People think we're nuts

General Landlording & Rental Properties
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People think we're nuts

Chris Gawlik
Investor · Yucaipa, CA · Member since 2011 · 162 posts · 232 votes

Hey everyone. We are selling our primary residence and moving into a travel trailer behind my parents house.  We live in one of the nicest neighborhoods in town. I have a family of 6.  A kid in high school and all the way down to an 8 year old. After looking at our bills we are just spending to much money.  We are developing a long term plan to develop some passive income.

We have around 250K in Equity. We will be paying off a 3 unit a car and some Bill's.  By the time everything is paid off we should have around 200k liquid. 

With the net cash flow and our jobs we should be saving around 7k a month. 

My wife is the driving force behind this plan. This is pretty hard for my kids and I, but our plan is to have 3 rentals paid for in cash before we move back into a primary again.  This also may sound a little crazy but I think the realestate market / stock market is going to be going into a recession in the next 1 or 2 years.

 Just wanted to know what some people might think that have more experience / knowledge with our plan. Thanks.

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
7y

@Chris Gawlik, You'll never regret one minute of this wonderful adventure!!!  You've identified what enough is and are moving toward it.  You've perceived that family isn't a building, life isn't a structure, and the only thing that lasts are memories and those are active verbs.  

18 years ago we moved onto a sail boat with 6 of us.  It was everything @Thomas S. said - noisy, cramped, inconvenient, our parents were scared to death, our friends didn't understand it.  It was horrible - So horrible we had to force ourselves off after 12 years.  So horrible that even today our 4 boys identify as "boat boys" and look forward to their own boats (or RVs a very similar lifestyle).  The biggest grandest adventure of our lives and none of us would trade it for anything!.  

One of my mentors in the endeavor had this comeback to all the naysayers.  You can adapt it for yourself.  When asked by a skeptic  "Do you really still live on a boat".  He replied, "Yes, do you really still live in a house?"

This is the freedom that real estate investing can give you.  Don't be a slave to a model or what everyone tells you to do.  Create your own perfect scenario,. Use real estate to sustain it.  

Love your plan!

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  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    7y

    @Chris Gawlik, Just so you know, I also agree with many others on the thread that think you should leverage debt to buy the rentals rather than pay for them all in cash.  The reason being is because using leverage correctly will speed up the process and magnify your results especially at the beginning.  If you wait until you can buy houses in cash you may miss out on a lot of growth unnecessarily.  Just be wise about it.

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  • Rich S.
    Central, MN · Member since 2015 · 148 posts · 184 votes
    7y

    I find it interesting that so many folks who tout, they are successful because they don't "think and act" like the average American, are shaming the poster for doing the same?  I agree with their point that it will be hardest on the kids and that should be the biggest concern, but like others have mentioned, this isn't a one and done.  If you try it and it doesn't work, you aren't doomed forever, you just find a different house.  The other benefit nobody has mentioned is how great it may be for your kids to connect more often and deeper with their Grandparents.  That benefit alone might be worth it.  In today's world, there is very little appreciation for the older generations and what they have experienced, been through, learned from, etc.  We are all so busy chasing the modeled American Way of living, we never stop to appreciate those who have created many of those opportunities for us. 

    As far as what to do with the liquid cash... you have to align that with your strategies and beliefs.  I think there is a happy medium between leverage and equity.  The folks with lots of equity I would imagine always sleep well.. the guys leveraged to the nine's... probably not as often.  Find a balance you can tolerate that gives you the biggest bang for your buck... 

    Please keep us updated... I'd love to see how this shakes out.  

    5Reply
  • Jan Kutrzeba
    Rental Property Investor · Austin, TX · Member since 2018 · 98 posts · 39 votes
    7y

    @Chris Gawlik

    Sounds like you guys are determined! Very impressive.

    But why buy all cash instead of leveraging money?

    0Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Chris C.:

    @Chris Gawlik 6 kids plus two adults. 8 people in a trailer might be hard?

    Chris Gawlik, I agree with Chris Connolly.  It sounds like everybody is on board, so that is great.  But just be ready to change your plans if, after really giving it a go, it is putting too much strain on your family.  Financial independence is about family, friends and freedom, after all.  You con't want to sacrifice the goal while working toward it.  Otherwise, it sounds awesome.

    0Reply
  • Caleb Landis
    Kailua-Kona, HI · Member since 2019 · 13 posts · 4 votes
    7y

    Way to go!! This is so good to hear. "Observe the masses and head the opposite direction." 

