People think we're nuts

[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.

[Jay Hinrichs]

Originally posted by @Matthew Paul:

Sounds like a plan for disaster . First , when someone complains about you living in a rv in a back yard , the government will make you stop , now when they see children they will call social services , you may lose your kids .  Now if you read about rv's they are not recommended for full time living ( I own a 30 foot and have 2 boys ) . You wont last 1 month with 6 people living in a rv .  ( one good bowell movement and you will clear the unit ) . Storage is limited , hot water is limited , refrigerator is small , seating is minimal . 

I think its not a bright idea with a family 

Matt I ran into a guy last Friday when I was bidding on a foreclosure in Vegas..  He got one.. so I sidled up to him and we got to talking and he buys one moves in while he rehabs and sells it.. once its sold he moves to a hotel until he can buy his next one.. And if you did not see him hand over a 140k check you might of thought him homeless.  deep tan long beard scruffy hair.. LOL..  

[Chris C.]

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

[Christopher Freeman]

If I had that much liquidity I would probably take out a commercial loan on a High C/Low B commercial building (6+ units). That building class will tend to be a little more resilient to economic downturn since people still need a place to live and you've got people "above" who can filter down to a more modest tier when they can't afford their class A condo anymore. The valuation will be income-based, so as long as you're able to continue collecting rent and managing your expenses, you'll be somewhat less prone a loss of equity.

[Matthew Paul]

@Jay Hinrichs I am in the same mode right now . I havent shaved for a week and a half .  I am buying a new used truck , So I am dressing down , driving my back up car , an old toyota corolla . This way when i am looking , the salesman dont run to me ,I have to go and find them .  So far  3 out of 4 want to run my credit before I can take a test drive . Number 4 was a bit condescending . I have a couple more to hit .  Nice thing is they dont apply pressure when you look poor .

[Dave Foster]

@JJ P., That is a  brilliant perspective!!  It also looks very different when the RV is parked beside a glacier or on a bluff overlooking the ocean in a national park. I was just thinking the same thing about outcomes.  If in the short term @Chris Gawlik and his family end up with $200K increasing by $7K each month that's a ticket to using leverage at that point to purchase some great cash flow in short order.  But having a rock solid base for the future.  Grandpa and Grandma's back yard could become just a launch pad for some truly magnificent adventures.  

@Matthew Paul,  Would love to host you.  Unfortunately the boat is now  tuition at "FU" (wait... when it's university it's UF) :)

[Ahmad H.]

@Chris Gawlik Your plan seems like a knee-jerk reaction to the realization that you're spending too much money. I would leverage the enthusiasm to take a deeper look into your spending habits and cutting down on unnecessary expenses. Having a decent house for your family falls under the necessary category in my book. 

You could use a HELOC or refi to get access to your 250k equity and use that to BRRRR or just put it in an index fund and that return should make your primary a little cheaper to keep. Other ideas would be to consider downsizing or even house hacking into a duplex in the same/similar neighborhood.

Make a plan to lower your expenses/increase savings and proceed gradually, reassess, and adjust as needed just like you would in building a real estate business. There's too much at risk for a rushed decision.

Best of luck. Keep us posted on what you end up doing.

[Brian Ploszay]

Getting properties paid off from rents takes a long time.  That's not even my goal.  I am comfortable with modest /  conservative leverage that can withstand a downturn.

I'd suggest saving for sizable down payments, buying quality real estate and going long.  In time, the properties will be paid off, hopefully values will increase and you will have cash flow and equity.

[Lee Ripma]

@Chris Gawlik

The only thing nuts about your plan is not leveraging the properties!

[Steve Vaughan]

I thought I was roughing it moving to a 3/2 doublewide in a trailer park 3 states away. And we were only a family of 3.

If it gets too cramped (and I bet it will) you can always just be normal and rent or be like a BPer and househack. A 2 bed in your new quad will feel like a McMansion! 

[Steve Vaughan]

Originally posted by @Jay Hinrichs:

And if you did not see him hand over a 140k check you might of thought him homeless.  deep tan long beard scruffy hair.. LOL..  

The homeless look is in, Jay.  Great for being underestimated and not seen as a threat.

Being underestimated got him a house at auction. Also works well when garage saling or when you don't want to be voluntold to do something.  Better than active wear! 

[Hoang Nguyen]

@Chris Gawlik

It’s a really great idea if your kid love outdoor activities. I think you can make stories video about it and have your own YouTube channel about your family. I wish you & family happy being fun outside!

[Account Closed]

Haha! I was literally getting ready to type a Dave Ramsey quote.

Originally posted by @Marko Zlatic:

"Live now like no one else so later, you can live like no one else." - Marko Zlatic

Just kidding. We all know that's Dave Ramsey :)

[Tanya F.]

