Is this all worth it?

[Rivy S.]

I currently earn a six figure salary at a pretty non-pressure, but full time, job.  We have 4 small children and would like to have more.  So we've been trying to build our rental portfolio so that I can replace my income and retire, but it's slow going.   

These last couple weeks have been really crazy, selling one house, under contract on one, and starting renovations on a third.  My husband made a comment that really gave me pause.  He said "We're making ourselves totally nuts now, so that when our kids are grown up we won't have to work. "

It's ironic, because of course the whole point in our real estate ventures is to enable me to be more present for our children. But on the way there... it's even harder to be present for our children.  Catch 22.  I'm interested in hearing different perspectives on this.  Any other working moms out there who want to share how they made this work?

[Jay Hinrichs]

@Andrew Johnson  true dat  I went with my Dad on many a sales call and would run lot lines for him.  I could give the pitch at 9 and close real estate transactions at 11... that was great training. He was not handy but he was a top producing real estate sales men in the 60s.... and 70's....

I see this in the Asian culture.. at their restaurants.. etc..

[JD Martin]

Thoughts:

1. As @Jay Hinrichs mentioned, owning rental properties outright is really more of owning a business than a passive activity. Once it is, it takes up far less hours than a typical job, but don't fool yourself into thinking you'll own all these doors and just collect checks. Even if you have a property manager you still have to manage the manager. 

2. Once the thing is rolling, if done right they will take up very little of your time on a unit-by-unit basis. We do rehabs on all homes that we pick up, which makes it time & labor intensive on the front end but almost care-free once they are up and rented. I have homes that I have been in/to once in the past year, and the total time commitment for them has been checking the business account once per month to be sure rents were deposited properly. On a house that's netting $700 per month, that works out to something like $8,000/hr. I have a good W2 but not that good!

3. Scale is everything. On the front end you're going to work your *** off, like you would in any small business (see @David Faulkner's point on entrepreneurs, above). As you reach critical mass you'll find that you're farming out most things. 

4. If you are so leveraged on the front end that you're only making $100-200 per door, you either need to reexamine your market/buying strategy or reexamine your personal costs of living. I started (well, got back into) real estate as a way of parking significant savings that was earning paltry returns elsewhere. Translation: I bought homes for cash. Those first homes provided significant cash flow at the front end, and since I had (and still have, until I retire - I like my W2) more than enough to live on without the rentals, all that cash got pumped back into the business. Later on, some of the first homes were partially leveraged, but our portfolio is still mostly free & clear homes with a few of them partially leveraged. This is not the fastest way to make money but I'm also somewhat conservative financially and also not desperate for money. Anyway, point is if you don't have any savings such that you have to have properties that are so highly leveraged that they produce such little cash flow, you might want to examine where your money at home is going first. 

[Steven C. Suarez]

If it's super stressful and it's something you don't enjoy doing, don't do it. Just passively fill up your 401k's, IRA's, Vanguards and don't go into debt with fancy cars and a fancy house and fancy vacations and you'll be okay. Simple. 😉

[Brian Nopper]

@Rivy S. I think @Andrew Johnson's post is excellent and could really change your mindset about this. I am a new investor (2 single family rentals) so I don't have a lot of experience. I'm really just getting started. I work full time in a mulit-six figure job...that I hate. I am bringing my 12 y/o son along with me on this REI journey, teaching him the value hard work and entrepreneurship. It's a great real world education and a skill set that could change his life. He's already calculating how quickly he could grow his wealth by house hacking when he goes to college. Depending on the age or your kids, maybe you could get them involved or at least let them tag along. They absorb so much. You may think you are "neglecting" them by working so much, but they probably don't see it that way. My dad was a mechanic, and some of my best memories as a child were just being with him, watching him work.

Best of luck to you! 

[Krista Roodzant]

Just my 2 cents, but I feel like our culture is big on beating up parents who don't "prioritize" our kids.  I don't know about you, but my parents, who by the way are still married after 51 years, both had careers and didn't put us kids in every sport imaginable.  They didn't show up for every. single. school. event.  They didn't know or care what we were doing when we were playing outside for hours until the street lights came on.  We didn't really have a vote on which activities or vacations our family did.  You know what?  I'll bet most of the people on this site had similar childhoods...and we are (almost all) well-adjusted, functioning adults!  

My kids are in their late teens and early 20s now.  They are the beneficiaries of a stay-at-home mom for their whole lives.  Pretty much every activity their hearts desired, we allowed them to explore.  They are great kids.  But are they so much better-adjusted than I was at their age?  They will make their way in life, just as we all have, because that is what is necessary.  

When our kids know that they are loved and they see us modeling hard work, then I think we are doing our best and shouldn't beat ourselves up about it.

