Wife is not comfortable REI

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Wife is not comfortable REI

Tyler Hardy
Rental Property Investor · Williamson, GA · Member since 2018 · 78 posts · 35 votes

I'm a new investor and I'm on the hunt for my first deal. I've been narrowing down my search and I'd like to start in smaller, commercial multi family (5+ units). The issue I have is the up front capitol. We recently built a house and put the large majority of our liquid capitol in it to keep our mortgage down. This way, when I finally get to the point of leaving my day job we won't have a huge monthly payment to cover, and we're not paying as much in interest. Unfortunately this leaves with with very little to invest. 

My issue is this, I'm thinking about using a HELOC to start investing but I will only do this if my wife is comfortable with it (being that this is our primary residence). I chose a HELOC because of the lower risk of default, and the fact that it won't change our mortgage payment like a REFI would. Because her parents were both agents before the crash and basically lost everything, she's hesitant about investing. How can I have the conversation with her that will put her mind at ease? Should I even try to push the issue if she's not comfortable? I'd like to have access to the 200k or so of equity I have in my home, but it's not worth her laying awake at night stressed about the risk. Thoughts?

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Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y

Don’t put your personal residence up on the line to buy real estate . Having your duplex taken down the street is not as bad as your family being thrown out in the steeet . Caleb is correct helocs are risky .

Why do you think you need 5+units right out of that gate ? Have you been watching grant Cardone motivational crap online ? You don’t know what your doing yet bro you don’t have the knowledge and skill required even if you had the cash in your pocket .get yourself a duplex and learn the business some without going into debt up to your eyeballs right away . Once the wife sees the proof of concept And the money coming in she will wake up soon enough . Don’t try to push or overly convince her she’s just not ready to be strong armed into it , you’ll just cause strife in your marriage

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  • Brandon Roof
    Rental Property Investor · Member since 2019 · 187 posts · 230 votes
    7y

    This is an all too common scenario in many relationships and I feel proof of concept may be the biggest thing here.  Generate some sort of return with little to no investment (a wholesale deal, lease option, etc.) to help better put their mind at ease.  Continue to tack on increasingly larger deals until the comfort level reaches the point to pick up the commercial multi units you strive to acquire.

    5Reply
  • Tyler Hardy
    OP
    Rental Property Investor · Williamson, GA · Member since 2018 · 78 posts · 35 votes
    7y

    @Brandon Roof Excellent advise. I'm looking for seller financed deals now to try and work that exact angle. If I can show her that my system works on smaller deals, She can be more comfortable as I scale up. Thanks for the help. 

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    @Tyler  Start small.  Do a single family home or duplex.  Ask her what it is that she is worried about.  Is it taking money out of your home, the rental losing money, etc.

    2Reply
  • Amanda Kessler
    Member since 2019 · 111 posts · 36 votes
    7y
    Brandon put it best. Also, she's right to be nervous, especially since BOTH of her parents lost it all during the crash. Hopefully you can make a good investment and prove her wrong though!
    1Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Tyler Hardy what’s your current interest rate on your house? I bet it’s under 4.5 percent assuming 30 year fixed and good credit. Why would you dump all your liquid cash into an “investment” that only yields 4.5 percent?

    Secondly, how much cash did you put into this house? I’m guessing it was a lot, and so you don’t really have “200k in equity”. You have 200k minus whatever your downpayment was.

    What's the current LTV? Equity is useless if you're already at 75 or above LTV as you will have a hard time borrowing more than that.

    HELOCS are actually not low risk, they’re actually higher risk and they’re part of the reason so many people got screwed in the last recession. Here’s why: most helocs are callable. Meaning even if you make your payment every month, the bank can call it due, whenever they want. So banks called the heloc and people lost homes when they couldn’t pay it off.

    Finally, my advice is listen to your wife and don’t do this. I would save up cash, don’t pay your mortgage down ahead of schedule and maybe refinance in a year or two. This advice could change if you answer the above questions, but in general, it makes no sense to spend a bunch of money buying a primary house and then trying to pull said money back out again immediately (that’s expensive).

    1Reply
  • Bill Plymouth
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
    7y

    @Tyler Hardy 

    @Brandon Roof hit the nail right on the head.  I think that’s the best thing you can do.  

    The next best thing you can do is show her what systems you are putting in place to protect yourself from the next crash.  

    0Reply
  • James Galla
    Attorney · Akron, OH · Member since 2016 · 535 posts · 389 votes
    7y

    Doesn't sound like she is motivated. You ought to take her to one of those real estate seminars. I suggest Rich Dad Poor Dad. However, I DO NOT recommend buying their products. The purpose is to attend and see the motivational speaker.

    If that doesn't work, and you can't otherwise convince your significant other, then maybe you ought to consider stocks or something. If you're interested in real estate, you can become interested in the stock market.