The nice thing about this extreme downsizing plan is you can always decide to change your mind. I might suggest trying it for 3 months before you commit for the long haul, and always have an exit plan ready to deploy. You might love it, or you might decide a compromise is in order.  Being frugal, conserving, and simplifying are things to aspire to.  

There's no shame, it's an adventure. If others look down on you that's their problem, not yours. But do ask the kids how it's going fairly often.

Keep a journal if you do decide to stick with it. It'll be interesting.

[Blayne Williams]

@Chris Gawlik great team work, it will pay off.

[Josue Vargas]

You are asking questions for a counselor level... 

This is what I think (me on your plate): Kids comes first.  Education, a good house/home, and some extras for the kids at least have some fun/extracurricular activities, etc.  They are kids and they have no interest on your investment strategies . 

Can you provide that to them with your investment plan? I would never sacrifice my children education or "normal social life" against my investment ideas.  

On other words, I'm not in disagreement for you to sell your won transporting vehicle so you can use a scooter or bicycle to commute from your house to your job, but would you agree that's the best option? 

You can still save $ as you are currently doing.  The market will not change so dramatically.  And if it change and you have a stable job and ultimately capital, then it will be better for you.  You need to know how bad or good markets works, is just basic economics (offer and demand but in Steroids)... 

[Sharon B.]

I think some people don't give kids enough credit for being resilient. It can be very good for them to encounter some difficulties in their lives and have to learn to adapt. It may even prevent them from feeling entitled, as many kids now days seem to feel.

[Scott Matthew C.]

@Chris Gawlik I have to say I really like the title of this thread! “People Think We’re Nuts!” Let them think that. You shouldn’t care what other people think. From your read, it sounds like you know your “why.” Just stay focused. If providing for your family isn’t a big enough “why” then I don’t know what is.

In terms of a recession, pivot your business model and aim it toward where money is being made.

Please friend me I would like to stay in touch and to hear about the progress you’re making.

Sounds like you have a great wife and teammate that knows her “why” as well.

Want to go faster in life? Run by yourself.

Want to go farther in life? Go together!

All the best!

[Mark Nicholson]

Are you wanting to invest in real estate?

If so, why not learn how to invest right now.. Instead of investing (sounds like a decade or so from now?). Go for a FHA loan on a owner occupied duplex or 4 Plex that isn't costing you money, or actually making money. Top it off with some appreciation, interest write off, and no capital gains tax after owner occupied for 2 yrs.

Find some bargains and put some sweat equity into it, that’s another income on its own, tax free.

When your ready to buy your rentals use some leverage instead of waiting to buy properties when you can own them free & clear. Less cash invested, tax write offs, and be able to own more doors.

Making a good quality of life for your kids is the best investment.

[Account Closed]

not sure why there are snowflakes on this forum. Some responses to you @Chris Gawlik are clearly meant to insult, and goes way below a standard of a professional. Where are the moderators? Take the garbage out!

[Matthew Irish-Jones]

@Chris Gawlik why is paying off your rentals in cash a priority? Can’t you purchase more rentals with financing and have your renters pay them off?

[JD Martin]

Originally posted by @Account Closed:

not sure why there are snowflakes on this forum. Some responses to you @Chris Gawlik are clearly meant to insult, and goes way below a standard of a professional. Where are the moderators? Take the garbage out!

 Thought some of the responses have been a little harsh there's nothing to moderate here. The OP created a thread with a scenario that will be controversial for some and can expect to have some tough responses.

My thoughts on the premise itself for the OP:

1. You can always reverse course. Selling a house is not a one and done deal. If it doesn't work out you can move back into a regular house.

2. Kids can be resilient but there's a lot of truth to the posts that warned of poverty damage. I grew up ridiculously poor, faced a lot of bullying and shame about it, and I know it has shaped my psyche even to this day.

3. This plan would be great if you were 22 and single. I've said it before many times, I would have had a similar plan if I was going back in time 30 years. Considering your current situation, I'm not so sure. I am with a few others in that it sounds somewhat knee-jerk to me in response to an unhappy level of debt, consumer and otherwise.

4. Your choices are not binary here. There are plenty of options within the scale that doesn't amount to living in a tiny home. When I was a kid we were homeless for 4 months and lived in a big tent. It wasn't an adventure - it sucked. 

So those are some other perspectives. Personally, I think you should both think this through some more before leaping.

[Thomas S.]

A better plan before going forward would be to move your essential belongings and your family into your living room for a couple of months. Set up a bar fridge, hot plate, beds and all essentials and make it clear to everyone that they must not leave the living room except to go out side, You will also need to restrict bathroom use to a single sink, toilet and small shower. 

If you can survive that with strict adherence and every one is happy at the end of 2 months go for it.