[Isiah Ferguson]

Someone feels' my pain and confusing I deal with everyday trying to figure this business out too financial freedom. I will suggest to not worry about the future so much and get things done 1 day at a time. RULE #1 NEVER give up. Keep striving, enjoy the ride, and always keep the end goal in mind. GOODLUCK the rest of the way, too you and your family. Best wishes......

[Account Closed]

As i read through these comments i cant help but notice some irony. It has come up that these rentals are going to pay for college. I also read that people are hating their corporate jobs and trying to find a way out through real estate. In our modern culture, unlike it was a hundred years ago, college is mostly a vocational school sold on the middle class that provides the key to the corporate jobs that people hate. Makes one think.

[Dovid Staples]

It sounds like you're taking on a lot that you could possibly leverage other people for. I don't know your exact situation, but have you and your husband talked about what things would be better delegated to other people? Perhaps that might not only help with your home life, but even help propel your RE career as you utilize your time with more value.  

[Jack B.]

I earn six figures from my full time job, completed my MBA, turned several existing rental units, sold one, bought two new ones, conducted renovations or additions, and managed existing rentals during that time, while also being hospitalized for a bit with a serious illness.

It sucks. But the key is to manage your time wisely. There are tons of time wasters in a day. Some of my biggest ones are debates on discussion boards and youtube. But in general I managed my time well enough to that I multi tasked, took advantage of down time (took textbook to dentist office and prepared for exam while waiting, etc.).

Now that school is over and all my units are rented/sold/bought or whatever, this summer I can relax a bit.

[Jack B.]

Originally posted by @Account Closed:

As i read through these comments i cant help but notice some irony. It has come up that these rentals are going to pay for college. I also read that people are hating their corporate jobs and trying to find a way out through real estate. In our modern culture, unlike it was a hundred years ago, college is mostly a vocational school sold on the middle class that provides the key to the corporate jobs that people hate. Makes one think.

 I wonder if people hate non corporate jobs too though? I mean being a Walmart cashier isn't really a corporate job, but I imagine most people don't like being paid pennies above minimum wage to do low level grunt work with the lowest common denominators in society. 

I will say when I did construction work I actually like my job. I got paid decently even at a young age. The only thing that sucked was winters...

Personally I think most jobs have some aspect of suck. The lower paying jobs are usually tolerable because they are easy but you can't get ahead. The higher paying ones are awful but you can get ahead financially. I've noticed many of the early retirement blogs and web sites like MMM and ERE are filled with IT people like me. I think in the survey it turned out 75%+ were IT people. IT has one of the lowest job satisfaction rates of any profession. I think it really depends on what your job is. After being in IT, working for some of the least intelligent people I've ever met in my life, I long for change. Although FI now, I've considered just becoming a realtor to keep working, doing something I actually like (dealing with real estate). Not all jobs suck as bad as some. 

[JD Martin]

Originally posted by @Account Closed:

As i read through these comments i cant help but notice some irony. It has come up that these rentals are going to pay for college. I also read that people are hating their corporate jobs and trying to find a way out through real estate. In our modern culture, unlike it was a hundred years ago, college is mostly a vocational school sold on the middle class that provides the key to the corporate jobs that people hate. Makes one think.

 This is true. It wasn't really that long ago that the point of going to college was to go to college - i.e. become a well-read, well-rounded individual such that one would be an asset to society in general. No one went to college, aside from a few technical degrees, to get a job. If you wanted to be a banker, you started out running in the mail room. I think it cheapens college to use it as a vo-tech, but such is the new economy where not having at least a bachelor's is akin to being a HS dropout. 

[Rivy S.]

@Jay Hinrichs well right now I am paying a manager ~9% of collected rent.  So when I scale to 50 or so units, I will be able to funnel that into  a salary for a full time employee instead (average rent of 900, 9%, 50 units is roughly 50k)  Also once I get to the point that I quit, I still plan on devoting parts of my day to this business, I just wanted the flexibility of having afternoons available for my kids.

@David Faulkner First of all, congrats on your stats! 2.3k votes on 2.2 posts? That's pretty awesome :)  I love the quote.  It's so true, and it's also what I'm trying NOT to do :/   In terms of the 1-200/door  @JD Martin  ... even with 1.3% rent ratios, which is what I'm targeting, that's been the best I'm able to do (with a 25% down loan) And that's also what BP tutorials all preach as normal.  (I'm allocated 10% each for management, cap-ex, maintenance, and vacancy. I can probably reduce each of those a little bit, but you're still not talking much about 200) What should i be doing differently? Appreciation is awesome, but I'm in bill paying mode-- I need steady monthly income.  Could be that's shortsighted of me, but that's the goal I'm trying to accomplish.  

@Mary White I'm so glad to hear from someone in a similar situation! Kudos for you for keeping your priorities straight and still managing to keep moving on your portfolio.  I will definitely look up that book.

@Christopher B.I think you're right I think once these properties are stabilized, we'll need to take a step back and reevaluate how we're going about this. 