    1Reply
  • Justin Robert
    Investor · Temple, TX · Member since 2015 · 111 posts · 83 votes
    7y

    @Tyler Hardy Put yourself in her shoes. You are risking your home on an investment. While it may be a calculated risk and a risk with a noble end goal, it is a big risk. To echo the advice of @Brandon Roof, maybe start smaller to prove you can make it work. 

    It takes a few deals to get the wife on board. 

    2Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    7y

    @Tyler Hardy First and foremost, you should be sensitive to your wife's concern since her issue was so close to home for her. 

    So, what you could push yourself to save up some capital for your first deal and let her see what you can do with that money you saved. Also, while you are saving up money, you will be amazed by what you will learn in REI too! No need to rush into it especially in your situation with the Mrs. 

    Then, you get your first deal, and this is probably going to take about 1 year or 2 for her to see what you achieve what that deal. 

    Then and only then, I suspect, can she be comfortable with taking a HELOC on the house...

    Right now, she is just trying not to lose everything, which is a fair sentiment anyone should be empathetic with. 

    Remember, Real Estate is about people and relationships (personal relationships too). 

    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    Don’t put your personal residence up on the line to buy real estate . Having your duplex taken down the street is not as bad as your family being thrown out in the steeet . Caleb is correct helocs are risky .

    Why do you think you need 5+units right out of that gate ? Have you been watching grant Cardone motivational crap online ? You don’t know what your doing yet bro you don’t have the knowledge and skill required even if you had the cash in your pocket .get yourself a duplex and learn the business some without going into debt up to your eyeballs right away . Once the wife sees the proof of concept And the money coming in she will wake up soon enough . Don’t try to push or overly convince her she’s just not ready to be strong armed into it , you’ll just cause strife in your marriage

    7Reply
  • Erik W.
    Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    @Tyler Hardy, I'm with the group that says do NOT try to convince your wife to do something she's not comfy with.  A marriage is too precious to risk, even if it means a $10 million net worth.  Lots of multi-millionaires out there on the 2nd, 3rd, 4th marriages...lots of it due to lack of unity on important issues like finance.

    Plus there are ways to do what you want without risking your home.  The gurus want you to load up on debt any way you can.  Not necessary.

    How about you find some folks who DO have money and offer them equity ownership and preferred payments on a project?  There's a lot of cash sitting out there in bank accounts, CDs, money markets, and safe deposit boxes looking for something to do.  If your deal is good enough to bet your home on, it should be good enough for investors to risk their spare cash on.  If your deal isn't good enough, then your wife is correct and you shouldn't be doing it.

    If you don't like that, find a package deal of 10 SFH's from an investor or burnt out land lord. Have them lease option those homes to you for 90 days. Negotiate a "bulk discount" purchase. During that time, you manage the tenants, collect the rents, and market the bajeebies out of them and sell off 9 unit at closer to retail so you profit enough that you can keep one for yourself. No debt needed. Rinse and repeat.

    There's 2 ideas.  Find others.

    3Reply
  • Trin Nagireddy
    Rental Property Investor · Cumming, GA · Member since 2017 · 66 posts · 15 votes
    7y

    @Tyler Hardy :PM me, I can see if I can partner, if the deal make sense. Thanks, Trin

    0Reply
  • Philip Coiro
    Flipper/Rehabber · Member since 2018 · 87 posts · 67 votes
    7y

    @Tyler Hardy

    My wife and I just used a HELOC to fund a flip. I wouldn't do it without her blessing if her name is on the house and only if you have a good income coming in to cover the interest and any emergencies.

    It’s not about convincing her, it’s about her learning about it. My wife is 100% committed to flips and when I speak of rentals and cash out refi she gets confused and says no. She’s been learning more about it now and is coming around.

    My opinion, I think the seminar idea is bad, makes it seem like a get rich quick scheme. Most every real estate investor who is now selling their “system” is someone who learned there’s more money in books and seminars than flipping.

    Good luck! You’ll figure it out if you really want it

    0Reply
  • Zac Boelkow
    Port Richey, FL · Member since 2016 · 129 posts · 48 votes
    7y

    @Tyler Hardy happy wife = happy life. If you guys aren’t on board together you’ll never gain her willing cooperation. It seems like you’re biting off way too much. She also seems to know it. Going in debt to invest is gambling. A great approach would be to recoup actual cash that you can use. At worst I would only use a very small portion of your home equity. Especially at first. Also if say you used 50K on a deal I’d want to pay back that 50k in no more than 24 months with ultimately 6 months as a realistic goal. Possibly use your heloc to invest in smaller widgets to build up actual cash first. This is exactly how I got started. I sold headphones, go pros, iMacs, cars, boats, and anything I could hustle up on Craigslist and eBay until I had the cash to buy my first property. The rest as they say is history...

