Mid-life, starting from 0, setting good goals

[Mick Murray]

So grateful for this site and community... this information is already starting to change our lives by giving us a new mindset and optimism as we look to build wealth.  

I'm about to turn 40, wife, 4 kids.  We have worked in the non-profit space for 17 years earning very little income but enjoying what we do in helping people.  To my embarrassment, I have not thought much about our family's financial future.  The pain is heating up, however, as our kids grow and expenses balloon.  

I earn about 60k/yr after taxes.  My wife just got her real estate license a year ago and is netting nearly 50k after year 1.  

Our income statement looks like: 
Income: about 9400/mo
Expenses: about 10,750/mo (which includes 4 kids in private school... a conscious choice we've made and are sticking to for now)

Our balance sheet is pretty bare.  Maybe 60k in equity in our home.  No liabilities to speak of (cars are paid off... no other doodads to use Kiyosaki-speak).  We have no cash to invest in a property unless we were to dip into our emergency fund, which can cover about 3 mos of expenses.  And you can see our monthly expenses are more than our income.  

Bottom line, I'm feeling the pinch and the anger at myself for allowing our family to be in this position at this stage of life.  But we have toyed with RE investing and it has come front and center in the last month or two.  We have several friends with capital who believe in us and are willing to go in on a deal or two.  And RDPD + Bigger Pockets has put some wind in my sail to see a way forward.

Questions: 

- How should I go about researching how to structure deals with partners where they are bringing the capital and I am providing the sweat equity (in terms of distribution of cash flow, depreciation, contingencies, exit strategies, etc.)?  Any tips here would be MOST appreciated. 

- I would love to be generating about 10k in cash flow 10 years from now. Is this goal too ambitious? Not ambitious enough? I don't plan on leaving my W2 non-profit job any time soon, so RE investing would be on top of that... though I do have more flexibility than most when it comes to my schedule within a FT job. 

- Any other tips for a newbie in my stage of life / situation?  I'm all ears!  

Thank you!

[Ron Brady]

@Mick Murray

Congratulations for making the leap. My wife and I started real estate investing after age 50, so to us, you and your wife are very much ahead of the game. And we too came from the non-profit world our entire careers.

To your Qs, here are our two cents:

Partnerships - Typically it is a veteran investor with the funds of others, not a new investor with other's funds. To be candid, knowing what we do today--8 properties in--we would not be comfortable investing with private money when we started out. We felt the same way when we started. We simply made too many rookie mistakes that would have lost our investors money. Not saying you should not do it, but we wouldn't. As an alternative, we'd recommend you consider a HELOC or cash-out refinance as a means to take as much equity from your home as you can as your starting capital. Small capital starting point strategies we'd recommend you to consider are short term renting a room in your home, mid-term rental using arbitrage or wholesaling. Once you have enough cash on hand, you can drop the start-up strategy and choose another one.

$10k/yr in 10 yrs - Not too ambitious, depending on how much time you and your wife can put into the work. Short term rentals generate big cash flow fast, but require lots of time. Single family long term buy and holds, generate far less cash but are more passive. Thus your cash flow goal and strategy are related.

Other tips: Keep reading the BP Forums and listening to the podcasts, consider joining a local REIA and try out https://podcasts.apple.com/ca/... which caters to old dawg's like me (and maybe you).

Best wishes to you!