My wife was laid-off today. 3 lessons.

[Steve Vaughan]

After 14 years, my wife just got laid-off indefinitely along with probably 50% of her colleagues. Shes in the aerospace Industry and Boeing was their largest customer by far. 

I'm not predicting gloom and doom for all or anything like that, just sharing a little about how we're handling it and maybe a couple lessons about why, financially, it won't matter a ton to us.

Live below your means. We took this to a whole new level for years. Because we've never needed fancy things that provided no ROI, we've always had a good rainy day fund and little consumer debt.

Don't over-leverage.  We've been ok with not 'maximizing' every dollar of equity and allowing mortgages to pay off or even buy with cash from the beginning.  By the time we think about cash out refinancing, our opportunity fund has recharged from the higher cashflow.

Single customer risk.  The (un)employment axe came down very quickly, largely because over 80% (probably 90%) of her employer's revenue came from 1 client or business.  Be diversified with your assets, clients, revenue streams.  

We will certainly have an adjustment period and experience grief and loss.  My 9th grader was a baby when she started working there. We are excited for her to pursue things she's passionate about now more than anxious, but primarily because of our RE investments made over the years.  The hardest part right now for her is the effect this has on her co-workers that didn't do 1 or 2 above.

The music will stop one day.  A couple speakers just went out in our house.  Be vigilant out there to ensure you have a chair. 

[Tony Wooldridge]

@Steve Vaughan, first off let me start out by saying sorry to hear that your wife was let go so abruptly it sounds!  However, after reading and paying attention to your post over the years here on BP it is of no GR8 surprise to me that you have taken the positive approach and not only that turned it into an educational thing to boot for all of us to hopefully learn from as well! It sounds as if you guys were smart enough as well as proactive enough in the past to help mitigate and minimize the impact of such a thing happening.  GOOD ON YOU TWO!  Something all to often in today's world that most lack (foresight as it relates to money).

I am excited for you two especially for your wife and what her future opportunities will come to light now that she no longer has to trade her (valuable) time for money! That last statement is the very reason I put in all the hard work of doing this thing called REI. It really isn't about the money at all for me. It is ALL about capturing and controlling MY clock as opposed to my JOB doing it for me. Getting closer to it every day!

Your diversification comment really rings true to my current REI business. We have recently had a rather large employer move into my farming area. A good majority of the applicant pool for our most recent BRRRR is from this very employer. I already have one of my current tenants that is an employee of this outfit. So you are absolutely right diversification is always something to pay attention to. to that point, I just got off the phone with my local Hospitals HR department seeing if they have an interest for their current staff or up and coming employee's need for a rental both present and in the future.

Once again, thanks for sharing your experience and shining a positive light on it as opposed to the alternative as all to often we see today.  Best of luck to you but more importantly your wife and her exciting future endeavors!  Always a pleasure Steve, thanks for allowing me to share! 

[Steve Vaughan]

Originally posted by @Tony Wooldridge:

@Steve Vaughan, first off let me start out by saying sorry to hear that your wife was let go so abruptly it sounds!  However, after reading and paying attention to your post over the years here on BP it is of no GR8 surprise to me that you have taken the positive approach and not only that turned it into an educational thing to boot for all of us to hopefully learn from as well! It sounds as if you guys were smart enough as well as proactive enough in the past to help mitigate and minimize the impact of such a thing happening.  GOOD ON YOU TWO!  Something all to often in today's world that most lack (foresight as it relates to money).

I am excited for you two especially for your wife and what her future opportunities will come to light now that she no longer has to trade her (valuable) time for money! That last statement is the very reason I put in all the hard work of doing this thing called REI. It really isn't about the money at all for me. It is ALL about capturing and controlling MY clock as opposed to my JOB doing it for me. Getting closer to it every day!

Your diversification comment really rings true to my current REI business. We have recently had a rather large employer move into my farming area. A good majority of the applicant pool for our most recent BRRRR is from this very employer. I already have one of my current tenants that is an employee of this outfit. So you are absolutely right diversification is always something to pay attention to. to that point, I just got off the phone with my local Hospitals HR department seeing if they have an interest for their current staff or up and coming employee's need for a rental both present and in the future.