    80% of Americans are in debt and have no financial plan. You should be proud to be walking a different path. You are transforming your family tree! 

    0Reply
  • Adam M.
    Rental Property Investor · Fort Collins, CO · Member since 2008 · 168 posts · 105 votes
    7y

    @Chris Gawlik Let me run this plan by my wife and I'll report back...

    0Reply
  • Christian Becker
    Rental Property Investor · Idaho Falls, ID · Member since 2018 · 67 posts · 78 votes
    7y

    @Michinori Kaneko

    My vote is with House hacking. Great strategy.

    Super easy. It’s downsizing but doable with a family. Leverage and use debt to buy a ton of properties. $200k down will get you quite a bit. 10 years from now you’ll have everything paid off.

    0Reply
  • Christian Becker
    Rental Property Investor · Idaho Falls, ID · Member since 2018 · 67 posts · 78 votes
    7y

    @Chris Gawlik

    Another thought. Stay where you are. Get a HELOC for 90% of your home value. Use the money to get into the game.

    1Reply
  • Juanjo Cerezo
    Member since 2019 · 3 posts · 0 votes
    7y

    Yes. I think you're nuts.

    0Reply
  • Michinori Kaneko
    Rental Property Investor · NY · Member since 2018 · 571 posts · 332 votes
    7y

    @Christian Becker absolutely! I only said 4plex because Chris originally mentioned having 3 doors, but since it looks like he has pretty sufficient cash, he can even APARTMENT HACK! Buy a smaller commercial property (6-12 units) and rent out more.  Since he have kids, he can even reno the apartment and connect few of the apartments so he has more space/bedrooms than other apartments.  when you have money, you can get creative with how to invest! no wonder the riches get even richer haha. 

    0Reply
  • Ryan Scott Isacksen
    Property Manager · Castro Valley, CA · Member since 2016 · 212 posts · 110 votes
    7y

    As Grant Cardone would say, "Pay the price today so you can pay any price tomorrow."

    I do agree that owning the rentals with no debt service isn't making use of your money.
    That debt is leverage to get bigger property.  You can put more down so the margins are better, but going all cash puts your $ completely at risk rather than having it split between you and a lender.  You also have no leverage, a powerful part of real estate investing.

    Read up on: The Wealthy Code https://www.amazon.com/Wealthy-About-Money-People-Never/dp/098270450X

    It goes into a lot of details about loans, leverage, and risk that will help you out in making a decision that works for your end goal.

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    7y
    Originally posted by @Chris Gawlik:

    Hey everyone. We are selling our primary residence and moving into a travel trailer behind my parents house.  We live in one of the nicest neighborhoods in town. I have a family of 6.  A kid in high school and all the way down to an 8 year old. After looking at our bills we are just spending to much money.  We are developing a long term plan to develop some passive income.

    We have around 250K in Equity. We will be paying off a 3 unit a car and some Bill's.  By the time everything is paid off we should have around 200k liquid. 

    With the net cash flow and our jobs we should be saving around 7k a month. 

    My wife is the driving force behind this plan. This is pretty hard for my kids and I, but our plan is to have 3 rentals paid for in cash before we move back into a primary again.  This also may sound a little crazy but I think the realestate market / stock market is going to be going into a recession in the next 1 or 2 years.

     Just wanted to know what some people might think that have more experience / knowledge with our plan. Thanks.

    Some folks like equity. Some like to let investments pay for themselves. There's arguments on both sides. 

    1Reply
  • David Moore
    Investor · Crystal, MN · Member since 2013 · 486 posts · 277 votes
    7y

    @Chris Gawlik

    There is a fundamental problem with your idea, and I've personally experienced it.  Your calculation says you will have around $200K, and you will increase monthly cash flow around $7K.  In my experience, life just gets in the way, and unsupported optimism can result in unfulfilled dreams.  Putting your family in such a cramped space sounds great because you have never done it.  Before you commit to selling your house, go live in the trailer for a month or two, and see if you can stand it.  The worst time to look for housing is when you are in a hurry to get it.  Find out what storage problems, relationship problems, and the fact that sickness can run through a small place faster than when in a house.  Live it, before you commit to it, not only for your sake, but the sake of your whole family.

    Also, big assumption on your part of the plan.  How do you know that there will be a recession in 1 or 2 years?  How do you know how long it will last?  How do you know a recession will locally seriously affect your real estate market?  That's a lot of ifs.  