@Andrew Johnson @Krista Roodzant Thanks for the dose of realism.  I think you're right, kids can definitely be included to some extent.  Right now, my oldest is 6.5, and my youngest is 8 months, so they can't be that much help... :)

[Kurt K.]

Why not buy and hold instead of flipping? Considerably less time is consumed being a landlord

[Jay Hinrichs]

@Jack B.  I love selling real estate and lending money and doing deals.. I hate landlording.. is that what your asking ????   Landlording for most is as I state just a adjunct to everyday income.

when I look back on my HML company I had in Oakland I had 250 investors that equated to about 50 million in play.

I can only think of a few that were landlords... and those were commercial landlords not resi.. now I had a ton of borrowers of course....

but most with cash owned other business's.. and every kind of business.... they kept their business's invested in loans and most had some sort of rentals.. but usually came in Beotching about them and how to sell them and buy more notes LOL.

My Daughter works for Intel.. she loves her corporate gig could care less about real estate other than she owns a few rentals as a diversification....

I just find it kind of strange that there is this glamour about the way to be financially free is to buy rentals.. granted it happens but it happens in a lot of business's ... one of my partners sold his garbage company to waste management for 60 million he is what I call financially free.. but he hauled garbage most of his life.  And many others I work with all made their money in some other business...

[Rivy S.]

@Kurt K. I am doing buy and hold for now.  But each acquisition, until it's stabilized, is pretty intense.  The one I'm selling was a money pit and needed to be gotten rid of.  

[Larry Turowski]

@Rivy S. I agree with @Jay Hinrichs.  Your strategy is not aligning with your goal.

Your goal is to have more time with family by retiring--pretty soon, before the kids grow up.  Rentals are more passive, not demanding as much of your time, but are probably not going to get you there fast enough.  Flipping will get you to independence faster, but is less passive.  Wholesaling could get you there but is very time intensive.

You could try to cut your living expenses to the bone.  That is a good strategy for a young, single person, but may not suit you right now.

You could also adjust your goals.  Maybe if you invest at a comfortable pace you could have enough time for family, but set yourself up for independence 10, 15, or 20 years from now.

[Rivy S.]

@Larry Turowski I'm afraid you might be right :( Even without the rentals, I don't feel like I have enough time for my family, because of my full time.  But I'm not sure rentals are going to make enough income in a short enough time.  I think it might be time to take a step back and reevaluate.

[Byron Jon Anfinson]

I think you need a goal with more clarity.  

We had four small kids.  The youngest graduated this month.   The time flew by.

I would go slower so you don't lose your passion or your kids.  

Live on less.

[Shelby Andersen]

I felt like you also. I was working full time 50-60 hours a week, managing our rentals (doing it all myself, no manager), taking care of my small children myself while husband works all over the United States & only home maybe 3 times a year for a few days each time. I was stressed out. We stumbled into our first rental when his oldest son couldn't keep living there, we had to do something with it. We chose to rent it out, not knowing what we were doing. Anyway, that was 2012, now we have four. I felt stretched too thin, so I suggested a rental manager and my husband said no, so I quit my job in 2016. Couldn't be happier now. Yeah, it's still stressful sometimes. I take my 7 & 8 year old with to the lease signings, to the cleaning between or painting in between, someday they will be able to help. I also now have a 2 month old and I'm thankful for the time I get to spend with her, not working that 50-60 hour a week job. I don't forsee my husband quitting his job, I don't see ever having 50-100 rentals. I'd be happy with a total of 10. Just for the extra money, not be too stressed, retire on them someday... I buy gradual so we only have one loan at a time. I'd say keep at it and it will pay off in the end. Maybe not take on as much as you have been.

[Jack B.]

Originally posted by @Jay Hinrichs:

@Jack B.  I love selling real estate and lending money and doing deals.. I hate landlording.. is that what your asking ????   Landlording for most is as I state just a adjunct to everyday income.

when I look back on my HML company I had in Oakland I had 250 investors that equated to about 50 million in play.

I can only think of a few that were landlords... and those were commercial landlords not resi.. now I had a ton of borrowers of course....

but most with cash owned other business's.. and every kind of business.... they kept their business's invested in loans and most had some sort of rentals.. but usually came in Beotching about them and how to sell them and buy more notes LOL.

My Daughter works for Intel.. she loves her corporate gig could care less about real estate other than she owns a few rentals as a diversification....

I just find it kind of strange that there is this glamour about the way to be financially free is to buy rentals.. granted it happens but it happens in a lot of business's ... one of my partners sold his garbage company to waste management for 60 million he is what I call financially free.. but he hauled garbage most of his life.  And many others I work with all made their money in some other business...

