SEEKING LIFE GUIDANCE...from all of you

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SEEKING LIFE GUIDANCE...from all of you

Account Closed
Member since 2020 · 15 posts · 18 votes

Hello Fellow BPers,

Just need some reassurance, constructive criticism, or to be told I'm an idiot.

Currently I own 2 rental properties, here are the breakdowns,

3Bd, 1 Ba Located in Ogden Utah:

Market Value 320k

Amount left on loan 59k

Currently rented and cash flowing 1200 a month

2Bd, 1 Ba Located in Wake County North Carolina:

Market Value 185k

Amount left on loan 105k

Cashflow 800 a month

Currently living in North Carolina and plan on staying here, sick and tired of making 16 bucks an hour cooking, I have 2 kids and just found out we are having a 3rd so I put my two weeks in and want to dive more into real estate. I know how to run heavy construction equipment and cook at a high level so I can get another job tomorrow if I need to but I want to make a run at real estate full time. My question is if you were me would you sell my Utah house and take the roughly 250k and buy more rentals in North Carolina? Utilize a HELOC? Sell both houses? I am open to anything and everything as far as ideas go. I have done all the renovations to both properties myself and plan on doing all the renovations myself until it doesn't make sense anymore. Thanks in advance I'm just in a limbo and need some numbers to reassure me I can do this.

-Bryan

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y

I would have stuck with the W2 job. I understand you're trying to get into investing full-time, but you're not even close yet.

You claim to be "cash flowing" $1200 on a 3bed/1bath in Ogden. I just checked and a 3bed/2bath is available for $1,800. Even if yours rented for $2,000 a month, you have a mortgage, taxes, insurance, and you should be setting aside money to cover maintenance, capex, vacancies, etc. I don't think you're cashflowing $1,200 a month or $800 a month. You're probably closer to $500 - $600 cash flow with both properties. If you don't have a hefty reserve, you could easily be wiped out with one bad tenant. It's not hard for a tenant to cause $10,000 in lost income and damages. What would happen if you got hit with that and your baby was born the same month?

Question: why are you cooking if you're qualified to run heavy equipment? A heavy equipment operator can earn 50% - 100% more than a cook. 

If I were you, I would seriously study what real cash flow is. https://www.biggerpockets.com/...

I would consider getting the best-paying job you can and socking away every dime possible for the next nine months. If you can seriously live off your $2,000 cash flow then you should have no problem living off it now and putting away every penny earned at a W2 job as a heavy equipment operator. Then you'll have money to invest.

Finally, you should sit down and really consider what you need to live with a family of five (or whatever). I suspect it's far more than $2,000 a month and I suspect you don't actually make that much from your two rentals. You should stick with the W2 job until you are at least close to earning enough from your cash flow to meet your living expenses. Then you can make the leap into financial independence.

I don't think you're there yet.

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    5y

    Keep everything, use Heloq to tap equity for downpayment on another cash flowing property.

    9Reply
  • Vinay Kolluru
    Investor · Cary, NC · Member since 2017 · 78 posts · 89 votes
    5y

    I agree. Tap into your existing equity through HELOCs. That way you can deploy the equity to expand and also enjoy the cashflow and appreciation. It's what the rich do - "hold forever, borrow against".

    And congrats on the new baby!

    8Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    I would have stuck with the W2 job. I understand you're trying to get into investing full-time, but you're not even close yet.

    You claim to be "cash flowing" $1200 on a 3bed/1bath in Ogden. I just checked and a 3bed/2bath is available for $1,800. Even if yours rented for $2,000 a month, you have a mortgage, taxes, insurance, and you should be setting aside money to cover maintenance, capex, vacancies, etc. I don't think you're cashflowing $1,200 a month or $800 a month. You're probably closer to $500 - $600 cash flow with both properties. If you don't have a hefty reserve, you could easily be wiped out with one bad tenant. It's not hard for a tenant to cause $10,000 in lost income and damages. What would happen if you got hit with that and your baby was born the same month?

    Question: why are you cooking if you're qualified to run heavy equipment? A heavy equipment operator can earn 50% - 100% more than a cook. 

    If I were you, I would seriously study what real cash flow is. https://www.biggerpockets.com/...

    I would consider getting the best-paying job you can and socking away every dime possible for the next nine months. If you can seriously live off your $2,000 cash flow then you should have no problem living off it now and putting away every penny earned at a W2 job as a heavy equipment operator. Then you'll have money to invest.

