optimistic. Try answering the following questions:
1) Are you or your wife a skilled plumber, electrician, or contractor? If not, do either of you intend to dedicate time to learn these skills?
No, and I would love to learn more about these skills, but the plan would be to hire people to do these tasks.
2) Do you already have a database of contractors and lawyers that you've already researched and vetted? Expect your first couple to be busy or otherwise unavailable.
Yes, my wife has access to vetted and recommended vendors through her job.
3) Are you financially prepared with cash reserves to cover vacant rental units? If so, for how long? Do not assume it will rent out immediately.
Yes, when we were putting in offers we had enough in cash reserves to cover at least 3 months of vacancies. We live in town with very high rental saturation though so this is not something I worry very much about.
4) How much cash reserves do you intend to put aside to replace broken essentials like the water heater, roofing, windows, piping, garage door, insulation, deal with mold, rodents, etc? What will you do if you lack funds?
My plan was to set aside 20% of gross rents to cover maintenance and capital expenditures. To mitigate the risk of a large system failure in the first year we planned to buy or have the seller buy a home warranty. Of course we would also get a professional inspection prior to making a purchase to reduce the risk of a unknown expenses in the short term. In a worst case scenario, my plan was to pull funds from my Roth IRA, but I would obviously avoid that if at all possible.
These questions may sound negative or nitpicking, but in my experience as a property manager I have encountered each of these scenarios (and worse) and they always come when the owners least expected it. The main difference between owner self managing their properties and my clients is the financial resources, time and experience. The businesses who use property managers are leveraging the time, resources, and expertise of other people. To help illustrate, I want to share with you three examples. One owner bought duplex and despite doing a thorough building inspection had cracked iron pipes under the lawn. These pipes broke during winter and flooded. Another owner, bought a condo, mold was hidden in bedrooms and closets until after the tenants moved out. This is a concern if there are pre-existing tenants. So on that note you might buy a duplex or multi-unit property but are you going to evict all of them?
I wouldn't necessarily evict existing tenants, but I would have all units professionally inspected prior to purchase.
If not, you will not completely know the existing issues in the units. I forewarn clients to expect to do repairs to any property purchased and understand during the repairs they will not have any rental income generated. Another owner a family, had a multi-unit and one set of renters sublet adding four more people not on lease to reach a grand total of seven people in a three bedroom unit; the renters partied on the roof that was off-limits (they clogging the drains), smoked marijuna, had a loud pet, and utterly disturbed the entire building and created hostility. When the owner tried to evict for just cause, the city they resided in required the owners to "buy" the renters out because they were in a rent controlled city. Bottomline, OP expect the property to have issues upon purchase and expect problems to continue for the life of ownership. Property management is filled with unexpected hurdles and all it takes is one incident to suck up your limited time and resources.
I appreciate your concern and your thoughtful reply.
Based on recommendations in this thread and discussions with my wife, I am planning to pass the CPA exam to increase my income, and pay down the higher interest of my our two student loans to reduce our expenses before purchasing a property.
However, barring a large change in life circumstances or the housing market, I do still plan to purchase a multi-family property to owner occupy and self manage at some point in the future. This will provide cheaper housing costs than buying a single family home as well as the possibility of an additional income stream in retirement.
Based on the expectation that owning a rental property has inherent risks and costly problems that come at unexpected times, how much do you recommend having as a rental property specific emergency fund either in terms of dollars, percentage of purchase price, percentage of rent, etc?
What non-financial steps (book to read, experience to acquire, skills to learn, etc.) do you recommend that someone take to prepare to be a landlord?