    Someone here mentioned Dave Ramsey.  His plan is better.  And you keep your house.  

    0Reply
  • James Allen
    Lender · Los Angeles, CA · Member since 2015 · 184 posts · 92 votes
    7y

    @Chris Gawlik - We have a family of four and we have been living with family for the last 3 years. In that time, we've eliminated $25,000 of debt and have acquired 7 rental units (3 that we've completely rehabbed), done a few flips and are in the hunt for our next purchase. It's not been easy living with my wife's family for this amount of time but the pros WAY out weigh the cons and I know we wouldn't even be close to the position we're in now had we not chosen to do this. I should also mention the kids have great relationships with their grandparents which is a nice bonus. 

    0Reply
  • Brian Ellis
    Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @David Dachtera:
    Originally posted by @Chris Gawlik:

    Hey everyone. We are selling our primary residence and moving into a travel trailer behind my parents house.  We live in one of the nicest neighborhoods in town. I have a family of 6.  A kid in high school and all the way down to an 8 year old. After looking at our bills we are just spending to much money.  We are developing a long term plan to develop some passive income.

    We have around 250K in Equity. We will be paying off a 3 unit a car and some Bill's.  By the time everything is paid off we should have around 200k liquid. 

    With the net cash flow and our jobs we should be saving around 7k a month. 

    My wife is the driving force behind this plan. This is pretty hard for my kids and I, but our plan is to have 3 rentals paid for in cash before we move back into a primary again.  This also may sound a little crazy but I think the realestate market / stock market is going to be going into a recession in the next 1 or 2 years.

     Just wanted to know what some people might think that have more experience / knowledge with our plan. Thanks.

    Some folks like equity. Some like to let investments pay for themselves. There's arguments on both sides. 

     And then there is an entirely different discussion for the kids feelings. 

    I wouldn't do it. 250k is a lot of equity that can be utilized to make you money.

    1Reply
  • Nathan Boyer
    Real Estate Agent · Manheim, PA · Member since 2018 · 37 posts · 20 votes
    7y

    @Dennis M. Although did that experience growing up contribute to your drive to succeed in real estate?

    1Reply
  • Royce Talbo
    Investor · Kaneohe, HI · Member since 2012 · 218 posts · 104 votes
    7y

    @Chris Gawlik have you tought about property taxes?  If in several years you buy and the market hasnt gone down to what you bought your current house for you could be paying a lot more in taxes and would eat into any profits you made from the 3 units you are purchasing.  I would try to see if you can do a heloc, refi or even see what you can rent out your place for and find a cheaper place for your family to rent.  

    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y
    Originally posted by @Nathan Boyer:

    @Dennis M. Although did that experience growing up contribute to your drive to succeed in real estate?

    Yep I would say  it has  constructively helped in all aspects of my adult life .the fear of poverty is real and it has pushed me to excel in my field and basically everything I do. It has given me that “ I will succeed and do whatever is required no matter what “ mindset that i use to set goals 

    0Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    7y
    Originally posted by @Chris Gawlik:

    Hey everyone. We are selling our primary residence and moving into a travel trailer behind my parents house.  We live in one of the nicest neighborhoods in town. I have a family of 6.  A kid in high school and all the way down to an 8 year old. After looking at our bills we are just spending to much money.  We are developing a long term plan to develop some passive income.

    We have around 250K in Equity. We will be paying off a 3 unit a car and some Bill's.  By the time everything is paid off we should have around 200k liquid. 

    With the net cash flow and our jobs we should be saving around 7k a month. 

    My wife is the driving force behind this plan. This is pretty hard for my kids and I, but our plan is to have 3 rentals paid for in cash before we move back into a primary again.  This also may sound a little crazy but I think the realestate market / stock market is going to be going into a recession in the next 1 or 2 years.

     Just wanted to know what some people might think that have more experience / knowledge with our plan. Thanks.

    0Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    7y
    Originally posted by @Chris Gawlik:

    Hey everyone. We are selling our primary residence and moving into a travel trailer behind my parents house.  We live in one of the nicest neighborhoods in town. I have a family of 6.  A kid in high school and all the way down to an 8 year old. After looking at our bills we are just spending to much money.  We are developing a long term plan to develop some passive income.

    We have around 250K in Equity. We will be paying off a 3 unit a car and some Bill's.  By the time everything is paid off we should have around 200k liquid. 