    Finally, you should sit down and really consider what you need to live with a family of five (or whatever). I suspect it's far more than $2,000 a month and I suspect you don't actually make that much from your two rentals. You should stick with the W2 job until you are at least close to earning enough from your cash flow to meet your living expenses. Then you can make the leap into financial independence.

    I don't think you're there yet.

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    42Reply
  • Scott M.
    Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    if you are really open to anything then go back to work and keep the houses.  Construction is and has been booming and I would be very surprised if people with your skillset wasn't in demand.  You are one bad tenant away from complete disaster for you, your wife, your two kids and the 3rd on the way.  

    4Reply
  • Account Closed
    OP
    Member since 2020 · 15 posts · 18 votes
    5y

    Thanks @John Underwood and @Vinay Kolluru I had thought the HELOC route was going to be the safest bet but kind of wanting to set things in motion faster is what had me thinking about selling. @Nathan Gesner Thank you for the link to study up on cashflow and I absolutely will but the mortgage after everything including insurance on my ogden property is $350.00 even, I had set aside a lot of money while in the Army and put way too much down on the house initially when I purchased but it has worked out well for me. Current mortgage for my other house is 448.00. Is it common practice to factor in maintenance work that may or may not come up into "cash flow" if I already have cash reserves set aside? And I don't want to run equipment or cook because at this point in my life I don't have to and am not in a position financially to where I need to have a job. Also I have the G.I. bill so if I ever needed an extra 2k a month I could just go to school and still have time to focus on real estate. 

    Thanks,

    Bryan

    0Reply
    • Nathan GesnerBusiness Member
      Moderator
      Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
      5y
      Originally posted by @Account Closed:

      Thanks @John Underwood and @Vinay Kolluru I had thought the HELOC route was going to be the safest bet but kind of wanting to set things in motion faster is what had me thinking about selling. @Nathan Gesner Thank you for the link to study up on cashflow and I absolutely will but the mortgage after everything including insurance on my ogden property is $350.00 even, I had set aside a lot of money while in the Army and put way too much down on the house initially when I purchased but it has worked out well for me. Current mortgage for my other house is 448.00. Is it common practice to factor in maintenance work that may or may not come up into "cash flow" if I already have cash reserves set aside? And I don't want to run equipment or cook because at this point in my life I don't have to and am not in a position financially to where I need to have a job. Also I have the G.I. bill so if I ever needed an extra 2k a month I could just go to school and still have time to focus on real estate. 

      Thanks,

      Bryan

      Only you know. I was just basing my comments off what you shared. Only you know the entire picture and can evaluate which way to go.

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  • Account Closed
    OP
    Member since 2020 · 15 posts · 18 votes
    5y

    @Scott M. Maybe I am looking at it differently but worst case scenario the tenants steal all my appliances and I have to replace every piece of drywall in the house and am forced to sell while still pocketing close to a quarter of a million dollars so I would say "complete disaster for you, my wife, your two kids, and the 3rd on the way" is a bit of an exaggeration. 

    2Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    @Nathan Gesner nailed it. You are jumping the gun. You have two verifiable skills, one that will make way more, and a third baby on the way. This is the absolute worst time to "go into real estate" especially because you are thinking of taking your assets and selling them just to reinvest the money into the hottest market in years everywhere. As others have said, if you keep working the W-2 while also looking at properties locally, that's your move. If your only assets are tied up in the first two properties, you are just stealing from Peter to pay Paul.

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y

    My .02 - Go back to work as a heavy equipment operator. Sell the Utah house and buy more in NC...I like having my stuff near me where I can be there to work on or check into...no PM fees either. Save and buy another, maybe STR for some cash flow....?

    Then you can kinda semi-retire..... kinda....

    But yeah, you're jumping the gun....

    1Reply
  • Account Closed
    OP
    Member since 2020 · 15 posts · 18 votes
    5y

    @Jonathan Greene Thank you for the Peter to Paul analogy to put things in perspective. I guess I looked at the numbers and am able to step away from working right now even though it will be tight. Maybe career change to a field within real estate? Finding out we were expecting our 3rd just kind of made me want to step away and spend time together as a family so maybe this will be a sabbatical. 

    Also I feel like I was painted as lying about mortgages or in a bad light, I know I have gotten very lucky my first two deals and they all won't be this easy but here ya go so I don't get blackballed. 

    1Reply
  • William Hochstedler
    Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
    5y

    Get your HELOCs in place before you quit your W2 job.  Borrowing is much much much harder without a paycheck to show the bank.

