The s#!t has hit the fan; options available, thoughts?

Question

Let's call this a thought exercise for you, but real for me.

I'll try to be succinct and I completely understand that this is very much up to me.  Still, I'm interested in what the community has to say.

Had a six figure job that evaporated with COVID.  Literally two months before I lost my job I purchased two properties with generous hard money I planned to BRRRR.  I have one other LTR with dream tenants that cashflows about $180/mo. I have options for income which *may* just cover our expenses such as being an adjunct at a college, consulting, and renting my RV (it was profitable this year even with COVID).  We have reserves, not as much as I would want but, enough that we're not desperate.  Also, my wife and I have done over eight live in flips so we know well the material and time cost of renovations but, haven't hired many contractors since I'm very handy.

Ok, the deals:

Total cost: $70k (Again both houses, or you could say $35k each)

Renovation cost House 1: $30k (contractors)

Renovation cost House 2: $25k (contractors)

ARV House 1: $75k

ARV House 2: $120k

LTR: House 1 - $750/mo House 2 - $900/mo

One addendum is that these houses are in a very desirable up and coming rural area near state and hunting land.  Based on AirDNA and other sources my estimate is that House 2 could gross ~$1100/mo from AirBNB.

My reality: I have a mortgage, $45k in debt, a toddler, and a wife with a part time job.

My dream: RE full time.

What would you do?

Jody Sperling · Answer

If I were in your exact situation, I would get a job that would stabilize the situation for my family, one that offered healthcare. Family changes everything.

Without a family, I'd take the risk of going full time RE immediately. Best of luck, whatever direction you choose!

Theresa Harris · Answer

House 2 cost $35K, renos are $25K and ARV is $120K....I'd sell after renovating.

House 1 you are in for $65K and would only make $10K that doesn't include closing costs.  I'd rent that out and hold it long term.

I'd also look for a job. If you are able to find more deals like house 2, then you can reduce your hours and do more real estate.  A lot of us work full time.

Jason Hill · Answer

Yeah that's my thinking; that's why I'm 100% looking for a job.  However, if you don't look for opportunity, you'll never find it.   When in a situation like this your first instinct is to only look for a job.  I want to make sure I'm not missing something.

Joshua Tessier · Answer

@Jason Hill

While you might be able to do it with that 45k in debt I wouldn’t. I’m not seeing the cash flow to support you.

I was in the same situation I lost my job in April purchased at 8 unit to add to my single and four unit that I already had. Unfortunately I ended with 3 vacancies in the 8 unit and 1 still being renovated in the 4 unit. I’m wrapping up the 4 unit but want to get the 3 vacancies renovated before renting. It feels like the one opportunity to do it and I need to jump on it now.

So I am now commuting 3 hours a day and poring all my money into the building to get these renovations going!  Hopefully in 6 months I’ll have 2 don’t and a plan to shortly wrap the others so by spring I can reevaluate but I’d say you need more cash flow.

Jon Kelly · Answer

@Jason Hill If you can find another job paying $100,000+/yr, I would bet that gets you to your goals faster than working part-time as an adjunct professor or consultant just to pay the bills.

If you plan to go full-time into real estate, what does your week look like? How much time is "wasted" as an adjunct professor or consultant because you need to pay the bills? How much time are you spending on real estate and how will you access capital? Can you do the exact same thing in real estate with a full-time job?

Jon Kelly · Answer

@Jason Hill I'm confused. Are you asking would we move forward with the deals OR get a full-time job? Why can't you do both? Get a job to help fund the rehab on these deals. Both seem like good deals, especially house #2.

Jason Hill · Answer

@Joshua Tessier

I'm sure you and I are not the only ones in this position and I can commiserate with the "might as well" mindset.

Agreed, the cashflow from the properties is not enough to support us, that much is certain.  I would have to go get some other jobs.  My point was that these alternate income sources would allow more free time to work on RE.  However, to @Jon Kelly's point, I'll probably end up working so hard on the side gigs that they become 40hrs or more a week and pay less. Now that I've had some time to think after my job loss I can see that I was just wanting to use this as an excuse to jump into what I want to do and out of my soul crushing 9-5.

Thanks everyone!

Jason Hill · Answer

@Jon Kelly That last post is exactly why I posted.  Really wasn’t considering time spent “making it” vs the return of a standard 40hr week and a bit on the side.  Really good point.

I was looking at it as more time to focus on RE.  However, if I’m working on all these side gigs that could take up 40hrs just to end up with less investable capital.....

I think I’ll stick with the original plan to get back to a 9-5 and keep building as I go.

@theresa Harris

The interesting thing about this deal is that I bought both for $70k.  Never really put a specific amount towards one house or another.  Another so for tax/numbers purposes I can move my capex around.  Good insight though.

Jason Hill · Answer

@Jon Kelly. My mistake, not very clear.  I bought the properties with the intent to do just that.  I’m just throwing out the idea of going full time since it is an option, although scary one.  I’m panning on getting another W2 and continuing my plan.  However.  I’m asking to see if anyone presents a compelling case for making the jump.So far, consensus says: keep on keeping on finding a new job.

The s#!t has hit the fan; options available, thoughts?

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