[Shiloh Lundahl]

@Chris Gawlik This is an interesting and timely thread.  I have been thinking a lot about how many, so very many, americans live well beyond their financial needs.  Many live pay check to pay check and could not whether a financial emergency themselves without needing assistance from family, friends, church charities, or government assistance.  Why is that, because many people have a warped perception of what they believe they can afford and what they think they deserve.  A lot of that perception comes from comparison to what everyone else is doing.  And if everyone else is making poor decisions, then at least I'll have comfort in knowing that I wasn't the only one who made a dumb mistake. 

Think back to 2005 - 2008.  Anyone with a mortgage calculator could have known that they shouldn't have purchased a house for as much as they did compared to their income (especially in Arizona).  But they did it because everyone else they knew in their stage of life was doing the same thing at that time.  I was lucky enough to have purchased a house right after the meltdown had already taken the majority of the fall in home values.  

In 2010 I was a membership clerk in my church so I knew of a lot of the people who were moving in and out of the neighborhood.  Over just a 2 year period of time, half of the neighborhood turned over; in just 2 years!  Why did that happen?  Because people were listening to their loan officers telling them how much of a house they could afford rather than doing the math on their own, and figuring out that they really could not afford the house that they were trying to buy AND save 10% of what they make on top of that (1st principle of wealth).  Thus they lost their homes because they made the same poor decisions that everyone was making at the time.

Chris, you may have started out like so many people with getting into a home with a substantial mortgage and getting cars that carry a lot of debt and financing things on credit like the majority of americans do.  Now you may have come to realize that that is not the best road to financial freedom (or even financial security).  Now you are doing what probably should have been done at the beginning which is start off small and build up.  I commend you for recognizing what may have been a financial mistake by following the common road (reference to Robert Frost poem about the road that diverged in the wood) and for being willing to restart your journey in a financially wiser way now.  So good for you.

[Bjorik Mutize]

@Chris Gawlik

Lol @ the title. Kudos to the plan.

Why pay off the 3 unit though?

[Shiloh Lundahl]

I appreciate the vulnerability some people have shown in the tread to share some personal information about their own growing up and the effect that deprivation trauma (poverty) can have on people (@Dennis M., @Patrick M.).  And I understand the concerns for the children that others have mention (@Lori Greene, @Josue Vargas).  

I would like to speak to those two topics specifically - trauma and children.  I don't treat lightly the topic of trauma. As a child and family therapist, I work in trauma and childhood trauma all the time. So my comments on the subject come from an accumulation of experience of over 10 years and over 10,000 hours of helping individuals work through trauma and in teaching parenting classes.

My wife grew up poor in a family of 6 (2 parents and 4 kids).  There were times that they lived in a shop and the bathroom was a bucket.  Other times they lived in someone's garage for a while or in a barn and, yes, even a travel trailer.  This was very difficult for my wife and she did feel a lot of shame because of it.  But that is because the family was really in a situation of poverty and they didn't know how to change their situation other than having dad working more hours than the 50 or 60 or 70 that he was already working never earning more than $10 an hour.  

This situation was very difficult for my wife and the other kids because it was their circumstances and they had no way to change it.  Comparing that to a family who is traveling around Europe for a month or two living in the same types of living situations but doing so because they want to do an extended family traveling vacation but they don't want to spend too much monty while vacationing.  This is a very different situation because the family has a choice whereas the kids in my wife's family did not.  That is what creates the trauma - knowing that you are in a bad situation and you don't have a way out.  

My wife and I moved about 3 years ago to Burbank, CA from Gilbert, AZ.  In Gilbert, we have a 2300 sq ft home (4 bed, 3 bath and a den) on more than a half an acre with beautiful trees and a guest house in the back.  My wife remodeled the home and made it look absolutely amazing with beautiful finishes.  We moved to a 1350 sq ft home (2 bed, 2 bath) 100 year old home in Burbank that was only partially updated several years ago.  I have 5 kids, 4 of which share a room.  It is small for my family, but we know why we are there and we have a purpose there.  Our kids also know that we are doing fine financially and they are able to save up money to travel to France, Costa Rica, and Japan (yes I say that they are able to save up for it.  My kids save up money to pay half of the costs of their trips).  So even though the living situation may feel small and cramped at times, my kids understand that it is temporary so that we can accomplish certain goals while we are in California and then we will be moving back to Arizona into our larger home - thus no signs of trauma.

Trauma comes from the way we perceive and make sense of the experiences that we have. Two people can go through the same event and one person walks away from it with trauma while the other doesn't.  Why is that?  Because of the way the brain understood and made sense of the meaning of the event.  So if @Chris Gawlik's kids understand the purpose of why they are doing what they are doing, and they know that it is temporary sacrifices for something better in the future, and Chris' wife is heading it up, then it will likely minimize the effects of any trauma that they could experience from doing this.  In fact, there are many more psychological benefits that could come from this experience than negatives if done right.