    Think about pivoting to a career that generates income in a real estate related business.  Go work for a flipper or become a real estate agent.  That way you can make money independently of your properties. They should be your seed that you cultivate into something bigger rather than sucking the money (Income or equity) out of them now.

    You're still young so you should be in the growth phase.  You've got a few years before you want to be living off your portfolio.  Now's the time to build it.

    5Reply
  • Account Closed
    OP
    Member since 2020 · 15 posts · 18 votes
    5y

    Thanks @William Hochstedler and also thank you to everyone who has contributed. It was half existential crisis of having another kid and half I want to pivot to real estate full time in some capacity so I will definitely be getting another job but in real estate. I appreciate all the older members who are probably family men as well telling me this is not the right move financially, being in a new town and not having anyone around to seek guidance from it is nice to get honest advice here.

    -Bryan

    3Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y

     No, the worst case scenario is always far worse than anything you can imagine. Tenant lives in your house for a year while you try to evict and have to pay the mortgage. He leaves lights on all night to drive up your electric bill. On the way out, he trashes it beyond anything you've ever seen. Insurance won't pay. You get sued. You lose both houses. One of your kids gets really sick. Your wife leaves. You want me to continue....?

    Ask us old farts how we know........you can't make this sh!t up.

    4Reply
  • Account Closed
    OP
    Member since 2020 · 15 posts · 18 votes
    5y

    haha thanks @Bruce Woodruff well hopefully that doesn't happen but if you see me on the side of the highway next year just throw me a dollar

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y

    You bet I will, but good luck...!

    0Reply
  • Jake Hart
    Accountant · Muncie, IN · Member since 2017 · 27 posts · 18 votes
    5y

    Bryan, I would have to agree with mostly everyone that getting rid of your W2 job wouldn't be the best decision moving forward. I would suggested working on getting a higher paying w2 for sure. Honestly just knowing the little bit of information you gave, if I was in your shoes I would (1) Get a super tight monthly household budget on paper so I was for sure saving more than spending (Saving all my rental income profit) (2) Set realistic and obtainable real estate investment & personal financial goals for the next 12 months with a game plan or road map on obtaining those, and (3) Put an awesome resume together and start searching for a higher paying W2 job. 

    From your post, and please correct me if I'm wrong, you sound a little unsure or frustrated with your current financial situation. I totally understand where you are coming from. Back in the day when I had my first son on the way, I took a second job at Menards making $11 an hour out of fear of not having enough. For me, I try to find the good in every situation because its always there if you look hard enough. Working there for the short 6 weeks it was, taught me that no one will value your time more than you. If you have to trade time for money, make sure it counts big towards your future. Within 1 years from that point I had doubled my income and purchased my first rental property. You have a major leg up on me having around $200k in equity to play with. There is so much potential there, but the key is to set yourself up for success, not failure. Luckily you have, in my own opinion, the best platform here to find all the info for you to succeed. Really take time to think about where you want to go and how you are going to get there. Put it on paper. Study it and refine it daily. Making wise financial decisions is a by product on knowing what you want and how you are going to achieve that. Use the resources: Books, podcasts, blogs, etc. that BiggerPockets offers to help refine your overall goals and dreams and then Execute!

    4Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y
    Originally posted by @Jake Hart:

     taught me that no one will value your time more than you. If you have to trade time for money, make sure it counts big towards your future.

    This is great advice for young people. I remember an old saying - "Money is a renewable resource...Time is not"

    So many people never get this...until it's too late.

    1Reply
  • Karla Simmons
    Vacaville, CA · Member since 2019 · 218 posts · 140 votes
    5y

    @Bryan Potter

    Bryan, if you want to move on to something else then DO IT. Life is short and you don’t want to regret doing jobs that you don’t like to do. Since you want to stay involved in the world of real estate, have you considered something like becoming a home appraiser?

    I might be tempted to sell the home in Ogden and purchase one or two properties in NC since that’s where you plan to stay. I know a lot of people have out of state rentals but with 2 littles ones and a 3rd on the way, that could complicate your life more than you want it to unless you don’t mind paying a property manager 10+ percent of the rent.

    Best wishes and congrats!

    0Reply
  • Scott M.
    Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    Not sure why the focus on worse case scenario's.  My point was you don't need a worse case, that is how precarious your situation is unless you are sitting on a huge bank account you forgot to mention?  With your only income coming from 2 homes you are simply one bad tenant or one major expense away from a disaster.  You don't need the worse case, you just need some bad luck and well, things can get hard fast.  You asked for opinions and the truth, there you have one, feel free to ignore.  