Once again, thanks for sharing your experience and shining a positive light on it as opposed to the alternative as all to often we see today.  Best of luck to you but more importantly your wife and her exciting future endeavors!  Always a pleasure Steve, thanks for allowing me to share! 

Thank you for your genuine empathy and words of encouragement,  Tony.  Means a lot!

I have a 10 unit mixed-use in a 1 horse town, too.  3/4 of the tenants worked at the same place when I bought it. This is a town of 1200.

You are smart to acknowledge the single employer risk and reach out to HR of a 2nd employer. I toured the plant with the foreman when doing DD on my building to get a sense of their viability.  They make plastic hinges and stuff for kitchen cabinets.  When the recession hit, they experienced deep employment cuts.  Excellent you are trying to stay diversified with your tenant employers.

Congrats on your 2nd BRRR with private money as well. Proud for you my friend. Keep it up!

[Kevin DeVargas]

@Steve Vaughan,

Thanks for sharing part of your journey and most importantly the lessons you've learned. I recently lost my job in January, long story.... I'm the sole provider for my family. Because I followed the fundamental/biblical rules, it was a hit a hit but not a devastating blow. 

1. I lived below my means and saved money in 401k and personal accounts. Cars are paid off and run great. Funny how some people mock me because I never buy top brands and purchased a nice home but noting luxurious. 

2. I had more than one source of income, my accounting business that I ran on the side. Now i'm going at it full time and placing it in God's hands. 

[Steve Vaughan]

Originally posted by @Kevin DeVargas:

@Steve Vaughan,

Thanks for sharing part of your journey and most importantly the lessons you've learned. I recently lost my job in January, long story.... I'm the sole provider for my family. Because I followed the fundamental/biblical rules, it was a hit a hit but not a devastating blow. 

1. I lived below my means and saved money in 401k and personal accounts. Cars are paid off and run great. Funny how some people mock me because I never buy top brands and purchased a nice home but noting luxurious. 

2. I had more than one source of income, my accounting business that I ran on the side. Now i'm going at it full time and placing it in God's hands. 

Thank you for sharing, Kevin.  So glad you've lived smartly and saved along the way to prevent your loss of a w2 as the breadwinner from being a catastrophe. 

Not only that,  but you've made lemonade out of those lemons and are using it as an opportunity.  We hope to do the same.  Thanks again!

[Theresa Harris]

@Steve Vaughan  Sorry about your wife losing her job.  Your advice is good and I hope others follow it.  Good luck.

[Anthony Wick]

@Steve Vaughan

Very sorry to hear this. Your attitude under the circumstances is outstanding. Just reading your short post, I would definitely bet you and your family will land on your feet and come out the other side in great shape! Good luck!

[Mike Dymski]

It took many years of hard work and preparation for you to have both the mindset and financial security that you currently have.  Nice work...that's personal finance and responsibility at an expert level.  Good luck with the transition.

[Jay Hinrichs]

Steve,  Was this related to the 737 Max debacle.. ?   when I was building out in Hood river a few years ago and one of Boeing's subsidies ( builds drones) was taking up 70% of the office space up and down the Gorge I worried about what would happen if Boeing pulled out.

Growing up in Silicon valley many dont realize that, the market there pre computers was driven by aerospace IE Lookheed.

Or Pre computer in Seattle Boeing Sneezed and Seattle caught the flu.

Congrats on having this event not effect your living standards or lifestyle.. And Maybe your wife will find a new passion. Women are great realtors.. :)   With your guys knowledge i bet she would do great at that and could work her own hours etc.

I followed Boeing to Charleston SC when they moved the 787 there and that turned out to be a good move on our part. 

[Karl B.]

While it stinks your wife isn't doing what she enjoys (working, seeing her co-workers, etc.) it's also tough in that the routine of her job the past 15 years is now gone and it's human nature to not want change, let alone such a extreme change as a job-loss. 

While that's tough enough to endure on its own, a lot of people in that situation have the added terror of trying to find a way to pay the bills. 

