The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: vishalpandey on July 22, 2018, 02:55:01 AM
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I am in my early 30s and have a good job making a little over 100K a year. I am currently working towards a significant promotion, but with it will come a lot more responsibility and stress. This resulted in the wife and I discussing our long term plans and whats most important to our family (3 kids). We have been fairly disciplined when it comes to savings and investing, even through some life events and our goal was to achieve FIRE, as soon as possible. That being said I doubt that i will not work at all, but i would like to dial back my commitment at work and focus on my family.
We currently have 1 rental home, which is doing quite well for us where we are able to net $700+ a month. The home is fairly new and was our old home so it was well maintained.
All that being said we discussed the best course of action to achieve this, which basically fell into 2 buckets
The first was to continue working myself up the corporate ladder and grow my income. I am in the process of starting a new business unit at my work which i will run and will be tied to the success of the business. This is a great opportunity if successful will make me very marketable for future opportunities inside or outside of my company. This and future opportunities will take more of my time, but will open the door for more income and savings. If i pursue this option i will be less likely to continue real estate investing since I will have less free time.
The second options is to find a landing spot in my company or another company were i can make a consistent wage with moderate to low stress. This would give me the opportunity to focus some of my time and energy on the real estate company and begin building my passive income.
I have have some assumptions built around timing and profitability of rental properties but i wanted to see if anyone wanted to share from personal experience how they approached the below questions
Did you jump in with both feet on real estate investing or did you keep your primary job while starting?
How much time (hours a week or month) did you spend building your business?
What are some things you would do differently if you had to start over? Would you start over?
How many homes did it take for you to achieve FI, meaning you could support your lifestyle through rental income?
I know this is somewhat of a long post, but I really value experience over news articles.
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I suggest checking out biggerpockets to learn some more about RE investing. Also, the book building wealth one house at a time is a good place to start.
Did you jump in with both feet on real estate investing or did you keep your primary job while starting?- Up to you but I would definitely keep your day job. Your income from employment is likely your greatest asset and source of cash until you are nearly FI or wealthy. Think of how much in assets you would need to make what you do at work, pay for healthcare you get from work, any matches etc. Also, the income from a day job looks swell when you go to a bank for a loan. Access to leverage is very important for many ways to do RE investing. Also, remember that just as leverage increases returns, it can magnify risk greatly. Do not over extend yourself is my advice.
How much time (hours a week or month) did you spend building your business? I probably spent 30 hrs a week at least starting out. Sometimes much more, now, much less as I do not swing a hammer much at all anymore.
What are some things you would do differently if you had to start over? Would you start over?- There are some houses I bought starting out that I would never buy today. You live and learn. Also, renting to college students is not for me, ever, ever, ever. I also would/should not have sold some houses but I needed the money.
How many homes did it take for you to achieve FI, meaning you could support your lifestyle through rental income? That depends on where you are and what you spend. HCOL? LCOL? If you can live happily on 20k a year, it does not take very many or you could do it with a small multi unit. If you need 60k it will take more invested. the link can give you some interesting things to think about. Good luck. https://www.coachcarson.com/benefits-real-estate-investing/
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- Did you jump in with both feet on real estate investing or did you keep your primary job while starting?
My 2nd run at REI - first time was in 2/2007 (and was a disaster). This time is working out much better. Kept primary job. Funneled wages into down payments for first 3 properties.
- How much time (hours a week or month) did you spend building your business?
I read A LOT, and after meeting ARebelSpy, and learning of his success, I read every book on this forum's recommended book list. Then I read other books, the best 2 of which are "The Millionaire Real Estate Investor", and "Landlording on AutoPilot". As for actual 'work', I'm at around 8 hours/week, and reading in my spare time in the evenings.
- What are some things you would do differently if you had to start over? Would you start over?
(this... and see last question. And yes, I would / have started over in a reasonably priced blue-collar market town)
I would look for other books like BiggerPockets "Real Estate Rewind" where long-time REI's give their best advice. I would buy my first place for cash, live in it while repairing & doing 'deferred maintenance' to bring it up to my standard of living, and adding things like USB electrical outlets, metered water service for all sides of duplexes, etc. On books: Most books on REI are all alike, but once in a while you'll come across 1-2 pages that standout. Brandon Turner's yellow book ("The Book on Managing Rental Properties") was like that... repeating other advice I'd read elsewhere... until p. 277(?) gave the drop-dead-simple suggestion: "use the categories shown on IRS Schedule E (https://www.irs.gov/pub/irs-pdf/f1040se.pdf) to sort your expenses".
WOW! Build a spreadsheet with those columns, and you'll be ahead of 90% of the others at tax time:
(by line# - Income:) 3 Rents received, 4 Royalties received, (Expenses:) 5 Advertising, 6 Auto and travel (see instructions), 7 Cleaning and maintenance, 8 Commissions, 9 Insurance, 10 Legal and other professional fees, 11 Management fees, 12 Mortgage interest paid to banks, etc. (see instructions), 13 Other interest, 14 Repairs, 15 Supplies, 16 Taxes, 17 Utilities, 18 Depreciation expense or depletion, 19 Other (list)
- How many homes did it take for you to achieve FI, meaning you could support your lifestyle through rental income?
One (1)!! I reached my FI number in 4/2018. Half of that is invested in VTSAX, and the other half is in a house purchased in the Seattle area in 2014 that's doubled in value over the past 4 years. I'm selling that house, and using that half of my FI $$'s to invest in additional SFH & multi-family rentals in Indianapolis. If the math works out, I should be able to more than cover my FI expenses with 7-to-8 rentals. So technically, everything I've saved to date ends up being a HUGE emergency fund that I never expect to touch.
May your results be as good, and may you not make the same mistake I did by saving up TOO MUCH before you start investing in RE where your recurring income becomes your FI income. Best of luck being a 'property manager'!