    1Reply
  • Account Closed
    OP
    Member since 2020 · 15 posts · 18 votes
    5y

    @Jake Hart You are absolutely right, just frustrated with trading time for money when I want to be with my wife and kids more. We follow a very tight monthly budget which is why I have been able to support my family on 16 bucks an hour and have two properties. My wife stays home with the kids and we want to keep it that way. In my mind I was thinking if I sold one of the houses I would be able to use the money to put 25% down on 2 others local to me now. @Karla Simmons After all the advice from tonight I am going to enroll in a home inspector certification program here in N.C. so I will replace my income with the G.I. Bill and transition into a career in real estate. 

    2Reply
  • Karla Simmons
    Vacaville, CA · Member since 2019 · 218 posts · 140 votes
    5y

    @Bryan Potter

    I have no doubt you are going to make all of that work for you and your family. Good luck!

    0Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    5y

    @Account Closed becoming a home inspector sounds like a good idea to me. Can you flip one? You have a good situation with your current properties that have been improved. Does your GI bill allow you to buy with zero down? Maybe buy with 0 down and move in something that needs work or even a multi-plex. Live in it for a while and then flip or keep.

    0Reply
  • Jake Hart
    Accountant · Muncie, IN · Member since 2017 · 27 posts · 18 votes
    5y

    @Bryan Potter I totally get it. We made the decision when my son was born that my wife would be a stay at home mom. Best decision we’ve ever made. As the father, I have had to suffer being away from my kids and wife, but what I’m doing will change not only my families future but also my grandkids and their kids. Your kids and wife seeing you work so hard for them will only make your moments together that much more memorable, and later down the road you can look back and see how you have change your families outcome. Hold on to those thoughts when your in the trenches working!!!

    1Reply
  • Corey Frank
    Gillette, WY · Member since 2017 · 149 posts · 68 votes
    5y

    @Bryan Potter Hi there Bryan! Before I give my 2 cents, I would like you to know I am pretty new at this real estate game so take my advice with that sodium stuff.

    I also have 3 kids and a w2 job that I CAN NOT STAND! By far the only reason I am still here is the rate of pay and the ability to save to enhance my position.

    I don’t want to speak for you but it sounds like you aren’t in to bad of a position for growth. You have massive amounts of equity in a market you can easily liquidate and a w2 that you can show to financiers. I would hate to see someone in your position lose that advantage. The worse case scenarios that Bruce talks about could cripple that position of yours very easily. What if you have to go back to your w2 without anything?

    Maybe I’m missing something and I hope someone points it out if I am but why keep these properties? I haven’t ran the numbers but at a glimpse it seems like even if you raised rents to the market level as Nathan pointed out, wouldn’t a HELOQ over leverage you on these properties? An equity loan is just going to keep you in small cash flowing properties anyway. My personal opinion is stay in the w2, research research research. How can you sell those properties and 1031 the equity into something that cash flows a lot better? Analyze A LOT of properties to understand what you need for reserves and really set yourself up for the future. Hope this helps!

    0Reply
  • Greg Henderson
    Flipper/Rehabber · Hattiesburg, MS · Member since 2020 · 59 posts · 25 votes
    5y

    @Bryan Potter

    If you can live off of what you get paid to go to school, I would enroll ASAP. Read a ton of articles and books on rehab and house hacking. It sounds like you have a great base if you've already rehabbed two houses! Sell the long distance rental. It will only drain your time. Set back enough to keep your family alive for 6 months. Buy a fixer upper quad plex with the VA loan. Rehab it and move your family in. Rent out the other units. Buy more. Grab the dream and never stop moving forward. Life isn't going to give you anything without risk.

    1Reply
  • Chris Levarek
    Real Estate Syndicator · Phoenix, AZ · Member since 2018 · 903 posts · 1k+ votes
    5y

    @Account Closed Lot of conservative advice here, and that's good! However, you know what you want to do. Go out and do it. Build that plan that gets you there. Take those HELOC's with the good history of W-2 but then do what you have to. Waiting around for the perfect moment isn't always what it's cracked up to be. Easier said then done, but sometimes burning the ships is exactly what is needed. It can give you that fire to create. That motivation to go beyond your safety net to build something massive.

    My recommendation, create your 5 year plan, then 1 year plan, then 90 day goals. Plan it out. Have a plan B. Then go all in. You can do it. The alternative is that you don't, and never know.

    0Reply
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