As previously mentioned by you and others, real estate is wonderful; those checks come every month. I remember a BP podcast guest who had a serious health issue come on suddenly (he was crippled for months) and had it not been for those checks coming in every month his family would have been in deep trouble. 

Your advice is good and a lot of people out there in the world today don't follow it. I know people who don't have a pot to **** in or a window to throw it out of and they're going out multiple times a week to eat or they're going to the bars, driving there in their late model car (OK - so that's one nice thing they might have) as they pay rent to landlords and have little savings. 

[Ray R.]

Boeing's bad decisions on the 737Max are going to have a huge impact on the economy, and may cut .5% from the US GDP. Plus, the Coravirus has had a huge impact on air travel / tourism, which then impacts airlines, which then don't need new airplanes. Boeing focused too much on immediate ROI, and made decisions that have endangered the company with top management relocating to Chicago, and losing touch with the factory floor from what I read. There also seems to be an issue that the McDonell Douglas culture took over,plus the importing of the GE Culture (and look where GE is now days). I would not be surprised if Boeing has to go through bankruptcy, and the company gets split up.

Being laid off is hard, and it's one of the top stressors that can happen. There are the stages of grieving, and their is no order, or shock, anger, denial, and acceptance. Plus the change of routine. And just a guess, but probably there will be the added challenge of age discrimination if your wife looks for another job. I view the aerospace industry as seasonal workers, where Engineers get hired in good times, and laid off in bad times, and are just viewed as commodities. Yes, my background is in Engineering, and I have been through a few layoffs.

The great part is your family already has other sources of income and this is a huge opportunity to explore other areas, while getting some income from unemployment. 

[Whitney Hutten]

@Steve Vaughan Being let go, for whatever the reason, never feels good.  So sorry your wife and your family are going through this.  It sounds like you have done some great financial / investment work to diversify streams of income.  Keep it up!  I firmly believe events like this are opportunities to reinvent ourselves.  I wish you all support, love, and a fiery spark to find your next adventure (and to keep up the financial/investing work you have started because it's obviously paying off!).  Maybe, 2020 is the year she qualifies as a real estate professional ;)

[Jim K.]

@Steve Vaughan

Steve, I'm sorry to hear the news. But I'm grateful for your wife's opportunity after the adjustment period to examine the possibility of doing something different, the opportunity you have both worked and bled for all these long years. I'm relieved that this is an occasion to be thoughtful rather than to be worried.

The wolf has come to your steel door with the four-point lock in the reinforced frame you built for your brick house. You're not relying on happy thoughts and a kind universe to save you.

[Andy Webb]

Thanks for posting - this just underscores why we do what we do.

[Anthony Rosa]

@Steve Vaughan, Sorry to hear that after 14 years of employment your wife got laid off.  Thankfully, you and the family are smart with money management.  The monetary effect this has on your family is minimal to none but the emotional effect for your wife is different and takes a little time to adjust.  To help with the adjustment, maybe you and the wife can take a nice vacation and get away for a little bit to change the scenery and minimize thinking about work. When you come back, another door will open and she can pursue passions without a job being in the way.

 You have solid advice and prepared yourself for a rainy day, kudos to you guys.   

[Account Closed]

Hi Steve,

Life is a reflection of us. Tell your wife to look at it as a blessing in disguise. Nothing to feel sad about.

I quit my job on September 11, 2009 to pursue real estate full-time. The following month, my wife came home and said her last day of work was 12/31/09. So both of us were out of a job while she was 7.5 months pregnant with our daughter. Talking about life threw a curveball at us at the depth of the Great Recession.

I told her to take the year off, have the baby and enjoy our time with her. Push comes to shove, I’d go get a W-2 again. No need to stress out. A month after she had our daughter, her former boss, now is a CFO of another company, came to visit our newborn and offered my wife a job. She’s been with this company for almost 10 years now and wouldn’t move anywhere else even with an offer $30k more than her current job. Her company is 3 miles from our house, and she can come in and leave whenever she wants. The job is easy and flexible.