I was just saying I think people in non-corporate jobs also often hate their jobs, such as Walmart workers, ditch diggers, etc. Yeah, one thing I keep telling my GF is that after a few years of having been a landlord, I wouldn't consider it retirement to just live off my rental income and manage them myself. It is a job. Luckily it's a part time job and not too bad most of the time, if you get good tenants. 

But as time goes on I'm looking at my exit strategy and considering putting the money into index funds, which would provide a true retirement. Part of my plan has been to do geographic arbitrage, buying a paid for house in Las Vegas or Tampa for example and then living off my investments. Trouble is right now the price to rent ratio in those places isn't going to allow me to do that, unless I buy paid for houses. Even then, I could just buy low cost index funds and get greater cash flow, and greater capital appreciation in the long run, while not being tied down to a location where rentals are good money instead of where I want to actually live. Make sense?

Plus with the index funds I'm literally not on call all the time, dealing with inept people or stressing out over tenant disputes, and not as likely to be sued...

[Joe J.]

This thread personally resonates with me as I have a daily discussion with my wife about planning/strategy for raising our children and finding balance (financial and mental).  I love hearing everyone's story and notice that there are a lot of parallel challenges that many share but different jobs/family/other circumstances.  @Rivy S. I definitely give you and your husband a lot of credit for putting in so much effort and taking on risk in hopes to create the financial and time balance you're striving for.  Like any journey, not everything is predictable and I'm sure you guys will continue to grow and tweak your strategies along the way.  I love all the diverse advice from the other BP members and am using a lot of it to question my current strategies myself.  It's clear to me that you're drive will create continued success for you and your family.  Best of luck!

[Deborah Burian]

I was a working mom and we did it with a kid but only one and she was old enough to help. 

In our household, we think about 'hats.' For instance, right now my husband's 'hat' is the 6 figure salary and I run the company full time even though he is better at some parts of it than I am. When our daughter was little, I also had a 6 figure job that was extremely high pressure.  Couldn't have been done without my husband wearing the primary parent hat at times. 

Now, we have young grandchildren and I bring them to work with me and they 'help.'  Slows me down a bit but so worth it.  You are limited by the total number of hours in the day.  

Might be time to ask yourself if it was a crazy week or two or if you're setting up a crazy lifestyle that is inconsistent with your goal of being present with the children. 

[Nghi Le]

@David Faulkner Love that quote!

@Rivy S.  A year ago, I presented myself as an IT Consultant by day, and Real Estate Investor by nights, weekends, and holidays. I was essentially working two full-time jobs, the second as a flipper. I used to love my job, but when I found real estate, going into the office started becoming painful. Now it just "gets in the way".

2.5 months ago, we had our first daughter. And that, of course, changed everything. Now I'm ramping down on the flips and looking for buy-and-holds (or BRRRRs), both locally and out of state. My philosophy with raising children is that at least one parent should always be at home. I think the problem with a lot of today's youth is because their parents weren't around enough. And it doesn't make sense to me to make more money in order to spend it on childcare. So luckily, we're able to do that with my wife staying at home. To compensate for the lost income, we just found ways to cut down on our costs and ironically enough, when you spend more time at home, you don't spend very much. We also started hosting international students to get additional income out of assets we already have (our primary and secondary homes).

In terms of flips, because the market here is so hot, margins are pretty thin and the risk has increased. I feel like if I took on side/freelance jobs as an IT Consultant, I'd spend the same amount of time and make the same amount of money, but with much less risk.

Something I learned from playing the cashflow game is that sometimes it's easier to get out of the rat race with a lower income. Someone making $40k/yr is going to require a lot less doors at $200/door (or any amount per door) to retire than someone making $100k. Another thing to think about is that when you have a lot of doors, I don't think you can depend on it being passive all the time. It really depends on your tenants, and you won't always have good tenants. Or if something happens to your property manager, such as they grow too big, lose their vendors, or sometimes life just happens, now you're jumping in as the PM, at least until you find another one (if you can find one with the same level of quality).

And honestly, we're all in it for the long term. If things are so tight and you have to invest so much time into something for so little, prioritize your kids now and wait for the market to settle down or go to a different market to invest.  If you time it right, it only takes one or two real estate cycles to become a millionaire.

[Nathan W.]

@Rivy S. True that now it may be difficult for you to send your children to Yeshiva, work full time and invest in this real estate thing. Think about what it costs us to marry our children off today, you may not be living in Brooklyn but regardless especially when it comes to girls it's just super expensive. I would say do whatever you can to juggle your family, career and investments; Shabbos is for your family. Ultimately when it comes time for you to pay for Chasunas you will see it was well worth the investment now.

[Logan Allec]

@Rivy S. Yes, it's worth it, as long as you're efficient and not spending dozens of hours on some SFR. Because honestly, if you're willing to put dozens of hours a week into something, you'd be better off starting a side business and just dumping your profits into the S&P 500, REITs, or some real estate syndication.