    With the net cash flow and our jobs we should be saving around 7k a month. 

    My wife is the driving force behind this plan. This is pretty hard for my kids and I, but our plan is to have 3 rentals paid for in cash before we move back into a primary again.  This also may sound a little crazy but I think the realestate market / stock market is going to be going into a recession in the next 1 or 2 years.

     Just wanted to know what some people might think that have more experience / knowledge with our plan. Thanks.

     I think you are a family that has a lot of guts.  We need way more of you in this country.  Nothing begets future success like today's sacrifices.  Everyone wants wealth but no one understands the sacrifices necessary to obtain it.  Big flashy house and luxury car might look good today but steal real wealth from your later years.

    A good foundation is key.  If you feel more comfortable paying off your triplex, then absolutely do it.  People use leverage to grow, but the less free cash flow they have the more they need that leverage.  If you'll have 7k a month free cash flow to invest you'll be able to have a significant real estate portfolio in no time.

    I know of what I speak. I used to live with my wife and 2 kids in a two bedroom duplex. My son came to live with us unexpectedly. Wife wanted to rent a bigger house. I said no way and saved and saved. Our one entertainment was bowling. Folks at the bowling alley thought we were dirt poor.

    Wrote a check for 160k (all saved) to buy a bigger house for the family twenty years ago. Clipped coupons, drove beaters and continued to save.  Could have mortgaged my house purchase but didn't want to.  Still own it and it's been rented for $1700 per month for last 7 years. Kind of a safety net in my brain.

    Bought and rehabbed 80+ more SFR's without leverage. Financially free now, as you will soon be with your plan of action. Congratulations!

    2Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    7y

    Check zoning for your area if this is truly an RV.  I suggest a trial run before you sell the house for you and your hosting parents.  It is a lot of togetherness for a family but at least you are in southern California with lots of  good outdoor weather.  I grew up in a large family and a small house, your plan sounds challenging to me.  We traveled with 9 in an RV and it was tough balancing stuff and personal hygiene. Sleeping of smaller kids with the natural later cycle of the rest of the family.   All that said it is your choice AND your parents! Make sure the hosting household isn't being pushed and you pay your fair share of expenses. 

     As for paying off the houses I do think you are nuts. Cash flow them comfortably.  

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    7y

    @Sharon B., I kept the like button down for like a minute but still only voted your post once!!!!  Well said - challenge children don't coddle them.  Enable them don't spoon feed them.  Love them don't smother them and watch them fly!

    Problem is first we had helicopter parents and now I hear it's lawn mower parents.  Not good for em.  Failure on their own isn't a bad thing. I tried to be there to dust em off and help them start again - not to avoid the failure. 

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  • Johann Jells
    Rental Property Investor · Jersey City, NJ · Member since 2011 · 1k+ posts · 876 votes
    7y

    Cutting back from the standard suburban model of throwing money everywhere is a good idea, but you're going too far. As said above you could easily househack a four unit or more and live expense free. I've raised my 2 kids in a 1200ft apartment in a 7U we bought 22 years ago. 5 years in when our 2nd was born we combined a 750 and a 450 to make our current space. We have never had living expense in all that time. We made an extraordinarily lucky investment, but had it just provided that and moderate equity and cashflow it would have been OK. 

    We've had to deal with a lot of family flack for raising our kids in the city in a relatively tiny apartment. They've done great, but it's not a mobile home. That is really rough, and I believe unnecessary to achieve your goals. You need to study the benefits of leverage in RE, you clearly don't understand it much. Look at the thread https://www.biggerpockets.com/forums/52/topics/688... to see how leverage multiplies equity gain tremendously.

    You should also watch the documentary Surfwise, about an eccentric doctor who raised his 8 kids in an RV wandering from beach to beach. The kids are a mess.

    2Reply
  • Account Closed
    Real Estate Agent · Austin · Member since 2019 · 100 posts · 28 votes
    7y

    @Chris Gawlik first of all, congrats on a large family! 4 kids is great to have. My personal suggestion is to refinance primary and pay off the debt. To get to the point of having cashflow and live from it is a long way. You should not be able to have more than 14k on your 200k per year. If someone promissed you otherwise - run. It is doable in a bad neighborhood, but then you jeopardize your 200k by taking more risk.

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    You should prepare your children to take some abuse at school. Kids can be cruel. Expect to hear Gypsy and Traveller being tossed around. No doubt with the internet the way it is this will come up.

    0Reply
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