My sister got laid off in Jan 2012. She was the sole breadwinner of the family. She was so stressed out and lost quite a bit of weight. I told her to look at it as a blessing in disguise, but it was so dark in her world to see it through at the time. Two months later, she found a new job that’s much better than her previous job. She’s making 2.5x compared to her previous job now.

My wife and I recently had a chat about how our lives would have been HAD I kept my W-2. I told her I wouldn’t be driving a Tesla now; she wouldn’t be owning a Tesla; and we wouldn’t be owning our $2M shack free & clear.

Life is a reflection of us. We get to paint our journey. It’s a new journey for you and your wife. I have no doubt you guys will make the best out of it.

Cheers!

[Lee Bell]

Opportunity knocks. It usually does not bother to knock twice.
Did you hear it?

[Dennis M.]

This reminds of me of the saying warren buffet says at his speaking engagements . “ you can always tell who is skinny dipping when the tide goes back out “

Most people continue on in their idiotic spending of liabilities right up to the time their boss hands them a pink slip then they are left dumbfounded in total ruin all because they didn’t practice personal responsibility when times were good .

This year my focus is to rid our family of some nasty consumer debts and also grow my assets . I like to be frugal in my personal life and very aggressive in business life because I do that for safety and I think that is a winning formula for success . Being laid off can be scary but the good news is if you played your cards right you can benefit from the extra time and energy now .

[Derrick E.]

WOW. This Boeing debacle has effected more things than I could have imagined. We just had a lot of local steel mill workers get laid off. They make a bunch of special metals for different industries, one of their big customers was Boeing. Ended up laying off over 50 people in our local area. 

[Nick Gann]

@Steve Vaughan

I remember the last job I quit 10 years ago. For many the uncertainty is too much, for me... best decision ever.

Congratulations on new paths and a great new focus for your wife. Sounds like you two have the minds to enjoy it and make the most.

[Curt Smith]

@Steve Vaughan and to the others here who lost jobs or changed jobs.

You now have a golden op remove your past employees 491k to a self directed IRA (please don't consider equity trust) and invest . Ideally a solid 401k if you start an active / earned income business.

We bought rentals and did very very well. Yes buying and self managing rentals us both controversial and has arms length requirements etc, non permitted transactions etc.

Today doing hard money loans is harder then it sounds with reduced deal flow you'll be sitting on your cash.

Leverage is possible too. Ubit is over blown!

For us quiting and buying rentals in our solo 401ks has exploded up our wealth.

Please consider moving your past employers 401k!

[George Blower]

@Curt Smith

@Steve Vaughan

You can rollover funds from a former employer plan to either a self-directed IRA or Solo 401k (if you qualify) to invest those funds in real estate.

There are certain advantages of setting up a Solo 401k instead of a Self-directed IRA (if you are eligible to do so). Please see more below:

Solo 401k vs Self-directed IRA:

A Solo 401k has several advantages as compared to a Self-Directed IRA including the following which specifically apply to your situation:

• Unlike a Self-directed IRA, you can have the account for the Solo 401k at a bank or brokerage that does not charge maintenance fees and where you will have checkbook control.
• Unlike a Self-directed IRA, if you use leverage (which must be non-recourse financing in either case) to acquire real estate with your Solo 401k the income will not be subject to Unrelated Debt Finance Income tax

General Considerations Re Investing Retirement Funds in Real Estate:

1. If you purchase via an IRA (as opposed to a 401k), you will need to open an IRA account at a specialty trust company which allows for investments in real estate. Unless you invest via an LLC owned by the IRA, you will not have checkbook control over the funds which means you need to run transactions (e.g. income, expenses, etc.) through the trust company who will need time to process the transactions and generally charge fees for each transaction. On the other hand, keep in mind that there are costs associated with maintaining an LLC (such as the $800 annual franchise tax in California).

2. If you are self-employed with no employees, you can set up a Solo 401k through a 401k provider which allows for investing in real estate. In that case, you can simply have the account at a bank or brokerage where you will have direct checkbook control.