    1Reply
  • Zac Boelkow
    Port Richey, FL · Member since 2016 · 129 posts · 48 votes
    7y

    @Ola Dantis I love this reply and approach. I see too many rush in with borrowed money on bad deals. What ever happened to working hard and saving. There is a place for debt and investing and I believe that place is best suited for seasoned investors that know the impact taking on debt has...

    1Reply
  • Frank Geiger
    Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    Try educating her with a bit of the material. Take an exciting trip to a RE seminar (like a vacation), show her the numbers, meet friends in the space that have had positive results. You need to try to reframe the experience for her and start with a safe investment. Don't jump in too quick; it's a process.

    1Reply
  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    7y
    Don't start a conversation with your wife about real estate. Start a conversation about identifying your personal values (based on what you actually do-- not what you wish you did or what you think your values should be). Set goals together that will allow you both to live a value driven life. The beauty of real estate is that there are so many ways to make a buck you can both probably find ways to play to your strengths and interests.

    0Reply
  • Parker Eberhard
    Contractor · Seattle, WA · Member since 2019 · 339 posts · 325 votes
    7y

    @Tyler Hardy will the return in your multi family investment be more than the cost of marriage counseling? I say this half jokingly, but my wife and I ended up in counseling after a home renovation that I project managed to save money almost cost us our marriage

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    @Tyler Hardy

    In my situation all I had to do was show her the numbers.. the cash flow, the small amounts of our $ we would need to put out out of pocket. After we bought the 2nd rental she said that was good for now until we saved some $. 4 mos later an off market deal fell on my lap. Again I showed her the numbers. She is now doing all the financial stuff for our rentals and wanting more. She went from not very interested to wanting us to buy enough for her to quit her W2. Good luck brother!

    1Reply
  • Gina Cardarella
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 111 posts · 38 votes
    7y

    @Tyler Hardy

    Even though I'm on my own I have gone through my head both ways the way your wife feels

    and the you feel . I started out going for the major big units commercial but after talking it over with agents and lenders I decided to start slow with duplexes tri-pleixes up to 4 units One reason this will be my 2nd deal and interests rates are really low you might want to keep it that way for the next 30 years but on commercial you generally have to do some different things by the 10th year usually a balloon or refi and it's harder to sell a large building and in the future you might just need a little cash so couple of small buildings I think would be easier but thats just my thoughts on it that's how I came to terms with it good luck tell your wife yes it's all scary but at least she has you in her corner everyone here is telling me I was crazy to invest with tenants but I did great let's hope I prove them wrong again investing out of state good luck

    0Reply
  • Gina Cardarella
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 111 posts · 38 votes
    7y

    @Dennis M.

    I had to give myself the same talk lol

    0Reply
  • Matt Carey
    Investor · Brandon, FL · Member since 2017 · 178 posts · 67 votes
    7y

    @Tyler Hardy

    Start smaller, educate, or move on.

    0Reply
  • Account Closed
    Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
    7y
    Originally posted by @Tyler Hardy:

    I'm a new investor and I'm on the hunt for my first deal. I've been narrowing down my search and I'd like to start in smaller, commercial multi family (5+ units). The issue I have is the up front capitol. We recently built a house and put the large majority of our liquid capitol in it to keep our mortgage down. This way, when I finally get to the point of leaving my day job we won't have a huge monthly payment to cover, and we're not paying as much in interest. Unfortunately this leaves with with very little to invest. 

    My issue is this, I'm thinking about using a HELOC to start investing but I will only do this if my wife is comfortable with it (being that this is our primary residence). I chose a HELOC because of the lower risk of default, and the fact that it won't change our mortgage payment like a REFI would. Because her parents were both agents before the crash and basically lost everything, she's hesitant about investing. How can I have the conversation with her that will put her mind at ease? Should I even try to push the issue if she's not comfortable? I'd like to have access to the 200k or so of equity I have in my home, but it's not worth her laying awake at night stressed about the risk. Thoughts?

    My wife and I had the same issue.  Not the same expected solution though. 

    Talk to her about what her thoughts are for how you and her are going to pay for retirement.  If you don’t know her thoughts you can’t pitch her yours.  Maybe she has different thoughts on how to get from current day to retirement.  

         My wife and I have a diversified  portfolio of stocks in numerous accounts as well as real estate.  We don’t use our home equity to pay for any of the real estate and actually don’t even use any of the profits from the rentals until we have owned them for 2-3 years.  

    1Reply
  • Michael King
    Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
    7y

    I couldn't get my wife on board with an investment property in 2011. Then exactly 3 years ago (2016) when we accidentally found ourselves landlords, she warmed up to the idea. Now we have 5 SFRs, worth on average $200K a piece, bringing in $84K gross annually. I feel like we've only just begun.

    0Reply
  • Chris C.
    Raleigh, NC · Member since 2017 · 347 posts · 94 votes
    7y

    happy wife, happy life.  Maybe partner with someone, that way your risk is diluted, and the learning curve wouldn't be as steep

    0Reply
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