3. In either case, all of the income and expenses will need to flow in and out of the retirement account.

4. In either case and if you will you debt to acquire the real estate, it must be non-recourse financing. See more at the following link: https://www.biggerpockets.com/blogs/9552/70408-ira... If debt-financed real estate is acquired via an IRA, any income attributable to such investment will generally be subject to unrelated debt finance income tax.

5. In either case, you can't live on the property or otherwise use it for personal use.

6. In either case, you can't work on the property as it must be a passive investment (e.g. you must hire someone to fix the toilet and can't pay the expense with non-retirement funds).

7. In either case, you must purchase/sell real estate from/to an unrelated person and the real estate can't be titled in your name personally (e.g. in the case of the 401k, it would be titled in the name of the 401k and you would sign as trustee of the 401k).

8. In either case, you should verify that you are eligible to transfer the funds from your existing retirement account (e.g. if the funds are in your current employer 401k, you will likely not be able to transfer until you quit your job).

Considerations in Setting up a Solo 401k to invest in real estate:

1. First, you must be eligible to set up a Solo 401k. In order to be eligible, you must be self-employed (e.g. providing goods and/or services through your personal effort), reporting self-employment activity on your taxes (e.g. Schedule C if you a sole proprietor) & you do not have any w-2 employees working for your self-employed business or otherwise.

2. If you are self-employed with no employees, you can set up a Solo 401k through a 401k provider which allows for investing in real estate. In that case, you can simply have the account at a bank or brokerage where you will have direct checkbook control.

3. All of the income and expenses will need to flow in and out of the retirement account.

4. If you will you debt to acquire the real estate, it must be non-recourse financing. See more at the following link: https://www.biggerpockets.com/blogs/9552/70408-ira...

5. You can't live on the property or otherwise use it for personal use.

6. You can't work on the property as it must be a passive investment (e.g. you must hire someone to fix the toilet and can't pay the expense with non-retirement funds).

7. You must purchase/sell real estate from/to an unrelated person and the real estate can't be titled in your name personally (e.g. in the case of the 401k, it would be titled in the name of the 401k and you would sign as trustee of the 401k).

8. You should verify that you are eligible to transfer the funds from your existing retirement account (e.g. if the funds are in your current employer 401k, you will likely not be able to transfer until you quit your job).

Considerations in Choosing a Solo 401k Provider:

1. Confirm that the provider has a pristine reputation (e.g. Better Business Bureau reviews, etc.).

2. You may wish to confirm that the new 401k provider has experience with the particular investments in which you intend to invest your retirement funds as you very likely will have questions in terms of the mechanics (e.g. how do you invest in real estate, etc.).

3. You may wish to confirm that the new 401k provider will handle the ongoing compliance support such as any required 5500 filing (e.g. 5500-ez for a one-participant plan with assets in excess of $250,000), any required tax reporting (e.g. 1099-r in the event of a distribution or in-plan Roth conversion), mandatory plan updates and amendments, etc.

4. If you might take a 401k loan, you may wish to confirm that the new 401k provider will prepare the required 401k participant loan documents.

[Pawel Cwierz]

@Steve Vaughan I’m glad you shared this story and just proved that what most of us learn here is for a good reason.

I was laid off two years ago, my wife was laid off almost a year ago (same company btw). We had a 7 months old baby at the time.

Our RE investments don’t cover our expenses 100% yet but reduce them enough that we were pretty safe.

Today my wife has amazing new job and I’m a stay at home dad, managing our rentals and enjoying the time with our toddler (which is much more energy consuming than rentals:).

[Stephen Flynt]

@Curt Smith so you don't like equity trust, do you have a custodian you do like?  I'm also in the Atlanta area and wondering if you have found anyone local.

"You now have a golden op remove your past employees 491k to a self directed IRA (please don't consider equity trust) and invest"

[Curt Smith]

@Stephen Flynt I like Advanta IRA they have a local office but that isn't important for me. They have every other Friday (??) education lunches. They are good for both SD-IRA and solo-401k. I have their self administered (I do all paper work including IRS filings) style of solo-401k. Read above re qualifying for a solo-k vs SD-IRA. Stephen you might join the local REIAs as well.